CSotD: The invisible hand delivers a bitch-slap
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Dana Summers comes up with a cartoon now that I would have condemned back in May, when Facebook stock prices launched a raft of "Faceplant" cartoons that pretty much missed the point in favor of the pun.
You may recall that, when Facebook launched their IPO, it didn't live up to the hype, in part because of a computer glitch, but largely because, well, it was hype. Sometimes the hype pays off, sometimes it doesn't.
This time, it didn't.
Now, as the stock tumbles some more, the news people are going right back into full astonished coverage mode.
I'm not going to go through the whole IPOs-and-media-hype rant today, because, for one thing, I think I did a rather exquisite job on the topic back in May, which I encourage you to read.
And, for another, I've got an early morning dental appointment to have a filling replaced, which is going to be a lot more fun than dwelling on the unhinged foolishness of the stock market or the people who cover it.
So, rather than rehashing all that, let's try to look at what the current downturn actually says.
There is a small element of change in coverage, which has expanded from simply marveling over the fact that Facebook doesn't seem to have as much value as it was supposed to and is also encompassing the failure of Groupon and some other virtual ventures.
But it's still being covered as "Wall Street doesn't love the Internet" rather than "Here are some business ventures that sure didn't pan out."
Groupon is failing because Groupon is, well, if not a scam, certainly a lousy deal for companies. There have been several articles about it that use the term "loan shark" to explain how, even when it works, it doesn't work.
That it doesn't work online is somewhat irrelevant, however: If it were one of those discount coupon books that get sold by schools and sports teams as fundraisers, its innovative, self-serving element would still keep it from working.
By contrast, for Facebook, unlike Groupon, the merchants who pay the freight charges are easier to bring in and, since they should not be as dependent on raising actual traffic, are likely slower to decide it's a bad deal for them.
That is, the Groupon model requires people not just to participate but — since the merchant loses huge piles of money on the deal — to return often enough as full-price customers to first pay off that cost and then to create profit.
Which ain't gonna happen, since a lot of people only come because of the insane discount being offered on something they would never pay full price for.
But a Facebook ad, like any other ad, has a task of raising awareness in addition to the immediate goal of getting a certain number of people to take action right now.
Back when I was in TV advertising, people were purchasing a new car every five years, which meant that most car ads were "wasted" in the sense that 80 percent of the audience wasn't even marginally in the market for a car that year.
But, then, when they did decide to buy a car, the brand preference had been implanted. And that was the point of the advertising.
I don't think Facebook has that same ability to implant preference, and neither does GM, which pulled $10 million from Facebook, an action which, in turn, panicked everyone else which, in turn, is part of why Facebook stock has fallen.
Another part of the fall in Facebook stock is that employees who got stock in the IPO were not permitted to sell it until now, and, with that restriction over, some of them are now selling their stock, which, naturally, does a little supply-and-demand tap dance on its price.
What's it all mean?
Well, it all means that nothing has changed and that all this innovation in business models is nothing but fresh paint on the same old building.
A chart came out on Facebook the other day about who owns what, showing that most of the supposedly niche-y little organic companies are actually owned by Kelloggs or Monsanto or whoever. Since the last of those charts that I looked into proved to be absurdly inaccurate, I won't hunt up and repost this one, but there is this to be said:
Whether it is a small purveyor of hemp-based Fair Market granola bars or an innovative hipster on-line social site, the fact that the entrepreneur wears a hoodie or a Peruvian dork hat or both says nothing about the spiritual purity of the venture, nor does it suggest that even a genuinely idealistic company won't eventually sell out to the traditional market.
At which point any investor who thought this was going to be different is left in a position that most certainly is not.
The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.
Mike Peterson has posted his "Comic Strip of the Day" column every day since 2010. His opinions are his own, but we welcome comments either agreeing or in opposition.
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