Bad

This GM Ad Cancellation Is Big, Bad News (FB)

Source: http://www.businessinsider.com/attention-facebook-investors-this-gm-ad-cancellation-is-big-bad-news-2012-5

chart of the day, facebook revenue growth ahead of ipo, april 2012

In what should come as a shock to potential investors, one of the world’s biggest advertisers, GM, has announced that it is pulling a $10 million campaign from Facebook…because the ads don’t work.

The effectiveness of Facebook ads has always been a big question-mark, with some data suggesting that the ads just don’t perform well.

According to Sharon Terlep, Shayndi Rice, and Suzanne Vranica of the Wall Street Journal, GM decided to pull the ads after meeting with Facebook executives and coming away unconvinced that they were effective.

GM currently spends $40 million a year on its Facebook presence.

Importantly, however, only $10 million of that spending goes went to Facebook.

The other $30 million goes to pay ad agencies and others to create content for Facebook and maintain GM’s pages and presence on Facebook.

In other words, GM has just killed the only part of its Facebook advertising presence that it was paying Facebook for.

Here’s the key section of the WSJ article:

Asked about the move, GM marketing chief Joel Ewanick said the auto maker, “is definitely reassessing our advertising on Facebook, although the content is effective and important.” Content refers to the unpaid Facebook pages many companies use to promote their products.

GM, started to re-evaluate its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ads. GM marketing executives, including Mr. Ewanick, met with Facebook managers to address concerns about the site’s effectiveness and left unconvinced advertising on the website made sense, according to people familiar with GM’s thinking.

Importantly, GM’s skepticism about Facebook is not due to a skepticism about digital advertising overall. GM spends about $300 million a year on digital brand advertising–just not on Facebook.

The growth of Facebook’s advertising business has slowed sharply in recent quarters, and the business achieved growth of only 37% year over year in Q1.

Advertiser skepticism may be one reason for this.

facebook google yahoo revenueAlthough some people are convinced that Facebook will eventually be a bigger company than Google, there is very little evidence to support this contention. At the same time, there is much to suggest that this conclusion is simply unwarranted:

  • Facebook is growing significantly more slowly than Google was at this stage of its development
  • Advertising on Facebook, however well-targeted, is like advertising on walls at a party (people are there to socialize, not buy stuff). Advertising on Google, meanwhile, is advertising to people who have explicitly expressed interest in your product (See: “Like Hell Facebook Is Killing Google“)

Facebook just rolled out a suite of new impressive-looking ad products, which will include large ads in users’ news feeds. These new units seemed to be well-received by advertisers, at least to the extent that they were excited about hearing more about them.

But GM appears to have gone to the trouble to hear a lot about them–and still came away unimpressed.

The loss of a $10 million deal obviously won’t dent the ~$5 billion of revenue Facebook is expected to generate this year. But the loss of lots of clients like GM will begin to dent it. And for a company whose growth rate is already decelerating, there’s no way this can be construed as good news.

SEE ALSO: Sorry, Facebook Fans, These Numbers Just Aren’t That Impressive

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Tuesday, May 15th, 2012 news No Comments

One Of The Most Impressive Cases Of Efficiency Growth We’ve Ever Seen

Source: http://www.businessinsider.com/chart-of-the-day-one-of-the-most-impressive-cases-of-efficiency-growth-weve-ever-seen-2012-1

Airlines don’t deserve credit for much — they’re notoriously loss-making, bankruptcy-prone, and customer-aggravating.

But with oil prices elevated for much of the past decade, they have done a great job battling the need for more fuel.

The below chart shows the massive divergence over the past decade between traffic growth (as measured by passenger miles) and jet fuel demand.

Says Barclays

According to Airbus and CERA, although cumulative growth in air traffic has totaled roughly 45% since 2000, fuel consumed by the global fleet of aircraft is up less than 5% over the same period, as airlines have accelerated aircraft parking/retirements of older airplane models and ordered newer more efficient replacements at a record pace. Greater efficiency (i.e. load factors) and fleet renewal are at the heart of an airline’s competitiveness in a world where fuel is now an airline’s largest single operating cost; this became the case mid-last-decade for the first time since the late 1970’s US deregulation.

chart of the day, jet traffic vs. fuel consumption, jan 17 2012

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Tuesday, January 17th, 2012 news No Comments

Netflix’s Bad Stock Timing (NFLX)

Source: http://www.businessinsider.com/chart-of-the-day-netflix-2011-11

Netflix “is showing investors how not to buy and sell stock,” says the Bespoke Investment Group.

Last night it sold $200 million worth of stock at $70 a share. It had to sell that stock as part of a deal to raise another $200 million in the form of convertible notes. The financial moves will dilute shareholders by about 10%, according to Credit Suisse.

The timing is really embarrassing for Netflix because it spent $200 million buying back shares at an average price of $218 during the first half of the year.

Buying high and selling low is not how you should do it.

For what it’s worth, as you can see in the chart below, Netflix’s timing wasn’t always terrible! It was pretty smart buyer until the second quarter of 2011.

chart of the day, netflix stock price and stock repurchases

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Wednesday, November 23rd, 2011 news No Comments

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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