The real cost of overselling


How do you lose $4.5billion in seven days? Well, it’s easy if you know how, or brazenly hike the estimation on your company before floating it on the stock market. It’s not often investors come away trying to sue a firm for false promises, but the real surprise is that people bought into the dream in the first place.
Mark Zuckerberg’s Facebook, the world’s biggest social network, was valued at $104billion, with individual stock hitting the exchange for the first time recently at around $38 a unit. By this Tuesday they were selling at just $30 each, and needless to say that result has led to plenty of grumbles, with some consulting legal representatives to see if they have grounds to file a claim.
This isn’t the first time a web based company has proved to be an overblown entity. A simple Google search using the term ‘MySpace stock’ will bring up a vast amount of articles from a range of sources pondering on what the outcome will be of this current FB fall. And we shouldn’t need to explain why that link is so telling, what with MySpace’s former dominance in this still fresh faced social media field, the huge buyout, and the platform’s eventual fall from public favour, turning it into a huge profit-sucking expense.
It’s unlikely things will repeat themselves exactly in this instance though- let’s not forget there are nearly 1billion users signed up to Facebook. And, realistically, the $4billion or so analysts estimate has been lost in the fire is really small bucks to the big boss; his brand will still be here tomorrow. What this really represents, if nothing else, is a stark warning about the cost of not keeping your feet on the ground when attempting to pitch an idea. And this applies to everything- from PR campaigns to new product designs, flash sales, or growth projections for the future.
It pays dividends to be realistic when offering services, or weighing up pros and cons. In the context of reputations, the FB situation is certainly not an irreparable catastrophe, but the company is no longer the untouchable darling of online business. All that glitters is far from pure gold then, though over time, with proof of retained advertising worth and sustainable user growth, Zuckerberg’s losses can, perhaps, be recouped.
But this is besides the point really. What matters is that no brand, irrespective of size and trend, can ever hope to continue overselling its worth, sans substantial evidence, without due reprisals- either financially or in terms of public perception. Post financial crisis it’s amazing this wasn’t already understood. But then again, with social media, the darling channel of marketers, perhaps it really is Fool’s Gold.