We learned this week how young and unformed Facebook (FB) is. This is nothing that will help you trade Facebook either way today, but the next time the stock is roiled by a piece of news about an advertiser leaving or a lawsuit filed, just remember: Facebook is sill in the larval stage. Don't overreact.
Overreaction held sway during Facebook's road show when General Motors (GM), calling Facebook advertising ineffective, pulled every last thin dime of its advertising from the social media giant. Never mind that Coca-Cola (KO) and Ford (F) were quick to say that they were still dutiful and satisfied clients. Wall Street went beyond judgmental. It was condemning.
Now? News broke this week that Facebook and General Motors were in discussions to patch up their relationship. That's right: We may be nearing a revival of General Motors advertising on Facebook after a fissure that lasted . . . barely more than a month. Apparently, General Motors wasn't completely dissatisfied. It just wanted more information on the effectiveness of its ads, part of an age-old quest in the advertising industry to gauge success, heightened in the current age where there is more data -- even if success is still far short of the function of mathematical formulas.
Speaking of unexpected turns, Yahoo (YHOO) sued Facebook over patents back in March. The firms reached a settlement this week that will result in . . . Yahoo ads on Facebook.
I did not see that one coming.
But that's the point. Facebook, however well-established in the public consciousness, is new. That makes it a work in progress, the ultimate producer of hairpin turns. With the general public on their Facebook pages every two seconds, there's a natural temptation to forget how well established . . . it isn't.
During the advertising contretemps with General Motors, predictably Ford came out as an advocate, even preening on Twitter that advertising was a matter of execution. If it leaves tomorrow, though -- or if any other Facebook advertisers like Starbucks (SBUX), Target (TGT), AT&T (T), Johnson & Johnson (JNJ), or Nike (NKE) turn tail and run -- it would stand to reason. As it would when the companies do a quick about face and come right on back.
Facebook is new. Everyone is trying to figure it out. You can be an expert on Facebook and you're still a knave. It hasn't been around long enough. Ads, lawsuits -- expect the unexpected for the duration of Facebook's larval stage.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.