Desperate Facebook Spending Monopoly Money: Wadhwa

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March 28 (Bloomberg) -- Stanford University Fellow Vivek Wadhwa discusses his outlook for Facebook on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Research director at the university said the efforts actually represent a lifeline for ceo mark zuckerberg who is struggling to stay ahead as social media grows stagnant.

He joins me with more of this idea.

Great to see you.

Is facebook in a desperate position right now?

If you look at social media, it essentially peaked.

What happened is it grew exponentially and then it started flattening out and facebook did not conquer the asian markets.

So there is only so much they can squeeze out of advertising from the u.s. market.

Mark zuckerberg realizes it.

That is why he went and bought whatsapp because social media was now moving to cell phones.

We used to go and brag on facebook about everything we did.

Now we are more on social media -- our children are on cell phones.

They don't like using the same tools that we did.

In other words, social media is becoming less social.

It is moving to the smaller devices.

And zuckerberg saw the writing on the wall.

Smart enough to figure it out.

That is why he had to buy this company for whatever it cost.

Whatever it cost -- in $19 billion.

The valuation is frankly insane and has a lot of people, myself included, wondering, are we seeing a top in these evaluations -- in these valuations and why is it happening question the facebook valuation, $200 billion, how do you justify that?

It is monopoly money.

If facebook does not do something desperate the market value could drop down to $100 billion, to $50 billion, quite rapidly.

So while that's why it is still by -- we have whatsapp for $19 billion, occulus for $2 billion, more multibillion-dollar acquisitions at the company tries to stay ahead of the curve?

Yes, because they are using the monopoly money, the stock price.

I would do the same.

Effectively play money, monopoly money?

That is what it becomes.

When you have valuations in the stratosphere like this it really is play money.

This is an issue, though.

Maybe not for facebook but for the overall economy.

What is contributing to this?

You've got interest rates that have been record lows five-plus years, so money is so cheap that you are in a situation where you actually see on the day of an acquisition acquirer's stock price now going the -- going up, which is not historically what has happened.

Are we in danger, vivek, of being in an asset bubble?

There is a mini bubble.

No doubt about the fact social media stocks are widely inflated.

You have these mini bubbles right now with no doubt will burst unless, as zuckerberg is doing, you figure out how to keep inflating it.

This is what we are seeing.

It is not like days --

This text has been automatically generated. It may not be 100% accurate.


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