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Nobody’s Perfect: The Silver Lining of Facebook’s IPO

Posted by Heather DelCarpini on June 28th, 2012 at 9:54 am

Remember how much hype there was around Facebook’s IPO?  Much of it was well deserved as the records that Zuck and company set were astounding.  Facebook’s $104 billion valuation was the largest ever by an American company at the time of its offering, it was the third largest U.S. IPO of all time behind Visa and GM, and it had the highest volume of any IPO in history, with 460 million shares traded.

We all know what happened next.  The perfect storm hit as news broke that GM would pull all its ads off the social network due to underperformance; lead underwriter Morgan Stanley began telling select clients that it was cutting Facebook’s revenue forecasts; finally, technical blunders at NASDAQ severely delayed trading.  Needless to say, the company’s stock didn’t perform up to expectations and took a steep dive from its $38 debut.  Over the next few weeks it bottomed out around $25 dollars before starting a long and slow ascent.

This week marked the end to Facebook’s mandatory “quiet period” after its IPO, enabling underwriters to comment for the first time about future performance.  As CNBC notes, “A dozen Facebook analysts—whose firms took the social network public 40 days ago—believe it will be another 12 months until the beaten-down stock gets back to its $38 IPO price.”

While the drama of Facebook’s IPO may be most interesting to people in the world of finance, there’s an important lesson in here for marketers to remember.  It’s a very clear reminder that Facebook is an imperfect company: like all others, it is subject to cyclical trends, market conditions, bad decisions and innovators nipping at its heels.  Just ask Friendster and MySpace how easy it is to fall from the top.

Here’s the point: It’s critically important to own and control the online properties you use to engage with customers.  Facebook may be king of the world right now, but as the vulnerabilities displayed during its IPO process show, it won’t be forever.  With that in mind, be careful how much you rely on any social network or media property to build your brand or reach customers.  Any of them could falter at any time, or worse yet, change the rules in the middle of the game.  In fact, that’s something else we experienced earlier this week when Facebook changed everyone’s email address to “@facebook.com” without warning.  There’s nothing stopping them from changing the rules for brands who use Facebook as a marketing strategy at barely a moment’s notice, or from suddenly demanding compensation for features that were previously free.  If anything like this happened to you after putting the time, effort and resources into building a community and a mass of followers on the site, it could be a major setback or hit to your marketing budget.

In short, it’s critically important to own and control the online properties you use to engage with customers.  Right now, the only way to do that is through domain names.  Your domain is your home online, and customers should know that.  Social networking will be an important part of a comprehensive marketing strategy for the foreseeable future, but just make sure you don’t put too many proverbial eggs into one social networking basket.  Controlling your own destiny online starts with a solid domain strategy.

One Response to “Nobody’s Perfect: The Silver Lining of Facebook’s IPO”

  1. Mike says:

    face book stanks. I wouldnt use it if I were paid to use it. I have FOUR (count em) FOUR friends that I trust enough to tell things to and I can do that with my phone and with email.

    there will be a growing trend away from face book. I hope people didnt invest heavily in it.

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