Five Reasons the Facebook IPO is Troubling

Adam Schreiber CEO & Managing Partner at ConvoNation, Senior Consultant & Partner at B&R,

Posted on June 16th 2011

According to a recent CNBC report by Kate Kelly, Facebook is rumored to be entertaining the idea of an initial public offering (IPO).

As most of you are aware, Facebook has been pushing back on investors and stakeholders who have wanted the social media behemoth to file an IPO for some time. Now, it seems that Mark Zuckerberg and company are eyeing first quarter 2012 as an ideal time to release the monster, $100 billion IPO. The story, which is neither confirmed nor denied, is raising questions around the blogsphere. So who am I to not jump on board and pick it apart?

Here are a few major issues the company is currently facing:

Other sites gain popularity: Facebook is no longer the only mega social site in town. Since its inception, Facebook has been the front-runner in the industry after pretty much sinking MySpace. But now it’s no longer alone. Take Twitter for instance. It’s not new, but the real-time message-sharing site continues to make strides in the amount of users it has and how much it is valued at (before revenue).  LinkedIn, of course released its IPO earlier this year and is slowly solidifying itself as the business networkers site. And let’s not forget Google’s +1 that is supposed to rival the Facebook Like button and help the company own the social search.

Early adopter fatigue: As the site continues to grow, the rate that people join will continue to slow. Ok, so a slow in growth isn’t the end of the world (yet) when your site population is over 700 million. But, consider this - Facebook had 11.8 million new users in May, which was down from 13.9 million in April.  There was even a decline of 6 million users in the US, as well as falloffs in Canada and the U.K. Maybe users are jumping ship for other networks or maybe they’re just tired of using the site for gossip. Regardless, Zuckerberg’s goal of reaching 1 billion users may actually be out of reach.

They refuse to understand privacy concerns: The hot topic in the media continues to be about user privacy. Facebook has 700 million users and because of that, not only marketers are going to want in on the information. That many profiles are a hackers haven for personal information. And, if the company does officially file for an IPO you know marketers are going to be feverishly pushing to monetize this user information. That is a gift and a curse. The gift, of course is for Facebook to make boat loads of money off user data, but the curse is that users are becoming more aware of their privacy and what types of information is safe and unsafe to share. And even though people are smartening up about their privacy, Facebook continues to insult its userbase’s intelligence. The company recently patented their (creepy) facial recognition software that users, and now the FCC are a bit concerned about. And on top of that, the company has been hit with a potential class-action for allegedly collecting information about Web users via the "Like" button -- a social widget that news organizations and other publishers began displaying last year. When will they learn?

Users are wanting more: People are finding the site less cool, and are searching elsewhere for deeper, meaningful connections. Sure the site now includes Brands and business execs, but what Facebook has not been able to do well is harness the conversations between these company pages and the users that write on them. It just seems as though they have failed to see that it’s not necessarily the quantity of content a site produces, but more so the quality of content. The point should not be to sift through chatter to get the messaging (as a marketer) you are seeking, the point should be to simply design a format that facilitates real conversations that you can monitor and get involved in directly.

Because Facebook has paved the way for online connections, many social network users are now searching for connections and richer discussions beyond Facebook. Whether it be on a blog or a rival SNS they are anxious to share their views and opinions with people who challenge them, not just agree with them.

Mark Zuckerberg: Yes that’s right, Facebook’s fearless leader is as much of a problem for the site’s well-being as he is a help. Between him trying to slander Google recently in a PR stunt, to his continuous lack of appreciation for his users, a “CEO” can only cater to spenders and avoid his bread and butter (the users) for so long before they turn on him. At first it was cool to have a young, ballsy CEO who did his own thing and walked at his own pace. Now it’s just frustrating on a grand scale.

So while Facebook’s (inevitable) IPO is just around the corner, and it may be an immediate buy, people need to consider what exactly is happening within the Internet giant. For the first time in the site’s creation they are being doubted on their performance. And as users become more savvy and continue to look for new outlets to engage in they will most definitely be stumbling across new mediums of sharing both inside and outside of their established social circles. So you can bet that if users are jumping ship to find new means of expression, marketers will be close behind. 


Adam Schreiber

CEO & Managing Partner at ConvoNation, Senior Consultant & Partner at B&R,

Adam is the CEO & Managing Partner of, and a Senior Consultant & Partner at Brand and Reputation Management. He has extensive experience in digital strategy, reputation management, and communication planning. Adam has previously worked in global communications in both digital technology and healthcare at Hill & Knowlton and Euro RSCG, serving such clients as Hewlett-Packard, Amgen, Deloitte, Yahoo!, and JNJ among others. He is a sought after speaker on topics surrounding reputation implications in social media.
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Nice article. I am wondering where are you getting those numbers about people quiting facebook from? Any data that could back up your statements?


I'm not sure that I agree that Facebook's potential IPO is troubling, at least not for the reasons you mentioned.


1) Other sites gain popularity

Ok I'll give you that Twitter is gaining in popularity, but it is still only around 200 million users, and probably less than 15% use it regularly. Linkedin has just passed the 100 million users mark. And Google +1 just launched.

And, Facebook has 700 million users. Its going to take a long time for these services to catch up to Facebook, if they do at all. Fact of the matter is Facebook has more users than all these services (700m vs 300+m) combined and they're still growing (although slower than before).


2) Early Adopter Fatigue

I wouldn't call new users joining the service early adopters - Facebook is mainstream. Also who cares if new users joining dropped to 11.6 million in a month. That's still 11.6 million new users in a month! Every company would love to have that growth!


3) They Refuse To Understand Privacy Concerns

I'm not sure this is as big a deal as people make it. I know I don't care, I know my friends don't really care, and presumably 700 million people and growing don't really care. 


4) Users are wanting more

Facebook releases new features all the time. They're apparently about to release a photo sharing app, and a there might be a partnership with Spotify. Also not to mention they may start streaming movies too. 


5) Marc Zuckerberg

While the PR scandal was bad, I don't think that anyone would consider Marc Zuckerberg anything than a genius. If Facebook IPOs next year and they are able to be profitable in a year or two, do you think people will remember or care? Probably not.

Sam, everyone is entitled to their opinions, and I definitely respect yours. However, I disagree. People constantly get caught up in numbers. Yes, Facebook has 700mm users. That's amazing. Twitter is around 200mm users. That's a lot, but def not 700. What I am trying to say is that the goal is not to "catch up" to Facebook. Better forms of communication are happening and taking people's interest. I don't know about you, but I am constantly looking for newer, better ways to communicate. With that comes competition. If you are looking only at numbers than of course Facebook wins. But if you look at how people are spending their time now on social sites it's amazing. Even Ted conversation is generating real content around talks instead of inane chatter. I did not call new users joining the site early adopters. I am calling early adopters, early adopters. Those people who have been on the site since 2004-2006 and have seen it grow are who I am referring to. Every time they make a move there is always back lash. And now with more options people will have places to go besides Facebook. Who cares that they dropped to 11.6? Facebook cares. Investors care. You may not, but how invested in the company are you? Those are staggering numbers. I run an internet start up, and yes numbers are crucial, but when you're growing at a certain pace and it slows down that much, it is a worry. As soon as that doubt is in the air you are not as strong as you were just one day ago. You may not care about privacy concerns, but you cannot talk about the millions of people who petition against Facebook and the abuse of their privacy. It happens all the time. Speaking for you and your friends is not collective society, I'm sorry. I, myself am less concerned about my privacy than most people I know, but that is because I've done the research and understand what's happening. People are losing trust every time Facebook ads something new and does not disclose what it means for their personal privacy. The fact that users have to find out from other users that they need to make changes is reason enough for most people not to trust Facebook. Yes, Facebook releases new features all the time. Is that always a good thing? I'm excited about the photo sharing app. But my point was about content. Users want more than the gossip they receive and the LOL's. Not all, but some. And movies? I am not going to watch movies over facebook. Many will, but many won't. This site is going to be unrecognizable soon! Change is good, but to a certain degree. Facebook has been coasting on momentum for a long time. Brands inhabit it because it's the "place to be". But that will not always be the case. I can promise that. In the long run, when people figure their $#!T out it is going to be quality over quantity. Mark Zuckerberg is a very smart man. Don't get me wrong on that. He's done incredible things to advance the internet. But it's not just the PR scandal, it's his public persona. It's how the world perceives him. And right now the world thinks that he is a arrogant young kid who doesn't play well with others.... Seriously appreciate that you took the time to read the blog and even comment on it. Always love to hear other's opinions and be challenged. I'd love it if you'd join and keep this awesome content rolling.

Thanks Adam,

That was an interesting read. I'm inclined to agree and feel a little cynical about the IPO. Has Facebook reached it's peak in terms of audience engagement and growth trends? (Makes for a good time to float)

Probably and certainly a combination of the factors you mentioned. Not so sure on the privacy side as I often find these issues to be a lot of smoke and very little fire. The privacy fire starters do make a lot of noise and we all love to hear a good scandal.

That said, nothing is going to happen any time soon that will disturb an institution that big, it will still be the hottest tech IPO in history and the trend for growth may be showing some decline, it's an audience size that will be of mega value for many years to come and for the majority, change is too uncomfortable and too much bother.

So I feel a little cynical, I'm less troubled and in fact, more excited about the new and alternative players on the social scene. Like, Instagram, Color, Meetup and many others.

Bring on the competition.

Nick -


Appreciate the read and the kind words to follow. I definitely agree about the whole privacy and scandal aspect. These things are largely hyped and people often times misunderstand what the word "privacy" means in Internetland. however, I must stick by my original article - it may be a bit of smoke, but it's continual and that is enough to stoke the flames.

You're also right about the IPO, it will likely be the biggest in in history. In my article you'll notice that I said it could be a good thing to buy right away, but get out early. Facebook is not invincible (even though Zuckerberg believes he is). There are many things that are great about the business and many things that aren't. As we get closer to the inevitable IPO I think we're going to see a lot of dirt rise up...Thank you for the comment! We'd love to have your expertise on ConvoNation.