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FACEBOOK BEATS Q2 2015 FORECAST WITH $4.04 IN REVS, BUT USER GROWTH SLOWS TO 3.47% FROM PREV QTR TO HIT 1.49 BIL

People aren’t using Facebook less, according to its new earnings report. Facebook recovered from last quarter’s miss, beating the street’s estimates in Q2 2015 with $4.04 billion in revenue and $0.50 earnings per share. Facebook now has 1.49 billion monthly users, up 3.47 percent quarter over quarter, which was a bit slower than Q1’s 3.6 percent growth.

Analysts had predicted $3.99 billion in revenue with 47 cents EPS. However, GAAP net income year-over-year, the measure of Facebook’s real profit, is down from $791 million to $719 million. That seems to be contributing to the current 1.39 percent dip in Facebook’s share price to $95.53 in after-hours trading.

But in terms of the long-term health of the social network, the most important stat is that Facebook held strong at 65 percent stickiness, or DAU divided by MAU. That’s the representation of how engaged users are, and the fact that it’s not slipping is a good sign as the service competes for attention with Snapchat and Twitter.

FACEBOOK COMMUNITY UPDATE

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REVENUES AND NET PROFITS

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EARNINGS-PER-SHARE

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Mobile now makes up a huge 76 percent of advertising revenue, up from 73 percent last quarter.

MOBILE AND NON-MOBILE AD REVENUES

 
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Mobile monthly users grew 4.8 percent  to 1.31 billion from 1.25 billion, and mobile daily users grew 5.76 percent to 844 million from 798 million, both a little slower than last quarter. Daily active users hit 968 million, up 3.41 percent from 936 million.

For comparison, Twitter’s user count grew just 2.6 percent this quarter, or just 0.66 percent if you don’t count “SMS Fast Follow” users that don’t see ads.

DAILY ACTIVE USERS (DAUs)

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The most interesting stat from Facebook’s earnings call was when CEO Mark Zuckerberg noted that Facebook Events has hit “global scale” with 450 million users. That means it could be ready to get its own standalone app focused on helping people answer the question “What should I do tonight?”

Another important point discussed was Facebook’s playbook for monetizing Messenger and WhatsApp. Like how Facebook delayed ads in the News Feed in favor of first allowing voluntary interactions with business Pages, Facebook wants people to connect organically to businesses over chat before it lets companies pay to reach customers.

Zuckerberg also ran through the stats for Facebook’s family of apps, including 800 million WhatsApp users, 700 million Messenger users, 300 million Instagram users, 850 million Groups users, and 40 million small businesses using Pages.

REVENUE BY USER GEOGRAPHY

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Facebook spent the quarter aggressively improving its advertising and e-commerce options while trying to pull content inside its walled garden, including videos and Instant Articles.

It’s added buy buttons and auto-filled email sign-up forms to News Feed. With well over 4 billion video views per day, it’s begun selling video ads with guaranteed 10-second views, compared to the option to just buy three-second video impressions.

Meanwhile, Messenger has grown into a behemoth chat app, now hosting 700 million users. The recent rollout of friend-to-friend payments and an app platform could help Facebook deepen loyalty among its users, while relying on its core app’s News Feed ads to earn money.

Improved Instagram ad targeting and formats mean it could start producing big revenue from its photo sharing app. Facebook still isn’t saying much about Instagram or WhatsApp in its earnings report. Unofficially, eMarketer estimates Instagram will hit $595 million in revenue this year.

AVERAGE REVENUE PER USER (ARPU)

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Facebook seems to have solved the ad revenue issue in its “rest of world” region, which includes many developing nations in South America and Africa. The ability to monetize users with slower network connections and older phones is critical to Facebook’s long-term revenue growth, since it’s already saturated user penetration in its key Western markets.

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The recent launch of the stripped-down Facebook Lite Android app could make surfing the social network and seeing its ads even easier for people around the planet.

Facebook is only just beginning to see the fruits of its quest to absorb the Internet. In 18 months, it’s gone from hardly showing any videos to becoming a massive host of viewership. Organic clips from users and businesses provide cover, masking the intrusion of auto-play video ads.

With Instant Articles, it’s found a way to turn a giant hole in its garden wall into a new way to earn money. Instead of users slipping out to read articles on news sites or closing the app in frustration as they load, Instant Articles keep users bouncing around inside Facebook’s app where they see ads.

If not for last quarter’s miss that it blamed on foreign exchange fluctuations, this would have been Facebook’s 12th straight beat. And while many were sure Snapchat’s rapid growth would take a big bite out of Facebook’s, the company has continued steady growth. 11 years in, and people still can’t get enough of Facebook.

COMMENTARY:   It is my belief that Facebook is rapidly reaching a critical inflection point where user growth and revenue growth reaches zero.  Facebook really needs to transform itself so that it is less dependant on the advertising model.  It must diversify in a similar fashion as Google and Microsoft have done in from search and software respectively.  

In the above article, TechCrunch states that Facebook has solved the "revenue problem" it has always had with the "rest of the world" countries, namely Africa and parts of South America (see map below).  Whether Facebook is ultimately able to monetize these underdeveloped markets depends on whether users can access the internet using cheap WIFI. Facebook is working on the latter by developing solar-powered WIFI drones that would beam down free WIFI signals so that users could connect to the internet around the clock.  

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Web-enabled cellular phone prices also need to come down substantially so that users in these very poor nations can afford them.  Household incomes in these depressed areas of the world are less than $200 per year, so cellphone affordability is a huge issue.  Many villages in Sub-Saharan and Central Africa use one cellphone per village which is shared by the villagers.

A whole slew of things need to happen which is a huge challenge.  Healthcare and education need to improve substantially.  Only then will these poor countries be able to grow their economies to create industrial expansion and employment opportunites and ultimately increased household incomes to make purchasing smartphones a reality in these nations.

Having said this, monetizing users in these "rest of the world" economies is going to be very slow. Revenues will continue to be just a trickle compared to users in developing and developed countries.

Courtesy of an article dated July 29, 2015 appearing in TechCrunch     

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THE STATE OF THE SOCIAL MEDIA TEAM AND EMERGING STRUCTURE OF SOCIAL MEDIA TEAMS [INFOGRAPHIC]

How are social media teams structured in different organizations? Take a look at how yours compares with the 350 social media marketers' surveyed in this recent study.

More than half of social media teams live within the Marketing department, according to Simply Measured.

Moreover, most companies have one to three people working on the social team: "Only 25% of companies have more than five members on their social media team," states Simply Measured.

The most common roles are social media manager, community manager, and director of social media.

To find out more about social media teams, tap or click on the infographic.

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COMMENTARY:  Interested in knowing the composition of your social media marketing team? Here's an interesting infographic that covers this.  However, keep in mind that the size and composition of social media marketing teams varies with each company.  Some of the variables that have a direct bearing on the size of a firm's SMM team include number of social media sites, social media marketing goals and objectives, social media analytics requirements, social media marketing campaigns being tracked and analyzed, and budget allocated to social media marketing.

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Courtesy of an article dated August 15, 2015 appearing in MarketingProfs

 

THE CHANGING ROLES OF THE CHIEF MARKETING OFFICER, NO LONGER A COST CENTER, BUT A REVENUE DRIVER

 

Do you look at Marketing as a cost center or as a revenue center? If you said "cost center," you're missing out on a big opportunity. Don't feel bad, though; for a long time, Marketing has been seen as just that—a necessary but costly part of doing business.

Revenue? How could Marketing actually contribute to that?

But things are changing, and fast. Buyers are much more self-educated than they were 10 years ago (or even 10 months ago). They've studied up, they're Internet savvy, and they're turning to social media and communities, including LinkedIn and Twitter, to see what people are saying about brands.

They're so knowledgeable, in fact, that many business buyers have already made a decision about what they're going to buy even before talking to a vendor.

Sales needs to adapt in response if it's going to be on equal footing with the buyer. Luckily, Marketing has a wealth of knowledge at its disposal to help Sales do just that.

Marketing can enable sales reps to be as educated as buyers are so that Sales knows exactly where the buyers are and can help them move forward in their journey toward a buy.

In short, Marketing can help sales reps to better do their job and, in turn, it can actually have an impact on revenue generation.

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Make A Culture Shift

When computer animation came on the scene, it was initially met with skepticism by traditional animators. "Why mess with a good thing?" they said. "That isn't going to last." Over time, however, the ease of use and the value of computer animation gave it an edge of traditional animation, and now it's the industry standard.

Before you can use marketing to generate revenue, you'll need to bring about a similar shift in culture. Marketing needs to be seen as an equal partner to Sales. Easier said than done, however: You're fighting with decades of commonly held beliefs. Sales needs to be made aware of the dramatic shift in buyer aptitude, and Marketing needs to step in and do some of the heavy lifting.

You'll be better able to integrate your sales and marketing organizations if you do the following:

• Stop working in silos: Sales and Marketing fulfill unique roles, and you can't have one without the other. But there's no need for them to exist in separate organizational silos. You need to break down the barriers between the two to facilitate the free-flowing exchange of information between the two teams.
• Get buy-in: More likely than not, you will get pushback from Sales. The viewpoint that Sales and Marketing are distant cousins has long been ingrained in many a sales rep's mind, and they will probably be resistant to the idea. You will need to convince Sales of the valuable information that Marketing can provide.
• Demonstrate Marketing's value: Marketing is home to a wealth of information on the buyer that could benefit Sales. If you're having a hard time getting buy-in from Sales, unearth some of the data you've collected on buyers and prove just how valuable that information really is.

Educate Sales Reps

What do you do when you're interested in a particular brand? You probably visit that brand's Facebook page, for example. You likely ask people about said brand on message boards or read reviews about their products on sites like Amazon. Needless to say, you don't just take a brand's claims at face value. Neither do your buyers.

Whether your sales reps are social media savvy or living-in-the-90s Luddites, it's Marketing's job to educate them, to provide them with enough info so that they are at least as knowledgeable as the buyer. That way, when leads come in, Sales will be better equipped to guide buyers through their journey.

Educating your sales reps will be easier if you do the following:

1.  Listen: It's Marketing's job to gain insight on buyers, and the number of channels available to do so is increasing every day. Marketing needs to be where the customers are (e.g., LinkedIn, Twitter, message boards) and monitoring their activity on a regular basis to collect quality data.
2. Mine your data: Sales won't benefit from Marketing if you feed them endless amounts of unsorted data. Provide them with a clear, easy-to-follow overview of buyer sentiment by sorting through the data and filtering the information that would help guide buyers on their journey.
3. Provide some guidance: Once you've gathered all the necessary data and filtered it down to the most relevant information, Marketing's job is to provide Sales with that information and help Sales understand what it all means. For example, if a buyer voices frustration about a product on Twitter, Marketing would let sales reps know and help them be prepared to respond to those concerns, even if that means sales reps' logging on to Twitter themselves.

Take the proper steps, integrate both teams, and Marketing can have a direct impact on revenue generation. Complete synergy won't happen overnight; however, by providing valuable information and getting sales reps up to speed with buyers, reps will be better equipped to guide buyers on their journey. Make that process smooth enough, and Marketing will be seen as a key player in revenue generation.

COMMENTARY:  Marketers have seen their jobs transformed over the past ten years. The transformation is happening again—but faster this time. According to the Economist Intelligence Unit’s survey of 478 high-level marketing executives worldwide, more than 80% say they need to restructure marketing to better support the business. And 29% believe the need for change is urgent.

Marketers believe that change will occur in six areas:

1. Marketing will increasingly be seen less as a cost and more as a source of revenue. The proportion of companies where marketing is viewed as a cost centre will dwindle and the number where it is seen as a driver of revenue will grow. In three to five years, survey respondents say, approximately four of five companies will classify the marketing function as a revenue driver. (Whether marketing has a formal P&L is another matter.)

2. Marketing will take the lead in the customer experience. The customer experience is increasingly seen as a key to competitive advantage in every industry. Slightly more than one-third of marketers polled say they are responsible for managing the customer experience today. However, over the next three to five years, 75% of marketers say they will be responsible for the end-to-end experience over the customer’s lifetime.

3. Engagement is becoming paramount. A marketer’s greatest achievement is an engaged customer. And because an engaged customer keeps coming back, engagement is defined most often in terms of sales and repeat sales. More than six out of ten (63%) marketers polled say that engagement is manifested in customer renewals, retention and repeat purchases. Adding in the 15% who see engagement in terms of impact on revenue, a full 78% of marketers see it as occurring in the middle or later stages of the classic funnel.1 A minority (22%) view engagement in terms of love for a brand—still important, but part of marketing’s legacy skill set.

4. The new marketer combines operational and data skills with a grasp of the big picture (and possibly working within a different organisational structure as well). Marketers are aggressively seeking new skills—especially those who believe that change is urgent. Nearly four of ten marketers (39%) want new blood in the two areas of digital engagement and marketing operations and technology. A close third, and not significantly different, is skills in the area of strategy and planning (38%). Meanwhile, marketers are tinkering with organisational structures to foster agility, increase cross-functional co-operation and help the organisation to scale.

5. Digital and data dominate investment. Technology investment plans by marketers illustrate both the dominance and fragmentation of digital channels. Three of the four most widely cited investments are aimed at reaching customers through different channels: via social networks, on mobile devices and on the old standby of e-mail. The fourth, analytics, is needed to knit together data from multiple channels into a coherent and actionable portrait of the consumer.

6. Two trends to watch: real-time personalised mobile and the Internet of Things (IoT). Just over half of marketers expect the Internet of Things— where ubiquitous, embedded devices with unique IP addresses constantly convey real-time data—to revolutionise marketing by 2020. Almost the same proportion cites the power of real-time personalised mobile communications as the trend with the biggest impact.

Marketing As A Revenue Driver

Management guru Peter Drucker once said that the job of marketing was to make sales obsolete. The conventional wisdom is that this is starting to happen: Marketers are going deeper into the funnel, into what used to be the territory of sales. They are taking on e-commerce responsibilities and even getting their own P&Ls. But many marketers don’t see the cost-revenue split in such stark and binary terms, although they do see their accountability for revenue growing.

When marketers are asked how they are viewed by the business owners, they say that they are viewed both as revenue drivers (69% agree, 19% strongly) and cost centres (68% agree, 26% strongly). At most companies, the business owners know that marketing drives revenue, but the view that marketing is a cost is just as widespread (especially in Europe). In three to five years, however, the view of marketing will change. It will less frequently (down by 3%) be seen as a cost centre and more often as a driver of revenue. The marketing function is slowly migrating from the cost side of the ledger to the revenue side.

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How will that change take place? A lot has to do with how marketing presents itself within the organisation. Says John Dragoon, CMO of Houghton Mifflin Harcourt (HMH):

“You reap what you sow. If you don’t accept accountability for being measured in terms of your contributions and outputs, then you are viewed as a cost centre. If you aggressively pursue an agenda of accountability and transparency, then you’ll be viewed as a trusted partner and adviser. Even if you don’t have a formal P&L, you’re seen as a revenue owner.”

Moreover, revenue owners tend to have different reporting arrangements. When marketing reports to finance or sales, it is often viewed as a cost centre or at the very least as an unequal partner. Mr. Dragoon says.

 “In my case, I report to the CEO, which says a lot about how our CEO and HMH as a whole view marketing.”

A more obvious example of driving revenue is lead generation: following the classic funnel and religiously tracking opportunities as they move from unqualified to marketing-qualified to salesqualified to a close.  Mr. Dragoon says.  

“About a quarter of our demand initiates through marketing outreach and marketing activities.  We do two things: identify demand ourselves, make sure it’s properly qualified, goes into the right channel; and, for demand that has already been identified, we help our salesforce accelerate cycle times and win rates.”

But even lead generation is getting more complex.  Kimberly-Clark's Mr. Gupta says.  

“In the past, marketing brought the consumer to the brand, and the sales team inspired the consumer to make the purchase.  But now the CMO has to drive an experience that can win that consumer at any point of the funnel, because there really is no funnel anymore. The consumer is at the centre. Marketing has to be able to inspire the consumer’s behaviour everywhere in the consumer’s world.”

Who gets credit for revenue? Ultimately, marketers are part of a team, and claiming credit for revenue often isn’t the best way to build teamwork.  HSBC's Chris Clark says.  

“It [the cost versus revenue divide] is not a useful distinction.  Seeing any part of the organisation in that binary way is an old-fashioned mindset. We play a team sport. You can’t win a football game with an entire team of running backs.”

Adds Mr Dragoon:

“We need to recognise that a multitude of touchpoints and activities ultimately result in a customer acquiring your products. I’m less interested in having marketing teams take personal credit for what they do and more interested in creating an environment where we achieve the top line together. When there’s a win, we do a look-back over the previous 12 months to find correlations with events they attended, e-mails they opened and samples they downloaded. That’s not the same as claiming credit.”

Courtesy of an article dated July 30, 2015 appearing in MarketingProfs and a marketing study by The Economist Intelligence Unit titled "The Rise of the Marketer: Driving Engagement, Experience and Revenue"  

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