3 things Mark Zuckerberg can do to revive Facebook earnings

Riken Mehta

 

Mark Zuckerberg, the fastest person to reach the one hundred billion dollar mark, has his work cut out ahead. After the disastrous Nasdaq listing, critics are out for Zuckerberg’s blood, raising concerns whether the 28 year old can manage the social networking company, which has more users than a small country.

Moreover, the ability of Facebook to generate revenues to justify its whopping valuation is also being questioned.

Here’s my attempt helping out good ole Mark:

Mobile Ad Revenue

Every time you log on to Facebook from your cell phone, it takes an average 5 seconds to load (For smartphones with 3G connectivity). Facebook can use this window to feature an advertisement while you’re waiting. Out of 1 billion users, nearly 50% (500 million users) access Facebook via mobile, making it very lucrative for advertisers.

 

                Existing                                              Login Banner Ad

A sure-shot winner

A couple of weeks back, Facebook started a logout banner/advertisement for desktop. As per the setting, an ad will play once a user logs out of Facebook.

Bharti was the first one to lap up this opportunity, wherein it paid Rs 30 lakh per day to Facebook for the logout banner. On first day itself, Bharti got 28 million clicks, giving it cost per view at 10 paise.

After success of logout ads, it makes sense to have login ad. The same concept can be used for cover photo on desktops with jacket/page push ads. (I know it sounds horribly irritating but these ads will be displayed only once in a day- first time you log onto Facebook) 

Facebook AdSense

Facebook recently launched Sponsored Search results that allow marketers to purchase ads, which will appear in Facebook’s search bar. This is somewhat similar to Google’s AdWords difference being the ad will lead you to Facebook page or app of that advertiser and not on its official website. However, this may not help Facebook’s cause.

If Facebook wants to make serious money then AdSense is something they should work on. AdSense allows owners to place Google ads on their website. For every click on the advertisement Google will share the revenue with site owners. (For one click, if Google gets 10 bucks then it will retain 7 bucks and share 3 bucks with website) It’s a win-win for both parties. Google has an edge over Facebook when it comes to AdWords. Google will remain the default search engine and users will rely more on Google AdWords than Facebook Sponsored Search Results. But when it comes to AdSense, Facebook has a superior advantage over Google.

Facebook records Likes (pages) of all users and throws ads based on your interest. Let’s understand with an example. Suppose Moneycontrol.com, India’s  No.1 Financial platform has tied up with Google AdSense and Facebook AdSense. When I log on to Moneycontrol.com, Google AdSense will display a home loan ad but Facebook knows that I am a big fan of cars and liked a page on my profile (Supercars and Exotics in Mumbai) so it will display Car Loan ad instead of Home Loan ad. In this scenario, Facebook ad is more relevant to me as Google is unaware of my interest.

In marketing parlance, Facebook is considered as a Brand Builder while Google is termed as a Sales Driver. The equation will change post launch of Facebook AdSense. Currently Google gets 65% of its revenues from AdWords and 35% from AdSense. It makes more sense for Facebook to launch AdSense since it has to start looking for revenues outside the world of Facebook.

Facebook Video

As per latest the Comscore data, Facebook toppled Yahoo! last month to become the second most popular online videos website. Google’s YouTube holds the numero uno position with 1.5 times more unique visitors than Facebook.

Facebook does not have a dedicated video page where a user can view all the videos (Popular, Most Viewed, Top Search, Sponsored). Currently, when you open YouTube, an ad plays for which Google charges Rs 7-8 lakh per day. Apart from that, Google also gets revenue from Recommended/Sponsored Videos, Video Preroll/Postroll, AdWords. The popularity of videos is growing at a healthy pace on Facebook and it should seriously consider creating a dedicated page for videos and monetise it.

Netflix, an online movie/TV show provider bought shares of Facebook worth 1 million recently. If market rumors are to be believed, then Facebook may acquire Netflix and shortly you will be able to watch your favourite movies and TV shows on Facebook.

It’s free and always will be! But should

This has been Facebook’s promise since inception. And this has made it an obsession among everyone, especially youngsters.  The company can leverage this addiction. Facebook gets PAID! Let’s say USD 1 per year (lowest denomination). Now the big question is will users pay? Even if 50% decides to do then it will mean 500 million dollars revenue per year. One can also argue that people may switch over to Google Plus. It can happen so that is why I think this is the last resort company should adopt.

Wrapping up

Honestly, it requires no rocket science to implement the above marketing strategies. They have been successfully implemented by tech giants and Facebook has to replicate it with 1 billion user’s database on its side.  Facebook Offers and Sponsored Stories are the new initiatives the company has taken but Mark needs to explore more opportunities like the above ones to extrapolate revenues and win the hearts of his shareholders.

Good Luck Mark!
 

 (With inputs from Sagar Salvi, Saunak Ghosh, Malay Tripathi, Mithun)

Are massive ad spends by telecom companies truly justified?

Riken Mehta
Moneycontrol Bureau


Marketing and advertising has always been a major expense for telecom companies. You switch on to any TV channel and chances are that you’ll see one or the other telecom company ad running. The prominent ones are Bharti Airtel, Vodafone Delights, Reliance Communication and Tata Docomo. However, in times when the telecom sector is grappling with one its worst phases ever, are such lavish expenses really warranted?

In last 18 months, the telecom sector has been plagued by the 2G scam and exodus of foreign players from the sector. Moreover, mobile number portability, though beneficial for users, has added to the existing cutthroat competition.    

Jo tera hai, Woh mera hai: Picking up?

Bharti Airtel , India’s largest telecom operator, spent over Rs 11,000 crore and managed to add 3.48 crore subscribers in January 2011 to June 2012 period. What’s interesting is that the company’s advertisement spends in the June quarter shot up by 22%, but it only managed to add 10% more subscribers, quarter-on-quarter.

* Sub- Subscriber addition (in millions), Ad- Advertisement Expense (Rs in Cr)



















Keeping it simple?


Youth icon Ranbir Kapoor’s charm is yet to kick for Tata Docomo. Even though the company has spent close to Rs 400 crore on marketing and advertisement, it has lost nearly 4 million customers in the January 2011 to June 2012 period.


















What an Idea, Sirji

Idea’s most brilliant idea probably was to cut down on its advertisement spend.  The company managed to add nearly the same number of subscribers as Bharti Airtel and at one-third of market leader’s cost in the January 2011 to June 2012 period.

Is the steering of Tata Motors completely in hands of Jaguar - Land Rover?

Riken Mehta
Moneycontrol Bureau

Tata Motors has managed to turnaround loss making Jaguar Land Rover unit in quick time, since acquiring it in 2008. The growth has been so phenomenal that the British luxury vehicle division now accounts for near 65% of Tata Motors' revenue and as much as 90% of its profits. Not surprisingly then the JLR's performance has been a key driver of its stock over the last two years. For instance, JLR sales last month were down 26%, compared to sales in March and the stock too declined 22%. However, over the Aug-March period (August 2011 - March 2012), the stock jumped 98%, with 72% rise in JLR sales.

Chart: Jaguar Land Rover monthly sales (Jan 2010-July 2012) versus stock price movement of Tata Motors.

 

Nifty ends lower; RIL hits 5-month high on Goldman report

A dull close for the Nifty after market resumed trade following the national holiday. The excitement was only seen in the broader markets, where renowned midcap IT and NBFC companies made smart gains for traders.

Goldman Sachs says Reliance Industries can potentially become a USD 100 billion stock by fiscal 2017 from its current market capitalisation of around USD 46.6 billion. The stock closed at 5-month high and above psychological mark of 800.

Rate cut? Not yet

The Reserve Bank today said it will assess if the declining trend in inflation is sustainable and accordingly take decision on reducing interest rate.

RBI Deputy Governor K C Chakrabarty said 5% inflation is India's comfort zone. The Reserve Bank is scheduled to review its monetary policy on September 17. Bank Nifty sheds 1% in trade today.

The Sensex closed at 17657.21, down 70.99 points or 0.40% at 17657.21 and the Nifty ended at 5362.95 down 17.40 points or 0.32%. The breadth of the market was negative. About 1261 shares advanced, 1505 shares declined, and 678 shares remain unchanged.

Top news of the day

ITC lost over 3% on fears about regulatory action at home after Australia called on the world to match its tough new anti-tobacco marketing laws that will ban logos on cigarette packs.

Maruti Suzuki will lift the lock out at its Manesar plant on August 21,  R C Bhargava, the chairman of India's largest passenger car maker said on Thursday. Maruti had shut the Manesar plant last month, following a workers unrest that left a general manager dead and 96 supervisors and managers injured.

Shares in India's software exporters Infosys and Tata Consultancy Services fall after MSCI's decision to lower their weighting in the MSCI India index.

MSCI also increased the weightage of HDFC's in its MSCI India Index by 120 basis points to 7.4%. The changes of MSCI index review would be effective after close of market hours on August 31.

Coal India (CIL) has agreed to certain changes in the fuel supply pact to be entered with state-nominated agencies. The development comes ahead of company board meeting early next month to approve model fuel supply agreement (FSA) which the coal major would sign with power companies.

Jet fuel or ATF price was today hiked by over 3.2%, the third straight increase since July, adding to the cost burden of cash-strapped airlines.

The price of aviation turbine fuel (ATF), or jet fuel, in Delhi was hiked by Rs 2,130.17 per kilolitre (kl), or 3.27%, to Rs 67,135.76 per kl, according to Indian Oil Corp, the nation's largest oil firm. The rate hike comes on back of a steep 4.5% increase in rates effected from August 1 and has wiped off all of the reduction in prices done in May and June.

TCS to buy Computational Research Laboratories (CRL), a start-up group company, for Rs 188 crore. The move would boost its cloud computing services.

European markets weak

European stocks and the euro were lower on Thursday after global growth engine China warned its trade outlook was worsening and stronger US data tempered expectations of additional stimulus from the Federal Reserve.

Gold demand at 2-year low

Gold demand fell to its lowest level in more than two years in the second quarter, the World Gold Council said on Thursday, as a drop in buying in major consumers India and China outweighed a record quarter for central bank purchases.

Overall gold consumption fell 7% or nearly 76 tonnes to 990 tonnes in the three months to June, its lowest quarterly level since the first three months of 2010, the WGC said in its quarterly Gold Demand Trends report.

Nifty ends at 5-month high; WPI data sparks rate cut hopes

The benchmark index Nifty closed near 5-month high surpassing barrier of 5350 mark and setting positive undertone for the market in the near term. The market shrugged off gloomy trade deficit data and gave thumbs up to lower than expected monthly inflation data.

India's wholesale price index (WPI) rose a lower-than-expected 6.87% in July from a year earlier, mainly driven by higher food prices. Analysts on average had expected an annual rise of 7.37%.

Banking stocks were the biggest beneficiary from inflation data as it also sparked hopes of rate cut from the Reserve Bank of India. Bank Nifty locked 1% gain.

The Sensex shuts shop at 17728.20 up 94.75 points or 0.54% and the Nifty closed at 5380.35 up 32.45 points or 0.61%. The breadth of the market was neutral. About 1378 shares advanced, 1374 shares declined, and 691 shares remain unchanged.  

Beaten down stocks post tepid quarterly results were leading the rally in Nifty today. Tata Motors, Ranbaxy, Tata Steel closed with hefty gains of over 2%. SBI and Bharti Airtel were exceptions in that list.

Major results announced today

Reliance Infrastructure's standalone net profit fell 24% year-on-year to Rs 327 crore in the quarter ended June 2012 despite sharp jump in other income. The total income from operations increased 6.6% to Rs 3447.3 crore from Rs 3691 crore during the same period.

Reliance Power , India's second-largest private electricity producer by market value, posted a 23 percent rise in first-quarter net profit, in line with expectations, as generation capacity doubled compared to the previous period.

The world's largest aluminium rolling company Hindalco Industries' net profit fell 34% year-on-year to Rs 425 crore in the June quarter. Analysts on an average had forecasted PAT of Rs 518 crore.

Amara Raja Batteries: Recharged

Amara Raja Batteries was the star performer of the day. India’s second largest battery manufacturer reported close to 100% jump in bottomline. The operating performance of the company was equally strong. The stock closed at life time high.

Swift recovery for Maruti

Maruti Suzuki India is understood to have decided on resuming partial production at its violence -hit Manesar plant by next Tuesday. "Almost all the assessments have been completed and partial resumption of the Manesar plant is likely next week.

Change of Guard at Tata Motors

Tata Motors on Tuesday appointed Karl Slym as its managing director. The post had been vacant since PM Telang retired in June. The stock surged 3%. Slym has been with US auto maker General Motors for 17 years and is currently executive vice president and board member of China's SGMW Motors.

German, French data boost Europe, euro

European shares and the euro rose on Tuesday as slightly better than expected performances by the German and French economies in the second quarter eased anxiety about wider euro zone data that are likely to show the bloc sliding back towards recession.

Demand for gold in India, one of the top buyers in the world, remained subdued on Tuesday after prices moved higher on a weak rupee and chasing a similar trend overseas.

Chart of the day: Bharti market-cap falls below Rs 1 lakh crore

Riken Mehta
Moneycontrol Bureau

Shares of India’s number one telecom services firm Bharti Airtel  extended their losses on Thursday, shedding 6% to close at Rs 257 as investors are worried of margin pressures persisting in the foreseeable future. With today’s decline, the company’s market capitalization has fallen below Rs 1-lakh crore.

The company’s m-cap had last fallen below this mark in May 2010. In its conference call on Wednesday, post the disappointing first quarter numbers, the company admitted that it may take longer for its African operations to turn corner. Losses in its Africa division doubled to Rs 670 crore for the June quarter.

The company blamed hyper competition in the telecom market and adverse regulations as the key reasons for the decline in its quarterly earnings. It is unlikely that any of these factors will change for the better near term.

Chart of the day: PSU banks continue to slide as NPA woes weigh

Riken Mehta
moneycontrol.com

Shares of state-owned banks are feeling the heat of mounting non-performing assets, as evident from their underperformance compared to the benchmark Nifty-50 over the last year. All indications are that the economy will slow further; the RBI has already lowered its forecast for the current financial year’s GDP growth to 6.5% from 7.3% earlier. And with monsoon now officially deficient, there is little reason to hope for inflation cooling any time soon, which in turn means a low probability of the RBI cutting interest rates. Investors are worried that the proportion of NPAs will only mount in the coming days.

Chart: Nifty Vs CNX PSU Bank Index Price Performance in last 1 year