On May 18, 2012, Facebook launched its IPO. It was the first big IPO failure we've had in the tech sector in a long time. Naturally, this event caused us to question, "Is this a game-changer, in a negative way, for other IPOs in the social media space? Will this slow the growth of social media?"
The answer is "no," it's only a bump in the road, although a big one, because social media is far more than just Facebook. Social media has many categories, and Facebook represents the category of social networking, which is different than LinkedIn, which represents the social media category of professional networking, which is different than FourSquare, which represents geosocial networking, which is different than WordPress, which represents blogging, which is different than Twitter, which represents microblogging, which is different than YouTube, which is about video sharing, which is different than Flicker, which is about photo sharing, which is different than SlideShare, which is about slide sharing.
All of these are categories, each with a category leader. In this case, Facebook is the category leader of social networking. But let's remember that before Facebook, MySpace was the leader of social networking.
So Facebook is not the king of social media; it's the current king of social networking within the world of social media. And as we continue to innovate and invent new ways for people to connect and share, there will be new categories of social media that will catch on in both the business and personal realms.
Looking back, Facebook was obviously very over-valued at $100 billion. Today, Facebook itself says it's worth maybe $60 billion. Some analysts have said it's worth $50 billion, which is still a lot of money but way lower than the initial hype. I talked about this hype in a previous blog post, which you can read here.
As for the most recent financial performance of Facebook, they came within estimates. But, again, the hype was so over-hyped that it was still a disappointment. Personally, I would not give up on Facebook and its ability to be an advertising/marketing machine. The key question is, "At what price is that investment worth?"
Going forward, the goal for Facebook is to not just continue to innovate, which they did before going public, but to show how they can generate revenue and meet expectations. That's a different focus for them. Now rather than just focus on innovation and doing "cool" things, they have to be looking at quarterly earnings, managing short-term profitability, and deciding how to generate new revenue. The key question is, can they manage that without sacrificing trust and the user experience and making their users decide to go somewhere else to do their sharing?