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Is Facebook’s Appeal Fading With Its Share Price?

Facebook seems to have soured users as well as investors with its initial public offering, a new poll shows.

Facebook’s shares remained down 24% Wednesday from the $38 IPO price of May 18. During that same stretch, the site dropped from No. 1 to No. 4 in the “Customer Loyalty Engagement Index,” a measure of brand perception among 49,000 social networkers polled by marketing consultancy Brand Keys. The index now rates Facebook alongside LinkedIn, and behind Twitter and YouTube. “There’s no doubt that Facebook’s brand was weakened by the events surrounding the IPO,” says Robert Passikoff, founder of Brand Keys. “Originally people felt that they were part of a community and now, for better or for worse, they feel like they are part of a business.”

As Facebook insiders raked in barrels of cash, and the banks underwriting the deal came under fire for how the IPO was handled, users were left feeling used, experts say. Jim Joseph, a professor of marketing at New York University and an avid Facebook user calls it the “The Facebook IPO Effect.” The controversy surrounding the IPO brought back feelings of “mistrust and insecurity” from the last tech bubble, he says. “I hear many people now questioning the long-term viability of Facebook,” he says. In fact, an Associated Press/CNBC poll conducted just before the IPO found that 51% of people believed the social network’s appeal would fade. Joseph says the ongoing concerns about the share price will only add to that skepticism. “A brand should excel during an IPO,” he says.

Facebook aficionados who invested in the IPO have also cooled on the brand. Michael McHale, a New York-based artisan industrial chandelier maker, spent $1,000 on shares. “When I log onto my Facebook, all I think about is the money I lost,” he says, noting that he believed the hype would sustain the share price — at least in the short-term. “I don’t plan on Friending Steve Wozniak anytime soon — I’d de-Friend him if I could.” (Wozniak, a co-founder of Apple, told reporters before the IPO that he’d buy Facebook at any price.) Michael Provitera, a professor of organizational behavior at Barry University in Miami Shores, Fla., who bought $4,000 in shares, agrees. “I’d feel a lot better about the site if I hadn’t bought it at this price,” he says.

However, others say Facebook’s members are too busy updating their statuses and sharing photos to pay attention to the controversy surrounding the IPO. The release last Friday of the photo-sharing app, “Facebook Camera,” provided a timely distraction, says Derrick Daye, managing partner at LA-based consultancy The Blake Project. “The IPO issue, while irritating for investors, has less of an impact for users,” he says. The biggest threat to the average social networker’s loyalty to Facebook will come with a spike in advertising, says K. Jason Krafsky, co-founder of the advice site, The Social Media Couple. He says people will only tolerate a certain amount of change. “Even if the IPO was a great success,” he says, “Facebook will have a tough time keeping nearly one billion members happy.”

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