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What Might Advisors Learn About HNW Marketing From FaceBook’s IPO?

Simon Reilly

These cut and paste points from Michael Hiltzik’s May 18, 2012 “Facebook’s Epic Fail – Maybe the dumb money wasn’t so dumb this time” article from the Los Angeles Times might help advisors learn something about using FaceBook to market to HNW clients.

  • The stock market did turn out to be a voting machine on Facebook on Friday (to quote Warren Buffett and Benjamin Graham), and the vote was thumbs-down on flapdoodle.
  • One lesson is that when given enough information, investors can find their way through fogbanks of hype.
  • It’s much more likely that the shares will be fully valued than that they’ll harbor hidden treasure. Facebook went public at $38 a share, and after a day of epically heavy trading, closed at $38.23, for a gain of 0.61%. Not quite the huge pop market mavens were predicting.
  • The expected pattern is that public investors — “dumb money” in Wall Street regard — react more to hype than to fundamentals. That’s why savvy Wall Street traders take it as a bearish signal when small investors pile into a stock or the stock market.
  • This time the expected frenzy didn’t materialize. What accounts for the disappointing showing? A few things come to mind. Among the downsides of becoming a public company is that your dirty laundry gets a public airing. In the run-up to the IPO, Facebook’s linens were out on the clothesline for all to see.
  • There was broad coverage of the company’s slowing growth, and its difficulty in placing advertising on mobile devices, through which more than half its users access the website.
  • It didn’t help that General Motors announced just days before the offering date that it was withdrawing all its paid advertising from Facebook out of doubts that the site is an effective advertising medium.
  • Normally, these are signs that interest is lagging, but many on the street figured that the public excitement would prevail.
  • The question in coming weeks may no longer be how high Facebook can soar, but how low can it go?

Does this mean that I am not a fan of FaceBook? No. It is great for staying in touch with friends.

I’m reminding all of us not to put all of our marketing eggs in one basket.

 

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