Daily Tech Snippet: Monday, April 20

• As Advertising on Facebook gets Expensive, Some US Advertisers Switch back to TV: In the pre-Facebook era, with no budget for TV, newspaper or radio advertising, this would have meant we had no feasible way to gain quality exposure at a large scale for years. The Facebook advertising platform changed the course of that fate: We could now bootstrap our marketing — and that was revolutionary. Facebook offered a genuinely disruptive solution with three core strengths. First, it was one of the only platforms that allowed you to accurately measure your results in real-time, letting startups do what they do best — be agile. Second, it provided a superior level of targeting. Want to advertise only to women aged 20-23, who live in Minneapolis, have an annual income of $40K, drive a Mini Cooper and listen to Kendrick Lamar? You got it. To put this in context, to this day, Twitter doesn’t even know the gender of its followers. Third, and most importantly, combining real-time measurable results and superior targeting meant we could scale up quickly. Our marketing dollars on Facebook went a long way, and accurate targeting strategies on our end allowed our tiny budget to catapult the business to $1 million revenues in 2012. Facebook users are clicking more, and advertisers are paying for more clicks. But what are users really clicking on? Facebook calculates its CPCs as cost per every single click the user makes, whether it’s a Like, a share, or a visit to the brand’s website. But in the world of direct-response advertising, where “engagement” is an obscure term (whose impact on either sales or brand awareness no one knows how to measure), Likes and shares are worth absolutely nothing. This is how the real surge of Facebook prices is disguised: For us, Facebook CPCs — cost per any Facebook click — went up 50 percent from January 2014 to January 2015. But our real CPC value — cost per Facebook click to our website — went up by a whopping 127 percent in the same time period. That means that our real Facebook prices have more than doubled YoY, and a sizable chunk of that price increase is due to a service of Likes and shares valued at zero. Large corporate brands are unaware that a hefty share of their Facebook spend is attributed to Likes and shares; newcomers and the biggest spenders on Facebook don’t fully realize what they’re paying for. Same goes for Facebook’s targeting. Yes, Facebook offers superior targeting, but unless you’re running a narrow-niche business, the benefits of targeting have their limits. If I had a business selling on-demand $10K caviar jars that deliver only to Manhattan’s Upper East Side, I would be very excited by Facebook’s granular targeting. But the biggest spenders on Facebook are mass-market brands looking for mass-market exposure, and while they may have the option to target by specific neighborhoods, elementary schools or favorite books, they have no business reason to do so. Facebook may be developing more granular targeting capabilities, but its biggest spenders don’t really need it. Big spenders on Facebook are paying a premium for a service they don’t use or need. Today, with its 2014 $6 billion advertising revenues in the U.S. alone, Facebook is exhibiting all the alarming symptoms of a bubble: a service traded in high volumes at inflated and economically irrational prices. we took the plunge and launched a national TV campaign on MTV, Bravo, Lifetime and other networks. When the results were in, we had to rub our eyes to believe it: The CPAs on TV weren’t that far off from Facebook. If I needed any further proof of the Facebook bubble and its irrationally inflated prices, there it was: Acquiring new customers on Facebook with an expert online team, optimized spend and single-image creative was almost as expensive as a full-fledged TV campaign, with third-party agency fees, not-yet-optimized spending, and three different pricey video creatives. In 2015, we have scaled back on our Facebook spend by almost two-thirds and plan to divert that budget into TV advertising. And we’re not alone. Other startups such as Birchbox, Dollar Shave Club and BaubleBar are going into TV, as well, and at least in our case, this is entirely at the expense of Facebook.

• Three Months After IPO, Box, Provider of Cloud-Computing Services, Faces Make-or-Break Moment: Box conducted an initial public offering in January, but had already raised more than $500 million privately. It employs 1,200 people and is considered on the cutting edge of a new generation of companies that provide services to big business customers over cloud-computing systems. Now comes the hard part — survival. Box today is worth $2.1 billion, but losses are continuing to add up while revenue is not growing enough to suit Wall Street’s tastes. The company’s shares are down 25 percent since it went public. And rival services from tech heavyweights like Amazon and Microsoft threaten Box’s business. In its last fiscal year, Box lost $167 million on revenue of $216 million. That was a 74 percent revenue gain from the year before, with a 5 percent bigger net loss. This year, revenue is expected to grow by about 30 percent, a marked slowdown that Mr. Levie hopes the new developer strategy may also turn around. As of its latest earnings report, in March, Box had $330 million in cash. Mr. Levie and his company are nearing a make-or-break point others in this generation of young companies are also likely to soon face: Find a way to cut those losses and stay ahead of deep-pocketed competition or disappear. For Box to compete, it has to get other people to build great things on what it has built in the same way Apple and Google got app makers to create tools that made their mobile software indispensable. At a company conference this week, Box, which has so far focused on Internet data storage and collaboration technology, will explain how it plans to help other businesses build their own cloud services. The goal is to create a so-called ecosystem that ensures continued growth just as Microsoft did with PCs and Apple did with the iPhone. If the plan does not work, it is doubtful that Box will survive as an independent company, and Mr. Levie, for all those high hopes, will become a footnote, someone with a great idea who could not quite turn it into a lasting business.

• AMD Q2 earnings: Stock Drops 10%, Most Since July After Outlook Misses Estimates: Advanced Micro Devices Inc. fell the most since July after the chipmaker’s revenue forecast fell short of analysts’ estimates. Second-quarter revenue will be between $968.2 million to $1.03 billion, the Sunnyvale, California-based company forecast Thursday in a statement after markets closed. Analysts had predicted $1.14 billion, according to 23 estimates compiled by Bloomberg. AMD shares slid 10 percent to close at $2.58 on Friday as the Nasdaq Composite Index fell 1.5 percent amid a broad decline for stocks. AMD is trying to break away from more than 40 years as a cheaper alternative to Intel Corp., the world’s largest chipmaker. Sales from custom chips that AMD sells for video-game consoles such as Sony Corp.’s PlayStation and Microsoft Corp.’s Xbox haven’t made up for falling demand for personal-computer processors.

• China fines Alibaba $129,000 for pricing violations: China's e-commerce giant, Alibaba Group, has been fined 800,000 yuan ($129,000) by the price bureau in eastern Zhejiang province for violations by third-party sellers during promotions on its e-commerce platforms. Since Alibaba turned "Singles' Day", a November 11 Chinese response to Valentine's Day, into an online shopping festival in 2009, the event has grown to similar proportions as Cyber Monday and Black Friday in the United States. Sales of more than $9 billion were achieved at last year's event, and the company has copyrighted the phrase "Double 11", a reference to the date (11/11), which in turn, refers to the status of single people. "The company has been fined 500,000 yuan ($81,000) for matters related to Singles' Day pricing by third-party sellers on our Tmall marketplace in 2013 and 2014 and 300,000 yuan($48,000) for pricing in other promotions in 2013 and 2015," Alibaba Group said in a statement on Friday. While pricing is handled by third parties, not directly by Alibaba, the group said, it would nevertheless reinforce pricing rules and regulations with sellers to protect consumers. The 27,000 vendors featured on Alibaba's Singles' Day shopping sites hope to boost sales and gain customers, but some have complained that discounts and cut-throat corporate rivalry undercut the benefits. Alibaba has had occasional difficulties regulating its sprawling e-commerce empire, which now includes online markets such as Taobao; Tmall, a platform for larger retailers linked to Taobao; group-buying site Juhuasuan and the original flagship platform Alibaba.com, which links exporters with foreign buyers. Alibaba shares have lost more than a fifth this year, with analysts citing concern about counterfeits along with lackluster third-quarter earnings and waning investor excitement after last September's record-setting $25-billion IPO.

• Offline to Online: Indonesian conglomerate Lippo prepares for a drive into e-Commerce: Indonesian conglomerate Lippo Group has appointed Credit Suisse and Bank of America Merrill Lynch to lead its first round of funding, worth $200 million, for its e-commerce push. Lippo, controlled by the Riady family, has also chosen Rothschild as its financial adviser for the transaction. The funding will be used to "dominate e-commerce in Indonesia," it said in a statement on Monday. Lippo plans to launch payment, chat and other online services early next year as it expands in the nascent e-commerce industry of the world's fourth most populous country, director John Riady told Reuters last month. Lippo has already earmarked $500 million for a new online department store, and investment in services planned for the first quarter of 2016 will be on top of that, Riady said.

• Rakuten Ventures invests in push notification platform startup: Rakuten Ventures, the investment arm of the Japan-based ecommerce titan, announced today that it has made an undisclosed seed investment in a US startup that’s made a push notification platform aimed at mobile app and game developers. That startup is OneSignal, which today rebrands from GameThrive. “If the opportunity arises, Rakuten Ventures would love to see the [OneSignal] team partner up with Rakuten Group to utilize the company’s capabilities,” he adds. Viber, which Rakuten acquired in February 2014, has 236 million monthly active users at the last count, surpassing the much-hyped Line app. While most people are coming to hate spammy push notifications as much as banner ads, they’re still considered by many mobile app developers as a great tool for engagement – to give people a little nudge and some kind of enticement to get back into their app or game. The simple fact is that monetization is a lot harder if people don’t open your app all that often. “Push notifications are a key part of every single mobile application since they are easy to use, have low barriers for user opt-in, and have significantly higher visibility than email messages,” explains George Deglin, the CEO of OneSignal. “Most of our clients use our service to send occasional messages to their users to re-engage users by encouraging them to complete an action or to tell them about new features. We also have many clients using our service for transactional notifications, such as telling users when it’s their turn in a multiplayer game.” The team has recently been working on HTML5 push notification support in Google Chrome and Firefox. “With this, our developer audience will soon expand outside of mobile to include anyone with a website,” adds Deglin.

• Facebook Seeks to Edge Out YouTube - Pushes Publishers for Exclusive, Optimized Content: Hosting exclusive programming appears to be Facebook's latest move toward becoming a dominant player in streaming video. BuzzFeed and ABC's Jimmy Kimmel Live also recently struck a deal with Facebook, while a number of other publishers say they have projects in the works. There is a strong push to provide exclusive content to Facebook, which the social network is "aggressively" asking for, say several publishers contacted by Adweek. One publisher who requested anonymity noted that while posting a YouTube link to his video on Facebook produced weak results, the same content posted directly to Facebook led to millions of views. Facebook, he said, had "no desire" to see YouTube's preroll ads on its platform as it affected the user experience. "Most companies know that a best practice on Facebook is that an image of a video performs better than a direct link [to a third-party player]," noted Paul Kontonis, executive director of the Global Online Video Association. "But Facebook native video performs better than everything." While Facebook has done a limited number of video ad deals, publishers have been told traditional ads are on the way. In the meantime, sources said the social network will announce the expansion of branded-content program Facebook Anthology at a meeting with publishers, brands and agencies in New York on April 22. Anthology connects advertisers with publishers to create Facebook-native content—Budweiser's 2013 Made in America partnership with Vice, for example. Other Anthology participants include Vox, The Onion and Funny or Die. The finely tuned targeting capabilities around Facebook video are grabbing the attention of marketers. And no wonder. Facebook targeting by age, gender and location boasts up to 94 percent accuracy while its video player can derive deeper insights and metrics than other competitors, including YouTube, per Universal McCann. Still, said Kevin Cronin, partner, search and social at UM, YouTube remains the leading platform for driving views overall. He cautions that if Facebook is asking publishers for exclusive content, marketers creating branded content might balk at having to limit that content to a single platform. James Crolley, media director at Starcom MediaVest, noted that while Facebook has an autoplay feature, videos can easily be passed over in a feed. The challenge, he said, is "it does require creative to be far more impactful."