April 26, 2024

Facebook Shares Touch a Symbolic Threshold

On Wednesday morning, the company’s stock crossed an important psychological barrier, trading above $38 a share, the price at which Facebook, the world’s leading social network, first sold shares to the public in May 2012.

The catalyst for the rise was the company’s surprisingly strong second-quarter earnings report last Wednesday, which quelled many investors’ doubts about Facebook’s ability to make money from its legions of mobile users and suggested that the company’s profit stream would continue growing.

Since last week’s report, shares have risen about 34 percent. Early Wednesday, they briefly touched $38.31 a share, although they pulled back to end at $36.80 a share at the time the market closed.

The company’s shares hit a low of $17.55 last fall. Since then, investors have warmed to the company as its management demonstrated that it can increase profits and not just users.

“There was a perception that they hadn’t monetized the users they have,” said Aaron Kessler, an analyst at the Raymond James brokerage firm, referring to last summer, when the Facebook’s stock was trading at half the current level.

These days, Wall Street sees revenue potential everywhere — from soon-to-come video ads in the Facebook news feed to the expansion of high-dollar ads targeted to specific swaths of Facebook users.

“Facebook was caught flat-footed by the shift to mobile,” said Mark S. Mahaney, an analyst with RBC Capital Markets. Now, he said, “they appear to be set up as a sustainable, high-growth business.”

Still, there are reasons to be concerned. Mobile messaging platforms like Snapchat and WhatsApp are grabbing the attention of many of Facebook’s younger users. Twitter is mounting a major effort to go after marketers, especially brands that typically advertise on television, as it prepares for its own likely public offering.

And Facebook risks turning off users with too many ads. About 1 in 20 items in the news feed, the main flow of items that a Facebook user sees, is an ad. During the company’s quarterly conference call with analysts, Facebook’s co-founder and chief executive, Mark Zuckerberg, said that users were beginning to notice the number of ads, suggesting that the company could not greatly increase their frequency without losing some users.

Nate Elliott, a principal analyst with Forrester Research, said Facebook users who visit the site on a computer’s browser still see too many cheap, poorly targeted ads on the right side of the page. “They’ve got to get much better at targeting,” he said.

Despite these worries, investors’ views of the company’s prospects have clearly changed.

Mr. Mahaney, whose firm has a $40 price target on the Facebook stock, said that analysts across Wall Street had increased their projections of the company’s financial performance. Analysts now expect Facebook to increase its profits 30 to 35 percent a year through 2015.

Because stocks tend to trade as a multiple of a company’s future profits, those upgrades last week sent Facebook’s stock soaring.

Facebook officials declined to comment on the stock rise on Wednesday. But for the company’s executives, who had urged investors to be patient as their strategy played out, the surge surely offers some vindication.

The company raised $16 billion from the initial public offering on May 18, 2012, vaulting it into the big leagues of American stocks, but problems struck immediately. The Nasdaq stock exchange botched the handling of buy and sell orders on the first day of trading — so badly, in fact, that regulators eventually fined Nasdaq $10 million for the fiasco.

In ensuing weeks, Facebook shares continued to fall. Instead of pouring into the stock, as they did a decade earlier with Google, many investors questioned whether Facebook’s stock was overpriced at $38 a share.

Particularly worrisome was Facebook’s seemingly nonexistent mobile strategy just as Internet users were abandoning PCs for their smartphones. The company’s smartphone and iPad applications were clunky, and it was generating no revenue from mobile ads.

Facebook’s management, including Mr. Zuckerberg, recognized the problem and began a crash course to revamp the company’s approach to mobile and better position the company for fast-growing emerging markets.

The company overhauled its apps, introduced ads into its users’ news feeds, and created a new category of revenue called app-install ads. With the app-install ads, a game maker, for example, can promote its new game in Facebook’s mobile software and give users an easy way to install the app with just a couple of clicks.

Facebook also introduced new advertising products meant to give marketers more ways to target specific groups of customers, which allowed the service to charge higher advertising rates.

While mobile advertising continues to grow, and was about 41 percent of Facebook’s ad revenue in the second quarter, investors are also looking to new areas of potential profit growth. Those include video advertising in the news feed, which is expected to begin later this year, and the possible sale of ads in Instagram, the fast-growing photo and video-sharing app that Facebook bought in 2012.

“All of those seem like relatively large low-hanging fruit, and they are starting to go after them,” Mr. Mahaney said.

Article source: http://www.nytimes.com/2013/08/01/technology/facebook-briefly-trades-above-ipo-price.html?partner=rss&emc=rss

Google Hones Its Advertising Message, Playing to Emotions

The search giant made its first push into advertising with a Super Bowl ad in 2010 about a young couple falling in love. But through last year it began a more focused national television campaign, as well as taking on other efforts, like hosting Google-themed conferences in an effort to represent its online brand in the offline world.

“This past year has really been a remarkable transformation for Google,” said Peter Daboll, chief executive of Ace Metrix, a firm that evaluates TV and video ads.

Though Google is a household name, it needs to tell its story now for a few reasons. It needs new businesses like the Chrome browser and the Google Plus social network to succeed if it is going to find sources of revenue beyond search ads.

The ads are also part of Google’s mission, led by Larry Page, its co-founder and chief executive, to pare down its product offering and make Google products more attractive, intuitive and integrated with one another.

Lorraine Twohill, Google’s vice president for global marketing, would not disclose how much the company had increased its advertising spending, but said there had been a shift in strategy.

“As we got bigger, we had more competition, more products, more messages to consumers, so we needed to do a bit more to communicate what these products are and how you can use them,” she said.

Also as Google comes under attack from antitrust regulators, it can’t hurt to tell heartwarming stories about Google to wide audiences.

“If we don’t make you cry, we fail,” Ms. Twohill said. “It’s about emotion, which is bizarre for a tech company.”

Some viewers may be hard-pressed to keep their eyes dry after watching “Dear Sophie,” Google’s ad for Chrome in which a father sends multimedia messages to his baby daughter, or to hold back a smile watching grandmothers and children dancing to Lady Gaga.

But that is not to say that Google, where data is religion, does not back up its sentimental branding efforts with cold, hard data.

Before showing the Super Bowl ad, Google tested a dozen versions on YouTube and chose to broadcast the one that received the most views.

And Google events, which also fall under the marketing division, require immense spreadsheets, like one to choose a location for Google Zeitgeist, its annual conference for wooing its biggest advertisers. The spreadsheet charted 140 hotels from Manhattan to Phoenix, with color-coded tabs and columns for ballroom size, room rates and the number of layovers to fly there.

The winner was Paradise Valley, Ariz., where Google’s event planner, Lorin Pollack, brought the company headquarters’ preschool motif to the desert.

“Google’s an online brand,” Ms. Pollack said. “You can’t experience the brand except for typing keys. It’s a huge responsibility to actually bring that brand to life outside of the computer.”

The lanterns lining the steps at the nighttime parties were Google colors — red, yellow, blue and green — and oversized stuffed ottomans mimicked the office’s beanbags, where engineers sit with laptops perched on their knees. Attendees could climb on the giant tricycle that Google Street View engineers ride to take photos or design their own Android robot T-shirts. A vending machine dispensed primary-colored juggling balls, bought by swiping Android cellphones.

Even the tablecloths had to evoke Google, which meant no billowy linen, Ms. Pollack said.

“Google is a very clean, simple brand,” she said. “Linen gets sloppy. It gets dirty; it’s hard to sit under. I take a lot of inspiration from our homepage. It’s just simple.” Like Google’s events, its TV ads are light on details about products’ features. Instead, they are meant to evoke curiosity and emotion, Ms. Twohill said.

The first ads for Chrome, aimed at frequent Web users, were online and discussed the browser’s speed and security. But when it came time to take Chrome mainstream, she said, Google turned to television to reach those “who don’t get out of bed in the morning and think, ‘I’ll get a new browser today.’ ”

Google broke the recent trend of 15-second television ads to tell stories in a minute or two.

An ad for Google Plus shows the arc of a couple’s courtship without spoken words. The man places the woman in a social circle titled “love of my life,” but he starts out in her circle called “creepers.” Over time, though, he graduates to “book club,” “ski house” and eventually “keepers.”

Another, which was broadcast just before Christmas, shows the Muppets in a Google Plus Hangout video chat singing along to Queen and David Bowie. A newspaper ad for Google Plus featured the Dalai Lama joining Desmond Tutu by Hangout after he was denied a visa to visit South Africa.

Google is also advertising its search engine, even though, with two-thirds market share in the United States, it is hardly an unknown brand to anyone.

“I still think it’s important to remind people why Google matters, how it’s had an impact on people’s lives, what life was like before this,” Ms. Twohill said. An added incentive: Google’s main rival, Microsoft’s Bing, also has a new ad campaign.

One search ad shows a surfer finding the perfect wave, a teenager becoming the youngest person to discover a supernova and a man installing solar panels.

“We’re all searching for a different thing, even if we’re all trying to get to the same endpoint,” a voice says.

Google’s strategy has connected with viewers, Mr. Daboll said, because they would rather view a story than have products pushed at them. Google ads took five of the top 10 spots on Ace Metrix’s list of the most effective TV ads for Web sites this year.

“Google has been so dominant in its usefulness, but nonemotional connection,” he said. “Now they want to make you feel something about search, as opposed to just relying on it as a useful tool.”

Article source: http://www.nytimes.com/2012/01/02/technology/google-hones-its-advertising-message-playing-to-emotions.html?partner=rss&emc=rss