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Facebook Needs a Salesman-in-Chief to Offset Weakening Business Metrics


Facebook's inability to sell its story means investors will focus on the numbers, which scream, "Slowdown!"

MINYANVILLE ORIGINAL Yesterday was a historic day within the horrific history of publicly-traded social-media stocks, with Facebook (FB) delivering its first-ever quarterly earnings report after its generation-defining IPO flop. (See: Facebook Faceplants as Buyers Are Nowhere to Be Found.)

Now, after listening to the conference call -- which was basically an extended sales pitch for Facebook's ad services -- I can understand what Facebook bulls are all jazzed about.

But while it all sounds great on paper, let's face the harsh reality: Mark Zuckerberg and Sheryl Sandberg can't sell the story when the numbers say something else.

Yes, Facebook met Wall Street's earnings expectations and actually beat on revenues, but all the metrics are screaming, "Slowdown! Slowdown!"

Don't take my word for it. Just look at the numbers.

Growth in monthly average users is declining:

As is revenue growth:

And revenue per user:

As a visionary, Mark Zuckerberg does compare to Apple's (AAPL) iconic Steve Jobs -- I really mean that. Mark Zuckerberg is out to change the world.

However, he has none of Jobs' steely confidence and self-assuredness.

That means that investors -- especially the ones who fell for Wall Street's sales pitches on the IPO -- aren't buying what he's selling.

Look at what happened after Apple's recent disappointing quarter. Yes, the stock's down, but just barely. Investors are programmed to forgive Apple's sins because of the fan base the Jobs cult of personality built.

Now, Facebook's mobile efforts could one day be enormously lucrative -- I get that. But for now, it's a total drag on Facebook's advertising and payments businesses.

On the advertising side, Facebook does not serve up as many ads as on desktop -- while on the payments side, mobile games don't process payments.

Additionally, Facebook noted that higher growth in international markets is a drag on ad pricing -- incidentally, Minyanville flagged this particular issue back in June 2011, a full seven months before Facebook filed its S-1 with the SEC. (See: Why a Facebook IPO Could Flop.)

So what do we do with Facebook now?

In the interest of full disclosure, as I noted in real-time in the Buzz & Banter yesterday morning (click here for a free 14-day FREE Trial, which you will NOT regret), I bought out-of-the-money Facebook puts and calls to bet on a large move in the stock, whether it be up or down. I am exiting this position this morning.

But going forward, I see no reason to buy when the mobile story the company's trying to sell isn't showing up anywhere in the numbers.

Maybe that will change when the aforementioned metrics start moving in the right direction, but for now, the sidelines are the place to be.

Elsewhere in the social media space, I truly hope LinkedIn (LNKD) keeps on its upward trajectory. As it stands now, when you think about the huge declines in key names like Facebook, Groupon (GRPN), and Zynga (ZNGA), the recent string of Internet IPOs add up to a massive joke played on the general public by venture capitalists and Wall Street bankers.

But hey, at least some of us tried to fight the good fight. (See: Facebook, Running Out of Bodies, Is in Need of Major Reacceleration in Monetization Rates.)
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Position in FB, AAPL.
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