By Adam Fraser
A big week for transactions in the MarTech world with SalesForce acquiring Demandware for US$2.8bn, Twitter investing in audio streaming service SoundCloud for US$70m and the big one – Microsoft swooping in on LinkedIn in a deal worth a cool US$26bn, a $US9bn premium on the value based on the stock price prior to the announcement.
LinkedIn has been under pressure from the stock market since its disappointing Q4 2015 results when its share price declined an incredible 44% in a single day. The deal came somewhat out of the blue and has puzzled a number of analysts.
At a price of 7.2 times revenue it is not cheap on any measure. LinkedIn remained loss making notwithstanding its preferred measure of profitability being to add back stock based employee compensation (at which point it became profitable).
Clearly therefore this deal is all about strategic synergy. As well as hoping LinkedIn (with its 400m plus members and exceptionally strong position in B2B) will mature into a profitable stand alone business, the key factor is the way it can help the remainder of the Microsoft product stable.
The most obvious product would seem to be Microsoft’s CRM product (Dynamics). A massive challenge for any CRM system is maintaining accurate contact information – most professionals keep LinkedIn up to date, so by integrating CRM with LinkedIn this becomes an important differentiator against CRM competitors (primarily Salesforce and SAP). Deep and accurate data on this scale is valuable. Other workflow related synergies should also emerge in managing appointments and sales opportunity status – with integration to Microsoft Office also in play here.
There are many other potential synergies, including LinkedIn’s online training business (it recently acquired Lynda.com) integrating with a number of Microsoft’s productivity apps. Jeff Weiner, LinkedIn CEO outlined many ways the companies could work together in his letter to all LinkedIn staff. In particular he noted:
“Think about things like LinkedIn’s graph interwoven throughout Outlook, Calendar, Active Directory, Office, Windows, Skype, Dynamics, Cortana, Bing and more”
For now LinkedIn remains a stand alone service, so don’t expect to see too many changes to user experience in the short term.
In the medium and longer term the potential synergies are certainly there; but the price tag is not cheap and as Microsoft discovered when it bought Nokia – $7.2bn price followed by a massive write down within 18 months – potential synergies don’t always come to financial fruition.
Based on this transaction I would expect to see increased takeover talk around Twitter and Pinterest from here. Interesting and dynamic times as always in the martech world.
— Joshua Tanchel (@tanchel) June 9, 2016
— Scott Monty (@ScottMonty) June 6, 2016
By Adam Fraser
The Sensis Social Media Report for 2016 has been released. It’s a report I look forward to – as I have previously discussed, there are lots of stats about global social media usage, but limited stats specific to Australia.
Sensis surveys 800 consumers and 1100 businesses in Australia about their social media usage across a broad range of metrics; the final product is a comprehensive 71 page report.
There are stats and insights a plenty from the report, but here are 12 highlights for those without the time to read the whole document:
- Nearly three quarters of Australians are now on social media – this is not a fad! Penetration is flat at 69% of Australians, but those on social media are using it more frequently
- Australians now spend more than half a day per week (12.5 hours) on Facebook alone, a significant rise from 4 hours last year
- Business participation on social media is growing with 48% of SMBs (31% last year) and 79% of large businesses (56% last year) having a presence on social
- Mobiles are now the most popular device (76% own), having eclipsed laptops (70% own) – accordingly, social networks are most often accessed via a mobile device (72%) versus a laptop (39%) and tablet (30%)
- 50% of social media users check social networks daily, with over 25% checking in more than 5 times per day
- Facebook is by far the most popular social network with 95% of users accessing it; by comparison penetration for Instagram is 31%, LinkedIn 24%, Snapchat 22% and Twitter 19%
- Whilst Twitter’s penetration ranks behind the other networks, those on Twitter use it the most frequently of any platform (35 times/week versus 32 times/week for Facebook); 47% of Twitter users tweet most days compared to 22% a year ago
- The average number of friends/contacts on each of the platforms is Facebook (272), Twitter (257), Instagram (234), LinkedIn (131) and Google Plus (43) – an average total of 403 across all 5 platforms
- 74% of mobile users access social networks via an app compared to only 14% using the website
- Around 40% of users are on social media while watching TV, with the 40-49 year old demographic the most likely to do this
- The primary reason (by some distance) people are on social media is to “catch up with family and friends” – something brands always need to remember!
- 14% of users use social media to research a product prior to purchase – the most popular products researched were travel, clothing and electrical equipment.
A comprehensive piece of research on the Australian social media landscape, and having prepared the research since 2012, a good indicator of trends over time.
By Adam Fraser
A recent survey from Gartner provided some interesting insights about enterprise marketing spend in 2015 and 2016.
The “Gartner CMO Spend Survey 2015-2016” surveyed 330 organisations about their actual marketing spend in 2015 and planned spend for 2016. The companies surveyed were at the enterprise level (>US$500m rev per year, average revenue US$4.8bn) across USA and UK.
Probably the key conclusion was that the distinction between digital marketing and marketing is finally disappearing, with 98% of respondents confirming that online and offline marketing activities are merging. As I recently discussed with Scott Brinker, author of the new book Hacking Marketing, there is no such thing as “digital marketing” anymore – we now “market in a digital world”. The survey affirms this thematic is now playing out in the actual marketing world.
Interestingly the survey showed that most marketing budgets are actually increasing, with 2/3 of respondents stating their budgets would increase in 2016 over 2015.
The areas where senior execs have increased expectation from the marketing function are (in order):
- digital commerce
- innovation in marketing
- converting leads to sales
- improvements in customer retention
The strongest increase in marketing budget allocation was digital commerce, which grew from 8% to 11% of the average marketing budget. Interestingly the budget allocation for digital commerce was equal for B2B and B2C.
The insights relating to the intersection of marketing and IT were particularly interesting:
- 33% of marketing budgets are now allocated to technology
- 80% of companies now have a “Chief Marketing Technologist” or similar role
- The top areas for technology investment were social media marketing, digital commerce and marketing analytics.
Customer experience remains a key battleground, but the survey showed many organisations still lacks a single owner or sponsor within an organisation.
Short and succinct, this is a worthwhile report to review.
By Adam Fraser
LinkedIn has learned a lot about the harsh realities of life as a listed company in the last quarter. Having lost more than 40% in value when it announced its last results, the market received its Q1 2016 results (released end of April) more favourably with the stock bouncing up 15%.
The Q1 results were generally very strong – with growth in revenue, profit and users from the equivalent quarter a year earlier. Importantly there was growth across all areas of the business – Talent Solutions, Marketing Solutions and Subscriptions and the guidance for future quarters was stronger than expected.
- Members grew to 433m, from 414m in the prior quarter (4.6% growth) and 364m a year earlier (19.0% growth).
- Unique visiting members (ie active members) were 106m, up on the prior quarter of 100m and 9.3% higher than the 97m active users a year ago. It is still interesting to see that less than 25% of total members are actually active on the platform and surprising we don’t hear more from management about strategies to drive dormant members to active; this would appear to be the lowest hanging fruit to true user growth.
- 58% of monthly users are accessing LinkedIn via a mobile, up from 50% a year earlier but still well below the 90+% of Facebook’s users who access via mobile . The recent release of its new app is assisting here.
- Talent Solutions remains the dominant division, driving 65% of LinkedIn’s revenue in Q1 2016, which is up on 62% from the same quarter in 2015. Marketing solutions (driven by sponsored updates) and subscriptions (driven by sales navigator) continue to contribute just under 20% each. LinkedIn’s attempts to diversify away from relying on recruitment related revenue remain only a partial success.
- Financials for the quarter were strong, with revenue of $861m (35% increase on prior year) and EBITDA of $222m (39% increase on the prior year).
- LinkedIn provided guidance for FY16 revenue of approx $3.7bn and adjusted EBITDA of $1bn. This was above market expectations, which helped the share price
- Importantly, a key engagement metric moved higher in the quarter with member page views increasing to 45bn from 37bn in the previous quarter and 34bn a year ago. Higher page views shows growth in true organic activity, a key metric for a social network liked LinkedIn. During the quarter, viral actions increased more than 80%, daily shares were up nearly 40%, and traffic to third-party publishers grew more than 150%. All important metrics.
- LinkedIn remains a reasonably US centric platform, with the USA contributing 61% of total group revenue, which is flat on both the prior quarter and a year ago
- LinkedIn continues to focus on (and invest in) its big data and predictive analytics capability; last quarter it announced it had acquired a tech start up Connectifier further boosting its ability to identify and match job searchers and seekers. The next generation of Recruiter, unveiled late last year, is the foundation of LinkedIn’s long-term growth strategy. Initial results are promising, with the number of candidates viewed per search up more than 40%, and InMails per search up more than 30%. By the end of Q2, the majority of customers are expected to have converted to the new version of Recruiter.
- Other focus areas are driving integration to CRM for Sales Navigator and integrating technology from Lynda.com into the overall online training offerings.
In summary a much improved set of results for LinkedIn compared to the prior quarter, with revenue, users and engagement metrics all moving in the right direction. LinkedIn should not get complacent as apps such as Glass Door circle, but it remains very well positioned in the B2B content, network and marketing space.
By Adam Fraser
Twitter has released its Q1 2016 results to the stock market.
At a high level the company disappointed the market by missing its revenue target, despite delivering $595m in the quarter and 36% growth on the prior year, and the stock feel by 14%. But digging under the headlines it wasn’t all doom and gloom.
If you want to dive into all of the detail, you can check the financials, investor presentation (also broadcast via Periscope!) and investor conference call. If you want the key highlights here are 10 key takeaways:
- Monthly active user (MAU) numbers grew slightly to 310m from v 306m last quarter (up 1.3%) and 301m a year ago (3.0% growth); a return to growth is encouraging but the pace is insignificant compared to other social networks
- 21% of Twitter’s MAUs (65m) are based in the USA; user numbers in the USA are flat with growth coming internationally
- Mobile MAUs were 83% of users, indicating Twitter sits in between Facebook ( 90%+ mobile users) and LinkedIn (approx 60% mobile users) for mobile penetration
- Revenue at $595m was 16% down on the prior quarter of US$710m but 36% higher than $436m a year ago; the market was expecting higher
- The breakdown of revenue for the quarter was broadly consistent with recent periods, with just under 90% of revenue coming from advertising and circa 10% coming from data licensing/other (the ‘big data’ aspect has huge potential for Twitter). Video ads are certainly growing but generally cannibalising marketing budget from other types of Twitter ads
- Total ad engagements grew 208% year-over-year, an acceleration in growth compared to Q4 2015, driven once again by the adoption of auto-play video, increases in ad load versus the prior year period, and improvements in click through rate in select ad formats
- Twitter made a loss of US$80m for the quarter but also discloses “adjusted EBITDA” which showed a profit of US$180m after adjusting for stock based compensation, depreciation and amortisation. Twitter ended the year with US$3.6bn in cash.
- Growth in Periscope is important and encouraging: people have created over 200 million broadcasts to date, and watch over 110 years of live video every day on iOS and Android; a streaming deal for live NFL games next year is an exciting development re live video use on Twitter
- The new algorithmic timeline (despite the widespread debate before it was launched) has proved effective with engagement (tweets, retweets, likes etc) up and the opt out rate (to the pure reverse chronological timeline) only 2%
- A key line in the results release highlighted the continued strategic focus on live: “We’re focused now on what Twitter does best: live. Twitter is live. Live commentary, live connections, live conversations”. Agree on this 100% as I have previously written.
At the end of Q4 2015, Twitter adapted the way it presents information to the market via the introduction of an investor letter to provide context to the results. It may seem a minor point but for a business that has been so widely misunderstood in the past, it has been an important change. The market may or may not like the results but it at least should have a clear understanding of the overall strategy. We were reminded that the top 5 priorities for 2016 are refining the core service, live streaming video, creators and influencers, safety and developers.
The increased focus on business use for customer service is encouraging with 2 new products launched in the quarter – an easier way to take a public conversation to DM and customer feedback cards to understand customer satisfaction. With Facebook also making great strides in this area (in particular via messenger) it is important Twitter doesn’t lose its initial completive advantage here (I have previously discussed in the podcast how effective Twitter can be for customer service). Unique DM volumes were up 50% on the prior year.
Short term revenue and user numbers remain broadly disappointing but product developments and the sharper strategic focus are encouraging. Jack is back and has started to bring in a new exec team. The remainder of 2016 will be critical in determining whether Twitter can remain a viable independent listed company or will be acquired.
By Adam Fraser
Another quarter, yet another powerful set of results from the world’s biggest social network.
If you want to dive into detail, you can find the detailed financials, investor presentation and management conference call. For those without the time to digest all of this, here are 10 key soundbites from the results:
- Monthly active users have reached 1.654bn from 1.591bn last quarter (4.0% growth) and 1.441bn a year earlier (14.8% growth)
- Daily active users hit 1.090bn from 1.038bn last quarter (5.0% growth) and 936m a year earlier (16.5% growth)
- Over 90% of MAUs and DAUs accessed Facebook via a mobile appliance with 54% of MAUs exclusively using a mobile
- Instagram has 400m active users and over 200k advertisers; a typical user misses approximately 70% of updates hence why Facebook introduced an algorithmic feed
- Facebook Messenger has hit 900m MAUs and Whatsapp has just hit 1bn MAUs; across the combined platforms, 60bn messages are sent every day on these platforms, 3 times the level SMS hit at its peak
- Total revenue was $5.4bn (exceeding market expectations) versus $5.8bn in Q4 (7.9% decline) and $3.5bn a year earlier (51.9% growth) – generating a net profit of $1.5bn and free cash flow of $1.9bn in the quarter; capex was up to $1.1bn for the quarter- more than double a year ago
- Facebook has reasonably balanced global spread with 50% of revenue coming from USA and Canada
- Mobile ad revenue of $4.2bn was 82% of total ad revenue (as a proxy this was 73% a year ago and only 20% 3 years ago) – both new and existing customers are spending more than prior quarters indicating a positive experience for advertisers
- Facebook ended the quarter with approximately 13,600 employees (35% higher than last year) and a cool $20.6bn in cash
- Some interesting random stats: users spend an average of 50 mins per day on Facebook properties (excluding WhatsApp); there are more than 3m active advertisers on Facebook; 35% of small businesses in the USA don’t have a web presence; people are sharing and creating 3X more video on the social network year-over-year, and that they’re watching 40% more on Instagram in the last six months.
COO Sheryl Stanberg discussed a successful marketing use case of Toyota reaching 36m people with a targeted video ad on FB for the launch of a new Rav 4 model then re-targeted users with over 500 personalised video ads.
Wall Street liked what they saw driving the shares up by 9% on the day the results were released.
“We had a great start to the year. We’re focused on our 10 year roadmap to give everyone in the world the power to share anything they want with anyone” Mark Zuckerberg, Facebook founder and CEO, said in the company’s earnings release.
In the investor conference call, management talked optimistically across a broad range of metrics, including longer term initiatives such as 360 degree video, artificial intelligence, Oculus Rift and ChatBots.
With strong user growth in Facebook, Instagram, WhatsApp and Facebook Messenger, ongoing investment in long term initiatives and increasing dominance in mobile, the scorecard continues to tick almost all boxes. The Facebook juggernaut powers on.
By Adam Fraser
Google has now further poked the bear that is traditional TV advertising by revealing in a study that in 80% of cases, ads on YouTube were more effective in driving sales than TV ads.
Google’s analysis was across a relatively small sample – 56 case studies across 8 countries – but the conclusions were clear cut (and it should be noted self serving) – brands should be spending 6 times more of their budget on YouTube.
“We found that while TV maintains a powerful impact in the digital age, digital video is under-invested in several categories we measured in the UK, France and Germany,” said Lucien van der Hoeven, general manager EMEA at MarketShare, one of the companies hired by Google to conduct the analysis.
This is not the first Google has hit the PR button in terms of attacking TV’s effectiveness to promote YouTube as an alternative. At a conference in late 2015, Google’s MD for UK and Ireland suggested brands targeting 16-34 year old should spend 24% of their TV ad budgets on YouTube.
The long awaited shift away from TV to digital channels finally seems to be emerging. Emarketer have forecast that in 2017, digital spend will exceed TV spend for the first time.
The share of pie between TV and digital (as well as how they can synergistically work together) is an important topic, but coming in over the top of this is the overall efficacy of advertising more broadly as Ad blockers grow and consumers increasingly block out the hard sell.
Advertising remains part of the playbook but marketers need to think nimbly and flexibly. A long term steady decline in advertising efficacy appears to be playing out and alternatives such as sponsorships, product placement, branded content, influencer marketing and native all warrant consideration.
In social networks in particular, active listening and customer service to respond to the actual questions your customers have comprise foundational aspects of any sensible holistic marketing strategy. Listening first before shouting about how great you are has never been more important.
By Adam Fraser
I read a stat this week which really caught my eye.
I have written before about the increasing dominance of Google and Facebook, who own 8 of the top 10 popular mobile apps in the USA. Further, a recent ComScore study showed the top two most popular websites were Google and Facebook.
However notwithstanding this, a stat I saw in an interesting NY Times article on the media landscape really smashed me between the eyes. The quote was:
“In the first quarter of 2016, 85 cents of every new dollar spent on online advertising will go to Google and Facebook, said Brian Nowak, a Morgan Stanley analyst”
15 percent to the entire rest of the internet. Simply staggering (note, I have reached out to the analyst to try to verify the source of the underlying data).
The internet was meant to democratise publishing and level the playing field. Not so much. Access to a truly scalable online audience now comes down to two main “networks”.
(If Apple and Amazon are thrown into the discussion across different metrics, the concentration level amongst a small number of players gets even higher).
The long term ramifications of such concentration are wide-ranging and significant. Big data analytics, algorithms and consumer privacy are front of mind. Do these networks now know more about consumers than even governments?
By Adam Fraser
A recent report from Comscore highlighted some very interesting trends on the digital landscape and social media market.
The report titled “Cross Platform Future in Focus 2016” is extremely comprehensive including sections on multi-platform, digital media, mobile, social media, TV, advertising and e-commerce.
I encourage you to dive into the detail but if you done have the time or inclination, here are 10 key highlights:
- Total digital media usage has tripled since 2010 with smartphone usage contributing 92% of this growth; mobile now represents 2 out of every 3 digital minutes
- Google sites remain the number 1 web property with almost 250m visitors per month; Facebook comes in second at just under 220m
- Smartphone penetration in the USA is just under 80%, with Millennials at 94%. Surprisingly (to the marketing community) Android is the number 1 operating system
- Social networking accounts for 1 in every 5 minutes spent on the internet; the smartphone app has taken over as by far the most popular access point with desktop on the decline
- Facebook continues to lead in both audience size and engagement across all age groups, with Snapchat running second in terms of engagement with Millenials (just ahead of Instagram)
- Facebook is the number one digital media property by time; Facebook usage accounts for more than 1 in 5 minutes spent on mobile devices
- Facebook users broadly mirror the Internet as a whole, where-as Instagram, Tuimblr, Vine and especially Snapchat skew younger (a majority of college age adults use Snapchat every month)
- Total time watching TV (both live and DVR) is down 2% (excluding video on demand services); the majority of video on-demand revenue ($8.7bn) comes from subscription services such as Netflix, Hulu and Amazon Prime
- Time spent on digital media (mobile plus desktop) now eclipses Live TV for Millennials
- 10% of US desktop users use ad blockers and of the ads that do get served, more than 50% are not viewable as they are not delivered to a human
While many of the macro trends (steady decline in TV, growth in digital driven by mobile) may not come as a surprise, the very marked growth in Snapchat, especially amongst younger consumers, was a real standout. The theory that younger people are leaving Facebook was not borne out in these numbers.
Deep analysis, well worth a read.
By Adam Fraser
The recent announcement from Instagram follows a familiar pattern.
Social network launches with simple rules. Users see a simple time based feed of what is posted. Popularity grows and the stream gets cluttered (“marketers spoil everything”). Social network announces we will henceforth see what they believe we most want to see. Translation: algorithms will define your feed and marketers now have to pay to ensure their messages are seen.
Or in PR speak this is what Instagram actually said:
“To improve your experience, your feed will soon be ordered to show the moments we believe you will care about the most.”
No more simple chronological based stream. Instagram just got less “insta”. Updates from friends and family likely move to the top of the pile, and branded content most likely disappears from view.
The writing was on the wall for organic reach for brands when Facebook lead the way down this path in mid 2014. Twitter wrestled with this issue for some time but it too is now introducing more algorithm determined content in your view.
Money talks. With Instagram owned by Facebook the changes over the past 12 months (introduction of new ad products, algorithm driven feed) were not unexpected. As a social network, if you can change the game and drive significant quantities of revenue, as a private enterprise it becomes somwhat inevitable. Currently pure, Snapchat sponsored stories seem inevitable at some point.
The delicate balance the social networks have to play is of course the unavoidable (whilst advertising is the business model) inverse relationship between revenue generation and user experience. Smash people too hard with advertising (native or otherwise) or over complicate the stream too much and users will eventually flee for the next “new thing” (until it too gets cluttered and spoiled). Engagement on Instagram has already declined by 40% according to reports based on the introduction of various ad products. Facebook has to date has seemingly navigated this balancing act reasonably well although consumer distaste for ads more generally is clear.
The message remains the same for marketers. Building your house on rented land comes with risks. Pay to play is the reality for brands on social networks but advertising efficacy is an ongoing question and the ad blockers loom large on the horizon.
We should never lose sight of the primary reason users are on social media – to connect with people they care about (hence why algorithms prioriotise such content ahead of brand publishing). It is not to be peppered with interruptive advertising messages. When users do want to speak to a brand on social media they will let you know. It needs be on a channel of their choice and on their terms. Customer service and customer experience is key. Accordingly active social listening and social customer service should be a foundation element of any social media strategy.
John Smibert from Strategic Selling Group interviewed our very own Adam Fraser.