Facebook IPO: A Little too Late?

With May 18th set as the official date for the IPO of Facebook, people are thinking the timing could not be more off. The latest earnings report showed a 7.5% decline from the previous quarter, and major brands are becoming skeptical of the value Facebook's ads provide them. All of these signs may create obstacles at an extremely inconvenient time: 3 weeks before the social networking giant's historic IPO.

When any company prepares for an IPO, it is essentially trying to market itself by building buzz for the few months leading up to it. In Facebook's case, it is trying but the results are not favorable. The last earnings report before an IPO is the last chance to give potential investors a look at hard numbers that can ultimately influence their investment decision. Thus, it is extremely important to show growth, but Facebook instead showed a 7.5% decline from the previous quarter. Facebook shrugged this off as just being seasonal trends, which may be an unsubstantiated excuse. If this really was a seasonal trend and Facebook was expecting it, why did they choose to IPO right after the slowest part of the year?

Had the IPO been set last fall, Facebook may have seen much greater success. During that time, Facebook was generating bigger profits and their was much excitement towards the future of Facebook. The earnings report at that time would have also shown positive numbers.

In addition, advertisers are becoming increasingly agitated since Facebook provides very few ways to measure the success of its ads. Cookies, which track the viewer's online action after seeing ads, are not allowed. The only numerical value given to advertisers the number of "likes" and "impressions" on the ad. Despite this, many companies like Unilever and Proctor and Gamble plan on ramping up their ad spending on Facebook, showing positive signs. Advertising on social networking sites is still relatively new, and companies will have to wait before they can figure out its true value in terms of the sales it brings.

Simply put, timing is everything, and Facebook waited too long.

-Smit Purohit