Facebook founder Mark Zuckerberg is no longer on the world's top billionaires list.
Facebook is the most used social networking sites and generating some huge amount of revenue. Facebook has been able to attract advertisers from variety of topics and geographies.This really does not pose any doubt about the success of Facebook. But Facebook IPO was not successful enough as anticipated. While it was "obvious" that IPO would be successful primarily because of the popularity of the Facebook, it failed due to several reasons. Here I have tried to outline some of them:
Strange Business model
Facebook was not really an innovation but a better version of Orkut. Facebook had some better features and attractive layout as compared to Orkut. Facebook as we all know, is tremendously successful website. But it is important to remember that it is just a site, that does not provide some definite service. One may argue that Facebook allows you to connect with your relatives easily but after some days such concept leads to stagnation. There is almost no scope for further expansion. We as a users always want something new. Just like sudden failure of Orkut, Facebook can also lose it user base all of the sudden. In such case it is really difficult for investors to put enough trust in it.
Dependent revenue stream
Facebook has only one source of income : Advertisement. It is just too dependent on the other business. While there are many other better options to advertise products like Google AdWords and Yahoo! which has a far wider reach of audience, Facebook revenue stream is not too safe. If advertisers withdraws, Facebook has no source of getting revenue. While Google also earns hugely from from advertisement but that they also have paid services. Further Google is a Search which is very much useful as compared to Facebook. Absence of some independent revenue source is a real flaw in the Facebook business.
High priced IPO and lack of trust.
Facebook each share was priced at $38 which was too high. Further, people did not hold their stake and sold off immediately. This shows the lack of trust and lead to slide in Facebook shares prices.
In all, Facebook success was like a balloon that can bust anytime. Let us see where is all goes.
