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/.
Thursday, June 14, 2012
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/.
Tuesday, June 5, 2012
Tech Patent Wars Ongoing
There is a conflict going on in the technology space that many investors are still not aware is occurring. The ongoing battle involves the future of the industry and who the winners will be. The ongoing turf war involves innocuous items, often overlooked...patents.
All of today's tech devices could not exist without a myriad of patents. It is estimated, for example, that inside the average smartphone is embodied about 250,000, often overlapping patents of various kinds from both the computing and the mobile communications world.
All of these varied patents have multi-billion dollar lawsuits flying between among some of the best-known names in the technology industry including Samsung, Facebook (Nasdaq: FB), Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG) and Microsoft (Nasdaq: MSFT). In the aforementioned smartphone business alone, where much of the legal action is occurring, $15-$20 billion has been spent in the last year alone buying up patents with legal bills conservatively estimated at half a billion dollars.
Proof of this new force at work in the technology industry came nearly a year ago when patents owned by bankrupt telecom equipment manufacturer Nortel Networks fetched $4.5 billion at auction. That was five times the initial estimate!
Among the losers at the auction, when compared to Apple and Microsoft, was Google. So what did it do? Several weeks later, it went out and spent $12.5 billion for Motorola Mobility. The main reason behind this deal was so Google could get its hands on Motorola's intellectual property.
And the action continues unabated. Just last month, Microsoft paid $1.1 billion for a number of important patents held by AOL (NYSE: AOL). All parties involved seemed to benefit. AOL received a lot of cash for patents it was not longer using, while Microsoft took home some of the first social networking patents ever granted. Facebook, a Microsoft partner, is now insulated form the possible legal attacks which would have followed if those patents had gotten in some other companies' hands.
This latest transaction again highlighted what is going on in the industry.....
The haves, cash-rich companies like Apple and Google, are buying up lots of legal protection for their business from the former leaders in the industry such as Nortel, AOL, Motorola and even Kodak that have little valuable left except for their intellectual property. In the long run, this could stifle innovation in that only giant companies may be able to compete in promising new areas like smartphones and social networking since they will be the only ones with the financial wherewithal to not only afford buying patents but also fend off lawsuits (think of the Yahoo versus Facebook lawsuit).
In the past, when this was not such a litigious society, disputes between converging technologies like the radio and the telegraph were settled amiably with cross-licensing agreements which benefited all the parties involved. But such an outcome today is highly unlikely...many more lawsuits are sure to follow soon. Some likely ones which come to mind are Yahoo suing Twitter, Amazon suing Facebook, and Amazon being sued by the tablet computer companies including Apple.
That's what makes technology investing so tough today. Picking the right company in which to invest may not come down to who has the best product or the best management, but who hires the best lawyers. Or who has the most cash with which to snap up the most patents. That likely means firms like Apple and Google may be on top longer than expected and perhaps for many years to come.
This article was originally written for the Motley Fool Blog Network. Make sure to read all of my daily articles for the Motley Fool at http://blogs.fool.com/tdalmoe/.
All of today's tech devices could not exist without a myriad of patents. It is estimated, for example, that inside the average smartphone is embodied about 250,000, often overlapping patents of various kinds from both the computing and the mobile communications world.
All of these varied patents have multi-billion dollar lawsuits flying between among some of the best-known names in the technology industry including Samsung, Facebook (Nasdaq: FB), Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG) and Microsoft (Nasdaq: MSFT). In the aforementioned smartphone business alone, where much of the legal action is occurring, $15-$20 billion has been spent in the last year alone buying up patents with legal bills conservatively estimated at half a billion dollars.
Proof of this new force at work in the technology industry came nearly a year ago when patents owned by bankrupt telecom equipment manufacturer Nortel Networks fetched $4.5 billion at auction. That was five times the initial estimate!
Among the losers at the auction, when compared to Apple and Microsoft, was Google. So what did it do? Several weeks later, it went out and spent $12.5 billion for Motorola Mobility. The main reason behind this deal was so Google could get its hands on Motorola's intellectual property.
And the action continues unabated. Just last month, Microsoft paid $1.1 billion for a number of important patents held by AOL (NYSE: AOL). All parties involved seemed to benefit. AOL received a lot of cash for patents it was not longer using, while Microsoft took home some of the first social networking patents ever granted. Facebook, a Microsoft partner, is now insulated form the possible legal attacks which would have followed if those patents had gotten in some other companies' hands.
This latest transaction again highlighted what is going on in the industry.....
The haves, cash-rich companies like Apple and Google, are buying up lots of legal protection for their business from the former leaders in the industry such as Nortel, AOL, Motorola and even Kodak that have little valuable left except for their intellectual property. In the long run, this could stifle innovation in that only giant companies may be able to compete in promising new areas like smartphones and social networking since they will be the only ones with the financial wherewithal to not only afford buying patents but also fend off lawsuits (think of the Yahoo versus Facebook lawsuit).
In the past, when this was not such a litigious society, disputes between converging technologies like the radio and the telegraph were settled amiably with cross-licensing agreements which benefited all the parties involved. But such an outcome today is highly unlikely...many more lawsuits are sure to follow soon. Some likely ones which come to mind are Yahoo suing Twitter, Amazon suing Facebook, and Amazon being sued by the tablet computer companies including Apple.
That's what makes technology investing so tough today. Picking the right company in which to invest may not come down to who has the best product or the best management, but who hires the best lawyers. Or who has the most cash with which to snap up the most patents. That likely means firms like Apple and Google may be on top longer than expected and perhaps for many years to come.
This article was originally written for the Motley Fool Blog Network. Make sure to read all of my daily articles for the Motley Fool at http://blogs.fool.com/tdalmoe/.
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