In the eyes of his distractors – a fast-growing army of small investors, however, Mr Zuckerberg just dumbed his shares at the expense of the former, after playing his role in determining the initial share prize at $38, which many believed as something heavily over-priced at the IPO.
Mr Zuckerberg who married Priscilla Chan, his long-time fiancée of Chinese origin, just a day after the IPO, failed to keep the growing tide of criticism at bay by the good news of the big personal event. Although, the 28-year-old Harvard dropout ditched his jeans and hoodies in favour of a suit and tie, there are plenty of people who simply refused to abandon the belief that Mark was still Mark.
When the share price nose-dived just two days after the well-publicized floatation, Mr Zuckerberg has made almost $174 million. Those who invested a relatively small sum in the company at the outset, became instant billionaires too, thanks to the carefully planned business mission.
However, the hype did not last long: within a week, the shareholders sued Facebook and the two investment banks behind the deal – Morgan Stanley and Goldman Sachs. Adding insult to the injury, three government level inquiries were launched in order to look into the nitty -gritty of the IPO; they are by the Securities and Exchange Commission, the Financial Industry Regulatory Authority and The Senate Banking Committee.
In a bizarre development, the analysts of the two banks in question are accused of downgrading the earning potential of Facebook in the middle of its IPO! Moreover, the two banking giants are singled out for discriminating against the small shareholders- giving out earnings estimates only to their favourites.
The earning potential of the social networking site, according to clever analysts, were related to a few parameters with the most notable one being its massive user base. They pinned their hopes on the targeted advertisements which appear on Facebook pages in line with individual customer profiles.
Since the appetite of users to click on the advertisements is on steep decline, the risk of advertisers deserting the site is on the increase in proportion to the former. General Motors fired the first salvo in this regard, a few weeks back; there may be more to follow suit.
As some web browsers offer tools to block advertisements on web pages all together, the advertising model may run out of steam in due course, even before the users become wary of the concept.
The first person to be alarmed at the development in public was none other than the chief operating officer of the Facebook. Sheryl Sandberg, the Harvard-educated executive, implicitly begged of the students of the Harvard Business School to click on advertisements while using the Facebook on the ground that the company had already gone public.
Ms Sandberg’s desperation will not cut any ice with the advertisers, though, as such a plea makes mockery of the entire pay-per-click advertising concept: unwanted clicks cost advertisers money without generating any corresponding revenue.
Facebook cannot go on bragging about its user base in order to lure advertisers for ever, unless it offers something unique to its users. It is not a secret anymore that the Facebook has made the removal of an existing account next to impossible; moreover, it has made little attempt to stop users from creating multiple accounts. I know teenagers who are boasting about creating as many as 20 accounts when they want to live up to what adolescence demands on regular basis.
For how long can the Facebook rely on the hypothetical loyalty of the users? Perhaps, until the next ‘big thing’ comes out of the blue. We are fully aware of the fate of MSN Messenger, Yahoo Messenger, Myspace and Yahoo itself.
Yahoo, which saw its share price rocketing after its IPO, is currently being traded at $15 a share – down from $442 at its peak in Janurary 2000. Myspace, which was bought by News Corporation for almost $600 million in 2005, changed hands in 2011 for a price tag of just $35 million, after making staggering losses for the parent company. The era of boom-and-bust of .dot com is awash with short-lived over-hyped ‘success stories’. The ill-fated AOL-Time Warner deal is the mother of all failures.
The Facebook may not be there yet. However, Mr & Mrs Zuckerberg are intelligent enough to know that the share price of their company – and its long term survival – will not be subjected to their collective charm alone. If social networking sites symbolize baits, the computer users, by nature, are quite prepared to emulate shoals of fish in the vast ocean of internet. That is the undisputed pattern of the relatively young internet.
http://www.asiantribune.com
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