May saw the floatation of Facebook on the NASDAQ stock exchange in the USA, with shares entering the market at $38 dollars each, valuing the company at a staggering $104bn! However, since the floatation, the company has been beset by problems.
Firstly, there were technical problems at the stock exchange which delayed the trading of shares for 30 minutes. Then there have been allegations that the major underwriters for the company failed to disclose to some of the biggest investors that they had revised down the valuation of the company just before trading started, so now the ass is being sued off Facebook. This has caused a significant drop in it’s share price over the last few days.
All this begs the question, can social media actually be worth what some people say? I’d say not. Social media is valuable to us, but not in the monetary sense. Yes Facebook has adverts, but the revenues are relatively small. Then there is Twitter. No ads there, no massive revenues and no massive profit. But it doesn’t need to. Twitter knows it’s place in the world and knows that it doesn’t need to make massive revenues in order to play a big role around the globe.
The business of it is logical. Social media, despite the advertising capabilities which are restricted somewhat, simply cannot be worth hundreds of billions because they physically do not sell anything. The services are free and social media companies at this moment in time do not sell products. Apple for example is different. Possibly the most valuable company in the world and deserved because of the massive numbers of iPods, iPads and iPhones they sell. But that is because they make and sell something you can hold in your hand. Facebook and Twitter really just provide a platform to talk to each other and share photos and videos, something which we all do on a daily basis face to face.
Social media is valuable though. It is valuable in the sense that it promotes networking. Take our industry for example. There are thousands of double glazing related people and companies who talk to each other on a daily basis and I know many have made new contacts and are now even starting to buy from each other. This is something I think Twitter does better than Facebook. Facebook is better for sharing photos, videos etc.
So, lets all calm down with the stratospheric estimations of what social media companies are worth, realise that they are valuable in a person to person way, not a monetary way, and lets focus on the business that make us all real money…double glazing businesses! ;)