Facebook Not Making The Wealthy Wealthier

© Eknarin Maphichai | Dreamstime.com

As the third day of trading gets underway, Facebook continues to not make the wealthy wealthier. By the end of trading the first day, fingers were being pointed. Close out the second and people are estimating where the bottom will be. Mark Z has said the business is driven by a social agenda and not investor's wealth. So far he is proving his point.

Other than the obvious over-valuation of the IPO, there is a fundamental difference in how Facebook operates compared to other Internet giants like Google. Companies want to be able to advertise in a way that makes sense to them, project a product in a manner that causes people to spend their money on it. Google can do that by target advertisements linked to search engine queries. As GM pointed out last week, Facebook was not effective in doing that, consequently they were pulling the plug on site advertising. From a return on investment evaluation, it was not working.

The adult majority population continues to see the Internet as a tool best utilized for disseminating information. Social networking sites however are not built on that, they are built on relationships. It is not the information a company wants me to know that matters, it is what my circle of 'friends' are experiencing that matters.

Facebook is a giant human web of relationships about 1 billion strong. Advertisers want to envision that as a giant crowd of people all staring at a screen as if they were waiting to buy something. TV did that - everyone watching experienced the same thing at the same time. A digital web of relationships does not operate simultaneously, it operates in waves. What is important is decided by the community, by the network, by the relationships.

Someday, somebody, somewhere will figure out how to make a boatload of money riding the waves of human relationships. Oh wait, somebody did...we call if Facebook.

Let me know, did you the think Facebook IPO would soar or tank? Gut feeling or valuation?