Facebook delivered the goods this afternoon. The company beat analysts' estimates and reported quarterly revenues of $1.56 billion and $5.09 billion for the year. Advertising revenue for the year was roughly $4.3 billion.
Despite the beat, Facebook shares were down after hours.
Advertising revenue for Q4 was $1.33 billion, or 84 percent of total revenue. Impressively mobile advertising represented 23% of total ad revenue, which is up from 14% the previous quarter.Even more significantly Facebook said that mobile daily active users exceeded web daily users in Q4 for the first time. CEO Mark Zuckerberg characterized Facebook as "a mobile company" accordingly.
There were 680 million mobile monthly active users in Q4 (compared with just over 1 billion in total). Of those 157 million were mobile only users.
For users who updated their iOS devices to 6.1 yesterday Fandango is now the commerce partner for movie ticket sales via Siri. If you look up movies using Siri you get the Rotten Tomatoes powered list with an option to buy using Fandango. If you don't have the Fandango app on your device you'll be prompted to install it to complete the transaction.
Fandango has reported that mobile now accounts for more than 30% of ticket sales. That will undoubtedly increase with Siri and iOS integration.
There are many Siri critics out there but the process of looking up a movie and (now) buying a ticket is pretty compelling. In fact this may well become the primary way that many iOS users buy movie tickets in the future. Once a credit card is on file with Fandango it's going to be faster and easier than conducting the same transaction even on the PC.
In addition, there's Apple Passbook integration post purchase.
This is yet another "mobile payments" point solution (it's really e-commerce on a mobile device) that will get people comfortable with the idea of using their phones to conduct transactions and pay for things. The convenience and value here are obvious to consumers.
Yesterday Yahoo reported Q4 2012 earnings and full-year results. In several respects company did better than expected in Q4, though display revenue was down 5%. Search revenue was up 14%. Display advertising is the single biggest source of revenue for the company.
On the earnings call CEO Marissa Mayer discussed the company's strategy. Among other things, Mayer is focused on improving Yahoo's mobile sites, apps and products, branding them consistently and upgrading them in those areas where Yahoo wants to concentrate. Improved Yahoo Mail and Flickr apps were two recent product upgrades for mobile.
Mayer is very focused on modernizing Yahoo user experiences and generating more usage and engagement accordingly. She believes that will bring more revenue opportunities including in mobile.
Below are some of her verbatim remarks about mobile from the earnings call transcript:
Yahoo! is focused on making the world's daily habits inspiring and entertaining . . . Essentially, we need to start a chain reaction . . . To start that chain reaction of growth, we've identified approximately a dozen products to focus on, each a daily digital habit. When taking multiple platforms into consideration for each product, desktops, mobile web, mobile apps and tablets, there's a lot of work to be done . . .
Focusing more on the pure advertising and monetization standpoint, there's greater opportunity with the big 4: Search, Display, Mobile and Video . . .
In 2012, we saw our Mobile adoption grow to more than 200 million unique monthly users. From a monetization perspective, this is still a very nascent source of revenue for us. With any platform shift, revenue always follows users, and Mobile will be no different . . .
Obviously, we have a large mobile web offering and people tend to use things like Yahoo! Finance, omg! on their mobile browsers on their phone. They also tend to use some of our applications . . .[M]ost of our applications and our mobile web experiences have Yahoo! Search boxes . . .
In terms of having 50% of our engineering workforce on Mobile, I think that this is something that will ultimately happen. I think you start looking many years in the future, it's hard to imagine that there are going to be technology companies where that isn't true. To date, we have started to shift some of our engineering teams to be more focused on Mobile. We need to get to a critical mass on that.
Just a few years ago Yahoo was well ahead of Google in terms of mobile advertising and revenue. Today that's hard to believe. Cleary, however, Mayer "gets it" and is working with her team to address Yahoo's current mobile deficiences. And the 200 million monthly unique users is a very encouraging figure for the company. By constrast Facebook, Yahoo's biggest display rival, has 600 mobile uniques on a global basis.
Even though Yahoo is building out its mobile assets, I would expect the company to make several mobile acquisitions -- perhaps on the consumer side but also of a mobile ad network or exchange. In fact, I would be surprised if Yahoo didn't make a meaningful acquisition to bolster its mobile advertising business.
I keep reading very aggressive projections about local-mobile advertising from BIA and others. Rather than grounded in reality today, these forecasts are built on a set of "optimistic" but simple assumptions about how the market will inevitably develop. For example, one assumption is that national ad dollars from brands and retailers that sell locally will pour into mobile and that their mobile ads will necessarily be geotargeted or localized.
While all forecasts must make assumptions about the future, my belief is that many of the assumptions being made about mobile are crude at best or simply incorrect. I'm a big proponent of location-based marketing and have written extensively about how geotargeted ads and ads with localized creative outperform conventional or "generic" national advertising. There's no question about consumer demand for local information. The question is whether and how advertisers can match or exploit that demand.
There remains a great deal of friction and many challenges to overcome before these big local-mobile forecasts can come true. There are also several "unexpected" things that may change the direction of the marketplace. I go into a few of those things below. In truth the majority of the localized mobile advertising today is happening in search. The platform is mature, the demand and the tools are there. The value is obvious to all involved. That's why Google is making the most money in mobile advertising today. (Facebook is also going to make a lot of money in mobile, some of which will be localized.) By contrast, local-mobile display is in its infancy.
There are two mobile ad networks generating and syndicating a large percentage of the local display inventory that you're likely to encounter: xAd and YP. CityGrid is out there and so are Verve, LSN, Telenav/ThinkNear and a couple of others. Marchex is there too with pay-per-call; however much of that is driving mobile callers to national call centers. Among the major ad networks Millennial, JumpTap and AdMob (Google) all offer local targeting. Often that targeting doesn't extend beyond state or DMA-level precision.
The emerging exchanges and RTB platforms all offer location as part of a laundry list of targeting capabilities. Indeed, location is likely to simply become one of many targeting variables on most networks and exchanges.
Some people have described the competition for business owners in the mobile payments segment as a "race to the bottom" in terms of credit card processing fees. Indeed, there are now at least 10 mobile payments or POS vendors targeting small businesses that are undercutting traditional credit card processing fees. The include LevelUp, Groupon, Square, PayPal Here, GoPago and others.
Clearly this is not the company's long-term strategy. It's trying to create more bar "inventory" for consumers in the hope of driving app adoption and expanding beyond San Francisco, it's only current market. However the zero credit-card processing fee is a major incentive for bars to sign up and use the system.
Coaster is another example of something I've written about multiple times: vertical or point solutions that offer self-evident value to consumers and will drive adoption of mobile payments. My favorite example is mobile parking payments but Coaster is a pretty good example.
By using Coaster smartphone owners can order, pay and tip at bars without giving over their credit cards directly or waiting in line. I've not yet used the app myself. However Coaster offers concrete and obvious value for bar patrons (and bar owners).
These kinds of vertical scenarios or "point solutions" will educate consumers and get them comfortable with mobile payments, paving the way for broader adoption of "horizontal" solutions such as Google Wallet. Exposure to a positive veritcal payments experience will tend to accelerate broader payments adoption.
By contrast people often don't see the reason or need for "mobile wallets" in the abstract.
How interested are you in using your mobile phone to pay for things, and replace cash or your credit cards?
Source: Opus Research (August, 2012; n=1,501 US adults)
Russian-based search engine Yandex this morning released a new mobile app called "Wonder." It's currently only available for the US market and right now only on iOS. It uses speech recognition from Nuance and social data from Facebook, Instagram, Foursquare and Twitter to provide search results refracted through social networks.
The kinds of queries Wonder envisions are those such as "tech news stories liked by my friends" or "restaurants near me visited by my friends." The app can only be used in landscape mode. It offers a visually polished UI but generally poor search and user experience (it would be better on the iPad). Unless there are some dramatic changes it won't be widely adopted by consumers.
Indeed, Wonder is no substitute for Google or Yelp or Facebook's new local and general search capabilities. What's interesting and significant is that it does illustrate broader adoption of social data as a filter and mechanism to personalize search results. The app is also consistent with the embrace of voice as a primary UI and capability.
Wonder offers a hint of a personality there but it's not a full blown "assistant" like Siri or Speaktoit. However Amazon's acquisition of text-to-speech specialist Ivona is a move to bring a Siri-like assistant feature to Amazon's Kindle tablet devices. (Amazon previously purchased speech provider Yap.)
Amazon already had text-to-speech for Kindle but Ivona offers a smoother, human-sounding voice capability that can be deployed for a range of purposes and use cases. And like Wonder it reflects the degree to which speech has become a critical "must-have" function on mobile devices.
By itself, however, speech is not enough. Increasingly there must also be a "personality" (assistant) to go along with the raw speech-processing capability. This is the impact of Siri on the broader marketplace.
My colleague Dan Miller brings a different perspective to the Ivona acquisition. He sees it in the larger context of speech-industry consolidation.
Update: TechCrunch says that Facebook has blocked Wonder's access to its user data while the companies negotiate about access.
Yesterday comScore reported that Facebook had the number one US mobile app of 2012. It beat out perennial leader Google Maps for the top spot. As an aside, Google Maps now has more usage in mobile than on the PC according to comScore.
There's nothing necessarily surprising or remarkable in Facebook's rise to the top position. It has long been one of the most popular apps and the app with the greatest monthly engagement (time spent).
What may be most significant here is the way in which Facebook's victory over Google operates as a kind of "metaphor" for the differences between PC and mobile usage. Search is not the center of the mobile experience as it is on the PC -- although local search, represented by Google Maps, is a critical and hugely popular function. Of course Facebook Nearby is a local search tool and has significant potential if Facebook invests further and continues to develop it.
Notwithstanding Facebook's win, Google still dominates the top 10 in comScore's chart above.
As widely discussed Facebook's challenge is to fully "monetize" all this mobile traffic/engagement without negatively impacting or "corrupting" the user experience. Search will help the company do that as would a mobile ad network for third party publisher sites that used Facebook user data. (There are some privacy issues and potential challenges there and it's on hold.)
Facebook has "display" ad units for mobile that are helping to quickly ramp its mobile revenues. The company allows mobile-only targeting as well as combined or cross-platform targeting for PC and mobile, thereby simplifying the mobile ad buy for marketers.
Many analysts simply assume that mobile advertising will follow the well-worn path of PC advertising, only perhaps in a more accelerated fashion. Thus you get mobile advertising forecasts that show a relatively smooth progression of ad budgets into mobile, with search and display being the two main ad categories (calls fall into both). There's a longer post to be written about these assumptions and why they may not play out as expected -- especially with respect to location-based ads on mobile devices.
Overall there are relatively few mobile search impressions available outside of Google. So most of the ad inventory being sold today is some form of mobie display. However there's also something a "war on mobile display." That's really about the business model: CPM/CPC vs. CPA.
It's largely being waged by firms whose business models that are not CPM or CPC based. Companies that use a pay-per-[app]-install or other CPA models have attacked CPM or CPC-based mobile display with the idea of the "fat finger problem."
The argument is that a huge volume of mobile display clicks are simply mistaken or perhaps even fraudulent in some cases.
Source: Trademob (9/12); based on analysis of 6 million mobile ad clicks
There's also the idea, often discussed, that consumers don't like mobile display advertising and consider it to be just a notch above spam.
More recently Marchex, which has transformed itself into a call-based advertising platform and network, asserts that the overwhelming majority of mobile display impressions and clicks are nearly worthless. In a study, released in December, involving six major display ad networks Marchex found that it took almost half a million ads to generate one "quality" phone call:
We examined a set of mobile display ad campaigns across the six largest mobile display networks to investigate the real, measurable performance of these ads. The call to action on all advertisements was a phone call. Performance was based on the number of high-quality calls driven by the media investment. Marchex defines high-quality calls as those that do not include misdials and spam; existing customers looking for support services; and unproductive calls (e.g. too short).
Our advertisers included national, branded businesses in Education, Insurance, Home Services and Entertainment. We conducted the study on major mobile ad networks and employed media tactics ranging from highly targeted to broad buys. Ad spend was distributed across networks and advertisers to ensure statistically valid conversion results on the back end.
Marchex said that in its test it took 494K impressions to generate 2,481 clicks, which in turn generated only one "quality" phone call (as defined above). That single call effectively cost $302 according to the company, because of all the wasted impressions.
Source: Marchex (2012)
I exposed these findings to one mobile ad network, which disputed them and said on its network the ratio of impressions to qualified calls was much smaller: 15:1 rather than 494K:1.
The Marchex argument is that it's simply cheaper to buy calls directly than to buy mobile display impressions. The company's study needs to be replicated before we can conclude that Marchex's findings are valid across networks. There's also the argument about awareness vs. direct response -- most national advertisers currently are just seeking broad awareness and scale.
Regardless Marchex's findings and the other data above collectively fuel pervasive doubts about the value of mobile display advertising.
Yesterday afternoon Google announced Q4 2012 earnings. In almost every respect it was a spectacular holiday quarter for the company. Consolidated revenues (which include Motorola) were $14.42 billion, an increase of 36% over 2011.
Google made $50.2 billion for the full year, crossing that revenue threshold for the first time. That compares with $37.9 billion the company made in 2011.
However the average price that avertisers paid Google per click (CPCs) decreased 6 percent vs. Q4 2011. That was a smaller decline than in the past, which could be seen as a positive.
The CPC YoY drop is because more clicks are now coming from mobile devices and advertisers are paying less for those clicks. According to a report released yesterday from marketing firm The Search Agency, CPC prices for paid-search ads appearing on smartphones are well below comparable ads appearing on tablets and PCs (see graphic below).
In Q4 mobile search clicks were worth less than 50% of what marketers paid for PC search clicks according to the data. Why are marketers paying much less for mobile clicks when mobile consumers are often much better prospects and customers than PC users?
There's less competition currently for mobile clicks than there is for PC search clicks. Because Google's ad system is an auction that necessarily affects pricing. But more than that many advertisers are unwilling to pay more for mobile clicks because they don't trust them and/or can't calculate a mobile ROI.
Source: The Search Agency
Many search marketers, especially brands and large advertisers, rely on automated systems that calculate paid-search ROI based on some pre-defined conversion event. Those conversions can be a variety of things but frequently they're e-commerce transactions or, in some cases, phone calls.
PC ROI calculations are generally flawed because they usually don't or can't capture online-influenced offline buying. Accordingly the system and the marketer only see online events but not the far larger collection of offline purchases and activities (e.g., store visits) that are driven by online and paid search advertising. The problem is even more pronouced for mobile, however.
Because there are relatively few mobile commerce transactions -- though there are plenty of phone calls from mobile devices -- marketers simply don't see the "latent" conversions that happen in the real world or later on another screen, such as in the case where someone does research on a mobile device and later buys on a PC or tablet.
As a result of this varied, multi-screen consumer behavior marketers aren't able to correctly perceive or attribute ROI and accordingly value mobile clicks. While this represents a "buying opportunity" for advertisers that know the true value of mobile the majority of advertisers are undervaluing mobile clicks. And that's reflected in the average CPC declines that Google has been reporting.
Yesterday Nokia announced "better than expected" Lumia sales. Overall the company said (in these preliminary results) that it sold just over 86 million mobile devices. Among them were 16 million smartphones, including 4.4 million Lumia handsets. The remainder were legacy Symbian devices and new lower-end Asha devices.
Asha phones are somewhere between a feature phone and a true smartphone. They're designed to be low cost and intended for emerging markets such as India. They would see little or no success in developed markets like North America or Europe. Indeed, they're not directed toward those markets.
In Q2 and Q3 2012 Nokia sold a combined total of 6.9 million Lumia handsets. The troubled-company's stock was up yesterday and this morning, having seemingly beaten a very grim Q4 forecast. And some financial analysts are hailing the results as the beginning of Nokia's long-hoped-for turnaround.
Any celebrations are premature however. According to Kantar Worldpanel Comtech research demand for Windows Phones is uneven and limited.
In the US Windows Phones continue to lose share and have failed to capture consumer interest. The story is somewhat different in Europe, however, in part because of the legacy of Nokia's strong brand. In the five major EU countries Windows saw aggregate growth of 1.7%.
The markets where Windows Phone gains have been meaningful are Italy, Spain and the UK, according to the Kantar data. In Italy, for example, Windows Phones gained almost 8 points and now have an 11.7 percent share of the smartphone market.
While there may continue to be modest growth for Nokia with Windows Phones, it's fairly clear that they are unlikey to power a full recovery. What Nokia really needs to ignite growth is to add Android devices to its lineup.
Remarks earlier this week by Nokia CEO Stephen Elop suggested that the company could be open to using Android:
In the current ecosystem wars we are using Windows Phone as our weapon. But we are always thinking about what's coming next, what will be the role of HTML 5, Android... HTML5 could make the platform itself -- being Android, Windows Phone or any other -- irrelevant in the future, but it's still too soon [to tell]. Today we are committed and satisfied with Microsoft, but anything is possible.
Contractual agreements with Microsoft probably would make Android "diversification" unlikely in the near term unless Windows Phones sales fell below a certain threshold. Given the modest momentum around Microsoft's OS Nokia will probably stick with Windows.
Yet if the company were to offer both Android and Windows devices it would see its fortunes improve more rapidly -- much more rapidly.