The Social Network Facebook Can’t Beat

Over the years, Facebook has been a relentless competitor.� It has crushed tough rivals like MySpace and Friendstar.� But Facebook has also contained the Internet giants like Google (Nasdaq:GOOG) and Microsoft (Nasdaq:MSFT).

Now the social network has 700 million active users and a market value of over $80 billion (according to the latest trades on SharesPost.com).� Within a year, the company is expected to have a public offering which is likely to be historic.

Yet there is an area of social networking that Facebook really can�t venture into:� adult entertainment.� Basically, the company needs to have a brand-friendly environment to capture a growing share of online advertising.

Let’s face it, this is a big busines that forces the question: is there a way for investors to play the adult-entertainment angle for social networking?� There is — the company is FriendFinder Networks (NYSE:FFN).� Based in Silicon Valley, it operates various sites that allow men and women to, well, connect.� Some of the brands include AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com and SeniorFriendFinder.com.� Features include chat, instant messaging, video sharing and blogs.�

FriendFinder became came public about a month ago at an offering price of $10.� Unfortunately, the stock plunged and is now fetching $5.80.�

But with its first quarterly report as a public company, FriendFinder was able to show some momentum.� Adjusted pretax earnings increased 33.3% to$27.2 million.� And the company continues to launch new sites.

True, FriendFinder has substantial debt, coming to $543.5 million.� But with its cash flows, it has been continuing to pay the amount down.� The IPO was also a big help.

FriendFinder has more than �200 million unique monthly users that come to its sites and there are more than 1 million paid users.� Keep in mind that these figures are larger than for those at LinkedIn (NYSE:LNKD), which has a market value of $7.35 billion.� FriendFinder’s market cap is a mere $50 million.�

Of course, FriendFinder isn’t for everyone, and it’s probably too taboo for many investors � and still risky, in light of its small market cap.� But it’s certainly a social-networking play and has good assets.�

More importantly, it won�t have to worry about Facebook or LinkedIn.

Tom Taulli�s latest book is �All About Short Selling� and he has an upcoming book called �All About Commodities.�� You can find him at Twitter account @ttaulli.� He does not own a position in any of the stocks named here.