Social media is about to get much more annoying, and it's all Facebook's fault (kinda.)
In the wake of Facebook's disappointing IPO, Paul Graham, the cofounder of the country's most famous and successful tech incubator, Y Combinator, sent an email to his portfolio companies predicting a shift in the way venture capitalists evaluated start-up potential. Before the public offering, companies that build a large audience were not under much pressure to build a revenue model to match. But "the bad performance of the Facebook IPO will hurt the funding market for earlier stage startups," he wrote, "possibly a lot, if it becomes a vicious circle."
Facebook's bad IPO wasn't an aberrational day. The company's stock kept dropping. And dropping. From $38, the offering price, into the $20's and below.
Very little about Facebook, the company, technically changed. Total users kept growing. Time spent on the site kept growing. Average revenue per user in the U.S., Canada, and overseas grew too. But not fast enough for investors, apparently.
But Facebook, as a symbol of the attention economy, had already changed dramatically. Before the IPO, the company's value was a debate. After the IPO, its value was a stock price. One side had said all along that no company had ever achieved Facebook's scale, reach, and mastery of an audience's time and attention without being worth $100 billion. Another side had said that no company such an undeveloped business model could possibly be worth even half that price. We don't know who's right in the long term, but in the short term the pessimists are winning.