What You Should Know About Social Media

Stay away.  As the current barbs about Facebook’s IPO fly and as GroupOn takes a dive with its stock closing in on single digits, the Social Media helium craze is drifting further away from the accountable reality of advertising performance.

Tech stars Google and Apple haven’t escaped the hammering of late by the pundits that are blinded by the hope of social media or even mobile media.
 

They are all wrong.

The reality check that follows tracks the opening price for the above mentioned companies and the Dow Jones and NASDAQ averages.  It may not be a precise measure, but it points out the underlying value placed on these firms by analysts and the public at large.

Since the opening stock price on May 18^th (the first trading day for Facebook) and the closing price on May 30^th the result that follows sends a strong signal and a vote for value creation vs. value deterioration.
 

Apple: up 8.5%

Google: down 5.9%

Facebook: down 33.0%

GroupOn: down 11.1%

Dow Jones: down 1.9%

NASDAQ: up 0.8%

While the averages remain relatively unchanged, Google tries to keep pace while the pure play social media darlings are clobbered.  The clear winner in this “race” … Apple.

MEDIA OCEAN'S TIES TO GROUPON - OCEANS APART?

GroupOn backers Eric Lefkosky and Brad Keywell, with investments in a host of companies, most notable among them in our world, Media Ocean, have much to explain concerning the financial chess game at GroupOn.

What follows is a recent piece by Chris Nemey, at IT World, on GroupOn’s state of affairs which have since driven the stock price to a new low of $12.58 as of this writing.

As for Media Ocean, a merged entity between Donovan Data and Mediabank, I cannot help but wonder if whatever financial games going on at GroupOn could trickle down to the “Ocean” as Mediabank takes firm management hold.

“Just days after Groupon (NASDAQ: GRPN) had to make yet another revision to its finances, just days after the daily-deals site settled an $8.5 million combined lawsuit regarding illegal coupon expiration dates, just days after the Chicago firm was hit with a shareholder lawsuit accusing it of misleading investors, and just days after it was announced that the Securities and Exchange Commission was again investigating Groupon, the company's stock continues to attract buyers.

Seriously, what is wrong with these people?

Groupon's stock is now selling for less than half its IPO, and I'll tell you right now it's never going to climb above $30 again. The company continues to lose a ton of money, and it essentially has no internal controls.

But you'd think people jumping on board now would know better. Hey, new Groupon investors, I hear Bernie Madoff's starting a new investment business from prison. Get in on the bottom floor!

Maybe they think they're getting some kind of bargain because Groupon hit a new low of 14.01 early Thursday (shares were at 14.35 in the early afternoon). Well, if it's lows they're looking for, they should be more patient because more new ones are coming.

However, they'd be better off being smart than patient. Here's the thing, investors: Whether it's due to incompetence or something far worse, Groupon has proven beyond any shadow of a doubt that it can't be trusted.

Investors aren't supposed to sink money into something they don't trust. That's what casinos are for.”

Disclosure: I am short GroupOn

BILLION DOLLAR FLASH IN THE PAN

With revenues approaching $500 million and having been in business just under two years its valuation is estimated to be $1 billion.

Groupon is a phenomenon that needs to slow down fast.

An article in this week’s BrandWeek covers two years of marketing efforts for the company that shuns traditional methods and relies on viral impact and PR efforts to push the envelope.

But can this business sustain itself in a fickle world of web “loyalists”? There is no doubt that Groupon is a success today. What it will become tomorrow is anyone’s guess …. if it survives.

I took the plunge about a year ago and purchased several restaurant chits that gave me an average 30% savings at three establishments (the restaurants pony up as much as 75% to the customer and Groupon). One chit introduced me to a new Chinese sandwich shop I would have tried again but, it went out of business. One was mediocre and a third was below sub-par.

Since the chits were good for several months I decided to wait a few months to avoid crowds. And I wanted to ask if they would “do it again”. No, no and NO!

Apparently it was good business for Groupon but not nearly a first base hit for the restaurants that need repeat, full-paying customers. Groupon is the leaking bucket that will eventually run out of water as it tries to refill itself with compelling offers.

Dismissing my preferences only for restaurants, I have since been deluged with offers for nail salons, spas and women’s apparel. According to Groupon’s SVP, marketing, Aaron Cooper …”When you deeply understand your customer and product, you’re going to be better …. no need to hire traditional marketers ….you’re going to be better”.

Pride before a fall …. hubris. I recently unsubscribed from the service and am a happy, “spam” free camper.