Facebook Slowly Scrubs Off the Stink
Facebook's debut on the public market was greeted with a nosedive in share value a month ago. Now, however, FB seems to be on the mend. Investors haven't forgotten the mistakes and accusations of shady undertakings that surrounded the IPO, but the social network's moves to focus on ads and revenue may have settled some shareholders' nerves.
06/21/12 10:35 AM PT
Facebook shares are rallying after their post-IPO slump, climbing 22 percent over the past two weeks.
Besides a slight downturn on Wednesday, the stock has slowly climbed closer to its initial value of US$38 on May 17. After its botched opening, the stock had fallen by as much as 32 percent to $25.52.
As of mid-day Thursday, shares were still trading about 17 percent lower than their debut value, but some of investors' initial distaste for the stock seemed to have disappeared.
Last month's Facebook IPO, already in the spotlight due to optimists' lofty expectations, drew even more attention after a fumbled opening. The social network, the Nasdaq and the lead underwriter, Morgan Stanley, faced harsh criticism as prices quickly sank soon after shares went on sale.
Going into Thursday afternoon, the stock was trading around $31.90.
Facebook didn't respond to our request for comment.
Facebook's debut on the public market was long anticipated, but as its big day drew closer and Facebook released more of its financial information, investors voiced concerns about the site. Facebook disclosed that even though the site had 900 million active users, growth had slowed slightly in the months leading up to the IPO.
Some investors also worried that Facebook was overvalued and would have trouble sustaining growth, especially in the mobile space.
"It's hard to say exactly why Facebook's stock dropped after the IPO," said Internet marketing expert Brian Carter. "One of the biggest concerns was that there was so much mobile and smartphone use of Facebook, yet Facebook had not monetized all that mobile traffic."
Give Them Something to Talk About
In response to investor concerns, Facebook has been making moves to help sustain growth, said Laura Martin, analyst at Needham & Company.
"We think they're only going to go up from here," she told the E-Commerce Times.
The company announced earlier in the week that it will revamp its in-app purchasing system, potentially helping drive revenue from third-party app developers such as Zynga.
The social network is also working to stay attractive to advertisers. It introduced a bidding platform that could help better target ads, and some investors might have been swayed by a recent ComScore report that found targeted marking on the site can be effective.
"They've released mobile and mobile-only ads, and the news about them is very positive," said Carter. "Some reports say that mobile ads [are] more more effective than desktop ads. So for those people who doubted Facebook's future in mobile monetization, it appears right now that problem has been fixed."
With its global network of 900 million users, Facebook certainly has the infrastructure in place to set up a worldwide market, said Martin, and it's being active in doing so.
"They have the platform built, and now the stuff they're working on is revenue," she said. "So far their only revenue is in advertising, but they have multiple opportunities going forward. They have a lot of options in the e-commerce business, and they're moving forward with those."