Your SlideShare is downloading. ×
Rohan
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Rohan

300
views

Published on

Published in: Business, Technology

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
300
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
9
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Social Media, the Economy, and Shifts in Consumer Behavior
    Keynote Address at Social Media Insider Summit
    August 18, 2011
    Jordan Rohan,
    Managing Director, Equity Research
    Internet and Digital Media
    jrohan@stifel.com
    212-271-3765; @jordanrohan
    Stifel Nicolaus does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 
    All relevant disclosures and certifications appear on pages 25-27 of this report.
  • 2. Has Facebook Peaked?
    2
  • 3. What Does It Mean To Peak?
    Microsoft has peaked, despite continued record profits.
    Apple continues upward with
    Innovative products, consumer imagination…(and record profits)
    Now is Facebook’s Moment in the Sun…
    … but moments in the sun can be so fleeting.
    Source: Apple’s “Get a Mac” campaign from 2006-2010
    3
  • 4. Internet Companies Have Cycles of Popularity
    Nasdaq Peak in 2000
    Source: FactSet, StifelNicolaus estimates
    4
  • 5. Is This a Peak?
    December
    2010
    Source: TIME Magazine
    5
  • 6. TIME Magazine Has a Strong Record of Calling Peaks
    6
    Netscape
    Marc
    Andreessen
    February
    1996
    Microsoft (peak?)
    Apple (trough?)
    Investment in Apple
    August
    1997
    Intel
    Andy Grove
    Man of the Year
    December
    1997
    AOL
    Time Warner
    “The Merger”
    January
    2000
    Source: TIME Magazine
  • 7. Magazine Covers Do Not Always Mark Peaks in a Company
    7
    Apple Continues to Innovate
    Amazon Executes
    Amazon’s
    Jeff Bezos
    Person of the Year
    December
    1999
    Apple
    iPod
    October
    2005
    Apple
    iPhone
    November
    2007
    Apple
    iPad
    April
    2010
    Source: TIME Magazine
  • 8. What Could Change? What Could Make Facebook Become“Establishment” Instead of “Insurgent”?
    • Shift in Economy
    • 9. Shift in Consumer Preferences - Competition
    • 10. Shift in Technology
    8
  • 11. Markets Digesting a Slower Growth Scenario, Globally
    • Right now, investors are de-risking as the economy moves through a period of de-leveraging. De-leveraging could continue to take years. It is a slow, painful process.
    • 12. In the U.S., the Fed is running out of stimulative actions: Low GDP growth despite three years of zero interest rates, which are now pegged at zero through 2013. Stubbornly high unemployment.
    • 13. Europe cleaning up (or holding together) the mess in Italy, Spain, Portugal, Ireland, Greece. Potential reorganization of the Euro Zone would be a destabilizing force.
    9
  • 14. More on the Economy – Leverage Remains High
    Nominal Home Mortgage Debt as a % of Nominal GDP
    Peak 1Q 2009 at 75.5%
    ‘91 – ‘97
    Source: FactSet, Federal Reserve, StifelNicolaus.
    10
  • 15. We Have Been in Secular Bear Market Since 2000
    Source: Dow Jones, U.S. Census, StifelNicolaus format.
    11
  • 16. After Adjusting for Inflation, the Last 12 Years Has Been Painful
    Source: FactSet.
    12
  • 17. Last Few Weeks Have Seen Extreme Volatility
    VIX (Fear) Index
    Spikes Up
    S&P rallies on QE2
    Source: FactSet
    13
  • 18. Macro Backdrop Uncertain…Does it Matter for Social Media?
    Cyclical Influences are more negative than positive:
    • "Rates will remain unchanged, as will credit standards," says Nicholas Stanutz, head of the auto finance and dealer services group for Huntington National Bank. "What most probably will change is consumer confidence.“
    • 19. “The biggest impact is emotional," David Cosper CFO of Sonic Automotive Inc. "The more people are afraid, the less likely they are to buy something, especially a big-ticket item like a car.“
    Secular shift towards digital and social media is positive:
    • "Auto dealers not on Facebook are missing the boat because that's where their customers are," he says. "And that's where their customers expect them to be.“ – Matthew Funk writer for TK Carsites
    • 20. Chuck Capps, Nissan dealership owner, used to spend $25,000 monthly on weekly newspaper, radio and TV advertising. Now he's only spending money online, with $8,000 monthly to TK Carsites.
    Source: Automotive News, USA Today, August 2011
    14
  • 21. Facebook: Key Metrics
    15
  • 22. Facebook – Usage Metrics Show High Engagement, Frequency
    16
    • FB accounts for 37% of all Internet visits and 16% of page views
    • 23. FB visitors averaged more than one visit per day in July.
    • 24. Facebook now working with Comscore and Nielsen to measure Internet GRPs.
    Source: Wall Street Journal, comScore, StifelNicolaus Estimates
  • 25. Facebook’s Opportunity: Improve Gross Profit per User
    Key Takeaways
    • Google/Amazon show best GP/User/Year at $63-$72 in the U.S.
    • 26. Facebook has made progress in GP/User/Year, now up to nearly $18
    • 27. U.S. Monetization 3-6x higher than International, on average
    Note: Estimates for LinkedIn and AOL are approximate and based on Consensus. AOL 2001 US Unique Visitors estimate represents 70% of Worldwide, we estimate international revenue was 20% in 2001 and 5% in 2011E. AOL Revenues based on Consensus figures. Facebook revenue estimates based on gigaom.com tied to WSJ and NYT. Yahoo assume 70% US revenue based on historical breakout as are gross margin assumptions. Facebook we assume 65% of $5bn total revenue derived from US and we estimate 85% gross margins. Google revenue estimates based on Gross Revenue percentage splits. Amazon US are representative of North America reported data.
    Source: Company Reports, ComScore, gigaom.com, FactSet, ThompsonONE, Stifel Nicolaus Estimates
    17
  • 28. All Things Considered, Facebook Remains Dominant Platform
    …Visitor data shows no peak-like characteristics
    Source: comScore, StifelNicolaus Estimates
    18
  • 29. Despite Facebook’s Popularity, Consumer Sentiment is Mixed
    Facebook
    is the only Internet brand
    to rank among
    “Most-Hated”
    Why?
    Source: American Customer Satisfaction Index (ACSI) July 2011
    19
  • 30. Successful Launch of Google+
    Toward the end of July G+ is close to 30mn Unique Visitors…
    Source: comScore, StifelNicolaus Estimates
    20
  • 31. Is Facebook Vulnerable to a Change in Consumer Preferences?
    • Once “invincible” Internet franchises face increased competition
    • 32. Historically, consumer loyalty to Internet content properties shifts ~5 years
    • 33. There is some “fashion risk” in social media, some vulnerability
    • 34. Switching Costs Matter
    • 35. Facebook’s implementation of the social graph creates real switching costs
    • 36. Now that consumers have their social network on Facebook, there is no way they will set up somewhere else. Or will they?
    • 37. That is why the entry of Google + mattered so much
    • 38. Google appeared to focus on privacy (circles) in ways that Facebook doesn’t
    • 39. But Google + alone doesn’t appear to be making a dent in Facebook’s traffic metrics
    21
  • 40. Twitter is the Top “Free Agent” in Social Media
    • In our view, Twitter needs a partner
    • 41. Twitter’s business model has lagged its overall level of influence (significantly)
    • 42. Google reported to have offered as much as $10 billion to acquire Twitter in the last year*
    • 43. “Google +” plus Twitter equals social relevancy and real competition to Facebook
    • 44. Twitter has become the most popular “open” sharing platform
    • 45. Sharing is part of Facebook’s core, but Facebook network is closed
    • 46. Mainstream media tells consumers to follow them on “Facebook or Twitter,” interchangeably
    • 47. Apple and Microsoft would likely also see strategic value in Twitter
    • 48. Facebook may prefer to have Twitter as an independent competitor
    22
    Source: *Google offer for Twitter reported by Fortune Magazine April 14, 2011
  • 49. Can Facebook’s Valuation Withstand Market Turmoil?
    • Facebook’s value is currently estimated at $86 billion ($35/shr) on SecondShares
    • 50. But there were reports of a sale by Interpublic this week at implied $66 billion (-23%)
    Did Facebook’s “real” valuation tick down with overall equity markets?
    Source: SecondShares, FactSet, Financial Times, StifelNicolaus Estimates
    23
  • 51. Conclusions
    • No, we do not believe Facebook has peaked. The metrics still reflect a dominant platform with high user frequency and activity levels. But some signs exist that hype related to Facebook is peaking.
    • 52. Facebook will peak some day. Consumers prefer choice and open platforms. Facebook has some shortcomings, including a declining signal-to-noise ratio in its stream. It also needs to improve monetization without alienating its core user base.
    • 53. Technology and the shaky macro economy / stock markets could disrupt Facebook’sparty as well, even if there is very little direct impact on social media’s fundamentals. The potential sale of Twitter could alter the competitive landscape.
    • 54. We continue to monitor the economy and the social media metrics closely, and welcome feedback and perspectives.
    jrohan@stifel.com
    24
  • 55. 25
  • 56. 26
  • 57.   
    27