By Adam Fraser
Why keep spending to ‘market to the world’, when you could invest in customer service and customer experience business processes and initiatives, to ensure your existing customers not only stay but also become advocates for the brand and do your marketing for you?
As the author of the book ‘Flip the Funnel’, Joseph Jaffe said: “retention is the new acquisition”. If the bath is leaking, perhaps it is time to put the plug in rather than turning the taps on faster.
The top 10 were telling:
- Amazon: Online Retail
- Google: Search Engines
- Apple: Tablets
- Netflix: Video Streaming
- Apple: Smartphones
- Amazon: Video Streaming
- Samsung: Smartphones
- Facebook: Social Networking
- Amazon: Tablets
- YouTube: Social Networking
The entire Top 10 were tech companies (noting Dunkin Donuts was 11 and Nike was 12). Interesting to see Amazon feature three times, showing its breadth of offering beyond pure online retail and Apple appearing twice for tablets and smartphones.
There are a number of factors – both emotional and practical – which drive premium customer experience and hence loyalty to a brand. However, the speed, reliability and affordability of Amazon’s deliveries and the Apple genius bar come to mind as key drivers here.
Honourable mentions in this Top 100 list for WhatsApp at 14th and iTunes at 15th.
An interesting view of brands based on a particular (and important) metric, with the dominance of tech businesses noteworthy.
By Adam Fraser
Snapchat continues to experience a very bumpy ride as a listed company.
I have previously written about its disappointing first quarter and second quarter numbers delivered post IPO. This pattern continued – and if anything accelerated – as it delivered its third set of quarterly numbers. The already pressured share price fell a further 17% in response and now sits well below the initial IPO price.
If you want to dive into the details, you can check the detailed financials, investor presentation and press release around the quarterly numbers. If you want a quick summary, the 10 key takeaways from the Q3 2017 results are below:
- Daily Active Users (DAUs) grew to 178m from 173m in the prior quarter (2.9% growth) and 153m a year ago (16.3% growth).
- Average revenue per user was US$1.17 compared to $1.05 last quarter and $0.84 a year ago – this is well below the levels achieved by Facebook of over $5.
- Revenue for the quarter was US$208m compared to $182m last quarter (14.3% increase) and $128m a year ago (62.5% increase).
- The user and revenue growth was significantly under the level expected by the market, leading to the negative response in the share price.
- Net loss was a staggering $443m for the quarter, identical to the prior quarter.
- Instagram stories and WhatsApp status now have 300m users, illustrating the impact competitors have had by imitating key aspects of Snapchats originally unique offering.
- USA DAUs were 77m, representing 43% of global users, a ratio that has been broadly consistent for the past 12 months. Whilst US users were growing slightly, flat user numbers in Europe will be a concern to Snapchat management.
- The USA, however, drove 80% of global revenues, showing the more rapid advertiser adoption in the company’s home location compared to the rest of the globe.
- Capital expenditure for the quarter was $26m, a significant increase on the $19m in the prior quarter – another concern for investors.
- Adjusted EBITDA (removing the impact of stock-based compensation) was a loss of US$179m for the quarter, slightly lower than the prior quarter.
A quote from one analyst summed up the mood – “This quarter was soft across basically every metric as it speaks to a business model which is in a state of major transition since going public.”
Snapchat is learning what Twitter has learned over recent years – it’s no longer about performance in absolute terms, but performance relative to what the market expects and has “baked in” to the share price.
One reason flagged by management for the revenue miss vs. expectations was the shift from a direct advertising sales model to an auction-based bidding system (a la Google) for selling advertising. While Snap hopes this will make it easier to cheaply scale its ad business in the future, this caused a massive 60 percent drop in the cost per ad impression year-over-year.
Still valued at circa US$16bn while significantly loss-making, Snap Inc is learning that when investors price perfection, even small disappointments will lead to the harshest of share price responses.
Snapchat is growing its user and revenue base. But its losses are significant and consistent, while the glare of the public markets can be an uncomfortable environment to innovate, evolve and pivot whilst also attempting to drive profitability.
Snapchat has by no means completely lost its lustre while it’s loyal and engaged millennial audience remains highly attractive to marketers. However, competition from Facebook and Instagram is fierce and much of it’s IP has been easily imitated. The road ahead does not look to be an easy one as Snapchat attempts to justify what remains a massive valuation relative to its actual financial performance.
By Adam Fraser
Twitter has delivered it’s Q3 2017 results and its another set of patchy results.
User growth was moderately encouraging, adding 4m users after adjusting for a prior quarter calculation error of 2m users (the company admitted it has misstated user numbers since the end of 2014 – never a good look). However, the company again posted a loss, and the dramatic growth evident at Facebook and Instagram, quarter after quarter, remains elusive for Twitter – even in a world where the US President is very publicly using the platform regularly. Revenue actually declined by 4% compared to the same quarter a year ago.
Having baked in a lot of bad news, the share price actually rallied on the results announcement, based on expectations of profitability in the coming quarters.
If you want to dive into all of the detail, you can check the financials, investor presentation, shareholder letter and investor conference call. If you want the key highlights here are the 10 key takeaways:
- Monthly active user (MAU) numbers were 330m, from 326m last quarter (1.2% growth) and 317m a year ago (4.1% growth).
- 21% of Twitter’s MAUs (69m) are based in the USA; this is an increase from 68m in the prior quarter, noting most of the user growth is coming internationally (261m v 258m in the prior quarter).
- Attempts to drive greater engagement and more regular usage of the platform are working, with Daily Active Users growing at 14% on prior year v 12% last quarter and 7% a year ago (interestingly the company does not reveal the absolute number of DAUs and actively refused again to release this in the face of formal queries).
- Ad metrics were encouraging: cost per engagement declined by 54% and overall ad engagements increased by 99% on a year-over-year basis. CTRs on a year-over-year basis are up across all major ad types.
- Historically, a significant Achilles heel for Twitter has been trolls and abuse on the platform. The company noted they had further refined their machine-learning algorithms in order to better identify and act on accounts demonstrating abusive behaviours. The company also noted, “we’ll be taking a more aggressive stance on our abuse rules and on how we enforce them”.
- Revenue at $590m was up 3.0% on the prior quarter of US$573m and, more significantly, 4.2% lower than a year ago when ad revenue was $545m. The revenue trends are clearly not convincing.
- The breakdown of revenue for the quarter showed 85% of revenue coming from advertising and 15% (consistent with the prior quarter) coming from data licensing/other (the ‘big data’ aspect still offers great potential for Twitter).
- Twitter made a loss of US$21m for the quarter (its smallest ever reported quarterly loss) but also discloses “adjusted EBITDA which showed a profit of US$207m after adjusting for stock-based compensation, depreciation and amortisation Twitter ended the quarter with US$4.3bn in cash so despite the frequent “Twitter is dying” headlines, the business is solidly funded.
- Live video remains a key focus. In Q3 Twitter announced approximately 30 live-streaming partnerships, including 10 international deals and two with leading consumer brands (Converse and Tommy Hilfiger). In Q3, Twitter streamed more than 830 events.
- Twitter streamed 96 million hours of live user-generated content via Periscope in the quarter.
Jack Dorsey, Twitter’s CEO said, “This quarter we made progress in three key areas of our business; we grew our audience and engagement, made progress on a return to revenue growth, and achieved record profitability”.
Jack has certainly had a positive impact since returning as CEO, delivering a tighter strategy and a more communicative approach to market updates. The absence of strong monthly user growth remains a key negative (especially in the context of the massive earned media from the US President), whilst continuing quarterly losses are always a concern. Twitter has undoubted public utility and societal importance – whether this means it can remain long term as a viable, independent listed company is a more difficult question.
By Adam Fraser
Another very strong set of quarterly results from Facebook. The juggernaut powers on based on pretty almost any metric you can look at.
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 reached 2.07bn from 2.01bn last quarter (3.3% growth) and 1.78bn a year earlier (15.9% growth).
- Daily active users hit 1.37bn from 1.32bn last quarter (3.2% growth) and 1.18bn a year earlier (16.0% growth).
- The CFO confirmed expenses will rise faster than revenue next year based on an increased focus on security. A fascinating quote from Mark Zuckerberg: “I want to be clear about what our priority is: protecting our community is more important than maximizing our profits”.
- Facebook has more than 6m advertisers, while Instagram has more than 2m.
- Video continues to increase its importance as a medium. Instagram Stories and WhatsApp Status each have more than 300m daily active users.
- Total revenue was $10.3bn (exceeding market expectations) versus $9.3bn in the prior quarter (a material 11% increase) and $7.0bn a year earlier (47.3% growth) – generating a net profit of $4.7bn (reminder – in a single quarter!).
- Facebook has reasonably balanced global spread with just under 50% of revenue coming from USA and Canada, a ratio that has remained reasonably consistent over the past 4 quarters.
- Average revenue per user increased by over 7% in one quarter, hitting $5.07 from $4.73 last quarter and $4.01 a year ago; note revenue per user is significantly higher in the USA/Canada ($19.38) compared to Europe ($21.20) and the Rest of World ($1.59).
- Facebook ended the quarter with a cool $38bn in cash – enough to buy Twitter and Snapchat!
- Some interesting random stats: Instagram has over 500m daily actives, Live videos generate 10x the number of interactions and comments as other videos, 20 million businesses are communicating with customers through Messenger, more than 550 million people are using Marketplace and Buy-and-Sell groups on Facebook to connect with other people for transactions.
Note that, mobile usage of Facebook has now become so prevalent Facebook no longer separately discloses mobile users. When it did, the number of users accessing via a mobile device was consistently over 90%.
With revenue growth, user growth, strong margins and consistent cash-flow, this is another powerful set of quarterly results.
Possible clouds on the horizon? Ad revenue is 98% of total revenue hence there is no diversity in income types. If ad blocking technology ever penetrated Facebook’s walled garden, this clearly would be a massive threat to Facebook’s earnings. There have even been recent signs of the cat and mouse arms race with ad blockers escalating.
Secondly, fake accounts (and fake news). As part of Senate enquiries in the USA, Facebook has been forced to admit that approximately 270 million (12%) of its user accounts are fake. Twitter has previously estimated that around 5% of its accounts are fake, hence this number exceeded previous expectations of fake account penetration on Facebook.
Privacy stoushes reuse of consumer data always loom large but never seem to bite.
For now, the blue skies remain.
By Adam Fraser
Facebook changing its algorithm wouldn’t ordinarily be massively newsworthy; such is the frequency with which it happens.
Major changes such as “Reachgate” is 2014 – when organic reach first began to be materially choked -garnered a lot of attention and angst, as brands realised they, in essence, could no longer freely communicate with fans of their Facebook pages. Reach dropped below 5% and subsequently crept much lower to 2% or less, in the following years.
Thus the begrudging acceptance of most people in the marketing world that social media had become “pay-to-play”, learning the hard lessons about the risks of rented land.
Publishers, such as the New York Times, Washington Post, Wall Street Journal (and locally, of course, Fairfax Media) have endured a slightly different but equally painful bumpy ride. Initially unsure whether to entirely reject or fully embrace distribution via third party social platforms, Facebook has attempted to entice with media-specific products such via Instant Articles, offering advertising revenue share and closer collaboration. Ultimately none have been particularly successful and in a post-Trump, Fake News era, most publishers are realising now that the only long-term safety is via driving direct web traffic and digital subscriptions.
The latest announcement from Facebook, however, is deeply ominous for publishers, many of whom still rely heavily on Facebook referred traffic. While initially only a test in 6 countries, Facebook is looking at moving ALL publisher (and brand) content to a separate tab – out of the all-important main feed and into the “Explore Feed”.
The no-go zone. How often do you explore anything other than the main Facebook feed?
The best analogy I can think of relates to changes made by Gmail in mid-2013. All newsletter and sales type emails are automatically moved out of your main email inbox and into a separate tab called “promotions”. You can guess how often that gets looked at.
If Facebook proceeds to roll out this change more broadly, there will at least be no absence of clarity about a publishers relationship with Facebook. Pay to be seen or be sent to the wilderness.
Advertising, of course, remains a viable and often very effective option for many brands (and publishers). Whilst offering far better targeting and interactivity options, the challenges for advertising as a whole remain true as the growth in ad blockers demonstrates, and the cat and mouse game between Facebook and ad blockers continues.
Social media as a platform for brands is evolving to an inevitable conclusion for a medium of connection – like the phone system – infrastructure. We use social media to connect with people we care about. We only want to connect with brands on our terms and at a time of our choosing. Hence effective listening and real-time responses are essential components of a social strategy. Be where your customers want you to be and engage with them on their terms. Answer all of their questions at any time on any channel they wish. Beyond that, most people would prefer brands to stay out of their lives.
Check out PR warrior and friend of the show, Trevor Young’s interview with Brand Tales, here.
By Adam Fraser
I was lucky enough to visit London last week on a whistle-stop tour, primarily to attend Brandwatch’s 2017 “Now You Know” conference.
Attended by 400+ practitioners from insights teams within some of the worlds largest brands, it was short on sales pitches from Brandwatch and long on valuable information relating to the world of social media and consumer insights.
In addition to the obvious networking benefits of such a face to face event (we all love social and digital – but really no substitute for this!), it was a valuable learning experience.
Some key highlights from the conference were:
- Blending social listening insights with other data sources (whether traditional market research, CRM data or website analytics) can be more powerful than looking at social insights stand alone.
- Major retailer Coop used social listening to identify key consumer feedback around environmental issues and particular products, leading to significant change in the core business processes.
- Coop also discussed how they were notified of a fire in a store via a Brandwatch alert before the PR team had formally been informed, showing the real-time benefit of active social listening.
- 95% of social media updates don’t mention a brand or product. Read that one again! Brands are not that important in people’s lives (something I have blogged about previously) – showing the importance and massive opportunity of using social listening to understand consumer attitudes to broader market research themes (e.g. climate change, congestion, buying a home, millennials etc).
- Nestle presented on the role social media played in their broader digital transformation, with listening used to anticipate future consumer needs and increase competitor knowledge.
- Emoticons have moved beyond the gimmick to the mainstream – Brandwatch now can generate ‘Emoji clouds’ as well as ‘Topic Clouds’ to summarise the key emotions being conveyed in a brand conversation.
- Approximately 80% of the time a brand appears on Twitter, there is no accompanying text naming the brand in question; hence the increasing importance of ‘visual listening’ via logo recognition technology.
- An interesting view of the media landscape from an ex BBC and Channel 4 employee looked at the impact of media consumption now taking place via “the Stream” (in social) not “the Schedule” (on broadcast TV).
- Twitter presented a McKinsey stat that social recommendations are responsible for 26% of purchases, showing the power of word of mouth marketing.
Brandwatch runs the Now You Know conference twice a year – once in the USA and once in Europe. Highly recommended if you get a chance to attend a future event.
By Adam Fraser
The latest CMO Survey has been released with its usual batch of interesting findings and insights. This bi-annual survey is well respected and is the longest-running survey dedicated to understanding the field of marketing. The latest edition received responses from 349 top marketing executives in the USA.
There are data points aplenty across the detailed 49 pages of results, but if you don’t have time to dive into the details, some of the key highlights were:
- Internet sales as a percentage of total sales remain relatively modest at 11.8%, flat on the prior survey from 6 months ago, and broadly flat over the last 3 years; from an industry perspective, Education (43% of sales) and consumer services (28% of sales) lead Internet sales.
- Marketing budgets as a whole are expected to grow but the rate of growth is slowing from prior periods (9% from 11%); notwithstanding the declining rate of growth, this remains a healthy barometer for overall spending.
- There is a marked difference re advertising spend trends between ‘traditional’ and ‘digital’ (side note – these boundaries between these definitions will become harder to define in the coming years) – with digital marketing spend expected to grow by 13% versus a decline of 2% in traditional advertising.
- Marketing budgets represent 11.4% of overall expense budgets, a slight increase on 6m ago, and broadly consistent with the trends over the past 3 years.
- Marketing spend is 6.9% of company revenues – this ratio has declined from the prior 2 periods; as a barometer, this was 8.3% 3 years ago in August 2014.
- Marketers are expected to expand social media spend by 89% in the next 5 years – growing from the current 9.8% of marketing budgets to 18.5% in 5 years time.
- B2C Products lead the expected growth in social media spend; all sectors are expected to grow by ~25-40% in next year.
- Based on survey responses, the assessment of how effectively social media is integrated into overall marketing strategy is showing no progress.
- The ROI challenge is alive and well as survey respondents confirmed the impact of social media remains difficult to prove.
- Marketing spend on mobile expected to increase 117% in three years but interestingly respondents assessed mobile’s impact on customers, brand, and financial outcomes as low.
- Spending on marketing analytics is forecast to increase a massive 229% in three years – moving from 5.5% of total marketing budgets to 18%.
Interestingly, while the spend on marketing analytics is growing significantly, only 1.9% of respondents felt they had the right talent to fully leverage those analytics.
In a related blog post, CMO survey director Christine Moorman analysed the contradiction between growing spend in social, mobile and digital yet disappointing effectiveness:
“One reason performance is lagging may be because companies remain focused on digital strategies, not on building a digital marketing organization. A digital marketing organization means embedding digital marketing activities into the very core of the organization. This means that digital marketing activities transform how the company operates, including its culture, its leaders, how it makes decisions, employee training and incentives, cross-functional cooperation, and the role of marketing capabilities.”
The recurring podcast theme of tactics before strategy in marketing seems to also be coming through in this survey.
A good piece of research into the current thinking of senior marketers.