Thursday 3 May 2012

Facebook IPO, The letter from Zuckerberg and the share price.

I promised I'd keep an eye on The Facebook IPO on Nasdaq. because this IPO is going to attract in the more casual investor. And it looks like Zuckerberg is going to make 1 billion usd, alone. Not bad.

I will look at it closer as we get nearer but here's a view just now.

Seemingly it's important to note that I'm not giving financial advice here just a view, just a blog. Trust me, take it only as that. Put it this way - When we floated on Nasdaq in March of 2000, we used Lehman Brothers......

Firstly, given a date of May 18th, the IPO Roadshow has now started and indications are that even this is attracting huge interest, despite a depressed market. 

Which in turn can mean, that a lot of traders are seeing the IPO as nirvana (because the market is depressed and lacking opportunity) and therefore, will want to push the share price to rise, in order to profit. So expect to see their "buy" recommendations.

They'll want to generate hype and appear "Bullish" (share price to rise).

Indeed, one pal told me that the interest in the Roadshow is so strong, some analysts will be turned away at the door. The ignominity of it.

So that's the 1st sign of being Bullish. The Roadshow is strong.

Secondly, filings with The SEC in the US have been made and you can see them here in detail

No mention here of the price (we won't know that until the day before) although investors will buy the shares during the last week and we'll get an indication then - but I'm going to estimate it at the end of this blog.

But reading the filings, appear to me anyway, to be confident, bullish. Remember too, with recent cash acquisitions all round, market confidence is strong, cash is out there. Bullish Sign two. Filings are confident, recent "bubble" acquisitions mean cash is there.

Thirdly, in those filings it's interesting to note The Facebook strategy in their own words This is one of the big issues when you go public - you have to disclose stuff that you wouldn't otherwise.

It's about growth (more users in less FB penetrated countries); New products; Better experience on more devices; A focus on mobile; Payment enabling (interesting one this); And more Ads. Expected it to be upbeat but this is global domination. Sign three - The company is Bullish. 

You'll read extracts from the strategy at the end of this in red.

Attached to the filing is a letter from The Zuck signed by the man himself. It tells us nothing except how much "corporate" they've become and again you can read it later here in red. Funny signature mind...

Fourthly, I'm thinking that this is going to be a bullish IPO driving up the price short term to allow for a profit. But of course, it depends on the price. 

What'll it be?

Well look at this way.

They paid a billion usd for Instagram in 23 million shares and 300m usd in cash. Therefore the 23m  shares had a value of 700m usd. Divide them and you get circa 30 usd a share. However they have been traded on the secondary market at 40+ usd a share

A massive P/E ratio way higher than Google.

And I think it's going to be pitched high. Remember too, that pricing was at the time of The Instagram acquisition. Post acquisition it increases value (with some arguing why Facebook bought Instagram in the first place).

There's a balancing act here - to go too high will discourage market action and a lower price will encourage general private action. 

At 40 usd a share it's over that "100 billion" valuation that the market is talking about and I think, where Facebook ultimately wants to be. 

It's a magic number that will draw headlines - and will be a barrier to be broken - but after that barrier, I think you'll see selling I think because as it rises, people will sweat.

The indications are already in a 28 - 35 dollar range - low - but low enough to spur the market tactically (valuing the company circa 90 billion usd). Investors who promised to sell 6 months post IPO, bought at 31/32 dollars.

I think they'll pitch it at the high end circa 35 usd a share.

Expect a piling into it, but stay really, really careful here. It will probably to go up past 40 usd (and possibly way past on the day) then flatten then selling. Very quickly becoming Bearish. 

If you are going to have a go, get your online trading account open now and you must be prepared to constantly watch the price. So get used to doing that now on any stock/equity just to understand it.

Remember, this could be a mugs game if you don't know what you're doing. 
When one person sells a share and another person buys that share, they both think they're being intuitive.

But the Facebook IPO might be a real chance to make money - in and out.

I might change my view so come back to look.
We will see.


Our Strategy

We are in the early days of pursuing our mission to make the world more open and connected. We believe that we have a significant opportunity to further enhance the value we deliver to users, developers, and advertisers. Key elements of our strategy are: 

Expand Our Global User Community. We continue to focus on growing our user base across all geographies, including relatively less-penetrated, large markets such as Brazil, Germany, India, Japan, Russia, and South Korea. We intend to grow our user base by continuing our marketing and user acquisition efforts and enhancing our products, including mobile apps, in order to make Facebook more accessible and useful.

Build Great Social Products to Increase Engagement. We prioritize product development investments that we believe will create engaging interactions between our users, developers, and advertisers on Facebook, across the web, and on mobile devices. We continue to invest significantly in improving our core products such as News Feed, Photos, and Groups, developing new products such as Timeline and Ticker, and enabling new Platform apps and website integrations. 

Provide Users with the Most Compelling Experience. Facebook users are sharing and receiving more information across a broader range of devices. To provide the most compelling user experience, we continue to develop products and technologies focused on optimizing our social distribution channels to deliver the most useful content to each user by analyzing and organizing vast amounts of information in real time. 

Build Engaging Mobile Experiences. We are devoting substantial resources to developing engaging mobile products and experiences for a wide range of platforms, including smartphones and feature phones. In addition, we are working across the mobile industry with operators, hardware manufacturers, operating system providers, and developers to improve the Facebook experience on mobile devices and make Facebook available to more people around the world. We believe that mobile usage is critical to maintaining user growth and engagement over the long term. 

Enable Developers to Build Great Social Products Using the Facebook Platform. The success of our Platform developers and the vibrancy of our Platform ecosystem are key to increasing user engagement.

We continue to invest in tools and APIs that enhance the ability of Platform developers to deliver products that are more social and personalized and better engage users on Facebook, across the web, and on mobile devices. Additionally, we plan to invest in enhancing our Payments offerings and in making the Payments experience on Facebook as convenient as possible for users and Platform developers.

Improve Ad Products for Advertisers and Users. We plan to continue to improve our ad products in order to create more value for advertisers and enhance their ability to make their advertising more social and relevant for users. Our advertising strategy centers on the belief that ad products that are social, relevant, and well-integrated with other content on Facebook can enhance the user experience while providing an attractive return for advertisers. We intend to invest in additional products for our advertisers and marketers while continuing to balance our monetization objectives with our commitment to optimizing the user experience.

Attached to the filing is the following letter from The Zuck signed by the man himself. 

"Focus on Impact
If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.

Move Fast
Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they’re more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a saying: “Move fast and break things.” The idea is that if you never break anything, you’re probably not moving fast enough.

Be Bold
Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that’s changing so quickly, you’re guaranteed to fail if you don’t take any risks. We have another saying: “The riskiest thing is to take no risks.” We encourage everyone to make bold decisions, even if that means being wrong some of the time.

Be Open
We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.

Build Social Value
Once again, Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.


Video on Demand, Live Streaming and the end of the world.

I've blogged before that I think YouTube is the new TV - especially with their opening of 100 new pro channels earlier this year. And clearly VOD (video on demand) is becoming king of the content stakes as businesses like Netflix drive on (30m subscribers this year estimated, 22m already). Unequivocally, it's the lack of VOD which is going to continue to destroy online print publishers. Newspapers online need video and in Ireland, they're not having the conversation quickly enough and I'd know, because I would be party to that more likely.
It goes without saying too, that I believe in live streaming and I've seen it happen before my very eyes this year with Streamabout.
It is beyond doubt that video, and local video, is becoming the holy grail. It is also the holy grail for mobile.
Netflix have announced that they now intend to develop their own programming so they'll now compete with traditional broadcaster for rights (and win because they have cash) as well as entering their own productions, like 'Lillyhammer' with Springsteen's Steve Van Zandt.Terrific.
Netflix biggest competitor is Jeff Bezo's Amazon's Love Film who've recently announced a tie-up with The Discovery Channel. I've already said before that Netflix is the biggest change since the birth of Television
So lo and behold, courtesy of Mashable, Amazon announces plans to stream one “promising new project” per month. Amazon will measure audience viewership and engagement with each pitched series to decide which series will go into full production. Amazon has been targeting new original programming for its web instant video channel since it launched in November, 2010. Children and comedy shows will add to the existing slate of show and movie genres".

So now Amazon have opened up opportunity for programme makers notably in children's shows and comedy. By the way you submit your ideas . 

Amazon Studios wants to discover great talent and produce programming that audiences will love,” Roy Price, director of Amazon Studios. “In the course of developing movies, we’ve heard a lot of interest from content creators who want to develop original series in the comedy and children’s genres. We are excited to bring writers, animators and directors this new opportunity to develop original series.” Already 15 shows are in production.

So if you can't buy or get VOD  content, you make it.

And more and more, brands are sponsoring almost like the old "live" TV and Radio programmes of old. When I lived in Canada, I remember a natural history programme 'Wild Kingdom' being huge and brought to viewers by Mutual of Omaha Insurance Company which went huge in turn.
You are now seeing the early stages of new broadcasting.
It's bad news for publishers, bad news for traditional TV broadcasters but good news for content makers. A massive opportunity in fact, if you'll excuse the mention, for Irish production talent of which there's lots.

This is a ground breaking moment with web based companies making their own unique programmes. It's small, it's a start but it's going to change entertainment forever. It's going to change TV. AND IT'S GOING TO THEREFORE, CHANGE ADVERTISING.

It's changing the world.

Wednesday 2 May 2012

Nokia, Apple, Samsung and Yappy.

I was talking with the great Dermot Hanrahan the other day. Dermot is the man behind Electric Media, a digital sales house, and was a shareholder with me in Club Internet, an isp that ultimately floated on Nasdaq.

He was also CEO of several Radio stations and currently is a shareholder of some (notably Radio Nova) as well as sites (such as So he knows his onions in terms of traditional media and new media.

His latest venture, Yappy, is a mobile play regarding smart mobile advertising. I've blogged before on the strength of mobile so I am a fan.

But he pointed me to the slide above (from BI), and others, which visually shows the ad opportunity.

But it also brought home to me the changes in this space and in particularly, the Nokia story. 

Remember Nokia? Finnish company who dominated handsets for many years? In 1998 it overtook Motorola (remember Motorola? we all had one) as the largest phone maker in the world but Nokia pooh-poohed smartphones. And god knows I've blogged about companies like these, many many times before.

14 years later, Nokia is now losing money and its rating by Standard & Poor's was cut to "junk status" last weekend. Hot on the heels of a Fitch's downgrade earlier in the week leading to a 15 year low stock price. Nokia??!! Jeez.

Last week Korean Samsung took Nokia's 14 year old crown as the world's biggest seller of mobile phones and what surprised me, is that Samsung leaves Apple in its wake. The Galaxy Note and Galaxy S2 outsold the Iphone by 10m units in the first 3 months shipping 44m smartphones V 35m iphones.

Mad isn't it?

But good news for Google who's OS (operating system) is at the heart of Samsung phones (Nokia have adopted Microsoft's Windows). Of course, the issue is price which drives Samsung's volumes.

But basically Samsung and Apple control the handset market. And more Samsung than Apple.

Samsung launches it's Galaxy S next week in London but of course, here comes the Iphone 5 launch too. So a bit of a battle but good news for users as each manufacturer tries to push out the boundaries of technology.

So, the upshot of all of this will be new applications, new features, new social media integration and the mobile taking over as the smart device of choice. It makes sense, because it's easy to carry, easy to use and you have it with you all the time. Constant internet access.

Dermot's right with Yappy. 
Mobile advertising and content is about to explode.

Facebook. IPO May 18.

This is really a post rather than a blog but just in, Facebook IPO will be May 18th. (UPDATED MAY 3 GO TO THE LATEST BLOG after reading this)

Apart from my multiple talents (Ha!), I also trade the markets online and so I'll be following this. But a that everyone is going to pile into this and drive the price up at IPO. Mom and Pop buyers.

And the market knows that. It's what they call the "mugs game". So they'll let that happen, see the quick growth over 1 or 2 days and then short it, I think. So you'll see a lot of selling just after IPO leaving Mom, Pop and Institutions hanging in for a later bounce back.

I think the opportunity here is to hold and then short the stock but you have to keep watching constantly. Not by the day, by the minute. Turn your candles onto 5 minutes and when you see a trend down, sell because it'll come quick.

Probably a big slide, a hold, a gain. And then a big offload.

Be careful not to get into the stock early. Remember, you're playing with the pros on Wall Street - who'll have a lot of this built into the price and love to take money off mugs. They know how to, trust me.

Analysts already valuing it at a 100 billion. That's the start of the drive to suck you in.

Watch what you're doing here especially if you're not a trader. I'll give you a better view when I start to see the shape but a good place to keep an eye on is Peter Brown in but don't do anything illegal.

Go short.

Monday 30 April 2012

Kevin Roberts. And The Saatchi + Saatchi scandal.

Kevin Roberts is really causing a stir.

He's 63 from Lancaster and has amazingly come up the ladder. A brand manager at Mary Quant, to international new products manager at Gillette, to Group Marketing manager at P&G, to regional VP at Pepsi and since 1997, worldwide global CEO of Saatchis. Not bad. His blog is here

Saatchis of course, are the quintessential traditional Ad Agency, a space I know very well indeed, having grown up with it (my Dad was at Saatchis and my Mum was at CDP).

I also know it very well having spent a lifetime as owner/CEO of Irish Ad agencies, some big (McConnell's/Lowe 88 million euro turnover was the number 1 agency here), and some small (AFA advertising had 7 employees when I started there 30 years ago). 

But I was steeped in it from the breakfast table and also having served 2 terms as President of The Institute of Advertising Practitioners (and later a Fellow) and as Chairman as The Advertising Press Club (and later a Fellow of the Marketing Institute). It matters not, except to give some more credibility for Kevin's position.

I'm friendly with the CEO's of most, if not all Irish agencies currently. When the Kevin Roberts story came out, the emails between us got hot.

Whilst I have been a traditional ad man all my life I have also been involved in the digital space for 15 years and am very enthused by it. Evangelistically so. The Kevin Roberts piece for me, was waiting to happen and hugely welcomed, because now I had something to point at and say, look don't listen to me, listen to Kevin. And so now had they, which is what they didn't want.

What he's saying is, as the header on this blog says, the world just changed. Here's an extract from The Drum;

During his colourful presentation, which followed on from a speech from Deputy Prime Minister Nick Clegg, Roberts said: “I am a radical optimist, I don’t buy into all this recession talk. I do not think we are in a recessionary environment, but we do have too many recessionary leaders. To win today we all need to power things up and speed things up.

“We don’t just live in a VUCA world - a volatile, uncertain, ambiguous and complex world - we live in a super VUCA world. We live in a vibrant world where our kids are connecting to each other and to brands across the world with no money involved. To us this is a world that’s gone crazy.

“Strategy is dead. Who really knows that is going to happen anymore in this super VUCA world? The more time and money you spend devising strategies the more time you are giving you rivals to start eating your lunch.

“Management is dead. To win today you need a culture and an environment where the unreasonable power of creativity thrives. Ideas are today’s currency not strategy. Martin Luther King did not say ‘I have a vision statement’ did he? He had a dream. You have to make sure you have dreams and your brand also needs a dream.”

He went on to outline how successful business leaders need to harness creative thinking in the future, saying: “Business leaders need to become creative leaders. We need to change the language of business. Who wants to be a Chief Executive Officer? It sounds like you work for the government and who would want that? Being a Chief Excitement Officer would be better, don’t you think? The role of a good CEO is to get people to buy into their dreams and their company’s dreams.”

Roberts also went on to say that the age of the ‘big idea’ has gone.

“The big idea is dead. There are no more big ideas. Creative leaders should go for getting lots and lots of small ideas out there. Stop beating yourself up searching for the one big idea. Get lots of ideas out there and then let the people you interact with feed those ideas and they will make it big.”

“Leaders need to become emotional thinkers. The difference between rational thinking and emotional thinking is that rational thinking leads to conclusions and meetings and more meetings. Emotional thinking leads to action.”

“There are three secrets to emotional thinking – mystery, sensitivity and intimacy. It is a lot about story telling. Brands need to tell stories on their websites, on their packaging and so on. Make sure your brand and company has a smell, it has a sound, it has a feel and an intimacy with people. Think about how you can build empathy. It is the small things that count and how consumers feel about our brands that count today.”

“Marketing is dead. The role of marketing has changed now. There is nothing new anymore. If marketers are just hearing about something going on then it is already old in today’s world. The further up in a company you go the stupider you become and the further away from new things. Speed and velocity is everything today. Marketing’s jobs is to create movement and inspire people to join you.

“Everyone wants a conversation. They want inspiration. Inspire people with your website. Don’t just interrupt, but interact. Asking about Return on Investment is the wrong question today. You should be asking about Return on Involvement.” 

He's saying strategy is dead (because we can't control brands anymore) and he's saying traditional advertising as we know it, is dead. I'll add to that, brands and brand loyalty is dead.

Kevin as the worldwide CEO is saying something which, for other Agencies, is heresy. It's like an earthquake with some even saying they could see the smoke rise over the city. Ad Agencies have been ultra critical of the web in an ignorant way. They didn't understand it, bothered to even look at it, and just started rubbishing it in the hope it would all go away and we could all get back to press ads. 

Here's one response, for example, by an Ad Agency to Kevin's piece on The Drum.

"Boy, Kevin is "down with the kids", isn't he? Although I have to say he isn't boring. And he understands PR.

‘Strategy is dead’: entertaining, but bollocks. Most people can't even define the word (I've actually got a training course on this very subject on my website). This week the government was accused of not having a strategy, by somebody who went on to talk about their “lack of clear aims”. It isn't the same thing. Anyway, it's perfectly possible to have a genuinely-strategic approach to selling your products without falling foul of the errors Kevin suggests.

‘Marketing is dead’: entertaining, but bollocks. A useful definition of marketing is' finding out what people want or might want and selling it to them at a profit’. Most of Kevin's speech consists of advising us all how to best do this, by avoiding things that Everybody Doesn't Want and giving Everybody what Everybody Does Want.

So the very least we have to question the Saatchi CEO’s definition of ‘marketing’.

And here, of course, lies the point of the whole thing. What Kevin would doubtless like clients to believe is that the science, rationality, and thinking part of the selling process is all dead. (And the nasty research, too, ooh, especially that.) All you poor clients can do is turn over your money to companies who will provide you with amazing creative ideas , even if bereft of any consistent direction or scale, so as to attempt to distract the mass of novelty- dazed goldfish allegedly inhabiting the modern marketplace. Coincidentally, raw ideas are pretty much the one currency which the advertising agency, as opposed to a raft of other allied service providers, still holds.

Now I'm not even sure if the points he makes apply to the majority of under-30’s. But let's not forget that the majority of consumers in the current EU marketplace, at least, are middle-aged or older. Go find some statistics for the dropout from things like Twitter within these demographics. Ask yourself if they are really in the market for a constant barrage of unrelated, "new" stuff, out of which they will decode your company’s offer and grow to love you. They aren't. They are in the market for good stuff, well presented. You can still do that strategically, using a lot of traditional marketing thinking"

So now instead of thinking, listening, understanding, they're going to have a patronising go at Kevin. Too bad. They've lost already.

The game is officially lost.

Kevin has just made that final too, because now a large traditional player is saying it publicly. With that level of endorsement, it will become self-fulfilling.

Instead of disdain, we had a chance to treat the web with respect to create a whole new opportunity. Ad Agencies were THE perfectly placed people to control this space for brands and they didn't and they don't.

You can see it even in how little attention they give to their websites alone.

So they will wither on sticks.

This might be last chance saloon for some and Kevin might prime them into action, but I don't think so, I think it's too late. Marketing is dead, Advertising is dead. 

Large traditional Ad Agencies? Dead. 

Kevin understands.

But like the peasants in Lamb's essay, we know not how to roast pork, other than to burn the house down.