Let me make one thing clear before I start: It’s not that I’m saying “social media” is going away, as in no longer will be around or, will not have any use or value going forward. What I am stating is this: Everything that you’ve been told, as well as sold, about social media as it is currently argued and used, along with why the companies or platforms that supply it (i.e., the Snapchat™, Facebook™ Twitter™ et al) should be valued not just mere $Billions, but rather $10’s and $100’s of Billions is over. The signs are there for anyone paying attention...
The only ones (in my opinion) that have yet to grasp this are: the “experts”, fund managers, and analysts still telling, and selling its “So worth it!” drivel. Because, as I implied above: the signs are everywhere for those willing to look for themselves rather, than waiting for some “news flash” appearing in their “social feed” or “groundbreaking development” via the main stream business/financial media.
Hint: Remember when all the media went crazy touting why everyone needed to be on, and read their “expert” commentary on LinkedIn™? You know, right before its stock value suddenly plummeted facilitating the need or rescue via Microsoft™ for its very survival? It’s a point worth remembering for context.
Over the last few years I have not only taken the opposite view of what was once considered “gospel” in “The Valley” such as “the eyeballs for ads” model being the be-all, end-all metric for $Billion dollar valuations. But rather, in openly declaring such, I’ve been marked via that same congregation as a heretic for doing so. And that’s being kind.
Over the years their defense against such allegations were, of course, such things as IPO’s, stock valuations, and more. These “touchstones” at the time were touted to show why I was wrong – and they were right. Again, at the time, it all appeared or seemed irrefutable. After all, how could I question anything about what these “miracles” of tech provided, along with the near insatiable demand for their stock. For even an agnostic must surely agree, “tech” was proving and laying bare even the most skeptics’ arguments beyond the shadow of any and all doubt. However, that was when the manna-of-QE flowed freely.
Then – QE ended. And guess what else ended with it? Hint: “It’s different this time” went from holier-than-thou rhetoric to, “WTF is happening!” agnosticism. And it’s getting worse – much worse. Regardless of how many gnashing-of-teeth induced stupor one displays to the contrary.
Back in March I penned the article “Silicon Valley: From Rarified Air To Exhaust Fumes” which presented the following chart. To wit:
The reason why the above did as Rod Stewart famously stated “Every picture tells a story, don’t it?” Is because of just that. As I stated in that article as to why one needed to pay attention was the following. Again, to wit:
“The issue here is that process has one key attribute: It’s the same pattern we’ve seen before, but now it’s represented in days. From IPO to today. What had once taken well over a year has morphed from months to now days.”
What truly puts the stamp of reality on what it says today, is the fact, that even as the “markets” have since (once again) risen to never before seen in history all time highs since that post some 3 months ago. The above have done nothing but either vacillate right where they stood, or worse, have lost even more value. (See “IPO to save the IPO world” Twilio’s current value for further clues.) And two of the three were supposed to be the “proof” that proved all the naysayers such as yours truly wrong. In retrospect, it seems they have done just the opposite.
But making or implying such a blasphemous statement as “social media is dead” and not arguing the same for one of this “religion’s” most cherished houses of worship without addressing it squarely would be insincere. Of course that would be the “idol” commonly known as Facebook™(FB.) And yes, I still believe (and have continually argued) FB along with social media in general – is the AOL™ equivalent of the dot-com era. Here’s why…
Remember all the fanfare they released just prior to the latest earnings report? For those having a hard time it was a statement declaring they had reached “5 million” small business advertisers. Here’s what I stated in a subsequent article. To wit:
“As of today all the estimates are that they’ll handily beat and some analysts are raising their targets. It’s very well they could, especially in today’s world of earnings reporting alchemy. However, one thing which caught my attention was the sudden touting a few weeks back that they had hit “5 Million advertisers.” Small businesses noted as the “key driver.”
“Sound great!” many are saying, and, in-truth, it is a worthy milestone. However, I see the timing as possibly a little suspect, here’s why… (I make this point for it has become near laughable how nearly all upcoming “tech” earnings reports now suddenly coincide with an ever-growing list of preceding announcements of grandiose ideas that are alluded to be right around the corner (like next week!) of flying cars, self driving trucks, rocket rides to space, virtual reality, just to name a few.)
Facebook as of late has been in the news with nothing but negative reports with a slew of horrendous acts being broadcast via their platform. e.g., Rape, kidnapping, beatings, and others. One of the concerns over all this (apart from the issue itself) was a possible backlash from potential advertisers. And who could blame them, and there lies the possible rub…
As I implied with the sudden “5 million” hoopla, what I’m asking is this: Is the addition of these stated 1 million plus new small business advertisers a replacing (therefore a diversion as to squash attention) for the potential of 1 or 2 (or more) large buyers who may have pulled ads?
In other words, if they’ve added so many “new” small business users – shouldn’t the ad revenue explode this report with all things being equal? I believe this is the metric to watch for.”
As per FB CFO Wehner: He once again reaffirmed ad growth will come down “meaningfully.”
Is that a “Wait…what?” moment, “Oh…oh?”, or combination of the two? For it just seems a little confusing on how such a statement could even be expressed (via the CFO no less) when you’re told both the “buyers” (see above “5 million” reference) of those ads, along with the users (see the only metric that’s supposed to matter e.g. 1.94 billion MAU) to view them have both increased.
But not too worry. Because in what seems to be the now “playbook” (See Elon Musk and Jeff Bezos for clues) for all that is “tech”, there’s a reason why one should not pay attention to such things and focus on others. To wit:
Facebook now has a plan to eat another $350 Billion IT market.
Or said differently (as in my opinion) – Zuck and crew found another narrative they believe they can spend money on and keep all the “happy” talk perpetually happy. After all – spending $Billions on companies that seem to never produce a nickel in net profit warranting that spending is what FB has come to do almost better than anyone else. See WhatsApp™, Instagram™, and more for clues. Or, if you want to think of this way: Snapchat is supposedly the Instagram killer – and how’s that business model working out? Sorry, too soon?
Isn’t it funny when it comes to anything involving “The Valley” it always seems it’s about the next big “buy” that’ll be the reason why some insane P/E or valuation will be, “So worth it!” Never the core product that is/was supposedly its raison d’être. And it’s always just around the corner, or as close as the shareholders checkbook. Funny how that works. Or shall I say, “did?”
But then again it does seem so old-fashioned to worry about things like net profits when all one needs to do is use or follow the example below as a guide for growth in the #1 metric touted via “The Valley.” To wit:
“A Russian Went Inside A Chinese Click-Farm: This Is What He Found”
Makes you wonder how much further “value” all that “Asia” growth means to advertisers going forward. But then again…
It’s different this time, no? Especially if advertisers themselves are beginning to see the light. See P&G™ for clues.
Contributor: Mark St. Cyr,
The internet has changed the way people shop around the world with the retail sector currently dominated by Amazon, accounting for almost 65% of online sales. Amazon past Walmart (in market cap) back in 2015 and within the past two years has grown in value to be worth twice as much.
Large department stores and the more traditional malls are closing, but this is happening as retail spending continues to grow.
Online merchants have made it far easier, tap a button and our goods arrive at the doorstep the next day, but obviously at the expense of shop staff. The more comfortable and confident that online retailers will actually deliver what we order the more intelligent we are becoming as online shoppers.
This is identical in online personal investing. Is having the ease of service and renewed confidence a major influence upon why we are turning to index trackers and ETF’s rather than pay a money manager 2% to do it for us? The ETF market has ballooned since the early 2000’s and is now worth approximately $2.5 trillion. With this “online” competition, the rumors are that the fees have been reduced to almost nothing, with money managers taking just 20 basis points on the fund in the hope that they can make additional returns on the bid/offer spread.
One of the problems we could face however, is that the derivative (ETFs) becomes more liquid than the underlying actual index. This relationship works when fine in an orderly market but, without question, it will be tested in extremely or volatile conditions.
You likely know what an ETF is, but I thought you may want to know how they actually work so I included a instructive video below:
U.S. retail stocks slumped once again on Friday morning amid a cascade of corporate earnings reports in the sector.
The drop in names like Nordstrom, J.C. Penney, and Dick's Sporting Goods follows a drubbing on Thursday as Macy's reported a particularly sharp drop in comparable-store sales.
The moves underscore the challenges facing brick-and-mortar retailers, which are closing stores as they contend with competition from e-commerce firms like Amazon.com, where consumers are increasingly spending their money.
A Commerce Department report on Friday showed a seasonally adjusted 0.4% jump in retail sales in April, and revisions higher to prior data, which eased concerns about a broader slump in consumer spending.
But the data also showed a growing divide: sales among nonstore retailers, which includes online shopping, jumped 1.4%, while department-store sales had a more mild rise of 0.2%. Nonstore sales are up nearly 12% over the past 12 months, while department store sales were down 3.7%.
“Non-store retail sales continued to benefit from the structural shift towards online shopping,” said Andrew Hunter of Capital Economics, in a note to clients.
As Amazon’s shares climbed 0.6% Friday morning, J.C. Penney fell 7.6%, Nordstrom sank 8.2%, and Dick’s dropped 6.6%. All are down more than 10% this year, and J.C. Penney has fallen more than 40%.
Nordstrom’s total sales actually rose in the most recent quarter, but investors chose to focus on a 2.8% drop in same-store sales at its department stores and Nordstrom.com. J.C. Penney reported a surprise profit, but revenues came in below expectations. Dick’s reports earnings on Tuesday.
Sears Holdings slid 7% and Vitamin Shoppe dropped 6.2%. The SPDR S&P Retail exchange-traded fund, the largest ETF tracking retail stocks specifically, was down 1.5% in morning trade, following its 2.7% drop on Thursday.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.