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Facebook IPO: Did Twitter Crowdsourcing Just Give Us the Closing Price?

When you get a lot of smart and interested people together to make a prediction in aggregate, it can be scary accurate. Anyone who has read the James Surowiecki business science classic The Wisdom of Crowds, and a host of corroborating authors such as Malcolm Gladwell, knows that.

So what if you applied that brave new world of expert prediction markets, of crowdsourcing the future, to the Facebook IPO?

That’s what famed investor Chris Sacca wondered aloud on Twitter, and programmer James Proud endeavored to find out. And thus was born Facebookipodayclosingprice.com, Proud even buying the exact URL Sacca had idly requested Tuesday.

By end of day Thursday, it had garnered more than 1,400 predictions, mostly from the Valley’s top luminaries — entrepreneurs, investors, analysts and others who know a thing or two from IPOs. And it was getting up to 20 visitors every second.

Pollsters and prediction market experts will tell you you need more than a thousand inputs for a good aggregate result with a low margin of error. So what did this prediction market come up with? And could you — or Sacca — get very rich in one day by banking on the result?

In theory, yes. Facebook’s launch price Friday morning will be $38. This site is predicting, in aggregate, that the stock will hit $54 by close of market Friday, for a total valuation of $135.7 billion.

Buy enough shares, and that $16 difference would make for a tidy one-day profit.

Of course, prediction markets have never been tested in this kind of circumstance. IPOs are inherently nerve-wracking wild rides. The Twitterati have been known to be wrong before. We certainly won’t be opening our wallets on the basis of this prediction.

But we will be eager to check back in at the closing bell, 4pm ET Friday, to see how close the prediction market came. Join us then!

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Twitter Wits Roast Facebook IPO

Albert Brooks

The film star, director and author breaks the news to the star of the Social Network.

Click here to view this gallery.

In case you’ve been living under that metaphorical rock these past several weeks, Facebook‘s much anticipated IPO happens on Friday. The Facebook IPO will mark the final step in the evolution of Mark Zuckerberg‘s social networking baby, all the way from Harvard dorm room to publicly traded company.

Facebook’s (FB on the Nasdaq market) official IPO share price was officially set on Thursday. Hundreds of Facebookers will become millionaires once the stock becomes tradable, and many observers have ideas for how they can avoid common pitfalls of the newly rich.

Others have speculated that Facebook could — just possibly — become the world’s first trillion dollar company one day. Facebook co-founder Eduardo Saverin made news this week when it was revealed that he had renounced his U.S. citizenship, which helped him sidestep millions upon millions of dollars in capital gains taxes.

And then, of course, there are the folks who got out of Facebook at just the wrong time.

As IPO angst and anticipation crested Thursday techies, comedians, writers and everyday Americans took — ironically enough — to Twitter to weigh in and riff. Some jokingly lamented the effect a new crop of IPO millionaires would have on real estate prices.

Some poked fun at the company’s past foibles and potential for future failure. Others were just plain off the wall. Scroll through the gallery above for a few of Mashable‘s favorite tweets.

And if you’re still not clear just what exactly an IPO is or means, watch our video primer below to get up to speed for tomorrow’s action.

What Is an IPO?

What exactly is an IPO? What are the risks to a company in going public? What are the legal requirements?

If you find the business terms and market lingo confusing, check out our explainer video, which breaks down an IPO in plain language.

Thumbnail image modified, courtesy Robert Scoble, Flickr.

More About: Facebook, facebook ipo, Twitter

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4 Steps to Cultivating Online Trust

Wendy Lea is the CEO of Get Satisfaction, a customer engagement platform powering 65,000+ customer communities to help build better relationships with their customers. Follow her @WendySLea.

You’ve likely heard that the secret to building relationships with your customers is to “be everywhere your customers are.” As a result, you’ve probably signed up for a dozen social networks hoping that just showing up will turn out to be enough.

SEE ALSO: How to Maximize Your Facebook Engagement

But being everywhere is only the beginning. It turns out that online, just like in real life, the key to building relationships is trust. Cultivating trust online is tricky and takes work, but is by no means impossible. When you respond to your customers in the right way, you earn that trust and build the foundation for a real, long-term relationship. Here’s what you need to consider as you do that.

1. Acknowledge with Empathy

When it comes to earning trust, it’s not if you answer, it’s how you answer. Recognize the type of feeling your customer is having, and respond in an empathetic, emotionally intelligent way. The worst thing you can do is respond with the attitude that your customers are yet another problem to be solved. They will sense it. For example, if a customer tweets asking for help with a lost password, winning their trust might be as easy as adding an, “I’m sorry” or “that must be frustrating” to the response.

Also, when a customer has a good experience with your brand, amplify it. Thank them and then share their feedback socially. Not only do you validate their emotion, you also create the opportunity to connect with the members of your community that might have the same feeling or problem, but haven’t made it known.

2. Enable the Right Outcomes

Before they trust you, your customers need to know not just that you’ll hear them, but that when they raise concerns, they’ll see a resolution. That means enabling your customers to express their feedback in the place where it’s most productive for them, whether that’s Twitter, Facebook, product pages on your website, or anywhere else. In other words, your community needs to have multiple front doors under one roof.

In order for a customer to find a channel that works, you have to make sure that all the conversations people are having about your brand are accessible anywhere your customers are. From there, they need to be able to access information and conversations about products, customer service, and community. That way, your customers are able to find like-minded people and can jump in on any conversation on any platform.

3. Educate Through Experience

It’s not your job to tell your customers what the company values are. It’s your job to let them experience those values by bringing them into the fold of your brand’s community. That requires a system for archiving, organizing, and sharing conversations, the rallying point for your community of customers.

For Intuit’s TurboTax that means offering a robust library of help documents created by the company, but the site also includes a “Live Community” widget that invites people to get help from a community of tax experts and users. Every customer experience is converted to valuable insight that can influence prospects, customers, and onlookers alike. What’s more, the community is a testament to the brand’s values: Offering a DIY tax experience that’s accessible and easy for everyone.

Of course, you still need to produce and share content. It’s not time to ditch the company blog or stopping sending original tweets. It is time to recognize that the conversations within your community actually turn into knowledge. Ultimately, your community is a living FAQ.

4. Keep the Momentum Going

Once you’ve earned your customer’s trust, they’re likely to be even more engaged with your brand and product. That’s a good thing, but it means you’ll need to go above and beyond to continue building that relationship. To do that, you have to get to the point where the trust goes both ways and you trust the customer. Take Tyrel Hartman, who wanted to use the social discovery app StumbleUpon to propose to his girlfriend. Both were active Stumblers and often enjoyed exploring the site together, so Hartman contacted the company and requested that they rig his girlfriend’s account so that she’d stumble on a wedding proposal disguised as a blog post.

StumbleUpon’s team could have easily said no to Hartman, but instead, they were inspired by Hartman’s enthusiasm and explored a new use for their product. It required cross-departmental collaboration and an investment of resources, but it was also a priceless marketing opportunity that earned the company ample news coverage across the web.

Ultimately, real relationships are a two-way street, and your customers know that. Trust is the foundation of a relationship, but to keep that relationship going, you need to prove that you earned it, every day and everywhere.

Image courtesy of iStockphoto, mikkelwilliam

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Facebook IPO: Here’s Why You Shouldn’t Buy Yet

Everyone’s talking about the Facebook IPO — and for good reason.

Facebook is currently valued at around $100 billion, though it made less than $4 billion in revenue last year. Still, if the social network with more than 901 million users plays its cards right, it could be the world’s first $1 trillion company by 2014.

The Facebook IPO is slated for Friday. New investors can potentially buy around 421 million shares of Facebook stock at $38 a pop.

The big question is: should you buy Facebook stock while it’s hot? Multiple financial experts told us no — at $38 per share, the stock is overpriced.

Former NYU Stern School of Business finance professor Kenneth Froewiss believes adding Facebook to a portfolio early on is risky for experienced pros and investment amateurs alike. It’s like playing the lottery, he says.

“Even for those individuals with above-average net worth, purchasing shares at an IPO, especially a ‘hot’ one that has been widely hyped, is rarely a good idea,” Froewiss says.

“Might someone on occasion reap a tremendous windfall by doing so? Yes, but then again, on occasion someone wins the lottery. That does not make the lottery a great investment in general.”

Factors that can affect Facebook stock are legion. The current excitement about the company’s stock market debut doesn’t guarantee long-term interest or success.

“In my experience this stock and its IPO has seen more enthusiasm than any other I have seen over my 40 years of investment experience,” says Lewis Altfest, Ph.D., CEO of NYC-based Altfest Personal Wealth Management.

The social network’s success or failure may lie in its ability to conquer the mobile space — which is growing faster than the company is adapting. Post-IPO, Facebook will have to ramp up its mobile ads to push profits.

Facebook reported $205 million in the first quarter of 2012 — down from December’s high of $302 million. “Revenue in the last quarter was actually off quarter-to-quarter,” Altfest says. “They have to deliver revenue growth. Over a longer period, they will have to deliver earnings.”

Altfest advises average consumers wait at least six months. He warns in the following weeks after the IPO, demand will cause stock prices to stay high, which is normal for an IPO debut. But it may eventually fall.

“Even in stocks there are laws of gravity,” he says. “Take a deep breath and come back in six months.”

Joshua Gans, professor at University at Toronto’s School of Management, advises people do nothing instead. “All of the uncertainties surrounding Facebook will not get resolved in the six months,” Gans says. “We’ll only know a decade from now whether it has a permanent place in the economy like Microsoft.”

Microsoft traded at $22 per share at its IPO in 1986. Now it’s $61 per share.

SEE ALSO: Facebook Meets Wall Street: How the IPO Stacks Up With Tech’s Titans

“There’s a scenario where Facebook clearly becomes the next Google or Apple, but there’s also a scenario where it simply does not and it ends up more like Yahoo,” Gans tells Mashable.

A safer alternative is buying into an index fund such as the S&P 500 instead of buying Facebook shares directly. Owners of an index fund can reap the benefits of the entire stock index doing well — without suffering sudden losses when a company’s stock tanks.

“Facebook will eventually be included in that, and it will be part of an index fund and you can buy it that way,” Gans says.

Some financial experts see Facebook as a good buy now. Lubos Pastor, finance professor at the University of Chicago, says it’s financially beneficial for investors to buy shares at IPO price. After the price of public shares rise, users have “historically earned subpar returns”, he says.

“However, the poor average post-IPO returns have been driven mostly by small firms, so it is quite possible that a large firm like Facebook will turn out to be a good investment,” Pastor says.

What do you hope Facebook has in store after going public? Sound off in the comments.

Image courtesy of iStockphoto, blackred, Infographic by Statista

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