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Facebook revenue has made it blind to ad strategy

Jeff Brown, Special to CNBC.com
Tuesday, 29 Oct 2013 | 3:34 PM ET
Mark Zuckerberg, Facebook
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Mark Zuckerberg, Facebook

Recapping the day's news and newsmakers through the lens of CNBC.

Notes:

Facebook stock is soaring and its revenue strides impressing investors, but it's advertising strategy is another story. In fact, it's a pitch that Facebook has abandoned, according to influential tech consultant Forrester.

Forrester argues in a new report that Facebook has enabled businesses to set up their own branded pages in an attempt to promote their services, but has done little in the past 18 months to improve its branded page format or the tools marketers use to manage and measure those pages. And the consultant doubts Facebook will make the changes needed to win back marketers' hearts. In fact, Forrester argues Facebook is blind to the problem given its recent financial success. Facebook reported $1.6 billion in total advertising revenue for the second quarter of 2013.

Facebook said in a statement the Forrester report was not only wrong, but at times illogical.

Quotes:

"Facebook hasn't delivered on its promise and in fact has quietly become reliant on the traditional advertising models it once lampooned."—Nate Elliott, principal analyst at research firm Forrester

"Its enormous revenues have blinded it to marketers' growing dissatisfaction. But if it doesn't change, the results will be dire."—Elliott

A sign is posted outside of the Twitter headquarters in San Francisco, California.
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A sign is posted outside of the Twitter headquarters in San Francisco, California.

Why Twitter is different

Notes:

Twitter's early November IPO may be the most anticipated since Facebook's in May 2012, but Twitter hopes the similarity will end there. The firm is working hard not to mimic Facebook's ugly start. Twitter has chosen the NYSE over Nasdaq, and a much smaller IPO, and has been more conservative in setting a starting price, improving odds of a first-day pop. Unfortunately, that could mean raising less than the company could. And while no one wants a messy start for Twitter, it's worth noting that Facebook shares, despite the bad launch, have soared 150 percent in the past 12 months.

Quotes:

"This is in every way the anti-Facebook IPO."—Max Wolff of ZT Wealth

"If Twitter's executives believe that they are in the right space, then instead of fearing the Facebook comparisons, perhaps they should embrace them and become more aggressive in raising the capital that they soon will be shepherding."—CNBC's Alex Rosenberg

Robert Shiller
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Robert Shiller

How (and how not) to define a housing bubble

Notes:

Despite rising mortgage rates, home prices keep going up. The latest S&P/Case Shiller index shows prices in 20 metropolitan areas rose 0.9 percent in August, and 12.8 percent over the previous 12 months. That's the biggest annual gain in seven years. Still, homes remain affordable and there are few signs of a bubble in the U.S., the report's authors said.

Quote:

"I define a bubble as a time when people have extravagant expectations, and the expectations are driving home price increases. We don't have the [bubble-driving] mindset of earlier this century."—Yale economics professor Robert Shiller, co-founder of the Case-Shiller index

Fed Chairman Ben Bernanke, speaking at a news conference, is seen on a TV screen on the floor of the New York Stock Exchange.
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Fed Chairman Ben Bernanke, speaking at a news conference, is seen on a TV screen on the floor of the New York Stock Exchange.

The Fed no longer matters?

Notes:

Today's meeting of the Federal Open Market Committee might have been a nail-biter—if the committee had been at least a little ambiguous about the fate of its bond-buying program back in September. But the FOMC left few expecting tapering to begin in October. And now a CNBC survey shows that top economists, strategists and money managers don't expect that tapering to start until April at the earliest. On average, they expect the Fed's program to end in December 2014, but 40 percent think it could last until spring 2015. And, of course, it must end before the Fed even thinks about raising interest rates. The federal shutdown and budget standoff have trimmed growth, delaying tapering, many of those surveyed said.

Quote:

"Federal government actions have only added to slowing [the taper start]. Congress and the White House have only made things worse than they would otherwise be."—David Kotok of Cumberland Advisors


Affordable Care Act navigator Nini Hadwen (R) speaks with Jorge Hernandez (L) and Marta Aguirre as they shop for health insurance in Miami.
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Affordable Care Act navigator Nini Hadwen (R) speaks with Jorge Hernandez (L) and Marta Aguirre as they shop for health insurance in Miami.

Obamacare is a 'pre-existing condition' in stocks

Notes:

If Obamacare is a mess, what's that doing to health care stocks? Not much. The market has a way of looking through the political brouhaha. And, for the foreseeable future, Obamacare is the law of the land, and a boon for insurers, drug companies and health care providers. In fact, health care stocks have been the second-best performers in the S&P 500, up 32 percent this year. They could take a hit if Obamacare's problems deepen beyond the troubled website. But site glitches alone do not so far seem to affect the key factor helping this industry: the expectation the law will produce millions of new customers.

Quotes:

"Health care stocks have been driven by getting more bodies into the health care system."—Brian Lazorishak, portfolio manager at Chase Investment Counsel in Charlottesville, Va.

"To me, this is a political event to begin with. The health care stocks can last forever. They're perpetual."—Keith Springer, president of Springer Investment Advisory in Sacramento, Calif.

By Jeff Brown, Special to CNBC.com

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