Feb

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

Posted by Ira Michael Blonder | Categories Investors | Tagged barrons, cloud, facebook, financial times, linkedin, saas, social media, tiernan ray, twitter, wall street journal

Perhaps 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

Dec

ExactTarget and Socedo enable direct marketing in an online, otherwise inbound contact world

Posted by Ira Michael Blonder | Categories Outbound Social Media | Tagged direct marketing, exacttarget, fire hose, newsfeeds, outbound marketing, socedo, social media

Direct marketers feeling lonely in 2014’s online world can take heart. ExactTarget and Socedo have the tools required to potentially transform an outbound strategy into an online, social media winner.

I’ve been using Socedo for about a month, and recently sat through a couple of ExactTarget product presentations. In my opinion, either of these tools provide direct marketing professionals with methods of proactively engaging with prospects online. The opportunity for this type of, hopefully, person-to-person interaction (as opposed to person to bot interaction), in a world of online product promotion otherwise dominated by inbound marketing solutions (like HubSpot, Pardot, Marketo), is no small feat. Certainly the prominence of social media, including Facebook, Twitter, LinkedIn, (along with the information-heavy alerts/newsfeeds they each provide) near the top of the heap of opportunities, online, for personal engagement, contributes to the promise of these tools. But readers are advised not to get sidetracked: the tools themselves are definitely worth some study.

Both tools can be used to identify online content matching patterns, including keywords, prospect profiles, etc. The ExactTarget demonstration I attended included identification and aggregation of online content matching pattern targets in real time. The presentation method included a set of browser widgets, which a user can run, ad hoc, by simply refreshing a browser window.

Socedo and ExactTarget each include a workflow engine. So some of the task of engaging with prospects can be automated. Socedo’s workflow is complex and includes a component which can be configured with a set of criteria the solution will then use to analyze targets prior to presenting them as “leads”. The brief glimpse I had of ExactTarget’s workflow leads me to assume their automation engine is more useful for routing information along to designated contacts within a marketing team, than it would be as a means of placing the whole outbound engagement process on auto pilot (which is where Socedo looks to be going with their processes).

As far as scope is concerned, ExactTarget presents online direct marketers with a panoramic view of just about all of the social media venues they could imagine. In contrast, Socedo is limited (at least at present) to the Twitter fire hose.

Bottom line: early stage ISVs after a method of neutralizing the “passivity potential” of inbound marketing should take a look at one, or better yet, both of these tools. Feel free to contact me for more of my thoughts on either product.

Ira Michael Blonder

Nov

Marketers look to be succeeding with customer data and have pressing needs to consume more

Posted by Ira Michael Blonder | Categories Social Media | Tagged consumer non durable goods, facebook, ibm, online chatter, online marketing, social media, unstructured data

During Facebook’s Q3 2014 Earnings Conference Call, Mark Zuckerberg, CEO reported $3.2 Billion gross revenue for the quarter, and a 64% year over year increase in their advertising business. In contrast, Google, as Patrick Pichette, Senior Vice President and CFO reported during its Q3 2014 Earnings Conference Call, experienced merely a 20% year over year increase in total revenue from its Sites business and only a 9% year over year increase in its Network revenue.

So it looks like a fair question to ask what’s up at Facebook? From a teaser summary this writer found on the web site for MIT’s Sloan Review, titled How Facebook is Delivering Personalization on a Whole New Scale, Blake Chandlee, Vice President of Global Partnerships at Facebook pointed to customer data as a very valuable asset Facebook has, apparently, learned to monetize much more successfully than Google.

Customer Data includes “[o]nline [c]hatter” (quoted from another short summary on the MIT Sloan web site, this one titled “Online Chatter is Big Data Gold”. The short piece was written by Leslie Brokaw and published online on October 27, 2014). Online Chatter is the stuff users produce when they post to alerts, interact with friends, etc on Facebook. All of this takes the form of unstructured data, which, in turn, has to be manipulated and given shape with tools developed for the big data trend.

The tools are not the subject of this post. Rather, what this writer finds to be important is how Facebook’s reported growth is emblematic of the success its customers have achieved using this “online chatter” to their advantage. Unstructured data, precisely as the MIT Sloan precis presents it, is becoming a very valuable asset.

One can argue this trend is not new. As far back as year ago, ostensible Facebook competitors AT&T and Verizon were said to be jumping into the same market (interested readers may want to check out an online article titled AT&T joins Verizon, Facebook in selling customer data). But not all customer data is the same. It isn’t likely either Verizon, or AT&T can produce the same treasure chest of “online chatter” to rival Facebook.

But Twitter certainly can and appears to be moving in the right direction with an announced first partnership with IBM. We just published a post to this blog yesterday on this announcement.

Google certainly has an enormous repository of a type of unstructured data in its GMail service. Assuming they have access to a comparable capability to anonymize the data, then, one might argue, they are prepared to go toe-to-toe with Facebook. But the contrasting sales growth numbers from the two quarterly reports mentioned at the top of this post point to a looming problem for Google — email just doesn’t seem to be producing as useful a set of customer data. How else to interpret the differences in growth? Pity Google + is not doing better. Google + failure is a big deal and likely to emerge as a major obstacle Google will need to fix.

Ira Michael Blonder

Aug

Telemarketing Continues to Provide Very Strong Returns Against Investment As Compared to eMail, or Social Media Approaches

Posted by Ira Michael Blonder | Categories Telemarketing | Tagged direct marketing, lead generation, social media, telemarketing, teleprospecting

Despite an enormous amount of material arguing to the contrary, in this writer’s opinion, telemarketing continues to provide the best return on investment of any sales lead development approach. Recent conversations with personnel from a number of prominent ISVs (active in markets related to Microsoft’s Office platform) indicate these organizations share the same opinion.

Perhaps it can still be argued online product promotion (web content in all its forms — online press releases, web site editorial content, blog articles, status updates to prominent social media venues, etc) is, nevertheless, the best method of driving prospect interest in a product. Further, it may be the case the best method of nurturing prospects through a series of interactions leading up to a purchase interest in a specific solution is to periodically contact these people via email messages. But, ultimately, as these leads transform into consumers with a defined appetite for a specific product, the best method of engagement available to ISVs remains telephone contact, meaning telemarketing or teleprospecting.

To provide some sense of how much more effective telephone contact can prove to be, at the right time, we refer to some work we recently undertook for one of our long standing clients. This ISV had recently exhibited at 3 prominent trade shows for its market. The initial effort to engage with booth visitors, after each event, took the form of a comparatively impersonal broad email message sent to each visitor, in HTML format. In each case the level of incoming activity from booth visitors, post receipt of this email message, was weak. Further, the follow up efforts we undertook immediately after the broad HTML email had been received by booth visitors, which took the form of a personalized text email message, produced equally anemic results.

In contrast, a serious effort to reach out to each booth visitor via a telephone call exposed healthy interest in our client’s solution. Approximately 5% of visitors contacted even expressed some serious interest in purchasing the solution albeit at a later point in time (for example, the next fiscal year).

Bottom line: telemarketing (and, by extension, cold calling) should play a prominent role in any ISVs lead generation planning.

Ira Michael Blonder

Aug

Twitter and Other Cloud Businesses Benefit from Investor Enthusiasm

Posted by Ira Michael Blonder | Categories Cloud | Tagged barrons, cloud, gaap, non-gaap, online marketing, sandra ward, social media, twitter

Twitter and its Cloud business peers are benefiting from highly enthusiastic investor sentiment. Investors appear disinterested in a widening distance between GAAP and non GAAP earnings results for these businesses.

Sandra Ward illustrated some of this disconnect last Saturday, in an article published in Barron’s Online titled Twitter’s Results: Less Than Meets the Eye. She writes: “Using generally accepted accounting principles, or GAAP, Twitter (ticker: TWTR) lost 24 cents a share in the second quarter, but it played up a non-GAAP measure that showed a two-cent profit, versus the consensus of a penny loss.”

As of the date of this blog post, August 6, 2014, a loss of $.24 per share for Twitter, amounts to $141.585 Million, USDs. This loss is actually 45.38% of all of the revenue ($312 Million, USDs) Twitter generated for the quarter. One would think investors would care about a company losing almost a dollar of every two it brought in for the quarter, but they appear not to have cared. By the time trading resumed on Monday, August 4, Twitter closed at $43.45, a mere 1% below its closing price on Friday, August 1, 2014.

While the primary driver of investor appetite for Twitter still alludes this writer, it is, perhaps, safe to assume a lot of momentum can be attributed to investor satisfaction with the non GAAP presentation of the same quarter’s results, namely the mirage of the 2 cent profit Ward notes in her article. Perhaps investors are now convinced management has “gotten the message” and subsequent quarters will continue to show profits, albeit on a non GAAP basis. Hasn’t this been the case with Facebook, which is often characterized as a direct competitor to Twitter? After all, quarter after quarter, Facebook has reported profits over the last couple of years.

What is likely to be of greater concern than this excessive investor enthusiasm in this social media business bleeding cash, (which has now opted to highlight its results, as expressed according to non GAAP) is their complacency. Maintaining confidence this business “will eventually get it right”, simply as the result of throwing cash at its problems, doesn’t make sense to this writer. When one looks at the overall market for these types of publicly traded businesses, one likely will conclude the whole sector is simply too inflated, at least at present.

Disclaimer: I am neither invested in Twitter, Facebook, nor any other social media cloud business at this time.

Ira Michael Blonder

Jun

Gallup Poll Results on U.S. Consumer Buying Habits Support a Skeptical View of Social Media Business Valuations

Posted by Ira Michael Blonder | Categories Social Media | Tagged facebook, gallup, google plus, online marketing, social media, state of the american consumer, twitter

Public companies in the Social Media business (facebook, Twitter, LinkedIn, Google, etc.) have all implemented global business strategies. Nevertheless, some substantial proportion of the business plans for each of these businesses, over the next near term, depend on sales to advertisers for the U.S. consumer markets. But the results of a Gallop® report on the buying habits of U.S. Consumers, published on June 23, 2014 may point to excessively optimistic revenue forecasts in these plans, and, in turn, even more inflated business valuations than previously appeared to be the case.

Here are some important points coming out of this report:

62% of a cross section of respondents to the survey reported Social Media had “No influence at all” on their purchasing decisions. Two caveats on this statement should be noted: 1) the numbers of respondents from each of four groups — “Millennials”, “Generation X”, “Baby Boomers”, “Traditionalists” — are not included in the article about the report, which is now widely available to the public (a link to the article is included in this post) and 2) despite a landing web page for the report, itself, the landing page does not offer the visitor any access to the report, so it is not possible to explore the report, at least at the time this post is being written
But this percentage drops to 48% of “Millennials” who responded to this survey. “Millennials” are defined as people born after 1980.
Only 5% of a cross section of respondents reported social media exerted “A great deal of influence” over their purchasing decisions. The percentage rises by 40%, to 7% when only responses from “Millennials” are considered.

In Facebook’s 10Q filing with the U.S. SEC, dated April 25, 2014, for the three months ended March 31, 2014, 45% of total global business revenue for the quarter was reported for the United States market, alone. The sources of revenue are clearly defined in this report as follows: “We generate substantially all of our revenue from advertising and from fees associated with our Payments infrastructure that enables users to purchase virtual and digital goods from our developers with applications on the Facebook website.”

Given the claimed results included in Gallup’s report, it might make a lot of sense for investors to recalibrate the cost of an investment in Facebook. In the opinion of this writer Facebook is grossly overvalued, as are most of its peers in this segment. Online advertising is simply better suited to the promotion of tangible items, or intangibles highly dependent on tangible factors, (for example, geographical location) than it is for purely intangible offers.

Since the range of items suitable for online promotion is, therefore, limited, the extent to which valuations have been inflated is even more extreme than this writer previously assumed to the be case.

Disclaimer: I have no current investment in any of the businesses mentioned in this post

Ira Michael Blonder

May

A Direct Comparison Between facebook and Twitter May Not Be Useful

Posted by Ira Michael Blonder | Categories Cloud | Tagged cloud, facebook, instagram, messenger, social media, twitter

Analysts often compare facebook to Twitter. But does such a comparison add real value to our understanding of either business, or their industry?

During facebook’s most recent quarterly earnings conference call, Mark Zuckerberg reported “Messenger and Instagram both reached 200 million monthly actives this quarter”. Turning to Twitter’s most recent quarterly earnings report, one finds a claim of 250 million monthly active users. So does it make sense to conclude facebook’s two components, combined, have a far wider reach than Twitter, itself?

I don’t think so. People consume facebook’s Messenger and/or Instagram features for an entirely different set of requirements, I would argue, than is the case for Twitter. Messenger, Instagram, and even What’s App are all targeted to individuals, without the public reach implicit to Twitter.

An important foundation of Twitter’s broader public reach, of course, is the extensive search capability included with Twitter. This capability is not available with either of facebook’s components. Much has been made about the difficulties businesses, and even individuals experience achieving exposure across a wide range of facebook’s consumers. Perhaps the intention is to predicate this exposure on ad purchases. Nevertheless, it is not possible to achieve the same reach with facebook Messenger, for example, as is the case for Twitter. Further, facebook advertisers are not likely to consider Messenger, as a medium, for the same reasons they would consider Twitter.

The challenge for Twitter management, as I see it, is how to craft this reach into a commodity advertisers will be likely to purchase. In comparison, the challenge of maintaining a meteoric growth rate for new viewers to consume Twitter’s content is a less important objective.

But the analyst community is focusing more on the fact Twitter is approaching a viewer plateau, than the steps management is taking to monetize their content. The end result is not much progress on the revenue front and a lot of spurious attention to expanding Twitter’s reach.

Ira Michael Blonder

Nov

How Will Social Media Evolve Beyond Facebook?

Posted by Ira Michael Blonder | Categories Social Media | Tagged cloud, facebook, social media

In an article published on the New York Times website on Monday, November 18, 2013, titled “Facebook, Still Dominant, Strives to Keep Cachet”, Jenna Wortham, Vindu Goel and Nicole Perlroth report on some strategic cracks in this business’ barriers to entry from competitors. The most dangerous of these include:

a Facebook App developer community less inclined to build new Facebook analytics hooks into their systems
an apparent popular dedication, on the part of early stage businesses in the social media sector, to look “long and hard” at any acquisition offers from Facebook. The most recent example of this attitude is SnapChat’s decision not to accept an acquisition offer from Facebook
apparent waning interest in Facebook on the part of a very important segment of its consumers — young people of high school age

So is there room for social media to evolve beyond Facebook? If yes, then how?

Certainly Facebook, or a “next generation” Facebook-like service could do a better job of balancing the privacy benefit many of its core consumers value, with the inevitable access advertisers, and business consumers, will require to the larger Facebook “community” of consumers.

Facebook’s efforts to retain consumers, while providing advertisers with greater accessibility to the wider Facebook user community with, for example, its own version of Twitter’s hashtag, have been clumsy. I have a business page on Facebook. I’ve made consistent use of the hashtag feature since it was debuted, but I’m not seeing any positive results from it. But it would be hard for me to see these results, anyways, as Facebook doesn’t provide any analytic data, whatsoever, until a site can magnetize 30 “likes”.

A feature like Google’s Analytics product, which is free to anyone with a Google account and a website, would certainly be welcome, as it would be useful, to business consumers, as they try to improve their exposure to the universe of Facebook consumers in order to collect the required 30 “likes”.

Ira Michael Blonder

Oct

New Publication Policies Implemented by Prominent Online Social Media Test Consumer Commitment

Posted by Ira Michael Blonder | Categories Social Media | Tagged click advertising, online marketing, social media

On Thursday, October 10, 2013, Google published its plan to provide its advertisers with an opportunity to include consumer testimonials in their ads. I recommend reading this article by Joshua Brustein as published in BloombergBusinessWeek, Google Is Going to Include Your Face in Its New Ads, to get an idea of where they plan to take this new notion of just how far they can go with your content if you opt to publish it on one of their products.

Broadly speaking there’s little new about this announcement. Advertisers routinely include real life success stories and other types of testimonials in campaigns. But what is very new about the announcement is the treasure trove of endorsements Google plans on exposing to its advertisers for their use. All of the blog posts, alerts, status updates, and, perhaps, even emails produced by Google consumers are now fair game for these advertisers.

This decision is not likely to be well received by Google consumers. When this tactic is put together with very similar announcements from facebook (and, I believe, LinkedIn, as well), the average consumer of these services should be able to clearly see the boundary, perhaps for a first time, between online social media with attractive offers, versus online social media to be avoided.

The catalyst for these new positions, in all likelihood, is yet another round of efforts by Google, and other online social media hosts hungry for profits, and revenue growth, to monetize the enormous amount of content published by consumers.

Click advertising efforts have not been producing the profits of the past. Plans like the one Google announced will likely provide them with a new set of products they can offer to online advertisers at a premium, over and above normal click ad rates. The plan also serves as a tacit acknowledgement that more of the market for click advertising opportunities is after a method building brand awareness, and market exposure, than in the past. The “bread and butter” segment of these click advertisers used to be after an opportunity to sell products and services directly to the consumer. But those days are long gone.

These tactics may create an opportunity for paid media to offer completely private venues where consumers of these services can publish, in privacy. It’s hard to envision a large proportion of social media publishers simply accepting these new policies and continuing “business as usual.” It’ll be interesting to observe just how consumers actually react to these new tactics.

Ira Michael Blonder

Oct

Does facebook’s Graph Search really make a difference?

Posted by Ira Michael Blonder | Categories mobile click advertising | Tagged facebook, online promotion, social media

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:

It is not available to users with business pages
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”
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