Now that Facebook Leads in Mobile, Where Does that Leave Google?

According to an article titled Facebook Better-Positioned in Mobile than Google per AppNexus Data, Says Oppenheimer, which was written by Tiernan Ray and published on May 6, 2014 on the Barrons web site, Jason Helfstein, an analyst with Oppenheimer & Co. “reiterates an Outperform rating on share of Facebook (FB) and a ‘Perform’ rating on shares of Google (GOOGL)”.

Mr. Helfstein bases his rating on some data he collected over a “call with ad broker AppNexus”. In my opinion this data is credible (I base my opinion on some points Mark Zuckerberg made during a webcast of Facebook’s latest quarterly earnings conference call. I wrote recently to this blog on these points). But the question of the long term benefit to Facebook of ascending to its new position as mobile advertising front runner, in my opinion, cannot be answered, at least as of yet.

In turn, I do not think it is possible to render an opinion on the question of what the long term impact will be for Google, as a result of this change in market leadership. The analyst community has emphasized the importance for online advertising media to demonstrate an ability to monetize mobile as a separate venue, or locale, for this type of business. But, in my opinion, mobile advertising consumers demonstrate a substantially different behavior pattern than online advertising consumers.

The result of these dissimilar patterns of consumer behavior is some products will benefit from the mobile advertising experience, while others will not. In my opinion the type of product best suited for mobile online advertising media will not bring with it, over the long term, the type of revenue for media players like Facebook and Google, analysts expect.

To put it rather simply, products requiring a considered purchase by consumers won’t play well on mobile devices. So, if Google has been dethroned by Facebook, who really wins and who loses? It is still too early to tell.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


facebook Looks Like the Leader in Mobile Advertising

I recently wrote to this blog my opinion on the current market valuations of the “leaders” in the online advertising market. In summary, I think each of these businesses is over valued. So why would I care about just who is the leader in the mobile advertising market?

I am not a full time investor. I also offer marketing consulting services. Mobile advertising is a genuine promotional opportunity for my clients. So, from this perspective I retain a high degree of interest in the companies leading mobile advertising.

At present I think facebook is the leader in this market, while Google is playing some catch up. In a transcript of facebook’s Q1 2014 earnings report, Mark Zuckerberg prefaces facebook’s results with a strong statement, specifically on mobile: “We also reached new milestones as a mobile company, with more than one billion monthly actives on mobile and almost 55% of our daily actives only connecting on mobile.” (note: this quote is from the transcript as posted to the Seeking Alpha web site, not from the actual webcast)

So, if these monthly actives are compiled from the daily actives, then facebook is reaching 550 million monthly actives on mobile, only.

It’s difficult to directly compare these results to Google. I couldn’t find this level of granularity on “actives” in Google’s latest quarterly report. But Mr. Zuckerberg’s claim, “And mobile accounted for 59% of our advertising revenue [which, in turn, Mr. Zuckerberg claims grew 82% year-over-year]” (ibid) is much stronger than Nikesh Arora’s comments on mobile advertising for Google. In Google’s latest quarterly earnings report, Mr. Arora noted pricing resistance for Google’s customers considering mobile CPC advertising spends with Google.

facebook’s recent acquisition of WhatsApp promises to keep the momentum going. WhatsApp is a messaging application, complementing facebook’s own Messenger. Both of these applications are high use across mobile consumers.

Finally, facebook’s investment in Internet.org also looks like a strong driver for further momentum as the company continues to mine mobile consumers for more revenue. Mr. Zuckerberg explains: “[b]y partnering with mobile operators in the Philippines and Paraguay, [facebook] doubled the number of people using mobile data with our partners and brought almost three million more people onto the Internet.” (ibid)

Based on these points, together with facebook’s smart phone app and branded smart phone efforts, I’m comfortable calling facebook today’s leader in the online mobile advertising market.

Disclaimer: I have no position, at present, in facebook or Google

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Does facebook’s Graph Search really make a difference?

Investors have been buying up shares of facebook stock very aggressively over the last 2 months. Their bet hinges on two assumptions:

  • that facebook will continue to make a lot more money from advertising than had been the case in the past and
  • their visibility on mobile devices will continue to grow exponentially

A key component underlying both of these assumptions, as I see it, is a better method of connecting the tens of millions of personal and business pages on facebook. As long as each page is isolated from other pages, regardless of whether the reasoning is to offer tenants a privacy factor, or simply to leave each page in a standalone state for lack of technical tools to tie them all together, the result is the same: the facebook universe becomes much less attractive for marketers who will be no more capable of addressing all of it with a single set of solutions than was the case in the past.

The best way, of course, of connecting these pages is to index them, to build a complex taxonomy that realistically represents the entire facebook user community and then to enable a search method, to endow users with an ability to span pages in search of information.

The graph search component has been touted as the answer to this need. This search method is reported to offer users all of the capabilities I’ve described. But does it deliver? In my opinion it doesn’t. Here’s why:

  1. It is not available to users with business pages
  2. It does not permit users to search for concepts, to which they are not directly associated. For example, one of my clients maintains an online brand name including the name of a popular, common piece of software (Microsoft® SharePoint®). When I used the graph search feature from my personal facebook page, I successfully searched for people who like my client’s brand, but failed when I attempted to search for “people who like SharePoint”
  3. When I attempted to search for keywords likely related to facebook’s new hashtag feature, My queries did not produce results

Of course, I may be wrong. Perhaps I used the tool incorrectly. But from what I noted, I am not sold on how great the ad results will be for those people that really count in this equation — the advertisers.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


On Mobile Ad Sales and Their Importance to Facebook Growth

Since July 21, 2013, the price of Facebook shares has substantially increased. As of August 4, 2013, the price of these shares has finally crossed the share price on the day this company went public. But does this dramatic increase in share price signal a pivotal turn in the road for this business?

We don’t think so. In an article titled Facebook Crossed Its $38 IPO Price, Ms. Evelyn M. Rusli, who wrote the article, sums up the last 6 months history for the stock: “[s]ince hitting a nadir closing price of $17.73 on Sept. 4, Facebook’s stock has more than doubled in 10 months, powered by increasing ad sales and signs that Facebook is finding its footing on mobile devices.” Ms. Rusli quotes Chris Baggni of Turner Investments who comments on the punishment Facebook shares have received (up to this point, that is) since the IPO: “[I]t only made sense that if they did the right thing, they would get paid.”

We think Wall Street has impatiently pushed Facebook forward into the position of a business doing “the right thing” (to quote Chris Baggni), when it is far too soon to reach this conclusion. There are two sides to any advertising deal. Publishers print ads and sponsors pay for them. Chris Baggni comments on one side of the transaction, but no one, to date, has commented on the other (meaning from the perspective of the sponsors).

Certainly there was the notorious comment from General Motors, published coincidentally with the Facebook IPO, of their intention to discontinue advertising on “the social network.” But mobile sponsors are a different set. We have yet to hear any opinions as to what they are getting from their click ads on Facebook’s mobile feed.

Unless and until verifiable, positive results can be ascribed to the sponsors paying for the ads, we can’t add our own congratulations to Facebook for “doing things right.” We think investors will do well to maintain a highly vigilant attention to news on this topic. The fact is share prices will likely change dramatically, either way.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved