Although it seems as though Facebook was overvalued when it’s shares first came to market, you have to remember that a share price is not just based on actual earnings, but future earnings and expectations. In this respect Facebook’s initial share price was probably spot on. The problem was that a hyped IPO lost steam and the investors looking to make a quick buck realized they needed to get out, thus explaining the sudden decrease in the share price first thing Monday morning.
Now that we have gotten all the financial jargon out of the way, how will the disappointing first couple of days of trading effect you?
Facebook boasts the largest user base of consumers and businesses of any social network and most platforms on the Internet. Do not be fooled into thinking it will not take advantage of this fact soon. With so much marketing data and so much potential for growth, Facebook will likely start moving into other industries aside from social media.
Here are some things to consider:
- Social Search: Social Search may very well replace conventional search and where Google+ has failed, Facebook intends to succeed. Imagine the power of a search engine that takes into account things you “like” and things your friends “like.” A finely tuned social algorithm could help people
- Mobile Marketing: Facebook has hardly utilized the mobile phone where much of its product is being used. In fact studies show that as of this month, more people are using Facebook on their mobile phones than on conventional computers. If Facebook can start using this medium more effectively, expect great things for all involved.
- Employees: Facebook employs some of the most creative and brilliant minds in Silicon Valley and trust me, there is a reason for it. Signal theory would suggest that the reason Facebook could head hunt so many amazing employees, is that there is something big in the pipeline.
To sum it up, the future expectations are high and there is an incredible expectation of growth. What are your thoughts? Will Facebook succeed and withstand the test of time?