On May 18, Facebook Inc (NASDAQ:FB) celebrated its one-year anniversary of its IPO release. Actually, wait, celebrate is a bit of a bad word of it, because in reality, the celebrations of the IPO launch died out as quickly as they started. Starting its first day at $38.23 per share, a lot of people were expecting the stock to soar. It’s Facebook Inc (NASDAQ:FB) after all, the website that has consumed our lives for nearly a decade and turned life into a series of Timelines and Likes. Unfortunately for Facebook’s investors, popular social networking sites don’t necessarily make the best of bedfellows with investors, as the stock plunged. Today, the price has fallen nearly 32% since its initial launch, and it doesn’t seem like there is much hope for a rebound to its original price in the future.
In reality, a lot of Facebook Inc (NASDAQ:FB)’s problems have been self-inflicted due to the company’s bravado upon the release of the IPO. Before its release, CEO Mark Zuckerberg pushed for a valuation of the IPO to nearly $100 billion, putting it in direct competition with companies like Amazon.com, Inc. (NASDAQ:AMZN) in terms of valuation. The main problem with such a high valuation was that Facebook Inc (NASDAQ:FB) has significantly fewer ways of being profitable than Amazon.com, Inc. (NASDAQ:AMZN), which has created an ecosystem of buyers and sellers of everyday goods to keep the company going. Also, Amazon is constantly trying to find new ways of making money. Recently, the company has created a space for writers of fan fiction to offer up their stories for profit, taking advantage of a community of fans of cult TV shows, books, and movies that want to write their own adventure.
Facebook Inc (NASDAQ:FB) has a share of this community as well, owing to the company’s large social network and the ease of sharing links and stories with people in Groups or on Pages, but Amazon’s ability to monetize this shows that Amazon is being run as a serious business, while Facebook has struggled to monetize the site without alienating its millions of obsessive users who enjoy the free service thus far.
Now let’s be honest. Facebook wouldn’t be the social media Goliath it is today if Mr. Zuckerberg wasn’t as brash as he is with his company; it’s probably why a lot of people thought the IPO would be a money-spinner.
Unfortunately, this time bravado got in the way of reality. Facebook’s cash flow from 2011 to 2012 only grew by about $63,000 to $1.612 million, compared to the $851,000 boost from the previous year. This plateauing of sorts shows how difficult it really it is to turn the millions of Facebook users into a tangible monetary asset. A company like Amazon.com has it significantly easier because it sells items over the Internet, so Amazon can justify its valuation to investors much better than Facebook can. Facebook has to rely mostly on people paying for certain features on the site, or selling advertising space and personal data to companies, which has been difficult because with more people moving to smartphones and tablets for gaming and news, a huge chunk of Facebook’s revenue goes with it.