Why Facebook Inc (FB) Execs Are Ditching the Stock

Following news that the social media site’s shares had fallen nearly 20%, Facebook Inc (NASDAQ:FB) insiders began selling off some of their own shares, including famed COO Sheryl Sandberg. Just last month, Sandberg boasted about how far the company had come since its IPO last summer. So what has investors so skittish?

The MySpace Curse

In 2006, MySpace was the darling of the Internet, passing even Google Inc (NASDAQ:GOOG) to become the most popular website. By 2009, the site had taken a drastic nosedive as consumers fled the site in favor of Facebook Inc (NASDAQ:FB). Because of this jump, naysayers have long concluded that Facebook Inc (NASDAQ:FB) will eventually suffer the same fate.

In its most recent earnings report, Facebook Inc (NASDAQ:FB) slightly exceeded revenue expectations, announcing $1.46 billion in revenue for its first quarter.This number was up 38% from a year ago, attributed primarily to CEO Mark Zuckerberg’s increased focus on mobile advertising revenue.

As of 2013, Facebook Inc (NASDAQ:FB) is still the reigning social media site. For a while, analysts suspected Google Inc (NASDAQ:GOOG) might be able to steal some of those users, but at last count Google+ had only 500 million registered users, half the number of Facebook Inc (NASDAQ:FB). Yet Google Inc (NASDAQ:GOOG)’s stock is valued at nearly $900 a share. Granted, this is largely due to success in other areas of its operation, which begs the question, is Facebook’s sole focus on social media to blame for the stocks struggles?

Perhaps a better comparison would be LinkedIn Corp (NYSE:LNKD), which has advanced in popularity as both a business networking and job search tool during the country’s recent economic troubles. The site’s popularity has grown exponentially over the past couple of years, now boasting 225 million users across the world.

Although LinkedIn Corp (NYSE:LNKD)’s membership base is only a fraction of Facebook’s, the professional social media site’s stock is nearly $200 a share. LinkedIn has performed well over the past year, the company’s first quarter revenue was up 72%, a total of $325 million. So what is LinkedIn doing that Facebook isn’t?

One major difference is that LinkedIn operates on three separate revenue streams: talent solutions, marketing, and paid subscriptions. While Facebook relies solely on advertising revenue, LinkedIn had $67 million in sales from subscriptions in its last quarter, making up one-fifth of the company’s total sales for the quarter.

Google+ Gaining Ground

Although Facebook still boasts the most users of any social media site, Google+ is proving a formidable opponent.