FB's Graph Search - Whom is it for?

A few days ago, Facebook announced a new capability in its social media platform. Called "Graph Search", it created more buzz with its pre-announcement media hype. Some news agencies described the actual announcement as a roomful of sleepy reporters.

It is for the advertisers, dummy!

It is clear FB's Graph Search is not built with the users in mind but built squarely for the advertisers. While most of us would rarely want to know, "Show me the favourite restaurant for all my friends in Washington DC", turn the same proposition around for advertisers, and it makes sense. Listen to Facebook making this pitch to a small down town restaurant looking to increase its evening sales. "If you, put up a Facebook page and encourage diners to like you, any of their friends in down town looking for a place to eat, can see the restaurant liked by their friends".

This and a few other indicators are the reason for my target price of $39.08 for the Facebook stock.

However, the true measures for validating if the stock is on track will be to see some new revenue streams appear in the financial filings. Till that happens, all the growth in the stock is already accounted for. Also, it is clear to me that the new revenue streams will not show up next week or even next quarter. It will be several quarters before these streams become big enough to cause a shift in he price,

New Trading Strategy for FB

Based on the above analysis, it seems clear that I will need to lower my average cost of holding FB stock. I will look for it to slide below $25 to pick the next lot, and then below $20 for the final lot. I think the actual impact of earnings is four to six quarters away.

Lets hope everyone has the stamina to stay with the stock for that long.