To the 99 percenters, the stock splat was mostly soap opera, with one exception: Small "mom and pop" investors, usually shut out of hot IPOs, were lured in unusual numbers to Facebook’s offering. Instead of the first-day "pop" in share prices that lucky 1 percenters can usually count on, mom and pop got popped in the gut. It’s a shame that Mark Zuckerberg’s enthusiasm for letting Facebook members into the game didn’t include, say, a discount ticket. Still, those are the risks of playing in the big leagues.
But here’s the thing: Facebook isn’t its stock. And maybe the percentage that matters most here isn’t the 1 percent or the 99 percent, or even the 16 percent drop in Facebook’s share price in little more than a week.
Instead, consider the 25 percent: That’s the astonishing fraction of time that Americans spent on Facebook while online in April, according to Nielsen.
More than 151 million Americans visited Facebook last month — more than 70 percent of everyone who went online, Nielsen reported Friday. Among the nation’s Top 10 Web brands, only Google surpassed that figure. And Facebook members spent more than seven hours on its pages — nearly one in every four of their average 29 online hours. Nothing else — not Google’s various pages, nor Yahoo’s, nor Microsoft’s — came anywhere close.
And that doesn’t even count mobile apps. Nielsen says. Facebook’s Apple and Android apps, among the most popular in both systems, were used by 62 million U.S. adults in March.
Understandably, those are the kinds of numbers that made Morgan Stanley and other investment banks drool at the chance to lead Facebook’s public offering. At the same time, there were plenty of red flags, such as Facebook’s repeated warnings that it hasn’t figured out how to make money on an increasingly mobile Internet audience. Even for a venture such as Facebook with actual revenue and profits, a new company’s public offering is inherently risky — you’re buying business plans, hopes, and dreams.
If you aren’t among those counting winnings or nursing wounds, this is a good time to step back and focus on the phenomenon behind Facebook’s stock. In just eight years, Zuckerberg’s creation in a Harvard dorm has changed the way many people use the Internet, a culture-changer that itself is barely past its infancy.
Yes, Facebook offered a better platform than its predecessors for sharing photos, voicing opinions, and connecting or reconnecting with friends and relatives. But that mix included some key innovations.
Remember the famous New Yorker cartoon showing a canine tapping at a keyboard: "On the Internet, nobody knows you’re a dog"?
That’s not true on Facebook, which requires members to use their actual names — a blow to the anonymity that can have value in fostering open speech but too often leads to thoughtless or ugly rants.
That focus on "authentic identity" has other consequences, of course.
"Facebook is a database-driven advertising and marketing company," says Joseph Turow, a professor at the University of Pennsylvania’s Annenberg School for Communication who studies the connections between media and commerce.
Turow says Facebook users often misunderstand the significance of the site’s privacy controls. They allow careful users to limit the information they present to the world at large, but not the data available to the company itself. It doesn’t share that personal information with advertisers, but it uses it to serve you ads.
One irony is that Facebook’s push to please Wall Street threatens to undermine at least some of its attractiveness to users. If you don’t really want most kinds of ads on your smartphone, trust me: You’re hardly alone. If Facebook’s stock soars, it may mean the company has figured out how to send you more ads while stopping just short of alienating you.
Is that bad? Not at all — those servers and programmers cost money, and those who built and supported Facebook deserve a reward. And those who ride out the current setback may someday be thankful, according to Philip Moyer, managing director of the technology group at Wayne’s Safeguard Scientifics, a leading growth-stage venture firm.
Moyer shies away from buzz-heavy IPOs — "I like to see the froth come out" — and Safeguard didn’t invest in Facebook. But he says Facebook could well "grow into its valuation" eventually.
His biggest basis for optimism? The so-called network effect — the well-grounded theory that a network becomes more valuable to everybody, including its owners, as more people join. Facebook’s huge number of members means it would be extremely tough to supplant.
There are many cynics out there who question Zuckerberg’s claim that his primary goal was to change the world, not to make money. But Moyer isn’t among them.
"I think some of the motivations at the company level were good," he says. "But when things hit the financial markets, it gets a lot more complex because of all the stakeholders, as well as your investors."
If Zuckerberg’s real goal, expressed in Facebook’s mission statement, is "to make the world more open and connected," the truth is he’s already succeeded.
While the dust settles, it’s worth remembering that not everything valuable can be measured in dollars and cents.
Contact Jeff Gelles at 215-854-2776 or email@example.com.