The Facebook IPO was mired in complications. Shareholders are unhappy. And now the Securities and Exchange Commission (SEC) is rethinking its pre-IPO quiet-period rules because of the problems with the Facebook IPO in May 2012. We asked our Zintro experts to share their thoughts on this.
Aaron Ganz, a marketing and sales expert, says that the Facebook IPO was drastically overvalued. “Overly optimistic traders, corporate greed, a shift in members viewing Facebook on smart phones versus PCs, which resulted in fewer advertising opportunities, are among the many reasons for a lower than expected IPO and corresponding current stock price,” Ganz says. “And while its revenues represent only one percent of the world’s $507 billion in total ad spending, the growth opportunities for Facebook are limitless.”
Ganz says that there are three reasons Facebook is too big to fail:
- Lifestyle: Facebook is not just a software application; it is a way of life.
“Individuals can find lost family members, old classmates, share pictures and events with friends and family, and chat live with other members. According to Mashable.com, the average person spends five hours and 46 minutes per month on Facebook, up from four hours and 39 minutes back in June of 2009. This is more than Google, Yahoo, YouTube, Microsoft, Amazon and Wikipedia combined,” explains Gant.
- Advertising Machine: Facebook relies on ads to drive revenues.
“While there has been a shift in members’ viewing patterns on Facebook from personal computers to mobile phones, Facebook has barely scratched the surface of reaching out to other companies to partner with,” says Ganz. “Companies with large networks of people have the ability to exponentially grow the views and ad opportunities. The same untapped potential is true of third party software applications that allow Facebook users to share content with online friends and login with their existing Facebook logins.”
- Demographics Collection and Meta Data build value.
“The most significant accomplishment of Facebook is the statistical data they have compiled. Users fill out their age, physical location, interests, simply by signing up. Pages users view, topics they frequent, companies they visit, all are collected which allows Facebook to search for patterns that their advertising department can capitalize on,” says Ganz. “But even more than that, Microsoft, Facebook, and Amazon have all have teamed up to share demographics (meta-data) from one site to another. While in many cases the personal information or identity of a specific person cannot be revealed, those seeking to advertise now have a larger reach, and the most precise statistics ever available. As the number of technology partnerships increase, the value and advertising opportunities increase.”
Ganz points out that other social media platforms, such as MySpace, have gone by the wayside. This is not because they weren’t useful, but because their technology did not keep up with the changing needs and demands of their users. Facebook understands their users. “Improvement of existing features, incorporating new features such as Timeline, which allow users to display more content and allows for more advertising opportunities, a large R&D budget, and an untapped world market guarantee a long and profitable future for Facebook,” he says.
Richard Sibincic, a networking systems engineer, says that the Facebook IPO was a mistake. “Aside from the insider trading info that was not publicly shared, the IPO has taken the private company application further down a path that has very little resemblance to the social network that won over users from MySpace,” says Sibincic. “Facebook is more of a familybook. Sharing is no longer simple or social, unless it relates to some corporate ad or need for market data mining.”
“There are many issues that led to the missteps. One example is how Facebook, without permission or notification, changed users’ emails to an @facebook.com email. If that wasn’t bad enough, they underhandedly hid users’ originally set, personal email addresses from their friends/network. Facebook also selects which posts people see from their friends, only providing users with a method to screen out more of their friends posts,” says Sibincic.
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