Tomahawk, WI 11/06/2013 (BasicsMedia) – Facebook Inc (NASDAQ:FB) has been compared to its predecessors MySpace and Friendster. What is known about these companies is that they have become pale shadows of their former self since they went public. Some have urged that the same providence could face FB and send it out of the profitability line later if not soon. Are these arguments credible? They could be until one gets to see the misunderstood thematic in the case of FB compared to the aforementioned social network companies which have since lost their glory and investor traction.

While indeed history is a teacher, history could be wrong this time around as regards the future of FB. Perhaps among the social network companies, history is likely to fail in repeating itself. What does this mean? If other some social networking companies were born to die, then FB was born to the opposite fate.

It is true that FB has yet to hit its desired penetration levels in the U.S. and among teens, but there is no alarm over that which could suggest that the company is on its demise bed. The same history that has been used to predict doom for FB is now going to reveal why the so-called shock from user exit has very remote impact on the company if any.

Look at MySpace, it IPOed when its active user base was around 76 million. As for Friendster, it went public after attaining 100 million active user base. What about FB? Mark Zuckerberg took the company public when it had attained more than one billion in user base. This is quite a juxtaposition that is strong enough to absorb the shock that brought down MySpace and Friendster.

FB’s strong base is its future

No one is quite sure whether Zuckerberg did wait for this maturation before taking the company public out of design or default, but what cannot be disputed is that this wait to attain almost ten-times the number of users of its predecessors is the reason user exit doesn’t seem to worry the company’s future. It does mean that even if FB were to lose users, it would still be boasting a huge number that is almost ten-times what its predecessors had in their heyday.

FB’s primary source of revenue is ads and the more user numbers it commands the higher that revenue can be. So a threat to its numbers is surely a threat to its earnings. A look at the company’s Q2 and Q3 numbers indicate that the social networking company not only still has its user base growing, but its growing steadily and in huge numbers.

Mobile and Paid Ad

A lot of FB users access its services on mobile gadgets. This means that it’s generating a lot of revenue through the mobile platforms as smartphones become part of people’s everyday life. The downturn to this is that mobile revenues are not as fat as revenue generated from desktop access. This has let the company to think about seeking paid ads. While this could effectively improve its top line, it seems to have a lot of challenges in its implementation. It would thus be better for FB to explore its options carefully before making a move that could prove counter productive.

DISCLAIMER: This content is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.