Facebook IPO Now a Lawsuit
This morning there's a new story about the Facebook IPO - Zuckerberg, Morgan Stanley are now being sued over the Facebook IPO based on the dismal performance - based (claims the suit) on withheld knowledge of the weak growth forecasts. I was never a fan of the Facebook IPO - but I haven't been a fan of Facebook in general. If anything, I think it's the extreme case of The Emperor's New Clothes - on a nearly global scale.
The vast majority of folks on Facebook are totally unaware that they are what's being sold. That being said, the profitability of Facebook depends on the users clicking on the ads to generate ad revenue for Facebook. Minus that, it's dead. If advertisers see that their ad dollars are being wasted there, they will simply go somewhere else - it's very simple. With the onset of hand-held apps for Facebook, the ads are gone, and therefore, the revenue - but that's just how people want to use it. Free and freely.
Looking at the chart of the first few days of trading for Facebook, it doesn't look anything like what people were expecting - or should I say hoping for…:
What you've got is pretty much exactly what Zuckerberg planned - sell the idea of a great IPO, and hope that you'll therefore have one. But business people aren't, as a general rule, complete defuses. They tend to see what's really valued and what's not. At least more often than not. And this is a classic case of The Emperor's New Clothes.
There's nothing to Facebook that the users don't bring to it. Which means the only barrier to entry is pulling those users away from Facebook. I've looked at Google+, and while the first versions weren't all that great, the latest version on my iPhone is much better. It's still the case of trying to sell me, but I don't use it that way. Nor would I think that Google were valued by Google+ alone.
This is one IPO that I wasn't ever interested in, and am glad I'm not working for anyone that's heavily invested in it. It's a smoke-and-mirrors game, and it's not going to tank immediately, there are now too many shareholders that want it to succeed, but it's the beginning of the end for the "darling" of the industry.
But hey… it's just a social networking site. There were others, there will be others. And this will be just a distant memory - like Napster, Netscape, and AOL.