Facebook a Fad? 900 Million People Can’t Be Wrong: CEO
Associate Editor, CNBC
Facebook’s long-awaited initial public offering will be a long-term bet, and selling pressure on the shares after the market excitement post-IPO will “relax,” Martin Sorrell, CEO at advertising bellwether WPP, told CNBC Tuesday.
“I don’t think 900 million people can be a passing fad. A lot of people have taken a position in Facebook, it’s a self-perpetuating situation,” Sorrell told CNBC’s “Worldwide Exchange.” “The $100 billion was predictable and they’re trying to build a momentum.”
Sorrell said he would buy the shares with a view to looking at them again in “15 or 20 years’ time.” He said through WPP he buys $75 billion worth of media a year, adding that he spent $200 million last year with Facebook and while he would increase his spend in the network, it would be lower than he had first envisaged.
“We’ll increase [spend] this year, but it is a social network and you interrupt a social communication with an advertisement at your peril,” Sorrel said.
Facebook has been keen to argue that its advertising revenue would form a key component of its ongoing success, saying it would make ads “more relevant, more social, and more engaging” as it looks to grow.
The social media giant hiked the widely anticipated price range of its IPO to $34 to $38 a share Tuesday with trading expected to commence Friday — valuing the company around $102 billion, Silicon Valley’s largest ever IPO to date.
Sorrell described the price range as “hard to stomach.”
An AP-CNBC poll found that half of Americans believe that the company’s expected stock price is too high.
Crucially, the same poll found that more than half — 57 percent — of respondents do not click on the ads on the site.
Critics of the hype surrounding the highly anticipated IPO argue the company’s advertising revenue history is weak and are doubtful about the site's longevity in the competitive technology sector.
Michael Browne, fund manager at Martin Currie, agreed that Facebook was a “unique proposition” and compared it to Twitter, the rival social network which has been snapping at Facebook’s heels as it has seen its popularity and users grow.
Browne said Twitter was more about “celebrity status and the cult of following people,” whereas Facebook was about interacting with “a smaller, more closed group of people.”