<html> <head><style type ="text/css">body { font-family: "Bloomberg Prop Unicode I", Verdana, sans-serif; font-size:125%; letter-spacing: -0.3pt; color: #FF9F0F; background-color: #000000; text-align: left; } p {line-height: 1.25em; max-width:900px; width:expression(document.body.clientWidth > 900? "900px": "auto" );} h1, h2, h3 { text-align: left; font-weight: normal; color: #FFFFFF; } h1 { font-size: 130%; } h2 { font-size: 115%; } h3 { font-size: 100%; } #bb-style { font-size: 90%; max-width:900px; width:expression(document.body.clientWidth > 900? "900px": "auto" ); } b, strong { font-weight: bold; } i, em { color: #FEC54A; } pre { font-family: "Andale Mono", "Monaco", "Lucida Console"; letter-spacing: -0.3pt; line-height: 1.25em; } table { border: 0; font-size: 90%; width: 100%; margin-left: auto; margin-right: auto; } td, tr { text-align: left; } td.numeric { text-align: right; } a:link { color:#53B2F5; text-decoration: none; } a:visited {color:#53B2F5} a:active {color:#53B2F5} a:hover {color:#53B2F5} </style> </head> <body> <p>By William D. Cohan</p> <p>Facebook’s first earnings report as a public company makes me cringe. It is yet another example of an over-hyped Wall Street IPO that finds a way to disappoint investors within months of becoming a public company. Facebook now joins a growing list of recent technology IPOs, including Groupon and Zynga, that have disappointed investors in ways that sent their stock prices reeling. As of Friday morning, Facebook's stock is now down almost 40 percent from its IPO price, while Groupon and Zynga are down 65 percent and 68 percent, respectively.</p> <p>It's more than a simple earnings miss. A moment spent digging into the Facebook numbers reveals a far more disturbing existential threat to the company: People are starting to get fed up with the fact that Facebook’s business plan depends primarily on taking the data that its nearly 1 billion users freely provide to it every minute of every day and then turning around and trying to sell that data to advertisers eager to know how such a monumental group of people spends its time. According to the earnings release, Facebook is experiencing a meaningful decline in the pace at which new users are signing up for its service.</p> <p>Mark Zuckerberg might argue that the decline in the rate of new users to Facebook is simply the result of  already large numbers. When you have some 955 million people using Facebook on a monthly basis, there are limits to how many new users can appear, especially when there are only about 1.1 billion personal computers in the world. I see something more interesting at play: People don’t like to share their data for free and then watch Mark Zuckerberg and his executive team get the rewards, in the tens of billions of dollars.</p> <p>If Zuckerberg is really smart -- and let’s stipulate that he is -- he’ll start sharing the wealth with his users by cutting them a check every time they post some data to the site, making them full partners in his social networking juggernaut and increasing the likelihood that Facebook will be around a little bit longer than MySpace.</p> <p>(William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist.  Read <a href="http://www.bloomberg.com/view/bios/william-cohan/">his columns</a>. Follow him on <a href="http://twitter.com/williamcohan/">Twitter</a>.)</p> <p>For more quick commentary from Bloomberg View, go to <a href="http://www.bloomberg.com/view/the-ticker/">The Ticker</a>.</p> </body> </html>