Although I thought the Facebook IPO valuation was a cruel and stupid joke, and I predicted that it would dive, I really didn't think it would happen this quickly or dramatically.
As I write this, the value of Facebook shares has dropped almost 30% in two weeks. At a putative value of $100 billion, that's a loss of $30 billion in value. That's about $2 billion a day. Even I can't blow money that fast.
The frightening thing to owners of Facebook shares has to be that over the next 6 months the "lock-up" period expires. This means that early owners of Facebook --who have been required by law to hold onto their shares -- will be allowed to sell them. A bunch of shareholders may decide it's better to cash out now, and shares could flood the market.
In the next 90 days, 10% of Facebook shares (over 250 million of 'em) will become "unlocked." In the next 6 months, 1.7 billion (with a b) shares will be unlocked.
With demand for Facebook shares already way below expectations, it could get ugly early.
The amazing thing about the Facebook IPO hysteria is that the whole foundation was built on -- as my dear mother used to say -- shit and glue. Facebook's revenue model is dependent on selling advertising space, and there is compelling evidence that paid advertising on Facebook has thus far been uniquely ineffective.
But we live in an age in which the marketing and advertising industries trust unreliable and foolhardy pundits and experts more than we trust facts or the evidence of our own eyes.
- Can you recall a single marketing message that has appeared on your smart phone?
- Are there any "conversations about brands" going on at your Twitter feed now? Please go there and check.
- Have you ever seen a normal person use a QR code?
- When was the last time you watched a YouTube video about a product?
- What was the last piece of online "content" about a brand you linked to?
Could it be that the Facebook face plant will serve the purpose of injecting some reality into the fantasy world of advertising and marketing?
Not a freakin' chance.