19
Feb

Facebook adds to its success as a leading medium for online advertisers

2-Color-Design-Hi-Res-100px-widthA couple of articles published recently point to further gains by Facebook as a leader in the media market for online advertisers. The first of these, titled Why Google Should Fear Facebook’s New Product Ads, which was written by Garrett Stone and published on the AdWeek web site, reports on some comments from Tamara Gaffney, who is a Principal Analyst at Adobe Digital Index, about Facebook’s decision to debut a product ad offer.

The key takeaway, for me, in Gaffney’s comments was the ranking she gave to Facebook’s analytics: “Facebook has the best targeting capabilities”. If this is truly the case, then it should not be much of a stretch (for anyone interested in just how organizations of all types can capture the highest value from online content publishing) to see the diamonds to be had from online chatter. This kind of press should provide further incentive to stakeholders in enterprise technology to work harder to refine so-called “big data” methods of containing, and then analyzing both text and binary data.

The second article appeared in Direct Marketing News. The title of this one is Salesforce Becomes Facebook Marketing Partner and is written by Al Urbanski, a Senior Editor for the publication. The significance of a decision of this magnitude by Salesforce should not be underestimated. If they see a much better opportunity mining online chatter from Facebook pages (in complete conformance with what look to be very high standards at Facebook Marketing Partners) and leveraging the other features of the program, at the same time, then Facebook is likely onto something big.

One more point on the comments made by Gaffney from Adobe Digital Index: If Facebook truly “has the best targeting capabilities”, then the social media architecture underpinning its online presentation is very likely to be a key contributor to its success. Somehow Google + is not hitting the mark. This lesson is not likely to be lost, once again, on enterprise computing stakeholders looking to incorporate “big data” and unstructured text data into the information they target for analysis.

Perhaps another entity listening to these messages is Facebook, itself. Why else would they throw substantial resources behind their own Facebook at Work, enterprise social computing effort?

Ira Michael Blonder

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

15
Jan

Just how accurate are advertising predictions produced by machine learning systems?

2-Color-Design-Hi-Res-100px-widthThanks to Mikio Braun, who on Thursday, January 2015 published an article on the InfoQ website. Braun’s article includes mention of a Google acknowledgement about the role played by machine learning (also known, at least in part, as data processing by algorithms) as a predictive tool in its ad placement technology for its click ad business. Readers interested in this topic should read Braun’s article, which is titled Google on the Technical Debt of Machine Learning.

I have written about the inaccuracy of click advertising in earlier posts to this blog. To quickly summarize my opinion on this topic, I found the systemic tendency towards poor ad placement to be especially difficult to overcome when the items to be promoted provide subjective, intangible benefit. So gaining a perspective on just how much of the ad placement technology behind Google Adwords and, in all likelihood, its direct competitors (principally Microsoft’s Bing advertising system), as Braun points out in this short article is very helpful.

What is also very helpful in Braun’s article is the manner in which the Google researchers (Braun’s article is really a news report on a presentation at a recent conference event held in Montreal, the Software Engineering for Machine Learning workshop, part of the annual Neural Information Processing Systems, NIPS, conference held in Montreal) shed light on the precariousness of proper performance for machine learning systems, in this (online advertising) context, given the effect they have on other related computer processes. These researchers make clear how the basic assumptions powering Neural Networks can actually adversely affect these siblings, and, thereby, produce erroneous results along with very little value to people depending on them. Readers should note this conclusion is my own, and not a conclusion expressed anywhere in Braun’s article.

From Braun’s article, and the technical précis of a research paper on the algorithmic process behind machine learning, which was also published by Google researchers, online advertisers should be careful to set realistic expectations about paid placements. Perhaps it will make sense to horizontally structure these campaigns, with a panoramic reach wherever possible, if they are to produce any meaningful results.

Ira Michael Blonder

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

8
Aug

PPC Online Advertising May No Longer be the Solution for Products Targeted at Specific Market Niches

Back in the late 1990s, a number of advertising agencies (Poppe Tyson and ModemMedia being just two) extolled online marketing as uniquely capable of providing marketers with a method to truly personalize presentations of product promotional information for highly specific market segments. Poppe Tyson’s promotional literature talked about something called “the considered purchase”, meaning a type of lengthy consideration a certain cut of buyers will undertake to carefully study potential solutions to a burning need, and why online marketing was the perfect venue to provide these prospects with information tailored, specifically, to appeal to them, and them alone. The epitome of this notion is the concept of “Marketing 1to1”, which Don Peppers and Martha Rogers, Ph.D, coined around the same time.

But now, in 2014, all of these notions may amount to little more than hyperbole, at least if an article titled How Facebook Sold You Krill Oil is credible. The article recounts the efforts of a Mr. Joao Rodrigues to determine if a marketing campaign on Facebook, which he has been considering for his product, something called Mega Red Fish Oil, would ” . . . help him find people who were already buying fish oil or other products that suggested they were concerned about the health of their hearts, and perhaps persuade them to switch to his brand.” (quoted directly from Mr. Goel’s article, as published on the New York Times web site)

As I read it, Mr. Rodrigues’ question is never directly answered by the team from Facebook, or the agency recommending the Facebook network of web sites as the perfect venue for Mr. Rodrigues to obtain the reach he required. But implicit to the rest of the article is the notion he cannot obtain those results, at least not through promoting his product on Facebook.

All of this should certainly be a big deal for anyone thinking about an investment in Facebook, or in any of its competitors. The enormous market capitalization each of these companies has achieved is built upon a set of assumptions likely to include a conviction they are uniquely capable of delivering a winning solution to Mr. Rodrigues’ requirement. If they are not able to deliver, as expected, and some significant portion of potential advertisers begin to realize this limitation, and opt for other methods, this same market capitalization may deflate very quickly.

Disclaimer: I have no investment in Facebook, nor in any of its peers

Ira Michael Blonder

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

13
May

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

18
Apr

Some Thoughts on Google’s Growth Rates as Reported for Q1, 2014

During the Google, Q1, 2014 Earnings Conference Call, Patrick Pichette, CFO, presented a set of headlines on business performance:

  • Google’s revenue grew by 19% year over year to $15.4 Billion, which was down 2%, quarter over quarter.
  • Google Sites revenue was up by 21% year over year, to $10.5 Billion.
  • Network revenue grew 4%, to $3.4 billion.
  • Other business revenue grew by 48%, to $1.6 Billion. In this category, Chromecast sales were a strong performer

Pichette provided his own judgement of the quality of business performance for the first quarter. Interspersed among his remarks were a lot of “good”, “very strong”, adjectives. But are these results typical of a still early stage ISV? Or are they, actually, signs of a maturing ISV struggling to retain the early shine of meteoric growth results.

Perhaps one can argue the performance of the “Other Business” group still retains the growth characteristics of an early stage ISV, but how many Chromecasts will Google need to sell (with an MSRP of $35.00 per Chromecast) to power this vertical to some sort of meaningful stature as a revenue producer for the company? In contrast, a very mature ISV, Microsoft®, recently reported meteoric results for Office 365, a Cloud, SaaS offer requiring no hardware, shipping, etc.

It may be time for analysts and investors to close the book on the question and just treat Google, going forward, as a mature ISV. A check of the GOOGL Class A stock P/E ratio on Thursday, April 17, 2014, reveals near parity with MSFT: GOOGL carries a P/E Ratio for trailing 12 months of 14.99, just 2% higher than MSFT at 14.68 for trailing 12 months.

Despite the recalibration of Google’s stock prices, analysts continue to make a big deal of the pace at which revenue growth has decelerated, perhaps more from a concern over the actual forward potential of the entire online advertising market (of which Google is clearly the leader) than anything else. This concern makes sense given the comparatively poor performance of the display network vs. Google Sites businesses.

If the concern is justified, then one would think the valuations of online businesses like Yahoo, Twitter, and even Facebook may soon experience versions of the same recalibration to better align them with their more mature ISV competitors.

Disclaimer: I’m long MSFT and have no current position in Google, Twitter, Facebook, or Yahoo

Ira Michael Blonder

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

14
Apr

IBM Acquires Silverpop — Just How Big a Market is Online Product Promotion?

On April 10, 2014, IBM® published a press release about its intention to acquire Silverpop. Perhaps it will be useful for readers to consider the importance of this acquisition from a couple of different angles:

  1. How, if it all, could Silverpop leverage other components of IBM to deliver substantial return on this investment?
  2. How big a market are we talking about when we consider Silverpop’s niche?

1) Does Silverpop’s stated business model promise to leverage other IBM components? and does this synergy look like a promising, substantial, net positive contributor to IBM’s bottom line?

The answer to the first question is “yes”:

  • Silverpop presents what I would read as the core of its market message in a short video available for viewing on its web site. This video (which speaks to the efforts of marketing communications teams within a larger business) contrasts the telltale emblems of a mediocre marketing campaign (without Silverpop), to a personalized campaign, targeted to prospects (presumably with Silverpop’s software). IBM’s Watson could be the perfect complement for Silverpop, promising to provide a much higher level of personalization than could be achieved via other methods.
  • Cognos, and other pieces of IBM’s data analytics offer can add more value to Silverpop as clients look for metrics on campaign performance, and more
  • finally, a quick glance at Silverpop’s client list reveals a number of firms where IBM’s consulting teams are likely to be already established, and trusted providers.

Should IBM provide Watson and its data analytics tools as a backend to Silverpop, then corporate marketing communications should be able to produce, over time, a number of useful case studies, success stories, etc. illustrating how this backend played an essential role in the effort.

How big is Silverpop’s market?

The answer to this question is, in my opinion, “not big enough”. I point to an article written by Jack Hough, and published on the Barrons web site late last month: Google, Facebook, Twitter: Not Enough Dollars to Go Around. Keep in mind: Silverpop’s niche is a subset of the online advertising market, and, necessarily, of a much smaller size. Further, Silverpop has a couple of competitors in its market, Marketo and Oracle’s Eloqua. So, even if one assumes Silverpop emerges as the market leader, the actual contribution to IBM’s broad revenue performance may not be substantial.

Bottom Line

Nevertheless, IBM needs methods of demonstrating the power of Watson and its data analytics tools to the much larger enterprise business market for business intelligence solutions. The Silverpop acquisition promises to give them another show piece for this effort.

Disclaimer: I have neither a position in IBM, nor any verified statistics to substantiate claims I make in this post

Ira Michael Blonder

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

14
Nov

Is Twitter Another Search Engine Like Google?

In this second of two posts built around an article by Alexander Eule, “How Twitter Might Actually Be Worth $31 Billion”, which was published on November 9, 2013 on barrons.com, I’ll take a closer look at one of the assumptions at the core of Eule’s argument — Twitter is competing in Google’s market.

In his article Eule states “In fact, at current prices, they assume that Twitter’s nascent Internet ad strategy will be even more effective than the groundbreaking model created by Google . . . ” I disagree. As I wrote in the prior post to this blog, Twitter is not competing in Google’s business. The public can’t find anything on Twitter. The same restrictions hold true for facebook. Without a facebook account it’s still very difficult to access content published on facebook. So Twitter is much more a competitor to facebook than it is to Google, or even to LinkedIn.

So all of the financial projections included in this article (most notable of these being the $18 Billion “operating” profit on $47 Billion in sales, presumably, for the current fiscal year, which Eule claims for Google) aren’t relevant, at least as I see it, to Twitter. Google is available to the public for unlimited viewing of content. It doesn’t have a facebook-like product, despite a lot of effort to craft Google Plus into one.

Neither do I find the products Google offers to be comparable to Twitter’s online real estate offer. Google is in an ever growing number of horizontally managed businesses. Increasingly, quarter after quarter, the real Google revenue drivers can be elusive. Are they making money from click advertising, only, or is Motorola Mobility, or Chromebook hardware contributing substantially to their bottom line? Further, if Google’s Q3 2013 Quarterly Earnings Report can provide us with useful information about the true profitability of their business, then I don’t see how Eule gets to the $18 Billion figure. GAAP net income for the quarter was $2.970 Billion, a little over 40% of Microsoft’s total ($6.4 Billion) net income for the comparable business period (Q1 FY 2014).

In my opinion Twitter, like facebook, will face some daunting challenges monetizing its precious online real estate to its real customers — the 230 million “Twitterers”. If Google is posited as being in some enviable position, I prefer the Microsoft story.

Ira Michael Blonder

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

13
Nov

What Does Twitter Sell and Who Buys Their Products?

On Thursday, November 7, 2013, Twitter became a publicly traded business. The opening price for the TWTR stock, set on November 6, 2013, the day before the IPO, was $26.00 per share. TWTR closed the first day of trading at $44.90, 73% above the opening price. Based on the float, meaning the number of share issued on Twitter’s first trading day, the book value of the business is approx $25 Billion.

The Barrons November 11, 2013 edition includes an article written by Alexander Eule, “How Twitter Might Actually be Worth $31 Billion”. Eule states “We now know what the broad market is willing to pay for a company with an unpaid workforce of 230 million people that creates (sometimes) compelling content for a global audience”.

But do we know anymore about what they sell, and what their target market looks like? From Eule’s article, it’s safe to conclude “no, we don’t”. So how do we get to some useful understanding about the product marketing strategy for this business?

Eule’s 230 million people, in my opinion, are consumers of Twitter’s product, and not an “unpaid workforce” for the company. They buy the Twitter product, which for 99+% of them is absolutely free of charge. These 230 million “Twitterers” can build a page, at no charge, on the Twitter website. As long as they respect Twitter’s publishing guidelines, they can publish as frequently as they want to their page, “retweet”, reply to “tweets”, etc. Twitter’s product is a spot on one of the most highly trafficked websites on the Internet. The product marketing opportunity on Twitter’s horizon, in my opinion, is to scale the types of space offered to these 230 million (and, hopefully, growing) people, and to build a method of monetizing their consumption of the product.

The public Eule assumes, meaning all the folks reading the content published by Twitter’s unpaid 230 million employees, do not exist. In fact, the general public can’t review anything on Twitter. Reading content on Twitter requires a Twitter account. So if one tries to extrapolate a Google-like click ad experience for the public on Twitter (which Eule’s article suggests to be the case), one is not likely to succeed. The real comparison is with facebook, which has a very similar accessibility requirement.

In the next post to this blog I’ll dig a bit deeper into Alexander Eule’s article.

Ira Michael Blonder

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