The Facebook IPO: ‘Don’t Believe the Hype’

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    Matts and Maria Nedermam, tourists visiting from Sweden, view Nasdaq’s giant monitor as it shows a welcome message for Facebook before the company began trading on the Nasdaq stock market, Friday, May 18, 2012, in New York. (AP Photo/Bebeto Matthews)

    The day Facebook went public and ended its first trading day on the Nasdaq, I couldn’t help but think of the old school hip-hop song ‘Don’t Believe the Hype’ by Public Enemy.

    Don’t know who Public Enemy is? Perhaps many remember one of the group’s most vociferous and famous member – the flamboyant Flavor Flav, who wore a large clock dangling from his neck and then did some reality shows.

    The Facebook IPO was the most anticipated public offerings of our time. The media frenzy and social media buzz surrounding it was of epic Kim Kardashian proportions. Watching CNN’s coverage, the scenes from the Nasdaq trading floor, the delayed stock trading session, the reactions — one would think this was the only news people should care about.

    And, for many, it was. There were a lot of Benjamins to be made on this IPO.

    What’s responsible for this hype?  Facebook’s road show , aka “dog and pony show,” where companies introduce new products or financial securities issues to potential investors or buyers. Usually hosted by investment banks and firms, Facebook’s “dog and pony show” was presented by Morgan Stanley. The goal is to market the company’s equity story: In essence, Facebook sold a good game and convinced investors of the its future earnings and prospects. I spent several years in investor relations and going on road shows across the U.S. and Canada and I know first hand how companies build up the equity story.

    But all the hype in the world couldn’t help Facebook’s stock price, and on its first trading day May 18th, the stock closed barely above its IPO price, at $38.23 — having dropped from a high trade of $45 at one point.  The stock has been correcting itself since, and this week it went as low as $25.52.

    Facebook’s IPO may not have raised the bar, but it certainly raised regulatory concerns. The company, along with the investment banks that led the IPO, is the subject of at least two shareholder lawsuits. A group of shareholders allege that analysts at the large underwriting investment banks cut their financial forecasts for Facebook just before the IPO, but only “selectively disclosed” that info to big banks ahead of the offering.

    In this image provided by Facebook, Facebook founder, Chairman and CEO Mark Zuckerberg, center, applauds at the opening bell of the Nasdaq stock market, Friday, May 18, 2012, from Facebook headquarters in Menlo Park, Calif. (AP Photo/Nasdaq via Facebook, Zef Nikolla)

    While the world was overjoyed with the IPO, I was skeptical. I didn’t buy into the Facebook IPO hype. Mark Zuckerburg is a genius and a visionary and does have everyone and their mother connected to the social network. You have 900 million users and now what? How do you monetize the consumer insight and continue to engage users even when you are constantly making changes that infuriate or confuse them?

    Don’t get me wrong, I enjoy Facebook. I love staying connected to my family, friends and former colleagues from around the globe — all in real time. Literally.  What’s not fun, is getting a message from my mother that says: “M’ija, you didn’t call me back, I know what you are at doing. I saw your status on Feisbuc.”

    But I do think Facebook is losing its luster.

    General Motors pulled ads from Facebook in May stating that its ads on the social network had little effect on consumers. Peter Relan, CEO of social media gaming company CrowdStar, said he has stopped developing new games for Facebook and is making a strong push into the mobile gaming market.

    Between Facebook serving as my mom’s GPS and a platform for geotargeted ads, I’m beginning to feel like I’m in George Orwell’s 1984 novel where ‘Big Brother’ is constantly monitoring and adjusting my timeline and news feeds according to my behavior. It’s fundamentally Pavlovian conditioning.

    Monday’s Wall Street Journal’s piece points out that the growth rate in the amount of time people spend on the social network—otherwise known as engagement—is also decelerating. In April, Facebook users spent more than six hours a month on the site, up 16% from a year earlier. But it saw a 23% climb in 2011 and a 57% jump in 2010.

    A television photographer shoots the Like sign outside of Facebook headquarters in Menlo Park, Calif., Friday, May 18, 2012. (AP Photo/Paul Sakuma)

    This confirms my theory that more of us are becoming ‘lookers’ not ‘facebookers.’ To quote my husband, “Facebook is getting boring” — though he quickly checks friend’s status and browses through photos without commenting. He is typical of a growing trend: Zero engagement.

    Public Enemy’s political lyrics are still relevant in 2012. I look back to 1988 and think how cool was Flava Flav back then. Today? Not so much.

    With many of my Facebook friends complaining of the changing face of the social media site, I wonder what the future has in store for Facebook. Will it be “Public Enemy #1?”

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