Facebook Free Fall (Sergio Tacchini / Djokovic Case)

by Bojan Vuksanovic

O.K. It’s not the first time newly listed company goes down more than 25% in two weeks (though it is very rare) but sure thing it is the first time company that was listed with so much hype, so much expectation, with so much potential, with almost a billion! daily consumers passed through such a free fall as Facebook. Now everybody is trying to figure out what went wrong. Is it initial price? Facebook smartphone delay? Estimation of future revenues? Zuckerberg on vacation? Similar local platform (like the ones in Russia and China)?…

I think none of that. In my opinion answer is pretty simple. I was never fan of Facebook (heck I don’t even have FB profile), but 900 million users worldwide with possibility to contact all of them in seconds rings a bell. Especially if you are in marketing and advertising. But this is the tricky part. Marketing and advertising potential is limitless, but…But I think they didn’t show investors they got know-how to make expected money out of it. Going publicly Facebook put itself in a big league, and rules are quite different there. Potential is not enough, in fact potential is nothing. Now we talking about cash flow, dividends, daily income…it is about some tangible things (you know “green thing”) if you are listed on NYSE. Simply speaking they failed to convince investors they know how to make money out of doubtless potential. I know they didn’t convince me.

Speaking of that, there was an interesting advertising case last week. Novak Djokovic, tennis world No 1, broke up 10 years endorsement contract with Italian brand (owned by Chinese) Sergio Tacchini. According to both sides, Sergio Tacchini admitted they didn’t know how to make money out of Djokovic’s tremendous success and advertising potential. Particularly in the US market. (And they need to pay huge bonuses related to Djokovic’s smashing season last year). Now, Djokovic signed with Uniclo, Japanese brand. Let’s see how they’ll do it.

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