Poof! $1 Billion Vanishes From 2012 Facebook Revenue Forecast

From my Forbes.com blog The New Persuaders:

Facebook’s revenues, particularly from advertising, won’t grow as fast as expected this year, according to a revised forecast from market researcher eMarketer.

EMarketer today said the No. 1 social network will just break $5 billion in revenues this year, with $4.2 billion coming from advertising and the rest from payments and other revenues. That’s down $1 billion from the research firm’s estimate from last February, several months before Facebook’s initial public offering in early May. Even so, Facebook’s ad revenues are still forecast to jump 34% this year from a year ago, and rise 29% next year.

The key reason for the change actually does not reflect a key concern of investors: mobile advertising. Although Facebook has been slow to roll out advertising on mobile devices, eMarketer had not factored that into previous forecasts either. Instead, the estimate cut reflects growing concerns about the effectiveness and measurability of Facebook ads.

The revenue estimate cut isn’t entirely a surprise. Facebook reported less-than-expected revenue growth in its first and second quarters this year. And eMarketer’s original forecast was higher than that of many other analysts, whose recent estimates came in at around $5 billion.

Still, the new forecast could add to investor worries that Facebook’s growth is stalling as its advertising sales, especially on mobile devices, come up short. In a market that was down about 1% today, Facebook’s shares fell a penny, to $19.09. That’s about half their IPO level. …

Read the complete post at The New Persuaders.

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Google Shuts Off TV Ads Business

From my Forbes.com blog The New Persuaders:

After five years of trying to sell ads on television using the automated buying system that works so well for its signature search ads, Google has finally given up. In a blog post this afternoon from Shishir Mehrotra, VP of YouTube and video, the ad giant said it will shunt the group’s staff to other projects:

Video is increasingly going digital and users are now watching across numerous devices. So we’ve made the hard decision to close our TV Ads product over the next few months and move the team to other areas at Google. We’ll be doubling down on video solutions for our clients (like YouTube, AdWords for Video, and ad serving tools for web video publishers). We also see opportunities to help users access web content on their TV screens, through products like Google TV.

The shutdown is clearly a disappointment for Google, yet another sign that its math-driven advertising systems don’t readily translate to traditional advertising. Back in 2009, the company shut down radio and print ad efforts for lack of interest.

Mehrotra’s not being entirely disingenuous when he says that Google’s efforts are better spent on online video advertising. After all, more and more TVs get connected to the Internet and more and more people watch TV shows on their laptops, smartphones, and tablets. With its Google TV project and its fast-growing YouTube video service, Google remains in a prime position to vacuum up ad revenues as big advertisers start to follow their audience onto the Web.

Indeed, YouTube especially has shown considerable traction in attracting new ad spending–$3.6 billion this year, by the reckoning of Citigroup analyst Mark Mahaney. As I wrote in a recent story, YouTube is where Google is placing its television-scale bets:

Now Mehrotra’s goal is to try to grab a big chunk of the $60 billion U.S. television business. But to do that, and fend off TV-content-oriented online rivals such as Hulu, YouTube has to become a bit more like conventional TV. To that end, it organized itself last year into TV-like channels, investing $100 million in cable-quality launches from Ashton Kutcher, Madonna, the Wall Street Journal, and dozens of others. More and more TV advertisers are being won over, says David Cohen, chief media officer at the media buying agency Universal McCann. “They’re getting marketers to think about YouTube as a viable outlet,” he says. 

Mehrotra, who last year became ­YouTube’s vice president of product, envisions millions of online channels disrupting TV, just as cable’s 400 channels disrupted the four broadcast networks. “We want to be the host of that next generation of channels,” he says.

In other words, Google’s strategy is to attack the TV ad business from where it’s strong instead of from where it’s not.

Why Do Programmers Hate Internet Advertising So Much?

Facebook ad question (Photo credit: renaissancechambara)

From my Forbes.com blog The New Persuaders:

Another week, another pontificating programmer slamming online advertising. What is it with these guys?

The latest example is a steaming heap of linkbait from software developer and entrepreneur Patrick Dobson entitled Facebook Should Fire Sheryl Sandberg. That would be the chief operating officer of Facebook, whose purported crime is that she steered Facebook toward being an ad-supported company.

In Dobson’s telling, while Facebook cofounder and CEO Mark Zuckerberg was off at an ashram in India, onetime Google ad exec Sandberg mandated that Facebook would henceforth be an advertising company. Proof of her folly? Facebook’s now worth half of what it was at its IPO three months ago as it “continues to flounder in advertising hell.”

This, despite the fact that Facebook will gross about $5 billion in ad revenues this year, despite the fact that its current market cap is still more than $40 billion less than eight years after the company’s founding in a Harvard dorm.

Thousands of Web developers would love to flounder this badly.

Dobson’s preferred alternative is that Facebook should gradually phase out advertising in favor of–and I have to get technical here, because the bigger picture he provides is fuzzy–selling access to its application programming interface. That way, developers can build businesses like Zynga did on top of the social network in the way personal computer software developers built applications atop Microsoft’s Windows. From his post:

… There is massive value in the social graph and the ability to build applications on top of it. I believe the value is greater than all of the advertising revenue generated on the web to date. … What is the best way to monetize the social graph? To sell access to the social graph! … Developers can then figure out if advertising, or micro transactions, or payed access is the best way to monetize the social graph.

I’m not really sure what “selling access to the social graph” would be, though it sounds like the result could make Facebook’s many privacy gaffes to date look tame.

But the bigger problem is the persistent implication by tech folks like Dobson that advertising is beneath them, and beneath any intelligent human being. Now, I’m no huge fan of most advertising, and all too often it is indeed lame. But there’s no doubt it can be useful at the right place and time, and even when it misses the mark, advertising is a small, remarkably frictionless price to pay for a whole lot of free Web services.

The notion that advertising is evil, to use a favorite term of Google critics, or at least useless is a longstanding meme in Silicon Valley. It goes at least as far back as Google’s founding, before it became–right–the biggest online ad company on the planet. Cofounders Larry Page and Sergey Brin famously wrote in their Stanford doctoral thesis describing Google that advertising could pollute search results.

Why this antipathy to advertising? A lot of tech folks seem to believe they’re immune to the influence of advertising. More than that, they assume that no one else is much influenced by it either (despite ample evidence over many decades that ads do influence people’s attitudes and behavior). Therefore, the reasoning goes, ads are nothing more than an annoyance, an inefficient allocation of capital. Dobson accuses Sandberg of a “rampant lack of business creativity” that has “no place in centers of innovation,” later saying she should start an ad agency in Miami. …

Read the complete post at The New Persuaders.

Twitter Launches Ads Targeted To Interests–Starting At A Penny

From my Forbes.com blog The New Persuaders:

Until now, advertisers could hit Twitter users with ads only if they followed the company or users Twitter deemed to be similar to those followers. That limited the potential reach especially for large brands looking to advertise to many millions of people.

Today, the company announced that marketers can now target the service’s 140 million users with ads, called Promoted Tweets and Promoted Accounts, based on their interests, inferred from their retweets and whom they follow, and other undisclosed qualities it uses to create its “real-time interest graph.” From the announcement, here’s how it works:

There are two flavors of interest targeting. For broader reach, you can target more than 350 interest categories, ranging from Education to Home and Garden to Investing to Soccer, as shown in the screenshot below. As an example, if you were promoting a new animated film about dogs, you could select Animation (under Movies and Television), Cartoons (under Hobbies and Interests), and Dogs (under Pets).

The two-level interest hierarchy is composed of more than 350 categories.

If you want to target more precise sets of users, you can create custom segments by specifying certain @​usernames that are relevant to the product, event or initiative you are looking to promote. Custom segments let you reach users with similar interests to that @​username’s followers; they do not let you specifically target the followers of that @​username. If you’re promoting your indie band’s next tour, you can create a custom audience by adding @​usernames of related bands, thus targeting users with the same taste in music. This new feature will help you reach beyond your followers and users with similar interests, and target the most relevant audience for your campaign.

So, how well does this work? Twitter says it’s seeing not only greater reach, no surprise, but also higher engagement thanks to messages reaching people more likely to be interested. It provides no specifics on these early tests, however.

Twitter also dropped the minimum bid for its auction-based ad system from 50 cents to a penny. That doesn’t mean a flood of cheap ads for getting rid of belly fat are coming. Indeed, it could open up its ads to a broader set of ad buyers, potentially creating more competition and higher prices.

As AllThingsD’s Peter Kafka notes, Twitter isn’t allow advertisers to target ads based on your tweets themselves, which probably makes them less effective in terms of purchase intent than Google’s search ads. Still, the ability to target people by their interests could be a big step forward for the company as it tries to turn its audience into dollars.

Consumers Juggle Four Screens Daily–But Marketers Haven’t Yet Followed Them

From my Forbes.com blog The New Persuaders:

Lots of investors are worried that Web companies such as Google and Facebook don’t have a clear way to make money as people increasingly access their services on smartphones and tablets instead of personal computers. Small screen sizes, the intensely personal nature of phones, and other factors mean it’s not readily apparent what kind of advertising will work best on mobile devices.

But new research commissioned by Google indicates the problem is even more complicated: People aren’t just going mobile, they’re using those mobile devices at the same time as, or right before or after, watching television, using their PC, or settling into the couch with a tablet. That means that it’s not enough simply to reach people on smartphones and tablets alone. Marketers must understand how people juggle those four screens for various tasks and types of entertainment throughout the day, so they can target ads that are most likely to appeal to them on each device given the different things they’re doing on each device.

Google’s research (full report here), conducted by branding and design firm Sterling Brands and market researcher Ipsos and summarized in the infographic below, provides some insights into this complex mix of devices and activities. But here are some of the highlights of the report, entitled The New Multi-screen World: Understanding Cross-Platform Consumer Behavior, that might be most relevant to marketers trying to figure out this whole mobile thing:

* Some 90% of people shuttle between various devices to get a task done, such as seeing a car ad on TV, checking it out further on a smartphone or tablet, then doing more intensive research on their PC.

* People use multiple screens in two ways: sequentially (going from one screen to another) and simultaneously (using more than one screen at once). The former is more for targeted tasks, while the latter is mostly supplementing TV watching with browsing on another device. …

Read the complete post at The New Persuaders.

Here’s How Badly Google Wants To Make Nexus 7 Tablet A Hit

From my Forbes.com blog The New Persuaders:

Only a couple of times has Google deigned to clutter its famously spartan home page with advertising. This is one of those times.

Today, Google is running an ad below its search box for the Nexus 7, the seven-inch tablet that it hopes will steal a march on Apple’s enormously popular iPads. Why now? Google hasn’t said, but it seems likely the ad push is looking ahead to Apple’s expected October release of the seven- to eight-inch iPad Mini, as well as to the expected announcement of Amazon.com’s new Kindle Fire next week.

As tablets take the computing market by storm, Google clearly views them as a critical device on which to make sure its search and other services, and the advertising that rides atop them, continue to be front and center. I remain doubtful about whether Google itself really wants to become a full-on maker of hardware, Motorola Mobility acquisition aside. But at the very least, a successful Nexus 7 could spark other manufacturers to pick up the pace of innovation in tablets.

That’s all the more critical in the wake of Apple’s big win in court last week, when Samsung was found to be infringing multiple Apple patents. Although Google’s underlying Android software was not directly involved, the jury’s ruling cast a pall on Android’s potential for further gains vs. the iPhone and the iPad.

The Nexus 7 spot marks a rare appearance of a Google ad on its home page, though not the first one. The company also ran ads for Motorola’s and Verizon’s Droid phone in 2009, followed by one for Google’s own Nexus One phone a few months later. It also has promoted other Google products, including the T-Mobile G1 phone in 2008. And just a few days ago, if you hovered over the “I’m Feeling Lucky” button, you got alternative messages that sent you to other Google services.

Still, don’t expect to see Google start splattering ads all over its home page. After all, then we’d all stop writing about how unusual it is and Google won’t get the free publicity it’s getting right now.

Five Reasons Apple May Not Dare To Sue Google

The official online color is: #A4C639 . 한국어: 공...

(Photo credit: Wikipedia)

From my Forbes.com blog The New Persuaders:

Now that Apple has scored a decisive win over Samsung in its smartphone patent trial, the big question is whether the maker of the iPhone and the iPad will go after the real enemy: Google. The search company is the maker of the Android software underlying Samsung’s and many other companies’ mobile devices, after all.

But a direct shot at Google looks unlikely at this point for a variety of reasons:

* Apple’s schoolyard bully strategy of going after the legal weaklings like Samsung worked like a charm, so it’s likely to continue going after hardware firms such as HTC and the now Google-owned Motorola Mobility, rather than Google directly. There are many other cases involving those companies, as well as Samsung, around the world–plenty to keep Apple busy, especially now that it has such a clear victory to build upon.

Indeed, patent expert Florian Mueller of FOSS Patents, a persistent Google critic, thinks Apple is more likely to go after Amazon.com first. As Mueller told Fortune’s Philip Elmer-DeWitt: “If I were in Apple’s shoes the next company I would sue is not Google, but Amazon, which has an even weaker patent portfolio than Google and sells large volumes of Android-based devices with a subsidies-centric revenue model, which is even more of a threat to Apple’s margins than Google’s advertising-based model.”

* Other hardware makers may now decide to settle with Apple, ratcheting down the need for Apple to go after Google. Analyst after analyst notes that with the clear loss for Samsung, the leader among Android device makers, other firms may decide it’s not worth continuing a fight they now seem more likely to lose.

* Apple looks less likely to win a patent infringement case versus Google. For one, Google itself mostly makes only software, and although its Nexus S device co-branded with manufacturer Samsung was identified by the jury as infringing Apple’s patents, it’s the only one and it’s not clear whether a single device provides a strong case for a separate suit. (It’s also not on Apple’s list of Samsung products it wants banned from sale.)

What’s more, Google doesn’t charge hardware companies for using Android, relying instead on ad revenues derived from Android device use, so there may not be much for Apple to sue about. Finally, let’s not forget that Android existed well before the iPhone came out–in fact, Google bought the company that made it in 2005, two years before the first iPhone. That doesn’t guarantee that whatever Google has done with Android since then is on firm patent ground, but it doesn’t seem a stretch to cast doubt in a jury’s collective mind that Android is simply copying iOS when Android the company clearly predates the iPhone.

Not least, Google has pockets deep enough to counter whatever legal threats Apple throws at it. Indeed, this ruling could well galvanize Google’s mostly passive efforts so far to protect Android hardware licensees. Apple may get all it wants from going after hardware producers, given that Apple makes most of its money from hardware itself.

* Apple has already gotten what it wanted from Google with this ruling: the likelihood that Google will have to change aspects of Android to avoid infringement, potentially reducing the competitiveness of Android devices. As Needham & Co.’s Charles Wolf writes: “Google will be forced to design workarounds of the violated software patents, which was the intent of Apple’s lawsuit, not the monetary award. These workarounds are likely to materially degrade the Android user experience relative to the user experience on Apple’s iOS operating system.”

* Google itself may start talking with Apple about some kind of way to avoid litigation. Wells Fargo Securities’ Maynard Um told investors in a note today that the $250 million or more that Apple could get in licensing fees from Samsung–not to mention additional fees from other device makers that may settle or lose in court as well–would be significant enough for Apple to be worthwhile. Add Google in there, and it may be a cash flow Apple can’t resist. After all, it apparently already offered a royalty deal to Samsung, whose rejection led to Apple’s suit.

One might wonder why Apple would feel the need to deal. …

Read the complete post at The New Persuaders.

What Does Apple’s Patent Trial Victory Over Samsung Mean To You? Nothing.

From my Forbes.com blog The New Persuaders:

Apple scored a big victory in its smartphone patent infringement case vs. Samsung late Friday afternoon as a jury awarded the victor $1.05 billion in damages. But does the closely watched verdict mean anything to consumers?

No–at least not for now. Why?

* This case no doubt will be appealed. That means little is likely to change anytime soon, at least until Apple files for injunctions against the Samsung products involved. And those are by no means all of Samsung’s products, let alone other Android smartphones.

* You won’t have to surrender your Samsung smartphones or tablets or worry that some court-induced software update will cause your device to stop working overnight. However, it’s quite possible an injunction that Apple surely will request could stop further sales of infringing devices such as the Samsung Galaxy S II in the U.S.

* Smartphone makers will find new ways to emulate (if not copy) Apple’s features. Patent infringements are often worked around by tweaks that are not very onerous for users, even if they’re a costly hassle for the infringer. So one way or another, it’s hard to imagine that nothing but the iPhone and iPad will have scroll-bounce, pinch-to-zoom, and tap-to-zoom, the features targeted in the case, or something very similar, forever into the future.

* The two companies, with Google lurking in the shadows, might go back to the bargaining table. Samsung won’t have many chips, of course. But it may still be worthwhile to Apple to find a way, perhaps by demanding a very large check or by getting Samsung to back off on other patent claims vs. Apple, to end the hostilities and avoid the costly appeal. Not least, Apple would avoid pissing off half or more of all smartphone owners who just wanted a good smartphone and got caught in the patent crossfire. …

Read the complete post at The New Persuaders.

Facebook’s Faster New iPhone App: It’s For Advertisers Too

From my Forbes.com blog The New Persuaders:

After fielding a mobile app that was widely panned for being achingly slow to use, Facebook has launched brand-new apps for iPhones and iPads that are much speedier.

Speed is something users can never get enough of, but in this case, Facebook surely isn’t aiming just at its users. Speed matters just as much to advertisers. And advertising, especially on mobile devices, matter a lot to Facebook these days, since it’s seen by investors as struggling to make money from its users as they increasingly access the social network from smartphones and tablets. Some 543 million users, or half its base, access Facebook from a mobile device.

In particular, the new apps update the Facebook news feed in real time, so users don’t have to manually reload the page to see them. That’s key for Facebook’s mobile advertising hopes, since Facebook earlier this year began allowing advertisers to run so-called Sponsored Stories, or posts from one’s friends that marketers pay to highlight, right in people’s mobile news feeds. Now, those ads, like other posts, will be able to appear faster.

Why is that so important? Because real-time ad placement, already a staple in more “traditional” online advertising, could be a big key to success for Facebook’s mobile advertising, especially as it expands its ad exchange announced in June. “Mobile devices have put people in charge of their experiences,” Cindy Murphy, VP of brand activation at social advertising firm RadiumOnesaid at MediaPost’s Social Media Insider Summit today. “It’s more of a real-time experience.”

In particular, advertisers are keen to reach people at precisely the moment they’re ready to eat lunch at a restaurant or grab a coffee at a local cafe. To do that, they need to know where people are at a particular point in time and, more importantly, they need to know an ad for a discount or coupon will get to them instantly.

Speed in ad delivery is key for another reason, too. It’s becoming clear that standard Web ads simply shrunk down to smartphone screen size won’t cut it, but not simply because of the screen size. A bigger factor may be that people view their mobile devices as much more personal than personal computers ever were, so they loathe being interrupted while they’re doing things on it.

A better opportunity for marketers, then, may be the moments in between activities, when people are already switching gears anyway. “There are natural breaks in television,” says Chris Cunningham, CEO of appssavvy, which helps create ads for social and mobile companies. “You can find natural breaks in mobile too–such as between levels of a game. They can be in the form of a large, beautiful ad.” But those moments are, well, momentary, so that’s why speed matters there as well.

So as much as you may enjoy a Facebook app that’s speedy, advertisers–and Facebook itself–may like it even more.

Can Social Networks Ever Make Money On Mobile Ads?

From my Forbes.com blog The New Persuaders:

If there’s one thing that dogs Facebook among investors, it’s whether it can make the leap to mobile devices–and bring its advertising along with it. Although Facebook claims some success with its mobile ads so far, they’re still a relatively small portion of its revenues, and it’s not apparent that it or other social networks can translate their ad formats to small screens where people are way more sensitive about interruptions to their activities.

What Facebook and other social networks from Twitter to Tumblr need to do, according to a panel of marketing folks at MediaPost’s Social Media Insider Summit in Lake Tahoe today, is to realize that they can’t simply slap smaller versions of their display ads onto iPhones and iPads. Instead, they must try to catch people in the moments in between activities on their phones when they’re most receptive to relevant marketing messages.

On the panel were moderator Erik Sass, a reporter at MediaPost; Kate Bare, product manager for innovation at Expedia Media Solutions; Gabriel Cheng, group head of media solutions at Ansible; Chris Cunningham, cofounder and CEO of appssavvy; Cindy Murphy, VP of brand activation at RadiumOne; and Nathaniel Perez, global head of social experience at SapientNitro. Here’s what they think will work (and not work):

Q: What doesn’t work with social advertising on mobile?

Cunningham: Using the same old, same old techniques and trying to apply them to a new medium. We know people ignore ads. This next generation is about people and users.

Murphy: Mobile devices have put people in charge of their experiences. Consumers are not going to engage with the usual (ad) content. It’s also more of a real-time experience.

Perez: Beyond just social and mobile, the rate of change has outpaced marketers’ ability to adapt. Content that’s relevant and delivered in the right way remains key. We have still failed to shift from interruption (marketing) to experiences.

Q: So we need to avoid interrupting the users’ experience. Does that mean mobile display is dead?

Perez: I don’t think you can write it off. It’s about delivering relevance in the moment. The real problem isn’t about screen size and layout.

Cunningham: Display today and how the ad networks are selling it (is the wrong way). We have to go back to big, beautiful ads. People are scared to interact with ads because they might be taken away. There are natural breaks in television, and you know it’s going to come. You can find natural breaks in mobile too–such as between levels of a game. They can be in the form of a large, beautiful ad. …

Read the complete post at The New Persuaders.

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