No doubt Friday's Facebook (FB) IPO marks an historical moment in the history of the tech and financial sectors, but that's all that this much-anticipated event might turn out to be - a moment in time that, at the end of the day, means little in the grand scheme of things, other than that a great campaign of hype can spark enough emotional momentum to create an insane amount of wealth for those involved in the hype campaign.
Remember when shares of Sirius (SIRI) ran to over nine bucks solely because Howard Stern agreed to join the company for half a billion dollars? That hype made a whole lot of investors rich - while the numbers were never there to support the price - but when reality came crashing down on those that believed the hype, the share price followed south.
Google (GOOG), in my opinion, is not even a comparison. Google provides a service, in essence. Users flock to Google with the expectations to use it as a vehicle for transportation, that the service will help them arrive at the information, products or websites for which they search. Much of the time, the end goal of using Google holds the intent of spending money, therefore the user "link shops" until they find what they are looking for. Google is a platform created and operated for the purpose of making money from "link shopping."
Facebook is a whole different ballgame - it's chief purpose is to serve as a social media platform.
Although advertising revenue is still huge, Facebook is just that - social media. Users log on to see what's up with friends and family. It's not - at least not in the first place - a tool for the consumer, and it will be tough for the company to change its operations to alter that perception.
There's talk of grandour that "Facebook credit" will link to thousands of online retail sites and rake in billions for the company, but is that a practical vision or just a load of talk bundled into maybe the best laid plans of hype since the Vonage (VG) IPO?
You've got to believe that the bankers, the brokers - and those who will become near-billionaires as a result of this IPO - are laughing all the way to the bank on this one.
Facebook opens the day Friday at a higher market cap than Disney (DIS), when Disney's Avengers alone will nearly equal in world-wide revenue during the current quarter than Facebook's entire operations.
At the end of the day it's much easier to compare Facebook as a social media fad more similar to MySpace - now a disaster thanks to the emergence of Facebook - than to a booming business to which consumers will flock.
To even more consider how much hype is surrounding this IPO these days, take a look at Facebook's purchase of Instagram. Sure, Instagram has a huge following in the mobile market - the next targeted field for Facebook, but what does the service really do?
It posts pictures in the shape of a box. Nothing more.
Again, it posts pictures in the shape of a box. Does that sound like a logical billion-dollar idea, since that was the valuation of the deal, or does it sound a little like a company seizing the moment to make bank - and more importantly - make headlines.
"Seize the moment."
That is how history is made.
The question is right now, however, whether the Facebook team is seizing the moment to become a huge player in the future of Internet and mobile commerce, or whether the true moment being seized is by the inside shareholders, who see this as the most opportune time to cash in on the latest social fad - the most opportune time because right now the hype is at its highest levels ever.
I'm more apt to believe the latter.
Don't believe the hype.
Disclosure: No positions.
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