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Is time running out for Snapchat?

By Adam Fraser

Tough times for Snapchat right now.

The cool kid on the block a couple of years ago is somewhat losing its shine, as the realities of life as a listed company kick in. The market will fund potential and brand for only so long before the numbers have to actually justify the underlying market cap.

A few recent headlines tell you all you need to know. Forbes discussed  Why Snapchat’s Trainwreck Stock Will Never Have A Facebook Rebound, The LA Times this week reported  Snap is ‘quickly running out of money,’ analyst says. The stock slides to a new low and, on a recent Recode podcast, influential Professor Scott Galloway stated “I believe this company is going out of business… Snap will not be an independent company by the end of 2019.”

Ouch.

The stock price has hit an all-time low of $6.59, with a market cap of (a still massive) $8.4bn. Compare this to the day of its IPO in early 2017 when the stock price opened at $24.

So what’s spooking the market? Another recent Forbes article dissected this, identifying a number of key issues:

  • Snap’s daily users actually declined last results announcement, at 188m daily active users in Q2 vs 191m in Q1 (as the market likes to price social networks like media companies, any miss of market expectations in this area is harshly punished);
  • Fierce competition from other social platforms, particularly Instagram which now over 1bn users, thus impacting demand for Snap’s inventory (the ease with which other platforms’ were able to copy Snapchat’s stories feature has been hugely damaging);
  • Stock market analyst downgrades (a vicious circle as each feeds further negativity to the stock); and
  • Key senior exec departures.

It’s not all doom and gloom of course. Snapchat has a very loyal, very active and very attractive user base, and it is continuing to innovate, most recently announcing a range of new scripted exclusive shows for its Discover map. Snap is a distinctive brand in its own right, and notwithstanding the failure of its Snapchat Spectacles, there is clearly retail potential within the platform.

The issue is not whether Snapchat is a “good business” (on any measure developing a platform with close to 200m users is a notable achievement), more whether its decision to IPO at a nosebleed valuation will be its Achilles heel. As Twitter learned, the public glare of the stock market, bringing a quarter by quarter focus, can be an uncomfortable place for a ‘teenager’ business to grow into adulthood.

The jury is very much out as to whether Snap can make it to sustainable profitability as a stand-alone business. The smart money seems to be increasingly thinking a takeover looks likely in 2019, with Google and Amazon identified as “most likely”.

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CMO tenure trends highlight short termism challenge

By Adam Fraser

A common theme on both the EchoJunction blog and EchoJunction podcast over the last 12 months has been the issue of short-term tactical execution overriding the importance of long-term strategic planning and brand building, in the marketing sector.

On the podcast, Professor Mark Ritson talked about the ‘tactification’ of marketing, JP Hanson discussed the optimum balance for branding vs activation and former ANZ Bank CMO Louise Eyres discussed the challenge of internally managing board expectations around the long-term v short-term results.

An excellent recent article on the Rogue Marketing website on the tenure of CMOs pulled together some interesting stats and analysis very much pertinent to this topic. It’s an excellent piece, well worth a read, but the spoiler alert is simple – CMO tenures are declining, with Harvard Business Review reporting 57% of CMOs have been in their position three years or less and Korn Ferry data showing CMOs have the shortest average tenure of any role within the C suite.

If CMOs are lasting less and less time in their role, the opportunity for genuine long-term strategic planning and execution early diminishes.

The article explores possible drivers of this trend – CEO expectations, clarity of role description and a general lack of patience.

There are also a range of enterprise-wide issues in play here; culture, incentive models, change management, org structures to name just a few.

Whether a symptom or cause, the longevity of CMOs is a key issue for boards and CEOs to address if they truly want marketing to build strong brands for the long term, based on multi-year, rather than month to month, strategic planning.

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Why all marketers need to stop and think

By Adam Fraser

I have been lucky to interview some incredible industry leaders on the EchoJunction podcast in the 3+ years since I started producing it.

From leading professors to top CMOs and best selling authors, the range of perspectives has been fascinating.

However, the guest that has probably influenced my thinking the most is probably less well known – certainly less well known than he should be.

Richard Stacy is a UK based PR industry veteran turned social media author and consultant who tends to swim against the tide with provocative thinking. Richard is not contrarian for the sake of it – this is not what Seth Godin refers to as “set yourself on fire” type of attention. Richard’s ideas are based on a deep theoretical understanding of media history, marketing strategy and the technology landscape.

Richard doesn’t just explain what is happening, he dives into the why. You can listen to his fascinating perspectives on “hot marketing”,  big data and social media and privacy on the podcast.

Richard has previously authored a book – the brilliantly titled “Social Media and the Three Percent Rule: how to succeed by not talking to 97% of your audience”. Written in 2013 it still remains relevant today.

He has now released his latest “manifesto” – longer than a normal blog post but shorter than an ebook. We often use the acronym TLDR in social (too long didn’t read), however, I would dub this work TLMR (too long must-read).

This isn’t one to browse on the train in a hurry. Set aside a quality 45 minutes and dive into some heavy yet deeply insightful thinking on the future of marketing.

You can find “Stop and Think” here. Something all marketers should read and have a very deep think about.

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Martech merger activity continues

By Adam Fraser

An interesting period in the martech sector.

In a world of 6800+ marketing software offerings, there’s rarely a slow news week and the constant M&A activity is interesting to observe.

A few recent major transactions:

This is just a small selection which illustrates the diversity of trends and drivers:

  • Extension of new capability (Meltwater deal)
  • Deepening of existing capability (Spredfast Lithium deal)
  • Management consultancies further encroaching into land traditionally controlled by agencies (Deloitte deal)

If you are looking for a nice simple consolidation trend of “the big guys hoovering up the small guys”, then martech is not the place to search. There are many trends within trends and a mix of underlying dynamics at play.

Is the much talked about ‘broader consolidation’ of this space coming? The quote attributed to the first American winner of the Nobel prize in economics, Paul Samuelson comes to mind:

“The Stock Market has Predicted 9 of the Past 5 Recessions.”

Since the martech landscape from Mr ChiefMartec himself, Scott Brinker, hit 2000 participants in 2015 (it’s now at 6800+) people have been discussing (including Scott and myself on the EchoJunction podcast here, here and here!) whether consolidation is coming. And every year the landscape grows deeper and broader. Scott himself dug deep into the cycles of new entrants, mergers and failures within martech in this recent excellent blog post on the topic.

Predicting the future size of this sector feels like forecasting the stock market – tempting to do but difficult to execute. However, never a dull moment as the recent M&A activity illustrates.

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Facebook Q2 results – have we finally reached a tipping point?

By Adam Fraser

Blogging about Facebook’s quarterly results since they became a listed company had become somewhat monotonous, such was the consistent strength and predictability. Growing users, growing profits, impressive free cash-flow generation. Quarter after quarter. Copy/paste previous quarters blog and change the headline. Rinse and repeat.

The recent Q2 2018 results, however, seemed to mark a potential watershed, and the share price was smashed 24% as the results were released.

Don’t get me wrong, the headline numbers were still strong, but the market was spooked about the road ahead, rather than the rearview mirror. No doubt the recent Cambridge Analytica crisis, Mark Zuckerberg’s recent testimony to Congress and a range of other governance and privacy-related headwinds created a level of tension which did not help the market’s willingness to be forgiving. Sell now, ask questions later.

To the numbers. If you want to dive into the details, you can find the financials, investor presentation and management conference call. For those without the time to review all of the details, here are 10 key points from the results:

  1. Monthly active users reached 2.23bn from 2.20bn last quarter (1.7% growth) and 2.01bn a year earlier (11.4% growth).
  2. Daily active users hit 1.47bn from 1.45bn last quarter (1.5% growth) and 1.32bn a year earlier (11.0% growth).
  3. An interesting quote from Mark Zuckerberg on security: “Looking ahead, we will continue to invest heavily in security and privacy because we have a responsibility to keep people safe. But as I’ve said on past calls, we’re investing so much in security that it will significantly impact our profitability.”
  4. During the quarter, Facebook launched two ad transparency tools; one to let anyone see the ads any page is running – even if the ads are not targeted at the person – and the other, an archive of ads with political or issue content starting in the US, ready for the midterm elections.
  5. For the first time, Facebook released how many people use at least one of their apps – Facebook, WhatsApp, Instagram, or Messenger – which was 2.5 billion people each month.
  6. Total revenue was $13.2bn versus $12.0bn in the prior quarter (a 10.6% increase) and $9.3bn a year earlier (a massive 40.9% growth), generating a net profit of $5.1bn, in a single quarter!
  7. Facebook has a reasonably balanced global spread with just under 50% of revenue coming from the USA and Canada, a ratio that has remained reasonably consistent over the past 4 quarters.
  8. Average revenue per user was $5.97 vs $5.53 last quarter and $4.73 a year ago. Note, revenue per user is significantly higher in the USA/Canada ($25.91), compared to Europe ($8.76) and the Rest of World ($1.91).
  9. Facebook ended the quarter with a cool $42bn in cash, enough to buy both Twitter and Snapchat!
  10. Some interesting other soundbites: over 200 million people are now members of meaningful groups on Facebook, Instagram active users now exceed 1 billion and mobile ad revenue was $11.9 billion (a 50% increase year-over-year) making up approximately 91% of total ad revenue. Also, over the next five years, Facebook is focused on building out its business ecosystem around messaging on WhatsApp and Messenger.

Nothing too much wrong with the actual historical results, but management flagged slowing growth rates going forward as well as further risks from GDPR regulation which led to the savage share price reaction.

As Twitter has learned, news around share price declines can create a brand reputation challenge which can then loop back into actual consumer attitudes and behaviour towards the platform.

With the privacy genie finally out of the bottle, a sense of declining consumer trust and regulatory headwinds, the waters seem far choppier from here than they have done for some time. The network effect (“I have to be on there because everyone else is there”) is a wonderful thing on the upside but delivers a savage, brutal impact on a business when it goes into reverse.

For the first time in a long time, people are openly saying Facebook may have hit a tipping point and could be in serious decline. For a business still valued at $US500bn+, that’s a big (and early) call but the headwinds are real and the risk is tangible. Interesting times.

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15 quick facts from the Yellow Social Media Report 2018

By Adam Fraser

The Yellow Social Media Report 2018 has been released. It’s a report I look forward to as, as I have previously discussed in 2017, 2016 and 2015, there are lots of stats about global social media usage, but limited stats specific to Australia. Previously branded as the “Sensis Social Media Report” this year Yellow get the naming rights for what is, in my opinion, Australia’s preeminent report on social media usage and habits.

1,516 Australian consumers were sampled this year (increasing from 800 in the prior year) with the survey shifting from a telephone to online methodology. For the purposes of the report, the term social media refers to platforms such as Facebook, Google+, LinkedIn, Twitter, Instagram, as well as online blogs and online rating and review mechanisms. A separate report covered business use of social media.

There are stats and insights aplenty from the report, but here are 15 highlights for those without the time to read all 47 pages of the detailed document:

  1. Almost nine out of ten Australians are now on social media. Penetration is up to 88% (from 79% in 2017 and 69% in 2016) of Australians, an incredible growth rate when many would possibly assess social as having hit maturity,
  2. Sixty percent of Australians use the internet more than five times a day. The average number of internet-enabled devices owned is 3.5.
  3. Smartphone penetration is 87% which compares with 76% for laptops, 59% for tablets and 52% for desktop computers.
  4. The two most popular times for social networking are in the evening (61%) and first thing in the morning (59%).
  5. The top four reasons users highlighted for social networking are to catch up with family and friends (85%), to share photos or videos (46%), for news and current affairs (36%) and to watch videos (32%).
  6. Nearly all social media users access it at home (94%) with the lounge or living room (78%) and the bedroom (58%) being the two most popular areas of the house where people use it. The toilet was mentioned by 20%!
  7. Almost two-thirds use social media while watching TV and this occurs across a range of genres with news, current affairs and reality shows mentioned most. Almost one in three discuss the program on social media whilst viewing. Only 5% primarily watch free-to-air TV replays via social media.
  8. More than nine in ten (91%) social media users are on Facebook, accessing the site 37 times a week for 16 minutes each time on average. This translates into an average of nearly 10 hours a week on Facebook (same as indicated in the 2017 survey).
  9. Facebook Messenger is used by 79% of social media users, 28% have used Facebook Live to watch live or recently recorded videos with 9% publishing their own live video. Forty-four percent have published videos or pictures via the story function on Facebook (35%), Snapchat (16%) or Instagram (16%).
  10. YouTube is the second most popular social media site with usage at 53% ahead of Instagram (39%), Snapchat (23%), LinkedIn (22%), Pinterest (22%), Twitter (19%) and Google+ (13%).
  11. Users of Instagram and Snapchat access these sites almost as much as Facebook users access that site – respectively 33 and 36 times weekly on average. Instagram users have many more friends, contacts or followers than Snapchat users – 241 on average compared to 93.
  12. The proportion of users follow a social media group associated with a brand or business is 44% (Instagram 44%, Facebook 39%); the types of brands most likely to be followed operate in the fields of holidays/travel/accommodation, entertainment, music and movies/TV shows. The benefits most desired by those who follow brands or businesses are discounts (62%) and giveaways (51%).
  13. Social media consumers are inclined to believe it impacts negatively on their privacy, sleeping, concentration, productivity, patience, grammar and spelling.
  14. Twenty-three percent use social media for retail research. Items most likely to be researched via social media are movies / TV shows (66%), holidays / travel / accommodation (65%), entertainment (63%) and clothing / fashion items (60%).
  15. Over two-thirds of consumers read online reviews and blogs (68%) averaging eight before making a purchase decision.

This is a thorough, professional and comprehensive piece of research on the Australian social media landscape. Having prepared the research since 2012, it is also a good indicator of trends over time. Well worth a read and a great reference doc.

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