More Bad News Piles Up for Facebook
Facebook has gotten nothing but grief since going public last month and now a user poll is adding to the misery with more evidence that their ads don't work and user engagement is going down. According to a poll taken by Reuters/Ipsos, 34 percent of Facebook users says they spend less time on the site than they did six months ago and 80 percent say they never purchased a single thing because of one of its ads.
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The oddest result to come out of the poll, although it may be the most telling, is that nearly half of the respondents now have less favorable opinion of Facebook than they used to simply because the IPO has been such a disappointment. Even thought the declining share price and frustrating technical troubles had zero affect on most Americans (or even the average investor) simply giving off the impression of a bumbling, unpopular company can change the customer's perception of it. Some respondents said that it's even effecting their opinion of the entire stock market.
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And this survey will only continue the downward spiral. Part of the reason the stock is struggling is because the public offering has exposed some of the cracks in the armor of Facebook's business model. Ads are awkward and under-performing and revenue is not growing at the rate it once was, particularly when matched against the site gigantic user base. (The site makes a little over a dollar per user, each quarter.) That makes consumers less interested in the site, which depresses the ad market even more, which drives down share prices, which turns off consumers... and so on. The stock opens on Tuesday at $26.90, still well below its IPO price of $38.
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There may also be the matter that after eight years of existence, the influx of everyone they know, a "tell-all" Oscar-winning movie about the founders, and non-stop stock market coverage, people are simply growing bored with the site. It's happened before with the once-popular Friendster and MySpace. Unlike those sites, there isn't another Facebook waiting to take their users away right now (though Twitter certainly occupies a lot of people's time), but use of the site may come to rest at a natural level that is far below its peak. Facebook isn't going away anytime soon, but it's also clear that its days of rocket-like growth combined with bright and shiny feelings are over.
