LIVE: Facebook Shares Soar As Q3 Ad Revenue Growth Accelerates

DAVOS-KLOSTERS/SWITZERLAND, 30JAN09 - Mark Zuc...

Facebook CEO Mark Zuckerberg (Photo: Wikipedia)

From my Forbes.com blog The New Persuaders:

After a rocky several months following its May IPO, Facebook finally provided some good news today as it reported third-quarter financial results that outpaced Wall Street expectations.

The key number: 36%. That’s the rate at which advertising revenues grew. And it’s noticeably higher than ad sales growth in the second quarter, which had flagged at 28%. Excluding the impact of foreign currency changes, ad sales would have risen 43% in the third quarter.

Mobile revenues, a key metric for a company that until recently had zero mobile ad revenues and offered little of note to its mobile users, were 14% of the total $1.09 billion in ad sales.

The other key number: 9%. That’s how much shares are rising in after-hours trading. Shares of FB rose a little less than 1%, to $19.50, in trading today. That’s still only a little over half of the IPO price.

* Update: Make that 20%+. After sleeping on it, investors like the results even better the next morning.

Facebook still faces many challenges, such as the need to provide a better mobile experience for users and advertisers. And thanks to rising expenses, including stock compensation and related costs–up 64% from a year ago–it’s actually losing money on a GAAP basis. But if advertising is returning, whether it’s from more interest in its social and mobile ads, in the Facebook ad exchange that’s getting a lot of attention, or even in the new Gifts e-commerce service, that’s good news.

We’ll hear more from CEO Mark Zuckerberg shortly when Facebook conducts its analyst earnings call at 2 p.m. Pacific. I’ll blog the highlights here, but you can also listen to the livestream.

The call begins. Zuckerberg will talk about the vision and strategy of the company–make the world more connected, etc. Three pillars to the strategy:

1) Build the best mobile product. This is the most misunderstood pillar. Mobile allows us to reach way more people, people spend more time on mobile devices, and monetization should be even better than on the desktop.

2) Improve the Facebook platform.

3) Strong monetization engine. On mobile, ads will be more like TV–more integrated into the core product experience, rather than on the side. We’re starting to see better ad products for people and better results for advertisers.

I want to dispose of this notion that we can’t make money on mobile. Until recently, Facebook didn’t even try. …

Read the rest of Zuckerberg’s comments and his Q&A with analysts at The New Persuaders.

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Facebook’s Mobile App Install Ads Get Moving

From my Forbes.com blog The New Persuaders:

Exhortations to install apps are likely a significant chunk of Facebook’s advertising revenues, and now they’re poised to become an even bigger factor in the social network’s future. Today, two months after offering app install ads for mobile devices to a select group of app developers and their marketing partners, Facebook opened up the ads to anyone.

These ads appear right in people’s mobile news feeds, providing prime placement for games and other apps in Apple’s App Store for iPhones and iPads and Google’s Play store for Android devices. Not surprisingly, Facebook says in a blog post that mobile app install ads are already working:

In early results, beta partners like Kabam, Fab, TinyCo and Big Fish were able to reach a more relevant audience and efficiently drive installs. For example, TinyCo saw 50% higher CTRs and significantly higher conversion rates compared to their current mobile channels, as well as a significant increase in player engagement.

A select subset of Preferred Marketing Developers (PMDs) has been testing mobile app install ads and saw similarly positive results. For example, Nanigans’ clients efficiently achieved 8-10x the reach compared to other mobile ad buys. Ad Parlor saw consistent CTR’s from news feed of 1-2% from engaged users looking for iPhone and Android games that their friends were playing.

No doubt those numbers will come down as the novelty factor in any new ad or feature wears off. Still, even a fraction of those results would still be valuable to advertisers.

That’s assuming–and this is a fair assumption given Facebook’s wariness about ad overload–that the company doesn’t go over the top and overload people’s mobile news feeds with the ads. Avoiding overload is especially important for these ads because unlike many of Facebook’s marquee ads, they don’t have a social component, meaning they appear strictly in response to developers paying for them, not because a friend liked an app.

Too many of these ads that don’t have the appeal of a friend’s connection, and the dreaded banner blindness is likely to set in.

There also more coming to improve these ads, according to Facebook engineer Vijaye Raji:

In coming months, we’ll continue to make updates that improve the user experience and the performance of mobile app install ads. For example, you may be able to customize your ad unit based on your audience, ensure that your ads are only shown to people who have not installed your app on iOS or Android devices, and allow people to start installing your app without leaving Facebook.

No ‘Pinterest For Cats': Google Ventures’ Kevin Rose Shoos Away Copycat Startups

Worlds Collide Onboard the S.S. Jeremiah O’Bri...

Photo: Wikipedia

From my Forbes.com blog The New Persuaders:

Few people have seen the ups and downs of startups more up close and personally than Kevin Rose, partner at Google Ventures and cofounder of Digg, the social news site that could have been Reddit but faded and is now trying for a comeback under new owner Betaworks. In an interview at the TechCrunch Disrupt conference this morning in San Francisco, Rose talked about his relatively new role as a venture capitalist.

Among the highlights: He said that he has helped speed up the way Google makes investments, that Google isn’t trying to lowball startups on valuations, and that he’s avoiding copycat startups (um, not to be too impolite, but like those dozens of companies in the conference’s demo hall?). Here’s what else he’s thinking about today, sometimes paraphrased:

Q: How has it been as a full-time venture capitalist?

A: I was doing angel investing for three or so years before joining Google Ventures. It was always a part-time thing, a casual investment every month or so. Now I’m seeing 10 or 15 companies a week. I always like seeing cool new ideas.

Q: Is it hard keeping them all straight?

A: Absolutely. I’m terrible at names.

Q: What’s up with the apparent drama between Y Combinator and Google Ventures, where the former accused the latter of lowballing startups on valuation?

A: We’re absolutely not going out there and trying to lowball companies. Some companies are worth $15 million and others are worth $6 million or $8 million. I’m closing three YC deals, all three we took the terms straight up. Another one, we just saw too much risk, so we didn’t do the deal.

Q: A couple of companies I talked to said the due-diligence process is longer with Google Ventures.

A: I don’t know that we’re more strict about that. I took $200,000 from GV for my last startup, Milk. The diligence process was a little longer. But I’ve been working personally on streamlining that. We do $5 million to $10 million that absolutely take good due diligence, when you’re investing that much. I think we’re in a great place now.

I have nothing bad to say about Y Combinator. I’m investing in several of their companies. Nobody’s mad at anyone.

Q: What YC companies have you invested in?

A: We just closed on BufferBox, kiosks for people to get packages at, like Wal-Mart stores.

Q: Are there certain kinds of companies you like?

A: I’d be lying if I said I have this grand vision. When I see a company that’s really doing something disruptive, that gets my interest. I don’t want to do a Pinterest for cats. I’m more of a surgical investor. The only way to do that is to pare down the total number of deals you do. I may do 10-12 deals a year, but they’re companies I really believe in. …

Read the complete post at The New Persuaders.

Reid Hoffman: Social Networking Isn’t Over Yet–And Neither Is Facebook

Reid Hoffman

Photo: Wikipedia

From my Forbes.com blog The New Persuaders:

Reid Hoffman is one of the most prolific angel investors in tech startups from Facebook and Zynga to Airbnb and Zipcar. It’s a talent he transferred to more traditional venture capital in 2009 when he joined Greylock Partners. He’s also a cofounder and executive chairman of LinkedIn.

In a “fireside chat” at the TechCrunch Disrupt conference in San Francisco today with TechCrunch founder Mike Arrington, who has since joined the VC world as well with his own CrunchFund, Hoffman proffered comments on everything from Facebook’s struggles to Twitter’s battles with developers. Here, paraphrased at times, is what he had to say:

Q: You are exceptionally wealthy. What changes?

A: There is a bunch of weird things. I had had a long-term plan to be affiliated with universities, like teaching. Overnight all those changed to donor relationships. Also, I would never have imagined I would fly in a private plane by myself, and now I have. It has its advantages.

Q: You wrote a book [The Startup of You]. How’s it doing?

A: It’s sold 120,000. In the consumer Internet space, we’re used to much higher numbers. I don’t think we’ve created a movement yet.

Q: You were one of the very first investors in Facebook.

A: $37,500 at a $5 million valuation. [That means he made 3,000 times his investment, or $111 million.)

Q: So you did very well. What do you think of Facebook’s stock now?

A: I’m a big believer in Facebook’s long-term position. The real question is how it plays out over the next year or so. People’s hand-wringing about not making money on mobile is an innovation problem that is not that hard to solve.

Q: Did Facebook screw up its IPO or was it inevitable it played out that way?

A: In some ways, it was inevitable. You had unprecedented demand, and you couldn’t know NASDAQ servers would go down. We at LinkedIn were criticized for leaving too much money on the table. …

Read the complete post at The New Persuaders.

Zynga Shares Tank, Down 40% On Q2 Earnings Miss, Lower 2012 Outlook

Image representing Zynga as depicted in CrunchBase

Image via CrunchBase

From my Forbes.com blog The New Persuaders:

Unforgiving investors are hammering social games company Zynga in after-hours trading following a disappointing second-quarter earnings report.

Shares were down 38% from Wednesday’s closing price of $5.08 a share–already half their IPO price last December. The swoon appeared to take down Facebook too. Shares in the social network, which reports its second-quarter results Thursday, were down 8% in late trading.

The problem: Zynga, creator of popular games such as FarmVille, Mafia Wars, CityVille, and other Facebook games, provided an outlook that can’t be construed as anything but alarming to investors. In particular, Zynga’s acquisition of mobile games startup OMGPOP, maker of the Draw Something game, now looks unwise. …

Read the complete post at The New Persuaders.

How Facebook–and Its Advertisers–Can Make Money From Mobile

Cross-posted from my Forbes.com blog The New Persuaders:

If there’s one thing that gave investors pause about Facebook’s underwhelming initial public offering last month–besides Nasdaq’s royal screwup–it was that the social network has been AWOL from the hottest trend in tech today: mobile. Facebook admitted shortly before its IPO that it wasn’t making any money on mobile advertising even as its users increasingly access the service from their smartphones and tablets.

But it’s also quite early in the opportunities associated with skyrocketing use of mobile devices, whether it’s games or advertising or payments. Lucy Jacobs, COO at Spruce Media, a company that helps brands do performance advertising on Facebook, offered a brief perspective on what Facebook and brands hoping to use it for marketing can do to make money from all the people ditching their PCs for iPhones, iPads, and Android devices. Here’s what she had to say during a talk at AlwaysOn’s OnMobile conference in Redwood City, Calif.:

Only about 32% of the world has a mobile phone so far, she says, and most of them aren’t smartphones, so there’s plenty of opportunity. We’re currently monetizing only 1% of all ad impressions even though 10% of time is spent on mobile devices. Result: Ad rates are five times lower on mobile devices vs. desktops.

Facebook is well-positioned to monetize mobile, Jacobs says. Why? Very rapid user growth, large number of innovative developers, broad base of advertisers, highly engaged consumers, and apps that are essential utilities.

Facebook now has four formats, or locations, for mobile ads–in the news feed on the home page, in the news feed in mobile, on the right-hand side, and on the log-out page. And last week, it announced the ability to run just mobile ads instead of having to do desktop and mobile ads simultaneously.

The mobile newsfeed ads have really high engagement and good results, Jacobs says. Click-through rates are 1% to 5%, or 10 times higher than on standard Facebook ads. That suggests that mobile has a huge upside for Facebook, since clicks on its other ads are way lower than the average display ad.

However, conversion rates, or the rate at which people buy something, fill out a form, or the like, are one-third lower. She doesn’t say why. Other marketers and agencies have suggested that it’s likely people using their devices on the go, such as in or near stores, simply buy the product in the store, but that purchase doesn’t get attributed to the Facebook ad.

Jacobs offers several tips and tricks for brands using mobile ads on Facebook:

Read the complete post at The New Persuaders.

What’s the Next Breakout Mobile Startup? Here’s What VCs Think

Cross-posted from my Forbes.com blog The New Persuaders.

Mobile computing is arguably the most disruptive force in tech right now. Just look at what it did to Zynga’s stock today. Or what it has already done to Facebook’s and Google’s shares.

Today, a group of venture capitalists laid out what they think is coming for mobile investment this year–in other words, who’s going to disrupt whom next. On a panel at the AlwaysOn OnMobile conference in Redwood City (Calif.) were host Mihir Jobalia, managing Director at KPMG; Rob Coneybeer, cofounder and managing director at Shasta Ventures; Paul Santinelli, a partner at North Bridge Venture Partners; Sling cofounder Jason Krikorian, now general partner at DCM and the Android Investment Fund; Navin Chaddha, managing director at Mayfield Fund; and Aydin Senkut, founder and president of Felicis Ventures.

Here’s what they had to say:

Q: What are the opportunities and challenges in Apple’s iOS vs. Google’s Android?

Chaddha: With Android, even though it’s open, not having control is a big issue. If developers have an app, they go to iOS first, then they look at Android, but there are so many choices, phones. It’s just hard. In the iOS, iPad and iPhone are all the same–life is easy.

Senkut: iOS’s big advantage is monetization. If you want growth and high numbers, it’s difficult without Android.

Coneybeer: It’s a stable duopoly. You need to do both. But nobody’s talking about any other platform now. For developers, you’re looking at a five-year-plus duopoly.

Santinelli: In a few years, you’ll be able to do all development in HTML5. It will solve a lot of those fragmentation problems.

Q: Where are the most interesting growth opportunities in the next five years?

Read the full post at The New Persuaders.

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