Facebook plans to launch video advertising in users' news feeds in July in an effort to boost revenues and tap into the growing online video advertising market. The auto-playing ads will be limited to 15 seconds per viewing and users will have the option to mute the sound. Some big advertisers are expected to participate in initial trials. However, there are concerns that the disruptive ads could negatively impact user experience and activity on the site if they prove too annoying. Additionally, US financial regulators are discussing whether Bitcoin, the digital currency, could fall under their regulatory authority due to its growing use and volatility in value.

1. ★ 13
Companies and sectors in this issue
Companies
AIA................................................18
Air France­KLM .......................24
American Express.....................13
Anheuser­Busch InBev.............10
Apollo Global Management....24
Apple......................................16,24
Archer Daniels Midland...........24
Assured Guaranty.....................14
BMC Software.................12,18,24
BMW.............................................18
Bain Capital..........................18,24
Bank of America..................14,24
Bharti Airtel................................18
Blackstone..................................18
CA Technologies........................18
Canon...........................................13
Carlsberg.....................................10
China Life....................................18
China Shipping...........................18
Citic Securities...........................18
Citigroup......................................14
Coca Cola....................................13
Credit Suisse.........................10,14
DLF...............................................18
Daily Mail and General Trust.14
Dell................................................18
Deutsche Bank................10,14,18
Diageo..........................................13
Elliott Management...................18
Emap............................................14
Eon...............................................24
Facebook................................13,15
Flagstar Bancorp.......................14
Ford..............................................13
Fresenius.....................................10
GIC Special Investments.........18
GMR.............................................18
General Electric...........................2
General Motors ..........................4
Golden Gate Capital............18,24
Google.....................................15,16
Green Plains..............................24
HBOS...........................................14
HSBC...........................................10
Haitong Securities.....................18
Heidelberg­.................................24
Holcim.........................................24
Huawei.........................................16
Infineon........................................18
Italcementi..................................24
JPMorgan Chase.......................14
KPN..............................................12
Kabel Deutschland....................12
Khazanah.....................................18
L'Oréal...........................................4
Linde............................................24
Lufthansa ...................................18
MBIA.......................................14,24
MStar Semiconductor..............16
MasterCard.................................12
MediaTek.....................................16
Microsoft.....................................16
Monster Beverage....................24
Motorola Mobility......................16
Munich Re...................................18
Nestlé...........................................13
Nielsen Holdings..................14,24
Onex Corp.............................14,24
Penton Media.............................14
Poet.............................................24
SABMiller....................................10
Samsung.....................................16
Sasol..............................................7
Sony.............................................13
Starbucks......................................4
Telecom Italia.............................12
Telekom Austria........................12
Toshiba........................................13
Toyota ..........................................4
Unilever........................................13
Valero Energy............................24
Verizon.........................................12
Visa...............................................12
Vodafone.....................................12
Wells Fargo.................................14
Yamaha ........................................4
ZTE...............................................16
Sectors
Media......................................14,15
Mobile & Telecoms...................16
Software......................................15
Technology HW & Equ............16
Travel & Leisure........................18
FINANCIAL TIMES
News Briefing
Gold price
Source: Thomson Reuters Datastream
$ per troy ounce
1300
1400
1500
1600
Apr 3
2013
1571
May 6 2013
1468.5
Gold prices see an increase
of 0.3 per cent, Page 24
BMC to go for $7bn
US business software
group’s activists push it to
private equity deal. Page 18
Nielsen deal with Onex
Media measurement and
retail data group offloads
exhibitions unit. Page 14
Lufthansa withdrawal
Wolfgang Mayrhuber bows
out of race to become
chairman. Page 18
Inside Business
Reforms open door to
performance­linked
pensions. Page 14
India groups plug holes
As growth fails to pick up
in the country, big groups
look to deleverage. Page 18
Motorola Mobility charge
Brussels turns on handset
maker in latest patent
wars battle. Page 16
Chinese groups in IPOs
Galaxy Securities and
Sinopec Engineering seek
total of $3.6bn. Page 18
Fresh prescription
Move towards becoming a
global pharma retailer still
a goal for Alliance Boots.
www.ft.com/ukcompanies
Islamic insurance target
Sharia­compliant cover to
be offered to commercial
property buyers.
www.ft.com/ukcompanies
Ethanol fillip
Support for corn as
ethanol output hits
10­month high. Page 24
Benchmark cheer
Apollo hits all­time high as
stocks hover near record
trading levels. Page 24
Caution reigns
Europe’s stocks slip off
five­year highs as growth
worries stall rally. Page 24
Aussie falls
The Australian dollar fell
amid speculation of an
interest rate cut. Page 24
Markets & Investing
Companies
Tuesday May 7 2013
Calling in the chips Industry curbs capacity expansion to lift prices Page 16
© THE FINANCIAL TIMES LIMITED 2013 Week 19
You know you’ve got a proper
bull market when a stock
called GungHo tops the charts
by value traded.
Last Thursday, before Japan
shut down for Golden Week
holidays, a little-known
developer of games for mobile
phones did exactly that with
its Y94bn ($950m) of turnover
exceeding that of Sony, Toshiba
and Canon put together. Even
more remarkably, GungHo did
so right in the middle of Japan
Inc’s earnings season.
That suggests the domestic
retail investor is rediscovering
a taste for equities. And for
foreigners counting on
continued rises in the world’s
second biggest equity market,
that could be good news
indeed.
For much of the 60 per cent
rally in the Topix since mid-
November, retail investors in
Japan stood and watched,
occasionally stepping in to sell
long-held stocks in order to
splurge on holidays and home
improvements. Foreign
investors, meanwhile, helped
themselves to trillions of
shares dumped by Japanese
banks, companies and
institutions seeking to
rebalance portfolios.
Now, however, the huge
surges in companies like
SoftBank-controlled GungHo –
the producer of Puzzle &
Dragons, a hit game now
spreading outside Japan – are a
sure sign retail investors are
getting involved. According to
the Nikkei newspaper, net
inflows into stock mutual funds
totalled Y440bn in April, the
biggest monthly haul in 13
years.
After many years of rotten
performance by equities, the
prevailing mood is cautious.
Nomura’s surveys of individual
investors continue to indicate a
strong preference for cashing
out, once gains reach double
figures. But if expectations of
inflation do begin to pick up in
Japan, so, too, could tolerance
for risk. And as brokers never
tire of pointing out, even a
1 per cent shift within
household assets would mean
Y15tn of flows into stocks – or
more than double the net
buying from abroad this year.
The next leg of the “Abe
trade” could be made in Japan.
The Short View
Ben McLannahan
Facebook to turn on video ads
By Robert Budden and
Emily Steel in London and
April Dembosky in San Francisco
Facebook is set to launch video
advertising in its news feed in
July as it seeks new revenue
streams to bolster its share
price after its lacklustre stock
market listing last year.
The move by the world’s
dominant social networking site
is a bid to tap into the vast
amounts that marketers spend
on television, budgets that
tower over online ad spending.
It is also an attempt to capital-
ise on the rapid growth in
online video advertising as
global brands follow users from
the TV to the internet.
Digital video advertising
spending remains a small frac-
tion of the $64.5bn market for
TV ads in the US but it is
expanding rapidly, with eMar-
keter expecting it to hit $4.1bn
in the US in 2013, up 41.4 per
cent from 2012.
The new video ads will appear
in a user’s news feed with the
first video starting automati-
cally but without any sound.
Users will then have the option
of activating audio at which
point the video will restart from
the beginning.
Several of the global brands
that sit on Facebook’s client
council, an advisory board of
big advertisers, are expected to
take part in initial trials. Com-
panies on the council include
Unilever, Nestlé, Ford, Diageo,
American Express and Coca
Cola.
There are concerns over how
the ads will affect the user expe-
rience. Analysts fear that if the
ads prove too disruptive, they
will hit activity on the site.
Brian Wieser, an analyst with
Pivotal Research, said video ads
folded into the news feed would
be no more intrusive than any
other ads Facebook delivered
there but any auto-play feature
that forced people to watch
could annoy some users.
Facebook will be charging in
the “low $20s” per thousand
video views, even when users
have not activated audio,
according to people familiar
with the company’s plans.
Each ad will be limited to a
maximum of 15 seconds of air-
play and, to give more powerful
exposure for brands, Facebook
will initially ensure that individ-
ual users see video content from
only one advertiser in any one
day.
That rate is a little less than
the average $29 that marketers
pay for a broadcast TV commer-
cial that reaches 1,000 people,
according to MagnaGlobal.
Facebook has been taking its
video ad sales pitch to agencies
in recent weeks amid the
annual “upfront” market in the
US where TV networks sell
about three-quarters of their
commercial inventory.
Based on the initial inventory
available on Facebook, the
online video ads could generate
up to $1.5m of new revenues a
day, people familiar with the
social network’s plans said.
In the first three months of
this year, the company gener-
ated revenues of $1.46bn. Face-
book declined to comment.
Data trail, Page 15
Social networking site
aims to boost revenues
Concerns over impact
on user activity
Protests mount over use of BP Gulf spill funds
By Ed Crooks
in New York
A plan to build a convention
centre in Alabama using money
given by BP to restore the coast
of the Gulf of Mexico has
angered environmentalists, rais-
ing concerns over how funds to
improve the environment are
spent.
The plan is part of $594m
worth of projects announced
last week by BP and the five
coastal states affected by the
2010 Deepwater Horizon disas-
ter, funded out of the $1bn that
the company promised in 2011
for early restoration of the gulf.
Groups including the National
Wildlife Federation have pro-
tested that building the conven-
tion centre in Gulf State Park in
Alabama, justified as a way to
improve public access to the
natural resources of the coast,
will do nothing to repair the
damage done by the spill.
The controversy is a foretaste
of even fiercer disagreements
that are likely over the much
larger sums expected to flow
into the region in damages and
penalties following the trial
over the disaster at the federal
court in New Orleans.
The centre is planned as part
of a refurbishment of the park
costing $85.5m, the bulk of the
$94m spending announced in
Alabama. It will replace a lodge
that was wrecked by Hurricane
Ivan in 2004.
Robert Bentley, Alabama’s
governor, said the centre, which
will be built and run by a pub-
lic-private partnership, would
create jobs and help generate
tourism.
David White of the NWF said
his organisation was “shocked”
by the decision. “The American
public expects to see BP’s oil
spill money spent on projects
that will restore the health of
the gulf coast, not on pork-
barrel projects like a convention
centre,” he said.
Several of the new projects
are not directly related to dam-
age done by the spill. Texas, for
example, is spending more than
$10.7m to restore Galveston
Island State Park to its condi-
tion before Hurricane Ike, in
2008. In Florida, $4m will fund
two passenger ferries.
BP said that although some of
the places where its money was
being spent had not been
directly affected by the spill, the
projects would “address loss of
use by providing residents and
visitors with new recreational
options, better access to existing
natural resources and a greater
opportunity to enjoy them”.
Projects have to be approved
by BP and the natural resource
trustees, which are representa-
tives of several US federal gov-
ernment departments and agen-
cies, and the five coastal states
of Louisiana, Alabama, Missis-
sippi, Florida and Texas.
Tapping revenues: the new ads on the social networking site will play automatically without sound in a user’s news feed Getty
Bitcoin virtual currency triggers
radar of real­time US regulators
By Tracy Alloway, Gregory
Meyer and Stephen Foley in
New York
Senior US financial regulators
are discussing whether Bitcoin,
the cyber-currency, might fall
under their regulatory remit.
Bitcoin “is for sure something
we need to explore”, Bart
Chilton, one of the five commis-
sioners at the Commodity
Futures Trading Commission
(CFTC) told the Financial
Times.
A person familiar with the
CFTC’s thinking said the regula-
tor was “seriously” examining
the issue. Mr Chilton said: “It’s
not monopoly money we’re talk-
ing about here – real people can
have real risk in these instru-
ments and we need to ensure
that we protect markets and
consumers, even in what at first
blush appear to be ‘out there’
transactions.”
The Bitcoin is attracting the
interest of regulators amid
booms and busts in the value of
the four-year-old cyber-currency
that have spurred media inter-
est. Intensified regulatory scru-
tiny could pose challenges for
proponents of Bitcoin, who have
praised the currency for its
independence from traditional
authorities.
In March, a branch of the US
Treasury said that all compa-
nies that exchange or transfer
the virtual currency would be
considered “money services
businesses”. That means they
must provide information to the
government and introduce poli-
cies to prevent money launder-
ing. Since the ruling, at least
three companies in North Amer-
ica have reported having their
accounts closed by their banks.
The CFTC regulates deriva-
tives contracts and, under Dodd-
Frank financial reform, has
sweeping authority to oversee
retail foreign exchange dealers.
CFTC jurisdiction generally
does not extend to cash markets
unless exchanges list deriva-
tives contracts based on them.
One person familiar with the
discussions said that Bitcoin
would not become subject to
CFTC jurisdiction unless it
became the basis for a deriva-
tives contract.

2. FINANCIAL TIMES TUESDAY MAY 7 2013 ★ 15
Source: company
Number of businesses
on its site (m)
Number of global
monthly active users (bn)
2009 10 11 12 13
0
0.2
0.4
0.6
0.8
1.0
1.2
Total
Mobile
11.0
12.8
15.0
16.0
Revenues
($bn)
2011 12 13
0
500
1000
1500
Advertising
Other fees
8
Jun Jul
2012
Oct Mar May
2013
North America
Average revenue
Per user, Q1 2013 ($)
Rest of world
Asia
Europe
2.85
1.38
0.65
0.21
0.07
0.03
0.48
Advertising
Other fees
0.57
SOCIAL MEDIA
Green card grief
When Alex Schultz was
studying physics
at Cambridge, his parents’
mortgage went
underwater, writes
April Dembosky.
He cobbled together odd
jobs to pay for school and
living expenses, from
cleaning toilets to selling
internet ads. He taught
himself about search ads,
then figured out how to
resell keywords from
Google ads to eBay
affiliates, earning
a 20 per cent margin.
Ebay hired him after
university to manage its
global affiliate programme
and transferred him to
headquarters in California.
Three years later, he
was offered a job at
Facebook. That was when
his American dream
stalled.
He could not get a visa.
He had one from working
at eBay, but it was an
L­1A: it could not be
transferred to another
company. Facebook was
willing to sponsor him for
an H­1B, the type reserved
for highly skilled workers,
but there were none left.
It was only May, and
already the federal cap on
H­1Bs had been topped,
mainly by IT outsourcing
companies based in India
who gobbled them up to
ensure a cheaper,
immigrant labour force in
its US support centres.
This has become a point
of contention for Silicon
Valley tech companies,
says Laura Reiff,
immigration lobbyist with
Greenberg Traurig. It is
one of the main reasons
Facebook has become a
vocal advocate for reform.
In the six months
Mr Schultz waited for
a green card – the fast­
tracked pace – Facebook’s
staff went from more than
100 to 500.
It captured its growth
guru in the end, but
because it altered its
stock­based compensation
plan during that window,
the delay meant a big loss
for Mr Schultz.
“[My boss] called it the
most expensive green card
ever,” he says.
His colleagues at Facebook call him
The Wolf. Although Alex Schultz
bears little physical resemblance to
the character in the cult hit Pulp
Fiction, his no-apologies approach to
reviving Facebook’s advertiser base
has conjured images among co-work-
ers of the film’s crime-scene cleaner
who takes charge of messy situations,
barks orders, and ultimately “solves
problems”.
“I definitely break some heads,”
says Mr Schultz, 30, Facebook’s senior
director of growth marketing.
The messy problem he is tasked
with solving is luring small busi-
nesses to join Facebook. Though the
social network has deployed aggres-
sive sales teams to win the marketing
budgets of large brands, it cannot
afford to do the same for the millions
of small businesses around the world.
Instead the company must rely on
data and design to get them hooked
and eventually move to Facebook’s
self-service paid advertising.
The competition is intense. Brian
Wieser, an analyst with Pivotal
Research, says Google generates
70 per cent of ad sales from small
businesses. He believes that most of
Facebook’s revenue growth – hun-
dreds of millions of dollars worth – is
coming from this sector.
“We know growth from large
brands isn’t that substantial yet. If
you’re already spending $10m with
Facebook, you’re not going to spend
$20m or $50m,” he says. “The average
small business spends $10,000 a year
on Google. It’s not unrealistic to
assume that same cohort could be
spending $1,000 a year on Facebook.”
The challenge of attracting local
businesses to the social network is
intertwined with efforts to build – and
hold on to – its 1.1bn user population.
“Advertisers are people, too,” reads
a blue flyer hanging near Mr Schultz’s
desk. “No, srsly.”
The team has doubled the number
of small businesses on Facebook from
8m last June to 16m today. Of those
businesses, at least 500,000 are paying
advertisers, putting Facebook on
track to reach the milestone of 1m
advertisers this year.
Exactly how Facebook woos small
business is a complex science Mr
Schultz refers to as the company’s
“secret sauce”. He is part of the
growth and analytics team, which
studies vast amounts of data – or “big
data” – looking for patterns in how
users and advertisers use the site.
They study the behaviour of adver-
tisers on the site – what they click on
and what they do not – and try to
figure out what features will make
them more likely to set up a Facebook
page, and eventually buy ads.
Mr Schultz says: “We do what
people refer to as ‘growth hacking’,
which falls somewhere between prod-
uct engineering and marketing.” The
mandate to increase the number of
active advertisers on the site was
issued in the lead-up to the company’s
public listing last May, around the
same time the social network suffered
the departure of one of its biggest
advertisers, General Motors, and came
under intense scrutiny over its lack of
progress in mobile advertising.
Since then, they have made some
important developments that have
helped convince small businesses to
pull out their credit cards, such as
previewing a mock-up of an ad on
their page as an enticement, and a
new mobile ad-buying feature that
allows people to order and monitor
ads from their mobile phones.
Wording is also an important factor.
Four years ago, the team noticed a
spike in the data patterns in France.
More businesses were buying ads
there compared with other countries.
When they looked into it, they saw
that Facebook’s translators had trans-
lated the “advertise” button from the
US site to “créer un ad” or “create an
ad”. Facebook changed the wording in
all languages, and saw a 40 per cent
increase in ad buying across the
globe, Mr Schultz says.
In addition to advertising, the
growth team is deployed to work with
teams across the company, including
messaging, photos, and games, to find
the tricks that entice people to share
more – which in turn increases the
total time spent on the site, a concern
of advertisers.
In developed countries in particular,
such as the US and Western European
nations, regions where Facebook
draws most of its revenues, some
surveys indicate that some users
may be suffering from Facebook
fatigue.
More than a quarter of Facebook
users in the US say they will reduce
the amount of time they spend on the
site this year, according to a report
from the Pew Research Center, while
61 per cent say they will take a “Face-
book vacation” of several weeks.
Facebook’s official response to these
reports is to refer to the steady
upward curve in overall user growth.
Internally, the growth team focuses
on “resurrecting” users who have
“gone stale,” says Naomi Gleit, senior
director of product management, and
preventing them from ever cycling
out of the monthly active user
numbers.
Historically, the biggest key to keep-
ing people on Facebook is getting
them to add more friends, she says.
Today, almost as effective, is getting
them to use mobile applications.
Such discoveries are the work of a
breed of data scientists, who know
how to look for and find patterns in
huge data sets.
Following in Facebook’s footsteps,
many other companies and start-ups
have started forming their own
growth teams.
“The secret is out,” says Dan
Siroker, chief executive of website
analytics firm, Optimizely.
“In the past it was more luck than
skill to build a business that would be
‘sticky’. Now you can get data that
shows what people like and you
can invest in those things to get a
business to grow.”
Facebook on data trail of small advertisers
News analysis
The company’s analytics
team tracks the online
habits of potential site
users hoping to sell
them advertising space,
writes April Dembosky
‘We do growth
hacking, which falls
somewhere
between product
engineering and
marketing’
Alex Schultz, Facebook
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