- In China, digital ad spend will overtake TV next year, amid a rapid jump to mobile advertising: Next year companies are expected to spend more money on digital advertising than on television campaigns in China. It is a stark shift from three years ago when nearly half of the advertising dollars went to television and just 14 percent went to digital, according to ZenithOptimedia, an advertising agency. China is also diverging from the United States, where television continues to dominate. Homegrown social media platforms in China are at the center of the push. Facebook, YouTube and Twitter are all blocked in China, giving platforms like Tencent’s Weixin — known as WeChat outside the country — and Sina Weibo an advantage. “I’ve been here four years. In that time I’m now on the third dominant social network — first it was Renren, then Weibo and now it’s WeChat,” said Chris Jones, the executive creative director at the ad agency Wunderman in China. Weixin’s particular quirk — that users communicate only with friends and contacts within their circle — has allowed companies to develop direct relationships with consumers. But it also poses a challenge since users have to first choose to include a brand within their Weixin network.
- YouTube struggles to monetize despite its enormous engagement..: For all of its influence as a cultural force, YouTube is still finding its way as an economic one. Viewers may be migrating online in droves from traditional television, but the advertising dollars have not yet followed. The marketing research company eMarketer estimates that YouTube will log about $1.13 billion in ad revenue in 2014, a small fraction of the $200 billion global TV advertising market. The quality of most YouTube programming is too unpolished to draw big investments from many blue-chip advertisers. YouTube creators, meanwhile, complain that the company takes too much of the ad revenue — as much as 49 percent — and does too little to market and promote its stars, which makes it hard for them to leverage their celebrity.
- YouTube also faces a host of small rivals - startups like Interlude that are gaining traction: The basic format of Interlude’s videos will be familiar to anyone who grew up on the “Choose Your Own Adventure” book series. As the film plays, a viewer is prompted with questions about how to proceed — wear the black dress or the white one? — and the video seamlessly integrates each choice. The company is one of many challenging YouTube’s dominance of online video. Vessel, started by two former Hulu executives, recently revealed a plan to offer $3 subscriptions for early access to short videos. And in September, the Universal Music Group made a deal with Mirriad, a company that specializes in inserting new ads into old videos. Interlude’s success against a giant like YouTube — which is owned by Google and attracts more than a billion viewers each month — is by no means guaranteed. But it has already had some promising hits. more engaged audience yields higher ad rates, and Interlude’s narrative mazes also offer ways for producers to incorporate brands (for a fee, of course). In one illustration cited by Robert S. Wiesenthal, Warner Music’s chief operating officer, the viewer of a rap video could choose to have the star keep dancing at a party or hop into a BMW. “We are all on this hunt for monetization,” Mr. Wiesenthal said. “When someone makes a choice to learn about something, that is worth more than, say, a passive pre-roll ad or a guy just holding a bottle of Scotch in his hands.”
- Beacon-enabled mannequins are the latest in mobile app notifications: “We decided we had to work out a way to bring the good old-fashioned mannequin into the 21st century,” said Jonathan Berlin, the managing director of Universal Display, the company that is selling mannequins with electronic implants. About a year ago, Mr. Berlin and his partner, Adrian Coe, had an idea to outfit their product with electronic beacons, small transmitters that can communicate with your cellphone. Mr. Berlin and Mr. Coe created a separate company, Iconeme, just for the beacons, which interact with users through the company’s app. Shoppers can see what a store’s mannequins are wearing, who designed the clothes and how much they cost. But these can beckon you from outside the store, sending messages to your cellphones and beaming pictures of their outfits onto them. They are one of the latest efforts by the struggling retail industry to lure customers away from the Internet and back into brick-and-mortar stores. Don’t feel like going through the store to find an item? You can even buy it through the app. Iconeme is not the only business trying to use technology to help people shop in stores. A company called MyBestFit created kiosks that quickly scan people’s bodies, analyze a database of clothes and make suggestions. Iconeme’s first beacon mannequin began in Britain in August. Since then, about 3,500 people have downloaded the company’s app, Mr. Berlin said. Beacon technology is already popular with retailers along Regent Street, a high-end strip of stores in London, which already use beacons to ping shoppers with promotions and advertisements. He said three retailers in the United States were testing his products, but declined to disclose them, citing confidentiality restrictions.
- Xiaomi close to raising $1B, valuation seen at ~$45B: Xiaomi raises over $1B from All-Stars Investment, DST Global, others. The round, which is expected to be closed this week, would value Xiaomi at more than $45 billion, as per this report. Chinese smartphone manufacturer Xiaomi, which also has a good presence in India, has netted over $1 billion in funding led by All-Stars Investment, an investment firm launched by former Morgan Stanley analyst Richard Ji, says a The Wall Street Journal report quoting an unnamed source. Russian investment firm DST Global, besides Singapore sovereign wealth fund GIC also participated in the round.
- Flipkart raises $700M, valuation seen at ~$11B: Flipkart, India’s largest e-commerce marketplace, has raised $700 million in fresh investment from existing as well as new investors Baillie Gifford, Greenoaks Capital, Steadview Capital, T Rowe Price Associates and Qatar Investment Authority. The e-commerce powerhouse, which is on a fund-raising spree, has raised funding for the third time in 2014. In May, it had raised $210 million (about Rs 1,200 crore). It had raised funding worth $1 billion (about Rs 6,000) in July. The latest round of fund-raising has seen investment from existing stakeholders DST Global, GIC, ICONIQ Capital and Tiger Global. According to reports, the latest fund-raising has pegged Flipkart’s valuation at $11 billion.
Facebook's shares fell 10% on forecasts of higher spending, lower growth, despite beating earnings expectations (Q3 rev: $3.2B, Y/Y 59%, net income $806M, Y/Y 90%). The firm forecast revenue growth of 40% to 47% in Q4 2014, down sharply from 59% in Q3. CFO Dave Wehner also warned that the social network is preparing for a 55% to 75% spike in expenses next year, when the world's largest social network intends to invest in Whatsapp, Oculus and other products that have yet to show a profit. Facebook declined to provide any estimates for its expected pace of revenue growth in 2015, adding to investor worries. "Giving expense guidance without giving revenue guidance is frustrating and spooking The Street," said BTIG analyst Richard Greenfield. "The multi-billion dollar question is what’s revenue growth going to look like next year," he said.
As Facebook stock has risen, the cost of the Whatsapp acquisition has risen too: from $16B ($4B in cash, $12B in FB stock) originally to $21.8B: For this, Facebook offered $4 billion in cash and $12 billion in stock, with the company’s founders eligible for an additional $3 billion in restricted stock. But as Facebook’s own stock has continued to rise, so has the value of the deal. The final tally came in at $21.8 billion, as the Deal Professor noted this month. WhatsApp reported a meager $10.2 million in revenue last year, but has 600M users. Mark Zuckerberg spoke about how he wanted to take the mobile messaging app quickly to a billion users from 600 million. (“For us, products really don’t get that interesting to turn into businesses until they have about one billion people using them,” he said.)
Facebook engagement ticked up; but the firm sidestepped Snapchat-inspired questions on teen engagement: Facebook, already the world’s largest social network, said it had 1.35 billion monthly users in September, up from 1.32 billion in June, and 64 percent of them used the service daily, up slightly from the second quarter. The firm however did not field the one question that could have instilled confidence…or sent it into a death spiral: teen engagement. The company refused to break out any data about usage levels of teens, which are widely thought to be abandoning Facebook for apps like Snapchat. When asked about engagement for different demographics, Facebook’s CFO David Wehner said the company had nothing to report on specific cohorts of users. That was probably smart. A year ago when ex-CFO David Ebersman said Facebook “did see a decrease in daily users specifically among younger teens,” the share price plummeted despite an otherwise killer quarter.
Meanwhile Renren (in 2011 touted as the Facebook of China) serves as a cautionary reminder that valuations can be fleeting: Renren Inc. (RENN) was touted the Facebook Inc. of China when it debuted in New York in 2011. Today it’s looking more like online flameout Myspace. The stock has lost more than three quarters of its value since 2011. “When Renren appeared, students like me added as many friends as possible, but you get tired scrolling through horoscopes and advertisements searching for original content, because WeChat looked like a more enticing platform for posting news and reading comments,” Hou said by phone on Oct. 21. “It was the same with Myspace: you log in, you scroll through your newsfeed -- to find out that all the interesting conversations are happening on Facebook.” Three years after the IPO, the networking website’s valuation has fallen to less than eight times sales. The 24-year-old still checks her Renren account about three times a week, though for WeChat “it’s every hour,” she said. Monthly unique users decreased to about 44 million as of June, Renren said in a statement in August. That compares with more than 438 million monthly active users for WeChat and 157 million users for Weibo, a Twitter-like microblogging service controlled by Sina Corp.
