The Value of Social is Not Found in Grand IPOs

As attention is inevitably focused on the imminent $100 Billion Facebook IPO it is worth reminding ourselves that the true value of Social is not to be found in grand IPOs. Controversy swirls around the actual value and how many revenue multiples should be used to arrive at a price. This is perhaps inevitable when a young company is valued at close to, or greater than, commercial behemoths with long established histories. But to my mind it is missing the point. For what it’s worth I find the whole notion of a revenue stream based on hyper targeted advertising dubious at best and, to me, more importantly running against the spirit and ethos of social.

I spend a great deal of time explaining the concept of how it is important to openness mind to the idea of unusual and non traditional expectations of return being a factor in Crowdfunding, particularly equity-based campaigns. Often this is a hard concept for those from traditional capital markets to understand. So why am I not saying that here, after all it is a capital round for the poster boy of social? Well for one this is not crowdfunding, it’s institutional investing, traditional and so, to a large extent, the new rules just don’t apply.

This looks to me a lot like old institutions using old style thinking and struggling to rationalise what, they probably fear, was once famously described as “irrational exuberance”. But at the same time they don’t want to miss out, or appear out of touch with the “new phenomenon”.

Of course Facebook have perhaps purposely stirred the pot by presenting it as “unconventional”. The non voting shares, the “rogue CEO” purchase of Instagram and, of course, the hoodie. Am I convinced, no not at all – corner offices all round I bet. Do I wish the early investors who took a leap of faith and held to it well, most certainly I do, although it is noticeable how many are seeing their returns up front by selling significant portions now. I don’t blame them.

But all this is to miss the point. The value of social is found in innovation, transparency, engagement, collaboration, agility, empowerment, iteration and the power of small when aggregated to make a difference. Its promise is to enable us to break old constraints and to reimagine ways of approaching economy, culture and society to be more effective, more democratic, and more inclusive. Does it mean old rules are simply swept away – not a bit of it, certainly not in my life anyway, but they must increasingly exist alongside the new.

I wish Mark Zuckerberg well and all involved in the IPO but, IMHO, I think it overvalues FB, but that doesn’t really matter. Is it probably the beginnings of a bubble fuelled by people that don’t get it? Almost certainly. Does it have anything to do with the new world of social? Not at all.