Was Facebook (NASDAQ:FB) actually ready to go public?
After being the most traded stock in a day (on the day of the listing) Facebook's stock price has taken a beating. Facebook's stock price is down 50% from its listing price of $38.
An article in the Wall St. Cheat Sheet said, "Early Facebook investor and director Peter Thiel earned $396 million after selling 20.06 million shares in the company after the IPO lockup period ended. Following the sale of, of 640.1 million worth stock in the public offering, Thiel's proceeds hit more than $1 billion. He now has around 8 million Facebook shares, down from his 44 million shares prior to the listing."
Another article stated how Mark Zuckerberg lost $9 billion of his net worth, in the recent downturn of his company's stock price.
What is the reason for such a dismal performance on the stock market, by a social networking site which is expected to touch 1 billion users by September? Why does something so popular like Facebook go bad on the exchange?
There could be various reasons for why Facebook is not doing that well on the exchange:
1) Facebook does not have a strong business model. Agreed its one of the most used avenue for advertising, but how many people actually go on to even click the advertisement? When the social networking site was fresh, advertisements did work because it was a very new concept about 4-5 years back. But now, people do not click on advertisements that often. And if advertisements do not work, advertisers won't be willing to spend such hefty sums of cash and remember Facebook earns a maximum amount of its revenue from advertisements.
2) Why Facebook's mobile application, adds to the problem? Desktop users are also now not that interested in ads, and when it comes to the mobile application, the biggest disadvantage is that there are no advertisements on the Facebook's dedicated application for smartphones. And a recent statistics released pegs the percentage of mobile users at 64%.
3) Not many people take Facebook credits seriously.
So the final question that comes to our mind, was Facebook actually ready? Or was it a mistime? Unless Facebook comes up with a half decent solution for advertisements it will have to make sure that advertisers feel that the money they are investing is being put to good use.
After being the most traded stock in a day (on the day of the listing) Facebook's stock price has taken a beating. Facebook's stock price is down 50% from its listing price of $38.
An article in the Wall St. Cheat Sheet said, "Early Facebook investor and director Peter Thiel earned $396 million after selling 20.06 million shares in the company after the IPO lockup period ended. Following the sale of, of 640.1 million worth stock in the public offering, Thiel's proceeds hit more than $1 billion. He now has around 8 million Facebook shares, down from his 44 million shares prior to the listing."
Another article stated how Mark Zuckerberg lost $9 billion of his net worth, in the recent downturn of his company's stock price.
What is the reason for such a dismal performance on the stock market, by a social networking site which is expected to touch 1 billion users by September? Why does something so popular like Facebook go bad on the exchange?
There could be various reasons for why Facebook is not doing that well on the exchange:
1) Facebook does not have a strong business model. Agreed its one of the most used avenue for advertising, but how many people actually go on to even click the advertisement? When the social networking site was fresh, advertisements did work because it was a very new concept about 4-5 years back. But now, people do not click on advertisements that often. And if advertisements do not work, advertisers won't be willing to spend such hefty sums of cash and remember Facebook earns a maximum amount of its revenue from advertisements.
2) Why Facebook's mobile application, adds to the problem? Desktop users are also now not that interested in ads, and when it comes to the mobile application, the biggest disadvantage is that there are no advertisements on the Facebook's dedicated application for smartphones. And a recent statistics released pegs the percentage of mobile users at 64%.
3) Not many people take Facebook credits seriously.
So the final question that comes to our mind, was Facebook actually ready? Or was it a mistime? Unless Facebook comes up with a half decent solution for advertisements it will have to make sure that advertisers feel that the money they are investing is being put to good use.
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