Amazon, Facebook , Google - three stocks to rule the world. They cannot do any wrong, and I don't mean that sarcastically. Buying these stocks is like investing in the companies that are building the matrix, but it's real life.
It's just nuts..even Microsoft and Cisco in the 90's..the growth was finite, but there is no limit to Facebook, Google and Amazon. Every quarter is a crusher..over and over, year after year.
Just when you think their growth is 'stalled out', something new comes along. Now it's mobile.
The small mobile screen is perfect for advertising. Adsense ads are everywhere. Sometimes major brands try adsense alternatives but always go back because adsense pays the most and has the most advertisers.
I like that this phrase can be used to condescendingly dismiss two opposite viewpoints.
"Automation and globalization are going to destroy the world." -> "We've been saying that for a hundred years." rolls eyes "This time, it's different."
"Current tech companies might actually have a legitimate sustainable business that won't be totally obliterated in an imminent market crash" -> "Remember 1999?" rolls eyes "This time, it's different."
In all seriousness, though, we had one dot-com bubble; I am not sure it's wise to extrapolate that all tech companies now and for all time are doomed to fail after a few years. Particularly since the companies listed are actually profitable.
They were supposed to be big buy and hold forever stocks. Interestingly looking back if you had bought and held for decades you would have done ok with the food type ones - McD and Coke and poorly with tech like DEC and Kodak. It's hard to build a tech company that will still be good 30 years later.
Zero chance of that. Facebook will be doing $16 to $20 billion in profit within five or so years. They'll have accumulated $60 to $80 billion in cash. They'll have a half trillion dollar market cap in the next few years. They'll liberally use the cash and market cap to buy into any market they're missing out on, just as Microsoft purchased LinkedIn and Skype to try to stay in the game.
These types of companies do not dislodge so easily such that they get "eaten for lunch" in the mere span of ten years. It's the exception for one of them to implode. This is especially true given that Facebook is still ramping, their sales growth is still extraordinary and their daily actives are still growing just fine for their size. They likely won't even peak on users for a few years, at a minimum; and afterward, they still have years to grow their non-US ad business a lot, because that part of their business is wildly non-optimized.
In ten years, Facebook will just be reaching the equivalent business plateau that Microsoft hit circa 2000-2003. They're still a very young business in the first half of their growth phase, they haven't even reached mild stagnation yet. A business doing $2 billion in quarterly profit, growing sales at 50%, and they're going to get eaten for lunch within a decade? It's extremely unlikely, as the mountain of cash they're accumulating will buy their continued place in the ecosystem, whether the anti-FB crowd likes it or not.
Just wait until AI becomes smart enough to recognize and block ads. Then it is all over with these companies, because you can only push ads so far, and after that point people will start to object.
> Nifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks.
> The long bear market of the 1970s that lasted until 1982 caused valuations of the nifty fifty to fall to low levels along with the rest of the market, with most of these stocks under-performing the broader market averages.
> Because of the under-performance of most of the nifty fifty list, it is often cited as an example of unrealistic investor expectations for growth stocks.
What if ad blockers become mainstream? Sure, they won't stop all ads, but they could seriously dent ad revenue, as could changes in online behaviour.
Personally I'm surprised online ad revenue is so high, I rarely click on ads, the fact that enough people do to continue to make it worthwhile for advertisers doesn't really make sense to me. Clearly there are important details I'm missing out on.
It doesn't take long at all for a majority of the users to switch to a different service... then what? But looking at these 3 companies, I would say that Google is different.
> The small mobile screen is perfect for advertising.
Clearly this must be a typo. Advertisers pay more for larger ads. All this mobile ad revenue is based on app installs. And the clicks are often fat fingers on a phone.
Our Google ad salesman keeps pressuring us to spend on mobile. We try to exclude this segment, but we keep getting ads served to mobile devices and clicks. Your comment reminds me that I need to get this sorted out.
Yes. Thats why I have invested some of my money equal weighted in all three of them plus Apple. My thinking goes along the lines that I dont know the future, but I'm pretty sure at least a few of those companies will be a big part of it. They all have high aspirations and huge warchests. So if they dont make the future themselves, they can probably snap up any new promising technology.
There is a limit. However, all of this growth is partly due to previously unexploited advertising/marketing demand. Older mediums like newspapers/magazines, TV, and radio only served to a small niche of potential advertising buyers. Facebook, Google, etc. make it easy and cheap for anyone to advertise pretty much anything.
Interesting that you omitted Apple. You could view the stalling iPhone sales as analogous to Windows reaching market penetration...maybe Apple will come up with a revolutionary new blockbuster (maybe the car), but post-Steve Jobs that won't be easy.
But publishers have done nothing to fight back. At some point, the probably will. It's easy to bypass ad blockers if they put any effort in doing so.
Also, we will see more and more native advertising. FB is a good example but your favorite tech quy on Twitter with million followers, your favorite basketball player on Facebook - ever wondered if they get money to tweet or share things? They do... Welcome to native advertising.
Mobile app ads keep paying more and more. I'm regularly getting $1 per click, and sometimes as high as $5 (finance category). I can't remember ever getting this much for websites. I'm using google admob
As a web advertiser, I pay on average $1.76 per click (for SaaS stuff with a high CLTV).
$1-5 per click for app ads makes sense if the apps have a high CLTV, or the campaigns are temporary as they often are -- they just need to get enough installs to start ranking in app store categories, after which that becomes a free customer acquisition channel, or so I've heard.
Wow, that's a huge gap between spending and earning. Do ad networks have costs other than employees and hosting or did just nobody undercut that price yet?
Edit: What is CLTV? I tried looking it up but not sure what I found makes sense.
May I ask what percentage of your visitors clicks on ads? $5 per click isn't really worth much if no one clicks the ad, or is that constant throughout topics?
Are you U.S. based? We're entering election season and the increased demand on advertising channels can have a network affect across all categories.
I was talking to a friend who is at an agency doing radio ads for a large retail company, and basically the company's usual budget will be blown out almost immediately on radio, so they're spending it on other channels.
Twitter's ads are like this. I hit the x, it opens the ad. I back out and hit the x again, it closes the ad. This behavior is consistent enough that I'm almost convinced it's intentional.
It's pretty steep compared to the last decade. For a while during the dotcom bubble GoTo.com used to list how much a text ad click cost when it was clicked. I remember Dell running ads on there that were paying $5+ per click at the time, and that wasn't uncommon. I really haven't seen anything quite that crazy since those days, when it comes to general / broad-based CPC advertising.
If (CPC * ConvRate * CLV) > CPC then you can pay those prices. Granted, it's not entirely that simple with payback periods to consider, but big advertisers like insurance companies have plenty of money to fund acquisition until it pays back.
I wonder if the fact that Google bans ad-blocking from its store and pre-loads Chrome on Android, which doesn't allow ad-blocking extensions either, has anything to do with that.
Somehow, between its 5 other anti-trust charges against Google, the EU seems to have missed one of Google's biggest abuses of its monopoly-level position in the mobile market.
Bears asking what market your website is in, perhaps? Since some keywords are more competitive than others, and if they're related to your site topic, presumably there's strong targeting there.
There can be both a finite appetite for advertising and increasing Google revenue as long as Google is either making advertising more effective (expanding the market), taking revenue from other publishers (controlling the market), or making money outside of advertising.
Some random stats I found estimate that advertising is currently a $500B yearly industry, which means Google is only 15% of the industry.
Right, I found estimates of $600B yearly ad spend. To put that into context, total annual spending (aka world GDP) is over $70T, meaning that less that 1% of all spending in the world is on advertising.
In addition, the online advertising market is growing naturally as more people get connected to the internet and already-connected people get wealthier. This is why Facebook is so keen to dominate the Indian market that they are willing to offer free (but not net neutral) internet access.
You forgot the most important part: making ads more targeted. More more targeted an ad is, the more you can charge for it. So Google can sell the same number of ads to the same number of advertisers and yet make more money, while advertisers get more bang for their buck.
There is. Advertising as a share of GDP has been flat for like 75 years. But what we see here is a platform shift away from TV and print and to the interwebs. There are a lot of convergent trends happening to drive this. Older TV watchers dying off, explosion of pocket computers, fragmentation of TV ad market by rise of cable channels, etc.
Yeah but TV ads have the nice advantage that you can't easily block them - unless you're timeshifting, that is. And muting, well, it blocks the audio, but you still see the video that can get a message across.
Also, print ads, given a sufficient niche-ness of the magazine, are way better targeted to actual customers than web ads.
About $500 billion globally, with ~$100 billion online, last I'd checked. Based on a global world product (GWP) of $75 trillion. Or 1.5% of the global total.
If that were to be split 3 ways between Google, Facebook, and Everyone Else, Google might get $167 billion in revenue, or (at 20x PE) $3.3 trillion market cap.
I think we'd see a surge in ad purchasing right before the death of it. Why does no one see this uptick in ad spending a potential indicator that advertisers are getting less of their money's worth?
Possibly because that's not how advertising budgets are really set? Nobody says "lets throw more cash at the thing that isn't working anymore". Certainly people will accept slimmer margins if they're still making money but every ad campaign has KPIs that are optimized for and no VP of Marketing is going to keep their job by accepting a status-quo of less effective, more costly advertising.
I don't understand your comment. It got a "callout in the earnings call", what does that mean? Does the "earnings call" refer to a part of the article I can't read (paywall) or are you making an assumption about this being because of PokemonGo and Google/Alphabet internally mentioning PokemonGo in a conference call?
Yup. Looks like I got linked to adinfo.aol.com on both mobile and desktop. The AdChoices icon is common across many platforms (it's from the Digital Advertising Alliance), their list of members is pretty huge[0].
Serious question: How does Google's ad revenue increase when Google themselves were saying people aren't clicking on adwords as much when searching in mobile? Also when people are using voice search such as Siri or Google Now, they are not even seeing the ad results.
AdWords has been making several big pushes over the last few years that contribute to this.
Among them:
- Pushing advertisers to advertise higher up in the funnel with additional clicks. Things like the push for "ZMOT" (Zero Moment of Truth) and such focus on the branding side of things before people are ready to convert. Google has long had advertisers focus primarily on last click conversions which does not play nicely with tracking for brand efforts.
- Video ad pushes by reps have been pretty big. Video CPMs are much higher than static display images, and that is also why you see every publisher under the sun having a a video for every article that autoplays even if it is a useless annoying video. And why they are looking into auto-generated videos.
- Turning previously free resources into paid plays (Google Product Search)
My gut right now in terms of their future monetization is the continued transition of Gmail from a "regular" mail platform into an algorithmic feed where advertisers have to pay a dynamic, auction-based payment model to get into the inbox. The Promotions tab is the first step in that direction. Gmail ads have been the next step. I would expect them to start adding them spread out through your inbox feed in the not too distant future, and then start drastically tapering brand reach unless you pay up like FB has done.
Additionally, their push for bots and voice search is to have people ask questions and just provide the answer and not give a list of choices. They want to know you well enough where they can guess right, but the options they provide are all paid placements, so you get the most relevant paid placement. It won't happen now, but once voice assistants are an integral part of the mobile experience that people can't live without and Google succeeds in owning the space.
> How does Google's ad revenue increase when Google themselves were saying people aren't clicking on adwords as much when searching in mobile?
Google sells ads besides search ads, so a lower per-search rate of clicks on search ads on mobile doesn't mean lower number of total clicks. (They sell both in-app mobile ads, and web ads that are not search ads.)
Also, a lower per-search click rate doesn't mean lower per-search revenue if the value advertisers are willing to pay per click goes up more than the decline in per-search clicks.
They definitely seem to have a way to get you to accidentally click on their mobile display ads while your scrolling through the page. I always get stuck with that and have to go back.
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It's just nuts..even Microsoft and Cisco in the 90's..the growth was finite, but there is no limit to Facebook, Google and Amazon. Every quarter is a crusher..over and over, year after year.
Just when you think their growth is 'stalled out', something new comes along. Now it's mobile.
The small mobile screen is perfect for advertising. Adsense ads are everywhere. Sometimes major brands try adsense alternatives but always go back because adsense pays the most and has the most advertisers.
"This time, it's different."
"When your barber starts giving you stock tips, it's time to sell"
"Automation and globalization are going to destroy the world." -> "We've been saying that for a hundred years." rolls eyes "This time, it's different."
"Current tech companies might actually have a legitimate sustainable business that won't be totally obliterated in an imminent market crash" -> "Remember 1999?" rolls eyes "This time, it's different."
In all seriousness, though, we had one dot-com bubble; I am not sure it's wise to extrapolate that all tech companies now and for all time are doomed to fail after a few years. Particularly since the companies listed are actually profitable.
They were supposed to be big buy and hold forever stocks. Interestingly looking back if you had bought and held for decades you would have done ok with the food type ones - McD and Coke and poorly with tech like DEC and Kodak. It's hard to build a tech company that will still be good 30 years later.
These types of companies do not dislodge so easily such that they get "eaten for lunch" in the mere span of ten years. It's the exception for one of them to implode. This is especially true given that Facebook is still ramping, their sales growth is still extraordinary and their daily actives are still growing just fine for their size. They likely won't even peak on users for a few years, at a minimum; and afterward, they still have years to grow their non-US ad business a lot, because that part of their business is wildly non-optimized.
In ten years, Facebook will just be reaching the equivalent business plateau that Microsoft hit circa 2000-2003. They're still a very young business in the first half of their growth phase, they haven't even reached mild stagnation yet. A business doing $2 billion in quarterly profit, growing sales at 50%, and they're going to get eaten for lunch within a decade? It's extremely unlikely, as the mountain of cash they're accumulating will buy their continued place in the ecosystem, whether the anti-FB crowd likes it or not.
> Nifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks.
> The long bear market of the 1970s that lasted until 1982 caused valuations of the nifty fifty to fall to low levels along with the rest of the market, with most of these stocks under-performing the broader market averages.
> Because of the under-performance of most of the nifty fifty list, it is often cited as an example of unrealistic investor expectations for growth stocks.
Personally I'm surprised online ad revenue is so high, I rarely click on ads, the fact that enough people do to continue to make it worthwhile for advertisers doesn't really make sense to me. Clearly there are important details I'm missing out on.
? It's very inconvenient to have your limited content cut by 40%.
Clearly this must be a typo. Advertisers pay more for larger ads. All this mobile ad revenue is based on app installs. And the clicks are often fat fingers on a phone.
Our Google ad salesman keeps pressuring us to spend on mobile. We try to exclude this segment, but we keep getting ads served to mobile devices and clicks. Your comment reminds me that I need to get this sorted out.
For one, ad blocking is on the rise.
Also, we will see more and more native advertising. FB is a good example but your favorite tech quy on Twitter with million followers, your favorite basketball player on Facebook - ever wondered if they get money to tweet or share things? They do... Welcome to native advertising.
As a web advertiser, I pay on average $1.76 per click (for SaaS stuff with a high CLTV).
$1-5 per click for app ads makes sense if the apps have a high CLTV, or the campaigns are temporary as they often are -- they just need to get enough installs to start ranking in app store categories, after which that becomes a free customer acquisition channel, or so I've heard.
Edit: What is CLTV? I tried looking it up but not sure what I found makes sense.
I was talking to a friend who is at an agency doing radio ads for a large retail company, and basically the company's usual budget will be blown out almost immediately on radio, so they're spending it on other channels.
"Insurance", "loans", "mortgage" are all $44+ per click.
Some very specialized one like "mesothelioma suit" are $800+. Even misspellings like "mesotheliama" are $600+.
Somehow, between its 5 other anti-trust charges against Google, the EU seems to have missed one of Google's biggest abuses of its monopoly-level position in the mobile market.
Maybe big brands pay over, or pay for just to be everywhere, but I wouldn't call it desperation.
Yes, Internet advertising works surprisingly well.
Deleted Comment
Deleted Comment
Some random stats I found estimate that advertising is currently a $500B yearly industry, which means Google is only 15% of the industry.
Also, print ads, given a sufficient niche-ness of the magazine, are way better targeted to actual customers than web ads.
Dead Comment
If that were to be split 3 ways between Google, Facebook, and Everyone Else, Google might get $167 billion in revenue, or (at 20x PE) $3.3 trillion market cap.
http://imgur.com/MpO82Ta
[0] http://www.aboutads.info/participating
Among them:
- Pushing advertisers to advertise higher up in the funnel with additional clicks. Things like the push for "ZMOT" (Zero Moment of Truth) and such focus on the branding side of things before people are ready to convert. Google has long had advertisers focus primarily on last click conversions which does not play nicely with tracking for brand efforts.
- Video ad pushes by reps have been pretty big. Video CPMs are much higher than static display images, and that is also why you see every publisher under the sun having a a video for every article that autoplays even if it is a useless annoying video. And why they are looking into auto-generated videos.
- Turning previously free resources into paid plays (Google Product Search)
My gut right now in terms of their future monetization is the continued transition of Gmail from a "regular" mail platform into an algorithmic feed where advertisers have to pay a dynamic, auction-based payment model to get into the inbox. The Promotions tab is the first step in that direction. Gmail ads have been the next step. I would expect them to start adding them spread out through your inbox feed in the not too distant future, and then start drastically tapering brand reach unless you pay up like FB has done.
Additionally, their push for bots and voice search is to have people ask questions and just provide the answer and not give a list of choices. They want to know you well enough where they can guess right, but the options they provide are all paid placements, so you get the most relevant paid placement. It won't happen now, but once voice assistants are an integral part of the mobile experience that people can't live without and Google succeeds in owning the space.
Google sells ads besides search ads, so a lower per-search rate of clicks on search ads on mobile doesn't mean lower number of total clicks. (They sell both in-app mobile ads, and web ads that are not search ads.)
Also, a lower per-search click rate doesn't mean lower per-search revenue if the value advertisers are willing to pay per click goes up more than the decline in per-search clicks.