David Kirkpatrick: Facebook Frenzy

Facebook makes the Nasdaq board in Times Square Spencer Platt / Getty Images

For a week, the world went Facebook-crazy as the company’s initial public offering of its stock turned into a circus of fervor, greed, and—ultimately—alarm. When the stock finally began trading on Friday morning, it opened at $42 a share, $4 above the offering price of $38. But for those who had hoped Facebook would offer a beacon during dark economic times, there was disappointment. The social network’s stock ended almost where it had started—at $38.23 a share, and would almost certainly have dropped further if the underwriters—led by Morgan Stanley—hadn’t themselves piled in to support the price. Nonetheless, even this disappointing debut left Facebook worth a stunning $104 billion.

What made the IPO such a cultural touchstone? Was it the youth of its 28-year-old CEO Mark Zuckerberg? Or the fact that half of all Americans and 900 million people around the world spend a considerable portion of their lives there? Or was it the clash of generations over how quickly tech is transforming how we live?

In what could be seen as a symbolism-fraught pushback by the old guard against the new, there was news, only three days before the IPO, that General Motors had decided to stop advertising on Facebook. GM said it had concluded that ads on Facebook don’t sell enough cars. It was as if the one-time blue-chip sneered at the upstart company like an aristocrat dismissing the prospects of an arriviste debutante. The auto-giant news raised a red flag for many about Facebook’s sky-high valuation and cast a pall on the impending IPO. If the nation’s third-largest advertiser was pulling out, how could Facebook grow its profits fast enough to justify a stock valuation more than 100 times last year’s earnings of about $1 billion?

In fact the majority of big advertisers have been increasing, not decreasing, their Facebook spending. GM’s big competitor Ford took a diametrically opposite view on Facebook. Ford VP of global marketing Jim Farley was gung-ho: “Today I know the right thing to do is to take some of my budget and create a social-media campaign six months before a vehicle comes out,” he said. David Eastman, CEO of ad agency JWT North America, also struck a confident note. “Facebook is the only one of the big four—Google, Apple, Amazon, and Facebook—that can confirm your identity online. They own that,” he said. “Figuring out how to monetize it could be very important.” At Facebook, meanwhile, hundreds of engineers, including Zuckerberg, conspicuously spent Thursday night before Friday’s IPO at a company “hackathon” working on new software products, flaunting the message that “things around here aren’t changing.” A similar point was made by the CEO’s hoodie garb at the stock-offering “road show” in New York. Zuckerberg, who knows his biggest challenge will be resisting Wall Street’s short-term pressures, said after the stock started trading that “Facebook’s mission isn’t to be a public company. Our mission is to make the world more open and connected.”