A Steep Climb Back for Facebook\'s Stock

SAN FRANCISCO - The spring is over. The dog days of August have taken hold.

In May, when investors tripped over themselves to buy a piece of Facebook, not even the skeptics predicted what has happened. Three months after the offering, shares have lost more than 40 percent of their value, closing at just under $21.81 on Friday, from $38 on May 18.

The stock began to dip immediately after its debut on the public markets, and at first technical errors with the offering were blamed. But these problems did not account for the stock's subsequent plunge, analysts and shareholders say. That decline, they say, can be traced to several factors, among them the sheer size and price of the initial offering, early exits by major investors and slowing growth.

Not least, the stock seems to have been jinxed by Facebook's own fairy tale.

“The underwriters (and the media) did a great job of hyping Facebook leading up to the I.P.O., and the sell-side (including me) did a great job of hyping it after,” Michael Pachter with Wedbush Securities, an equity research firm, wrote in an e-mail.

Still, some investors remain bullish. Facebook is profitable, it keeps its nearly one billion users glued to their screens longer than any other Internet site, and it is aggressively experimenting with new ways to drum up advertising - its main source of revenue. Just this month, for instance, it began offering application developers a way to focus ads, and sought to diversify revenue by opening its site in Britain to online gambling.

The next test for the stock could come soon. Over 1.6 billion shares will be eligible to come on the market in several waves, starting on Thursday, when a number of shareholders are allowed to sell. Investors may fear that an influx of shares could cause prices to fall even more.

“It becomes a company perceived as vulnerable rather than invincible,” said David B. Yoffie, a Harvard Business School professor who sits on several technology company boards, though none that relate to or compete with Facebook.

Facebook executives say they remain focused on expanding. They declined to comment on the stock price, but in late July, in a conference call with analysts to discuss the second-quarter earnings, David Ebersman, the company's chief financial officer, said he was “disappointed” in the stock dive. On Friday, Mr. Ebersman was in New York speaking to investors, current and potential.

One former Facebook employee, who did not want to be named because he did not want to damage his relationship with onetime co-workers, said he expected other employees to cash in their stock options as soon as they could, and predicted that the stock's woes could make it difficult to retain and hire talent. He no longer owns Facebook stock.

The former employee pointed out that many of the company's early big backers - including Peter Thiel, an original angel investor, and Accel Partners, one of its first venture capital investors - sold a hefty portion of their shares at the peak price.

Mark Zuckerberg, a co-founder and chief executive, sold a portion of his shares in the offering, to meet his tax bills, the company said. All told, the early backers sold over $9 billion in shares. They still own significant amounts.

Kevin Landis, chief investment officer of Firsthand Funds, an asset management firm, now has to weigh what to do with his piece of Facebook. Late last year, he bought what were then coveted Facebook shares on the private market. On average, his shares are now worth about two-thirds of what he paid. Under the purchase terms, he may not sell until late this year.

It's not “a good feeling,” he said, but he added that he remained confident that with so many users and so much data about them, Facebook was destined to be the most lucrative advertising platform in the world.

Korea Policing the Net. Twist? It\'s South Korea.

Jean Chung for The International Herald Tribune

Park Kyung-sin, one of the few members of the government's Internet regulatory board appointed by opposition parties, says political elites feel threatened by the openness of the Internet.

SEOUL, South Korea - A government critic who called the president a curse word on his Twitter account found it blocked. An activist whose Twitter posting likened officials to pirates for approving a controversial naval base was accused by the navy of criminal defamation. And a judge who wrote that the president (“His Highness”) was out to “screw” Internet users who challenged his authority was fired in what was widely seen as retaliation.

Such a crackdown on Internet freedom would be notable, but perhaps not surprising, in China, with its army of vigilant online censors. But the avid policing of social media in these cases took place in South Korea, a thriving democracy and one of the world's most wired societies.

The seeming disconnect is at least partly rooted in South Korea's struggle to manage the contradictions in eagerly embracing the Web as one way to catch up with the world's top economies, while clinging to a patriarchal and somewhat puritanical past. In a nation so threatened by Lady Gaga that it barred fans under age 18 from attending a concert, the thought of unlimited opportunities for Internet users to swear in “public,” view illegal pornography and challenge authority has proved profoundly unsettling.

“Not so long ago, the role of the government and the role of the establishment, including the press, was sort of the benevolent parent of the masses,” said Michael Breen, author of “The Koreans: Who They Are, What They Want, Where Their Future Lies.” “The government always knew best and the people were kind of stupid. I think still a bit of that is lingering on.”

Critics of President Lee Myung-bak's government agree that its conservative streak is a driver behind the Internet crackdown. But they argue that prohibitions on profanity and other online activities have also become a convenient excuse to silence critics. It is not the first time that the government has been accused of being overzealous; two former presidential aides and other officials are on trial on charges of conducting illegal surveillance of citizens.

The whittling away of hard-won freedoms is especially troubling, activists say, because the social media have become the newest outlets for rebellion, replacing the street battles of the 1980s that forced the end of decades of dictatorship.

“New media and social networking services like Twitter have emerged as new political tools for antigovernment and left-wing people,” said Chang Yeo-kyung, a free-speech activist. “The government wants to create a chilling effect to prevent the spread of critical views.”

That accusation has been echoed by some international observers. The United Nations special rapporteur on freedom of expression was alarmed enough last year to lecture officials on the necessity for public scrutiny in a democracy.

And this year, Reporters Without Borders listed South Korea as a country “under surveillance” in a report titled “Enemies of the Internet,” putting it in the company of Russia, Egypt and other nations known for their intolerance of dissent.

The group said South Korea had intensified its longstanding campaign on material that appears to support North Korea. But the report said “censorship is also focused on political opinions expressed online - a critical topic in this election year.”

The government denies trying to stifle criticism and says it opens most cases after being alerted by citizens, including those who have deputized themselves as “cybersheriffs.”

In a statement defending its stance, the government said it acted because “character assassinations and suicides caused by excessive insults, the spreading of false rumors and defamation have all become social issues.”

But the Rev. Choi Byoung-sung, a critic of the government's environmental policy, argues that free speech is being undermined.

“They are burning down an entire house under the pretext of killing a few fleas,” said Mr. Choi, who fought the removal of his blog postings warning of potential health risks from cement containing industrial waste. (He won.)

Unboxed: How Big Data Became So Big

THIS has been the crossover year for Big Data - as a concept, as a term and, yes, as a marketing tool. Big Data has sprung from the confines of technology circles into the mainstream.

First, here are a few, well, data points: Big Data was a featured topic this year at the World Economic Forum in Davos, Switzerland, with a report titled “Big Data, Big Impact.” In March, the federal government announced $200 million in research programs for Big Data computing.

Rick Smolan, creator of the “Day in the Life” photography series, has a new project in the works, called “The Human Face of Big Data.” The New York Times has adopted the term in headlines like “The Age of Big Data” and “Big Data on Campus.” And a sure sign that Big Data has arrived came just last month, when it became grist for satire in the “Dilbert” comic strip by Scott Adams. “It comes from everywhere. It knows all,” one frame reads, and the next concludes that “its name is Big Data.”

The Big Data story is the making of a meme. And two vital ingredients seem to be at work here. The first is that the term itself is not too technical, yet is catchy and vaguely evocative. The second is that behind the term is an evolving set of technologies with great promise, and some pitfalls.

Big Data is a shorthand label that typically means applying the tools of artificial intelligence, like machine learning, to vast new troves of data beyond that captured in standard databases. The new data sources include Web-browsing data trails, social network communications, sensor data and surveillance data.

The combination of the data deluge and clever software algorithms opens the door to new business opportunities. Google and Facebook, for example, are Big Data companies. The Watson computer from that beat human “Jeopardy” champions last year was a triumph of Big Data computing. In theory, Big Data could improve decision-making in fields from business to medicine, allowing decisions to be based increasingly on data and analysis rather than intuition and experience.

“The term itself is vague, but it is getting at something that is real,” says Jon Kleinberg, a computer scientist at Cornell University. “Big Data is a tagline for a process that has the potential to transform everything.”

Rising piles of data have long been a challenge. In the late 19th century, census takers struggled with how to count and categorize the rapidly growing United States population. An innovative breakthrough came in time for the 1890 census, when the population reached 63 million. The data-taming tool proved to be machine-readable punched cards, invented by Herman Hollerith; these cards were the bedrock technology of the company that became I.B.M.

SO the term Big Data is a rhetorical nod to the reality that “big” is a fast-moving target when it comes to data. The year 2008, according to several computer scientists and industry executives, was when the term “Big Data” began gaining currency in tech circles. Wired magazine published an article that cogently presented the opportunities and implications of the modern data deluge.

This new style of computing, Wired declared, was the beginning of the Petabyte Age. It was an excellent magazine piece, but the “petabyte” label was too technical to be a mainstream hit - and inevitably, petabytes of data will give way to even bigger bytes: exabytes, zettabytes and yottabytes.

Many scientists and engineers at first sneered that Big Data was a marketing term. But good marketing is distilled and effective communication, a valuable skill in any field. For example, the mathematician John McCarthy made up the term “artificial intelligence” in 1955, when writing a pitch for a Rockefeller Foundation grant. His deft turn of phrase was a masterstroke of aspirational marketing.

In late 2008, Big Data was embraced by a group of the nation's leading computer science researchers, the Computing Community Consortium, a collaboration of the government's National Science Foundation and the Computing Research Association, which represents academic and corporate researchers. The computing consortium published an influential white paper, “Big-Data Computing: Creating Revolutionary Breakthroughs in Commerce, Science and Society.”

Its authors were three prominent computer scientists, Randal E. Bryant of Carnegie Mellon University, Randy H. Katz of the University of California, Berkeley, and Edward D. Lazowska of the University of Washington.

Their endorsement lent intellectual credibility to Big Data. Rod A. Smith, an I.B.M. technical fellow and vice president for emerging Internet technologies, says he likes the term because it nudges people's thinking up from the machinery of data-handling or precise measures of the volume of data.

“Big Data is really about new uses and new insights, not so much the data itself,” Mr. Smith says.

I.B.M. adopted Big Data in its marketing, especially after it resonated with customers. In 2008, Mr. Smith's team put up a Web site to explain the Big Data theme, and the site has since been greatly expanded. In 2011, the company introduced a Twitter hashtag, #IBMbigdata. I.B.M. has a Big Data newsletter, and in January it published an e-book, “Understanding Big Data.”

Since its founding in 1976, SAS Institute Inc., the largest privately held software company in the world, has made software that sifts through databases, looking for nuggets of value. SAS, based in Cary, N.C., has seen many a marketing term in its field, including “data mining,” “business intelligence” and “data analytics.”

At first, Jim Davis, chief marketing officer at SAS, viewed Big Data as part of another cycle of industry phrasemaking.

“I scoffed at it initially,” Mr. Davis recalls, noting that SAS's big corporate customers, like banks and insurance companies, had been mining huge amounts of data for decades.

But Big Data seeks to tap all that Web data outside corporate databases as well. And as SAS's technology has moved to exploit these Internet-era data assets, its marketing has changed, too. Last year, SAS started adopting Big Data and “Big Data analytics,” along with a term it has been using for years, “high-performance analytics.” In May, the company appointed a vice president for Big Data, Paul Kent.

“We had to hop on the bandwagon,” Mr. Davis says.

IT may seem marketing gold, but Big Data also carries a darker connotation, as a linguistic cousin to the likes of Big Brother, Big Oil and Big Government.

“If only inadvertently, it does have a sinister flavor to it,” says Fred R. Shapiro, editor of the Yale Book of Quotations.

Big Data's enthusiasts say the rewards far outweigh the risks. Still, smart technologies that promise to observe, record and make inferences about human behavior as never before should prompt some second thoughts - both from the people building those technologies and from the people using them.