That the stock market moves in mysterious ways was shown again on May 18 as the initial public offering (IPO) by Facebook was nowhere near as successful as most people had expected. The share price for the social networking behemoth barely budged from its opening price of $38, ending up just a few pennies above that price. This could partly be explained by hubris. The IPO may have overestimated just how much people were willing to pay for Facebook shares, especially since the initial price was wildly out of sync with the profitability of the company. And while Facebook relies predominantly on advertising for its revenues, it has not been anywhere as successful as its competitor Google in convincing users to click on those ads.
None of this is to say that Facebook is not a successful company on a strong footing. Its profits in 2011 exceeded one billion dollars and there is no reason to think those numbers cannot be maintained. But the IPO should lead to some humility in the company, which has come to see itself not just as the future of the internet but the future of the world too. Facebook founder, Mark Zuckerberg has continually innovated with new ideas and he will have to be on his best game for the company to continue its upward trajectory after going public.
Now might also be a good time for Zuckerberg — whose net worth has jumped to $20 billion after the IPO — and his company to take more seriously the many privacy concerns that have been raised by users and watchdog groups. Facebook has been exceptionally poor in that regard as it has often decided to use content posted by users for its own purposes and has always been lethargic in responding to complaints. In an age of over-sharing where we all have digital lives, privacy should not go out the window. Facebook’s profits are dependent on its user’s date but its morality will only remain intact if it does not take undue advantage of that.
Published in The Express Tribune, May 21st, 2012.