So what’s a “Like” worth?
You knew I was going to weigh in on Facebook’s IPO last week – how could I not???
So I ask again – what’s a “Like” worth?
I have asked that question before and I do speak about it in many of my keynote speeches – what is the value to a company or brand of a “Like”? Can it really be monetized?
Clearly if one of your close friends gives you a “Like” on something you posted on Facebook, it has personal value to you, much I’d bet. However, I suspect that if some random person liked or disliked something personal you posted, the value would be less – or maybe negative – it might have a creep-out value, in fact.
And the question that most savvy investors started to ask – late in the game, I’m afraid – was can Facebook really create value from the millions of “Likes” that so many brands have accumulated, thinking it was money in the bank – for themselves, never mind Facebook – or was their newfound obsession with advertising – that is, with interrupting your stream with paid messages – an indication that monetization would really be more like old-fashioned broadcast (albeit it possibly more targeted), not exactly the concept that people signed up for.
So what’s a “Like” worth?
Frankly, I think we have really found out – here is my view on the IPO and why it might portend better than some think:
Facebook was the second-largest IPO ever and the largest in technology – as if the “sharing company” is a tech company. Why isn’t Uniqlo a tech company? Or Nike? Time to revise our orientation, folks, on what’s tech and what’s not….
According to Bloomberg, the average first-day pop for a tech IPO is 32%:
Which would have made the Facebook crew even richer than they became – yet as we know, the stock closed pennies above the opening – Groupon, already repudiated, closed at a higher percentage, as did LinkedIn and Yelp.
But here is the key info – insiders dumped more shares than did the insiders in Google, and Goldman Sachs sold more than 50% of its share – more than they had announced originally – hmmm…
So the people who know the company best sold a huge percentage of their shares – wonder how they feel about the long-term viability of the stock price? Please note I say stock price – not company – a critical distinction for me. I think the company is amazing and has huge potential – it’s the stock price I’m after, and the shameless hyping.
Also interesting to note is that a number of funds that owned pre-IPO shares of Facebook dropped more than 20% as investors reacted to the relatively slow opening – which was the opposite of what many had expected when the IPO news first hit the street.
Now let’s be clear – the value of Facebook is still more than Amazon.com on one side – McDonald’s on the other and HP in the sort of middle – and Mark Z has over $19 billion…not too shabby – but come on….
So let me come back to my initial question: What’s a “Like” worth? Was the IPO a failure as the professional investors and funds who created the original circus backed away and individual investors were able to actually buy shares – unusual for such an offer? Was it proof that it was priced right – meaning that it’s valued where it should be and that the underwriters never expected it to pop…yeah – you want a bridge? Or is it something else???
Here is my take….
I always poll my audiences on the number of Facebook friends they have – when the numbers get into the 500s+, I ask them how many of those 500 or more buddies will pick them up at the airport – nervous laughter is always the reaction, but the point is made.
My bet is that Facebook just found out who will pick them up at the airport – the average citizen investor who uses the platform, believes in it and sees its long-term viability – not just its short-term money-printing side. They discovered true “Like” value.
Facebook has great potential – one day they will figure out how to monetize without killing the golden goose of its user base, and they have now been given the go-ahead to do just that.
If you own shares – give them a break – don’t look for daily movements or quarterly results – take a long-term view.
And bottom line – let me remind you of my view on GMOOTs – the Give-Me-One-of-Those attitude of so many today as they view the world and its developments.
Listen:
“If fifty million people say a foolish thing, it is still a foolish thing. “
Anatole France
And there you have it – don’t be fooled. Look at Facebook – and everything else for that matter – with your own eyes, as a human user who knows the true value of “Like” and who knows that no price can be placed on true friendship.
What do you think?
It is very likely that Facebook stock will not be worth nearly as much as the opening IPO price as some of the founding fathers start padding their bank accounts.
And now that its a publicly owned company expected to meet quarterly expectations, they will have to push revenue to new highs. Facebook’s #1 revenue generator = ads. More ads, which will be the new reality, will ultimate frustrate the all to valuable user base.
When the user base starts to defect, your data will be the next revenue generator. Welcome to a SPAM new world.
When I try and figure out how much something is worth, I think how much impact it has on my daily life. Facebook became popular when I was in high school, and by college it became a requirement. I check my newsfeed a few times a day, and chat with some friends. But I can’t help but think, if Facebook shut down for a day, a week, would it affect me? Would I care? I don’t think so. Then I ask myself, what if google shut down for 30 seconds? I would freak out (ask anyone who was around me when gmail stopped working for about 10 minutes a month ago… not a pretty sight). Facebook has definitely helped usher in this new era of social networking, and has changed the way we communicate with our family and friends, and with this new \online community\ that has been born. But what unique value does it really have?
Taking it down to a micro level : How much is a Fan / Like “worth” ….
About $136 according to research from 2010
Trying to place a monetary value on the effectiveness of any advertising is difficult, with social media being no different.
GM has just pulled $10 million in ad spend from the site, I suspect due to the fact they are unable to make the clear attribution of spend = sales that they expect from a digital “accountable” channel.
So back to the question, what $ value does being a fan actually mean to brands?
A survey conducted by Syncapse attempts to shed some light onto this areas with some interesting assumptions and findings.
20 top brands analysed
Fans and non fans were compared to measure their previous, current and future behaviours towards these brands.
Being a fan for MacDonald’s – your likely to spend more than $159 more than a non fan.
Fans are nearly 30% more likely to continue being loyal to a brand.
Being loyal is not an indication of your spend with that brand, however all of the metrics indicated a higher spend for fans than non fans across all brands.
Facebook fans are 68% more likely to recommend a product or brand, with people more likely to buy if recommended by friend, with this onward recommendation resulting in over a third of these people actually trying the product.
The closeness of the recommender has an impact on this percentage, with family members scoring higher than those with loose social connections.
A while back I outlined how product types and the advocates peer standing and expert levels effect the onward performance of these recommendations– i.e they are regarded as an expert in the field of music, onwards recommendations have a more likely effect to influence than areas they are not.
It is important to remember that these fan basis exist already without Facebook, however the ability to monitor and articulate ‘numbers’ from the site gives an ability (albeit still open to conjecture) as to what these could be worth.
Full report here :
http://www.syncapse.com/media/syncapse-value-of-a-facebook-fan.pdf
The affect of your peer standing and how you influence people :
When your friends become spammers : http://onehandshake.blogspot.com/2007/02/when-your-friends-become-spammers.html
Wasn’t a big factor in Facebook’s humdrum IPO the Nasdaq technical glitches that caused the IPO to be delayed?
“Issues stemming from a number of late order cancellations slowed the start of trading in Facebook, As a result, shares of Facebook (FB) didn’t start trading until 11:30 a.m. on Friday. The glitch kept some traders from knowing for more than two hours whether their orders had been honored or cancelled, the Wall Street Journal reported. Some investors questioned whether the confusion contributed to the lackluster first day performance of Facebook’s shares.”
I’d like to think that the relative stability of the stock price means the shares were valued reasonably, which is consistent with many of the insiders selling substantial amounts. If you were going to dump, you’d want to dump at the day’s highest possible price, not at the low starting point of a hyped Day 1 run-up.
And to your point about thinking in terms of quarters and years instead of trading minutes…there was an article yesterday about how Murdoch must’ve been pleased with the lack of excitement, apparently cold comfort for the 90% loss on his MySpace investment. When a company’s success is judged by two days of public trading, our ADD has gone epidemic.
@Gabriel: I doubt it (about “ads everywhere”). Zuckerberg has always been very vocal against plastering the site with ads. Bending over for Wall Street’s short-term goals and killing the golden goose in the process is seriously underestimating a guy that so thoughtfully built this empire.
Like Jeff Bezos, expect him to give the middle finger to quarterly results, unless it is aligned with users’ expectations and a decent experience. He has several options to monetize the company while still adding value to users: an AdSense-like platform (but better), Mobile, FB Credit, better Analytics, Music and Entertainment, MS Bing. Disrupting user experience would not be a wise move.
In the meantime, rest assured the stock will continue on this up-and-down (down 9% today, on top of the 11% yesterday).
Now talent exodus is a concrete risk (I’d say the biggest one). If they miss Sandy or other key guys in engineering, they’ll have trouble keeping the same pace of innovation. That’s the real fire test for Mark.
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[...] – we should all know better by now. A mili-second click on a thumbs up does not a friend make – remember my question from last week – one thousand friends and who will pick you up at the [...]
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