General Motors dumps Facebook

[neddy]

Just saw this article:

GENERAL Motors kills a $10 million Facebook campaign with other advertisers set to follow as world's largest social networking prepares for it's highly anticipated IPO.

GM, the third-largest advertiser in the United State, is the first major company to indicate disappointment with Facebook and pulls its ads, according to The Wall Street Journal.

Read more: http://www.news.com.au/business/com...er/story-fnda1bsz-1226357299679#ixzz1uzUhoJPE
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[snoopy]

Would expect a bit of this. I think it is the minority of companies who will find success with Facebook ads. The CTR rates are just tiny (makes even Google's content network look good) and my gut feeling is conversion rates are not good for the vast majority either. To try and sell cars on Facebook I'd say it is like someone walking into a pub and trying to sell cars. I could see it working for certain types of businesses (clubs, bar, maybe music etc) but not for the majority of businesses.

 

[Chris.C]

Would expect a bit of this. I think it is the minority of companies who will find success with Facebook ads. The CTR rates are just tiny (makes even Google's content network look good) and my gut feeling is conversion rates are not good for the vast majority either. To try and sell cars on Facebook I'd say it is like someone walking into a pub and trying to sell cars. I could see it working for certain types of businesses (clubs, bar, maybe music etc) but not for the majority of businesses.

Exactly.

Facebook IPO will probably be Groupon v2.0 - ie perform underwhelmingly.

I'd sooner buy overpriced GOOG, APPL or AMZN shares if I was forced to invest in tech companies, because at least these company's have profitable and dependable business models.

I read awhile ago that Facebook's IPO is at 99 times earnings... the company has barely existed for 5 years, now has stagnant growth, yet thinks 99 times earnings reflects fair value.

Might have to look into going short Facebook to make up for not shorting Groupon when it was so obvious their business model was flawed.

 

[snoopy]

I read awhile ago that Facebook's IPO is at 99 times earnings... the company has barely existed for 5 years, now has stagnant growth, yet thinks 99 times earnings reflects fair value.

Might have to look into going short Facebook to make up for not shorting Groupon when it was so obvious their business model was flawed.

Regarding valuations, the market is dictating that. The shares have been traded for a long time.

Don't know if the IPO will be flop immediately, I think it might take some time. Agree it does not seem to have a proper business model, at the moment it has a social version of adwords that doesn't seem to work very well and that definitely isn't mainstream.

When it is considered that Google is worth around $200 billion then $100 billion for Facebook certainly doesn't seem right to me. One is an amazon and the other a hotmail.

 

[Chris.C]

Don't know if the IPO will be flop immediately, I think it might take some time. Agree it does not seem to have a proper business model, at the moment it has a social version of adwords that doesn't seem to work very well and that definitely isn't mainstream.

I don't think it will flop immediately either. It will probably take a few quarterly statements that could be summarised to the following:

"So you all know how everyone was using Facebook and we all thought we'd be rich because we have such a large untapped market, well it turns out that large untapped market just uses us to socialise and they aren't interested in our ads because they are not looking for anything other than socialising, and they are doing less of that as it is, and we can't sell them anything because we don't make anything, and charging for our service would sort of be like the nail in the coffin that hotmail suffered back in the day. Plus the people that use us most are all young tight asses anyway. So turns out earnings won't be growing by the fantastical amounts we projected..."

I give them 10 - 15 years before people are like "Face...what? Oh I remember them."

 

[Ashman]

I give them 10 - 15 years before people are like "Face...what? Oh I remember them."

I give them only a max of 5 years before something better moves them aside.

 

[snoopy]

I don't think it will flop immediately either. It will probably take a few quarterly statements that could be summarised to the following:

"So you all know how everyone was using Facebook and we all thought we'd be rich because we have such a large untapped market, well it turns out that large untapped market just uses us to socialise and they aren't interested in our ads because they are not looking for anything other than socialising, and they are doing less of that as it is, and we can't sell them anything because we don't make anything, and charging for our service would sort of be like the nail in the coffin that hotmail suffered back in the day. Plus the people that use us most are all young tight asses anyway. So turns out earnings won't be growing by the fantastical amounts we projected..."

I give them 10 - 15 years before people are like "Face...what? Oh I remember them."

I think it is a fairly mixed demographic, not sure it all young people.

I think you are right it is a platform where people aren't looking for anything other than socialising, so selling those people anything is an uphill battle (expect for social activities perhaps).

 

[snoopy]

I give them only a max of 5 years before something better moves them aside.

I don't think they will be overtaken. They've got the market sown up now in my view. Just that it isn't a very good market to be dominant in I think.

 

[James]

I think this is doing more damage than good for Facebook days before their IPO. I mean investors will need a good advertising strategy, hence why Facebook is getting desperate with ideas, they really need more money coming from Mobile, but the mobile advertising game is not easy.

Watch the brand get given some preferential treatment or beta tests to get the spend coming back in imo, ive seen some of these top level strategy talks FB now gives to big brands to try and gain some extra $$$.

That been said I think you need to have a Good strategy, I think Ford is doubting the move but -

http://www.businessinsider.com/ford...t-work-because-gm-sucks-ours-work-fine-2012-5

 

[James]

I give them only a max of 5 years before something better moves them aside.

yeah exactly, why do you think they paid so much for Instagram, because it was a good loading base for a dominant social media network to be built from, with 30 million smart phone users on it they had the methodology to built it into a smart phone social network, they even presented ideas around this. I bet Google was lurking in the dark to get a piece of it at the time hehe =)

 

[James]

I don't think they will be overtaken. They've got the market sown up now in my view. Just that it isn't a very good market to be dominant in I think.

Say that to Zuckerberg, he is work how many billion after the IPO LOL..

I think social media is a good market to be in but the provide proven ROI is what is lacking, this is where Google dominates with Search, they are also dominating it with Video at the moment, this is why they are so desperate for Google+ to take off but it isn't at the moment.

 

[Honan]

Fairly funny that GM , a company that went broke and was bought by US treasury, should pronounce on the effectiveness of FB just before n IPO
If you are not profiting from FB right now, you are not doing it right. I think James could point you in the right direction. Sorry, I am too busy to help.

 

[snoopy]

Fairly funny that GM , a company that went broke and was bought by US treasury, should pronounce on the effectiveness of FB just before n IPO
If you are not profiting from FB right now, you are not doing it right. I think James could point you in the right direction. Sorry, I am too busy to help.

I think the key thing is they are leaving & are one of the biggest advertisers in the US, whether they are getting it right or wrong they aren't profiting from it. So if others do the same it is going to leave a fair dent in facebook's growth, which already is looking pretty rocky.

Note also they didn't say they are profiting from Facebook, they said the paid advertising isn't working and they'll continue on with regular facebook pages/free stuff.

 

[James]

interesting infographic - http://mashable.com/2012/05/15/facebook-google-advertising/

 

[Chris.C]

interesting infographic - http://mashable.com/2012/05/15/facebook-google-advertising/

I'm the sort of guy that normally doesn't get too caught up on quarterly figures, but if what that infographic says is true and revenues fell by 6% and profits by 32%...



If a company is priced at 100 times earnings, it's being bought for "rapid future growth" so if revenues fell at all over any quarter I'd be getting very nervous (I could understand sometimes if earnings fell to produce extra revenues - ie amazon style) but if revenues fell AND earnings fell (by 32% no less) in any given quarter I'd be running for the exits!

 

[helloworld]

I would be interested in seeing who actually converts via Facebook ads. I recently ran a campaign and got zilch out of it. Was quite disappointing, though I am not trying to drill down on specific markets, I will know if it works out in the next few weeks.

I think the facebook ad model is wrong though. I think twitter has done a much better job of montetising and I actually click there ads occasionally. Having the advertising in the feed is great. I think Facebook needs to ad this, although you can do it for free with a page etc I think they could expland on their ad campaign ability by ad feeds on pages that are non company ie a music artist

 

[snoopy]

I'm the sort of guy that normally doesn't get too caught up on quarterly figures, but if what that infographic says is true and revenues fell by 6% and profits by 32%...



If a company is priced at 100 times earnings, it's being bought for "rapid future growth" so if revenues fell at all over any quarter I'd be getting very nervous (I could understand sometimes if earnings fell to produce extra revenues - ie amazon style) but if revenues fell AND earnings fell (by 32% no less) in any given quarter I'd be running for the exits!

Looking at the IPO filing they seem to have a dip in that quarter most years, might be bigger in % terms this year though.

 

[James]

I would be interested in seeing who actually converts via Facebook ads. I recently ran a campaign and got zilch out of it. Was quite disappointing, though I am not trying to drill down on specific markets, I will know if it works out in the next few weeks.

I think the facebook ad model is wrong though. I think twitter has done a much better job of montetising and I actually click there ads occasionally. Having the advertising in the feed is great. I think Facebook needs to ad this, although you can do it for free with a page etc I think they could expland on their ad campaign ability by ad feeds on pages that are non company ie a music artist

We work with a large number of FB ads, as we run under and agency spend.

From my experience it seems big brands/ holiday companies/ promos that have a direct target to pages can do well.

But in the scheme of things Google is killing FB for conversion.

 

[James]

I'm the sort of guy that normally doesn't get too caught up on quarterly figures, but if what that infographic says is true and revenues fell by 6% and profits by 32%...



If a company is priced at 100 times earnings, it's being bought for "rapid future growth" so if revenues fell at all over any quarter I'd be getting very nervous (I could understand sometimes if earnings fell to produce extra revenues - ie amazon style) but if revenues fell AND earnings fell (by 32% no less) in any given quarter I'd be running for the exits!

I was planning to buy some stock in FB launch via a broker, but after some research I decided to sit back and wait for a bit.

I am by no means a seasoned investor but from recent tech IPO's the price starts high then drops.

I know a few people who have been at facebook for around 5 years in the UK and now Aus, these guys are obviously very happy =)

 

[Chris.C]

I am by no means a seasoned investor but from recent tech IPO's the price starts high then drops.

Not if the IPO price accurately reflects the underlying fundamentals of the business and make an accurate NPV projection of future earnings at the start.

Of course the reality is lots of people invest into an "idea" (that idea being that if they buy the latest hot business that is up for IPO and it takes off like their broker says it will they'll be a millionaire) but over time price can only reflect one thing - "reality" and if investors start seeing that the reality is that the company is going to under-deliver on the hype they will inevitably they sell. Just like Groupon.

It's sort of the same with domains - some people buy idea domains, eg "3D" related domains - others buy domains with solid metrics today.



Domaining and stocks are not so different. It's all about value and price. Everything has a price - you just need to work out if it's good value for money at that price.