Talking at the TechCrunch technology conference in San Francisco on Tuesday, Mark Zuckerberg, co-founder and CEO of Facebook, described the fall in Facebook stocks as ‘disappointing’. At the time stocks were worth half their original price of $38 and there were fears that they would continue to fall. ‘Disappointing’ is all too apt a description for this situation considering the company only started trading publicly in May this year.
Not so many friends after all
It’s hard to believe that before twelve years ago the phenomenon that is Facebook was non-existent (yes I don’t know what I did before then either). Now the company that boasts over 950 million users has gone public and is proving not to have been such a good investment for many initial financiers who hung onto their shares. With such a wide reach and undeniable popularity, this was one of the most anticipated stock offerings in history but it would seem the initial price of $38 may have been inflated as suggested by a loss of over half the stock value which hit a low of $18.98. Earnings of over $1 billion saw the company’s value estimated at more than $100 billion but the game has changed with smartphones swiftly encroaching on PC usage and Facebook desperately needs to optimise its platform on mobile devices if it wishes to regain some of that valuation.
For a business that relies heavily on earnings from revenue on advertisements on the site and royalties from third-party software developers, the limitations on mobile ad space have greatly affected the growth of the company that at one point seemed unstoppable. 500 million of the 950 million users choose to log on via mobile each month and without sufficient innovation and focus on this space, the growth in “new unique users” is at less than 5%. Zuckerberg admitted that their ability to monetize in this way was as yet ‘unproven.’
The $157 million loss reported last week saw the continuation of a downward spiral that understandably caused concern and so much negative sentiment that Zuckerberg himself was rumoured to be off-loading some of his 444 million shares as soon as the “lock-up” policy that prevented early investors and insiders from selling their shares is lifted in the near future. The company have come back reassuring the world that he intends to do no such thing and will hold onto his shares for at least another year; however that did not stop Peter Thiel, one of Facebook’s earliest backers, from selling much of his stake to the tune of more than $1 billion. Senior staff including their Marketing Director and Mobile Marketing Manager have also left the company leaving a ‘talent gap’ just when they need innovation the most.
Despite all the doom and gloom, Zuckerberg seems to have retained a great amount of faith in his creation and it’s long-term future. The twenty-eight year old addressed the San Fran conference in jeans and a t-shirt but his words were taken far more seriously as he remained positive on the company’s situation, ending the downward trend as he spoke, with stocks rising 65 cents and 3.4% to a healthier $20.08 in after-hours trading. He expressed his worry but seemed to give enough strategic details to put investors at ease, coming clean about ‘mistakes’ they had made and how they ‘had “burned” two years by working on HTML5 rather than native mobile apps’ according to cbronline.com.
“It is really clear from the stats and my own personal intuition that a lot of energy in the ecosystem is going to mobile, not desktop,” he said. He also reminded the attendees that “Facebook has not been an uncontroversial company” having survived missteps and market fluctuations in the past. He showed encouraging hyper-optimism by adding – “Now we are a mobile company and all the code is being written in mobile.” “We will make more money on mobile than we make on desktop.”