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Investment Thesis Facebook FB May 2013 by Augustine Fou

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Investment Thesis Facebook FB May 2013 by Augustine Fou

  1. 1. Augustine Fou- 1 -Dr. Augustine Fouhttp://linkd.in/augustinefouMay 2013Investment ThesisFB
  2. 2. Augustine Fou- 2 -Executive SummaryTHESIS• FB may have bottomed, but uncertainty lingers about itsability to monetize mobile and continue to monetizedesktop via display ads.
  3. 3. Augustine Fou- 3 -Executive SummaryNOW• The claims of increasing monthly active users is driven by countingInstagram users as “active” (previously not counted)• Outside tracking firms all report accelerating declines in metrics such asvisits, pageviews, pages per visit and visits per person monthly which arecritical drivers of ad impressions and therefore FB’s ad supported revenues• There is continued downward price pressure on CPMs due to “low qualityinventory”• The shift of users to mobile means fewer pageviews per user session andfar fewer ad impressions per session; higher CPMs for mobile display adswill not offset the far fewer impressions• Inserting ads into users’ newsfeeds, including autoplay videos will turn offusers and accelerate the mass exodus of users
  4. 4. Augustine Fou- 4 -ARPU Decline (1st Datapoint)Shift to mobilemeans fewerpage views persession andfewer ads perpage view,despite higherCPMs. Firstdatapoint ofAPRUdecrease seenQ1:13)Source: KPCB, May 29, 2013
  5. 5. Augustine Fou- 5 -Revenue WorldwideQ1 2013Source: FB SEC Filings 10Q May 1, 2013Remains to be seen whether thedrop in revenues is seasonal.
  6. 6. Augustine Fou- 6 -Mobile vs Desktop AdsQ1 2013Source: Business Insider May 1, 2013Desktop adrevenuedeclined, andpaymentsrevenue aswell. Mobilegrew but notenough tooffset thedeclines,resulting inoveralldecline.
  7. 7. Augustine Fou- 7 -Q1 2013 Update-30%Visits/Person16.6 /moPages/Visit16.7 /mo-40%
  8. 8. Augustine Fou- 8 -Q1 2013 UpdatePageviews45.6 billion /moAverage Stay18 mins /mo-23%-50%
  9. 9. Augustine Fou- 9 -Q1 2013 UpdateVisitors165 million /moVisits2.7 billion /mo-36%
  10. 10. Augustine Fou- 10 -Related ArticlesMeet the Most Suspect Publishers on the WebBy: Mike Shields, March 19, 2013State of Display Ad Market 2013By: Augustine Fou, April 17, 2013Botnet Traffic Clicks Cost Advertisers Millions in WasteBy: Augustine Fou, April 29, 2013Future of AdvertisingBy: Augustine Fou, March 15, 2013Augustine Fou- 10 -
  11. 11. Augustine Fou- 11 -Dr. Augustine Fou – Digital Consigliere“I advise clients on innovating theirbusiness to stay ahead of trends andreduce their reliance on single forms ofrevenue (e.g. display ads in the case ofWebMD).”FORMER CHIEF DIGITAL OFFICER, HCG (OMNICOM)MCKINSEY CONSULTANTCLIENT SIDE / AGENCY SIDE EXPERIENCEPROFESSOR AND COLUMNISTENTREPRENEUR / SMALL BUSINESS OWNERPHD MATERIALS SCIENCE (MIT 95) AT AGE 23@acfouClickZ Articles: http://bit.ly/augustine-fou-clickzSlideshares: http://bit.ly/augustine-fou-slidesharesLinkedIn: http://linkd.in/augustinefou
  12. 12. Augustine Fou- 12 -Q4 2012 Facebook Ad Benchmarks
  13. 13. Augustine Fou- 13 -Shifting to Lower CPM AdsBig Portals Ad Networks Facebook10’s of dollars 1’s of dollars 10’s of centsAdvertisers are shifting allocation to get more impressionsLarge audiencePublisher/portalhas more powerLots of long-tailsmall websitesAdvertiser hasmore powerMassive number ofimpressions“Junk” quality andsuper-low pricesCPM0.1% 0.01% 0.001%CTR
  14. 14. Augustine Fou- 14 -Digital Used for PerformanceSource: IAB 2012 Annual Report