Facebook Friday Fan Frenzy Fizzles

Michael Hedges May 21, 2012 Follow on Twitter

Social media gives millions – tens of millions – their moment. Andy Warhol’s fifteen-minute rule is so last century and such an eternity. Now fifteen seconds is all you get, even with the ad.

The Facebook founders, crew and investors are still in the midst of their fifteen minutes, figuratively speaking. There’s a bit of money coming in and the user-base is nearly the size of India. It is yet another triumph of the internet; code-writing turned bling.

Cooked up in a Harvard dorm room, blessed by the smartest VCs in The Valley and adored by 900 million the social media phenomenon went looking for the big payday, a fabled initial public offering (IPO) on the NASDAQ. But, unsurprisingly, greed or hubris seeped in. The opening price was raised to US$38 and the number of shares offered increased by 25%. The IPO would value Facebook at more than US$100 billion.

So Facebook Friday came and went. The opening was delayed by a glitch in the NASDAQ computer system. Trading shot up to more than US$42 per share, even to US$45 at one point. There were more glitches, computer and otherwise. As the trading session ended the share price settled back to US$38 and looked like it might fall below the opening price.

Before the close it was underwriting banks that stepped in, so to speak, and saved the day, as well as their fees. Morgan Stanley ended the day with US$6.6 billion in Facebook shares. JPMorgan invested US$3.2 billion, Goldman Sachs US$2.4 billion. Chump change, it could be said. A week earlier JP Morgan CEO Jaime Dimon waved off a US$2 billion derivatives trading loss as “irregular.” By the end of Friday trading the Facebook IPO raised over US$16 billion.

As the new week arrives the Facebook share price may rise or may fall. For CEO Mark Zuckerberg other things will weigh more heavily, his Saturday wedding to Harvard-days girlfriend Priscilla Chan notwithstanding. The company’s revenue stream – US$3.7 billion, according to some reports – needs constant massage. Just before the Facebook IPO automaker General Motors announced, with significant coincidence, it’s advertising on Facebook was “ineffective” and had ended.

The advertising world, adoring as they are of all things new and novel, want reassurance that Facebook is up to the mobile media challenge, where Google is way ahead. At the moment Facebook only serves ads to PCs and laptops. Almost before the truckloads of money arrived at Facebook headquarters Friday afternoon (May 18) the company announced it had acquired mobile gift-giving apps startup Karma. In the US Securities and Exchange Commission S-1 filing four days before the IPO the company indicated the US$1 billion Instagram acquisition will not come to close as quickly as originally expected.

Google is also way ahead, better some say, at romancing the advertising people. The great and good of the ad world will soon gather in Cannes and social media is on the agenda with presentations from Facebook’s Paul Adams and Twitter’s CEO Dick Costolo. The Google presentation focuses on YouTube.

Media organizations have, by now, embraced social media as a means to reach and interact with fans. Facebook pages are very popular with broadcasters and publishers looking for that special engagement. The Facebook pages of Austrian public broadcaster ORF were so popular that the media regulator made them stop, competition with the private sector being unfair. How that interaction translates into ratings and revenue is, like everything else about social media, anybody’s guess.

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