Facebook’s arrival on the NASDAQ trading board fell flat.  The social media hype train is long in the tooth, as was demonstrated with Facebook’s opening day performance.  If investors are expecting a repeat of Google’s early performance in 2004, I think we’ll see a lot of disappointment.  Until social media companies can define and demonstrate a well built business model that is weighted towards substance rather than hype, investors should stay away from such companies.

Take it from me…About a year and half ago I invested in a social media company called QuePasa.  I did so because of the hype train around social media.  Since Facebook was still private, many investors looking to establish a position within the social media realm had to settle for 2^nd tier players that were attempting to carve out a small piece of the pie.  Unfortunately for me, I mistook the longevity and staying power behind the ‘hype’ and forewent 100% return on investment.  Now I’m negative.  Hindsight is 20/20…my plan differed from what actually came to be.

The fact is that the Facebook hype train has been chugging along down the road for 3+ years.  If the company would have debuted back then, investors would likely have seen some ‘astronomical’ growth, but the company’s valuation would have started lower to start with, too.

Facebook is well known and well understood by the investing community.  Based on its current business model, how can investors be irrationally exuberant?  How long will advertisers pile in money into a channel that doesn’t deliver?  Many people on mobile devices that use Facebook don’t even see ads, a good amount of people using a regular PC’s web browser have ad blockers that prevent ads from even being shown and the remaining majority of Facebook users ignore the ads.  It doesn’t matter how targeted a business might make an ad, value is lacking if the user ignores or never sees the ad.

Where else will Facebook turn for revenue?  The virtual good market?  Yes, that sounds like a model for success (sarcasm).  Innovation must take place and it must occur fast.  The competition is real and quarterly reports will cause investors to flock to or away from the company.

For Facebook to continue being a ‘revolutionary’ force, the company must continue to be a dynamic change agent.  Since its inception the company has been a location online for people to go and socialize, fulfill their voyeuristic desires, play a games and maybe click on an ad by accident.  This has been a platform widely successful in terms of attracting users, but how about turning users in to profitable customers?

Facebook must change if it to be a zenith of the stock market.  The social media hype train is loosing steam.  The thought of a reenactment of the late 90’s dot-com bubble isn’t in the works because people are no longer that irrationally exuberant when it comes online technology.