Let me make one thing clear before I start: It’s not that I’m saying “social media” is going away, as in no longer will be around or, will not have any use or value going forward. What I am stating is this: Everything that you’ve been told, as well as sold, about social media as it is currently argued and used, along with why the companies or platforms that supply it (i.e., the Snapchat™, Facebook™ Twitter™ et al) should be valued not just mere $Billions, but rather $10’s and $100’s of Billions is over. The signs are there for anyone paying attention…
The only ones (in my opinion) that have yet to grasp this are: the “experts”, fund managers, and analysts still telling, and selling its “So worth it!” drivel. Because, as I implied above: the signs are everywhere for those willing to look for themselves rather, than waiting for some “news flash” appearing in their “social feed” or “groundbreaking development” via the main stream business/financial media.
Hint: Remember when all the media went crazy touting why everyone needed to be on, and read their “expert” commentary on LinkedIn™? You know, right before its stock value suddenly plummeted facilitating the need or rescue via Microsoft™ for its very survival? It’s a point worth remembering for context.
Over the last few years I have not only taken the opposite view of what was once considered “gospel” in “The Valley” such as “the eyeballs for ads” model being the be-all, end-all metric for $Billion dollar valuations. But rather, in openly declaring such, I’ve been marked via that same congregation as a heretic for doing so. And that’s being kind.
Over the years their defense against such allegations were, of course, such things as IPO’s, stock valuations, and more. These “touchstones” at the time were touted to show why I was wrong – and they were right. Again, at the time, it all appeared or seemed irrefutable. After all, how could I question anything about what these “miracles” of tech provided, along with the near insatiable demand for their stock. For even an agnostic must surely agree, “tech” was proving and laying bare even the most skeptics’ arguments beyond the shadow of any and all doubt. However, that was when the manna-of-QE flowed freely.
Then – QE ended. And guess what else ended with it? Hint: “It’s different this time” went from holier-than-thou rhetoric to, “WTF is happening!” agnosticism. And it’s getting worse – much worse. Regardless of how many gnashing-of-teeth induced stupor one displays to the contrary.
Back in March I penned the article “Silicon Valley: From Rarified Air To Exhaust Fumes” which presented the following chart. To wit:
The reason why the above did as Rod Stewart famously stated “Every picture tells a story, don’t it?” Is because of just that. As I stated in that article as to why one needed to pay attention was the following. Again, to wit:
“The issue here is that process has one key attribute: It’s the same pattern we’ve seen before, but now it’s represented in days. From IPO to today. What had once taken well over a year has morphed from months to now days.”
What truly puts the stamp of reality on what it says today, is the fact, that even as the “markets” have since (once again) risen to never before seen in history all time highs since that post some 3 months ago. The above have done nothing but either vacillate right where they stood, or worse, have lost even more value. (See “IPO to save the IPO world” Twilio’s current value for further clues.) And two of the three were supposed to be the “proof” that proved all the naysayers such as yours truly wrong. In retrospect, it seems they have done just the opposite.
But making or implying such a blasphemous statement as “social media is dead” and not arguing the same for one of this “religion’s” most cherished houses of worship without addressing it squarely would be insincere. Of course that would be the “idol” commonly known as Facebook™(FB.) And yes, I still believe (and have continually argued) FB along with social media in general – is the AOL™ equivalent of the dot-com era. Here’s why…
Remember all the fanfare they released just prior to the latest earnings report? For those having a hard time it was a statement declaring they had reached “5 million” small business advertisers. Here’s what I stated in a subsequent article. To wit:
“As of today all the estimates are that they’ll handily beat and some analysts are raising their targets. It’s very well they could, especially in today’s world of earnings reporting alchemy. However, one thing which caught my attention was the sudden touting a few weeks back that they had hit “5 Million advertisers.” Small businesses noted as the “key driver.”
“Sound great!” many are saying, and, in-truth, it is a worthy milestone. However, I see the timing as possibly a little suspect, here’s why… (I make this point for it has become near laughable how nearly all upcoming “tech” earnings reports now suddenly coincide with an ever-growing list of preceding announcements of grandiose ideas that are alluded to be right around the corner (like next week!) of flying cars, self driving trucks, rocket rides to space, virtual reality, just to name a few.)
Facebook as of late has been in the news with nothing but negative reports with a slew of horrendous acts being broadcast via their platform. e.g., Rape, kidnapping, beatings, and others. One of the concerns over all this (apart from the issue itself) was a possible backlash from potential advertisers. And who could blame them, and there lies the possible rub…
As I implied with the sudden “5 million” hoopla, what I’m asking is this: Is the addition of these stated 1 million plus new small business advertisers a replacing (therefore a diversion as to squash attention) for the potential of 1 or 2 (or more) large buyers who may have pulled ads?
In other words, if they’ve added so many “new” small business users – shouldn’t the ad revenue explode this report with all things being equal? I believe this is the metric to watch for.”
As per FB CFO Wehner: He once again reaffirmed ad growth will come down “meaningfully.”
Is that a “Wait…what?” moment, “Oh…oh?”, or combination of the two? For it just seems a little confusing on how such a statement could even be expressed (via the CFO no less) when you’re told both the “buyers” (see above “5 million” reference) of those ads, along with the users (see the only metric that’s supposed to matter e.g. 1.94 billion MAU) to view them have both increased.
But not too worry. Because in what seems to be the now “playbook” (See Elon Musk and Jeff Bezos for clues) for all that is “tech”, there’s a reason why one should not pay attention to such things and focus on others. To wit:
Facebook now has a plan to eat another $350 Billion IT market.
Or said differently (as in my opinion) – Zuck and crew found another narrative they believe they can spend money on and keep all the “happy” talk perpetually happy. After all – spending $Billions on companies that seem to never produce a nickel in net profit warranting that spending is what FB has come to do almost better than anyone else. See WhatsApp™, Instagram™, and more for clues. Or, if you want to think of this way: Snapchat is supposedly the Instagram killer – and how’s that business model working out? Sorry, too soon?
Isn’t it funny when it comes to anything involving “The Valley” it always seems it’s about the next big “buy” that’ll be the reason why some insane P/E or valuation will be, “So worth it!” Never the core product that is/was supposedly its raison d’être. And it’s always just around the corner, or as close as the shareholders checkbook. Funny how that works. Or shall I say, “did?”
But then again it does seem so old-fashioned to worry about things like net profits when all one needs to do is use or follow the example below as a guide for growth in the #1 metric touted via “The Valley.” To wit:
“A Russian Went Inside A Chinese Click-Farm: This Is What He Found”
Makes you wonder how much further “value” all that “Asia” growth means to advertisers going forward. But then again…
It’s different this time, no? Especially if advertisers themselves are beginning to see the light. See P&G™ for clues.
Contributor: Mark St. Cyr,
InterAnalyst has been serving investors globally since 1990. Authoring hundreds financial articles and publications, thousands of trading charts to investors worldwide.