Tanked. Slumped. Declined. Tumbled. Skidded. Belly-flopped. Whatever word you use, on its second day as a public company, Facebook’s stock fell 11% to close at $34.03, below Friday’s offering price of $38. At one point, Facebook’s stock was down 12%, to $33.56 on the Nasdaq. There went the initial euphoria over the social media company.
But why the short honeymoon?
CNET says it’s a simple fall from a bubble of hype to reality:
There are a lot of reasons: glitches with the Nasdaq system that slowed early orders, an IPO price that got a last-minute bump, and indications of lackluster demand from institutional investors. But the most important is the underlying concern and growing realization that Facebook just isn’t worth $100 billion.
Nearly 1 billion Facebook users log into the site each month, and nearly half a billion check the site daily. As noted before, Facebook has yet to figure out how to make a real profit from all those users (from us) through advertising and through its mobile app. The problem for Facebook lies in what people use it for and in how they use it, in ways different from Facebook’s main rival for ads, Google:
The dilemma… is people don’t go to the site to be bombarded with ads. The display ads that do show up generate a decent amount, but given its large base, Facebook should be generating more revenue….
Google, on the other hand, serves up targeted ads based on what a user searches for, something advertisers and companies are willing to spend bigger bucks on. With a search query, there’s often an intent to buy that’s not there when you’re on Facebook to check on the latest status updates of your friends.
On Friday, with its initial price per share of $38, Facebook was valued at $100 billion. The stock’s performance on Monday suggests that, while the company might be worth that much someday, people don’t think it is now because, says CNET, ”the company still doesn’t quite know how to fully take advantage of its huge user base to generate revenue.”
Facebook might be a great way to keep with up with the latest that family members and friends are up to; it is hard to avoid it, as so many people use Facebook to share information, photos and such that in an earlier era (i.e., three or five years) they would have sent via email. But just recently, another mother of a child on the autism spectrum noted to me how difficult it is to keep of things — bits of advice, helpful websites and resources, shared snippets of “a day in the life” raising a child with disabilities — on Facebook.
As a debate on ZDNet proposes: Will Facebook still be the “king” in five years or relegated to “has been” status?
(Remember MySpace. Remember AOL.)
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Photo by Keith Bloomfield