Flashback to 2001: How Far Can Facebook Shares Fall Before They Can’t Fall Any Lower?

Facebook’s stock performance since May IPO

From my Forbes.com blog The New Persuaders:

I’m having a flashback, and it’s Mark Zuckerberg’s fault. OK, not exactly the fault of Facebook’s cofounder and CEO, but his company’s stock.

The swoon in Facebook’s shares, culminating in a close today at less than half their IPO price, brought back memories of what feels like (but may or may not be) a similar situation I observed a decade or so ago in the wake of the dot-com bust. I was covering Amazon.com during its period of rapid expansion, when it was far from apparent to everyone that it would survive, let alone turn into a blockbuster business.

Amazon.com’s shares–which went public at $18, as it happens the price to which Facebook’s shares fell today–had dipped below $6 a share in late 2001. Amazon had huge costs from building out massive warehouses around the country well ahead of its level of revenues, prompting one analyst to predict that Amazon would go under unless it changed its expansionist ways.

It was the one time I remember wishing that I weren’t prohibited by BusinessWeek rules from buying stocks of companies I wrote about. Having reported on the company for several years and knowing how the economics of its business worked, I was pretty darn sure Amazon wasn’t going under and that founder and CEO Jeff Bezos knew exactly what he was doing.

And he did. Thanks to his vision coupled with a determination to stay the course while adjusting for market changes along the way, Amazon is now trading at $248 a share. A mere 100 shares bought then would have realized 40-fold return for a pre-commission, pretax profit of $24,200.

I don’t yet have the same feeling about Facebook’s stock that I had about Amazon’s back then. …

Read the complete post at The New Persuaders.

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Why Do Programmers Hate Internet Advertising So Much?

Facebook ad question (Photo credit: renaissancechambara)

From my Forbes.com blog The New Persuaders:

Another week, another pontificating programmer slamming online advertising. What is it with these guys?

The latest example is a steaming heap of linkbait from software developer and entrepreneur Patrick Dobson entitled Facebook Should Fire Sheryl Sandberg. That would be the chief operating officer of Facebook, whose purported crime is that she steered Facebook toward being an ad-supported company.

In Dobson’s telling, while Facebook cofounder and CEO Mark Zuckerberg was off at an ashram in India, onetime Google ad exec Sandberg mandated that Facebook would henceforth be an advertising company. Proof of her folly? Facebook’s now worth half of what it was at its IPO three months ago as it “continues to flounder in advertising hell.”

This, despite the fact that Facebook will gross about $5 billion in ad revenues this year, despite the fact that its current market cap is still more than $40 billion less than eight years after the company’s founding in a Harvard dorm.

Thousands of Web developers would love to flounder this badly.

Dobson’s preferred alternative is that Facebook should gradually phase out advertising in favor of–and I have to get technical here, because the bigger picture he provides is fuzzy–selling access to its application programming interface. That way, developers can build businesses like Zynga did on top of the social network in the way personal computer software developers built applications atop Microsoft’s Windows. From his post:

… There is massive value in the social graph and the ability to build applications on top of it. I believe the value is greater than all of the advertising revenue generated on the web to date. … What is the best way to monetize the social graph? To sell access to the social graph! … Developers can then figure out if advertising, or micro transactions, or payed access is the best way to monetize the social graph.

I’m not really sure what “selling access to the social graph” would be, though it sounds like the result could make Facebook’s many privacy gaffes to date look tame.

But the bigger problem is the persistent implication by tech folks like Dobson that advertising is beneath them, and beneath any intelligent human being. Now, I’m no huge fan of most advertising, and all too often it is indeed lame. But there’s no doubt it can be useful at the right place and time, and even when it misses the mark, advertising is a small, remarkably frictionless price to pay for a whole lot of free Web services.

The notion that advertising is evil, to use a favorite term of Google critics, or at least useless is a longstanding meme in Silicon Valley. It goes at least as far back as Google’s founding, before it became–right–the biggest online ad company on the planet. Cofounders Larry Page and Sergey Brin famously wrote in their Stanford doctoral thesis describing Google that advertising could pollute search results.

Why this antipathy to advertising? A lot of tech folks seem to believe they’re immune to the influence of advertising. More than that, they assume that no one else is much influenced by it either (despite ample evidence over many decades that ads do influence people’s attitudes and behavior). Therefore, the reasoning goes, ads are nothing more than an annoyance, an inefficient allocation of capital. Dobson accuses Sandberg of a “rampant lack of business creativity” that has “no place in centers of innovation,” later saying she should start an ad agency in Miami. …

Read the complete post at The New Persuaders.

Marketers Send Facebook Message In Q2: Show Us

Facebook CEO Mark Zuckerberg (Getty Images North America via @daylife)

From my Forbes.com blog The New Persuaders:

Facebook may have disappointed investors with its first earnings report as a public company, but the results also reflect disappointment among an even more important group of constituents: marketers and agencies.

It’s not that Facebook did badly on the sales front. It exceeded admittedly dampened expectations, not to mention hitting the Street’s profit target. Nor do the folks who write the checks to run ads on Facebook spend much time watching FB on the stock ticker. “Whether the stock is up or down is not a big concern,” says David Berkowitz, VP of emerging media at Japanese ad giant Dentsu’s digital agency 360i.

What is? Results. While Facebook today trotted out plenty of stats and examples of success stories for the Sponsored Stories that it clearly views as the most effective ad it offers, the company hasn’t yet managed to close the deal for many marketers and agencies. “Facebook has to do a better job of articulating the value of its advertising to the brands,” says Heather Pidgeon, VP of services for iProspect, a digital agency owned by Aegis Group. “They have yet to say, ‘This type of advertisement works for this type of advertiser.’” …

Read the full post at The New Persuaders.

LIVE: Facebook Shares Plunge On Disappointing Q2 Earnings

English: Mark Zuckerberg, Founder & CEO of Fac...

Facebook CEO Mark Zuckerberg (Photo credit: Wikipedia)

From my Forbes.com blog The New Persuaders:

Facebook managed to hit the second-quarter earnings numbers investors had expected, but that wasn’t nearly good enough as shares plunged in after-hours trading.

The social network earned a non-GAAP 12-cent profit, on target with expectations, on revenues of $1.18 billion, the latter up 32% and a tad above estimates.

Ad revenue was up 28%, to $992 million, well above analysts’ forecasts, though still below the first quarter’s growth rate. Facebook suffered a net loss of $157 million, or 8 cents a share, largely because of accounting for employee stock plans post-IPO.

Shares rose as much as 6% in extended trading initially, but then quickly fell back almost 11%. That’s probably at least partly because Facebook didn’t offer a forecast, at least ahead of the conference call. They fell more than 8% at the market close today. They now sit at an all-time low of just under $25. That’s 37% below the $38 IPO price.

A quick take from Global Equities Research analyst Trip Chowdhry: “Overhyped and underdelivered.”

Here’s what CEO Mark Zuckerberg and other executives had to say about the quarter in the company’s first earnings conference call: …

Read the complete post at The New Persuaders.

Pres. Obama Live at Facebook Town Hall Meeting

President Obama is about to start his town hall meeting at Facebook headquarters in Palo Alto, as thousands of Facebook members watch it live online. I wasn’t able to attend live, but I’ll join the online throng to hear what he has to say to his interviewers, Facebook CEO Mark Zuckerberg and COO Sheryl Sandberg, and to the many people (supporters, enemies and wingnuts alike, if comments here are any indication) who will be asking questions online. I’m liveblogging it here.

And it’s underway as Sandberg welcomes the president. “Even though it’s Facebook, no poking the president,” she says. Now Zuckerberg comes on in a suit (CORRECTION: nice jeans and a jacket), (loose) tie, white dress shirt… and running shoes. He pauses. “Sorry, I’m kind of nervous, we’ve got the president of the United States here!” And so he introduces Obama, who appears to get almost as many cheers from the studio audience as Zuck.

“I’m the guy who got Mark to wear a jacket and tie,” Obama says. So now we know. “Second time!” adds Zuckerberg. (First time was a January dinner with Silicon Valley luminaries and Obama.) Now they both have their jackets off–no sweating (visibly) for Zuckerberg.

Continue reading

Facebook’s New Messaging System: All Your Messages Will Belong to Us

Facebook is set to announce this morning what many people believe is an email system that might go up against Gmail and other Web mail services. Other folks are not so sure a head-on assault on standard Web mail is a great idea, or even a likely one. In fact, CEO Mark Zuckerberg told Robert Scoble that it’s not really email as we think of it, which isn’t surprising. Facebook clearly has the social DNA and the technical chops to add its own wrinkles. Not least, it certainy has the financial resources to do almost whatever it wants–or, perhaps, the financial imperative to fulfill the almost ridiculous expectations by shareholders, even if they are technically private. But we’ll find out shortly.

UPDATE: This is not a new email system per se, though clearly Facebook would like to see it subsume email in coming years–and for that matter, subsume pretty much all your communications (which worries some people). Instead, it’s Facebook’s attempt to 1) help people organize their conversations among various communications systems–email, Facebook messaging, SMS and chat–into single threads; and 2) help people view only messages from close contacts by default, although there will be separate folders for messages from other contacts and for apparent spam. The new messaging system will be by invite-only at first but roll out widely over the next few months.

My quick take before getting a chance to try it out (which I will shortly, thanks to a fast invite from Facebook): This is not a revolutionary product out the gate, and you won’t want to dump your email accounts yet, if ever. Many details remain to be worked out, from how it will work with non-Facebook members to how well it sorts messages in the various ways promised–which is why it’s not rolling out to every Facebook member yet. And like any product offered up by a Web powerhouse, whether it be Facebook or Google, we’ll have to see whether the data and potentially privacy we give up is worth the value. But offering a way to bring together various communications methods in one place–and organize them automatically by conversation thread, as well as by which are likely to be most important to you–seems like a smart move if Facebook can pull it off in a smooth way. That will be the trick.

Here are my liveblogged notes, with some of the highlights in bold. And here’s Facebook’s blog post on the new messaging system, which sums it up thusly: See the Messages that Matter.

And we’re underway. Continue reading

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