In The Headlines
Is Facebook the New YouTube?
Seemingly overnight, video uploading and viewing have exploded on Facebook, where users now watch 4 billion video streams a day, quadruple what they watched just a year ago. It is happening because the social network’s engineers, quietly and with little fanfare, have retooled Facebook’s interface to make video easier than ever to watch and share. In February 2014, only a quarter of all videos posted to Facebook were uploaded directly to the network, while the rest came from YouTube or other video sites, according to analytics company Socialbakers. By a year later, the ratio had flipped: 70% of Facebook’s videos were uploaded directly.
These may sound like minor technical distinctions, but tiny changes make a huge difference when you have 1.4 billion monthly active users. Facebook, and its subsidiary Instagram, already account for one out of every five minutes Americans spend on smartphones, and Facebook drives nearly a quarter of all web traffic. The company’s recent video improvements will likely push those numbers even higher. And while the surge will help the social network do even more to entertain bored millennials, there is also big money at stake. Facebook is, after all, in the advertising business. The new video-tech innovations not only encourage its users to spend more time on the site, but they also make it easier for marketers to reach those users.
Facebook has already proved that it is a quick study in the ad world. Mobile advertising, a meaningless sliver of its business three years ago, made up 73% of its $3.3 billion in advertising revenue in the first quarter of 2015. It is the main reason Facebook’s total revenue has roughly tripled over that stretch, and it is the driver of the network’s current $226 billion market cap and sizzling 40% operating profit margins. Video, especially mobile video, could blow up just as dramatically for Facebook, offering a gateway for advertisers to reach digital consumers in the format that most closely resembles television—just as the migration of advertising dollars from television to digital reaches a tipping point. Facebook has become “synonymous with mobile,” Carolyn Everson, Facebook’s vice president of global marketing solutions, said at a recent investor conference. “I think that the next frontier is becoming synonymous with mobile video.”
To reach that frontier, Facebook is plowing resources into its video products at a rate that has executives buzzing at the television networks that are steadily losing ad spending to the Internet, and at the agencies that broker that spending. Above all, the push is raising questions for Google’s YouTube, the big kahuna of online video for the past decade, which for the first time faces a competitor that can match its reach.
The audience growth Facebook offers is clear. Creators have already noticed that Facebook’s algorithm—the secret formula determining which content shows up in a person’s News Feed—seems to heavily favor video. For creators with more than a million Facebook fans, photo posts reach 14% of their audience on average, and text-only updates reach just 4%, according to one manager of content creators. But video posts reach 35%. In March, Facebook launched a tool that lets video makers expand their audience even further by using an embeddable player that allows Facebook videos to be published elsewhere on the web, just as YouTube’s player does.
Facebook has one huge advantage: data. No other media outlet knows the full name, hometown, marital status, exercise habits, political opinions, and favorite movies, musicians, cars, retailers, restaurants, airlines, and electronics brands of hundreds of millions of people. This enables the site to deliver the targeted audiences that brands crave. Lexus, for example, created 1,000 versions of the same video ad to target 1,000 different types of customers on Facebook—so a “male Lexus enthusiast who appreciates technology” saw a different spot than “a female, who lives in Chicago, and enjoys travel.” Advertisers “are realizing that video doesn’t need to be this, like, super-blast thing. You can have all of the reach you care about in a targeted way,” says Fidji Simo, Facebook’s director of media products.
But Facebook’s biggest advantage over YouTube and other video providers may turn out to be boredom. “Video is watched when people are bored,” says Benjamin Ling, a venture capitalist who has worked at Google, YouTube, and Facebook. “Facebook is particularly good at curing boredom.” Where YouTube, owned by a search giant, makes it easy for people to find videos they are looking for, Facebook can show people things they did not even know they wanted to see. And with almost a billion people logging on every day, the audience is there now. “We are already a destination for everything,” says Simo, “and video is a part of that.”
The U.S. Tobacco Industry Senses a Return to the ‘Old Days’
The U.S. tobacco industry is looking more like the “old days,” with profits rising and smoker litigation on the decline, CEO Susan Cameron of Reynolds American, Inc., said recently. The cigarette maker completed its more than $25 billion purchase of Lorillard, Inc., last week, making it a stronger No. 2 in the market to leader Altria Group, Inc. That new heft is expected to help increase profit margins and possibly raise retail prices. Recent court decisions also have made it harder for smokers to sue, bringing a tailwind to the industry.
The rosier outlook may make the U.S. more inviting to foreign companies, which have largely steered clear of the nation in recent decades, Cameron said. The U.K.’s Imperial Tobacco Group Plc. is already expanding its presence in the market by buying four of Reynolds’s old brands, part of a regulatory agreement to preserve competition. “The global tobacco players over time will be more interested in the U.S., just like the old days before it all changed,” Cameron said in an interview. She also commented that Japan Tobacco, Inc., based in Tokyo, could target U.S. customers. The same goes for Philip Morris International, Inc., and British American Tobacco Plc, which turned away from the U.S. to focus on overseas customers.
There is no denying the fact that in spite of a global economic downturn, lawsuits, health problems, and rising prices of cigarettes, the global tobacco industry has continued to generate strong growth as well as profits. But many legal problems also continue to plague the global tobacco industry as governments around the world continue to put in place strict regulations to curb the use of tobacco.
Not everything will be as it was in the “old days,” however. One of the major challenges facing the tobacco industry is the growth of discount cigarette manufacturers who are not involved in the settlement with US state governments, and are gaining market share rapidly. Also, the Food and Drug Administration is still testing its relatively new power to regulate tobacco. Cameron went on to say that uncertainty creates a barrier to entry for some potential investors, such as private equity. “To the uninitiated, from an unregulated environment, it still looks a little scary,” she said.
While the major tobacco companies continue to initiate campaigns to stop children from consuming tobacco, they are also pursuing research and development efforts to develop cigarettes that reduce the health risks related to smoking. With traditional flame-lit cigarettes under scrutiny, Reynolds and its competitors are aggressively pursuing alternatives. The company is promoting its Vuse e-cigarette, which delivers nicotine by way of inhaled vapor. And it is developing a line of Revo heat-not-burn cigarettes, which use temperature to release nicotine without any combustion.
For now, integrating Lorillard’s Newport cigarettes into Reynolds’s sales and distribution network will be a priority, according to Cameron. The company, which also sells Camel and Pall Mall smokes, is looking to expand the Newport brand, possibly through product-line extensions. “As you look out in the next decade, certainly there will be more changes,” Cameron said
Citations
1. http://for.tn/1RJcfL8 – Fortune
2. http://bloom.bg/1ThwYHU – Bloomberg
The Good News Is . . .
• U.S. retail sales surged in May as households boosted purchases of automobiles and a range of other goods, the latest sign that economic growth is finally gathering steam. The Commerce Department said retail sales increased 1.2% last month after an upwardly revised 0.2% gain in April. April sales were previously reported to have been unchanged. March sales were also revised to show them rising 1.5% instead of 1.1%. Solid retail sales data combined with robust job growth in May and stabilizing manufacturing activity suggest the economy is finding momentum after getting off to a slow start in the second quarter.
• Toll Brothers, Inc., the nation’s leading builder of luxury homes, reported earnings of $0.37 per share, an increase of 5.7% over year-ago earnings of $0.35. The firm’s earnings topped the consensus estimate of analysts by $0.02. The company reported revenues of $852 million. Management attributed the company’s results to strong growth in the value of contracts signed and improvement in its quarterly year-over-year gross margin.
• Tokio Marine Holdings of Japan agreed to acquire HCC Insurance Holdings for $7.5 billion in cash in its latest bid to build on its business in the United States, the world’s largest insurance market. The bid also mirrors moves by Tokio Marine’s domestic rivals to expand outside Japan, where an aging population is expected to cut into the results of insurers. Tokio Marine, based in Tokyo, said the deal would broaden its product offerings, including accident and health insurance, directors’ and officers’ liability policies, agriculture insurance and other specialty lines. Under the deal, Tokio Marine said it would pay $78 a share for all the outstanding shares of HCC, which is based in Houston.
Citations
1. http://on.mktw.net/1MNVcFd – Market Watch
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/1Idalvi – Toll Brothers Inc.
4. http://nyti.ms/1FhhqJo – NY Times Dealbook
Planning Tips
Guidelines for Multi-Asset Exchange Traded Funds (ETFs)
Fine-tuning a near-retirement investment portfolio can be tricky. Yields—even amid a recent rally and expectations for an eventual Federal Reserve rate hike—remain at historically low levels, and growth stocks can be fickle. Multi-asset exchange-traded funds (ETFs) offer a structure that allows the fund manager to diversify among more asset classes, including high-yield areas such as master limited partnerships and real estate investment trusts (REITs). Multi-asset ETFs have grown from less than $500 million in 2010 to more than $6 billion today. As with any investment, there are risks which you should discuss with your financial advisor beforehand.
What are multi-asset ETFs? – Multi-Asset ETFs build portfolios that contain multiple asset types. These types can include real estate, commodities, bonds, equities, and more. These ETFs have the freedom to go across different asset classes to achieve a higher yield.
How multi-asset ETFs work – By customizing portfolios to balance income and growth, multi-asset ETFs can offer investors allocations that are more appropriate as retirement looms. Within multi-asset class ETFs, there has been further specialization. This is good for “do-it-yourself” investors because you can sift through ETFs that are labeled to suit your risk profile. So if, for example, you are a conservative investor, you can opt for a multi-asset conservative fund. You may want a higher risk multi-asset ETF if you want better returns and do not mind a bit of volatility. Multi-asset class ETFs can build a portfolio by putting together other ETFs, for example one tracking an equity index and another tracking a fixed interest index. However, some are more complex and can use leverage. There are also multi-asset class ETFs that track a basket of assets designed to cater to specific target retirement dates.
Where to find multi-asset ETFs – One excellent source of information on various multi-asset ETFs can be found at ETFdb.com. The site includes information on historical performance, dividends, holdings, expense ratios, technical indicators, analysts reports, and more. You can click on an ETF ticker symbol or name to go to its detail page, for in-depth news, financial data and graphs. By default the list is ordered by descending total market capitalization.
The benefits of multi-asset ETFs – Multi-asset ETFs offer the opportunity for greater yield because of their ability to invest in multiple relatively high yield asset classes as master limited partnerships. This type of diversification also helps reduce overall volatility. Income investors can fall into the trap of being over-allocated to one asset class such as: dividend equities, high yield bonds, preferred stocks, closed-end funds, master limited partnerships, and mortgage REITs. While these investments can have excellent short term gains and sky-high dividends, they also have proven to be susceptible to periods of extreme price corrections.
The risks of multi-asset ETFs – To perform well, a multi-asset ETF must have the right balance of asset types. These investments can pump up yields, but holdings such as master limited partnerships and mortgage REITs are riskier than typical yield instruments. They can be subject to significant price drops if rates go up. In this case, higher yields do not just mean higher risk, but greater volatility. Also, holding lots of bonds means that a fund may underperform in a bull market.
Citations
1. http://etfdb.com/type/multi-asset/all/ – EFTdb.com
2. http://www.cnbc.com/id/102746326 – CNBC
3. http://bloom.bg/1hoEpLe – Bloomberg
4. http://bit.ly/1MC5NlH – BizNews.com
5. http://bit.ly/1cUXfKG – BrightScope.com
