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With Facebook Inc (NASDAQ:FB) trading down 27 percent from its IPO price, there is no shortage of fund managers, analysts and even layman investors slamming the company. In John Hussman’s weekly market commentary, he continues this trend with a good look at Facebook’s overall business model and why it doesn’t work like Amazon or eBay Inc (NASDAQ:EBAY) do.

While Dr. Hussman applauds the innovative nature of Facebook as an interesting company and platform, he is quick to question the underlying business model and how it appeals to investors. When users are on Facebook, they are there to catch up with friends and keep current with their social circle. Advertising has limited value in this type of environment as users aren’t looking to leave the site and make a purchase or learn about a product. That is not what they are on Facebook for. This clearly differs from Amazon.com, Inc. (NASDAQ:AMZN), eBay Inc (NASDAQ:EBAY) 

or even Google Inc (NASDAQ:GOOG), where visitors are searching out information to make a purchase or learn about a product. Clearly, advertising has much more value in an environment where users are actively seeking out advertising information.

The reality is Facebook has dubious opportunities for major earnings growth. Further growth of the application development side of the Facebook platform offers some potential, as does a slow but steady increase in advertising. None of these potential sources of growth ever justified a $100 billion valuation however, and that is reflected in the current stock price, a stock price that will likely continue to fall.

Hussman argues that these kind of IPOs have a negative impact on the economy as whole as it represents a poor allocation of investment capital. If the economy continues to choose poor investments based on hype or popularity, the real value engines will be starved of capital and economic growth will be impaired. Perhaps this is what we’ve seen in developed market economies over the past four years, a poor allocation of capital to investments not worth the paper they are written on, whether that is a speculative technology IPO or sovereign debt obligations that are impossible to truly repay.