Facebook Stock Drop Closely Watched

Facebook’s announcement last Friday revealed that the company would be sharing at $38 per stock. On Monday, the shares had dropped 10 percent, to $33.50, and was continuing to slide Tuesday morning.

The IPO had closed at $38.37 per share the day it was released, but it has seen a quick downturn in the day since, according to Business 2 Community.

“The fall in Facebook’s value will raise further questions about whether the $38 IPO price – which implies a value of $104 bn – was justified given the company’s $4 bn in 2011 revenues,” wrote author Tim Human.

When compared to competitor Google, Facebook’s future as a marketing money maker looks questionable. CEO Mark Zuckerberg has said that he is against advertising on his site, but it accounts for 86 percent of its revenue.

Last week, car manufacturer GM pulled out of an advertising deal with the site, which made up $10 million in annual revenue for Facebook.

“No free market spends billions on a media format with zero return,” writes Business Week‘s Ben Kunz. “What GM’s retreat really shows is the harsh reality that other brands must face: Making social-media communications work requires heavier lift than many organizations can muster.”

Social media ads can be a gamble, and more brands could well get cold feet in light of Facebook’s drop in share prices.

Image courtesy of  sofiabudapest/flickr


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