Facebook’s Stock Price Is the Least Important Thing About Facebook

Facebook's disappointing IPO and sluggish stock price don't tell us a thing about the company's signficance -- or even its long-term potential to please investors.

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An electric sign outside NASDAQ headquarters announces Facebook's IPO on May 18, 2012

Facebook CEO Mark Zuckerberg is fond of telling his cohorts that their journey is only one percent finished. Even if you quibble about the exact percentage, he’s right that his company’s vision is boundless and that the service, in its current incarnation, is nowhere near done exploring its potential. The man is nothing if not both ambitious¬†and patient.

Wall Street, unlike Zuck, is famously bad at taking the long view of things. When Facebook went public, a year ago today, shares were snapped up by speculators hoping to make an insta-windfall from a pop in its stock price. At the end of the first day of trading — bedeviled by NASDAQ technical gremlins — the stock flatlined rather than popping. In the year since, as my colleague Sam Gustin reports, it’s bumped around without ever returning to the initial offering price of $38. Some people are still brooding about it.

If you’ve lost money on Facebook stock, I feel for ya. Really. But the fact that it didn’t turn out to be a convenient way to turn a quick buck doesn’t have much bearing on the company’s importance to the world. It doesn’t even say much about the its long-term prospects to do well by investors.

Plenty of tech companies have had happier IPOs than Facebook did, but a happy IPO has never been a reliable sign of a bright future. Consider Netscape, the browser pioneer which went public in 1995, in what may remain the most iconic tech-company IPO of them all. In 2003. Jim Cramer, now the host of CNBC’s Mad Money, wrote a wistful remembrance of it for TIME:

We didn’t know what it was. We had never opened a browser. We had never gone on the Net. But we had heard that the deal would be hot, so we at Cramer & Co., my $250 million hedge fund, dutifully put in our share of stock in the initial public offering of Netscape. We got several thousand shares. And we, along with most everyone who got some, made an absolute killing. The stock, which we thought was going to be priced at $12 a share, came in at $28 and then opened at $71. (It peaked at $97.62 on March 17, 1999) We were giddy. We had never made money that quickly in our lives. We thought it was going to be a one-time event, never to be repeated.

The Netscape IPO was fabulous if you got in on it, but it was also Netscape’s last great moment of unbridled glory. After doing more than anybody else to popularize the web, the company got distracted by side projects such as business software at the same time that Microsoft began bundling the increasingly formidable Internet Explorer with Windows. In 1998, when AOL agreed to buy Netscape for $4.2 billion, it already felt like it was buying damaged goods. It never did much with its new toy, and killed the browser altogether in 2007.

Facebook is already at least as important to the web as Netscape was in its day, or almost any other company (hello, Google!) has been since. Making that case feels redundant, but let’s recap a few basic numbers anyhow: 1.11 billion monthly active members (751 million of whom use Facebook on mobile devices), 300 million photos uploaded a day, 16 million events created a month. Through features such as Facebook Connect (which lets you use a Facebook account to log into other sites) and those omnipresent Like buttons, the service also provides essential connective tissue to millions of other sites.

If you went through an It’s a Wonderful Life-like exercise of imagining what the web would look like in 2013 if Facebook had never been born, you’d envision a significantly different place. That’s true whether you see it as a positive force or a privacy-invading scourge. And while it’s fashionable to speculate that Facebook’s original audience, young people, no longer think it’s cool, that too is a sign of its dominance of social networking: It’s tough to stay cool when you’re as popular with grandparents, parents, aunts and uncles around the world as you are with teens and tweens.

Facebook’s impact on society makes it fascinating, but it doesn’t, of course, make it a successful business or a sound investment. Not automatically, anyhow. Especially since part of the 99 percent of Facebook’s journey that remains unfinished is finding a business model which is as transformative as the service it provides to consumers.

Most Facebook members have never paid it a nickel directly. The methods it does have to extract cash from them — it keeps suggesting that I give Starbucks gift cards as birthday presents — are unlikely to ever add up to enormous sums. Therefore, it’s marketing messages of one sort or another which will bring in most of the money, and while the company made almost $1.5 billion in revenue last quarter, it has the potential to do far better.

Facebook skeptics may be worried about the amount of information the company has on its users, but anyone who uses Facebook and pays attention to the ads can tell that the company hasn’t yet cracked the code of turning all that information into highly-targeted advertising of the sort that advertisers crave. Earlier this week, for instance, I pulled up my Facebook page and found ads for the Mormon Church’s newsroom, a dating service, a technical-certification school and a contest involving uploading photos of oneself flossing. None of them were a match for my interests, and the dating ad was particularly discordant considering that Facebook knows I’m married. If the service knows too much about me, it’s sure failing to do much with that knowledge.

It’s worth noting that Google established a powerfully effective business model before it went public in 2004: text ads next to search results, auctioned off to the highest bidder. If Facebook ever comes up with anything remotely as potent, people will stop writing articles saying that there’s no way it can turn a meaningful profit.

Over time, Facebook could become a cash cow; it could struggle to satisfy investors; it could grow even more dominant; it could lose ground to some shiny new thing that hasn’t been invented yet. But decades from now, when people look back and argue about Mark Zuckerberg’s legacy — and they will — I’ll be astonished if anyone remembers him principally as that guy whose IPO didn’t live up to expectations. This first anniversary seems as good a time as any to stop obsessing over it.