The social media sector took a hit this week with an average weekly loss of 3% as FB’s announcement of a new graph search failed to excite investors, sending the stock down 7% (though it is still up 11% in the three weeks of trading of 2013). Despite the negative week, the average return for the social media sector in 2013 is a gain of 5%. EBAY announced solid Q4 results (see below) and next week we will see notable earnings from GOOG, NFLX, and most importantly, AAPL, which has cast a cloud over the entire Internet and media sector during the past six weeks.
Speculation continued over another liquidity event for Alibaba, driving YHOO to a nice gain of 4%, but it was a bad week for YELP and Pandora investors, with losses of 8% and 4%, respectively. YELP was driven down by the thought that FB’s Graph Search is highly competitive (we do not agree in the near-term) and Pandora on the news that Sony/ATV negotiated an increase in royalties and that Amazon’s new mobile web store for MP3s increases the likelihood of AAPL launching a competitive streaming music service.
- FB announced a new product, Graph Search, which will feature the ability to dynamically search content available through Facebook (people, photos, places and interests) for answers (rather than links as in typical search engines). Graph Search is not a mobile product at this time and full rollout will take years, according to Zuckerberg. The key differentiator is that Graph Search intends to answer queries based on how content has been organized on Facebook (liked, categorized, and grouped). MSFT’s Bing search engine will be a partner to FB by defaulting searches to Bing answers when Graph Search queries cannot be adequately addressed.
- Despite the prior hype, last week we noted that the ‘mystery’ press event would be meaningless and with the stock down 7% this week, we reiterate that FB’s Graph Search should have zero positive impact on the stock in the near-term. It is difficult to project the long-term potential of Graph Search, but the U.S. paid desktop search market is currently $16.4b (MagnaGlobal) so if FB were able to find a way to monetize it in the future, even a slice of that market could be relevant.
- Presently, we view Graph Search as a defense against decreasing user engagement, which we have previously highlighted as a potential problem for the company. Even if Graph Search is still nascent at the moment, search functionality increases the usefulness of the social network. In the medium-term future, we can be certain that FB will not miss the chance to find a way to increase ad inventory based on search results or boost sponsored search in a significant way.
- In terms of effects on derivative stocks, despite YELP’s large decline in reaction to Graph Search, we continue to believe that the company is well placed and for now still rules local search and discovery. While GOOG is a natural competitor for Graph Search, the company has a 65.2% market share of worldwide search as of December 2012 (comScore) and it is not likely that users will substitute searches on FB for Google searches in a significant way in the near-term. Lastly, even though FB highlighted the potential benefits to hiring/recruiting with Graph Search, at this time it is not a credible competitive product to LNKD’s offerings.
- EBAY announced their Q4/12 earnings, showing solid results, beating consensus estimates on revenue ($3.99b vs. $3.98b) and on non-GAAP EPS ($0.70 vs. $0.69). Total revenues increased 18.1% on a year-over-year basis and 14.8% vs. Q3/12 on the back of strong organic growth across all business lines. PayPal revenue came in at $1.54b, an increase of 24.3% y/y and 23.4% q/q. The company noted that 25% of new users come from mobile and that PayPal mobile payments are now 10% of PayPal’s total payment volume. The company guided 2013 revenues and earnings within expectations, but Q1/13 guidance was slightly below consensus numbers.
- Overall, EBAY’s results were a positive beginning to the Internet season with intriguing mobile numbers, though management noted that parts of Europe are still sluggish. Other than AAPL’s earnings next week, which is an overwhelmingly important event, GOOG will also announce Q4/12 results. Investors should pay close attention to details on mobile effects on overall CPCs in terms of volume and pricing, as any indication of a positive shift sometime in 2013 would be very important.
FB announced a new product, Graph Search, which will feature the ability to dynamically search content available through Facebook (people, photos, places and interests) for answers (rather than links as in typical search engines)
AT&T finally announced that it will enable FaceTime over cellular at no extra charge for customers with any tiered data plan
After initial testing in Canada, FB is starting to rollout a Messenger app feature that allows free VOIP calls using WiFi or cellular data
SocialBakers, a social media analytics firm, estimated that FB’s U.S. and U.K. active users fell by 1.4m and 600k in December
Instagram announced that it now had 90mn monthly active users (it has never released monthly active user data in the past), and claimed that this was up 10% on a month-over-month basis
AMZN is launching an HTML5 mobile web store for MP3s specifically for iOS devices. It will allow direct MP3 purchases (circumventing AAPL’s 30% retailer fee) that will be synced with an Amazon Cloud Player account for easier access
LOVEFiLM, Amazon’s European video streaming company, partnered with NBC Universal to license hundreds of episodes of U.S. television series including The Office, 30 Rock, and Heroes
The company launched its Instant Video service on the Nintendo Wii
A new study from Branding Brand covering 84 mobile websites indicated that over the 2012 holiday season, mobile commerce sales increased by 171% (year-over-year), while visits to mobile commerce sites increased 109% and page views increased by 116%
EBAY announced their Q4/12 earnings, showing solid results beating consensus estimates on revenue ($3.99b vs. $3.98b) and on non-GAAP EPS ($0.70 vs. $0.69)
The company’s PayPal division struck two partnerships with RadioShack and Dollar General that allows customers to user PayPal to pay for store purchases
PayPal agreed to a partnership with NCR, a strong point-of-sale hardware company, whereby PayPal will be offered as a payment option at restaurants integrated with NCR’s Mobile Pay app (and with PayPal’s own apps in the future)
In a new study, Forrester projects that US mobile payments will reach $90b in 2017, a 48% compound annual growth rate from the $12.8b spent in 2012
A study by Garner projected that worldwide mobile advertising revenue will increase 19% in 2013, reaching $11.4b (up from $9.6b in 2012) and $24.5b in 2016. North American revenues are expected to grow from $3.2b in 2012 to $8.7b in 2016
Media rumors continue to circulate that YouTube will acquire a minority stake in Vevo, a music video site
A new study from comScore showed that in December 2012 Google sites (YouTube mainly) dominated unique video viewers with 153 million (total audience was 182 million) and 388 minutes per viewer (dwarfing the nearest competitors by over 5x)
GRPN acquired Glassmap, a real-time location tracker, for an undisclosed amount. The company will likely integrate the acquisition into Groupon Now! to offer users a stronger mobile product
In addition its partnership with FB’s Graph Search, MSFT announced that 5x more of content from FB users’ friends would be searchable in the sidebar
The company finally fully launched its new completely redesigned site (it had previous been open only to beta users)
NFLX put a new licensing agreement in place with Warner Bros. for new content from the Cartoon Network, Adult Swim, and TNT’s series Dallas
Time Warner Cable claimed that NFLX is withholding content while seeking preferential treatment from ISPs. NFLX responded by stating that Time Warner should join its Open Connect initiative to reduce costs, minimize congestion and improve data delivery
Joel Brown, SVP of Operations, resigned from the company
The NY Post reported that Sony/ATV (a JV between Sony and the Michael Jackson estate) negotiated a 25% increase in royalties from Pandora after pulling out of Ascap and BMI to negotiate directly with music services
Justin Somaini, chief of information security, and Shashi Seth, SVP of Yahoo Connections, resigned from the company
Yelp will add restaurant hygiene inspection scores to reviews on its business pages by rolling out in San Francisco and New York initially
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