Facebook IPO goes public, company faces new challenges

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Facebook began trading shares on NASDAQ on May 18, 2012
Facebook began trading shares on NASDAQ on May 18, 2012

Facebook shares began trading on US stock exchange NASDAQ today at 11:30am EST at $42.25, raising $16 billion and making it one of the largest tech initial public offerings (IPO). The share price was $4.25 higher than the $38 pricing Facebook announced yesterday May 17 for its IPO. However, the stock closed at $38.23.

The IPO is expected to close on May 22, according to a company statement. 

“The IPO means Facebook will have to pay more attention to its marketers because that's where the money is coming from,” said David Berkowitz, 360i's VP of emerging media. “Historically, marketers have needed Facebook more than it has needed marketers, but now the tables have turned and marketers are going to demand more accountability.”

One of the challenges Facebook faces is that brands are still unclear what the true value of Facebook is, in particular the value of a fan. Earlier this week General Motors dropped its Facebook ads, stating the ads had low consumer impact. Berkowitz said Facebook can improve its offering through several ways, including improving its analytics, its search capabilities and potentially becoming an ad network similar to Google. Improving on mobile is also an option as Facebook has already stated in its SEC filing that mobile remains a weakness.

Facebook has around 150 million users in the US alone. Facebook also has more information about users than Google currently has, Berkowitz said. “Social advertising works and Facebook is in a position to show this better than any other company on the planet,” Berkowitz said. “It needs to focus more on what the value is and it needs to tie it to more ROI metrics.”

Finding the balance between pleasing advertisers and not overwhelming users with so many ads that they leave the site will be difficult, analysts said. Kip Casino, EVP at Borrell Associates, said the IPO will change the way the company will be run, as well as the user experience. However, he could not say how quickly or exactly how it will be changed.  

“I don't think it will change tomorrow or the next day. But maybe next year, over time, we will see an increased demand for some of these money-making initiatives to pay off,” Casino said.  Facebook could not be reached for comment. Morgan Stanley, JP Morgan and Bank of America declined to comment.   

At 2:37pm EST, the share price had dropped and was trading at $40.11. Casino said he thinks the price will run up, but wondered if it will stay up.   

One complication is the $15 billion lawsuit filed on May 17 against the social network claiming Facebook invaded their privacy by tracking their internet use even after logging out of the site.

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