There’s been lots of action on the Facebook front over the past few weeks. Most recent of course is the company’s quarterly earnings. The big story there is the continued march of mobile, now up to 59 percent of its ad revenues (see our recent mobile forecast).

Where things get more interesting is Facebook’s plans to continue growing mobile revs. Percentage growth naturally slows as revenues grow linearly from a small base to a larger one, as it goes with revenue growth (just ask Google). So the mobile strategy coming out of Menlo Park will be crucial.

It’s likewise important not to misinterpret what is going on at Facebook, as the company’s trajectory in mobile will provide valuable learnings for anyone else tackling mobile advertising (as we discussed on a recent analyst roundtable). Lots of tech reporting has missed the point though.

Someone Else’s Backyard

Attention has focused on two events: The Nearby Friends feature, and a Facebook “off-site” ad network, rumored to be announced at the upcoming f8 conference. These are each interesting in their own right, but there’s been too much link-bait fueled speculation to connect them.

Stepping back, Facebook’s mobile advertising happens on a few levels. They have native news feed ads within their flagship app, and a prospective ad network that would be off-site. The latter would use all of its data on users and target ads accordingly, but within third party apps.

Facebook had a pilot program for that already and then folded it to focus energy on its own native mobile ad efforts (people often forget this). Now the rumor is that they’ll relaunch some version of this off-site network. This makes sense and my prediction is that it will be mostly app install ads.

Facebook certainly has lots of good data for retargeting users within other apps. This would require tracking/identifying users, which can happen within its existing network of apps that use Facebook Connect. Authentication at the OS level — like Twitter’s deal with iOS — is even better.

But ultimately the beauty of an off-site network is to use all of this data and positioning to continue milking demand for mobile ads, without killing the cow. Instead of over-monetizing its own core user experience, it can do so in someone else’s back yard (albeit with a publisher rev share).

For the ad strategy itself, FB will have to translate its success with mobile news feed ads to other apps (this is where the punditry has fallen apart). In Facebook’s feed based interface, native ads work great. But most other apps don’t have the same scrolling real estate / inventory to work with.

So will it be traditional banners instead? That’s not a lot to get excited about, although there’s admittedly value in Facebook’s targeting capabilities alone. That will involve behavioral targeting, and potentially location targeting. But not the way generalist tech media would have you believe (yet).

All About Local… Kind of

That’s where the Nearby Friend’s feature comes into the media blitz. In the wake of its launch, it was discovered that Facebook is thinking about using the location tracking (core to the friend finder feature) to target ads in the future. Interesting but not likely tied to the prospective ad network.

Rather, any location targeted ads resulting from this will be applied to mobile news feed ads on Facebook proper. It could apply to a prospective ad network in the future but Facebook is very careful about rolling these things out — especially anything resembling a privacy minefield.

As for any location targeting they do for their own native news feed ads — if this does indeed roll out in the near term — it could have some benefits in adding location relevance to mobile ads. But there are also some challenges that most coverage so far has ignored.

1. News feed ads are more brand based at these early stages. The calls to action in those ads have been more about branding or downloading an app and other things that have less to do with location relevance or offline transactions. App install ads are in fact a huge chunk of Facebook mobile ad revenues and they don’t have a location targeting imperative. This could change over time but that’s what we’re dealing with now.

2. Most advertisers that have adopted Facebook’s mobile ad options are large brand advertisers as opposed to SMBs (as is the case with any new emerging media or ad product). Per the point above, they are more interested in reach and branding. Location targeting is great ad boosting relevance and ad performance, but it greatly impedes reach by segmenting audiences into tiny geographic pockets. And for many brand advertisers and agencies, campaign reach is a top objective.

3. For SMBs by comparison, there is obviously less emphasis on reach and more on targeting users that are nearby a store location. However SMBs are very hard to reach from an ad sales perspective. Everyone seems to ignore that fact when news like this comes out. Relatively few SMBs self serve and the rest require capital intensive sales resources to reach in the high-touch fashion that’s required. They often need their hands held. (See lots of rich SMB sentiment data in our LCM data).

The other potential route is to partner with a sales channel such as local traditional media companies who can re-sell Facebook ads to SMBs. That’s of course what Google has done (in different fashion) with third parties like local newspaper or yellow pages sales teams or pure plays like Reach Local.

There’s lots of good debate around this channel strategy. Screenwerk recently spotlighted a bearish attitude towards sales channels from Facebook local head Dan Levy. What it will do instead is unclear (go it alone potentially), but this will be a vital factor in Facebook’s ability to unlock local.

___________

We’ll cover this topic closely at our Leading in Local Conference in Atlanta, now just 10 days away. Email me for a discount code to register (mbolandATbiakelsey.com)

The post Where Will Facebook Go to Sustain Mobile Growth? appeared first on BIA/Kelsey - Local Media Watch.

photo courtesy of Crain’s Chicago Business

All eyes are on “local” this morning on Wall Street, with GrubHub‘s IPO off to a great start. The company has placed 7.4 million shares priced at $26, or $192.4 million. The shares closed at $34.

We’ve been watching GrubHub’s IPO with real interest. The Chicago-based online take out ordering company — which merged last August with Seamless, its primary competitor — represents a key local “food” anchor, along with Open Table, UrbanSpoon, Groupon (reservations); Yelp and Google+ (reviews); and eventually, Amazon, WalMart, Google,eBay, TBD (grocery delivery).

It has 28.8K restaurants and 135,000 daily orders. Forty-three percent of its activity now takes place from mobile devices, a key metric in this space which relies on impulse purchasing. The company has operations in most major U.S. cities, but is strongly penetrated in several.

In this area, which might loosely be termed as “food,” the silos are falling fast — they each do a little of each. We expect to see a major land grab by the key players that are already in the space, and the possible addition of other tech and retail players.

At its most basic level, GrubHub views, confirms and tracks food orders, It makes its money from commissions of roughly 10-12 percent. Last year, it made $137 million. But the company’s value extends beyond order taking. It acts as a giant search and discovery engine that can bring customers back to locations, and recommend others when they are in the mood for something else.

The cost to use GrubHub is relatively high. There have been anecdotes in the press about some restaurants quitting GrubHub, seeing a drop in orders, but making higher profits. Obviously, these reports are not the general consensus, as the company continues to grow.

But the best way for restaurants to justify its cost is if they chalk it off as a promotional expense. GrubHub executives like to point out that it is ultimately cheaper and more retentive to spend on GrubHub than on a deals site such as Groupon, with its high commission structure taking 30-50 percent, on top of high discounting off menu prices.

While GrubHub has a nice lead in this space for now, the key for it now will be to extend its brand and reach. Its brand awareness remains low, and it is mostly known among niches such as office workers and college students. The company’s current competitors include Delivery.com, which claims a roster of almost 10,000 restaurants in 50 cities; and Eat24.com, which covers 20,000 restaurants in 1,000 cities across the country.

We’ll be watching for activity from companies such as Yelp, Google and other players too, either via start up or acquisition.

The post GrubHub IPOs: Thoughts About GrubHub and the ‘Food’ Segment appeared first on BIA/Kelsey - Local Media Watch.

photo courtesy of Crain’s Chicago Business

All eyes are on “local” this morning on Wall Street, with GrubHub‘s IPO off to a great start. The company has placed 7.4 million shares priced at $26, or $192.4 million. The shares closed at $34.

We’ve been watching GrubHub’s IPO with real interest. The Chicago-based online take out ordering company — which merged last August with Seamless, its primary competitor — represents a key local “food” anchor, along with Open Table, UrbanSpoon, Groupon (reservations); Yelp and Google+ (reviews); and eventually, Amazon, WalMart, Google,eBay, TBD (grocery delivery).

It has 28.8K restaurants and 135,000 daily orders. Forty-three percent of its activity now takes place from mobile devices, a key metric in this space which relies on impulse purchasing. The company has operations in most major U.S. cities, but is strongly penetrated in several.

In this area, which might loosely be termed as “food,” the silos are falling fast — they each do a little of each. We expect to see a major land grab by the key players that are already in the space, and the possible addition of other tech and retail players.

At its most basic level, GrubHub views, confirms and tracks food orders, It makes its money from commissions of roughly 10-12 percent. Last year, it made $137 million. But the company’s value extends beyond order taking. It acts as a giant search and discovery engine that can bring customers back to locations, and recommend others when they are in the mood for something else.

The cost to use GrubHub is relatively high. There have been anecdotes in the press about some restaurants quitting GrubHub, seeing a drop in orders, but making higher profits. Obviously, these reports are not the general consensus, as the company continues to grow.

But the best way for restaurants to justify its cost is if they chalk it off as a promotional expense. GrubHub executives like to point out that it is ultimately cheaper and more retentive to spend on GrubHub than on a deals site such as Groupon, with its high commission structure taking 30-50 percent, on top of high discounting off menu prices.

While GrubHub has a nice lead in this space for now, the key for it now will be to extend its brand and reach. Its brand awareness remains low, and it is mostly known among niches such as office workers and college students. The company’s current competitors include Delivery.com, which claims a roster of almost 10,000 restaurants in 50 cities; and Eat24.com, which covers 20,000 restaurants in 1,000 cities across the country.

We’ll be watching for activity from companies such as Yelp, Google and other players too, either via start up or acquisition.

The post GrubHub IPOs: Thoughts About GrubHub and the 'Food' Segment appeared first on BIA/Kelsey - Local Media Watch.

Dex Media plans to spend 2014 moving past the integration phase that occupied much of last year, and into an execution phase focused on dialing in the right digital product set for small-business advertisers. The result should be an improving trend on digital revenue, and possibly a more stable picture on the print side.

That’s what we inferred from this morning’s Q4 and year end 2013 earnings call. Dex Media executives do not offer guidance, and they largely resisted analysts efforts on this morning’s call to provide any specific revenue forecasts.

What we do know is that the digital results moved in the right direction in Q4, following a negative trend through the first three quarters of 2013. Dex Media reported zero Q3 digital ad sales growth on its Q3 earnings call, culminating a steady declines in online ad sales throughout the year. For Q4, digital ad sales were 5.1%. What accounts for the improvement? Dex Media executives blamed much of the poor performance on the inevitable integration disruption. The improvement is a combination of moving through the bigger integration hurdles while also making some progress on the product and sales effectiveness side.

For the full year, Dex Media generated 24% of its roughly $2.1 billion in revenue from digital, or about US$500 million in online revenue. Print ad sales results stabilized a bit in Q4, but CFO Dee Jones cautioned not to over interpret one quarter. He noted that the mix of markets in Q4 slightly favored better print results. That said, the effect of bundling print along with digital products is expected to have a slight stabilizing impact on print over time. Print ad sales declined by 19.1% in Q4, compared with a 20.6% Q3 drop. In Q4 2012, print ad sales were down 23.3%.

Dex Media CEO Peter McDonald was more focused on the digital opportunity on today’s call, emphasizing the opportunity Dex Media has to make digital simple for small-business advertisers. He noted that with 2,000 local sales reps, Dex Media is well positioned to bring SMBs online at scale, something others have tried and failed to do. When asked about competition, McDonald said the biggest threat is from what he referred to as “that guy,” an informal expression Dex Media has coined internally to describe small local digital consultants and agencies.

“They tend to be good at one or two things, like SEO or social media,” McDonald said of these small local agencies. Dex’s opportunity is to offer a simplified, comprehensive solution for SMBs that includes presence, search engine marketing, social media, reputation management and other solution, with measured performance. “Businesses need us.”

McDonald said Dex Media is constantly trying out new bundles, looking for the right mix that will maximize revenue growth and retention. At the entry level, McDonald said  the company is getting traction with its Start Smart bundle.

Dex Media ended 2013 with about $2.7 billion in bank debt, down from $3.3 billion at the end of 2012. Moving forward, the company plans to use some of its cash to further reduce debt, but when asked, Jones would not rule out making strategic investments, including acquisitions.

The post Dex Media Focused on Digital Growth appeared first on BIA/Kelsey - Local Media Watch.

“A core value for Twitter as a company is to reach every person on the planet. In 2014 we want to build a Twitter that is accessible to everyone,” says Dick Costolo, CEO of Twitter in yesterday’s Q4 earnings call. Twitter reports having has 241 million monthly active users worldwide, up 30% from last year, with 54 million of those users in the United States.

With only 24.9% of U.S. consumers actively using Twitter, according to BIA/Kelsey’s Consumer Commerce Monitor?, it looks like such an expansive reach is going to be a challenge for social media’s newest public company.

To tackle this feat Twitter mentioned several changes it has or will make to stimulate user growth. As Twitter users may have noticed, in-line social actions and media powered timelines were introduced in October which increased user interaction such as favorites and retweets by 34% in Q4. Search is also a quickly growing feature with 120% increase in total search year over year while simpler user onboarding experiences with native mobile signup are aimed to reengage inactive users. Another new feature that was introduced, and is a new concept for Twitter, was direct messaging. Messaging is up 25% since it was implemented.

The main device that users are accessing their Twitter accounts on is mobile. More than 75% of total ad revenue is being generated through mobile devices.

With all of this focus on growing their user reach, we have to ask; what is twitter doing for advertisers? According to Mike Gupta, CFO at Twitter, ad engagement is up more than 600% from the prior year. The increase in ad engagement is a combination of the improved prediction and targeting capabilities by twitter and the realized importance of the native ad by advertisers. Not only that but “for large branded folks, Twitter in TV is much a part of the conversation,” says Gupta “TV ad recall was up roughly 14% or so for folks who are using Twitter.”

For SMBs, there’s an apparent gap between SMB’s sentiments about Twitter and the company’s traction with small business advertisers. Twitter made little mention of SMB advertisers. According to BIA/Kelsey’s Local Commerce Monitor?, 44.4% of local SMBs consider social media to be a very high or extremely high future marketing priority. Not only that, but SMBs are already very heavily engaged on Twitter as users. Nearly 50% of SMB’s have a Twitter account or plan to get one in the next year. Of those who have one, over 78% of SMBs update their Twitter account daily or weekly.

Additional Key Highlights

–Full year revenue is expected to be in the range of $1.15 to $1.2 billion

–Employee headcount is now over 2,700

–International revenue represents 27% of total revenue

The post Twitter's Q4 2013 Earnings Call: Big Plans for User Engagement, No Plans for SMB Advertisers appeared first on BIA/Kelsey - Local Media Watch.

“A core value for Twitter as a company is to reach every person on the planet. In 2014 we want to build a Twitter that is accessible to everyone,” says Dick Costolo, CEO of Twitter in yesterday’s Q4 earnings call. Twitter reports having has 241 million monthly active users worldwide, up 30% from last year, with 54 million of those users in the United States.

With only 24.9% of U.S. consumers actively using Twitter, according to BIA/Kelsey’s Consumer Commerce Monitor™, it looks like such an expansive reach is going to be a challenge for social media’s newest public company.

To tackle this feat Twitter mentioned several changes it has or will make to stimulate user growth. As Twitter users may have noticed, in-line social actions and media powered timelines were introduced in October which increased user interaction such as favorites and retweets by 34% in Q4. Search is also a quickly growing feature with 120% increase in total search year over year while simpler user onboarding experiences with native mobile signup are aimed to reengage inactive users. Another new feature that was introduced, and is a new concept for Twitter, was direct messaging. Messaging is up 25% since it was implemented.

The main device that users are accessing their Twitter accounts on is mobile. More than 75% of total ad revenue is being generated through mobile devices.

With all of this focus on growing their user reach, we have to ask; what is twitter doing for advertisers? According to Mike Gupta, CFO at Twitter, ad engagement is up more than 600% from the prior year. The increase in ad engagement is a combination of the improved prediction and targeting capabilities by twitter and the realized importance of the native ad by advertisers. Not only that but “for large branded folks, Twitter in TV is much a part of the conversation,” says Gupta “TV ad recall was up roughly 14% or so for folks who are using Twitter.”

For SMBs, there’s an apparent gap between SMB’s sentiments about Twitter and the company’s traction with small business advertisers. Twitter made little mention of SMB advertisers. According to BIA/Kelsey’s Local Commerce Monitor™, 44.4% of local SMBs consider social media to be a very high or extremely high future marketing priority. Not only that, but SMBs are already very heavily engaged on Twitter as users. Nearly 50% of SMB’s have a Twitter account or plan to get one in the next year. Of those who have one, over 78% of SMBs update their Twitter account daily or weekly.

Additional Key Highlights

–Full year revenue is expected to be in the range of $1.15 to $1.2 billion

–Employee headcount is now over 2,700

–International revenue represents 27% of total revenue

The post Twitter’s Q4 2013 Earnings Call: Big Plans for User Engagement, No Plans for SMB Advertisers appeared first on BIA/Kelsey - Local Media Watch.

(BIA/Kelsey, Local Commerce Monitor – Wave 17, 2013)

BIA/Kelsey data shows small-businesses are fully embracing Facebook as a media channel. Facebook executives made it clear on the company’s recent earnings call that they see SMBs ultimately driving big revenues for the social media giant.

BIA/Kelsey’s LCM Wave 17 data shows that 54.5% of SMBs are utilizing Facebook page for online marketing. Another 38% say they’re likely to adopt it within the next 12 months.

Facebook COO, Sheryl Sandberg emphasized the company’s commitment to small business on the recent Q3 earnings call. SMBs make up a large piece of the pie at Facebook; 11 million SMBs, 7 million active with a Facebook page and 3 million of them make at least one post per week. SMB Dan Levy announced at the Local Search Association show back in April that 70% of Facebook users are connected to at least one local business page. And in total, there are 645 million monthly views for these pages.

A Comscore/Neustar/15Miles study that showed Facebook has the second largest app usage for local search, behind only Google. Sandberg mentioned again how SMBs are a big opportunity and that they’ve developed products over the past year that specifically target local SMBs. If Facebook can continue to develop ad products that answer the needs of location targeted ads for SMBs, they’ll be in great shape in the coming years to meet our projected demand and growth for the location based mobile advertising market.

Location Based Mobile Advertising on the Rise

(BIA/Kelsey, Local Commerce Monitor – Wave 17, 2013)

Facebook is heading in the right direction to meet its prediction that mobile ad revenues will surpass desktop ad revenues by the end of the year. Currently, already 48 % of its daily active users only use mobile devices while 49 percent of its total ad revenues come from mobile ads. A surprising fact is how fast FB has grown – 0 to 49% in the last 5 quarters.

Facebook ads garnered in nearly $890 million in revenue during the third quarter through the company’s app install ads, mobile engagement ads, and news feed ads. In comparison to Twitter, whose mobile platform ad revenue ratio is the best of social websites at 70%, means Facebook has the right idea investing in their mobile platforms. Sheryl Sandberg said “Q3 total ad revenue grew 66% year-over-year to $1.8 billion and mobile ad revenue grew to 49% of our total ad revenue. This is a remarkable milestone in the short time since [FB] introduced mobile News Feed ads just last year.”

Facebook CEO Mark Zuckerberg also mentioned the company’s recent acquisitions of Mobile Technologies and Onavo. The first is a speech recognition and machine translation company that will help expand FB’s work beyond just photo recognition to voice. The second is a team that builds world-class data compression technology and mobile analytics. Onavo dabbles in a number of areas, including mobile app analytics and measurement for marketers, as well as in a mobile security division. However, its main core competency is data management and compression and we believe that’s what Facebook cares about the most.

With recent mobile engagement and ad revenue numbers still on target with the company’s projection, we envision Facebook continuing to solidify itself as a strong player in the mobile space. We expect to see continued mobile ad revenue gains and larger push for mobile coming from all ranks within the company to meet this growing industry.

The post Mobile Up, Desktop Down: Facebook Focuses on Mobile in a Big Way appeared first on BIA/Kelsey - Local Media Watch.

We’re watching ReachLocal  closely, and note some changes at the company. Reach has been pushing the envelope as it transitions from a company that is largely dependent on reselling search and display to one that has a deeper relationship with SMBs via a wide range of platform services – and a direct relationship with consumers as well via service leads, placement and transactions.

Today, during its 3^rd quarter earnings call, Reach announced the departure of President (and SMB Digital Marketing Keynoter) Nathan Hanks. Hanks follows founder Zorik Gordon out the door and will be replaced by CRO Josh Claman, who joined the company in August 2012 from Dell and NCR. Interim CEO (and DoubleClick Cofounder) David Carlick remains in place.

The announcement was made during the company’s Third Quarter earnings, which emphasized that the company has expanded its advertiser base 11 percent from a year ago, to 24,600. It also grew its advertiser campaigns 11 percent, and now has 34,600 active campaigns. Additionally, international operations in 16 countries have become increasingly important to the company’s revenue mix, with 34 percent of its revenue now coming from international, up from 29 percent in 2012.

The post More Exec Changes at ReachLocal Amidst Advertiser Growth appeared first on BIA/Kelsey - Local Media Watch.

Hibu will go through a leadership shake up early next year, an aftermath of the recent takeover of the company by lenders.

Today we learned that Hibu Chairman Bob Wigley will leave the board, to be replace by Alfred Mockett, who recently left as CEO of Dex One following that company’s merger with Super Media. Hibu CEO Mike Pocock is also on his way out the door.

Both departures are expected to take place once the current financial restructuring is completed, which is expected by sometime in early 2014. Pocock joined Hibu (then Yell Group) as CEO in November 2010, replacing the retiring John Condron.

Hibu has struggled to find stability through the combination of a large debt load and a sharply declining business.

According to BIA/Kelsey’s Global Yellow Pages report, Hibu is the third largest directory publisher in the world. The company ended its 2013 financial year with revenues of GBP 1.35 billion (roughly US$2.1 billion).

Before the lender takeover in July, Hibu carried GBP 2.3 billion in debt, most of which is expected to be converted into equity for the lenders.

Hibu CEO Mike Pocock has been in charge of the global search and directory company since November 2010.

In other developments, Hibu has appointed David Eckert as “operational” chief restructuring officer to replace outgoing “financial” CRO Simon Freakley, who has been engaged since December 2012 to help Hibu navigate its way out of its financial predicament.

Pocock has attempted to reform Hibu into a digital business, offering a range of media and platform services to SMBs. None of his efforts have thus far succeeded in offsetting the steep decline in the core print business, which has been declining at an accelerating rate throughout Hibu’s operations in the UK, Spain, the United States and Latin America.

Making matters worse is the fact that the company digital directories business is also in sharp decline. A bright spot has been digital services, which is growing robustly, but from a relatively small base.

Whoever takes over as permanent CEO will have to decide whether to follow through on Pocock’s strategy or shift gears. We imagine Mockett will likely play a key role in guiding the company’s strategy going forward. At Dex he focused on expanding the company’s digital product portfolio and moving aggressively to increase digital revenue.

One of the signature pieces of Mockett’s tenure at Dex was the Guaranteed Actions model, which bundled various lead sources, including print, and sold them as a bundle, guaranteeing the delivery of a predetermined number of “actions” in the form of calls, clicks, form completions, emails and appointments.

Mockett’s resume also includes a stint at British Telecom, Yell’s former owner. At one stage, Mockett oversaw the Yellow Pages, though he did not actively manage the business.

Pocock’s successor has not been named.

Outgoing Hibu Chair Bob Wigley. He will be replaced by former
Dex One CEO Alfred Mockett.

The post Leadership Shuffle Ahead at Hibu appeared first on BIA/Kelsey - Local Media Watch.

Dex One and SuperMedia have each entered Chapter 11 bankruptcy as part of a pre-packaged deal as the two companies moved toward merging by mid 2013. The prepackaged route was necessary because the companies were not able to convince all of the senior debt holders to go along with the credit amendments necessary for the merger to go forward without using bankruptcy.

These filings represent the second Chapter 11 bankruptcies for both companies. Both companies emerged from their previous bankruptcies in 2010 with new names and lighter balance sheets. Idearc emerged as SuperMedia, and R.H. Donnelley became Dex One.

The post-merger entity will be called Dex Media, and current SuperMedia CEO Peter McDonald will helm the new company. The other members of the senior leadership team have not yet been announced.

This morning, Dex One also announced its full year 2012 results. Total net revenue was down by 12.2 percent for the year, to $1.3 billion. Total bookings declined by 13 percent overall for the year, with print bookings down 23 percent and digital bookings up 34 percent. The company’s EBITDA margin fell from 44 percent to 43 percent for the year. Dex One did not offer 2013 guidance, citing the pending merger.

The post Dex, SuperMedia to Use Prepackaged Bankruptcy Route appeared first on BIA/Kelsey - Local Media Watch.