Zynga (ZNGA) Shares Setting Up Nicely Off Bottom
It’s been a rough go for shares of Zynga (ZNGA) since the company debuted, but there is daylight. After bottoming out around the $2 level late last year the stock began to inch higher above the first major resistance area of the 50 day moving average for the first time since the correction again. It held that new level of support for a few months before showing signs of significant buy interest just in the past few weeks.
On Jan 4th and Jan 28th, the stock showed healthy surges off the 50DMA with good volume, but it wasn’t until early this month after the company reported earnings (beating analyst estimates) that a sustained rally took place as the stock soared to the next resistance level of the 200 day moving average. Buy volume soared to nearly 3x the daily average indicating strong conviction on the part of buyers.
===> Get a Free Daily Analysis of Zynga (ZNGA) Stock Here |
This is where I get interested for a possible swing trade of a few weeks to a few months. I want to see that initial surge, followed by a consolidation period with declining volume. That’s what we’re seeing now and I think this period needs to play out for at least a few more days. It’s possible it may need to come all the way back and retest support of the 50 day moving average (red line in chart below).
A trade entry for me is signaled if the stock returns to the 50DMA and holds and/or it breaks out of a consolidation period. So, if it doesn’t touch the 50 again, but instead shows signs of breaking out of the consolidation (big volume & price surge intraday), then that is also a signal. Either way ZNGA is an interesting swing trade to keep an eye one.
Tags: znga, zynga
Who’s Winning The Tesla (TSLA) Tussle? Musk vs NYT Broder
I’ve been covering Tesla Motors (TSLA) for a few years now (not as much recently) and since the company went public in June of 2010, the scrutiny level continues to rise. With shareholder fortunes at stake and a general skepticism of electric cars, particularly of those not made by Toyota, the microscope has zeroed in on Tesla. If there is one thing you can count on, it’s that CEO and Co-Founder Elon Musk won’t simply rely on a PR department damage control piece. He’ll get into the ring himself and throw some punches.
===> Get a Free Daily Analysis of Tesla (TSLA) Stock Here |
In 2008, he hit the show Top Gear with a lawsuit claiming the show lied in order to sensationalize the piece where it showed the Roadster dying after just 55 miles along with criticizing the brakes as deficient. The lawsuit was thrown out last year with the judge saying the show is more for entertainment rather than factual journalism so couldn’t be punished for embellishing the truth (which in fact it had). Around the same time last year, the brick issue was making the rounds. The latest disagreement (that’s putting it nicely) involves New York Times writer John Broder who wrote about his journey in the Model S from DC to New York which ended with the Model S on a flat bed tow truck. I won’t get into all the details of the “he said, he said”, but Broder claimed the car struggles in cold temperatures with a significant depletion in range. Musk countered with tracking data from the car claiming that instructions weren’t followed by Broder. The end result of all this is another round of skepticism that in fact a Tesla made car can in fact be a mainstream car while Broder’s credibility is questioned. Some point out the fact that he’s not an automotive expert and actually focuses on the oil industry. Fair or not, you can understand the criticism. Probably not the best guy to put on this assignment. It should be noted that the NYT’s auto expert wrote a glowing piece of the Model S in September, but based on a drive in California, not the frigid NE. Taking a step back and viewing the big picture I think most of us can agree that the Model S, which is designed to hit more of the mainstream market, just isn’t quite there yet. Perhaps in another year or two. You can start at the price point which is out of the range of most middle class families and then consider the potential issues including lack of infrastructure. The company originally expected to sell (CORRECTION: deliver. The company has close to 20K reservations for the Model S and it’s expected to take close to a year to deliver on all these) about 5000 of the Model S in 2012, but estimations are calling for about 3500. We’ll know the exact numbers once the company releases it’s much anticipated earnings report after the close on Wednesday. Heading into this earnings report, the stock chart for TSLA actually looks considerably bullish, so perhaps traders are forecasting a surprise the to the upside. The stock broke out of a real nice looking cup with handle base a few weeks ago on decent volume and the pullback off the NYT story at least for the time being is a very normal pull back. There is STRONG support around $35 and it looks like that level will need to be tested. Should it be tested and it holds, that would be an excellent entry point.
===> Get a Free Daily Analysis of Tesla (TSLA) Stock Here
To wrap up this post, I just want to say that regardless of whether you believe in electric cars or not, or whether you like Elon Musk, you have to admire the drive and entrepreneurial spirit of Musk. This is a guy who isn’t afraid to put it all on the line and continue to forge ahead when others say it can’t be done. This is exactly the attitude that is the backbone of the success of this country and what continues to make it great today. I’m rooting for Musk and Tesla and do think they will continue to improve the car over time. Costs will come down and maybe in a year or two you will see the Jones next door with a Model S in the driveway.
Tags: elon musk, Tesla, tslaChart Of The Day: Live Deal Inc (LIVE) Perfect Setup
I’m hoping to do a few of these over the next few weeks to see if there is any interest. Many of the charts featured will be of bigger risk, much higher reward so don’t even consider betting the farm 🙂 I like to dabble in these kinds of swing trades with 2-5% of my portfolio, looking for a quick gain of 20 – 100% over the course of a few days to a couple weeks.
Todays’ stock is Live Deal Inc (LIVE), a company that focuses on marketing services and products for small to medium businesses in local markets. The stock soared a couple days ago and has been digesting those gains quietly. Now, you just want to wait for a breakout from this consolidation with good volume which would signal a nice entry point. The first chart is the daily chart showing Monday’s high volume surge breakout. The 2nd chart shows the 5 min chart and orderly consolidation as traders take their quick profit. Often times these stock will carve out this exact same move – big surge over one or two days followed by a digestion of those gains over a day or two, followed by a more sustained move in the direction of the breakout which in this case is up.
IMPORTANT: Be patient and wait for a breakout of this consolidation. As I write this I see the stock has dipped below $4 and taking out intraday support so an intraday breakout is no longer imminent. It may not happen until later today or tomorrow.. OR even at all for that matter. That’s why it’s important to wait for buy demand to return.
===> Get a Free Daily Analysis of Live Deal (LIVE) To Help Guide Your Trade
Amazon (AMZN) Breaks Out On Licensing Deal
Shares of Amazon (AMZN) are up nicely this morning, breaking out of a sharp cup with handle base on news that the company has secured an exclusive content licensing deal with TBS and Warner Bros. Specifically, the TNT drama Falling Skies and the Warner Bros. produced “The Closer”. These shows will be added to the Prime Instant Catalog giving Prime members free access to these shows. Amazon had rolled out a monthly Prime membership service, but quickly cancelled the test and only offers the yearly membership. If you are a frequent Amazon shopper and like to watch shows and movies on demand from your PC or mobile device, it’s a great deal. You’re even allowed to share the shipping savings with family members in the same household.
“Today’s agreements with TNT and Warner Bros. Domestic TV add two great TV series to Prime Instant Video,” said Brad Beale, Director of Digital Video Content Acquisition for Amazon. “Falling Skies and The Closer are some of Turner’s most-watched and highly talked about series and we’re happy to offer them exclusively for Prime members to enjoy. Amazon Prime just got even better.”
Technically, shares of Amazon (AMZN) remain strong and in a 4 year uptrend on the weekly chart. On the daily chart, the stock is breaking out of a cup with handle base this morning (albeit an average looking one). Given the sharp, V like pattern of the base I’d expect fairly limited upside in the coming weeks and some kind of consolidation period. The best time to purchase the stock would have actually been on a return to the 200 day moving average following the breakout in July.
===> Get a free daily analysis of Amazon (AMZN) to help guide your trade
Tags: amazon, amzn
SodaStream (SODA) Breaking Out With Good Volume
A high quality breakout is taking place in shares of SodaStream International (SODA) this morning with good volume. I don’t see any news on the stock at this time, but there may be an upgrade that I’m missing. SodaStream is a company I first wrote about over at Self Investors not long after the IPO. I liked the stock quite a bit then despite some question marks. The question marks remain today as long term investors remain skeptical. Let them remain skeptical. What I see developing today is a breakout from a cup with handle base with strong volume. While this isn’t a breakout to new all time highs, but rather a base within a much larger base created with the huge plunge in the summer of the last year, I believe there is room to run. A real nice trade setup here.
===> Get A Free Daily Analysis of SodaStream (SODA) To Help Guide Your Trade
SodaStream is a play on homemade soda. The company makes a carbonation machine allowing to you create your own cola, energy drinks or sparkling water. They tout the cost savings, the ability to sweeten it just the way you like (ie soda without the mounds of sugar that pepsi and coca cola use) and the environmental benefits. The company continues to show rapid growth and with a breakout move like we have today, I believe the time is right for at least a swing trade of a few weeks to a few months. The stock may be beginning a move ahead of it SuperBowl debut on February 4th. I’d be looking to take a profit the following morning if the stock runs more than 20% from here.
List Of Top Performing IPO’s (2012) Part I
I’m always a big fan of tracking the top IPO’s because it’s from this group every year that the next big winners will arise. When I ran SelfInvestors I built a database of IPO’s and ranked everyone by fundamentals and technicals to keep close tabs on the best opportunities. It was a lot of work but well worth it. Since I’m not actively running an advisory service anymore, I don’t keep it up to date, but I do keep an eye on what’s coming to market. It’s always interesting to see which companies and industries will lead the market in the coming years. Unfortunately, the free data that’s available quite frankly.. sucks! The best I have found after searching high and low is the IPO data from Edgar Online.
I took a look at the nearly 150 IPO’s that came to market in 2012 and by my count there were 22 that increased 50% since the offer date. I thought I’d take a look at the top 20 by performance, provide a brief description, then discuss a few that are setting up into a good trade along with a chart for those. Hope you find it valuable!
1. Guidewire Software (GWRE): this is the top performer so far in 2012, up 135% from the offer date. The company offers insurance software which provides operations in underwriting, policy administration, claims and billing. Its customers include GEICO, Genworth Insurance and many smaller insurance companies. The company is profitable and continues to grow, but that profits have been under pressure a bit this year. The stock is currently in a big basing pattering after a meteoric rise immediately after going public. Get a free daily analysis of GWRE here!
2. HomeStreet (HMST): a close 2nd is HomeStreet which is up 134% so far this year, but let’s keep in mind it’s a bank. While bank stocks can do well, I prefer technology stocks when looking for that next home run. The company is now showing profits in 2012 after steep losses while it emerged from the financial melt down of 2008. Get a free daily analysis of HMST here!
3. Proto Labs (PRLB): next up is Proto Labs which is up 128% this year. The company uses CNC machines and injection molding to manufacture custom parts for customers. While manufacturing doesn’t typically get me excited as an investment, this is a company that is growing quickly and has streamlined the short run manufacturing process leveraging the power of the internet of uber smart software. Customers can upload their CAD rendering of a product and Proto Labs will not only provide a quote to produce it, but provide suggestions on how to make it better. This is a company that has been increasing revenues 50% over the past few years and became profitable last year. This is a solid, growing company that should be on your radar.
Get a free daily analysis of PRLB here!
4. NationStar Mortgage Holdings (NSM): as I mentioned above, I’m not real interested in financial stocks as IPO’s but this is one that had a tremendous run after breaking out last May as mortgage rates continued to drop. The company hit profitability last year and has seen a huge surge in revenues over the past few years since 2009. The chart looks mighty toppy to me and the stock should be avoided in my opinion. Get a free daily analysis of NSM here!
5. Five Below (FIVE): if technology is my favorite sector for playing IPO’s, specialty retail might be 2nd. I still remember the high flying Crox days 🙂 Five Below is a specialty retailer that sells everything from candy, to stuffed animals to DVD’s to t-shirts aimed at the pre-teen and teen market. As you may have guessed everything is below $5. The company is growing quickly and turned its first profit last year. There are nearly 250 locations mostly on the East Coast. There is lots of room for West Coast growth which is probably why the stock has done so well. It’s actually setting up for a nice entry point here. I’m a big fan of high volume gap ups followed by orderly consolidation. That’s what we have here. A breakout from this consolidation here offers the entry point. Get a free daily analysis of FIVE here!
6. WageWorks (WAGE): with a surge of 109% since the offer date, WageWorks is up next. WageWorks administers and operates a broad array of CDBs, including spending account management programs such as health and dependent care Flexible Spending Accounts, or FSAs, Health Savings Accounts, or HSAs, Health Reimbursement Arrangements, or HRAs, and commuter benefits, such as transit and parking programs. This is a company that is steady, but isn’t providing the kind of big growth I like to see in a homerun IPO. I’d pass on this one for now. Get a free daily analysis of WAGE here!
7. Intercept Pharma (ICPT): in at the 7 spot is Intercept with a 102% surge since its offer date. The company isn’t profitable and is working on treatments for liver and metabolic diseases. I have to say I’m not a fan of early stage pharmaceutical/biotech stocks unless it’s for a very short term trade. The risk is too great in my opinion. I typically avoid them, but if you look at the chart it provided a picture perfect entry from a flat base on Nov 29th and is up 50% in just a few trading days since. If I were in, I’d take the money and run. Get a free daily analysis of ICPT here!
8. Annie’s (BNNY): at number 8 is organic, specialty food producer Annie’s with a 93% increase since the IPO date. The stock has the biggest opening since the LinkedIn IPO. Impressive stuff for a food company! The company sells its natural and organic pastas, pizzas, snacks and dressings in all major grocery stores. Growth has been steady and solid with the company ready to post its first profitable year. I like companies capitalizing on the trend towards healthier, organic meals at home and Annie’s is a solid one. No, the company won’t likely provide an explosive move in the coming years, but hey it’s up 100% so far and there may be room to run. The stock has been in a basing pattern since the big gap up on the first trading day and is currently looking to carve out a bottom after falling into a new base in recent months. Definitely a stock to keep an eye on.
Get a free daily analysis of BNNY here!
9. VIP Shop Holdings (VIPS): next up is VIP Shop with a 92% increase in the price of the stock since the offer date. The company is the largest discount retailer in China and uses a flash sale model to sell discounted items in a short period of time. There should be some caution with China ADR’s as there have been many in the past several years that have been crushed due to accounting issues and downright fraud. It should also be noted that this is a company seeing explosive revenue growth ($3 mill in ’09, $33 mill in ’10, $227 mill last year and will get close to a whopping $600 million this year. Despite the huge revenues, the company still isn’t profitable, but came close last quarter and could turn its first profit in Q4. That’s probably why the stock broke out from a long double bottom base on Sept 19th and hasn’t looked back. The stock has more than doubled since that breakout and is too extended at this time to get in. It needs a consolidation period. Get a free daily analysis of VIPS here!
10. Workday (WDAY): at 10 is Work Day with an 85% increase. Workday is an enterprise, web based software company offering solutions for a variety of industries including payroll, time tracking and employee expense management. While I really like fast growing software companies as IPO’s, I prefer that they be profitable for longer term holds. Since Workday isn’t profitable it may just offer a nice swing trade. Take a look at the setup here: Get a free daily analysis of WDAY here!
Facebook (FB) Beats Estimates, Relief Rally Ensues
There has been quite a bit of negative press surrounding Facebook and its stock since the day they announced they were going public. Of course many of those concerns were valid as the company continues to find the best way to monetize its massive worldwide user base.
The stock has been hit hard in recent months, but after the bell tonight the stock is getting a healthy lift after the company beat analyst estimates by a hair on both the top and bottom lines. FB reported a non GAAP EPS of .12/share which was ahead of the consensus analyst estimate of .11/share as well as the whisper number of .10/share. On the revenue side, the company also reported just above the analyst estimate of 1.23B by reporting 1.26B. So, while revenues increased 32% Q/Q, the EPS number is stagnant despite beating estimates. I’ll call this a good quarter, not a great quarter with the after hours move a relief rally. That relief rally will likely give some back which could create a nice longer term entry point coming out of a large base.
====> Get Your Daily Facebook Stock Analysis Here
Let’s take a look at a few of the highlights of the quarter:
* The company will continue to focus much of its effort on mobile and how to monetize that. It appears they are succeeding with mobile ads which now account for nearly 15% of revenues.
* Monthly active users hit the 1 billion mark in the quarter. 60% of those users now on mobile devices and that number continues to increase rapidly.
* Launched Facebook Gifts, an easy way to send friend gifts from ecommerce partners. This could be a healthy revenue driver.
* Closed Instagram acquisition – Instagram user base has grown from 27M to 100M since the acquisition.
* Excluding Forex changes, ad revenue increased 43% over the year ago quarter.
“As proud as I am that a billion people use Facebook (FB) each month, I’m also really happy that over 600 million people now share and connect on Facebook every month using mobile devices,” said Mark Zuckerberg, Facebook founder and CEO. “People who use our mobile products are more engaged, and we believe we can increase engagement even further as we continue to introduce new products and improve our platform. At the same time, we are deeply integrating monetization into our product teams in order to build a stronger, more valuable company.”
Technically, FB stock base been trying to find a bottom to a base for several months and the gap up move tomorrow morning may just be the beginning of a sustained move. However, as mentioned above, I think the stock will pull off the morning highs and possibly retrace most of the move in the coming days which could very well offer a nice entry point. This earnings report likely puts a floor under the stock at least for a few months.
Tags: earnings, facebook, fbProof Golden Tate Catch Vs Green Bay A TD
OK, so this is a stocks blog and not exactly the place for a football post but I felt as a Seahawks fan I had to do my part to help get out the truth about Golden Tate’s winning catch (or partial catch) vs the Green Bay Packers.. . even if people are getting tired of hearing about as am I.
I would like to point out that (as a Hawks fan) I’m not biased to the point of blindness and felt just like ESPN and many others that it was a great injustice to the Pack when the catch better known as “Failed Mary” or “Inaccurate Reception” was ruled a TD and not an interception. However, at the time we were only fed one angle over and over again.
Then images and video emerged from the reverse angle. I had wondered about those reverse angles because ESPN wasn’t showing where the left arm was. Now we know. Tate’s arm was firmly wrapped around the ball at the time both feed touched the ground before Jennings could get both feet to the ground. Touchdown, game over, good call.
Sure the way the end of the game was handled turned into a circus. Sure there were other highly questionable calls particularly the roughing the QB call on Russell Wilson, but these kinds of calls went both ways and as for the shove by Tate ahead of the catch, those are never called.
There are a few other blog posts out there that break it all down in great detail. You’ll never see this kind of analysis on ESPN.
http://bleacherreport.com/articles/1347469-green-bay-vs-seattle-3-simple-reasons-it-was-a-touchdown
Even if you’re in the camp that disagrees and believes it was an interception, can you at least admit that it wasn’t the worst call in the history of the NFL and one a real ref could have made as well? Now imagine trying to make that call in real time. Let’s also keep in mind both the review up in the booth (by a real ref) AND a review by the league office both upheld the call. At the time it seemed absurd, but they likely had shots from every angle not the lone shot ESPN was replaying.
Obviously this game deserves a rematch whether it be in the playoffs this year or at Lambeau on Monday Night next year… no replacement refs, no excuses.
Tags: golden tate, green bay packers, md jennings, seahawks
Google (GOOG) To Enhance Travel Searches With Frommer’s Acquisition
Google (GOOG) acquired popular travel guide brand Frommer’s earlier this week in a move that is believed to help the search giant. Google has already announced plans to partner the Frommer’s segment with its recently acquired restaurant rating company Zagat.
===> Get Your Daily Google Stock Analysis Here
Frommer’s was founded in 1957 by Arthur Frommer. Frommer wrote a guide book about European destinations for army soldiers. His guidebook was then turned into the first Frommer’s book Europe on $5 A Day. The company he started is now one of the most popular and most trusted travel guide companies.
Google’s goal with the acquisition is to “provide a review for every relevant place in the world”. Google has now acquired several review and travel brands with Frommer’s, Zagat, and ITA. The Zagat acquisition gave Google the ability to show a rating for restaurants in search listings along with phone numbers and addresses. Google has been working hard at giving consumers relevant information in search results. The end result is that less people are clicking through on actual links in search results.
A perfect example of Google’s new search technology is biographies. If you run a search for a popular person, Google actually showcases a small biography of the person along with search results. Hre is a sample of what a search for Warren Buffett returns on Google:
Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely considered the most successful investor of the 20th century. He is the primary shareholder, chairman and CEO of Berkshire Hathaway. Wikipedia
Born: August 30, 1930 (age 81), Omaha
Net worth: US$ 44 billion (2012)
Spouse: Astrid Menks (m. 2006), Susan Buffett (m. 1952–2004)
Children: Howard Graham Buffett, Peter Buffett, Susan Alice Buffett
Education: Columbia Business School (1950–1951), University of
Nebraska–Lincoln (1950–1950), Wharton School of the University of
Pennsylvania (1947–1949), University of PennsylvaniaMore
Appears in: Buffett & Gates Go Back to School
If I was looking to find out how old Buffett was, where he was born, or if he had kids, I wouldn’t need to click on any of the links, because the answer is right in front of me. Google is doing the same by integrating Zagat ratings and now Frommer’s. People searching for popular vacation destinations will soon see immediate results within the search result listings. The announcement of the Frommer’s acquisition sent shares of rival travel firms like Expedia, Orbitz, Priceline, Yelp, and TripAdvisor all down.
Frommer’s comes to Google with a vast amount of material and research. Over the last fifty plus years, the company has produced over 300 guidebooks and covered the majority of the countries on Earth. The company is said to cover over 3500 different destinations in detail. Frommer’s has been a part of popular publishing units like Simon & Schuster, Pearson, IDG Books, and John Wiley & Sons. More than seventy five million Frommer’s branded books have been sold. Here is a list of popular series within the Frommer’s family:
Frommer’s Complete Guides
Frommer’s With Kids
Frommer’s Day by Day
Frommer’s Portable Guides
Frommer’s Irrevent Guides
Frommer’s Memorable Works
Frommer’s Phrase Finder & Dictionaries
Frommer’s Driving Tours
Pauline Frommer’s Guide
The Unofficial Guides
For Dummies
Travel Guides
Suzy Gershman’s Born to Shop Guides
Frommer’s National Park Guides
MTV Travel Guides
The deal by Google shows that the company is trying to control what we see and search for on the internet. As Google once relied on people clicking advertisements and links, the company is now buying into content to provide the best searching experience for consumers. The newest acquisition will see a slight hiccup in watchdog groups, but will pass regulators just like Zagat and ITA did.
Shares of the GOOG have been on a tear in recent weeks following a strong earnings report back in July with the stock up nearly 20% in just a month. The stock hit a new 5 year high a few days ago and appears to be headed to take on all time highs around the $750 range, although it may need a bit of a rest before that happens.
Tags: Frommers, GOOG, GoogleFacebook (FB) Conference Call Highlights & Analysis
Yesterday, the much awaited Facebook (FB) earnings report hit the street resulting in a wild ride in after hours trading and at the open today. It’s safe to say traders weren’t impressed with the report with the stock gapping down big at the open (although it has recovered some). Here are some highlights of the conference call followed by own thoughts.
====> Get Your Daily Facebook Stock Analysis Here
– Importance of Mobile
Zuckerberg estimates that it in about 5 years there will be twice as many mobile users as current desktop users and early indications point to greater engagement from mobile users (20% more). Over the past year, the number of active mobile users has increased 67% so clearly the company is focused on how to monetize it (under the guise of “how to better connect people”).
“So mobile not only gives us the potential to connect more people with our services, but it also gives us the ability to provide more value and a more deeply engaging experience,” says Zuckerberg.
– Social Selling (selling without.. selling)
The biggest challenge for Facebook in terms of advertising is how to sell without selling. How to incorporate advertising without being intrusive and taking away from what people are on Facebook to do.. interact with friends and family. Zuckerberg discussed Social Ads on the call highlighting the fact that the best form of advertising is a from a friend. True, there is nothing more powerful than an endorsement from a trusted friend or family member and Facebook of course has the viral platform to make this successful. However, they have to do so carefully.
COO Cheryl Sandberg discussed the rollout of their more social form of advertising called Sponsored Stories: “Sponsored Stories are regular stories that people see in the News Feeds already, updates, likes, comments posted to Facebook every day that a marketer pays to highlight. For example, if I post a positive review of a product I purchased at Walmart, about 20% of my friends have seen the post, depending on things like when they check their News Feed. Using Sponsored Stories, Walmart can pay to boost distribution of this post so a larger percentage of my friends see it.”
“By the end of June, Sponsored Stories in News Feed was at a run rate of over $1 million per day in revenue and about 1/2 of that is coming from mobile. This is an encouraging start in our effort to generate revenue from the mobile use of Facebook. We know that social ads perform much better than nonsocial ads, so our job over the next few years is to increase the percentage of ads that are social and engaging,” said Zuck. Sandberg mentioned that Sponsored Stories perform multiple times better than the standard ads on the right hand side of the page when measured by click through rate. Considering this is probably the only way they’ll be able to advertise on mobile devices, that’s a good sign. It should be noted however that they don’t have a ton of data on this yet and are rolling it out slowly.
One potential significant ad revenue driver for Facebook that most analysts aren’t really factoring in is the Facebook Ad Exchange which is still in testing. It’s basically a retargeting model where users are shown ads of websites they visit. For example if you visit a site about fly fishing, your computer would be cookied by that website so that their ad would then show on Facebook once you went to Facebook. This used to be considered a bit creepy, but it’s so common now that many are used to seeing ads of sites they visit all over .. essentially the ad follows them around. That’s the age we live in when it comes to online services. Everything is free, paid for by advertising. If you don’t like it, there are ad blocker plugins for FireFox and Chrome and certainly (albeit hard to find) ways to opt out.
Getting Facebook users to click through and engage in ads is one thing, but companies need to see an ROI. Not many small business can afford to pump money into brand awareness and social proof. They need to see a verifiable return. Sandberg indicated that an independent review of 60 campaigns revealed that 70% of them delivered a return of 3x or better and half delivered a return 5x or better. I have to say I’m skeptical of these numbers based on what I’ve read in forums and what I’ve seen from my own efforts as marketing director for an e-commerce company. It wasn’t long ago that General Motors made headlines ahead of the Facebook IPO when it announced it was pulling its Facebook paid ads due to poor results. I think there are two angles at play here.. (1) it greatly depends on the type of business advertising and (2) valuing Facebook advertising is very difficult. If you’re just tracking how many people come directly from Facebook then buy, my own results aren’t great. However, you have to believe consumers see an ad for a Facebook page then research that product in Google or somewhere else before clicking through. There is value in Facebook for businesses in both brand awareness and social proof as well. These points probably illustrate why most companies are spending some money on Facebook advertising, but not a big chunk of it. It’s still relatively early days for reaching customers on Facebook and companies are proceeding as cautiously optimistic.
Key Metrics
– Total revenue up 32% from year ago, ad rev up 28%
– Ad revenue driven by 18% increase in number of ads shown and 9% increase in price of ads (mostly US)
– strong international growth, particularly Asia
– Payment revenue of $192 million which has been flat for 3 quarters due to more gaming moving to mobile
– 955 million users at end of June (increase of 29% in past year)
– 552 million active users (accessing FB every day) (up 32% over past year)
– Amount of engagement remains steady (likes, comments, posts)
– Excluding IPO related expenses, expenses increase 60% to 669 million
– Number of employees has increased 50% in past year
– Company expects to continue to spend aggressively, not worried about a target margin yet
– Operating margin of 43%
You can read the transcript of the full conference call over at Seeking Alpha
I’ll follow up this post on Monday with some highlights of analyst commentary. Have a great weekend.
====> Get Your Daily Facebook Stock Analysis Here
