How valuable is a company for advertisers if it cannot even stop the free fall of its stock price? That is the question now confronting Facebook (FB) as the social media website’s share price dipped below $20 for the first time on Thursday after debuting at $38 in May.
The challenge for the firm continues to be incorporating new and engaging advertising techniques that provide value for companies and entice them to buy advertising space on the website. Facebook is also still trying to master the sphere of mobile advertising as Internet use increasingly moves in this direction.
Another point of pride that Facebook has used to lure advertisers is that its total user base is enough to rival that of many large countries. That may no longer be the case, as reports were released Wednesday, coinciding with the drop in share price, that an estimated 83 million accounts are either duplicates or fakes. How can marketers expect to reach new people if so many of the people on Facebook are not, well, people?
A recent study showed a significantly strong correlation between the number of "likes" a company has and customer engagement. So does a larger presence on Facebook translate into better business performance? Here is a social index comprised of the top nine companies with the most "likes" on Facebook.
We reported back in February that based on Facebook’s valuation, and its 845 million users (at the time), each Facebook user is worth about $116. Comparatively, Michael McHugh of YCharts applied this member-valuation to LinkedIn and Twitter. He found LinkedIn, with 150 million users and a $9 billion valuation puts members at $60 each. Twitter’s 200 million (more or less) users are worth about $50 a pop.
So if about 83 million Facebook accounts are fake, at a perceived value of roughly $116 each, the company is basically announcing $9.6 billion of their value is a falsified. Interesting…
The Facebook Index: Investing Ideas
The Facebook Index is composed of the 9 companies with the most “likes” on the social network. We've cited studies that show there is a correlation between the number of likes a company has and user engagement and customer loyalty. It would be interesting to see what percentage of corporate pages' likes are also fake- would there be a higher rate of fake likes and fans?
Still, a "like" is a "like," and indeed data shows that the most liked firms on Facebook have performed admirably, even if Facebook has not. Their 1-year returns are largely very positive, and the list average 1-year return is 26%. Here's a look at the breakdown:
So, how have these companies fared of late? We have compiled a list on the most liked firms, their number of likes, as well as what they have been up to.
1. The Coca-Cola Company (KO, Earnings, Analysts, Financials): Distributes, and markets nonalcoholic beverages worldwide. Market cap at $182.75B, most recent closing price at $80.50. The company with 46.2 million likes on Facebook was recently recognized by the EPA as one of America’s top green energy users.
2. Walt Disney Co. (DIS, Earnings, Analysts, Financials): Operates as an entertainment company worldwide. Market cap at $87.26B, most recent closing price at $48.46. The entertainment giant has 11 million likes recently announced that it would offer free Wi-Fi at its Magic Kingdom resort.
4. Nike Inc. (NKE, Earnings, Analysts, Financials): Designs, develops, and markets footwear, apparel, equipment, and accessory products for men, women, and children worldwide. Market cap at $42.4B, most recent closing price at $91.30.
5. Starbucks Corporation (SBUX, Earnings, Analysts, Financials): Operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores. Market cap at $33.21B, most recent closing price at $43.30. The company has 31.2 million likes on Facebook and recently introduced Starbucks Refreshers, a natural energy drink.
6. McDonald's Corp. (MCD, Earnings, Analysts, Financials): Operates as a foodservice retailer worldwide. Market cap at $90.88B, most recent closing price at $89.40. It was recently announced that he fast-food chain would not be allowed to include toys in their Happy Meals in Chile. This might make it difficult to add onto their 21 million Facebook likes.
7. Limited Brands, Inc. (LTD, Earnings, Analysts, Financials): Operates as a retailer of women's intimate and other apparel, beauty and personal care products, and accessories in the United States and Canada. Market cap at $13.63B, most recent closing price at $47.39. The apparel conglomerate saw revenue increase 12% in the second quarter, nearly doubling analyst expectations.
8. Monster Beverage Corporation (MNST, Earnings, Analysts, Financials): Market cap at $11.43B, most recent closing price at $64.56. The energy drink giant’s profits were more than halved in the second quarter from a year earlier. The firm still boasts 17.9 million likes on Facebook.
9. Wal-Mart Stores Inc. (WMT, Earnings, Analysts, Financials): Operates retail stores in various formats worldwide. Market cap at $249.1B, most recent closing price at $73.50. The company’s investment rating was recently increased to hold by Deutsche Bank and has 18.5 million likes on Facebook.
Written by Dan Connelly
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