Facebook: The Social Standard - Initiating Coverage With A $155 Price Target
Altum Research • 97 Comments
Altum Research • 97 Comments
Fri, Mar. 18, 3:17 PM
- Citing sources at both companies, The Information reports Yahoo (YHOO +2%) is thinking of letting Facebook (FB +0.4%) sell ads within Tumblr's popular mobile app, with the companies splitting the revenue that's produced.
- Though Tumblr reported having 550M monthly visitors as of last year (only some of them have set up Tumblr accounts, the rest are just browsing its content), the blogging platform failed to hit Yahoo's $100M 2015 revenue target, leading Yahoo to take a $230M write-down on its $1.1B 2013 purchase of Tumblr. The Information reports only 10%-15% of Tumblr's ad inventory is being sold.
- A Tumblr deal would involve Facebook's Audience Network, one of the top players in the mobile ad network space (others include Google's AdMob and Apple's iAd). Facebook previously disclosed the Audience Network was on a $1B/year revenue run rate (includes publisher payments) as of Q4. Yahoo has its own mobile ad network thanks to the Flurry acquisition, but Facebook's is reportedly ~3x larger, with Facebook getting a $200M cut on 2015 ad spend of $675M. Facebook argues its superior user data acts as a differentiator.
- In other news, Facebook reportedly plans to unveil a Bot Store for Messenger at its April F8 developer's conference. The store would let users access various automated services (for example, weather reports, food orders, or flight check-ins) by sending a message to an automated service. Facebook has already launched an SDK for Messenger bots, and struck Messenger integration deals with Uber and Lyft.
Fri, Mar. 18, 4:45 AM
- Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) are battling to win the right to stream conventional TV programming, according to the NY Post.
- Both companies, eager to ramp up their capacity to deliver compelling live streaming video, have approached programmers about a deal for such rights.
- "All of a sudden, Facebook and Twitter are trying to get in the tent with us," one programmer told The Post. "They're each arguing their attributes and why aligning with them is to our advantage."
Mon, Mar. 14, 3:15 PM
- Through February, clients of Facebook (FB +0.5%) ad partner Kenshoo had increased their social media ad spend by 87% Y/Y, up from Q4's 50%, reports Baird's Colin Sebastian (Outperform rating, $120 target). Sebastian adds strong demand for Facebook's Dynamic Product Ads - they allow multiple products from an advertiser's catalog to be promoted - is contributing to the growth,, as is growing Instagram monetization.
- Kenshoo estimates Dynamic Product Ads now make up 8%-9% of total social media ad clicks. Video ad clicks account for an estimated ~20% of Facebook's total (the same as Q4), and app install ads - a market for which Google (GOOG, GOOGL) just unveiled new offerings tied to mobile search - 10% of Facebook ad spend. Both search and social ad spend are deemed healthy as online ads continue taking share from offline channels, with search still accounting for ~3x as much spending as social.
- Not surprisingly, Sebastian believes Facebook (has a long history of posting sales/earnings beats) can top Q1 estimates. Kenshoo also provided strong numbers in January ahead of Facebook's Q4 report - the company wound up trouncing estimates on the back of 57% Y/Y ad sales growth, up from Q3's 45% and Q2's 43%.
- Last week: RBC reports strong online ad survey results for Facebook and Google
Wed, Mar. 9, 11:56 AM
- "When asked to rank order all the major Online Advertising platforms based on ROI, marketers placed platforms in three clear groups: Google (GOOG +1.1%, GOOGL +1.3%), Facebook (FB +1.1%) & YouTube (“YT”) again lead, Twitter and LinkedIn are in the middle, and Yahoo and AOL are last," reports RBC's Mark Mahaney following a survey of nearly 2,000 ad pros. "We note that Twitter (TWTR -3.5%) was the only platform to see a clear falloff in its relative ROI vs. our prior survey, while AOL showed a modest improvement."
- Mahaney adds 62% of Facebook, 54% of Google, 48% of YouTube (Google-owned), and 32% of Twitter advertisers plan to up their ad spend on the platforms over the next year. Only 9%, 10%, and 8% of Facebook, Google, and YouTube advertisers plan to cut their ad spend; for Twitter, the number is 23%.
- 31% of Google advertisers and 28% of Facebook advertisers spend over 30% of their online budgets on the platforms. 59% of Facebook, 42% of Google, and 39% of YouTube advertisers think their ROIs have improved over the last 6 months. Notably, 69% of advertisers had positive attitudes towards Facebook's autoplay video ads, and 76% have a YouTube budget allocation.
- Mahaney states Twitter, which provided soft Q1 guidance last month, "generally had the weakest results with respect to advertiser budget allocation, expected future spend, and general satisfaction." Meanwhile, a record 45% of survey respondents showed an interest in advertising on Snpachat (Private:CHAT), which is reportedly aiming for 2016 revenue of $300M-$350M.
- The survey data comes after both Google and Facebook reported strong Q4 ad figures. Google's revenue from its own sites rose 20% Y/Y in Q4 to $14.9B, as 40% paid click growth (fueled by YouTube and mobile search) more than offset a 16% drop in ad prices. Facebook's ad revenue (boosted by Instagram's ad growth) rose 57% Y/Y in Q4 to $5.6B, an improvement from Q3's 45% growth.
- Two days ago: Facebook ends ad-buying servicetest, reports native and video ads outperform
- Update: More details from RBC's survey can be found here. Mahaney: "Per our survey, a record 57% of marketers (up from 49% in our last 2 surveys) allocate over 20% of their budgets to Online, including a record 23% who allocate over 50% of their budgets to the Internet ... Key – 40% of respondents now cite TV [ad budgets] as a source of funds for Online Advertising, up from 37% in our September survey."
- Update 2: Some other Facebook news: The company is buying Masquerade, a popular iOS app that lets users overlay animated filters on top of their faces in selfie shots.
Mon, Mar. 7, 6:43 PM
- Re/code reports Snapchat (Private:CHAT) is aiming to produce $300M-$350M in revenue this year, far above the $50M in 2015 revenue it was aiming for last summer. One source adds the ephemral photo/video-sharing service hit a $100M/year run rate in Q4.
- Snapchat stepped up its monetization efforts in 2015. The company's revenue streams include sponsored photo filters, its Discover section (hosts publisher content and splits related revenue), and Live Stories (allows advertisers to sponsor a montage of event-related photos/videos). Last spring, CEO Evan Spiegel stated Snapchat has close to 100M daily active users in developed countries.
- The WSJ reported last week Snapchat has raised $175M from Fidelity at the same $16B valuation it obtained last year. If Snapchat hit the midpoint of its reported 2016 revenue target range, the company would be worth 49x forward sales. Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) respectively trade for 11.8x and 4.7x 2016 consensus sales estimates of $25.5B and $2.96B.
Mon, Mar. 7, 1:10 PM
- Following a test with advertisers, Facebook (FB -1.9%) has pulled the plug on a demand-side ad-buying platform (i.e. a DSP) for its Atlas ad-server/measurement solution.
- Ad tech chief David Jakubowski states low ad quality drove Facebook's decision. "[W]e plugged into a number of the usual exchanges and bought across several formats ... We were able to deliver ads to real people with unprecedented accuracy, but came up against many bad ads and fraud (like bots). While we were fortunately able to root out the bad actors and only buy quality ads, we were amazed by the volume of valueless inventory."
- Notably, he adds the only ad formats that "delivered significant value" during the test were native ads (Facebook and Instagram feed ads are native ad types) and video ads (another area Facebook is well-exposed to). Not surprisingly, mobile ads in general delivered much of the "true business value" found in the test. Facebook VP Brian Boland claims native/video ads delivered "7x better results than banner ads."
- As part of its efforts to double down on ad types it considers effective, Facebook is rolling out new tools for Atlas: A tool for measuring the impact of online ads on offline sales, a service that gives advertisers insights on how users see ads across devices before making a purchase, and a video-ad-serving/measurement service. Jakubowski: "[M]any marketers still choose to deliver and measure their ad campaigns using desktop-first tools that are not built for a cross-device world — and they’ve got the wasted spend to show for it."
- Facebook has tried to differentiate Atlas in part by using anonymous Facebook profile data (rather than cookies) to measure ad performance across devices. Atlas competes against Google's (GOOG, GOOGL) DoubleClick unit, which (among other things) is a major player in the DSP space through its Bid Manager platform. Independent DSP providers Rocket Fuel (FUEL +5.1%) and Sizmek (SZMK +3.9%) are higher today.
Fri, Mar. 4, 6:25 AM
- Long under pressure for tax avoidance, Facebook (NASDAQ:FB) is changing its U.K. sales structure and is expected to pay millions of pounds more in corporation tax.
- An internal memo to staff noted that going forward "U.K. sales made directly by our U.K. team will be booked in the U.K., not Ireland. Facebook U.K. will then record the revenue from these sales."
- Facebook paid just £4,327 ($6,116) in British corporate tax in 2014, a smaller bill than paid by one person on the average U.K. wage.
Wed, Mar. 2, 2:01 PM
- Facebook (FB -0.7%) now has over 3M businesses actively advertising on its platform, up from 2M as of Feb. 2015. 70% of the businesses are outside the U.S.
- Facebook's advertiser count dwarfs the 130K reported by Twitter (NYSE:TWTR) in its Q4 report, and highlights the company's strong small-business inroads. Last week, Facebook announced Instagram, which began to be aggressively monetized last year, has topped 200K advertisers.
- Facebook's efforts to get businesses to buy ads have included giving advertisers a standalone app, allowing businesses to sell products on their Facebook Pages (with the help of Buy buttons), and letting users contact businesses via Messenger. Efforts to provide advanced targeting and measurement tools for businesses have been ongoing for years.
- In other news: 1) German regulators have added Facebook to the list of U.S. tech companies they're probing - the company's use of personal data for advertising purposes is being studied 2) a Facebook exec has been freed a day after being arrested by Brazilian authorities on account of Facebook's failure to provide access to WhatsApp messages linked to a criminal investigation. 3) Re/code reports Facebook is offering to pay celebrities to use its livestreaming platform, as part of a promotional push.
- Previously: Zuck talks virtual reality and A.I., reportedly "obsessed" with livestreaming
Mon, Feb. 29, 7:27 PM
- "It took 10 years to go from building the initial smartphone to reaching the mass market ... So I can’t imagine it would be much faster for VR," says Mark Zuckerberg (NASDAQ:FB) in a wide-ranging interview with Germany's Die Welt am Sonntag. "I do think a new computing platform always emerges every 10 or 15 years. VR is currently the most promising candidate."
- Zuck adds Facebook is "mostly interested in the software" when it comes to VR - Oculus is seen as having an early edge here - but adds it's necessary for the same company to do both hardware and software in the early stages of a new platform's development. "Only later does specialization become valuable."
- When asked why anyone should buy the Oculus Rift ($599 + the cost of a PC featuring a high-end GPU) over Samsung's $100 Gear VR headset, Zuck declared the former delivers a far superior experience. "VR is a very intense visual experience and having the most powerful PC is the only way to deliver certain experiences ... You are playing Ping Pong or interacting with someone and the technology needs to be fast enough so that when you do something, it triggers and sends that action all the way across the Internet to someone else."
- Regarding artificial intelligence, Zuck predicted the technology will usher in an era of unsupervised learning. "You have this model of how the world works in your head and you’re refining it to predict what you think is going to happen in the future ... A.I. will help us with this." He also dismisses Elon Musk's concerns about A.I. potentially being a threat to humanity.
- Separately, Re/code reports Zuck is "obsessed" with livestreaming, and that "the engineering and product teams that work on video at Facebook" have made the company's Live video streaming service their top priority. Live, now available to users in general s after initially supporting just celebrities, is battling Twitter's Periscope, which topped 10M user accounts last August.
Wed, Feb. 24, 10:07 AM
- Facebook's (FB -1.6%) Reactions feature, in testing since October, has been rolled out to all users.
- In addition to the age-old Like button, users can select buttons/emojis labeled Love, Haha, Wow, Sad, and Angry. with the latter accessed by mousing over or tapping and holding the Like button. Posts will display a total Reaction count; users can click/tap on Reactions counts to see a breakdown.
- Facebook insists the change was carefully planned. "For more than a year we have been conducting global research including focus groups and surveys to determine what types of reactions people would want to use most. We also looked at how people are already commenting on posts and the top stickers and emoticons as signals for the types of reactions people are already using to determine which reactions to offer ... We will continue learning and listening to feedback to make sure we have a set of reactions that will be useful for everyone."
- Advertisers and brands have previously suggested Reactions will give them a better understanding of how users are responding to a post or ad, and thus help them deliver better ads and improve targeting.
- Update: Some other Facebook news: Instagram says it now has over 200K advertisers. That's well below the 2M+ claimed by Facebook proper, but more than the 130K claimed by Twitter as of Q4.
Tue, Feb. 23, 3:45 AM
- Facebook's (NASDAQ:FB) efforts to boost global Internet connectivity will continue despite a recent setback in Indian (which banned its service this month), CEO Mark Zuckerberg said at the Mobile World Congress in Barcelona.
- He then outlined the progress of the Internet.org initiative, through which he hopes to expand Internet to billions of people who lack access.
- Free Basics, a package that offers only select services including Facebook, operates in 38 countries and has brought access to about 19M people worldwide.
Fri, Feb. 12, 3:49 AM
- Under pressure from government officials, Facebook (NASDAQ:FB) is more aggressively policing material it views as supporting terrorism.
- The world's largest social network is now quicker to remove users who back terror groups, investigate posts by their friends, and has a team that focuses on terrorist content. The unit is also helping promote counter speech, or posts that aim to discredit militant groups.
- Facebook's not the only one figuring out how to curb extremist propaganda. Twitter last week suspended 125K accounts associated with ISIS.
Mon, Feb. 8, 11:59 AM
- Following months of contentious local debate, India's telecom regulator (TRAI) has imposed net neutrality rules that prohibit carriers from charging different prices for data services based on content. The ruling serves to ban Facebook's (FB -3.7%) Free Basics/Internet.org service, which aims to boost mobile Web adoption in emerging markets by providing free access to Facebook and a limited number of other sites.
- Free Basics has launched in more than 35 countries. However, the program faced a backlash in India from critics arguing it creates an uneven playing field for Internet service providers unable to join. Facebook reportedly spent INR3B ($44M) on a PR campaign supportingFree Basics.
- Even without Free Basics, Facebook had 132M Indian monthly active users as of last August; WhatsApp had 70M Indian active users as of late 2014. However, only 252M of the India's 1.3B people are currently believed to have Internet access.
- Facebook is seeing steep losses on a day the Nasdaq is down 2.8%.
Fri, Feb. 5, 12:43 PM
- On a day the Nasdaq is down 2.4%, Internet stocks are seeing outsized losses after LinkedIn (down 41.3%) issued weak Q1/2016 guidance with its Q4 beat.
- The professional social networking leader forecast its corporate hiring solutions business would see slower growth in 2016 (international macro issues were blamed). It also noted display ad sales fell by a high-30s % Y/Y in Q4 amid ongoing secular industry pressures, and reported just 7% Y/Y unique visitor member growth.
- Facebook (FB -5.5%), which soared last week after blowing away Q4 estimates on the back of 57% Y/Y ad revenue growth, is among the casualties. As is Amazon (AMZN -4.9%), which sold off last week after missing Q4 estimates and issuing in-line Q1 sales guidance, is also down sharply. As is Twitter (TWTR -5.3%), which reports in five days and continues trading near post-IPO lows amid growth/engagement concerns.
- Other decliners include Yelp (YELP -7.9%), TripAdvisor (TRIP -6.3%), Expedia (EXPE -6%), LendingClub (LC -8.3%), Wix.com (WIX -6.8%), Wayfair (W -7.6%), Groupon (GRPN -4.9%), Shopify (SHOP -6.3%), and Zillow (Z -6%), as well as ad tech firms Criteo (CRTO -8.9%) and TubeMogul (TUBE -7.6%). The aforementioned companies are generally expected to post Q4 results in the coming weeks.
- Earlier: Enterprise software and security stocks hammered after Tableau/LinkedIn's earnings
Tue, Feb. 2, 4:05 AM
- After buying WhatsApp two years ago in a deal worth about $22B, Facebook (NASDAQ:FB) founder Mark Zuckerberg said he expects the messaging app to contribute to the company's bottom line after it hits roughly a billion users. That metric has now been reached.
- The firm also stated recently it was exploring new WhatsApp business models geared toward profitability and scrapped the service's $0.99 annual renewal fee.
- About 42B messages, 1.6B photos and 250M videos are shared daily over the seven-year-old application.
Thu, Jan. 28, 3:27 PM
- As one would expect, Facebook's (NASDAQ:FB) big Q4 beat has been followed by a flurry of target hikes and plenty of analyst praise. Shares are less than $1.50 removed from a November peak of $110.65.
- "This was a breakout quarter because of Instagram," proclaims RBC's Mark Mahaney. He also notes ad revenue rose 66% excluding forex (it was up 57% in dollars), observes Q4 was the first quarter of Y/Y margin growth since Q2 2014, and says he's unconcerned about 2016 guidance for 45%-55% non-GAAP spending growth (30%-40% GAAP) in light of Facebook's growth trajectory. Mahaney's target has been upped by $30 to $160, with shares declared to be worth $200 in a best-case scenario.
- SunTrust's Bob Peck ($125 target): "We believe ad dollars will follow time spent and that with >1B daily visitors, improving targeting and analytics, new ad units, and >20% of time spent on mobile, Facebook has a long runway. Increasingly investors we speak with are focusing more on the inflection points for FB: Instagram roll-out cadence (now above 400M MAUs); continued video adoption and standalone prospects, new targeting and analytics; ecommerce, and new ad units (DPA and Lead Ads)."
- Rosenblatt's Martin Pyykkonen ($125 target): "We think Facebook has increasing traction with large brand advertisers (more tangible measurement metrics), Instagram and auto-play video ads on the core platform, and early but growing social media advertising market development in earlier stage foreign countries. We estimate Instagram’s global advertising revenue will be >10% of Facebook’s total advertising revenue on a run rate basis by the end of this year and will represent around $1B in advertising revenue for full year 2016 (~5% of Facebook’s total revenue).”
- FBN's Shebly Seyrafi ($135 target): "Instagram taking off like a rocket ship ... [Brand Networks] is forecasting that impressions on Instagram will be over 1B per month by the end of CQ1. This might imply ~2.5B impressions in CQ1, which would be almost double the 1.37B impressions in CQ4 noted above. Instagram [CPM ad prices appear to be] fluctuating around $5-7.”
- In other news, Facebook has announced all U.S. iPhone users are now able to use the company's video livestreaming platform, which competes against Twitter's Periscope. International and Android support will arrive later.
- Prior Facebook coverage
Facebook, Inc. is a social networking service and website. Its website allows people to communicate with their family, friends, and coworkers. The company offers advertisers a combination of reach, relevance, social context, and engagement to enhance the value of their ads. Its services include... More
Industry: Internet Information Providers
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