Is the Luster Off Social Media?
-- Social media doesn't look as sexy as it did in 2011. Fortunately, investors are not punishing companies just for being affiliated with Facebook.
Facebook hit a new all-time low of $21.61 on Tuesday. It was a huge selloff as Facebook closed down 6.2% to $21.71 on twice the normal trading volume. The company's stock has dropped 19.1% since announcing its second-quarter earnings Thursday afternoon. It is far below its $38 opening price and the $45 reached on its first day of public trading.
Although people are still using Facebook, the social network has lost the magical properties it had a year ago. Whereas people used to talk about its huge global footprint, now the talk is about its deficiencies. Its growth is slowing. Its ability to monetize mobile users is being called into question. It has met the public market with less of a road map than investors want.
As its luster fades, Facebook isn't the marketing pitch and publicity angle it was a year ago. Companies used to boast of their integrations with Facebook's Open Graph. They wanted to prove they were social-minded. They wanted everybody to know they were pushing e-commerce into social platforms.
The Facebook-oriented pitches seemed to have faded. Maybe it was just a phase that was going to end soon anyway. But maybe it has been a conscience choice. In any case, it's a good idea to put some distance between your company and Facebook. Let people see there's far more to your company than your Facebook strategy. If you happen to be planning an IPO and need a hook for your investor road show, it shouldn't be your reliance on Facebook.
The good news is investors do not appear to be punishing stocks that are strongly or mildly associated with Facebook. To see if Facebook's stock woes have been associated with similar changes in other stocks, I looked at the changes in daily closing prices of a handful of companies and indexes over the last 44 trading days.
Facebook and Pandora had only a 12.6% correlation coefficient, meaning the changes in their daily closing prices had a weak correlation. (A correlation coefficient of 1, or 100%, would show perfect correlation.) As a point of comparison, Pandora predictably had a moderately strong correlation coefficient of 56.7% with the New York Stock Exchange composite.
Facebook and LinkedIn, social networks with similar growth trajectories and business models, had a fairly weak 29.2% correlation coefficient. Zynga, which is dependent on the Facebook platform for its traffic and revenue, has had its own financial issues separate of Facebook's issues. Zynga and Facebook had a -52.5% correlation coefficient.
Facebook and Live Nation had a weak 23.2% correlation coefficient. Ticketmaster appears to be an exception. Although Ticketmaster has touted its Facebook integration and social media initiatives, investors probably don't care because it's part of a large, diversified business.
About 11 Million: Spotify's Active User Numbers Discrepancy
-- If you saw Billboard.biz's report on Spotify reaching 15 million active users, you may have noticed the figure is far lower than some publicly available data. Facebook app tracker AppData.com currently says Spotify has 25.7 million monthly active users. As industry analyst Mark Mulligan noted a few months ago, the Facebook website put active users at 20 million in mid-May. Billboard.biz had previously noted that AppData pegged Spotify's MAU at 10.2 million in December and 7.7 million in mid-November .
A difference in methodology could be behind the large discrepancy. But why is there a difference of nearly 11 million active users? AppData gets its traffic data through the Facebook API, according to its "about" page. A Spotify spokesperson tells Billboard.biz the company defines an active user as someone who has downloaded the app and used the service in the last 30 days. Since Spotify requires Facebook for registration and log-in, AppData seems like a pretty good unofficial number. AppData did not respond to Billboard.biz's request for comment on its methodology.
All of this is a long way of saying there isn't an easy way to reconcile publicly available Spotify user numbers and Spotify's self-reported numbers. The official number is about 42% lower than the unofficial number.
As a side note, Spotify is now the #7 app on AppData's leaderboard and its highest music app. The top apps are Texas Hold'Em Poker and Yahoo! Social Bar (35.5 million), TripAdvisor (34.9 million), Socialcam (33.9 million), The Ville (32.5 million) and Bubble Safari (28.1 million). Spotify is slightly ahead of Instagram and Microsoft Live (24.8 million).
App Revenues: To The Relatively Few Victors Go the Spoils
-- Here's something to keep in mind as you build a premium app for your artist or label: relatively few apps generate a large portion of total app revenue. It's just like the record business. To the victors go the spoils.
According to Flurry, the top 25 apps will generate 15% of app revenue in 2012. Apps ranked from 26 to 100 are expected to account for another 17%. That means the top 100 of the 600,000 apps at the iTunes App Store and Google Play will make 32% of the $8.7 billion apps will generate this year from app purchases, in-app purchases and advertising.
( Flurry blog)