Facebook Should Pay Attention to Netflix

Yahoo Contributor Network

COMMENTARY | Facebook should probably take a hard look at the fate of Netflix stock. Granted the Internet giants have little in common on the surface, but as CNBC reports, the chief issue with Netflix's recent stock price drop has to do with expansion concerns. When it comes to expansion, Facebook is also facing similar questions leading up to what is likely to be a record setting IPO. Facebook has set a torrid pace for growth, but seems unable to keep up that pace.

Netflix is seeing firsthand how investors can punish a stock even though the recent loss was less than expected and the service added three million subscribers, as CNBC reports. The Wall Street Journal is reporting that growth at Facebook is slowing down. Granted, the same report mentions more than one billion in revenue, which is a lot of cash but still a decline from the last quarter of 2011.

Adding more concern for Facebook is the probable delay of the IPO as a result of the social network buying Instagram and a slew of patents from Microsoft, as another CNBC report claims. Facebook is experiencing some growing pains, and should expect investors and analysts to respond harshly to falling revenue and slowing growth. Like the WSJ report highlights, other social companies, like Groupon and Zynga, have struggled in the public eye, which should raise more eyebrows about Facebook.

All it took for Netflix to start down the wrong path was a bad decision about a price hike, which started a series of dominos falling as the Associated Press reports. Facebook should be taking notes on what not to do, but since the service is free it is nearly totally dependent on revenue from advertising. Small issues that alienate users will be reflected in the stock price of the company, and one wrong move could have investors and users remembering what happened to Netflix.

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