Facebook’s IPO Buoyancy and Afternoon Beers

Facebook’s IPO Buoyancy and Afternoon Beers

Facebook’s recent IPO flop must have sent some shivers down the spine of not only some unfortunate investors but also Social Media gurus and fans, at float Facebook was valued at $104b; a week later its ‘valued’ at 25% less than that figure.

But how does a company which turned over $4b USD in last year, with profit only accounting for 20% of that amount, get valued at $104b? The truth of the matter is we live in an unknown and sceptical market and the Facebook IPO was the first of its kind, combined with the standard hype surrounding the Social Network and investors end up with the current situation.

Many analysts wrote off the stock as ‘avoid’ due to the issues Facebook had with its mobile platform, more to the fact that it was not generating any substantial revenue at all. Their development team introduced Timeline to create more advertising space for desktops but they are yet to crack (or decide) how advertising dollars can be made from their mobile platform.

The key issue for Facebook at present is how it tries to maximise its profitability now that the majority of users are going mobile; queue advertisements. By creating ad space on the mobile platform they can open up a brand new revenue stream and suddenly the IPO valuation becomes more a tad more realistic.

The truth is, most Facebook users do not care whether the company is publically or privately operated so long as it’s free, Facebook to most people is about interaction, participation and networking. Initial talk of flotation on the NASDAQ did not interest the majority of users outside of the US, why would a person like you or I take a risk on such a volatile stock in such a volatile time?

Facebook’s misinterpretation of its own business model and over-valuation draws parallels to many businesses own misunderstanding of Facebook itself. By splashing their latest offers and sales on a Facebook page ad nauseam, rather than creating something the reader will feel emotionally interested in; detaches them from the content as their brain quickly sorts it within the ‘ads’ section of their brain.

Some of the best social media campaigns will use obscure or left-field content and ideas to connect to the user, sometimes all you need to do is ask your followers: “Is it beer-o-clock?”