Social Media Stock Tracker: Facebook, Google, Yelp on the Rebound

WEEKLY STOCK PERFORMANCE The social media sector was up an average of 4% this week as it rebounded from last week’s negative performance. There were no real fundamental drivers to value that standout, but it is notable that continued downward pressure on AAPL shares (perhaps unfounded) did not drag the sector down. Also of interest is that WEBM (the parent company of Social Times) rebounded strongly with a 15% gain on the week. CHANGE SINCE DEC 7CHANGE SINCE DEC 7 WEBMBIDUSINAPOPENGRPNReNNLNKD 14.7%9.0%8.1%7.3%5.4%5.2%4.2%3.0% GOOGYHOOYELPANGIJIVEZNGAFBMM 2.6%2.3%2.2%0.9%0.1% (0.4%)(2.4%)(2.5%) COMMENTARY Facebook It is difficult to justify the 35% gain on FB shares since its significant lock-up expiration on November 14 (there was an additional small lockup this week of 156m shares). The massively increased supply should have put pressure on the stock, but the shares have soared despite insider sales such as Sheryl Sandberg’s recent disposal of almost 5% of her total stake. While FB’s initiatives in search, a broad ad network, and the expanded launch of Gifts offer very interesting potential over the next 12 months, they are still nascent and the core of its business remains the same. With the focus still on monetizing mobile while US users are essentially plateauing and Sponsored Stories is potentially reaching a limit (before cannibalizing user engagement), FB has spent the last several weeks cleverly setting itself up to monetize Instagram by essentially stripping users of their right to approve changes in the future (see news below) so it can implement future commercial integration more easily. Despite the inclusion of the stock to the NASDAQ 100 this week, there was negative pressure on the shares (down 2.4%) and we think that the stock will continue to trade on sentiment over the next month, ahead of its Q4 earnings, rather than on fundamentals, which means a potentially volatile ride. Google Maps & Yelp The Google Maps app for iOS was finally released this week, where it skyrocketed to the top app status, with strong positive reviews. With more expected iOS 6 upgrades, but with less overall usage on AAPL’s native map application, speculation has increased that YELP’s mobile efforts will suffer (as YELP is tightly integrated into Apple Maps). Further, with continued rumors of Foursquare’s further integration or acquisition by AAPL, the assumption is that YELP will suffer. However, we note that YELP is on track to re-accelerate its revenues in Q4, and it is the clear leader in local review content by a significant margin. Even prior to iOS integration, 40% of YELP searches were through mobile, so any incremental value YELP gains from its AAPL partnership are a positive to an already impressive position (mobile searches increased to 45% at the end of September). YELP has built a company with unique assets that could be attractive to potential acquirers: there are few $1.2b companies that are strong competitors to GOOG. Going forward, YELP is well positioned to continue to rapidly capture the online shift of the local advertising market. Its value will not be driven by Google Maps, but instead on its ability to begin to monetize its already impressive mobile platform in a significant way and show that it can commercialize international markets with the same growth rates that it undertook in the US. Advertisement KEY DEVELOPMENTS IN SOCIAL & INTERNET Facebook PRODUCT FB updated its Android app, eschewing HTML5 for a native app that performs faster and more responsive than its previous version, and also released an incrementally faster iOS app PRODUCT FB updated its Android app, eschewing HTML5 for a native app that performs faster and more responsive than its previous version, and also released an incrementally faster iOS app PRODUCT Instagram announced an integration with Foursquare that places a Foursquare button that allows direct clicks from Instagram venues to Foursquare’s app PRODUCT After testing its Gifts service for a few months, FB launched the service to all US users PRIVACY A user vote on data-sharing/privacy policies failed to reach the binding threshold, even though 88% of FB users voted against them, so FB will implement changes that essentially strip users of the right to vote against other changes in the future PRIVACY FB made privacy-related changes by eliminating the ability for users to hide themselves from search queries within the site, while at the same time adding new shortcuts to block users and easier ability to view and control comments STRATEGY The company confirmed that it intended to monetize Instagram in the future, but did not confirm whether this would be through ads or another method STRATEGY nstagram made another change in relation to Twitter by disabling the ability to display its photos in users’ Twitter stream FINANCE 156m shares were released in another lockup expiration FINANCE FB shares were officially added to the NASDAQ100 index DEAL U.K.’s 888 Holdings will launch a number of real-money games on Facebook such as bingo, slots, and other casino games, which will target adult UK users Amazon PRODUCT The company made its Cloud Player music service available on Roku and Samsung Smart TVs PRODUCT AMZN launched its Prime Instant Video app for the iPhone which allows optimized streaming video for the iPhone Dropbox DEAL The company acquired Audiogalaxy, a cloud music streaming company, for an undisclosed sum Google PRODUCT Google+ rolled out new iOS and Android versions with numerous changes that improve content editing, event planning, notifications, and overall user experience PRODUCT GOOG integrated a more sophisticated “confirmed clicks” feature in its mobile ads, whereby ads that are tapped on its border by users will require a confirmation that the user really intended to click the ad PRODUCT Google Play added the carrier billing ability in Australia through a partnership with Bango (and Telstra) PRODUCT The company shut down its Google Shopping service in China after it failed to gain traction LEGAL GOOG settled a six-year copyright dispute with a group of Belgian newspaper publishers by agreeing to work with the publishers to help delineate paid content from free content, specifically on mobile devices Groupon PRODUCT GRPN launched a new version of its iPad app that improves Facebook integration, allows for the use of gift codes, and showcases its location-based product “Nearby” which allows searching for deals based on user proximity Pandora PRODUCT After a short trial period over the past few months, Pandora fully launched its music service in Australia and New Zealand Sina DEAL The company announced a partnership with AutoNavi, which will allow Sina’s Weibo (Twitter-style) content to be accessed on AutoNavi’s mobile map apps, and will similarly integrate AutoNavi's Chinese location services through Weibo PRODUCT The company launched a new payment system for its Weibo messaging platform called “Weibo Wallet” Twitter PRODUCT The company added Instagram-style photo filters (powered through the startup Aviary) and editing to its mobile apps Veriphone STRATEGY VeriFone plans to divest its mobile payments business and refocus away from the Sale platform due to the high costs of customer acquisition and low margins (and presumably, from a hyper competitive arena with Square, EBAY, and GRPN) WebMediaBrands PEOPLE Directors Gilbert Bach and Michael Davies are resigning from the Board for personal reasons effective December 31, 2012 Yahoo PRODUCT YHOO released its new Flickr iOS app that features photo filters and mobile sharing functions, as well as support for Twitter, FB, and Tumblr sharing PRODUCT YHOO launched new mail apps for both its mobile apps and desktop, featuring a leaner and cleaner look PEOPLE The company made changes to its board, appointing Max Levchin, former CTO of PayPal, with simultaneous resignations of David Kenny and Brad Smith DEAL The company agreed to a partnership with NBC sports to exchange access of its sports news and fantasy platforms in return for access to NBC’s live streams and other content Zynga PRODUCT ZNGA announced that it intends to launch its third casino game, Elite Slots, in the near future PEOPLE The company confirmed that it is eliminating some game and forum moderator positions as part of its recent cost reduction program 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.

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Social Media Stock Tracker: Facebook, Google, Yelp on the Rebound

Nathan Drona

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