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


When Different Words Mean Different Things to Different Writers, Readers Feel the Pain

On Friday, September 12, 2014, the Wall Street Journal featured an article by Peter Thiel on competition and monopolies. The Journal supported the article with a video interview with Thiel about his notion.

In the second paragraph of Thiel’s article he contrasts the financial performance of Google, in the year 2012, to the performance of the entire airline industry: “But in 2012, when the average airfare each way was $178, the airlines made only 37 cents per passenger trip. Compare them to Google, which creates less value but captures far more.” But what does “value” mean, and for whom? Unfortunately Thiel includes neither a definition of “value” nor much of any description, whatsoever, of just how Google “captures far more”.

One may argue Thiel’s failure to support his thesis with these points of detail is trivial. But, in this writer’s opinion, the lack of detail is, thematically, consistent with the rest of the “atmosphere” of this article, and, actually, a very important indicator of some “snake oil in the wine”. So neglecting to include any notion of what “value” means, Thiel proceeds further, and presents the core of his thesis: businesses should make best efforts to achieve monopolies in their industries, and avoid reacting to competitive pressure as much as possible.

Leaving aside, for a moment, the decidedly non free market capitalism at the core of an argument for monopolies, this writer would prefer to focus back on Thiel’s construct of Google vs the airlines as the preferred method of demonstrating, ultimately, a lack of connection between building a business plan to prosper by delivering value to a market, rather than building a business plan to prosper through some other means.

We are choosing to refer to the method Thiel evidently presumes Google implemented to make “100 times the airline industry profit margin that year [2012]” as simply “some other means” for a reason. In this writer’s opinion, there is no other way for a business to prosper than by delivering “value”. Google made a lot more profit than the entire airline industry because customers paid them, proportionately, more money for a product much less costly to develop than the cost of flying a jet plane, with hundreds of people on board, anywhere. They paid more money because they thought they received something more valuable from the product purchased from Google. They would not have paid this price had they thought otherwise.

Further, we would argue, airlines have failed to deliver any more value to customers other than a lowest possible price of a flight at a most convenient time because of market pressure, where consumers have come to expect essentially the same product to be delivered from any number of sources. Flights are, for better or worse, commodities. Back in 2012, click ads on Google were not.

We would recommend readers read Thiel’s article very closely and be wary of semantic stretches.

Ira Michael Blonder

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


Has Microsoft Alerted Media As To Its Target Market And Its Niche for Windows Phone?

A recent review of a new HTC One, this one running the Windows Phone 8.1 O/S, points to more work for Microsoft Public Relations (PR).

The title of this review is HTC One for Windows: Another Great Phone You Probably Won’t Buy. The writer is Joanna Stern, and the publication is the online Wall Street Journal.

Readers unable to read the entire article are encouraged to watch the 3 minute video embedded in the article. Why the writer would choose Time Square as a fair location to collect a sample of public opinion as to the popularity of Windows Phone (or the lack of it) eludes this writer. But, to give Stern the benefit of the doubt, perhaps someone in Microsoft’s PR team has identified mass market smart phone consumers as the target market for the Windows Phone 8.1 O/S.

If this is the case (and one must ask, with so many of these “reviews” producing nothing more positive than “it’s a great phone, but no one will buy it”, over and over again) then someone at Microsoft should take corrective action to ensure PR communicates the right message to the media.

In this writer’s opinion, the target market for a comparatively expensive smart phone like the HTC One, with the Windows 8.1 O/S, is enterprise business users (inclusive of the “fringe” created by the consumerization of IT and the BYOD structures enterprise businesses have constructed to support it). After all, what’s a tourist in Times Square going to do with Office? Office 365? Enterprise Search (for which Cortana will play a big role)? Yammer?

One can argue these consumers will be attracted to the camera on the phone, but the camera is not one of the “mission critical” features of this smart phone. The Apps we just mentioned, and to name but one more, Remote Desktop Connection, make up the solution for the burning need this target market has for the Windows Phone. In this writer’s opinion, making the rounds of mass media every time a new feature is added to the Windows Phone O/S, or even to inform them about the debut of the Surface Pro 3, only serves to render Microsoft’s products something less than what they ought to be.

Ira Michael Blonder

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


Does It Make Sense to Ignore Consumer Interest When Designing Technology Products?

Amazon débuted yet another smart phone targeted to the broad consumer market, this one named the “Fire Phone”, in mid June 2014. In an interview with Greg Bensinger, which was published by the Wall Street Journal, titled Amazon’s Bezos on How the Fire Phone Is Like Chocolate Ice Cream, Jeff Bezos, Amazon’s CEO expressed his opinion on whether ISVs should listen to consumers, and, subsequently, produce products, within their reach, to satisfy consumer needs.

This nugget popped up in the middle of Mr. Bezos’ reply to a broad question posed by Mr. Bensinger, the core of which amounted to “why are you sill diversifying products, horizontally, with a hardware device?”

Bezos replied as follows: “It’s easy to do something unique if you’re not constraining yourself by customer interest.” This short sentence of fourteen words nicely sums up several variations on what this writer calls “engineering driven product marketing”.

In the 1980s this approach provided the operating juice behind “solution without a problem” products.

In the first decade of this century (and even, perhaps, to this day) this notion provided the core of “ready, fire, aim” product design for ISVs, who, unfortunately, confused the intended benefit of this product development method (which is to reduce time to market, while insulating a very early stage business from a poorly timed decision to deeply commit to a wrong product notion), with a laissez-faire product design mandate.

Mr. Bezos’s point, in the opinion of this writer, should not be taken as a recommended product marketing methodology by early stage ISVs, who may have a lot technical heft, but little understanding of what markets are looking for, simply because they either

  • haven’t sampled consumer interests, and requirements, or
  • have focused on, as Mr. Bezos’s notes in his statement, “building something unique”

The question of whether “uniqueness” amounts to anything, at all, as regards the potential of a specific product for a specific market can not be broadly answered. Commodity markets, like the smart phone market to which Mr. Bezos has introduced the Fire Phone have not reacted well to so-called “unique” products in the past. For example, the Ford Edsel was a big failure, as was “new Coke”.

Early stage ISVs, in this writer’s opinion, will do better in commodity markets by either lowering their cost of product manufacturing/consumer acquisition, or rethinking product platforms to truly meet unmet consumer needs.

Ira Michael Blonder

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


Are Product Marketers Changing Direction on Tablet Computers?

Anyone watching the webcast of Microsoft’s debut, late in May, 2014, of the Surface 3 Pro computer would think tablet consumers are really after more traditional computers, but with an enhanced set of features for mobile work. But this view isn’t consistent with the opinion of some analysts, at least up to now.

In a review of this new hardware device from Microsoft®, titled Microsoft Surface Pro 3: A Tablet That Desperately Wants to be a Laptop, which was written by Joanna Stern, and published on the Wall Street Journal website on May 27, 2014, Ms. Stern expresses her opinion on tablet computer product marketing. Pointing to the Apple iPad, she notes: “Microsoft is clearly going after its original vision of the tablet here (stylus and all), rather than Apple’s more limited—but more successful—approach”.

While her review does not include a clear statement about tablets, and why they should provide consumers with a superior electronic reading experience, and a great method of viewing movies, she does state: “You can’t hold the Surface Pro 3 for hours, reading in bed. Its weight and cumbersome size wear out your arm, and the back corners of the tablet can get quite warm.” So, perhaps it’s safe to surmise she’s content with the tablet benefits statement Panos Panay summed up at the Surface Pro 3 debut – tablets are great for reading ebooks and great for watching movies, but not much more.

But, if these are the sole benefits consumers realize from their tablet computer purchases, manufacturers should plan on selling fewer of them, going forward. Once again, anyone following IDC’s periodic forecast for global tablet sales will note a recent revision downwards: IDC Lowers Global Tablet Shipment Outlook by 5.9%.

Since there are few PC manufacturers who would be pleased about the future prospects of a progressively diminishing world wide market for hardware, like the IDC report on tablets presents, Microsoft’s product strategy for the Surface Pro 3 may make a lot of sense.

In fact, anyone reviewing the press releases coming out of Apple’s world wide Developers’ Conference, 2014, will note efforts to closer align Mac OS X Yosemite with the iOS experience, kind of like the Surface product strategy, but in reverse.

As to the remaining major player in the tablet O/S arena, Android, clearly Chrome is Chrome, is it not? Whether one consumes the Chrome computing experience on a Chromebook, or on a Nexus tablet, or even a Samsung smart phone (but Tizen may be just around the corner), the bottom line is still the same — a lot of Apps and a set of variants on the same browser (Chrome).

So, in my opinion, Tablet product marketers are looking for opportunities to win market share from laptops, and vice versa. If they cannot succeed in this effort, there really isn’t much of a future for them, unless they plan on going head-to-head with the television set.

Disclaimer: I’m long Microsoft and do not have a position in either Google or Apple

Ira Michael Blonder

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