Dmitrij Harder: Lessons Learned from the Facebook IPO

With 2012 coming in as the slowest year for Initial Public Offerings (IPO's) since 2008, business owners who have been contemplating a public offering are trying to decide whether to take the plunge or wait until the pace of offerings accelerates. Part of the blame rests with Facebook's disappointing (aka: failed) IPO last spring which saw shares slump into the teens after being sold to the public for $38 per share. Since making its low at $17.55, the shares have recovered to a current trading level in the high $20's but the IPO market has remained chilly.

 

Despite this tepid environment for companies trying to go public, the right IPO deal can still get done and the Facebook IPO can teach us a lot about what not to do. Here are some of the errors that were made in the third largest IPO on record.

 

1) A lack of experience in the team that was put together to take Facebook public – David Ebersman was hired in part due to his "public company experience" but that experience was gained during his 15 tenure with Genentech, which had gone public 14 years before Ebersman joined the company. One of his biggest errors was his over-estimation of demand for Facebook shares, which led to his push for a 25% increase in the amount of shares in the offering a few days before the IPO. This effectively flooded the market and shares took a dive in part due to oversupply.
2) Shares in the offering were structured with voting rights diminished to the point that shareholders had no power to effect change in the company. It was perceived as an act of hubris based on the hype surrounding the offering and led many institutional investors to a decision to sit on the sidelines instead of participating in the offering.
3) Rampant insider selling – In most cases, especially in high-visibility IPO's, insiders are forced to wait for the expiration of blackout dates or for a secondary offering after the IPO is completed to sell their shares. The high amount insider selling in Facebook's IPO looked like a massive exodus to many industry watchers.

 

IPO's in today's market can be completed successfully by making the right offering and learning from mistakes made by recent predecessors. Working with an experienced group, such as the team led by Dmitrij Harder at Solvo Group can put your company's IPO on the right track and keep it there through its completion. For more information, visit: http://solvogroupinc.com/

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  • User Experience and SEO

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    Prior to Google’s implementation of the Hummingbird algorithm in the second half of 2013, search engine optimization and delivering a positive user experience with published content were distinctly different practices. Despite Google’s mission to surface high value content, its algorithms were easily manipulated with SEO tricks that didn’t necessarily deliver the information that the search engine users were looking for. At the same time, content that delivered relevant information often earned lower rankings than poorly written articles that prioritized packing in keywords over adding value.

     

    Hand it to Google, the search engine has stayed true to its commitment to deliver improved user experiences and is now far less vulnerable to manipulative practices. Its ranking algorithm now factors a variety of signals that result from positive user experiences, including:        

            

            Links from authority sites – Content that contains valuable source material, topic-relevant information or delivers a positive user experience in general can earn links from authority sites to provide additional information or to be cited as a reference. These links carry an increasing amount of weight in the ranking algorithms due to the quasi-vetting process from originating authority sites. This is a completely different ranking methodology than the one which rewarded web pages that had thousands of spammy backlinks purchased for a few pennies each.       

            Social actions – When content is posted to social media platforms such as Twitter and Facebook, user can elect to share that material with their friends and/or followers. Sharing or liking posted content is referred to as a social action, which is an indication that the content delivers a positive user experience, whether it’s entertaining, informative or a combination of the two. Steady and/or increasing social actions with specific web pages can then boost rankings due to the implied legitimacy of independent referrals.    

             Active and positive comment threads – Quality content draws engagement in the form of active commentary threads. Content that is generating shares and likes will also elicit commentary, with the actions reinforcing each other when being weighed by search algorithms. While these reinforcing actions are great for SEO campaigns, they are equally capable of driving higher rankings for negative content, such as news stories.    

     

    In today’s SEO campaigns, manipulating the algorithms has become increasingly difficult. This is due in part to the growing sophistication in algorithm methodology that can detect spammy links and content. It is also due to the evolution in the way people communicate and share information on the web. The paradigm change now forces SEO and content distribution campaigns to focus on the same primary goal; delivering a positive user experience. 

  • One SEO Change to Implement Now

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    As the sophistication of search algorithms continues to increase, search engines are improving their understanding of what their users are looking for with their inquiries. Prior to replacing its search methodology with the Hummingbird algorithm in 2013, search results typically showed results that had a high percentage of the same keywords included in users’ inquiries. While the pages that were returned based on keyword matches generally reflected some relevance to the search, there were also results that had nothing to do with the nature of the inquiry.

     

    Two of the primary reasons for these unrelated results were black hat techniques that were used to trick the early algorithms into granting high ratings, as well as words that were spelled the same but had different meanings, known as homonyms. An example of a homonym is the word “lead”, which can either be a noun as in the metal or a verb as in “to guide”. An inquiry such as “lead dog” could list sculptures of dogs made of the metal as well as dog teams in the Iditarod race. Refining the search to “what is a lead dog Iditarod” could still return mixed results. With the implementation of the Hummingbird algorithm, searches provided results based on the context of the inquiry, rather than trying to find pages with identical keywords.

     

    The change to contextual search, in addition to providing a higher percentage of relevant results for all users, was also influenced by the more conversational nature of inquiries from mobile device users. When voice commands are used, it’s more natural to ask a question than limiting inquiries to a few key words. As the search phrases became longer, keyword-based algorithms struggled to return listings that answered the questions that were being posed, which required follow-on searches and lead to a less than optimal user experience.

     

    For businesses that have not changed the foundation of their SEO initiatives to the new search methodology, previously high rankings are likely to start falling, if they haven’t already. The key to success in context-based search is to modify content so that it answers the questions posed verbally by mobile users. As a simple example, a searcher may pose the question “Where is a pizza place in Anytown?” Content that answers that question, which would earn a higher search listing, would include something like “Jack’s Pizza is located at 123 Main Street in Anytown.”

     

    As Google and the rest of the search engines try to deliver the best user experience possible, the focus is on eliminating listings that don’t deliver the answers sought by searchers. To that end, the listings that are presented will increasingly address the full context of inquiries with the delivery of specific answers. In this environment the SEO campaigns that are modified to answer questions, rather than match keywords to searches, will deliver website and storefront visits which will drive revenues.  

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