Slashdot Mirror
Facebook IPO Stumbles Out of the Gate
Facebook's much-hyped IPO kicked off today, but an anonymous reader points out that things didn't go quite as smoothly as investors hoped. "Public trading didn't get underway until about 11:30 a.m. ET, half an hour after it was supposed to. The delay was likely caused by the huge amount of interest in the stock – especially by retail investors. In the first few minutes of trading, Facebook shares were only up between 5 and 10 per cent and by noon were essentially back down to the IPO price of $38. Many observers had expected the stock to double in price by the end of the day, if not sooner." The NY Times has a data visualization showing how Facebook's IPO compares to other tech IPOs throughout the years, and how the first day of trading treated all of those companies. Meanwhile, the debate is lively over whether the social networking giant will be a good investment. "The banks helping take Facebook public want us to value this 8-year-old upstart at as much as $104 billion, more than Disney or Kraft Foods, though those companies earn three and four times more. That top valuation is also more than 100 times Facebook's earnings last year, versus 13 times for the average company. At such a high price, it will take years for this so-called earnings multiple to fall to a more reasonable level, and that's assuming the company can maintain its torrid earnings growth."
(points) Ha ha!
"Facebook hasn't yet really spent time on monetization. Their primary goal has been quick growth and they have greatly succeeded in that."
Where have I heard that before? Ah, yes, we're back to valuation based upon "eyeballs" or "clicks." How'd that work out last time?
A bunch of investors throwing tons of money after dot-com companies on the belief that these companies, despite having no earnings, would somehow grow big. Then in 1999-2000 the bubble burst.
Today's investors are not going to make the same mistake of going after another dot-com company that has almost no earnings. The memory of 13 years ago is still too fresh. (Plus many of them are probably short on cash due to the ongoing recession.)
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
Maybe I should suggest to my company that they start giving our products away for free just to grow the user base. Apparently having revenues lowers your stock price.
AccountKiller
announced this IPO, I was skeptical. Then they amended it, eight times (I think). Now, it seems to me that we've blown a rather large bubble - as the article says, this 104 billion is 100X their earnings last year. I wonder which set of retirees or naive persons will lose their asses on this one when it pops.
I remember when, recently, myspace was quite large. Does anyone else have a myspace page still? Now imagine if you owned 100 shares of that company. . . . . Now imagine your investment person has most of your retirement tied up in that company. . . .
Thoughts?
Last time I heard it was Google's IPO. That turned out pretty darn well.
Does anyone have a toothpick? I have AstroTurf stuck in my teeth from reading that. I lived through the dot-com boom... Facebook is great and it will/can make money, but I haven't seen this much hype since Pets.com
Sig. Sig. Sputnik
FB knows your stated desires. GOOG knows you're hidden desires. FB gets you when you're goofing off. GOOG gets you when you're actively seeking something and you're ready to buy.
GOOG is undervalued.
Facebook IPO Crashes Nearly 10% After $42.05 Opening Price - and the Underwriters had to STEP IN, to prevent a free-fall in decline. That is - no matter what you'd spin it - a market manipulation.
Bubble, meet needle!
"Flyin' in just a sweet place,
Never been known to fail..."
Seems to have been quite great for Google, which spent its first six years (1998-2004) without making anything and just running things on venture capital.
Actually not quite true, in the year+ before Google's IPO they were making money hand over fist, far more than they had thought they would be, and so they were hiding it:
By 2003, AdWords Select was serving hundreds of thousands of advertisers and making so much money that Google was deliberating hiding its success from the press and from competitors. But it was only a launching pad for the next brilliancy.
source
MEME TIME
Remember M$ and "Monkey Boy"?
Remember MAFIAA ?
Here's our NEW MEME. Carry this in every Facbook CEO Namecheck:
"Suckerborg".
Thank you. That is All.
"Flyin' in just a sweet place,
Never been known to fail..."
I am not sure which is more disappointing. The parent post or the people who voted this insightful.
Google and Facebook are hitting the Holy Grail of marketing. They do not advertise to generic demographics. Instead they are able to market to the individual. The more information they can find out about you, the more effective their advertising.Instead of marketers blindy throwing out products to 25-34 year old females, they will be able to disect the market in finer terms and use their money wisely. The more effective the advertising, the more money they can charge. So while you laugh at the idea, Google's founders could lose a billion in their couch cushions.
See my journal for slashdot ID's by year. Mine created in 2005. http://slashdot.org/journal/289875/slashdot-ids-by-year
Facebook is the identity of the internet going forward.
MySpace is the identity of the internet going forward.
Geocities is the identity of the internet going forward.
AIM is the identity of the internet going forward.
YAHOO Chat is the identity of the internet going forward.
Opendiary is the identity of the internet going forward.
Fucking 4chan is the identity of the internet going forward.
I think it might be a bit bold to say that this one site will be the face of the internet from now on. . . The internet is a fickle mistress, and small changes today can equal large changes in the future. The only difference between those other companies and facebook? Time. (yes, I know that some of them are still successful, I was making a point, just go with it)
1) Brand new user
2) Posts a multi-paragraph post within a minute of the story going live
3) Glowing review of Facebook that goes against every conventional wisdom
4) Gets basic facts wrong about finance
5) Gets basic facts wrong about business etiquette
Woo. More astroturf.
To be a bit more on-topic: the facebook valuation is insane. A 100 times current earnings? It'll be years before Facebook can justify that kind of price, and that's assuming that it will keep growing as it has - which is an insane proposition, considering that there aren't that many more people who CAN join Facebook.
Those who can, do. Those who can't, sue.
And we have absolutely no proof that they ever will be able to effectively monetise Facebook or that it is even possible to the extent that all of these optimists believe that it will be.
Right now Facebook's value is 99% smoke and mirrors, and I would never invest in it.
Troll is not a replacement for I disagree.
No comments about Zynga, the makers of Farmville, tanking?
Twice during the day (so far), their stock dropped more than 10% in 5 minutes and resulted in a halt to trading.
http://money.cnn.com/2012/05/18/markets/facebook-social-media-stocks/
Learning HOW to think is more important than learning WHAT to think.
I'm curious if price discovery is accurate right now since NASDAQ isn't delivering execution notices for FB orders. I know eTrade was down earlier (even the public website) and Fidelity has a notice that FB trades are stuck and have been since it started trading.
All that makes me curious how many orders are stuck out there in limbo land? Will people find out tomorrow that the order they thought was cancelled got filled?
Seems like a big screw up that NASDAQ doesn't want anyone to know about. I don't think you could have mishandled an IPO any further.
Natural != (nontoxic || beneficial)
Right, because Facebook did such a sterling job of finding people whose profile made it appear like they had with the cash to spend on a General Motors car. OK, maybe a bad example given the current state of global finances, but when was the last time you heard mention of a successful Facebook marketing campaign? I don't even think Zynga has done that, and they are about as linked at the hip to Facebook as you can get.
I think that's the crux between Google and Facebook, really, and probably why Zuckerberg seems so interested in integrating search into Facebook all of a sudden. I'll bet plenty of people post things to Facebook about how much they like some expensive trinket, but it's Google that gets to see which ones are actually looking into making the purchases. My long term prediction; neither company is going to go away anytime soon, but Google is going to see the growth while Facebook is going to start a slow slide into mediocrity with the next few years unless it can find a major source of revenue in all those terabytes of data it has.
UNIX? They're not even circumcised! Savages!
People still print ads? On paper?
It's that stuff you see outside, under the daystar.
-- This space for lease, low setup fee, inquire within!
And then there are the people who hate him because he really is a shitty human being long before the social network was made.
.
I wonder if Mr. Zuckerberg knows that the Internet has beat him to it.
Congratulations on missing the point.
Google and Facebook are hitting the Holy Grail of marketing. They do not advertise to generic demographics. Instead they are able to market to the individual.
Advertising is still only worth anything if the people seeing the ads actually buy stuff.
Just this week, GM pulled out of Facebook advertising, representing a loss of millions of dollars to Facebook. Here's the money quote, in every sense, from that link:
GM dropped its Facebook ads because they were less effective than other options such as Google's AdSense, the sources said. Facebook's ads garner about half the clicks per page view, a measure of effectiveness, compared with the average website.
It turns out that focussed advertising is much more valuable when it's related to something that someone is searching for or reading about right now, and people who use Facebook a lot are (shock!) not doing it because they enjoy the ads. IIRC, there was another survey reported this week, in which about half of the Facebook users questioned said they would never click a Facebook ad.
The more effective the advertising, the more money they can charge.
Exactly. And Facebook aren't doing very well on that score.
What's more, the growth in their user base so far has been based on social pressure and reaching a critical mass of users who bring their friends along with them through networking effects. There simply aren't enough people in the world for them to carry on doing that at the same rate.
Surprising, I know, but I'm in the "Are you kidding?!" camp on this one.
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
Yeah, but it sounds like they're just propping it up artificially at this point to maintain the opening price.
Branding would be about the only kind of advertising you do there unless FB gets into phones, gadgets, etc.
Actually, branding is the LAST thing you'd do on Facebook. Place your ad on FB, and your brand would be seen as Spam, instead of as something valuable.
Why would any advertiser place their brands ad next to your friend from high-school throwing up, when they can place it next to a Kate Moss cover story in Vogue?
So, that's how branding works.
There is a significant difference tho; with google there is actually a fair chance that the searcher is looking for a product related to the actual search at hand, while with facebook you're basically trying to surreptitiously slip sales in to a largely unrelated activity.
Targetted advertising simply isn't that worthwhile if you cant target it temporally. You may know my interest intimately, but you're not going to sell me anything unless I'm actually in the market for that specific thing at that specific time. At best you can build brand awareness, but there are many ways to do that that are at least as good or better by simply targetting specific venues, mags, etc.
Actually.. oddly enough that would mean that facebook priced its IPO perfectly. Ideally an IPO comes out at near or at the price the market will pay for the stock -- that is -- maximizes the value to the company for selling its shares. If the stock price had doubled today that would be good for investors that bought into the initial subscription to the IPO, but BAD for Facebook, and bad for Facebook's owners that sold off in the intial round of sales.
What makes media happy and what makes the company successful are not always the same thing.
-GiH
That's not true. This information is all public and easy to look up...
Google had $3.2B in revenue in 2004, and their IPO made them worth about $24B. Their net income the quarter preceding the IPO was $80M, and diluted EPS was $0.30.
Facebook had $3.7B in revenue in 2011, and their IPO made them worth over $100B. Net income last quarter was $137M, and EPS was $0.09.
Revenue and income are clearly in the same ballpark, but valuation and EPS sure aren't. Seems to me FB is in fact way overvalued right now...
And even more interesting to note is Google's revenue and income took off like a hockey stick in the quarters following their IPO (and thus so did the stock). I just don't see Facebook's revenue doing the same. There may soon be a lot of disappointed investors who naively assumed FB stock would be going the same route as GOOG just because it's a "trendy company" rather than actually looking at the financials...
Targeted adds...
ARGH!
Sorry, second time I've seen this. Driving me nuts. It's "ads". It's short for "advertisements". Count how many 'd's you see in "advertisement". You see "adds" when a new group of mobs attack you during a fight. You see "ads" in a newspaper. Well, you used to, back when people still read newspapers...
"Convictions are more dangerous enemies of truth than lies."
There are a few issues with Facebook making a lot of money:
(1) - Click through rates of Facebook ads are abysmal, at best.
(2) - People use Facebook to share stuff, not to look for stuff to buy, thus they ignore most ads. Reason Google click through rates are better because people look for stuff on Google, often to buy.
(3) - Growth of Facebook in countries where the population has spending power, thus being desired products by advertisers, has stalled or it's very slow.
for the 5000th fucking time NO they don't want to play Farmville or meet singletons in their area now.
Tell me about it. I tried to meet singletons in my area, but they kept giving me the same one over and over again no matter how many times I asked for a new one.
https://www.eff.org/https-everywhere
Google serving ads is different. For anyone seaching for a product they can throw sponsored links at the top of the search results page and they are often relevant to the person searching. This particular advertising mechanism actually makes sense and is probably one of the most effective around. Not that everyone is doing a search where ads are welcome, but that nobody goes looking for products or services on Facebook ads there are never relevant to what people are doing. I suspect FB click-through rate is much lower than Googles. OTOH, FB ads have images and reflect your "likes" even if they are not related to what you're doing at the moment. I suppose the jury is still out on this.
Once upon a time, a large portion of web sites had Geocities buttons on them, and forums listed AIM names.
You do not have a moral or legal right to do absolutely anything you want.
Actually.. oddly enough that would mean that facebook priced its IPO perfectly.
From the news I heard, the underwriters had to step in today to assure the stock didn't go below the IPO price. The pricing of the IPO was not as "perfect" as you assert.
Nope ... it was overpriced.
The only thing that prevented the stock from going below the IPO price was MASSIVE underwriter support (i.e. the banks that got paid to do the IPO buying the stock in large volume whenever it hit the IPO price of $38).
Look at the price chart here:
http://finance.yahoo.com/echarts?s=FB+Interactive#symbol=fb;range=1d
See the flatline at $38 from 3:30-4:00pm? That's due to the underwriters buying the stock in massive volume providing support at $38. If you monitored the detailed stock quote during this time (as I did), you'd have seen that the bid volume, normally single or double digit lots spiked to a continuous 99999+ lots (i.e. 10,000,000+ shares) during this time - i.e. the underwriters were essentially buying unlimited volume of the stock at $38 (to artificially support it). From the trade volume during that final half hour, I reckon the underwriters bought well over 50M shares (10%+ of the 420M shares floated).
So... stumbled out of the gate is being kind. It really slithered out like a giant wet turd.
Lots of Slashdotters think branding is a number's formula. It's not.
It's an art.
I'd love to see them try and quantify Kate Moss. It's why Vogue charges $150 CPM, and Facebook $0.01 CPM.
Conde Nast gets $4 billion/yr from about 5 million readers. Facebook needs 800 million people to get that much.
Social media really is useless as an advertising medium. Tech nerds should stay FAR away from the media world. Don't get into the art world if you don't understand art.
There may soon be a lot of disappointed investors who naively assumed FB stock would be going the same route as GOOG just because it's a "trendy company" rather than actually looking at the financials...
Those aren't investors, those are gamblers. A fool and his money...
Others have mentioned the underwriter issue, but take a look at this article. Basically, the underwriters of the IPO stepped in every time it looked like the stock might hit $38 in order to avoid it going negative. So they end up with more stock than they planned on, which they will be hoping to offload in the next few weeks. The idea being that if the stock tanked out of the gates it would shatter confidence and they would lose money, but if they can maintain even or positive valuation for a little while it will increase investor confidence and they will be able to offload these extra shares bit by bit. Basically perfectly legal manipulation of the stock price in an attempt to assuage investor concerns. The fact that the stock didn't really pop does seem to suggest that they didn't undervalue it (which has been a favorite game of underwriters in the past, as it puts more money in their pockets), but you can't really tell from the trading results whether it was overvalued because, at least for now, there are major banks protecting the stock price.
Personally I think the stock is rather overvalued (I'd say by about 2-3 times based on potential for growth; I just don't think there is that much headroom for user growth, and thus far they haven't been terribly good at monetizing their vast user base), but then I'm not a trader and my talent for picking stocks has yet to make me rich (or even a significant profit).
Check out the NASDAQ chart; http://www.nasdaq.com/symbol/fb/real-time
You can see time they've stepped in. During that flat line you can see they've stepped in 5 or 6 times in just 20 minutes.
What is also interesting is that Zynga's stock dropped 23% during the day, and ended the day at -13%. Nasdaq actually had to stop trading on Zynga twice to keep the stock from dropping even further. And they bring in a lot of money for Facebook. So obviously Facebook's performance in the IPO has shaken a lot of people even in regards to one of their largest business partners.
The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil