theregoesdave

Facebook has been churning through executives almost as quickly as it tossed aside founders in its early days. The departure of CFO Gideon Yu continues a disturbing trend of turnover for a company so small and on the rise.

Now Facebook is apparently looking for someone to replace Yu that has experience running a public company. This requirement hints that the company could be filing an IPO in the coming months or at least in the next year or so. Beyond just the sagging economy, here are the reasons that it could be Zuck’s greatest folly.

1. Where’s the profit?

If institutional investors and individual traders are going to make Facebook part of their already battered portfolio, they’re going to expect a return on investment. So far, not only is Facebook not profitable, it’s burning through its investments from Microsoft and others at a blinding pace.

2. Where’s the growth?

Online advertising revenues are tanking across the industry, with even the mighty Google expecting to be flat at best this year. Yahoo as the top display advertiser saw operating income for 2008 plummet to $13 million compared to $695 million for 2007.

3. Innovation inspires investment

Innovation is the juice that allows Internet and Scientific companies to be valued at multiple times their actual valuation. This is because investors expect them to produce great leaps in their field that will garner huge returns.

Facebook just isn’t an innovative company. It copied MySpace and added in life streams, likely its greatest innovation. Then the company lifted social aggregation features ala Friendfeed and, more recently, ripped of Twitter’s look and feel for updates.

Don’t get me wrong, Facebook is far and away my preferred social networking site. It allows me to stay connected to my friends seven days a week via the Web and stellar iPhone application. However, I think that its greatest strength lies in its first second mover’s advantage.

Before Facebook goes to the market with its hand out, I would simply like to see some good old-fashioned fiscal discipline. What Facebook needs is to trim expenses, work on providing more value to its advertisers and come out of this economic slump ready to ride the wave to the top.

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