Friday, May 18, 2012

Facebook (FB) IPO Fails to Meet Hype

However it may be spun, the IPO of Facebook (NASDAQ: FB) was a disaster by any measure, as the much-hyped bringing of the company public resulted in a deafening yawn, as the social networking company ended its first day of trading a mere 38 cents over its initial offering price of $38.00, with almost 600 million shares exchanging hands.

Now that the company is under scrutiny as never before as to its business model, many are concerned over how it's going to make money going forward, as a significant number of advertisers and marketers don't consider it a good place to spend money.

I've heard that from a number of online marketers over the years who did a lot of experimenting on Facebook with very little return for their money.

The question is how long with advertisers go along with the hype with so little impact from their campaigns.

Having a huge number of people interact on Facebook is one thing, but very few want to interact with ads, or even take notice of them. That's the major problem Mark Zuckerberg, Facebook, and his team face ahead.

That's not to say the share price of the company won't grow, as it simply has too much publicity not to have people in states of euphoria dump their dollars on the company shares, not even knowing the risks associated with its dubious business model, which the company itself admits is under pressure because of privacy concerns around the world.

To make matters worse on its opening date, reports say that underwriters JPMorgan (NYSE: JPM) and Morgan Stanley (NYSE: MS) acquired shares in the company to keep it from dropping under its offering price. That doesn't bode well for the company.

Once the realization the business model of Facebook is flawed, who knows what the company will morph into via acquisitions and new focus, as pressure will inevitably mount for the company to grow revenue and earning in a way it hasn't proven it can do over time.

Maybe we'll eventually see a Facebook smart phone and tablet in the future. Growth will have to come from somewhere.

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