Traders buying Facebook (Nasdaq: FB) looking for a quick pop have certainly been disappointed. But what about longer-term investors? Is Facebook a company worth owning? The answer to that may lie in whether the company is able to come up with a mobile strategy.
On the surface, Facebook looks like a web powerhouse, with hundreds of thousands of apps and sites building on its social network site. But in the mobile world, it looks like just another applications developer. And one that, like others, is dependent on platforms owned by Apple or Google for distribution. Facebook management has recognized this and has made some moves including a series of acquisitions and a new app store as part of its attempt to adapt to the mobile device world we live in.
Data from research firm Gartner reinforces the idea that Facebook had better adapt and quickly if it is to be a profitable company. It estimates that revenue from non-mobile social media will climb to $10.2 billion in 2015 from the $1.3 billion level in 2010. But mobile social media revenue is forecast to rise to $29.1 billion in 2015 from $7.3 billion in 2010.
Clearly mobile social media is a sector in which Facebook has to become a major player. Facebook itself admitted before the IPO that growth in advertising sales isn't keeping pace with the gains in the number of users, many of which are logging on via mobile devices. Facebook sent more than 160 million visitors to mobile apps in April 2012 alone! This is a colossal opportunity for the company and it has to simply find a way to monetize those visitors.
One way Facebook can try to catch up fast in the mobile world is through acquisitions of companies rooted in mobile technology. It has already acquired mobile tech companies Tagtile and Glancee, not to mention Facebook's $1 billion offer for Instagram.
But of course, Facebook has to acquire the 'right' type of mobile technology companies from the myriad of choices out there. Many of these companies use the old-fashioned method of throwing a bunch of stuff against the wall and seeing what sticks. Mobile gaming companies, like Zynga (Nasdaq: ZNGA) and Glu Mobile (Nasdaq: GLUU) use that strategy. Zynga, with more than 290 million active users, spent over $56 million in the first quarter acquiring new users.
Glu Mobile is a leading global developer and publisher of “freemium” games for smartphones and tablets. Some of its most popular games are available now at the new Facebook App Center. It is well positioned in a market forecast to grow to $16 billion by 2015. But it still follows the strategy of building and hoping. Also think of the creator of the highly successful Angry Birds game, Rovio Entertainment. It was another 'build it and they will come' company that had a lot of losers before hitting upon Angry Birds.
It should be mentioned though that Zynga to date has been successful, providing Facebook with many of its most popular games including Farmville and CityVille. In fact, Zynga supplied Facebook with 12 percent of its revenues in 2011, its largest source of income.
Perhaps Facebook could look at mobile technology companies that are approaching the sector from a different angle using predictive analytics. That is finding a particular target audience, such as fans of a particular sports team, and building apps specifically for them.
One company doing that is a small company called Bitzio (BTZO.OB) which has already surpassed the 40 million app download mark. Its entire strategy is centered around licensing media rights of sports and entertainment properties with millions of existing fans and then creating apps and web experiences for these fans. To execute its strategy, Bitzio recently acquired an award-winning animation studio and a mobile games developer. A caveat here...this is a small company, trading below $1 a share, so investors are urged to do their due diligence.
Getting back to Facebook, making Facebook-friendly mobile apps could become even easier if the company decides to develop its own operating system as Apple and Google have done. Rumors of a “Facebook Phone” have been circulating for two years with even more recent rumors of Facebook buying Research in Motion. But obviously such undertakings would be risky for Facebook, especially considering its loss-making mobile business.
Or perhaps Facebook could look at payments as a solution to its mobile revenue problem. Some app developers have already told Facebook they would like to use its Credits virtual currency on mobile also. But Apple's App Store expressly forbids developers from using any other payment system than its own. And Google is not likely to be happy if Facebook moves to oust its payment system from Android applications.
So Facebook is left with a dilemma as to how to prosper in an increasingly mobile world. It's a problem the management needs to solve if the company is to survive and grow profitably in the years ahead.
This aericle was originally written for the Motley Fool Blog Network. Check out my daily articles for the Motley Fool at http://blogs.fool.com/tdalmoe/.
Showing posts with label fb. Show all posts
Showing posts with label fb. Show all posts
Monday, July 2, 2012
Thursday, June 14, 2012
A Look at the Social Media Marketing Sector
It is one of the hottest spaces in the technology sector right now...social media marketing. The torrid growth over the past several years of social networking services such as Facebook (Nasdaq: FB) and Twitter has presented companies with both new marketing opportunities and new marketing challenges.
Companies today need to keep pace with their customers, many of whom now use social media to talk about firms and their products. Companies gaining intelligence from conversations by consumers across social media will allow them ideally to create a stronger brand image, products more suited to consumer tastes and improved customer service. Since this industry is still in its early stages, even companies in the same sector such as GM and Ford, are pursuing differing social media strategies as my recent article pointed out.
Because of the rapid growth in this area, there is hotly-contested race between software powerhouses – Oracle (Nasdaq: ORCL), SAP AG ADT (NYSE: SAP) and Salesforce.com (NYSE: CRM) to become a dominant player in the sector. The field is one where Facebook has generated a ton of traffic, but with no direct revenues flowing through to the bottom line. As many analysts have said, it is a “missed opportunity” for Facebook to generate additional revenues.
Facebook allows companies to market on its platforms for free. As companies look for ways to monitor and manage an increasing number of Facebook pages and fans along with other social media sites like Twitter, social media marketing firms (which did not exist not long ago) are stepping in to help companies. Facebook calls these firms “partners” and gives access to its platforms free of charge. But, in turn, these firms are charging corporations a fee for use of their software which track their performance on Facebook and other sites.
A number of these firms have been snapped up recently by the aforementioned Oracle, SAP and Salesforce.com, folding these companies into their portfolio of software offerings. Some of the most recent deals include Salesforce.com's $689 million deal to acquire Buddy Media and two purchases by Oracle – Virtue for $300 million and Collective Intellect for an undisclosed sum. Last year, Salesforce.com started the feeding frenzy with its purchase of Radian6.
These deals highlight a growing macro trend technology investors should be aware of...the line between marketing and technology firms is becoming increasingly blurred and morphing into one. As Salesforce's CEO Marc Benioff said recently, “The marketing industry is undergoing the biggest transformation it has seen in 60 years. Facebook has become the new corporate homepage.”
Investors should expect the trend of software firms acquiring social media intelligence companies to continue. Zach Hofer-Shall of research firm Forrester stated this week “This social technology arms race is the start of something very big to come.” He should have added that the big – Oracle, SAP and Salesforce.com – will only get bigger in the field. Their profits will grow larger too unless, maybe, Facebook decides to monetize the marketing occurring on their site and start charging the software companies fees for access to their platforms.
This article was originally written for the Motley Fool Blog Network. Make sure to read all my daily articles for the Motley Fool at http:blogs.fool.com/tdalmoe/.
Companies today need to keep pace with their customers, many of whom now use social media to talk about firms and their products. Companies gaining intelligence from conversations by consumers across social media will allow them ideally to create a stronger brand image, products more suited to consumer tastes and improved customer service. Since this industry is still in its early stages, even companies in the same sector such as GM and Ford, are pursuing differing social media strategies as my recent article pointed out.
Because of the rapid growth in this area, there is hotly-contested race between software powerhouses – Oracle (Nasdaq: ORCL), SAP AG ADT (NYSE: SAP) and Salesforce.com (NYSE: CRM) to become a dominant player in the sector. The field is one where Facebook has generated a ton of traffic, but with no direct revenues flowing through to the bottom line. As many analysts have said, it is a “missed opportunity” for Facebook to generate additional revenues.
Facebook allows companies to market on its platforms for free. As companies look for ways to monitor and manage an increasing number of Facebook pages and fans along with other social media sites like Twitter, social media marketing firms (which did not exist not long ago) are stepping in to help companies. Facebook calls these firms “partners” and gives access to its platforms free of charge. But, in turn, these firms are charging corporations a fee for use of their software which track their performance on Facebook and other sites.
A number of these firms have been snapped up recently by the aforementioned Oracle, SAP and Salesforce.com, folding these companies into their portfolio of software offerings. Some of the most recent deals include Salesforce.com's $689 million deal to acquire Buddy Media and two purchases by Oracle – Virtue for $300 million and Collective Intellect for an undisclosed sum. Last year, Salesforce.com started the feeding frenzy with its purchase of Radian6.
These deals highlight a growing macro trend technology investors should be aware of...the line between marketing and technology firms is becoming increasingly blurred and morphing into one. As Salesforce's CEO Marc Benioff said recently, “The marketing industry is undergoing the biggest transformation it has seen in 60 years. Facebook has become the new corporate homepage.”
Investors should expect the trend of software firms acquiring social media intelligence companies to continue. Zach Hofer-Shall of research firm Forrester stated this week “This social technology arms race is the start of something very big to come.” He should have added that the big – Oracle, SAP and Salesforce.com – will only get bigger in the field. Their profits will grow larger too unless, maybe, Facebook decides to monetize the marketing occurring on their site and start charging the software companies fees for access to their platforms.
This article was originally written for the Motley Fool Blog Network. Make sure to read all my daily articles for the Motley Fool at http:blogs.fool.com/tdalmoe/.
Monday, June 11, 2012
Social Media and the Automakers
Automakers are finding it difficult to decide where to spend their advertising budget dollars to get the most bang for the buck. Take General Motors (NYSE: GM) for example whose $4.47 billion ad budget remains unchanged from the 2011 budget. Among the ad decisions it made, GM decided to skip advertising during the last Super Bowl (with 111 million viewers), but is a major sponsor of this year's upcoming Summer Olympics on the NBC networks.
It not long ago decided to pull paid ads from Facebook (Nasdaq: FB). The move to pull ads from Facebook, despite its 900 million members, highlighted something that new investors to the social media giant are finding out about the hard way with its falling stock price. There is yet little consensus in the ad industry as to what sort of return companies will get by advertising on Facebook.
So until that consensus emerges, some firms like GM will opt to not advertise there. Advertisers like GM are still coming to grips trying to understand the more interactive platforms – social media and mobile devices – and will not commit to Facebook and Twitter until there is a definitive way to measure the success of an ad campaign.
Investors should not freak out though as this is really nothing new. In the last century, advertisers were also reluctant to begin advertising on the new forms of media such as the television and the radio until they became better established.
Where GM and the other automakers spend their ad dollars is a high stakes game for media companies, both new and traditional such as the television networks. Why? Because no other sector spends more on advertising than the automotive sector which spent a full 17 percent of all the US advertising dollars last year, according to Kantar Media.
Many of those dollars went to the TV networks such as the number one network, CBS Corporation (NYSE: CBS), although the numbers are slowing drifting downwards for the networks. Automobile companies are expected to allocate 39.6 percent of their ad budgets to TV this year. This compares to 41.4 percent last year and 42.3 percent in 2010.
That gradual downward trend for firms like CBS is due to the rise of non-traditional media outlets like Facebook. Global ad revenue at Facebook will top $5 billion in 2012, up from $3.15 billion last year. Mobile ad spending in the US is expected to jump from $1.45 billion in 2011 to more than $10 billion by 2016, says research firm eMarketer.
This change in the allocation of ad budgets has been led by other industries, but it seems the automobile industry (despite the GM-Facebook parting) is catching up. In fact Ford Motor (NYSE: F) took a jab at GM after it made the announcement to drop Facebook advertising. Ford tweeted “It's all about the execution.” Ford went on to say that its Facebook ads are effective since they are combined with engaging content and innovation.
Overall online ad spending is forecast by ZenithOptimedia to climb by 16 percent this year. However, automakers will spend $11.9 billion of their total $30.9 billion advertising budgets online in 2012, up 39 percent from last year, according to Borrell Associates. This shift to online media only makes sense for the automakers. Think about the shift in how consumers purchase vehicles today who gather much of their information and comparison shops for cars online.
The macro trend of shifting to online advertising by the auto industry and others will continue in a big way. The only question facing investors in companies such as Facebook will be how much you are willing to pay for such growth in their ad revenues?
This article was originally written for the Motley Fool Blog Network. Make sure not to miss any of my daily articles for the Motley Fool by going to http://blogs.fool.com/tdalmoe/.
It not long ago decided to pull paid ads from Facebook (Nasdaq: FB). The move to pull ads from Facebook, despite its 900 million members, highlighted something that new investors to the social media giant are finding out about the hard way with its falling stock price. There is yet little consensus in the ad industry as to what sort of return companies will get by advertising on Facebook.
So until that consensus emerges, some firms like GM will opt to not advertise there. Advertisers like GM are still coming to grips trying to understand the more interactive platforms – social media and mobile devices – and will not commit to Facebook and Twitter until there is a definitive way to measure the success of an ad campaign.
Investors should not freak out though as this is really nothing new. In the last century, advertisers were also reluctant to begin advertising on the new forms of media such as the television and the radio until they became better established.
Where GM and the other automakers spend their ad dollars is a high stakes game for media companies, both new and traditional such as the television networks. Why? Because no other sector spends more on advertising than the automotive sector which spent a full 17 percent of all the US advertising dollars last year, according to Kantar Media.
Many of those dollars went to the TV networks such as the number one network, CBS Corporation (NYSE: CBS), although the numbers are slowing drifting downwards for the networks. Automobile companies are expected to allocate 39.6 percent of their ad budgets to TV this year. This compares to 41.4 percent last year and 42.3 percent in 2010.
That gradual downward trend for firms like CBS is due to the rise of non-traditional media outlets like Facebook. Global ad revenue at Facebook will top $5 billion in 2012, up from $3.15 billion last year. Mobile ad spending in the US is expected to jump from $1.45 billion in 2011 to more than $10 billion by 2016, says research firm eMarketer.
This change in the allocation of ad budgets has been led by other industries, but it seems the automobile industry (despite the GM-Facebook parting) is catching up. In fact Ford Motor (NYSE: F) took a jab at GM after it made the announcement to drop Facebook advertising. Ford tweeted “It's all about the execution.” Ford went on to say that its Facebook ads are effective since they are combined with engaging content and innovation.
Overall online ad spending is forecast by ZenithOptimedia to climb by 16 percent this year. However, automakers will spend $11.9 billion of their total $30.9 billion advertising budgets online in 2012, up 39 percent from last year, according to Borrell Associates. This shift to online media only makes sense for the automakers. Think about the shift in how consumers purchase vehicles today who gather much of their information and comparison shops for cars online.
The macro trend of shifting to online advertising by the auto industry and others will continue in a big way. The only question facing investors in companies such as Facebook will be how much you are willing to pay for such growth in their ad revenues?
This article was originally written for the Motley Fool Blog Network. Make sure not to miss any of my daily articles for the Motley Fool by going to http://blogs.fool.com/tdalmoe/.
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