Twitter left a lot unanswered with new ad strategy, but Wall Street didn’t mind

Twitter left a lot of questions unanswered about its new syndicated ad network, but it looks like Wall Street didn’t mind. The social company’s stock closed up six percent after it announced it would start powering promoted tweets on other sites. The tweets would look a lot like they do in Twitter.

A mockup of a promoted tweet that could appear outside Twitter

A mockup of a promoted tweet that could appear outside Twitter

It’s sort of a confusing premise, one that led Re/Code to call it a “concept” rather than a “full-blown product.” Would promoted tweets appear on the sidebars of websites? Would they pop up embedded in posts? Would they only show up in widgets that serve up a bunch of tweets? Twitter’s blog post on the news didn’t elaborate further, aside from saying they’d appear on Twitter’s first partners: Flipboard and eventually Yahoo Japan.

Flipboard is an obvious integration, since tweets are already part of the content. Flipping past a promoted tweet as you go through stories would feel natural. “Because Flipboard already integrates organic Tweets into the app, the Promoted Tweet will have the same look and feel that is native to the Flipboard experience,” the Twitter post said.

I was struggling to think of many other examples where there are streams of tweets on other websites. Most media companies embed or show one-off tweets, so a promoted tweet there would look jarring and might keep journalists in particular from embedding tweets. A few years ago, embedded widgets showing latest tweets by certain users were very popular, but I haven’t seen those in awhile. I asked Twitter for more examples of where they imagine these promoted tweets appearing, and I’ll update this if I hear back.

On the surface, Yahoo Japan is a weirder partner choice than Flipboard. Why would Twitter want to work with an Asian arm of a struggling media brand?

Turns out, Yahoo Japan is its own separate entity — the American Yahoo helped found it in conjunction with telecommunications company SoftBank. Yahoo Japan’s popularity has continued to soar even as Yahoo’s has plummeted. And Twitter is hugely popular in Japan as well. It’s an easy way to test the product before courting other companies.

A source familiar with the Twitter’s strategy told me they’re still developing this new promoted tweet strategy and will be releasing more information in the future. The person I spoke with said that we can expect to see promoted tweets both in feeds of tweets from the website, but also as standalone units. “The promoted tweet is a trusted and known unit and it looks and feel really easily digestible,” they said. “You need users to say, ‘This is content I’m ok with having here.'”

That’s key for Twitter’s new external ad strategy to succeed. Given the fact that the company is serving up promoted tweets, not newly designed ads, it has to hope people like that format.

Here’s why Facebook got away with a 335 percent hike in ad prices

Ads dominated the discussion during Facebook’s fourth quarter earnings call this Wednesday. COO Sheryl Sandberg told analysts that the company is charging 335 percent more for each ad on average, despite the fact that the ad impressions has decreased by 65 percent.

The company says its ads have become more efficient at targeting and tracking people. Facebook is measuring the return on investment that each advertiser receives for every dollar spent. “When I sit down with clients this year compared to last year … we’re able to A/B test Facebook ads versus no Facebook ads and what the effect is on their sales,” Sandberg said on the call.

She repeated Facebook’s new advertising mantra, a tactic it’s calling “people based marketing.” The company is building new ways to measure a user across multiple devices, like phone, desktop, laptop, and tablets, instead of relying on cookies, which don’t work well on mobile.

“The ability to understand that that’s one person, to serve an ad and measure through all the way, we think is going to massively improve the efficiency of the system,” Sandberg said.

She’s not the only one who thinks that. On Google’s earnings call last quarter the company admitted it was keeping an eye on Facebook’s innovations in the mobile advertising space. At the time, analysts were concerned that Google didn’t have enough visibility in the app ecosystem, via Gmail logins, to track users across their apps and target the best ads to them.

Since many apps have integrated Facebook login technology, the company is the leader in targeted advertising for mobile. 69 percent of Facebook’s advertising revenue came from mobile in Q4, 16 percent more than in the same quarter of 2013. It’s staggering growth, given it was only two years ago it was struggling to figure out how to make money on mobile.

As for the rest of Facebook’s Q4 numbers, the company beat Wall Street estimates for the tenth quarter in a row. Its growth continues unabated and it surpassed its number of monthly active users from Q3 by 40 million.

Here are the Q4 numbers:

Revenue:

Analysts expected — $3.77 billion

Facebook actual — $3.81 billion

Earnings per share (non gaap):

Analysts expected — $0.48

Facebook actual — $0.54

Monthly active users:

3rd quarter 2014: 1.35 billion

This quarter: 1.39 billion

Other significant stats:

3 billion video views per day

890 million daily active users in December

1.19 billion monthly active mobile users

The company’s continued success comes on the heels of positive news about its social acquisitions and messaging efforts. As Kevin Fitchard reported this morning, Facebook owns the top four most downloaded apps worldwide in 2014: WhatsApp, Instagram, Facebook itself, and Facebook Messenger.

Facebook’s attempts at building new social apps haven’t succeeded quite as well — Poke was quietly shuttered, and Slingshot and Rooms have been laying low. But Zuckerberg’s lavish acquisition strategy, although occasionally jaw-dropping, appears to be working. Instagram is now believed to be worth $35 billion compared to the $1 billion Facebook bought it for.

This post has been updated with more information from Facebook’s earnings call.

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Wall Street loves Snapchat! No, seriously!

Snapchat is about to raise $100 million from unnamed investors, probably hedge funds. Maybe they are following Peter Lynch theory investing: invest in what you know.

Bloomberg launches financial app store, offers Angry Bonds

Financial giant Bloomberg has opened an app store in which it wil take 30 percent of revenue. The move is significant because it is the first time the tightly-controlled company is opening up its rich pools of data to outside developers.

The Apple-Samsung verdict: Wall Street reacts

The impact of Apple’s landmark victory over Samsung in their patent trial on Friday has resulted in Apple shares hitting their highest mark yet. Here’s how some of the largest investors in Apple and Google are looking at the verdict on Monday morning.

Zipcar’s future

Zipcar lost about a third of its market value last week as it reported slowing membership growth, a failed broadcast radio campaign and problems with its U.K. expansion. It also lowered revenue and income guidance for 2012, the year in which it was hoped the company would finally reach profitability. Almost every analyst on Wall Street promptly downgraded the company.

You can read the transcript of the Q2 earnings call here, and here are the key takeaways, and the implications for Zipcar’s future.

1) The membership model has to change. This was, by far, the most concerning aspect of the call for investors, but also an important step.  CEO Scott Griffith said that Zipcar is “developing a more holistic set of membership offers that will address a wider variety of member segments” but was cagey about what they’re considering other than to reassure analysts that free memberships are a non-starter and that some sort of trial package as well as a cheaper renewal option will likely surface.

Zipcar has about 730,000 members and with a $60 annual membership fee, that’s almost $44 million in annual revenue for a company that does less than $300 million in total revenue per year. If a holistic membership program reduces by even 10 percent membership revenue, that’s $4 million off the bottom line at a time when the company is struggling for profitability, even if it’s probable that a more open membership program would drive hourly usage of Zipcar’s fleet. That said, opening up the membership model is a necessary step for long term growth, if for the most basic reason that the company will face competitors like Hertz that aren’t charging membership fees.

I don’t actually think Hertz has anything to do with the disappointing membership growth numbers for Zipcar. Still, Zipcar has the worst of both worlds, a subscription fee plus a la carte pricing, and that’s going to have to soften to appeal to a broader range of customers. Griffith noted that Zipcar’s research shows there are prospective customers that want “to try the service out before committing to an annual term” and figuring out how to trial those customers at a discount without alienating current members will be the trick.

2) Marketing woes. On Friday it was announced that Zipcar’s Chief Marketing Officer Robert Weisberg was leaving the company. The failed radio campaign ballooned the cost to acquire a new member to $89, from the year ago quarter where it cost $70. And with the radio campaign now eliminated, it’ll be tough to accelerate new membership growth as we go into winter, one of the major reasons analysts aren’t excited about the next few quarters. Zipcar will look online as it wants to leverage social media and better track its ad performance. At the end of the day, services like Zipcar embody behavioral shifts among consumers and a social campaign is probably a better route since word of mouth encouragement of the product is what will drive new membership anyways.

3) Europe? Griffith alluded to the double dip recession in the U.K. as being the worst in 50 years, which is a problem, given that London is Zipcar’s most promising foreign market and Zipcar has high hopes for the rest of Europe. No doubt the European economic doldrums aren’t helping and there’s some concern that in London that Zipcar is used for weekend getaways and fun daytrips, which correspond to better times and disposable income. Many people in London don’t own cars to begin with.

What Next?

So lots of bad news, right? Well, sort of. The issue is that Zipcar remains an experiment. The Zipvan rollout is going really well, even though it’s a small part of the business right now. But it makes perfect sense. Everyone needs to rent a van for three hours to move a couch. It may not be a huge driver of usage (you only move so many couches a year) and it’ll require a different membership model (no one wants to pay a $60 member fee to move a couch), but it’s proof that Zipcar has its eyes on unmet needs in the market.

Additionally, the one figure that always stands out is Zipcar’s performance in established markets. In those markets it did just under $40 million of revenue with $8.7 million of pretax profit. Not bad, and evidence that the model can work.

Griffith said on the call that Zipcar was considering other services for its network, including peer-to-peer car sharing, one-way trips, and ride sharing. That’s pretty all over the map even if there could be synergies to trying to build one overarching “mobility network” where customers could do everything from book a ride to borrow their neighbor’s car to rent a van. 90 percent of Zipcar’s users carry smartphones and the majority of reservations are done on mobile devices.

Zipcar is still learning. And that’s what’s so disconcerting to Wall Street, particularly because expansion and trialing new programs is expensive. You add to that expectations for a constant rate of membership growth and you’re going to have some ugly days on the street.

Question of the week

Where should Zipcar focus its resources to accelerate growth?

Today in Connected Consumer

Wedbush Securities analyst Michael Pachter certainly stepped in it yesterday in comments to Bloomberg criticizing Facebook CEO Mark Zuckerberg for showing up for his IPO roadshow appearance in his trademark black hoodie. In Pachter’s view, the move showed “immaturity” on Zuckerberg’s part. “I think that he has to realize he’s bringing investors in as a new constituency right now, and I think he’s got to show them the respect that they deserve because he’s asking them for their money,” according to the analyst. That set off a firestorm among tech bloggers, who called Pachter everything from a “doofus” to a “complete douchebag” for not recognizing that the product matters more than the CEO’s attire. The best line came from Om, who wondered in a blog post, “Will a Yahoo patent on Hoodies mysteriously emerge and stop Zuck from being a hoodie-maven?”  Ultimately, I think Pachter’s comments say more about Wall Street than about Zuckerberg. It is Wall Street that doesn’t understand that the point of running a business is not simply to generate fees for bankers and arbitrage opportunities for traders. It’s also to produce a product of value to its users. I doubt it really bothers Zuckerberg much. But if he does get down about it he can commiserate with Barack Obama, who has also earned the undying enmity of Wall Street despite the marked improvement in the stock market since he took office and the watered-down “reform” he shepherded through Congress.