Facebook IPO Sucks: Sell, Buy, Hold?

Facebook’s IPO has not performed well and some may call it a great disappointment.  The declining share price has somewhat affected the general sentiments of the stock market.  Add to this misery is that their ads don’t work as well as they should and user engagement is declining.  A recent poll conducted by Reuters shows more needs to be done by the company to convert its massive 900million users install base to advertising revenue.  The online poll indicates that 34 percent of its users spend less time Facebook (rated best social media tool) compared to 6 months ago while 80 percent never purchased anything because of its ads.

To make matters worse, granting users access to Facebook on smartphones do not create justice to the company’s revenue stream.  The reason is the mobile version offers limited advertising space and it is a platform that Facebook is facing a tremendous challenge to monetize from its mobile users.  Speculation even that the social media giant may acquire a mobile company to gain a foothold in the area.  We shall wait and see.

Another interesting finding from this survey indicates that the comments or recommendations posted on the wall of Facebook users’ friends are only responsible for converting 20% of users into making a purchase of the products or services.  Normally comments and recommendations from friends carry a lot of weight due to the trust factor.  However, the numbers do not justify the claim.  Surprise! Surprise!  Looks like Facebook has a long way to optimize and fine-tune the effectiveness of serving relevant ads.

After about 8 years since inception, Facebook is showing signs of aging.  People are getting bored with the site. This has happened before with Friendster and MySpace – gone were the glory days and once-popular websites.  The common disease that these sites have in common is the declining sense of novelty.  People expects more from Facebook who cannot deliver to the demands or simply rejuvenate the interest level.  Maybe because of the clutters, the spam comments, infringement of privacy, or simply people want to keep the social level down.  Who knows.  Facebook will need to figure this one out quick before it goes in the path of the dinosaurs.

The stock opened Jun 4 at $26.90, still well below its IPO price of $38.  Down 29.64%.

Filed under: Social Media News

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