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Elgan: Facebook's Summer of Fail

The social networking sites' woes started with its IPO and have continued ever since

August 4, 2012 06:18 AM ET

Computerworld - Remember when Facebook was the company that could do no wrong? When all the attention and traffic and users were headed in droves to it? When founder and CEO Mark Zuckerberg was anointed as the new Steve Jobs?

Neither do I.

Facebook's Summer of Fail has shortened memories about the good times for Facebook, and focused attention on an uncertain future.

Facebook's IP Ohhh!

It all started with Facebook's clumsy attempt to become a public company.

Hoodiegate, as they called Zuckerberg's "road show," in which some investors concluded that the CEO was too arrogant to be trusted, got Facebook's long-anticipated IPO off to a bad start.

The May 18 IPO itself was a train wreck.

Since then, Facebook's stock price has dropped to nearly half, and investors are not optimistic about the company's financial future.

TIME Magazine is asking if it's time for Zuckerberg to resign. (As if losing more than $7 billion in personal net worth wasn't punishment enough.)

But the IPO and subsequent stock declines were just a prelude to Facebook's Summer of Fail.

Facebook is losing users (and using losers)

Facebook's greatest asset is its user base, which has historically grown at a breakneck pace and which has been assumed to be composed of rabid Facebook fans who love the platform. A large, growing and enthusiastic user community is the entire basis for any optimism about Facebook's ability to make money.

But last month, the American Customer Satisfaction Index (ACSI) released a report showing that Facebook fell 8% from last year to a score of 61 on a 100-point scale, the lowest-ranking social network for customer satisfaction by far. Worse, new rival Google+ scored highest with 78.

Meanwhile, Capstone analyst Rory Maher reported last month that Facebook is bleeding users, dropping by 1.7% in the US over the last six months.

This week, the company reported to the U.S. Securities and Exchange Commission that about 83 million Facebook user accounts are duplicate, misclassified or "undesirable."

From a business perspective, perhaps the most devastating developments this summer are widespread questions about the effectiveness and even the legitimacy of Facebook advertising.

The trouble with Facebook ads

The BBC set up a Facebook page for a phony company it invented called VirtualBagel. The VirtualBagel page provided almost no information, and no solid basis on which anybody might "Like" the company or its page. The BBC advertised it on Facebook, gaining more than 3,000 "Likes," mostly from Egypt and other places outside the U.S. and U.K., and often from clearly fake Facebook users. The BBC concluded that the "Likes" you buy via Facebook advertising is mostly junk traffic by people who don't buy things and who don't care or even know what they're liking.



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