Facebook’s splashy IPO was meant to herald in the new social era. Instead, it has reconfirmed the hype cycle. Facebook’s honeymoon period of inflated expecatations soon cratered into the trough of disappointment, at least among traders and the Silicon Valley cognoscenti. Debuting at $38 and once trading at $45, the stock price keeps heading in the wrong direction, closing yesterday at about $20. The doubts keep mounting: privacy issues around its sponsored stories ad program, advertiser doubts on ROI, spam bots, doubts of high-valuation, executives leaving, the upcoming investor lockup period ending when more shares are released.
But the funny thing is that Facebook is, at the moment, a successful business, generating $1.18 billion in revenues for the second quarter, up 32 percent from the previous year. The problem Facebook has right now is that it’s stuck between two irrational echo chambers, Silicon Valley and Wall Street. The Valley is fickle, going from The Next Big Thing to the Next Next Big Thing in a blink of an eye. Wall Street is the home of irrational expectations and seemingly has little to no idea how the media business works. And then there is a third constituency that will ultimately determine the success of Facebook: Madison Ave. Here the picture is more nuanced. Brands get the power of Facebook as a huge distribution platform; but they’re just getting used to the idea that they need to create good content. Facebook is playing a long game. It’s betting that brands will improve at content and then want even more distribution, which is where Facebook’s ad business comes into the picture. This is going to require patience, something in short supply in either Silicon Valley or wall Street.
More in Media
Adalytics Research asks, ‘Are YouTube advertisers inadvertently harvesting data from millions of children?’
Publishers’ Q2 earnings reveal digital advertising is still in a tight spot, but digital subscriptions are picking up steam.
Experts reflect how the failures of social media and online advertising can help the industry improve the next era of innovation.
Ad position: web_bfu