Investors buy up shares of prominent social media ISVs despite slowing user growth

2-Color-Design-Hi-Res-100px-widthPerhaps investors are changing their taste in prominent social media ISVs. Could the search for a telltale sign of promise have shifted from substantial growth in users to what may be a meaningful increase in revenue? From the after hours trading experience of LinkedIn and Twitter on February 5, 2015, it would appear to be the case.

Twitter and LinkedIn both reported solid revenue growth in the quarter ending December 31, 2014. But in the case of Twitter this plus was offset by anemic growth in the number of active users. Tiernan Ray wrote in Barrons: “[Twitter] said its monthly average users (MAUs) rose 20%, year over year, to 288 million from 284 million in the prior quarter. That was down from a rate of 23% growth in Q3. Of those MAUs, 80% were on mobile devices, about the same as the prior quarter.”

Hannah Kuchler of the Financial Times also remarked on management’s forward-looking guidance, “that was above the average analyst forecasts”.

Investors looked like they liked what they were hearing and reading. Twitter’s share price was up over 10% after hours.

LinkedIn shares were also up substantially, approximately 6% above the close. The quarterly earnings report included very similar highlights: substantial growth in revenue. But I found a different nugget: Maria Armental wrote in the Wall Street Journal:“The professional social network, which this month launched a localized version in simplified Chinese and traditional Chinese that has nearly doubled its Chinese member base to more than 8 million, said nearly 70% of total members come from outside the U.S.” Eight million users is certainly not a very big number for the country with the biggest population in the world. But LinkedIn is succeeding (as Apple is also succeeding, though in a much bigger way) in a market that continues to elude Microsoft and curiously enough Google (Android).

As a user I must attest to a much more promising experience from my efforts with Twitter than has been the case for how I have worked on my LinkedIn profile. I make a lot of use of Twitter’s Analytics. As my tweets have magnetized more impressions there has been, over time, a substantial increase in the page views of this blog. But perhaps the best result of all has been a growth in our following on Facebook. But I will write more on this point in a later post.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2015 All Rights Reserved


Global Smart Phone Market, at the Low End Trumps the High End for the US, Western Europe and Japan

On Friday, September 19, 2014, Curt Prins (a mobile strategist) posted his thoughts, which were distributed by LinkedIn, on the comparative impact of the launch of the Android One, in India to Apple’s recent, highly publicized debut of the iPhone 6. Prins titled his post Apple just lost the global smartphone war to Google. This writer has written several posts to this blog to voice similar opinions about whether or not all of the media accolades about Apple’s new smart phones really amounts to much, at all. My concern is whether or not Apple will be able to maintain its enormous market capitalization just on the appetite of consumers at the very high end of the market, or not.

But Prins is to be commended for supporting his contention with metrics. I didn’t take the time to put together supporting data for my position, choosing, rather, to articulate it based on my gut instinct about markets and where all the frivolity surrounding the September 9, launch of the new iPhones might be headed.

A quick look at the Android One home page exposes some additional information worth noting: Samsung is noticeably absent from the set of OEMs committed to manufacturing the devices. The same set does include several businesses located in India, including Karbonn, and LavaOne to name just two.

The features of the device can be reviewed on the Android One web page. The quad core processor, all day battery life, and dual SIMs are more typical of smart phones targeted to the high end of the market than the low end. So the $105.00 price Prins claims for the Android One represents a significant move, on the part of Google and its Android OEMs, to lower the cost of entry for emerging markets (with India being the first) to the world of mobile online computing. Further, the actual consumer costs Prins presents, in contrast, for the iPhone 6, etc., lend accuracy to my own comments, earlier this week, on the actual street price for the iPhone 6, “after the emperor has shed his clothes (meaning the carrier subsidies applied to create an artificial consumer price of $199.00)”. Is yet another Apple smart phone, unlocked, worth $649.00? After the rush of the last two weeks, I don’t think so.

The Android One is also some bad news for Microsoft’s efforts to introduce low cost smart phones to the same markets. Ditto for Blackberry. But the real story, likely in the making, is precisely the change in leadership for the smart phone industry Prins alludes to in his post.

Ira Michael Blonder

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


LinkedIn Reports Q2 2014 Results

On July 31, 2014, LinkedIn reported its results for the second quarter, 2014. All product segments reported substantial year-over-year sales growth.

The strength and importance of its “field sales channel” group is, perhaps, atypical of its peers in the Cloud, SaaS market, and worth some words. This business segment produced $319 Million for the quarter, approximately 60% of total revenue. These sales represented a 73% increase over the performance of the same group in Q1, 2013.

In contrast, LinkedIn’s online sales for Q2, 2014, totaled $215 Million, or a 52.8% increase over the performance of the same business segment in Q1, 2013.

So, one can conclude, at least according to these results, the “field sales” segment is growing faster than online sales for LinkedIn.

According to an article written by Ingrid Lunden, and published by the TechCrunch web site on May 2, 2013, titled LinkedIn Stock Dips 10% On Slowing Growth, Even As It Beats Q1 Estimates On Sales of $324.7M; EPS $0.45, things looked a bit different back in 2013.

Lunden provides a definition of “field sales”, as a business segment, along with a prediction for its likely future performance: “Field sales, involving actual people, are more costly for LinkedIn and so the company will likely be trying to increase its online sales in quarters ahead to improve earnings as growth slows.” (quoted from Lunden’s article as published on TechCrunch).

So it is likely safe to assume the “field sales” team at LinkedIn looks a lot like a typical outside sales force, which, LinkedIn, in contrast to many of its cloud, SaaS peers, opts to deploy to produce most of its sales.

As per our quote, above, Lunden opines LinkedIn will likely try to reduce the proportion of sales attributable to this business segment over time. But 16 mos later the revenue share of this business segment looks flat, at 60%, but is actually growing at a faster pace, year over year, than its online sales sibling. Is it safe to say LinkedIn is actually increasing its field sales efforts?

In this writer’s opinion, the answer to this question is likely “yes”, and for good reason. If LinkedIn is to maintain a very fast growth rate this field sales segment will likely be even more important to its overall health than is the current case. Sales of methods to promote recruitment requirements to Fortune 1000 businesses in the US, like the kind powering LinkedIn’s results for Q2 2014, are still complex and show no potential for change. At least not for the near-term future.

Ira Michael Blonder

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