Tuesday, May 22, 2012

Where does Facebook go from here? Part II

A few months ago, I rambled on about whether Facebook had a bright future ahead of it. I thought it did back then, but going public in such a ramshackle, overly optimistic way killed my cheery perspective. In fact, I can't imagine anything more damaging to FB than this IPO fiasco.

A large part of that is a tarnished brand. Sure, Facebook had skeptics from the beginning. But until now, the hard numbers were all positive--huge growth, users numbering close to a billion, ever-increasing pervasiveness in popular culture, and profits to boot. Now they're not. There's a big, tangible minus next to its name--a loss of billions on its second day of trading.

And this chink in the armor very well could lead to far more than brand issues. Already there's a Wall Street Journal article [subscription required] on CrowdStar, a big-name gaming company, bailing on Facebook because it fails as a mobile platform. Worse yet, more advertisers are likely to follow GM away from Facebook, which would impact their primary revenue source. And if you move from a P/E ratio of 85 to 100+, you're just asking for trouble.

Organizations can and do recover from tarnished brands and big falls. Just think Apple, Xerox, Intel, and IBM. All faced issues, all are thriving now. But my opinion is it's different with Facebook. They're more vulnerable, both as a brand and as a business, so the IPO albatross around their neck has the potential to drown them.


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