Facebook’s botched IPO has been a heated discussion lately. A lot of people are blaming the investment banks for deceiving their investors and offering its shares at such a high price. This is a big hit on the reputation of those investment banks who underwrote Facebook, and if they had anticipated that the stock would be performing so poorly, they most likely would not have done so.

Of course, a deal with the scale of Facebook’s IPO often is very complicated and possibly involves conspiracies and violations of securities regulation. My focus wouldn’t be on those because they are mostly speculations due to lack of solid evidence. I would like to offer an explanation for Facebook’s IPO failure from a marketing perspective with a very simple framework, the 4Ps.

The product here is Facebook’s stock or basically a portion of ownership of Facebook. Based on the public perception of the future growth potential of Facebook, this is a highly sought-after product, so there’s no problem with the product itself. Place or distribution doesn’t have much relevance here in this context. The two components I would like to focus on are promotion and price. These two things are closely related. Since the value of this product is for investors (consumers) to have a decent return on their investment, the higher the price is, the lower the value is to consumers (investors). In order to maintain the value of this product while selling at a high price, the investment banks, or the marketers, have to do a very good job in promoting this product and this is a very difficult task. The two most common ways to promote Facebook’s stock are publishing stock research reports and discussing the stock on talk shows. Research reports are generally published by the research divisions of investment banks, so the opinions expressed by those reports can be heavily influenced by their respective affiliates. Research reports contain a rating on the stock based on a price target and it tells you whether to buy, hold or sell the stock. It’s a great way to market the stock if you can write a convincing argument for why it should be valued so highly. The other promotional scheme is to appear on television shows.

Here’s an example: http://video.cnbc.com/gallery/?video=3000099225

The difficulty with these two methods is that not everyone will help you promote the stock. There are always people going against you. The dubious argument presented by Gene Munster in the video link above is not going to convince everyone. Therefore, marketers have to achieve a balance between price and promotion, since the higher the price, the more difficult it is to successfully promote the product. In the case of Facebook’s IPO, its overvaluation is already cliché, but if investment banks can successfully pull off the promotion part, though very difficult and in this market environment nearly impossible, it can still be a very successful deal.