The dog days of summer have arrived early at Facebook, which has been Dis-Liked by investors of late. Facebook greeted the month of August on a downer, with shares trading in the low 20s.
Shares are now down 45 percent below the IPO price of $38. But, the Facebook selling frenzy could get a lot worse. That’s because on Aug. 16, insiders–including company officers, directors, and employees–get the green light to sell about 270 million shares of Facebook. Why would they sell? It’s called capital conservation.
Where did Facebook go wrong? Plausible answer No. 1: it didn’t. It still has millions of users, strong brand recognition, and a boat load of cash from its botched IPO. Answer No. 2: Timeline, the ham-handed attempt to move users e-mail to Facebook, and bad PR from the IPO.
But I have a different question: what does Facebook produce? It’s not a news site, it’s not an e-storefront like amazon.com. What it produces is Internet chat, though in a rather diffused way. There is no Facebook campaign in support of this or that. But, because of its numbers, Facebook is still a huge marketing program that markets Facebook.
The problem with businesses such as these is that they are bandwagons. As long as the bandwagon is based on billions of “likes,” all is well and Mark Zuckerberg is a hero. The trouble is, Zuck is no longer a Harvard student running a business out of his bedroom. He may soon wish he were. But now, Zuckerberg is the chairman of a publicly traded company, and unless Facebook’s investors are so rich that they don’t mind losing half their IPO dough in less than 90 days, he will eventually have some explaining to do.
Right now, anyone with a browser can see that Facebook is a leaky boat. Recently, Facebook’s director of platform partnerships handed in his resignation. Ethan Beard follows chief technology officer Bret Taylor, who said he was logging off in June. The company’s director of product management and director of public policy have also jumped ship. Maybe they know more than the investors.
In one of those things that happen on the Internet, Forbes asked “Is Facebook Becoming a Joke?” before changing its headline to “Is Facebook’s Credibility Eroding?”
The story cites GM’s decision to pull its ads from Facebook a few months ago as evidence that users don’t pay much attention to ads on Facebook.
Does it matter what happens to Facebook? Yes, because the Internet community has looked upon Facebook as a leader, though few could say what Facebook is leading to. What it might be leading to is Myspace.com. Myspace used to be Facebook, and Rupert Murdoch was so impressed, he bought at the top of the market. So investors shouldn’t feel too bad. The moral of the story might be that a company based on a shared concept of cool goes cold when people start to disagree about what is and what is not “cool.”
If you require further information or have any specific questions, don’t hesitate to give a member of the GoPromotional team a call on 0800 0148 970 or simply email us today.
