Facebook stunned yesterday with its report that mobile advertising represented 41 percent of its total ad revenue in the second quarter of 2013. In the first quarter of 2013, it totaled a then-hailed 30 percent, bumping that key ratio by more than a third in just a fourth of a year. On a dollar basis, Facebook’s mobile advertising grew more than four times as much as its desktop-sourced advertising incomes in the most recent quarter.
However, looking backwards, last quarter’s mobile ad growth is less astounding when placed into context. From the third to fourth quarter of 2012, Facebook juiced its ad revenue as a percentage of total ad income by 9 percent. From the last quarter of 2012 to the first quarter of 2013, growth was 7 percent. Taking into account the 11 percent gain reported yesterday, Facebook has averaged 9 percent growth in its mobile ad revenue as a component of its larger ad top line for the past few quarters.
This allows us the ability to make basic predictions. Facebook yesterday noted on its earnings call that mobile advertising revenues will eventually outstrip desktop ad income. But when? Well, we can predict. If mobile advertising revenues continue at their average rate of the past few quarters, Facebook should earn precisely as much from desktop and mobile advertising platforms in the current quarter.
The math is simple: Facebook ended the most recent quarter with a 41/59 split between mobile and desktop ad income. If mobile revenues are growing by 9 percent quarterly – again, on average – 41 and 9 make 50, leaving the remaining 50 percent for desktop ad revenues.
Adding another 9 percent to Facebook’s mobile ad revenue as a percentage of its total ad income, and we could wrap the year where the second quarter finished, but in reverse, with mobile revenues comprising 59 percent of total ad income, and desktop just 41 percent.
This feels, prima facie, optimistic. Are we being too generous?
There is always a risk in any form of prediction, as future market dynamics are outside of our vision, and will always remain so. That said, we can take mild refuge in the fact that our average rate of mobile ad growth, again as a percentage of Facebook’s total advertising top line, is under the most recent quarter’s rise; this means that we are anticipating Facebook to under-perform its most recent quarter moving forward.
This gives us some breathing room in our predictions. Here’s the chart:
If mobile revenue is so strong, where does that leave desktop advertising incomes? Well, as it turns out, Facebook’s desktop advertising business is all but not growing. We can deduce this by subtracting the percentage of Facebook’s mobile ad revenue from its total advertising income, leaving us with its desktop-sourced figure. Let’s have some fun:
- Facebook’s total advertising revenue was $1.25 billion in the first quarter of 2013. Of that, 30 percent came from mobile. That means 70 percent came from desktop sources. Seventy percent of $1.25 billion is $875 million.
- Facebook’s total advertising revenue was $1.60 billion in the second quarter of 2013. Of that, 41 percent came from mobile. That means 59 percent came from desktop sources. Fifty-nine of $1.60 billion is $944 million.
- $944 million – $875 million = $69 million. That, assuming that Facebook has its numbers in place, is the delta between Q1 and Q2 for Facebook’s desktop advertising business.
That’s not much. Not only is Facebook sourcing a growing percentage of its revenue from mobile platforms, but its revenue growth is increasingly coming from a smartphone near you.
Let’s get to the bottom of the final number: In dollar figures, how much did Facebook’s mobile ad revenue grow from the first to second quarter? I’m glad you asked. Let’s find out:
- Facebook’s total advertising revenue was $1.25 billion in the first quarter of 2013. Of that, 30 percent came from mobile. Thirty percent of $1.25 billion is $375 million.
- Facebook’s total advertising revenue was $1.60 billion in the second quarter of 2013. Of that, 41 percent came from mobile. Forty-one percent of $1.60 billion is $656 million.
- $656 million – $375 million = $282 million.
So, Facebook’s mobile revenue grew by a quarter billion dollars in the second quarter. Not bad, given that as a percentage gain it works out to around 75 percent. And, perhaps more importantly, the $282 million figure is more than four times our previous $69 million sum. Therefore, mobile ad revenues on a dollar basis grew four times as fast as desktop advertising incomes in the most recent quarter.
Top Image Credit: Randy Lemoine
Personalized Financial Planning Service LearnVest Raises $16.5M From Accel, American Express And Others
LearnVest, a personalized financial planning program, has raised $16.5 million in strategic funding from existing investor Accel Partners, and new investors: American Express Ventures; Claritas Capital; Ed Mathias, founding member of The Carlyle Group; and Todd Ruppert, Former CEO & President of T. Rowe Price Global Investment Services. This brings the startup’s total funding to $41 million.
Founded by Alexa von Tobel, LearnVest originally debuted back in 2009 at TechCrunch50 as an online guide aimed at teaching women to become more financially savvy. As we wrote a few years back, the startup was Suze Orman blended with personal finance site Mint.com. Last year, LearnVest pivoted slightly to aim for both men and women, and became a full-fledged investment advisor.
As von Tobel explains, LearnVest is now more like Weight Watchers for your finances. The company offers the LearnVest Action Program, which is a seven, step by step program that takes you from cutting expenses to budgeting for goals to investing your money. All users get a certified financial planner who gives them specialized attention based on their financial needs and goals. Von Tobel adds that each of these advisors has gone through training and is empathetic to all financial situations. Financial plans starting at $89 for the budget version. The five-year plan is $299 and the portfolio builder is $399.
From the sounds of it, it looks like LearnVest may get a huge marketing boost from AmEx to push its financial planning product. “We believe strongly in the mission of LearnVest Planning to provide accessible financial advice,” said Harshul Sanghi, Managing Partner, American Express Ventures, in a release. “As we seek to expand our portfolio of products across American Express, we believe LearnVest Planning can be an important partner in helping us to bring customers more convenient, affordable and transparent ways to manage their money.”
With headquarters in New York City, the company has now opened a west coast office in Phoenix, Ariz., to serve as a hiring and training hub for the company’s team of financial planners. In addition to the investment, LearnVest Planning is debuting Workplace Solutions, a financial wellness platform that companies can offer as an employee benefit.
Mathias and Ruppert are advisors, as is Susan Lyne, AOL’s Brand Group CEO and Vice Chairman of Gilt Groupe (and our boss’s boss’s boss); and Ann Sardini, former CFO of Weight Watchers.
There are plenty of startups that want to disrupt wealth management, including Wealthfront, Betterment and of course, Mint. But von Tobel says that LearnVest Planning is really focused on a broader demographic because the program triages individuals for financial health and then gives them an action plan. She believes that LearnVest is the most hands-on financial planning program you’ll find.
It is not a good day to be Zynga, or one of its investors if you held stock in the firm yesterday. Following a decidedly negative earnings report, investors have unloaded the firm’s shares, sending them down around 15 percent in regular trading.
That loss comes after Zynga’s stock price rose in the wake of a very strong quarterly performance by Facebook. Investors had hoped that the strength of Facebook’s earnings indicated that Zynga, too, would have reported a good set of financial and user-based metrics.
It was perhaps a decent gambit, but it was utterly wrong. A small picture of the company’s decline: Zynga’s daily active user count for the quarter totaled 39 million. However, in the preceding sequential quarter, Zynga had 52 million daily active users. A year ago, that figure was 72 million.
Revenue, to cite another statistic, was down by more than $100 million to $231 million. Zynga is a company in steep decline.
And the market docked its allowance. Comparing yesterday’s closing price of $3.50, Zynga’s current price of $3 is a just over a 14 percent decline. In dollar terms, Zynga today shed around $400 million of market capitalization. As you will recall, this is not the first time that Zynga has suffered from this sort of gut punch to its stock price.
This is not Zynga’s lowest point. The company’s 52 week low rests at $2.01 per share, at which point Zynga was worth less than $2 billion. Zynga’s stock peaked in March 2012 at a price of $14.69. At current tip, Zynga’s stock has declined around 80 percent since its all-time high.
Whether Zynga can pull out of its current slide is an open question. Its CEO change provided a large bump in its market valuation, sending the worth of Zynga up $300 million. Quickly, those gains have been erased, and more.
Zynga reported $1.53 billion in cash and marketable securities. The market is therefore valuing Zynga, post cash, at under $1 billion. Zing? Guh.
Top Image Credit: Ben Watts
Zenefits Lands $2.1M From Venrock, Maverick, Aaron Levie, Charlie Cheever And More To Automate Startup HR
For small businesses, managing health insurance and payroll services can be a huge pain and time-sink. They probably don’t have someone on staff dedicated to these issues, and they themselves would rather be dedicating that energy to building a company. Zenefits launched out of Y Combinator this winter to remove the friction of setting up and managing group health coverage and payroll by automating the process and bringing it online – for free.
As a testament to how much demand there is among startups and small businesses, since expanding its service at TechCrunch Disrupt NYC in April, Zenefits co-founder Parker Conrad tells us that the company has signed on over 110 clients (ranging from 2 employees to over 100) and is now bringing on an average of 10 customers each week. Today, as it looks to continue expanding operations beyond California, Zenefits is announcing that it has raised $2.1 million in seed capital from an impressive roster of venture firms and angel investors.
The new round, which includes the initial $372K chunk of capital the startup raised out of Y Combinator from Andreessen Horowitz, Yuri Milner, General Catalyst, Garry Tan, Justin Kan and Alexis Ohanian, was led by Venrock and Maverick Capital. A big reason why Zenefits was keen to bring these two investors on board in particular, Conrad tells us, was that Bob Kocher, who led Venrock’s investment, was a key player in helping to write the Affordable Care Act (a.k.a. Obamacare) when he worked at the White House.
As Greg explained in April, at its core, Zenefits is essentially a digital insurance broker, meaning that they help startups automate insurance, benefits and payroll but they also get paid a commission by insurance companies each time a company opens a new plan through its system. Over the next two years, as Obamacare goes into effect, the new regulations and provisions mean big changes for health insurance companies and brokers.
These health players are not only being forced to move operations online but will also see the amount of commissions they can take drop – among other things. Many health insurance brokers are going to drop their small-group clients to focus on bigger-ticket customers as a result – and, as premiums could go up for businesses – Zenefits could stand to benefit big-time by offering their services for free. Plus, having someone who’s intimately familiar with the complex and nuanced provisions and regulations in Obamacare (because he helped write them) is huge.
Maverick Capital is also familiar with the healthcare and health insurance industries itself, having backed some of the bigger startups and players in the market, like OneMedical, Castlight Health and SeaChange Health, for example.
On top of its lead investors and the Y Combinator partners (like Sam Altman, Garry Tan, Harj Taggar, Alexis Ohanian, Paul Bucheit and Justin Tan – who all invested personally), Zenefits also saw a number of recognizable names contribute as angels, including Box co-founder and CEO, Aaron Levie, Quora co-founder Charlie Cheever, former Googler and Twitter VP of Corporate Strategy Elad Gil, Weebly co-founder David Rusenko, former Googler and Badoo COO Ben Ling, Google’s Head of Spam Slamming Matt Cutts and Inkling co-founder and CEO, Matt MacInnis.
With the new capital under its belt, Zenefits has expanded its team to 12 and will look to add more in the coming year. Because the company is considered a broker, it is paid a commission from insurance companies for each new employee and employee added (every month), which is great for its bottom line. But this also requires that it be approved by the government on a state-to-state basis. Currently, regulations limit it (and others like it) to a few states.
But with the changes Obamacare will bring, Conrad expects that digital insurance brokers of its ilk will be allowed to expand to more states beginning in January, at which point, Zenefits will look to move quickly beyond California and New York.
In the meantime, Conrad tells us that, according to BenefitMail, the company has already vaulted into the top 5 percent of insurance brokers (in terms of number of clients) in California, primarily as a result of new company submissions to Blue Cross – not bad for a startup five months from launch.
For those unfamiliar, Zenefits has been growing fast in California by turning a paper-heavy process into a digital one, allowing users to create new plans, while serving up quotes for group coverage across health, dental and vision insurance. The company’s system makes it easier for companies hiring new employees to add coverage for each employee, or, if a company fires someone (or they leave), they can click a button to remove their coverage and take them off the payroll, while starting them on COBRA coverage.
It works for companies regardless of whether they don’t have existing coverage or already are set up, syncing employee coverage data and taking over as your insurance broker for those in the latter camp. The company also recently added payroll services, so that startups and small businesses can just tell Zenefits about a new hire and give them the employee’s information, at which point Zenefits will take care of generating offer letters, IP agreements, onboarding details and then add them to its payroll system. They can also do the same for that employee’s benefits.
As part of its payroll services, Zenefits also sets up deductions employees pay for health insurance and other benefits, which employers would usually have to set up themselves. This is a pain, because salary and pricing can be different for each employee and whenever deductions change (which happens a lot when employees move, get married and so on), the price changes. Traditionally, the price of deductions change every 10 years, but with Obamacare, this will happen every year. This could be a huge boon for Zenefits, as it takes care of this stuff for startups and small businesses, who would be seeing a lot more paperwork as a result.
Furthermore, while services like Zenefits may seem familiar or not particularly disruptive to some, it’s hard to over-state just how old-school (and offline) most of the big, old school health insurance brokers are in the U.S. Some of them are multi-billion-dollar market cap companies, but may have little or no software or online-based solutions for their customers. So many startups and founder say “we’re disrupting and old offline industry” to get you excited about your company, and in a lot of cases that’s only half-true.
Health insurance brokerage is definitely one of those industries that qualifies as ripe for disruption thanks to its archaic procedures, practices and infrastructure. Many are aware of the changes that are coming, but they’re limited in how quickly they can react by responsibilities to shareholders, quarterly earnings and so on. Easier to preserve and protect the current state of things than re-build from the ground up. Zenefits won’t be the only one to benefit – many new companies are going to spring up in this space – but it’s definitely off to a good start.
As Inkling CEO Matt MacInniss (who personally invested in this round) told us:
Zenefits has identified a huge opportunity in the shifting landscape of benefits and healthcare among growing companies. Incumbents aren’t going to move as quickly as smaller, nimble companies – and they’re not technologists – so I think there’s a huge opportunity for new digital health insurance brokers to quickly move out front to take the pole position in what’s essentially a new category
After promising to sell his shares at a discount and increasing the price of his offer, Michael Dell, founder of Dell, has today vowed to stay at the firm regardless of the success of his bid to take the company private.
This is not a surprise, given that Dell owns a large equity stake in the company. For him to step back if his plan to take the struggling computing giant failed would almost be odd; given how much of Michael’s personal fortune is tied up in the company, to fully step back would be the functional consignment of his wealth to others.
Who would be comfortable with that?
In an interview with the Wall Street Journal, Dell stated that he, in the language of the paper, “wouldn’t sell assets or commit to any leveraged recapitalization as some shareholders have advocated.” This means that Michael would not take part in the plan advocated by activist investor Carl Icahn, that would see a tender offer put forth for most of the shares in Dell corporation at a price slightly higher than what its founder has offered.
Michael Dell wants to take the company private, to give it space to reform, and rebuild its product line and business service offerings. The only current competing offer, via Mr. Icahn, would not grant the Dell company that flexibility, though, it would greatly boost the per-share revenue of the equity that Icahn would control after newly acquired debt was used to fund the repurchase of other shares.
Michael Dell and his partner Sliver Lake recently boosted their per-share offer for Dell shares to $13.75 from their former offer of $13.65. That small margin was the target of criticism when it became known. As I reported at the time:
How can Michael Dell and his partner think that they can get away with such a pathetic sweetening of their former offer? Because what Icahn has in mind for Dell is complex and not in the best interest of the corporation. The firm needs time as a private entity so that it can rebuild its OEM business and focus on expanding its business services arm. It cannot do that with sufficient flexibility if it is chained to quarterly earnings reports.
Given what Michael Dell has said to the Journal, either Dell shareholders accept his offer at the August 2 meeting, or perhaps Icahn won’t have access to enough shares to execute his plan. This essentially limits the options of shareholders to two: Accept what the founder has in mind, or sit adrift.
Ironically, the company continues to trade at a discount to both offerings, signaling that the market lacks confidence in either plan to reach conclusion. Time is short, and this chapter is all but closed for the famed OEM.
Top Image Credit: Dell Inc.
“Given the fact one of the first posts I submitted for this blog was titled, ‘Why Apple Is Worth At Least $650,’ I couldn’t help but question a recent article saying Apple won’t hit $700 again. While it’s true my original post was from January of 2012, I figured roughly a year later is as good a time as any to revisit my original conclusion,” Chad Henage writes for The Motley Fool. “In the article called, ’4 Reasons Why Apple Won’t See $700 Again,’ the author makes four points to show why Apple won’t reach its prior levels.”
Slowing Growth In Phones: “Growth in phones is slowing as competition increases.” Since the iPhone lineup makes up 56% of Apple’s total revenue, a slowdown could cause the company’s revenue and earnings growth to change dramatically. However, when it comes to the mobile phone market, Apple is actually gaining market share on a global basis.
Shrinking Margins: The author suggests that Apple’s margins are shrinking because customers are choosing the cheaper iPhone 4 and 4S models over the iPhone 5. In addition, the iPad Mini is cannibalizing sales of the full sized iPad. One of these issues is real, the other is not.
Apple Is A Blue Chip And That’s A Problem How? I won’t address the article’s third issue, which was the loss of Steve Jobs, because it is what it is. No one can argue Steve Jobs was a brilliant mind, but nothing said about this would be productive… The author seems to assume that a fast growing company can’t pay a dividend or buy back shares. The truth is, Apple is being treated much worse than a blue chip stock.
Read more in the full article here.
“While Apple’s market cap is mind-blowing at nearly a half a billion dollars, they have ample earnings to support it,” Greg Satell writes for Forbes. “What’s more, with average forward P/E ratios for the S&P 500 running somewhere between 14 and 15 (depending on who’s estimating it), the stock looks positively like a steal.”
“With a commanding presence in the fast growing smartphone and tablet categories, why would you pay 50% more for the earnings of an average company than you would for Apple (or some of the other companies on the list for that matter)?” Satell writes. “Moreover, a lot of people (like me, for instance) would find it hard to break away from the Apple ecosystem, which gives them somewhat of a protected consumer base.”
Satell writes, “Apple remains a great company, but the future is always uncertain… They have great challenges ahead and great assets with which to meet them.”
Read more in the full article here.
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