Friday, August 31, 2012

Crash of social IPOs

Facebook is trading at 18.03.  Compared to its initial price of $38, it's at less than half of its original value.  Zynga, social gaming powerhouse, is also trading at its fraction of IPO price.  Today Zynga ended at 2.80.  It has dropped about 70% from its original value.

Facebook ended its day at 18.06.
Facebook needs to focus on its customers,
and that means mobile and marketers

Both had dramatic drop from its earlier IPO, and could not maintain its original hype.  What happened?  Did Facebook and Zynga valuation got overblown by investor hype, i.e. bubble, or have they missed opportunities to deliver on their promise of everything becoming social?  Are we simply getting over the social network hype and is it time for all of us to move on in search of the next big thing?

I see primarily one reason for precipitous drops of Facebook and Zynga: Missing the shifting customer need.

Social networking market that Facebook and Zynga depended on is going through a change that is faster than any other industry has seen.  It's getting disrupted by the surge of mobile.  Facebook and Zynga users are accessing their social network and games through their mobile devices more than ever, and it's a change that is happening faster than anyone anticipated.  Both companies did not have a good plan to thrive in this changing market dynamics.  And they are suffering as a result.

But I don't believe social network is a passing fad.  In fact it's becoming even more important.  As people stay connected, there are increasing need for people to share information and collaborate with others in an entirely different way.  Sending SMS and email do not scale as number of groups that all of us interact with on daily basis.  We all need a virtual group page where we can interact and keep track of conversations.  That is the promise of social network.

I see Google+ making efforts to become that collaborative social network.  With its recent addition of enterprise features, Google+ is going after enterprise market where collaboration is a critical component and solves an immediate problem.

Let's see how Facebook and Zynga make a comeback.  They are still very young companies.  I would not discount them from the future of social network.

No comments:

Post a Comment