This week's Facebook IPO, valued at an eye-popping $100 billion, is among the most-anticipated initial public offerings ever. But some analysts wonder about Facebook's business model for the future. General Motors pulled its ads this week, and insiders plan to sell lots of shares.
It’s prom season – and the Internet behemoth Facebook is all dressed up and ready to dance with both Wall Street and small-time investors. Its much-anticipated initial public offering, now valued at some $100 billion, is finally launching this week; but as the social media giant tries to sell itself as the hottest date in town, signs are that not all suitors are equally smitten.
Just this week, one of the nation’s largest advertisers, General Motors, announced that it is pulling its $10 million in advertising on Facebook, saying it was not cost-effective. Facebook also recently announced an earnings slump in the first quarter. That combination, along with findings such as a recent AP-CNBC survey of Facebook users revealing that 54 percent wouldn’t buy goods or services through the site, has some analysts wondering if Facebook co-founder and chief executive officer Mark Zuckerberg is about to stumble in his bid to turn his online community of nearly 1 billion users into an even bigger business, publicly owned.
Facebook may be the BMOC, but the valuation of the company leaves little margin for error, says Andreas Scherer, managing partner at Salto Partners, a Washington management consulting firm and a former executive at both AOL and Netscape.