Thursday, May 31, 2012

The FaceBook IPO - Social Media's Last Stand?

Unlike the Google IPO which used its considerable popularity to reward individual investors and boost their stock value, Facebook used the same dynamic against their users, the retail investors. So, is this the end of Social Media - from the Entrepreneur's perspective?
In this version of the Wall Street Spring, the pinstripe set got to show how Social Media can be used against the crowd.
While it isn't exactly a revelation that Wall Street is rigged in favor of insiders, it wasn't supposed to happen with our friendly FaceBook.
The market expected the typical "popping tech IPO" based on the idea that you sell a tiny sliver of stock, limit availability to insiders who ride the pop as they dump it on willing outsiders (a/k/a fans of the company) in a way that keeps the prices up. 

Facebook did the opposite.
They let the considerable number of willing outsiders (a/k/a fans of the company) get their hands on the stock at just about the highest valuation of the stock as insiders lined up at the bell to blithely sell into the market - knowing that the pop had already happened before the opening. Instead of spreading the wealth, they knew just how many suckers there were out there to milk. Remember when they unleashed more stock just a few days before the IPO? That's when they know just how many fools there were. 

All they had to do was make sure to put out as much stock as they could to all of these willing buyer. There was so much that they jammed NASDAQ. Not that they care, they had already run for the hills.
Let's just say they un-occupied Wall Street.
This head fake by insiders took away scarcity and an underlying faith in the stock that had the effect of lowering prices. The old sell-a-sliver-and-let-it-pop technique usually meant the value stayed high as the insiders waited for the secondary offering. But not here.
As the price slides, the air goes out of the Social Media bubble - at least in the short term. In the long term? Let's just say that without trust, you really don't have a Social Media. You have Media that is used Socially.
Bottom Line - if you haven't already figured that the low hanging fruit has already been picked in the Social Media space, this should serve as notice.
What I would invest in though, is a Facebook porting utility - a website that lets you back up your Facebook data assets and lets you move them as you see fit while making it easy for you to get the word out to your Friends.
Let's call it SavingFace
by Alan Brody   

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