Goodbye, Facebook… Hello, equity-focussed Private Social Network

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Last week, I wrote about the value of using Facebook (and other social media) to test investment hypotheses on large, diverse audiences. I cited the example of my early reporting on the coming vegan/vegetarian food boom and showed you how the feedback I got from such a test audience was useful in identifying and analysing new investment trends.

You may have wondered, though, why I also mentioned that I deleted my Facebook profile at the end of last year. After all, hadn't I just said that it was a useful investment research tool?

I got several emails asking about this seeming contradiction, so here is the reasoning behind my move. Shareholders of Facebook may want to pay particular attention.

Improving my arsenal of research tools

Talking about the pros and cons of social media networks like Facebook is a public obsession right now. You can barely open a single newspaper without finding an article about it.

It's a very complex subject, one where everyone will be driven by personal preferences and individual circumstances.

As for myself, I had simply concluded that after two years of Silicon Valley pursuing ever-increasing censorship and speech control policies, the big social media channels are now simply less valuable as a research tool. E.g., Twitter is now, on the whole, the world's ultimate left-wing echo chamber rather than a broad representation of views. This defeats the entire point of using a social network to test a thesis on people from all backgrounds.

That's why I deleted Mark Zuckerberg from my life and instead focus on building and growing this blog.

The early results are excellent:

• My audience is still very diverse, ranging from student to billionaire and covering the entire globe. But it's now focussed on the idea of using public equity markets to achieve superior returns. I have eliminated a lot of other noise while retaining the option to run ideas past people who look at issues from entirely different perspectives, and who do so without a Tech Overlord controlling what can and cannot be said.
• Because of what I write about and how I write about it, I have a lot of very thoughtful, well-informed readers sending me private messages with their views. The value of the feedback and input I am getting from readers is now even more valuable than what I received on publicly visible social media profiles. One thoughtful email from a reader is worth more than 20 short, knee-jerk social media replies.
• As a side effect, communicating with a limited number of thoughtful readers by email is so much less distracting than following a never-ending social media newsfeed every day. My writing output has soared, and the lengthy research reports that I am sending my members' way have proven pretty darn popular, based on the number of people who have signed up to them over the past four months.

I was recently looking for a term to succinctly describe the changes that I've made to my social network life. A good way of summarising it is probably to say that I have created my "Private Social Network" (even though you could argue that this is a bit of an oxymoron). Call it a micro-network if you will, and some of you might even think of yet better terms. The point is clear. I now operate a social network that is small, focussed on high-value output, and which is guaranteed to not have the WrongSpeak Police influence what its members (or its main author) can and cannot say.

Which, if you so will, isn't good news for Mark Zuckerberg.

What about Facebook shares then?

I happily admit that I have been itching to write a column about Facebook (NYSE:FB), and focus it on why I think this social network could very well go the way of MySpace.

In the end, I decided not to write it.

The media world is already awash with reporting (both positive and negative) about Mark Zuckerberg's company. What you get to read on Undervalued-Shares.com should be distinctively different from the menu of dishes served up to you by the mainstream media.

Still, I would love to point you towards one brief, insightful article that I believe could turn out to be one of the more valuable pieces about Facebook stock.

What I did observe during my final year (or two) of heavy Facebook usage, was that the level of activity and quality of engagement of the platform was gradually decreasing. Put simply, good people posted less, and the amount of rubbish clogging up my newsfeed only ever grew. This also featured quite heavily in my decision to download my profile data and pack up.

My own observations in this regard were nicely summed up by a blogger who calls himself "the original Facebook bull". He did write an extensive, bullish research report about Facebook back in 2010 when the company had a mere 400m users (now 2bn) and was trading on private markets at a valuation of just $50bn (now $550bn). You can't argue with his public record, i.e., he did call this one earlier than anyone else.

He recently published another piece, Facebook is Dying, Wall Street Just Doesn't Realize It Yet. Its main point is that engagement on Facebook has been dropping, and in a way that investors should be worried about. True, Facebook's stock price is once again near its record high and the company's recent numbers looked good. However, marketing departments of large corporations base their budgeting decisions on past data, which is why there is an inevitable lag between engagement figures and Facebook's revenue and profits. That's the time lag the author identifies as the main reason why Wall Street is currently still more bullish about Facebook than the company deserves based on user engagement (and this includes popular offshoots, such as Instagram and WhatsApp).

Given how many people own Facebook shares, I did want to point out this particular article to my readers. If you own Facebook shares, it's worth five minutes of your time.

If you ask me, in a few years' time, it could well have turned into a prophetic article.

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