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http://www.thewrap.com/media/article/facebook-zynga-wall-street-wants-out-social-media-web-50301
From Facebook to Zynga, Wall Street Wants Out of Social Media
Published: August 02, 2012 @ 6:29 pm
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<!--
-->By Brent Lang & Lucas Shaw
As the stock prices of Facebook, Zynga and Groupon tumble, investors are thrashing to get out of the social-media web, fearing they're trapped in Tech Bust 2.0.
The 40 percent decline in Facebook?s value and insider-trading charges against Zynga especially have done little to convince Wall Street that social media is a smart investment.
"Investors are quickly recognizing the valuations simply don't make sense for most social-media stocks,? Michael Yoshikami, CEO and founder of the investment consulting firm Destination Wealth Management, told TheWrap.
?It took investors many years to realize this in the dot-com crash in 1999. But it seems as if this lesson is clearly in investors' minds, particularly given the problems with the Facebook offering.?
</IMG>
Getty Images
While most analysts believe we?re a long way from another crash, the swift loss of confidence in these companies points to a real problem with valuing the next wave of tech titans.
Consider:
>> Facebook has lost nearly half its worth, seeing its valuation crater from $100 billion when it went public in May to $60 billion. On Thursday, shares of the company closed at $20.04, nearly half of its initial offering price of $38.
>> Groupon?s accounting issues have resulted in embarrassing admissions that it inflated earnings results and caused its stock to plummet over 65 percent from its IPO price.
>> Zynga, which hit the Nasdaq as the hottest name in gaming, is struggling to stay out of the red and has seen its shares languish at $2.95 -- a steep drop from its $10 debut.
>> And that?s to say nothing of Pandora and Angie?s List, both of which have disappointed investors with their aversion to profits.
</IMG>
Getty Images
Two rare exceptions are LinkedIn and Yelp.
With its steady revenue growth and thriving network of job-seekers, LinkedIn has defied the odds and seen its stock price soar near $100. While Yelp has seen its share price rise 46 percent above its IPO on the strength of its overseas expansion.
But in the internet age, having a vast user base does not guarantee profits or brand loyalty. And social media in particular encourages fickle behavior.
Also read: A Year Later, Where's That Hip New Makeover of MySpace?
?Just as quickly as a company can accumulate 1 billion users, it can lose 1 billion users,? Andreas Pouros, COO of the digital marketing agency Greenlight, told TheWrap. ?We?ve seen that with MySpace, which journalists used to say had social media sewn up. The feeling was that with so many users, how can they fail? But people today, their mood and feelings can change in a snap.?
The situation is bad, but most analysts believe that the current carnage in the social media sector will not match the chaos of the previous tech bust.
"To say we have another bubble bursting, there?s no comparison,? David Kirkpatrick, founder of CEO of Techonomy, author of "The Facebook Effect" and former technology editor at Fortune, told TheWrap.
From Facebook to Zynga, Wall Street Wants Out of Social Media
Published: August 02, 2012 @ 6:29 pm
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<!--
-->By Brent Lang & Lucas Shaw
As the stock prices of Facebook, Zynga and Groupon tumble, investors are thrashing to get out of the social-media web, fearing they're trapped in Tech Bust 2.0.
The 40 percent decline in Facebook?s value and insider-trading charges against Zynga especially have done little to convince Wall Street that social media is a smart investment.
"Investors are quickly recognizing the valuations simply don't make sense for most social-media stocks,? Michael Yoshikami, CEO and founder of the investment consulting firm Destination Wealth Management, told TheWrap.
?It took investors many years to realize this in the dot-com crash in 1999. But it seems as if this lesson is clearly in investors' minds, particularly given the problems with the Facebook offering.?
Getty Images
While most analysts believe we?re a long way from another crash, the swift loss of confidence in these companies points to a real problem with valuing the next wave of tech titans.
Consider:
>> Facebook has lost nearly half its worth, seeing its valuation crater from $100 billion when it went public in May to $60 billion. On Thursday, shares of the company closed at $20.04, nearly half of its initial offering price of $38.
>> Groupon?s accounting issues have resulted in embarrassing admissions that it inflated earnings results and caused its stock to plummet over 65 percent from its IPO price.
>> Zynga, which hit the Nasdaq as the hottest name in gaming, is struggling to stay out of the red and has seen its shares languish at $2.95 -- a steep drop from its $10 debut.
>> And that?s to say nothing of Pandora and Angie?s List, both of which have disappointed investors with their aversion to profits.
Getty Images
Two rare exceptions are LinkedIn and Yelp.
With its steady revenue growth and thriving network of job-seekers, LinkedIn has defied the odds and seen its stock price soar near $100. While Yelp has seen its share price rise 46 percent above its IPO on the strength of its overseas expansion.
But in the internet age, having a vast user base does not guarantee profits or brand loyalty. And social media in particular encourages fickle behavior.
Also read: A Year Later, Where's That Hip New Makeover of MySpace?
?Just as quickly as a company can accumulate 1 billion users, it can lose 1 billion users,? Andreas Pouros, COO of the digital marketing agency Greenlight, told TheWrap. ?We?ve seen that with MySpace, which journalists used to say had social media sewn up. The feeling was that with so many users, how can they fail? But people today, their mood and feelings can change in a snap.?
The situation is bad, but most analysts believe that the current carnage in the social media sector will not match the chaos of the previous tech bust.
"To say we have another bubble bursting, there?s no comparison,? David Kirkpatrick, founder of CEO of Techonomy, author of "The Facebook Effect" and former technology editor at Fortune, told TheWrap.
