Facebook IPO, Boom or Bust?

The tech world was abuzz last week with Facebook’s entry into the world of publicly traded companies. Days before the Facebook IPO, analysts were pouring over charts, comparing tech revenues, and generally obsessing over the stock market equivalent of the biggest box-office opening of the year. As the enchantment begins to wear off, and the initial valuation of the social-media giant slumps, it’s beginning to appear that expectations were, in fact, a little high. Facebook’s potential growth and revenue model (based primarily on display advertising) simply could not justify its $100 billion market cap. Unfortunately, Facebook’s primary asset (an unprecedented volume of personal information) is rarely discussed because it raises serious privacy implications. The stock closed four dollars below its initial listing of $38 just two days into trading.

Not helping Facebook’s cause was the announcement, days before Friday’s IPO, that General Motors was going to be pulling $10 million worth of its ad budget out of Facebook display advertising. Although GM was keeping mum about the reasons behind this decision, many speculated that the automotive giant was frustrated by the dubious quality of traffic generated by Facebook’s display advertising. Skunkworks has spent some time exploring the world of Facebook display advertising and we, like GM, have found it to be less effective for professional services firms than other online advertising platforms (Google AdWords).

However, it is important to note that Facebook – though facing growing pains on Wall Street – is still a tremendously versatile medium for corporate advertising. The problem Facebook faces is that its best tools are free. For instance, Skunkworks’ recommends and creates custom Company Pages for many of our clients. Company Pages on Facebook add a personal dimension to a firm’s professional facade, can improve visibility in organic search results, and contribute exactly $0 to Facebook’s annual revenue.

Regardless of whether or not you are bearish or bullish on Facebook, it is important to recognize that social media offers a new platform to strengthen your firm’s marketing efforts. It’s important to explore these tools as they arise and judge for yourself whether or not you can derive value from the latest and greatest. In short, focus on your advertising and let Mark Zuckerberg worry about the share price.

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