The subject has come up more than once concerning Facebook’s foray into the stock market. At first investors seemed a bit unsure as to whether the company’s stocks would be worth the investment. When it hit the market for the first time however things seemed like they might take off. As with any publicly traded company though there are chances that you take when investing. Now it seems that some of those chances are rearing an ugly head. As Facebook stock falls further behind it has some investors wondering if they made a wise investment or not.
With stock prices just barely above the $20 mark it is easy to see why this would come into question. Those who bought in early did so at $38+ per share – a pretty hefty loss for any investor let alone those who bought up a substantial number of shares. Now Facebook has released their second quarter earnings. Rather than viewing the one-third revenue increase over last year’s numbers as positive, investors are still not quite happy.
It seems that investors are still not quite sure about the earning potential of the social media giant. Whether it is due to the company’s current business model or to the outlook of the investors on whether social media is a reliable market in which to do business is still a question. Needless to say however they are becoming quite skittish with the continued drop in stock value. If the worst happens and investors begin to pull out, where will this leave Facebook?
Would the company be able to survive being pulled from the exchange? Without the ability to attract new investors through stock sales how will the company press forward? You can be certain that these are questions that Mark Zuckerberg and his colleagues are already beginning to ask as the $20 mark looms near and the stock continues to creep downward in value.
Why Facebook Is Failing
There is one major reason why Facebook stocks are dropping and earnings are much lower than expected. It all comes back to profitability. Facebook relies on its ad sells to help generate much of the company’s income. Anyone who uses Facebook has seen the pervasive little ads that are located on the screen usually to the right hand side. They are nice little boxes enticing viewers to click for free insurance quotes or some other such offer. While the idea is that there will be someone who will actually want to click the ad and learn more, the truth is that there are few users who really want to do so.
Businesses who buy into Facebook ads and who see little to no results for their efforts will quickly pull the plug rather than lose any more money. It seems that many businesses that have a Facebook presence are still pushing the old fashioned hard sell method. One look at the big brands however tells you that a new approach is warranted. Brand awareness is the key. Businesses need to concentrate on getting Facebook users emotionally invested in the brand. Then they will have a much better chance at success.
The trouble is that Facebook is suffering due to the businesses inability to change their sales paradigm. Unless the company can find a way to better train businesses on how to make the best use out of the social networking giant’s platform it could mean the end for the company’s foray into the stock market. Will there be changes now with the continued slump in prices? Considering it won’t be long until investors cry for blood we will certainly see.