Weekly Stock Performance

The social media sector performed well this week, with an average gain of 3%, mainly on the strength of FB (through more positive coverage) and Pandora (ahead of its earnings next week). Media speculation on GRPN and changes to ZNGA’s partnership with FB resulted in daily volatility of those stocks, but the news did not provide any fundamental changes that should impact their securities as discussed below.

 

Change Since Nov. 23

Change Since Nov. 23
FB

16.7 %

 RENN

0.9 %
P

11.2 %

 LNKD

0.5 %
ZNGA

6.0 %

 BIDU

0.1 %
GRPN

4.9 %

 YELP

(0.4%)
GOOG

4.6 %

 MM

(1.0%)
JIVE

3.4 %

 OPEN

(1.2%)
ANGI

3.3 %

 WEBM

(1.7%)
YHOO

1.1 %

 SINA

(3.3%)

 

Zynga/Facebook

  • FB announced a series of amendments to their agreement with ZNGA that removed preferential partner terms, meaning that ZNGA will be subject to FB’s standard developer terms of service.
  • Although FB notes that it is not planning to develop its own games, the amended agreement allows this possibility in the future. Key changes for ZNGA include its freedom to use other social platforms on Zynga.com for both logins and payments systems, and the removal of requirements to display FB’s ad units on Zynga.com.
  • Though ZNGA can now attempt to better leverage its brand across other platforms, much of the Q3 weakness for ZNGA was due to the continued shift of FB’s users to mobile, so the key for a turnaround in ZNGA remains to develop a significant and sustainable mobile gaming portfolio.
  • With ~$1.80 of cash per share, ZNGA is trading at a technology value of roughly $0.66 per share. Although the downside to the stock is limited beyond cash, with numerous key executive defections in the past two quarters and with an overall terrible performance in 2012 thus far, it is difficult to have confidence in the company’s ability to execute a turnaround in the next several quarters.

Groupon

  • There was a flurry of media speculation this week that CEO Andrew Mason would be fired, but after a board meeting, there were no executive changes made. At a conference, Mason addressed questions regarding these rumors and signaled his confidence in the business and his continued leadership.
  • Mason also noted the strength of the company’s growing ecommerce platform, Groupon Goods (even though this business has resulted in lower overall margins for GRPN). Mason also specifically noted that despite the success of Goods, the company did not intent to build out a shipping/fulfillment logistics platform.
  • The international segment remains the key problem for GRPN and addressing these issues by optimizing its deal mix, rolling out better technology platforms, and improving overall execution will continue to take time as the overseas business has historically been patched together. A new CEO with experience in effectively running a global enterprise would likely unlock some pressure on the stock.
  • Despite GRPN’s recent guide to reacceleration in both billings and revenue growth for Q4, negative sentiment on the stock continues and was exacerbated by news that LivingSocial (its primary daily deals competitor) fired 10% of its workforce in an effort to focus more on mobile after a poor Q3 performance. If GRPN does indeed show improved international and overall reacceleration in Q4, the stock price will likely react positively irrespective of any potential CEO changes.

Key Developments in Social & Internet

Company News
Facebook
  • Product:   FB updated the design of its mobile page ads with colorful banners and more descriptive text to attempt to balance user interest and any negatives to the user experience
  • Product:   Nokia added two new mobile phone models, the Asah 205 and 205 dual-SIM, which are Qwerty devices that will feature a dedicated FB button that will allow for direct access to users FB profile
  • Legal:   A federal court dismissed ad company Sambreel’s antitrust suit against FB which was launched after FB blocked users running Sambreel’s software which allows changes to users’ FB pages
Adobe
  • Data:  The Adobe Digital Index estimated that 2% of visits to online retailers on Cyber Monday came from social media referrals, though 77% of those referrals came from Facebook and Twitter (15% came from Pinterest)
Amazon
  • People:  LivingSocial, 29% owned by AMZN, fired 400 workers (~10% of its workforce) in an effort to focus more on mobile after a poor Q3 performance 
  • Product:  Amazon launched the its Appstore in Japan
Apple
  • People:  The company fired Richard Williamson, who was responsible for Apple Maps, which has failed miserably since its release on iOS6
  • Product:  AAPL released an update of iTunes that features cosmetic changes and more control over music history and the upcoming queue. Notable is the lack of any innovative social features, but this supports the idea that the company will be launching a new music streaming service once licensing deals are in place with the major labels
BIA/Kelsey
  • Data:  A new report forecasts that from 2012 to 2016, social media ad spend will increase from $4.6bn to $9.2bn, native ads on social media sites (ex. newsfeeds) will grow from $1.53bn to $3.85bn, and social display ads will grow to $5.4bn from $3bn
comScore
  • Data:  A new study which, for the first time included both desktop and mobile users, indicated the following breakdown in mobile users vs. mobile only users: 51% and 16% for FB, ~51% and 12% for GOOG, 50% and 13% for YHOO, 25% and 1% for MSFT, 39% and 11% for AOL, 48% and 30% for YELP, and 81% and 62% for P.
eBay
  • Data:   PayPal noted that it saw a 190% y/y increase in Cyber Monday global mobile payment volume and a 193% y/y increase in Black Friday payment volumes
Eyeo
  • Product:  Launched its Adblock Plus app for mobile devices on Android, which essentially blocks pop-up and display ads on Web sites, and pre-roll video commercials. Near-term this could have a negative impact on GOOG’s and others CPM in mobile display ads, though eventually an “Acceptable Ads” update will be rolled out which will allow users and marketers to agree on what type of ads are acceptable.
Flurry
  • Data:  A new study by Flurry estimated that China had 167mn active iOS and Android devices, and projected that the this total installed base would surpass the US in Q1/13
Google
  • Deal:  GOOG acquired Incentive Targeting, provider of a self-service platform for delivering targeted online coupons, for an undisclosed amount, in a move to help strengthen Google Offers
  • Deal:  GOOG acquired Bufferbox, which provides customers with lockers to pick up online purchases (similar to AMZN’s Lockers), for a rumored purchase price of ~$20mn, in order to build on its commerce initiatives including Google Offers
  • Glitch:  Despite various media reports early in the week, it was confirmed that GOOG did not acquire wireless infrastructure provider ICOA
  • Privacy:  Google Play reviews on both mobile and web will display users’ Google+ name and profile picture with all reviews (with no option to disallow this)
Groupon
  • People:  Despite swelling media rumors that CEO Andrew Mason would be fired soon, the board has yet to make any executive changes
  • Product:  A new partnership with Major League Baseball allows GRPN to sell baseball tickets through its daily deals
LinkedIn
  • Product:  LNKD launched a new Ads API that allows developers to build customized tools for automatically launching and quickly managing ad campaigns, which should encourage large-scale campaigns and allow for easier campaign testing
  • Strategy:  The CEO noted that the company’s long-term strategy is to create an “economic graph” of information about professionals that enables companies to analyze its workforce skillsets more effectively

Disclaimer:

The user acknowledges that he/she is not relying on any content or information contained in the foregoing report for any financial, tax, legal, accounting, or other business matters, and will rely on the advice of its own professionals and advisors for such matters. The user acknowledges that the above reports are for informative and/or entertainment purposes only and the mention or reference of any company does not imply an investment recommendation. The user acknowledges that under no circumstances is any content of the reports to be construed as an offer, solicitation, or recommendation to buy, sell, or solicit the purchase or sale of any securities of the companies mentioned. The user acknowledges that the information contained in the reports is obtained from sources believed to be reliable, but its accuracy and completeness, and that of the opinions based thereon, are not guaranteed. WebMediaBrands and the author will not be liable for any economic loss that may be sustained based upon the reliance of any material published in the reports.

Image by rzymuR via Shutterstock.