ImaginativePRO Blog

FACEBOOK MISSES ITS $38.00 IPO PRICE BY 4 CENTS, ENDS TRADING AT $37.63, INVESTORS MUST WAIT ONE MORE DAY

Facebook COO Sheryl Sandberg and CEO and co-founder Mark Zuckerberg celebrate Facebook IPO back on May 18, 2012 (Click Image To Enlarge)

It took 14 months, but the market may finally agree with  Facebook Inc. NASDAQ:FB +6.15% and its bankers.

Facebook appears poised to crack above its $38 IPO price.

Shares continue to rally in the wake of last week’s blowout quarterly results. At last glance,  the stock jumped as high as $37.66, leaving it within spitting distance of the price it went public on May 18, 2012.

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Aside from Facebook’s trading debut, the social network hasn’t traded above its IPO price in its 14-month history as a publicly traded company.

Facebook last week reported a big earnings surprise, boosted by a surge in mobile and local ad sales. Analysts have been gushing optimistic remarks in the wake of the results, and shares have continued to push higher as investors have applauded Facebook’s ability to gain significant traction in mobile.

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The roundabout route back to $38 has been a long time coming. Facebook shares fell by more than 30% in less than a month following the IPO and traded as low as $17.73 in September. Shortly after the stock hit bottom, CEO Mark Zuckerberg spoke at a conference — his first public remarks since the IPO — and was widely praised on Wall Street. Analysts said then Zuckerberg showed poise and vision, proving that the company had a long-term road map to monetize its mobile strategy.

Facebook Inc (NASDAQ:FB) - Share Prices From May 18, 2012 Through July 30, 2013 - Google Finance (Click Image To Enlarge)

That vision appears to be playing out now. Shares have rallied 42% this year. The bulk of the gains have come after last week’s results, which J.P. Morgan JPM -0.59% called “thesis-changing.”

On Tuesday, July 30, 2013, the stock gained $2.20 or +6.2% to $37.63 on more than three times its average daily trading volume (172.54 million shares traded hands vs. 50.92 million shares average volume).

COMMENTARY:    

Facebook Fails To Reach IPO Price of $38.00 on May 18, 2013

Four cents!

That’s how close Facebook Inc.NASDAQ:FB +6.20% came to hitting its $38 IPO price on Tuesday before finishing the day at $37.63, its highest level since May 2012.

Shares have rallied in the wake of last week’s blowout quarterly results. A surge in mobile and local ads has Wall Street feeling better about Facebook’s future prospects. The stock is up 41% this year, with the bulk of the gains coming after last Wednesday’s earnings report.

In the short term, the rally got us wondering if there’s any technical resistance hanging around the $38 price that investors should be aware of. Considering $38 is not only a psychologically significant level, but also the break-even point for early investors who invested in the IPO, there’s plenty of attention surrounding it.

Mark Newton, chief technical analyst at Greywolf Execution Partners, said in a chat with MoneyBeat.

“Intra-day levels can have importance technically when approached after a meaningful time has elapsed.  And often the longer the time, the more important the level becomes.”

In an email, Newton explained how the attention surrounding the $38 IPO price may impact trading over the short term:

"Resistance often times is created based more on psychological factors than any type of real fundamental factors.  Those who are long stocks which have declined will often wait until they approach former levels where they bought, before selling the shares. So in this case, many who bought the stock between 38-45 on [May 18] often will sell into gains as they become “whole” with the mindset that “well, at least I got back what I paid for it, and am lucky, despite having ridden a big roller coaster down, and now back higher.

Technically oriented folks understand this logic also in terms of how important these levels are, and will sell as a stock approaches former highs, or in some cases some aggressive types might attempt to “SHORT” the stock, or use options to “write calls” against shares, knowing that these levels often can have some importance in causing at least some minor consolidation to the former rise. …

Former highs and also former lows often have importance, but of course if BREACHED, and in this case, if FB were to close meaningfully above $45, it could create a “breakout” type situation where those who had attempted to short the stock would then be forced to cover and/or others with screens pre-programmed to search for stocks hitting all-time highs, might be inclined to buy into the shares on a move to new high territory."

Facebook shares jumped as high as $37.96 on Tuesday, meaning Wall Street will have to wait at least one more day before the social network may be able to push through the highly anticipated $38 marker.

In a blog post dated July 27,  2013, I reported on Facebook's Q2 2013 earnings report conference call with Wall Street analysts.    Facebook blew away Wall Street's Q2 2013 forecasts by a country mile.   Facebook impressed investors by generating $656 million in mobile ad revenues, a new high for the company.   This started a trading frenzy and Facebook stock rally.  

But,  I also cautioned investors not to celebrate too early.  Although Facebook is successfully churning out higher mobile ad revenues, it should be borne in mind that back in Q2 2012, the company did not have any mobile ad revenues, so there is no benchmark to compare against.  

All this excitement could come back to haunt Main Street investors.  Facebook is not a long-term buy, but a short-term speculative stock.   Institutional investors have been shorting FB shares everytime it hits a new high, and FB just hit a new high.   I expect this trend to continue, so investors beware.    

Institutional Investors Set The Pace

I do not have the number of shares held by institutional investors, but I firmly believe that a lot of them will cash most of their Facebook shares, or have already done so during this recent runup since the Q2 2013 earnings report came out.   Many of them were just waiting for Facebook's Q2 2013 earnings report to come out, and they are now benefiting greatly.  The number of shares that traded hands during the last four trading days far exceeded average daily volume for the previous 90 days by 3 to 7 times.  Those are the institutional investors cashing out or meeting short positions.

Can Facebook Continue To Grow Mobile Ad Revenues?

The big questions is whether Facebook will continue to grow mobile ad revenue at this blistering growth rate.  Most of the growth in mobile ad revenues is coming from the U.S.   Average revenues per user overall were up for Q2 2013, but most of the gain was from the U.S. International average revenues per user are about one-fifth that in the U.S.  This is the conumdrum that Facebook faces.   This is the "revenue gap" that I have often referred to in previous blog posts.   Mobile and desktop Facebook ad rates on a CPM basis are about one-fifth to one-third those of rates in the U.S.   Simply increasing the number of mobile and desktop ads internationally will be insufficient to counter any slowdown in U.S. mobile or desktop ads.

Facebook Video Ads Could Boost Ad Revenues

During the Q2 2013 earnings report conference call, Sheryl Sandberg said that Facebook video ads were not ready for primetime just yet.  I expect video ads in the news feed to happen late in Q3 2013.  Facebook could have a huge 4th Quarter as more advertisers place video ads in the news feed.                    

Courtesy of an article dated July 30, 2013 appearing in The Wall Street Journal Blog and an article dated July 30, 2013 appearing in The Wall Street Journal Money Beat

THE STATE OF DIGITAL COPYWRITING: TOP CHALLENGES AND TRENDS

 

The majority (60%) of marketers and content creators say one of their biggest digital copywriting challenges is that "people just don't get what good copy is," according to a recent report by Sticky Content, an agency based in the United Kingdom.

Among other challenges to creating good digital copy are the following:

• 55% have too much to do/not enough people. 
• 51% having problems finding skilled writers. 
• 44% have difficulty meeting SEO requirements. 
• 40% do not obtain input from stakeholders. 
• 37% lack writing guidelines. 
• 34% have insufficient time to check copy. 
• 31% have no copywriting training.

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Below, additional key findings from the report, The State of Digital Copywriting, which was based on a survey of 365 marketers, copywriters, content editors, content strategists, and consultants, the majority of whom are based in the UK.

Copywriting Activity

• 74% of respondents check and proof copy before it goes live. 
•  58% use language and style guidelines.
• Only 32% have a standard content structure format for their writing.
• Just 19% train all their content creators in Web writing.

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Workflow

• 52% of respondents write copy on demand, in response to business needs.
• Just 18% roll out copy according to a content plan, and only 9.8% always use a creative brief.
• 43% have, on average, 1-2 stakeholders who need to sign off on a key piece of Web copy, and 42% have 3-5 stakeholders.
• 42% of time is spent creating content, and the rest is spent planning, delivering, and governing it.

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Measurement

• 56% of respondents measure the effectiveness of copy by by unique visits or pageviews.
• 48% measure effectiveness by looking at conversions.
• 20% aren't measuring the effectiveness of their copy at all.

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About the research: The report was based on a survey of 365 respondents, the majority of whom are based in the United Kingdom. The largest number of respondents are marketers (20.7%), followed copywriters (10.6%), content editors (9.8%), consultants (3.9%), and content strategists (3.6%).

COMMENTARY:    Unless you are a large enterprise organization, you are probably juggling several balls simultaneously, and this includes doing your regular job, whatever that might be, and creating digital copy for your company website, blog, forum or social network(s).   Most of the time it is a "rush job," or getting something online as quickly as possible, without regard to its correctness or construction.  Misspellings are the most common mistake, and this is followed by poor grammar.   I have even found these type of errors in the digital content of some of the major digital content publishers.  I won't mention any names.   I often find the mistakes, and correct them before they appear on my blog.      

Courtesy of an article dated July 30, 2013 appearing in MarketingProfs

GOOGLE UNVEILS 2ND GEN NEXUS 7 TABLET, SLIMMER, NARROWER, LIGHTER, FASTER, AND FULL HD 1920X1200 DISPLAY

Back of second generation Nexus 7 tablet unveiled on July 24, 2013 (Click Image To Enlarge) 

Google and Asus have teamed up again to create and launch the second-generation Nexus 7.

The Mountain View, Calif., company formally unveiled the new Nexus 7 on Wednesday morning, July 24, saying the device now features a "black on black" design on a body that is now slimmer, narrower and lighter than its predecessor.

Hugo Barra, vice president of product management for Android at Google Inc., displays the new Nexus 7 tablet.  Photo by Tony Avelar, Bloomberg, July 24, 2013. (Click Image To Enlarge)

Hugo Barra, Google's Android director of product management said.

"It fits easily into your purse or your jacket pocket." 

Prior to Google's press event, Best Buy revealed the new Nexus 7 tablet by making it available for pre-order through its online store early Wednesday morning.

The new Nexus 7 will be the first device to run Android 4.3 Jelly Bean, the latest version of Google's mobile operating system.

 

The tablet also has an improved 7-inch screen that can now display 1080p HD videos. The Nexus 7 has a 1,920-by-1,200-pixel resolution with a 323-pixel-per-inch density, the highest of any tablet on the market, according to Google.

The company also added a rear-facing, 5-megapixel camera. The device will run on a 1.5GHz quad-core Snapdragon S4 Pro processor.

Google said the new Nexus 7 will be available for $229 with 16 gigabytes of storage and $269 for a 32-GB version. Those models will be available starting July 30.

A 4G LTE version that can work with AT&T, T-Mobile and Verizon will be available "in coming weeks." It will cost $349.

COMMENTARY:  

Best Buy Leaks New Nexus 7 Tablet

Prior to Google's press event, Best Buy revealed the new Nexus 7 tablet by making it available for pre-order through its online store very early Wednesday morning.

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The new 2nd generation Nexus 7 tablet is now available for sale on Best Buy's website.   Sam's Club and PC Connection are now displaying the new Nexus 7 tablet through their online stores too.

2nd Generation Nexus 7 Specifications

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2nd Generation Nexus Tablet Reviews

Here is a sampling of the rave reviews the new second generaton Nexus 7 tablet has received.

"The Nexus 7 is still the best damn Android tablet, Period.  The new Nexus 7 is a better tablet in many ways than its predecessor, and it still carries a great price." - Mashable  

"The new Nexus 7 is a downright steal. It’s the best 7-inch tablet, period. Google has redefined budget tablet so that it no longer refers to cheap-feeling, sub-£200 devices. You can now grab a svelte, premium 7-inch tablet with a high-resolution screen, wireless charging, quad-core processor, and 2GB of RAM for a measly £199." - PC Advisor

"Google's Nexus 7 was the best small tablet of 2012. Rather than mess with success, Google did something uncharacteristically conservative: It made little improvements here and there and left the rest mostly as is. The result? This year's Nexus 7 is more low rumble than tectonic shift, but it's still our new favorite tablet." - Gizmodo

"The new Nexus 7 is the best 7-inch tablet that money can buy. The original Nexus 7 was merely a bargain, a good-enough tablet at a great price. The new Nexus 7 is a downright steal. It’s the best 7-inch tablet, period. Google has redefined budget tablet so that it no longer refers to cheap-feeling, sub-$200 devices. You can now grab a svelte, premium 7-inch tablet with a high-resolution screen, wireless charging, quad-core processor, and 2GB of RAM for a measly $229." - TechHive

It certainly appears that from the above reviews, that Google's second generation Nexus 7 is a winner.  I just bought one, and will be posting reviews in the not too distant future.

Courtesy of an article dated July 24, 2013 appearing in The Los Angeles Times

CHICAGO WRITER MARGO ROWDER TESTS HER FIRST PAIR OF 'GOOGLE GLASS' AR GLASSES AT GOOGLE'S VENICE OFFICE

Chicago writer Margo Rowder was one of the few selected to try Google Glass, and here she is at Google HQ trying them out for the first time (Click Image To View Video)

During the month of May 2013, Google has been handing out the first editions of its much-anticipated Glass wearable computer devices to a select group chosen to try it out.

One of them was avid bicyclist and science-fiction writer Margo Rowder, who was invited to pick up the high-tech eyewear at a Google office in Los Angeles. All those selected to buy the glasses must pick them up at a Google office and go through a Google initiation-like process.

Rowder allowed me to tag along and experience the whole process with her.

She applied to receive an invitation to the Google Glass Explorer program in February, telling Google she was interested in using the device to help her get around Los Angeles on her bike.

In her application, Rowder also said Glass would make it easier for her to record any thoughts that came to her that would be useful for the book she is writing called "Thirty Decibels," which is about a futuristic society where most people are forbidden from speaking any louder than a whisper.   Rowder said she was very excited to receive her invitation to purchase the $1,500 glasses because in her book, which she began writing in 2009, she imagined a device that's very similar to what Google has made.

Riding on her blue Raleigh hybrid bike, Rowder pulled up Wednesday afternoon to Google's offices in Venice, located inside the Binoculars Building, designed in the 1980s by architect Frank Gehry.

Google office in Venice Beach, California (Click Image To Enlarge)

A look at the sleek interior of Google's Venice Beach, California  (Click Image To Enlarge)

The cafeteeria at Google's Venice Beach, California office (Click Image To Enlarge)

Inside we were greeted by half a dozen Google employees, all wearing Glass.

After Rowder finished putting on her contact lenses (you can't wear prescription eyeglasses while using Glass) we were escorted to the Glass team's wing of the building. Along the way we got an inside peek of what employees have access to: a Google L.A.-imprinted burgundy pool table, a large snack room and an open courtyard complete with a human-size chess board.

The team’s room looked like an Apple store that had been converted into a theater dressing room with vanity mirrors. On one side were counters with numerous glasses in various colors, and on the other, were vanity tables with black bags labeled with the “Glass” logo. Google's staffers offered drinks and hors d’oeuvres.

Rowder had no interest in the white, black or gray glasses and instead focused on those that were in orange (tangerine) and blue (sky).

Glass is essentially made up of five parts: a titanium frame, two nose pads that hold up the frame, a counterweight on the back right side of the device, the main component which sits next to the right temple of a user's face and doubles as a touch pad, and a glass cube, which houses the tiny screen.

Once she picked out her color, Rowder was taken to one of the vanity tables, where she was presented with an encyclopedia-sized white box. She opened the box slowly, hoping to take in the full experience like a tech geek unboxing a new device. Once she got to the Glass, she lifted the device and examined it before putting on her very own head-mounted display for the first time.

Pat, a Google Glass team member, asked Rowder how the device felt before giving her tips on the proper way to wear it: The frame should sit straight across her brows and once she turns it on, she should be able to see the screen in the glass unimpeded.

She said.  

"Oh I see it." 

Pat asked her.

"You see the screen already?" 

Rowder said with an excited chuckle.

"Yeah." 

Another Glass staffer asked if I would like to try on the device. We went to the stand and I picked out the shale gray model -- I've always gone with dark and cool colors when it comes to my devices.

Margo tries on a light blue pair of Google Glass glasses and checks how the new augmented reality glasses look on her in a mirror. (Click Image To Enlarge)

Margo Rowder wears her new pair of Google Glass glasses for the first time (Click Image To Enlarge)

After putting it on and turning it on, I had to tap the touchpad on the main device (quickly tilting your head 30 degrees also works) to bring up a floating screen with a transparent  “OK Glass” written across it. It was like looking through a heads-up display on a fighter jet.

Along with “OK Glass” the see-through screen displayed the time of day. The display of “OK Glass” signaled that I could give it commands, to take a picture for instance. 

I instructed.  

“OK, Glass, take a picture.”

And the device snapped a photo, which I could see immediately on my display screen.

With the touch pad, I could scroll the screen left or right using a finger. Scrolling to the left displayed various information, including weather.  Scrolling to the right, I found the picture I had just taken.

After a few minutes, my eyes were beginning to strain -- I felt a little bit overwhelmed by the new technology -- so I took it off and handed it back to the staffers.

I rejoined Rowder as Pat helped her set up the smartphone app that works with Glass, check out the website where she can adjust Glass' settings, and add Glass apps (or Glassware as they are officially called). Rowder tried out all Glass’ functions, shooting video of us, searching images of actress Julia Roberts and sending her first Glass-written text message.

Rowder said aloud, specifying the punctuation marks, which Glass transcribed, turned to text and sent to her mom.

“Hi mom I'm talking to you from Glass. What do you think!?” 

After about half an hour spent setting up the device, Rowder was finally good to go. The Glass team walked us out and gave her as much information as they could before we said our goodbyes, like a couple of parents sending their daughter off to college for the first time.

Outside, Rowder popped on the sun visors that came with the Glass, put on her helmet, and hopped on her bike. For a moment, though, she seemed in an odd daydream-like state as she tried to get the Glass to give her directions.

I told my colleagues all about this weird instance that must surely happen to all Glass users as they scroll through their device looking for information. We came up with a term for it: Glass-eyed, as in,

“That girl’s totally Glass-eyed right now.”

COMMENTARY:    Sure looks like Margo Rowder had a great time experiencing Google Glass. Here a few of our Google+ posts shortly after she began using her glasses.

Courtesy of an article dated June 1, 2013 appearing in The Los Angeles Times

FACEBOOK Q2 2013 EARNINGS BLOW AWAY WALL ST FORECASTS, REVS $1.81 BIL OR +11.72%, EPS 19¢ OR +35.71%, MOBILE REVS $656 MIL

Facebook's Q2 2013 earnings have blown away expectations on both topline revenues and bottom line earnings per share.

The beat came on a massive increase in mobile advertising, which was ~$656 million in Q2, up from $375 million in Q1.

Going forward, that big increase in mobile is going to give Facebook harder comparable numbers to beat in the coming quarters. Mobile wasn't part of the mix last year.

CEO Mark Zuckerberg played up the growth of Instagram on the call, and also underlined his belief that the U.S. imply doesn't produce enough engineers to fuel tech company hiring.

He also denied the accusation that teens are getting bored of Facebook.

Lastly, COO Sheryl Sandberg confirmed our report from yesterday that Facebook's video ad product is NOT yet ready for prime time. She declined to say when it might appear.

More details on the financials are at the bottom of this post.

EPS: 19 cents (expectation was 14 cents).

Total Revenue: $1.81 billion (expectations were $1.62 billion).

Keynotes of The Q2 2013 Earnings Call Conference:

CEO Mark Zuckerberg began the conference call.  

"We now have more daily actives on mobile than on desktop ... soon we'll have more revenue on mobile than on desktop."

"Our mission is to reach the next 5 billion people."

FB added 45 million monthly active users during Q2.  700 million daily active users worldwide.   Zuckerberg said.  

"People are spending more time on Facebook than ever before." (Because of mobile.)

Teens are NOT abandoning Facebook:  

"That just isn't true."

Zuck says he's done the research and the numbers bear him out.

On to Instagram. Video is a success, he says. (When he mentions "Kevin," he's presumably referring to Instagram CEO Kevin Systrom.)

FB now has 1 million active advertisers.  They're still satisfied with ROIs.  Zuck said.

"This quarter marks the end of our first year as a public company."

Happy IPO anniversary, everyone!

COO Sheryl Sandberg is spoke next.

"E-commerce companies increased their spend significantly." 

Spend doubled in the second quarter.  They have high click-thru rates.  She mentioned mobile app install ads, as well. (My take: This is part of Facebook's push to position itself as a direct-response medium with robust ROI analytics.)   Sheryl said.

"Every night 88-100 million people are using Facebook during the nightime hours while watching TV." (Sandberg seems to be addressing Twitter's moves into the social media/TV ad market here.)

Custom Audiences clients more than doubled, she said.  (Those are the advertisers who use their own lists to target customers. It's one of Facebook's key pushes to demonstrate that ads on FB actually work.)   Sheryl said.

"We have one of, if not THE, most effective mobile ad product."

CFO David Ebersam spoke next.

He said about Instagram:

"There are 130 million actives using the service."

Average price per ad on FB is up 13%.  No. of impressions served is up, too.

He said.

"We were pleased to see King's rapid growth in Q2." (Note that the maker of Candy Crush Saga gets the first shout out — Zynga has yet to be mentioned! Ouch!)

Questions from analysts!

Question 1 is about effectiveness of ads in the news feed.

Sheryl answered:

"All four marketer segments are growing ... increased supply and increase in demand."

Question 2: Mobile app install ads.

Sheryl answered:

"All four segments are growing. Mobile app install ads are small but they're important and they're growing rapidly."

Question 3 is on Custom Audiences.

Sheryl answered:  (Long answer about targeting. Bit dry, frankly.)

Question 4 is on monetization of Instagram!

Zuckerberg answered:

"Kevin (Systrom) has always been clear that we're building Instagram as a business. ... probably through advertising."

...focus will be to increase footprint of Instagram. Not at advertising point yet.

Sheryl also spoke:   Says she wants to increase share of consumer packaged goods (CPG) marketers.

Question 5 is on growth of ad sales force and ad ops, particularly outside US.

Sheryl answered:

"Our growth was very strong across regions. ... we're up to over 40 offices, we have sales teams on the ground in 40 offices."

... [strong in Asia.]

Question 6 is on programmatic selling (that's FB's ad exchange, FBX).

Sheryl answered:

"FBX ... is actually a very small part of our business and sometimes people don't understand that."

(My take: Ouch! Hundreds of real-time bidding adtech execs just died a little inside. Previously, people thought this was worth hundreds of millions or maybe billions of dollars a year, eventually.)

Question 7 is on impression-based selling v. performance selling.

Sheryl answered:

"Advertisers are looking for discovery. ... We have a big brand opportunity ... up to 100 million engaged during primetime hours. ... T-Mobile did a campaigns ... used offer ads ... they had a 20X return on adspend. That's what we can do with impressions, taking it all the way through the funnel."

Ebersam is talking about capex. Not too dramatic.

Question 8 is on mobile. Why so lumpy?

Ebersam answers:   ... News feed ad integration was a big, smooth success.  Ad prices held up even though more inventory was supplied. ... clicks in system is still increasing, increasing supply, but cost per clicks for news feed ads increased anyway, Q-Q.

Question 9 is on mobile news feed ads, again. He wants a breakdown of how growth pricing works.

Ebersam answers:

"We're trying to find the right balance for each user."

Wants better creative so ads are more engaging. Everything contributed. Supply, demand, cost per click all went up.

"A nice balanced contribution from the variables."

Question 10: Video ads! Finally! What are the hurdles?

Sheryl answered:

"We have a current video ad product, because advertisers can embed a video in a page post ... demand is there ... we are exploring how to expand that but we don't have anything new to announce today."

(My take: Reports back in April that a video ad product was on its way were premature.)

Question 11:  Platform strategy 

Zuck answered:    

"We've found the mobile app install ads work. People like them."

Question 12: Big picture question for Zuck, views on long-term aspirations.

Zuck answered:

"Yeh, I think we're early. ... reaching a billion people was this big rallying cry for the company for a long time. ... no one had ever built a service that had a billion people signed in ... the real goal is to connect everyone in the world..."

Question 13 is on 40% increase on y-o-y price per ad:   please call out one of two enhancements that were contribs to that; challenging comps (comparisons or comparables) in second half of year?

Ebersam answered:  

"Pricing is really strong all over. Comp: if you're looking at the percentage growth rates, last year the quarter didn't have much mobile revenue attached to it.  Comps will get harder because old numbers had no mobile revenue in them."

Sheryl answered:

"E-commerce doubled year over year. Mobile app install ads saw a lot of growth."

(Sandberg is really hammering on those two areas.)

Question 14 is on e-commerce spend doubling. What drove it?

Sheryl answered:  

"We've made a major investment in helping DR (direct response) marketers measure returns. ... their budgets are flexible around ROI .... They adjust to their budgets."

Question 15 is on hiring, are their pressures on finding talent? Also, what are the mix of advertisers and how are they growing?

Zuck answered:

"Hiring great people is one of the biggest challenges that any tech company has. We're doing really well ... but there's a systemic issue where our country doesn't produce the volume of engineers that companies want to hire. ... we have a strong program on colleges ... it's really important."

(My take: Zuck has barely restrained himself from going into a diatribe about immigration reform — he wants it relaxed so he can increase hiring of foreign engineers.)

Sheryl answered:

"CPG (consumer packaged goods), gaming, retail, these are categories where we're really strong."

She calls out GE's Instagram work.

Question 16: On adoption / targeting / programmatic.

Sheryl answered:  

"We like having an ecosystem of PMDs and 3rd party sellers ... we'd like to see all sales channels continue to grow and thrive."

Question 17 is on Graph Search and Facebook Home. What have you learned?

Zuck: He's taking a long run-up to answer the question ... Instagram video is doing really well, it fits really naturally ... things like Home and GS are new use cases. ... I think of it more as a seed we're planting that will create a new pillar of the ecosystem ... [long term bets] ...

That's it!

+++

The stock took a big leap after the numbers came out, up 15% in seconds. FB has been trading around $26.30 all day. It's now above $30 for the first time in weeks.

Investor slides: see them here.

Here are the highlights from the press release:

The revenue gain came after Facebook for the first time signed up 1 million-plus active advertisers. Ad revenue was $1.6 billion. Mobile ad revenue is now 41% of Facebook's ad revenue. Payments revenue was $214 million. (Payments is turning out to be a not-very-interesting business for Facebook.)

Facebook for Every Phone passed 100 million users. FEP is Facebook's feature phone app, which is popular in developing countries. There are also now 100,000 Facebook apps available for users.

User numbers:

• Daily Active Users: 699 million, up 27%.
• Monthly Active Users: 1.15 billion, up 21%.
• Mobile MAUs: 819 million, up 51%.
• Mobile daily active users: 469 million.
• Mobile only monthly users: 219 million.

Here's a snapshot of the top and bottom lines:

Click Image To Enlarge  

COMMENTARY:     Facebook shares went ballistic right after Facebook's earnings conference call with investors.  Shares quickly jumped from $26.51 at the end of regular trading on Wednesday, July 24, 2013 to $33.87 right after trading resumed on Thursday, July 25, 2013.  Facebook closed at $34.359, an increase of +$8.449 or +31.87%.  Over 350 million shares changed hands on July 25, 2013. That's speculation.  Quite an increase in price.  Here are the charts.  You be the judge.

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dd

Before you think FB stock is now the hottest investment of 2013, take a closer look at what’s going on.

dd

 First off, some of the gains are very likely thanks to a short squeeze. Heading into the release, some 39,754,124 FB shares were sold short, making it currently one of Nasdaq’s most heavily shorted stocks.

Volume suggested a race to cover shorts was in play.

And despite the solid gains, Facebook stock still isn’t trading over its May 2012 IPO price of $38, a level not seen since the famously flawed debut.

Money Morning Chief Investment Strategist Keith Fitz-Gerald said.

“Bottom line to me is Facebook may prove to be a great short-term trading opportunity, but I remain absolutely convinced it has no place in a long-term investor’sportfolio.  Where’s Eastern Airlines today? Where’s Palm Inc.? Research in Motion (Nasdaq: BBRY)? AOL Inc. (NYSE: AOL)? Myspace?”

While some investors get lured into this Facebook exuberance, here’s why Fitz-Gerald warns against it.

Sure, Facebook Earnings Weren’t Bad…

FB stock opinion aside, there’s no question this was the best Facebook earnings report since the company went public.

The social media giant posted earnings of $0.19 a share, a nickel better than forecasts, and up from $0.12 a year earlier. Revenue climbed to $1.81 billion, also beating projections of $1.62 billion, and up 53% from $1.18 billion a year ago.

The big question on everyone’s minds was how the Menlo Park, CA-based company tackled mobile. Facebook was late to the mobile arena and has been playing catch-up since. It finally appears as though it’s making headway.

Mobile advertising revenue accounted for roughly 41% of Facebook’s $1.60 billion in total advertising revenue in Q2, up from 30% in the first quarter.

RBC Capital Markets analyst Mark Mahaney told CNBC. 

“They’ve taken three or four quarters to try to fix the mobile issue.  They’ve gone from zero of their revenue being mobile to almost 50% now. That’s pretty good evidence that they’ve fixed the mobile issue.”

The mobile monthly active user tally at the end of the quarter was 819 million, up 51% year-over-year. Daily active mobile users averaged 469 million in June.

The overall daily active user count grew at a more modest pace, up 27% to 699 million on average for June, while monthly active users averaged 1.15 billion at the end of Q2.

The efforts stemmed from some deliberate Facebook moves to morph the company into a truly mobile-focused operation.

David Ebersman, Facebook CFO, told CNBC.

“The investments we have made over the past year are really paying off to position the company to thrive in a mobile world.” 

But, Investing in FB Stock Still Isn’t Good…

We here at Money Morning give Facebook CEO Mark Zuckerberg the proverbial “pat on the back,” but we still don’t think these shares are a good “Buy.”

 Fitzgerald said. 

“From the headline hype this morning, you’d think that Moses had parted the Red Sea again, and that Zuckerberg was ready to walk on water, but I think if you look behind the numbers, a couple things are really apparent, things long-term investors can’t ignore.  Number one, there really weren’t any comps last quarter, so it’s only natural that they have some big upside numbers to report, when coming off a low base.  Number two, the company appears to have solved the mobile user problem, but I think they’re going to run up against competition for eyeball time and additional applications.” 

The “comps” he’s referring to are the mobile growth and revenue numbers from previous quarters – which were so low, they make any growth now appear phenomenal.

While Facebook’s explosive growth phase saw phenomenal numbers that caught the eye of money-hungry Wall Street players and eager tech followers, that phase is over.

Fitzgerald said.  

“The law of natural selection says there are only a finite number of people on this planet. And the first law of natural selection is that exponential growth can’t continue forever.” 

As more social media businesses come to market, they’ll be going after Facebook’s customers – meaning that user base could not just plateau, but decrease.

For the company, without an increasing user base, the biggest long-term challenges remain: How to keep its user base spending, how to avoid trouble from the massive amount of personal data is has collected, and how to profit overseas.

The bulk of its revenue still comes from North America, and to a lesser extent Europe.

North American ad revenue slipped to 45% in Q2 from 48% in the prior quarter, perhaps a sign that Facebook is diversifying its geographical revenue reliance. But revenue per user in Asia, a key territory because it has the potential of offering explosive growth, was just $0.68 versus $3.76 in North America.

Facebook is still is spending a lot of cash on experimental ad formats, programs and platforms. Yet, many of these costly endeavors won’t stick.

So, Instead of Investing in FB Stock…

As for competitors, there are many and they are growing – but none are as intimidating as Google Inc. (Nasdaq: GOOG).

For all of last year, Facebook took in about $5 billion revenue, a little under one-tenth of what Google pocketed.

Moreover, in the mobile advertising business, Google reigns.

In 2012, Google took in more than half of all mobile ad revenue. That number is expected to swell to 56%, or $8.84 billion, this year.

Facebook earned just $470 million in mobile ad revenue in 2012. That number is expected to grow to $2.04 billion in 2013, but Facebook still remains a mere shadow in Google’s path.

So, great job Team Zuckerberg on a great quarter – but we’re still going to pass on investing in FB.

I totally agree in ETF's assessment of Facebook and its stock price.  This is still a very speculative stock. Institutional investors almost immediately short Facebook shares.  They are all looking short-term. There are no real long-term investors buying into Facebook. Sure, there are a few small Main Street holders, but they are still waiting to get back what they lost when Facebook ended its IPO trading at $38, and just went south since then.  Many of them are still waiting, but most of them bailed out over the year since the IPO. 

On June 24, 2013, Seeking Alpha recorded the following transcript of Facebook's earnings conference call with investors: 

Facebook q2 2013 earnings conference call of july 24, 2013 from turk5555

Facebook prepared the following slideshow for investors:

Facebook Q2 2013 Earnings Conference Call Investor Slideshow from turk5555

  

Courtesy of an article dated July 24, 2013 appearing in Business Insider and an article dated July 24, 2013 appearing in Seeking Alpha

REPORT: 51% OF ADVERTISING AGENCIES SAY GOOGLE+ HAS NO IMPACT ON SEARCH CAMPAIGNS, BUT GOOGLE+ IS THE NOW #2 SOCIAL NETWORK

 

Every now and then a report is published that suggests people are slowly coming round to the idea of using Google+, however the reality is that it is still a long, long way behind Facebook in terms of active users and average time spent on the site.

Also, I recently looked at how major retailers use Google+ and it’s clear that they don’t have a very high opinion of the network.

But there’s still a nagging sense that businesses can’t afford to totally ignore Google+, as there’s a chance that in the long term it will have an increasing influence on search rankings.

Given this discussion, the use of Google+ was explored in the new Econsultancy/NetBooster UK Search Engine Marketing Benchmark Report 2013. It revealed some striking differences between client-side and agency responses over the perceived impact of Google+.

Almost two-thirds (63%) of client-side respondents stated that they don’t know if Google+ is having an impact on their search campaigns, compared to just 28% of agency respondents.

This could of course be an accurate reflection of the situation, or it could be that agencies are less willing to admit they’re unsure of Google+’s influence over search results.

Obviously this means that a greater proportion of agencies knew what impact Google+ was having on their clients’ campaigns and in the majority of cases this impact was ‘neutral’ (51%). 

An additional 20% believed the impact to be ‘positive’, and no agencies thought it was negative.

What impact is Google+ having on your/your clients’ search campaigns?

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Google+’s positive impact

Respondents were asked to expand on why they thought Google+ was having a positive or negative impact on search campaigns.

Positive views from companies focused on the greater visibility allowed, and some have seen improved CTRs through use of Google+. Agency responses also focused on visibility and rankings.

A sample of agency responses regarding the positive impact include:

• "Making content more visible in the SERPS through authorship mark-up."
• "Higher rankings for those that utilise Google+ accounts and have social share icons (including Google+) on their blogs."
• "Social extensions drive purchase intent."
• "Greater SERP ownership on brand terms."
• "Increased referral traffic."

COMMENTARY:  A new study commissioned by Janrain shows that, of the people who use social networks to log in to other websites, almost half (46 percent) use Facebook. But Google+ is in a strong second place, with 34 percent of social logins. (Janrain makes tools to help web developers use social network logins on their sites.)

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That bolsters the claim that Google+, despite its late start, is solidifying its position as the number 2 social network after Facebook.

In a distant third place: Yahoo, with just 7 percent of social logins; and Twitter, with 6 percent.

Google+ launched to a limited number of users in June, 2011, and more widely in September of that year. In the two years since then, it has zoomed past social networks that were years ahead and had hundreds of millions of users already: LinkedIn, Twitter, and a handful of Chinese social networks.

Google+ now has more than 500 million registered users and 343 million active users, according to an independent study by GlobalWebIndex from December, 2012.

Facebook is twice as big, claiming over a billion registered users, while GlobalWebIndex estimates Facebook has almost 700 million active users.

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But Google+ is growing faster, according to some measurements. It’s holding steady on social logins, according to Janrain’s data, growing just a fraction of a percent in Q2 2013. (Facebook sharing also stayed at roughly the same level — see the graph above.)

But sharing on both networks is increasing rapidly — only it’s growing much faster on Google+. People who use Facebook are sharing 10 percent more each month, in aggregate, while Google+ shares (aka +1s) are growing by 19 percent per month, according to a recent estimate by Searchmetrics, which tracks social network data.

At that rate, Searchmetrics estimated, Google will surpass Facebook by May 2016, at which time its users will generate over 1,096 billion +1s per month (yes, more than a trillion) while Facebook users will generate just 849 billion shares per month.

However you look at it — registered users, active users, social logins, or shares — Google+ is a surprisingly serious second. And it may even be a contender for the #1 spot in a few years.

Now if I could only find some people to hang out with on Google+.

The following graphs and charts compare Google+ with the other major social networks, including comparisons with Facebook and Twitter.

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I think you have to be very careful that you don't come to some quick conclusions regarding Google+. Google+ is very early in its development, only about two years old (founded June 2011), while Facebook has been around since nine years, and Twitter has been in existence since 2006.  

Google treats Google+ as an all incompassing connecting platform for its other applications, namely Google Mail, YouTube, Google Search, Google Play, Google Images, Google Calendar, Google Drive, Blogger, Google Mobile, Google Shopping and Google Wallet, to name a few.  

Google is purposely growing Google+ in an aggressive manner requiring users to open a Google+ account to access their Google Mail, is a great example.  Google+ is nothing like Facebook or Twitter, and that's a point of differentiation that truly sets it appart from its more older competitors.  The audience tents to consist of younger males and females, better educated, techies and professionals. Google+ is my social network of choice.  

I joined within days after Google+ was launched, and the thing I like about it is that it is not bloated or complicated to use like Facebook. It has a very elegant and simplistic user interface and is more appealing to the eye.  For my money, Google+ offers a better overall online user experience than either Facebook or Twitter.    

Courtesy of an article dated July 24, 2013 appearing in EConsultancy.com and an article dated July 8, 2013 appearing in VentureBeat

GOOGLE Q2 2013 REVS AND EARNINGS FALL SHORT, MOBILE AD REVENUES THE CULPRIT, SHARE PRICES FALL NEARLY 5%

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On July 18, 2013, Google surprised investors with second-quarter results that fell short of expectations thanks partly to a continued drop in ad prices, pushing its shares down 5% in after-hours trading.

Revenues and Earnings Fail To Meet Wall Street Expectations

The search giant reported a profit of $9.56 a share before stock compensation and Motorola restructuring charges, considerably below analysts’ estimates of $10.78 a share. Revenues rose 19%, to $14.1 billion–just a little under estimates of $14.4 billion, but apparently enough, along with the profit shortfall, to raise concerns among investors. Second-quarter earnings last year were $10.12 a share on $9.61 billion in gross revenues.

Share Prices Take A Hit

Google’s shares had fallen nearly 1% to $910.79 in trading on July 18 before the earnings announcement.  Shares hit a record-high $924.69 Monday, up from a recent low of $766 in mid-April. Some analysts already had raised their price targets to $1,000 or more.

Google Inc (NASDAQ.GOOG) shares slid nearly 5% in after hours trading on July 19 after the search giant reported lower than expected earnings and revs for Q2 2013 (Click Image To Enlarge)

The main culprit is dropping mobile search ad prices, which already are at least 40% lower than prices for ads served to desktop computers. Ad prices overall in the quarter fell 6%, more than the 3% analysts expected and the 4% drop in the first quarter. One factor may be that Google is opening up much more mobile ad inventory, which could serve to reduce prices until more advertisers move to reach people while they’re on smartphones and tablets, according to Larry Kim, founder and chief technology officer for search marketing firm Wordstream.

AdWords Ad Serving System Revamped

A big revamp recently of Google’s core AdWords ad serving system, called Enhanced Campaigns, was supposed to help remedy that situation. But its full impact clearly has not yet hit. The change, which officially kicks in July 22 but is already underway at most of Google’s millions of advertisers, is intended to spur more mobile ads and thus more competition in Google’s auction-based ad system, ultimately raising ad prices.

Jared Belsky, executive vice president at digital ad agency 360i, said in an interview that he expects that to happen, but it will take some time for advertisers to tweak their campaigns in the new system. He says about inevitably raising prices.  

“There will be more demand for mobile ads.”

Indeed, Adobe’s advertising business recently reported that it was seeing higher Google ad prices as a result, though Google itself poured cold water on the report.

The overriding question is when that trend will kick in broadly, and by how much mobile ad prices will rise. “We see a more challenging growth outlook,” Scott Kessler, equity analyst with S&P Capital IQ, said in an interview.

Hightlights Of The Q2 2013 Earnings Call Report

A few other details from the quarterly report:

• Paid clicks rose 23% from a year ago, and 4% from the first quarter.
• Non-ad revenues such as Google Apps contracts with businesses, schools, and governments, as well as app sales, shot up 138%, to comprise 8% of Google’s revenues.
• Revenue growth would have been 22% if not for foreign currency rate changes.
• Google expects to continue to make “significant capital expenditures.”
• Headcount totaled 44,777 people–40,178 at Google and 4,599 at Motorola. That’s down from 53,891 in March, when there were 38,739 at Google and 5,170 at Motorola.

 You can listen to a pre-recorded audio of the earnings conference call webcast by clicking the link to Google’s YouTube investor relations site.  For more detail, take a gander at the earnings slides.

Larry Page, Google CEO and co-founder started off Google' Q2 2013 earnings call conference call with analysts (Click Image To Enlarge)

Google CEO Larry Page Talks Up Mobile, Android and Chrome and Adwards Enhanced Campaigns

In a statement, Google CEO Larry Page preferred, as he has for a long time, to cast the mobile issue as a future opportunity more than a current problem. 

He said.  

“Google had a great quarter with over $14 billion in revenue – up 19% year-on-year,  The shift from one screen to multiple screens and mobility creates tremendous opportunity for Google. With more devices, more information, and more activity online than ever, the potential to improve people’s lives even more is immense.”

Page said Google had a “great” quarter, surely a bit of hyperbole given the disappointing numbers and the investor reaction. He immediately talked about the huge shift to mobile devices that he referenced in his statement.

First, he talked about platforms–Android and Chrome.

• 900 million+ Android devices have been activated worldwide. 
• 1.5 million Android devices actived each day. 
• 15 billion+ apps have been downloaded from the Play Store. 
• Chrome, just four years old, has 750 million users worldwide.

Page then turned to apps–a revamped Maps user interface and navigation feature, for instance. Same with Google+, a complete redesign to use the entire screen, which looks the same on all screens and platforms. He also touts the video chat service Hangouts. Knowledge Graph, a catalog of info, keeps growing too. Google Now, the next-gen search service, also launched on Apple’s iOS.

OK, what about that Moto X? “I’m really excited” about what Motorola will launch, he says without mentioning the name of the soon-to-launch signature smartphone.

Then Page went on to the visionary stuff, such as Project Loon to provide global WiFi via balloons.

Google CFO Patrick Pichette (Click Image To Enlarge)

With that short, mostly news-free intro, he turned the call over the Chief Financial Officer Patrick Pichette to go over the numbers. You’ve already seen those, so I’ll spare you a rerun. Pichette did say that revenues would have been up 22% if not for currency fluctuations.

Nikesh Arora, Google Chief BUsiness Officer (Click Image To Enlarge)

Chief Business Officer Nikesh Arora says business was especially strong in automotive and in Brazil, to name two divergent sectors. The U.K. was weak, though.

One thing he focuses on is the opportunity to work with brands to advertise more online, the explicit message being: You can do better by shifting TV ad dollars over to online.

He also says the non-ad business is growing rapidly, though he emphasizes the number of devices and apps more than the revenues, which are still fairly insignificant compared with the core business.

The enterprise business, that is sales to businesses of Google Apps software and services, also is growing quickly, he says.

Now on the main event, the Q&A portion:

Q: How is the transition to Enhanced Campaigns going–is ROI going up for customers? And are you providing conversion (sales) tracking across devices?

Arora: Six million campaigns have had to be migrated to the new system, he says. The ROI should continue to improve, he adds.

Q: Are there other hardware categories beyond smartphones and tablets that Google could do?

Page: We’ve been an early innovator in smartphones. Certainly over the long term, we’re going to have new kinds of devices. We’re obviously excited about Google Glass and interacting with new types of hardware. (No news on a smart watch, though, let alone a brain implant.)

Q: More color on expenses given the rise from Q1?

Pichette: Our expenses in Q2 were completely in line with expectations. Sometimes they come in a bit over and sometimes a bit under. That’s the issue between Q1 and Q2.

Q: Is mobile the main factor in ad price declines?

Pichette: It’s just one of the factors. It’s always just to look at CPCs (cost per click, or prices) or just at paid clicks. They can go all over quarter to quarter.

Q: How have hiring opportunities changed in the past year or two?

Page: I don’t think we’ve seen a significant change in hiring in the short term. Retention for the company has been great. We’re able to hire some of the best people in the world. It’s pretty stable.

Q: Why isn’t the R&D budget higher if there are so many opportunities?

Page: It’s our job to figure out how to invest more. It’s pretty easy to come up with ideas. It’s pretty hard to make them real for millions of people. I wish we could just snap our fingers and accomplish this. It’s hard work to scale and that’s what we do.

Q: What specific financial metrics do you use to evaluate Google Fiber as a business?

Pichette: We already had profitability as one of the key criteria for this business. There’s no real rocket science in the finances of it. It’s the technological infrastructure to make it 100 times faster.

Q: Why the networks revenue growth decline to 7% growth this quarter vs. 12% in Q1?

Pichette talks about DLA policies, an acronym whose meaning escapes me for the moment. Update: Actually, I think he was talking about Product Listing Ads.

Q: What gets mobile ad conversion up in the next few quarters?

Arora: We have to understand the cross-device behavior and conversion better. We need to understand the context of the user a lot better.

Q: What’s the timeline for Gmail app updates and impact on this as marketing distribution channel?

Page says he actually doesn’t know the details of the rollout. But Google is trying to improve the commercial offers in email, and trying to make sure people don’t feel spammed.

Q: Update on automated cars and commercialization?

Page: It’s really early on. No real updates, especially on commercialization.

Q: Data centers and other infrastructure is lumpy, you said, but is amortization part of what’s causing the rise in operating expenses?

Pichette: We don’t give the details. But data centers have a long lifetime, but the computers themselves have a much shorter lifetime. But nothing unexpected.

Q: How do you ensure that people at Google keep small entrepreneurial culture Google had in early days?

Page: I’m very excited to see things like Project Loon and automated cars. I want to make sure people at Google have permission to do these things. That’s the only way we end up with things like Android and Chrome. I look at it like a portfolio.

Q: We expected to see some impact of Enhanced Campaigns, like higher prices. Why didn’t that happen?

Page: We’re still in very, very early stages. Biggest change ever in AdWords. It’s been pretty smooth. We’re very pleased with how it’s going. (Which didn’t actually answer the question.)

Q: What’s the impact on network revenues growth of quality improvements?

Pichette: Updated from transcript: Basically it was indeed the quality improvements–cleaning up site, which are part of Google’s network of outside websites where it runs ads, that don’t add much valuable content besides the ads–that were responsible for the decline in growth from 12% in Q1 to 7% in Q2.

Q: Was there any impact from Enhanced Campaigns on paid clicks and CPC? If not, how long will it take? (Good for Goldman Sachs analyst Heather Bellini for repeating the unanswered question. It is clearly the main concern of analysts here, since Enhanced Campaigns was supposed to reverse the downward price trend.)

Arora: We’re still looking at the full impact. Longer-term, we should be able to provide simpler, better, faster ads. Over the long term, it should have a positive impact on conversions.

Q: How did foreign exchange affect ad prices?

Pichette: Marginally.

Q: Gross profit has been trailing revenue growth for three quarters. What drove the step down in Q3 of last year?

Pichette: We care about both revenue growth and profitability. We really look at every incremental profit dollar rather than the percentage margins. We’ll have different margins in our core business, but they offer great, huge revenue pools in actual dollars. And there can be synergistic value between products. That’s the mindset that we apply. We remain focused on our core business. The core is the core is the core. (Pichette goes zen on us.)

Q: Product Listing Ads impact?

Pichette: People want an answer more than 10 blue links. We are signing up tens of thousands of merchants.

Q: Will users be able to purchase items without ever leaving the search results pages at some point? (Very interesting question, given the rising possibility that mobile apps from Amazon, Yelp, and many others could usurp traditional search.)

Page: We’re doing a trial in the Bay Area in same-day delivery. (He doesn’t answer the question, though.)

Q: What about Moto X? Will you be aggressively marketing it? How will you avoid impacting your Android partners?

Page: Nothing about what we’ve said has changed. They’re working hard on making great products. You’ll get to try it out pretty soon.

Q: Will the marketing investment be $500 million as reported?

Page: They’re operating Motorola independently. But I think too much has been made over these things. (Whatever that means.)

Q: How widely do you see Google expanding into subscription businesses–big in three to five years?

Page: I’m sure over time we’ll have products in those areas, but no specific plans to talk about.

Q: Motorola has lost a billion dollars in the last three quarters, so what’s the ultimate aim for Motorola to c0ntribute to Google’s profit base or even spread Google’s services?

Pichette: We divested the home (settop) business for a lot of cash. It’s now lean and mean under Dennis (Woodside, the Google exec now running Motorola).

And that’s a wrap.

Google’s shares are now down a little over 4%, indicating a slight lessening of investor concern. Still, so much for those $1,000 price targets.

COMMENTARY:    Google's disappointing mobile revenue numbers clearly demonstrates the challenges digital advertising platforms face in monetizing mobile.   Facebook is facing the same challenge when it comes to mobile advertising.  Investors wait for Facebook's earnings conference call later today at 5:00 p.m. EST.  

The "Mobile Lifestyle," a term coined by the late Steve Jobs of Apple, has driven more users to use mobile devices like smartphones and tablets to access the Net, read their email, view video and digital images, and log into their favorite social networks,   The rapid movement to mobile devies is not going to change in the foreseeable future.  What will probably change is the number of smartphones and tablets as adoption becomes saturated.

The biggest challenges for digital media platforms like Google, and Facebook for that matter, will be to find new ways to motivate users to use their mobile devices longer and designing compelling ads that are effective in reaching consumers while overcoming the limitations and disadvantages of the smaller display real estate on mobile devices.  

Earlier this year, Facebook launched Facebook Home a mobile app that locked up a smartphone users startup display to show their Facebook newsfeed and what their friends were doing online.  This experiment failed miserably because it was too intrusive and ruined the users overall mobile phone experience.   Google has to be careful that they don't repeat that mistake.

So far I like what Google management said about Enhanced Campaigns during their Q2 2013 earnings conference call, and I tend to agree that it will take a bit while longer to see the benefits of the new AdWords enhancements to multiple platforms.

The new Enhanced Campaigns, which change how ads are run on desktop and mobile devices, have come to 75% of advertisers, a week before it becomes mandatory.

What are Enhanced Campaigns?

What Google says:

According to the official Google adWords Blog Enhanced Campaigns will give marketers the ability to bid on multiple devices more easily by allowing for segmented bidding from within a single campaign. According to the Goog, users are utilizing multiple touch points when making purchasing decisions and are moving seamlessly between devices. They even offered a snazzy slideshow and infographic to show how this is happening:

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Key features

Here’s an overview of some key features.

1. Powerful marketing tools for the multi-device world - People want search results that are relevant for the context they are in — their device, location and the time of day. Enhanced campaigns help you better manage your campaigns and budgets for this multi-device world. With bid adjustments, you can manage bids for your ads across devices, locations, time of day and more — all from a single campaign.   Example: A breakfast cafe wants to reach people nearby searching for "coffee" or "breakfast" on a smartphone. Using bid adjustments, with three simple entries, they can bid 25% higher for people searching a half-mile away, 20% lower for searches after 11am, and 50% higher for searches on smartphones. These bid adjustments can apply to all ads and all keywords in one single campaign.
2. Smarter ads optimized for varying user contexts - People on the go or near your store may be looking for different things than someone sitting at their desk. With enhanced campaigns, you’ll show ads across devices with the right ad text, sitelink, app or extension, without having to edit each campaign for every possible combination of devices, location and time of day.  Example: A national retailer with both physical locations and a website can show ads with click-to-call and location extensions for people searching on their smartphones, while showing an ad for their e-commerce website to people searching on a PC — all within a single campaign.
3. Advanced reports to measure new conversion types - Technology is enabling people to take action on your ads in new ways. Potential customers may see your ad and download your app, or they may call you. It’s been hard for marketers to easily measure and compare these interactions. To help you measure the full value of your campaigns, enhanced campaigns enables you to easily count calls and app downloads as conversions in your AdWords reports. Example: You can count phone calls of 60 seconds or longer that result from a click-to-call ad as a conversion in your AdWords reports, and compare them to other conversions like leads, sales and downloads. 

Upgrading to enhanced campaigns

Enhanced campaigns will roll out to advertisers as an option over the next few weeks, and we plan to upgrade all campaigns in mid-2013. 

Enhanced campaigns are designed to help you succeed in a multi-screen world, but we know that transitioning may involve some initial changes. Here are some resources to help you:

Courtesy of an article dated July 18, 2013 appearing in Forbes and an article dated February 7, 2013 appearing in Zen Search Marketing and an article dated February 6, 2013 appearing Google Inside AdWords 

WALL STREET FORECASTS STRONG REVS AND EARNINGS FOR FACEBOOK IN Q2 2013, TOTAL REVS COULD HIT $1.62 BIL, UP 37% FROM 2012

Facebook has scheduled a Q2 2013 earnings call conference call to begin after the close of trading (1:00 p.m.) on Wednesday, July 24, 2013 (Click Image To Enlarge)

Wall Street may not have warmed to Facebook yet -- but the company is expected to report another solid quarter on Wednesday, fueled by continued mobile ad growth.

Analysts, on average, project second-quarter revenue of $1.62 billion for the social networking giant -- up 37% from a year ago -- and earnings of 14 cents a share, up two cents. That compares to a 39% revenue gain in the first quarter, and profit that was flat from a year earlier at 12 cents a share.

Advertising revenue, which accounts for the vast majority of Facebook’s overall sales, is forecast to rise 40% to $1.39 billion, according to a research note released Monday by JP Morgan analyst Doug Anmuth. Mobile advertising, which was virtually nil 18 months ago, is estimated to account for $446 million of that amount, or nearly a third of ad revenue.

That would represent a gain of 19% from $375 million in the prior quarter. Desktop advertising, by contrast, is expected to fall almost 4% from a year ago, and 8.3% from the first quarter to $944 million, as ad dollars continue to shift to mobile devices. Payments revenue is projected at $205 million, up 7% from a year ago.

Underscoring its commitment to mobile expansion, the company announced on Sunday that its “Facebook for Every Phone” app, designed for feature phone users in emerging markets like India and Indonesia, now has more than 100 million monthly users. While reaching that milestone will not bear on Facebook's second-quarter results, it highlights the company's efforts to play a key role in mobile as those markets mature. 

Facebook for Every Phone app screenshots (Click Image To Enlarge)

As of the end of the first quarter, Facebook had 751 million monthly mobile users in all.

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Facebook has recently launched other initiatives that will not necessarily bear fruit immediately, but could help bolster revenue over time. These include its move to simplify the ad-buying process by cutting the number of ad formats it offers in half. It also rolled out its upgraded search service more widely after announcing it in January.

If Facebook eventually begins showing ads on Graph Search as expected, that would add another revenue stream. Also looming on the horizon is the long-rumored introduction of video advertising later this year, which the addition of video on Facebook-owned Instagram this month did nothing to dissipate.

We believe ad formats/products like Newsfeed ads, FBX in the Newsfeed, video ads in 2H13, Mobile App Install Ads, and Custom Audiences are likely to be key drivers of growth going forward,” stated Anmuth in his earnings preview. Still, investors have remained skeptical that Facebook can maintain strong sales growth and user engagement.

The company's stock closed Monday at $26.05 -- 31.5% below its IPO price of $38 a share in May 2012. Lately, the rise of popular messaging apps like WhatsApp and SnapChat -- along with the continued growth of non-Facebook properties like Twitter and Instagram -- have raised questions about the social network's hold on younger users.

Amidst heightened competition, Anmuth noted that Facebook’s share of total minutes across desktop and mobile (smartphones only), increased to 15.7% in May from 11.8% a year earlier. Even so, analysts will be looking to get more detail from CEO Mark Zuckerberg and other Facebook executives during the company's earnings conference call on user engagement and ad performance during the quarter.

One thing that investors and analysts are not likely to get is any formal revenue or earnings guidance for the current quarter or the rest of the year, which Facebook historically has not provided.

COMMENTARY:   A representative from Spruce Media, a Facebook marketing agency, said Facebook pleased advertisers in Q2 by simplifying and improving current products rather than launching new ones. Spruce Media has seen an increase is mobile advertising spending on Facebook.

Advertisers are also optimistic about new opportunities for video advertising on Facebook. Facebook announced video capabilities coming to its subsidiary Instagram in June, leading to more videos on Facebook.

Spruce Media said.

“Facebook has been pitching ad agencies about a completely new updated video ad product centered around TV-like reach with costs approaching $1 million per spot.”  

If this catches on, and Facebook users don't leave the platform because of an influx of video ads, it could provide a profitable new revenue stream for the social network.    

Those updated video ads better deliver the audience, CPM's and CTR's that will attract advertisers willing to pony-up $1 million per spot.  

Recent research shows that ads appearing in a user's newfeed have significantly higher CTR's than regular marketplace ads.  As usual, the effectiveness of the new video ads will depend largely on the message and offer.  Certainly video has much more appeal from a strictly aesthetic basis.

I am looking forward to the Q2 2013 earnings call conference since it marks the 1st year anniversary of Facebook's IPO.  It's a good benchmark for determining whether Facebook is making the right moves to optimize its monetization strategy, especially capitalizing on its growing base of mobile users.    I also want to see if Facebook is able to meet Wall Street's revenue and earnings expectations.  Anything short of this, would be a disaster for Facebook shareholders. 

To listen to Facebook’s Q2 2013 conference call, visit this link at 5 p.m. EDT Wednesday.

 Courtesy of an article dated July 23, 2013 appearing in MediaPost Publicatons Online Media Daily and an article dated July 23, 2013 appearing in International Business Times

Q2 2013 VC INVESTMENTS WERE $7.2 BIL, LOWEST SINCE 2010, FLASH SALE SITE FAB.COM WAS HIGHEST WITH $150 MIL

In April, May, and June, U.S. venture capital investment had its worst quarter--in both number of dollars and deals--since 2010, according to the Dow Jones VentureSource quarterly report released yesterday.

Overall in the second quarter, 801 U.S. companies raised $7.2 billion in venture capital money. That was down 2 percent in dollar terms, and 0.5 percent in number of deals completed, compared to the first quarter of 2013.

 

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VC investment in the second quarter of 2013 was also lower than the second quarter of 2012, when venture capital firms invested $8.91 billion in 959 companies; it was down 19 percent in dollar terms and 16 percent in number of deals.

The second quarter $7.2 billion in VC investment was the smallest total sum since 2010, when VCs invested $5.3 billion and $6.1 billion in the first and third quarters, respectively, according to Dow Jones analysis.

Still, there were some notable VC deals in the period, and they were by no means confined to Silicon Valley.

The $321 million face of Fab's Jason Goldberg. Fab raised the largest venture round of Q2 2013 (Click Image To Enlarge)

Startups raising the most VC funding during Q2 2013 were:

• Fab.com in New York, a flash sale site that offers indie designer housewares, accessories, clothing, and jewelry, raised $150 million--the largest transaction of the quarter. 
• Acumen Brands, a Fayetteville, Arkansas based online retailer that sells outdoor apparel, work wear, and medical scrubs, raised a $83.16 million VC investment, 
• TOA Technologies, an Ohio-based developer of mobile workforce management software raised $66 million. 

Two big deals, tied for the fourth-highest VC financing at $70 million each, were located in the San Francisco Bay Area: 

• Twilio, a San Francisco startup which helps developers incorporate text messages and other phone services into apps.  
• Alvine Pharmaceuticals, a biotechnology company in San Carlos, California that is focused on autoimmune and inflammatory diseases.

The five most active American VC investors in Q2 2013 were:

• 500 Startups with 25 deals. 
• New Enterprise Associates with 17 deals. 
• Andreessen Horowitz (which invested in Fab.com) with 17.
• Google Ventures with 16 deals.
• USVP Management Company with 14 deals.

In terms of VC financings by industry, most sectors saw an increase in amount raised, with the two largest allocations to the following industry sectors:

• Information technology with 238 deals, raising a total of $2.1 billion and representing 29 percent of total equity investment during the quarter. 
• Health care the second-largest sector, saw 168 deals  raising a total of $1.9 billion, but dipped 8 percent from the previous quarter. 

The consumer goods sector suffered the worst drop with an 80 percent drop from the previous quarter.

At the same time, the Dow Jones VentureSource report found venture capital firms are raising sizeable funds to invest going-forward. In total, VCs raised 50 funds at a total of $6.8 billion in the second quarter of 2013, a 48 percent increase compared with the first quarter of 2013. The first half of the year was up 4 percent compared to the same period in 2012.

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Though there were fewer acquisitions of VC-backed companies than in any quarter since 2009, with 84 completed deals at a total of $8 billion in the second quarter of 2013, there were some memorable pairings.

• Google's acquisition of Waze, a social-based traffic and navigation app that allows users to share real-time info with one another was the largest acquisiton at $1.3 billion 
• AstraZeneca's purchase of Pearl Therapeutics, which develops treatment therapies for respiratory diseases, was second with $1.15 billion. 
• Yahoo's $1.1 billion acquisition of Tumblr in May was the third largest.

COMMENTARY:   Although the number VC financing deals and total amount funded was the lowest since 2010, there is hope for the future, because VC firms raised 48% more new capital for their investment funds than they did in Q1 2013.  

The largest IPO of the second quarter (in June), was Gogo, a provider of in-flight web services, floated 11 million shares at $17 apiece and raised $187 million.  Tableau, a cloud analytics software provider raised $55 million in their May IPO.

Again, as in previous quarters, Silicon Valley led all geographic regions for venture capital fundings.

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And the San Francisco Bay Area led other major metropolitan regions by a country mile during Q2 2013.

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Series A and Series C rounds raised the most venture capital during Q2 2013.

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Courtesy of an article dated July 19, 2013 appearing in INC

HOW BEYOND VERBAL MAPS THE PATTERNS AND FREQUENCY OF OUR VOICES EXPRESSING OUR EMOTIONS TO CREATE EMOTION-DRIVEN APPS

When a startup called Beyond Verbal began mapping the patterns and frequency of voices expressing various emotions, they noticed something odd: Love and hate looked almost identical. Yet despite the apparent similarities, our human minds can easily grasp the difference, and now machines are learning how to do it, too. In May, the startup revealed a technology that it says can identify hundreds of emotions in real time based on a voice alone.

The key to algorithmically deciphering the difference between love and hate? Beyond Verbal CEO Yuval Mor demonstrating the huffy tone of hatred says.  

“When you hate someone you really push the air and speak out.”

Then he switches to a kinder, cooing quality:

“When you love someone, this is the ‘pull’ kind of method.”

While to human ears the two tones are obviously different, on paper, their sound patterns look quite similar--except for these “push” and “pull” qualities, which the company built into its algorithm.

Yoram Levanon (Top) and Lan Lossos (Bottom)

Beyond Verbal’s technology is based on research that two PhD students, Yoram Levanon and Lan Lossos, began in 1995. At the time, they were investigating emotion’s role in decision-making. That developed into gigs as advertising consultants, and eventually, after realizing the connection between intonation and emotion, they started a business that improved call centers by identifying caller emotions. That company went into liquidation, but others saw opportunities for the researchers' data-driven emotion identifier beyond the narrow scope of call centers.

Dominance - This diagram represents the relative location of a voice filled with dominance in each aspect of basic acoustics (Click Image To Enlarge)

If, say, Apple’s Siri understood how you were feeling in addition to what you were saying, it could pull up not just a playlist, but rather a playlist that matched your mood. Politicians could use the technology to practice enhancing qualities such as leadership in their voices while giving speeches. People with Asperger's syndrome, who often have communication difficulties, could use it to understand verbal cues that extend beyond literal words. It could even help air traffic controllers identify when pilots were under stress.

Excitement - This diagram represents the relative location of a voice filled with excitement in each aspect of basic acoustics (Click Image To Enlarge)

Since a tiny startup couldn’t pursue all of these options at once, the researchers helped start a new company, Beyond Verbal, that focuses on making their technology available for developers to use in their own apps. The company has not yet announced its first customers.

Desire - This diagram represents the relative location of a voice filled with desire in each aspect of basic acoustics (Click Image To Enlarge)

During a demonstration in Fast Company’s offices, VP of Marketing & Strategic Accounts Dan Emodi played a video of President Obama talking about Mitt Romney during the 2012 presidential election. Beyond Verbal’s test app, Moodies, identified emotions in his voice like “provocation” and “cynicism.”

 

While listening to Princess Diana talk about her troubled marriage in a 1995 interview with the BBC, it noticed “love,“ “grief,” and “feeling of loss.“ 

 

You can try it on your own bit of monologue here.

The diagram below represents the relative location of a voice filled with Fear in each aspect of basic acoustics. The color represents the degree and location of the tested emotion, in this case fear, within that grid.  

Emodi says.  

"You think about fear, and fear is cold.  We didn't touch this...it so happened that fear is represented by blue colors [in our system for mapping the relationship between voice and emotion]."

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The app is not attempting to understand what you say, but how you say it. Researchers based the technology on an analysis of more than 1,000 speeches and questionnaires from several thousand study participants who listened to sound clips and chose corresponding emotions. Beyond Verbal has tested it by asking about 60,000 people online in 26 countries whether the machine had correctly paired sound clips and emotions. That research is continuing, says Emodi, and humans agree with the machine’s analysis 75% to 80% of the time, with success being slightly lower in countries such as Vietnam that speak tonal languages.

Is a machine that understands emotions creepy? A bit. Will politicians use it to practice their false apologies until they sound genuine? Probably. But, argues Mor, you could just as easily use the technology to practice sounding confident as a leader or loving as a parent, and through practice affecting these qualities, a la the “make it till you fake it” method, you may actually achieve them. In any case, you’ll be more in tune with the importance of how you say things.

Mor says.

“It’s not that you are necessarily [just] talking differently.  You’re listening. You’re listening to yourself.”

COMMENTARY:   In a blog post dated June 21, 2012, I commented on the neuroscience technology developed by Berkeley, California based NeuroFocus which measures the emotional responses of the human brain to external stimuli and how these differ between men and women. What is even more significant is how both sexes neurologically react to advertising and what aspects of an advertisement stimulates them, creating positive responses that ultimately lead to making a purchasing decision.  This new research into the human brain has led to the development of the new science of neuromarketing which explores the dynamics of consumer purchasing decisions, customer brand affinity, and customer brand engagement. 

Neuroscience research is making it increasingly clear that many of the decisions people make about what products they will buy or what services they will use are a result of intuition and unconscious mental processes rather than analysis or reasoning.  Consumers have emotional responses and logical responses to marketing and advertising.  And in both types of responses can occur on a conscious basis or an unconscious basis.

Experts at NeuroFocus suggest that approximately 11 million bits of sensory information is processed by the human brain every second. But only 40 bits of sensory information is processed consciously - this is all the conscious mind can handle - and all the rest of the information is processed unconsciously.

Advertising and marketing efforts are part of the universe of sensory information that the brain processes every day in a typical environment in the developed world. Images used in advertising, colors and designs used in packaging, music and fragrances associated with services, and the rich attribute sets of products themselves are all subject to the conscious and unconscious sorting that happens in the marketplace.

I believe that the creaton of emotion-driven apps for voice-activated apps in response to our voice patterns could eventually lead to customized marketing messages that increase the effectiveness of a brands advertising.  I could easily see a situation where I could make a phone call to order something and by decoding the emotional patterns of my voice, a salesperson or automated system could custmize its sales pitch to better serve my needs and increase the likelihood of a purchase.

I think that Beyond Verbal's voice pattern technology still have a way to go, and a lot of data still has to be gathered and analyzed, before generalizations can be drawn about the voice patterns of the population as a whole.  As NeuroFocus has discovered, there are distinct differences between how males and females respond to marketing messages.  The same thing maybe true in our voice patterns.   

Courtesy of an article dated July 17, 2013 appearing in Fast Company