[WestCoast]

That's interesting. My buddies immediately called me thrilled about it, the richest of them all blew up my phone yammering on about it half the shit I didn't even understand haha.

You don't need to advertise in whatsapp to make it profitable if they really can exit the interface. But of course that is a possibility.

[dtf]

(02-23-2014 03:31 PM)WestCoast Wrote:  

^ Don't mean to be a dick but teen ad worries are nonsense from seeking alpha type articles they feed to the masses. it is true. 18 year olds don't have money man. Also there is a heavy teen proportion on insta, there will always be another vine/tango whatever but it doesn't matter at all. All that matters is Facebook has better information on what you are going to buy than anyone else. if they continue they win.

Facebook hit the mature cycle phase and is now moving outside the platform. To address dtf's point this means they can advertise to you off of the facebook platform! That's a mind fuck. If they pull that off google is FUCKED. why? It means they can out bid you.

Lets go ahead and look at the actual tech.

Whatsapp is international information that is secure. The age group is not a "latch on to teens" game, there are many many older folk on there, it is an international "texting platform". That's the real value and it is SECURE.

---

Dtf here's the highlights of your questions.

Outside the interface means I can now outbid google. Think about how insane that proposition is. The bid in facebook ads is double or MORE the bid on a google ad. This means the ROI for advertisers in facebook is more than double that of google... What does that mean if they go out of the interface?

Now they outbid the google placed ads and replace with Facebook ads. Now the advertisers have next to no reason for working with google. (Is is an extreme bullish view and will likely never happen) but the point is simple.

If advertisers make more money paying 2x the amount for a facebook ad as they do for a google ad that means Facebook has significantly better info on what you are going to buy correct? That's game over you are printing $$.

You asked about a snapchat buyout, I am saying they should have bought it before it reached this level of penetration. It's too big now. It is worth much more than $4B assuming they fix it to dual encryption. Similar to what happened to Instagram they bought that thing for $1B?! That thing is probably worth over $5B today (likely an underestimate).

I addressed the slight difference between Instagram and snap. It's real time. Now I know where you are and literally exactly what you are looking at. Instagram is not real time. Again the headache there is three fold. 1) security, 2) data Analytics you likely need a heavy scale out flash data center to analyze the photo and 3) real time ad based on the photo (already done well on Instagram beta test that has been released). None of those 3 are easy of course but good god the profits are huge if they can link it all up.

Finally yes, some of those apps are so shitty in terms of security that they can already access your info. If you don't think so try typing in the same name of a country or city destination over and over on your phone and tell me what happens to your ads. Suddenly you'll see ads for "flights to New York!". But that kinda data is complete and utter shit compared to your real personal life because many people search and type bullshit into their browser all the time. They want info on exactly who you are right here and right now so they can sell you more shit you don't need.

Anyway that's the highlights of the transaction/ what Facebook intends to do in the future.

Thank you for the insightful answers. +1 from me.

[dtf]

I think that both FB and Google are already operating "outside the interface" via their Like and +1 buttons, cookies & IP addresses.

You don't even need to click on the Like button for FB to know that you visited a site. Since FB knows the IP address that you logged in from, when you visit a page on some site that has hte Like button, that button gets pulled from FB by a request from your browser. That browser request to FB includes your IP address as well as the site domain and specific page. Now FB uses the IP to refernce & get your user profile and adds this info to your profile.

This works even if youre logged out of FB.

[WestCoast]

^ yeah that's stage one outside the interface. The real game is out smarting google on the ad side right?

That's where the value is if they can truly advertise outside the platform. See what I mean?

You're just talking about the IP address and them tracking where you go. That's not good enough. They need to place the ad when and where you're going to buy based on previous web interactions, out bid google for the slot and then take the payout.

Complicated shit bro.

It's like the difference between SEO and paid for clicks. Anyone running real money doesn't give two fucks about SEO. They buy the right traffic and make dough. Now imagine you buy the right traffic and also have the right information at the right time. The guys making real money buy all traffic from major ranges such as "men age 20-40" if that is all you need for paid for clicks you know you're taking in dough. Trying to target and get niche within the Facebook platform is an auto red flag we're talking peanuts in terms of money because your market is too small.

Anyway, we'll see if they can monetize the tech over the next 2-3 years. If so it's basically the next google. If not yeah the stock is going to shit.

Tech is insane today. I have a hard time calling a genius an idiot when I barely understand the basics of how all the tech will work.

The fact that most people don't even know why snapchat is worth a few billion or why Instagram will be monetized tells me we're all sitting around talking about this from a non-tech perspective ie: no money perspective. The technology they are working on over there at both google Facebook etc is simply mind blowing if done correctly.

Then again I am a weirdo who likes this stuff and I can put my tail between my legs and go to a different forum for discussions on the software etc.

[RockHard]

WestCoast I tend to agree with you. It seems to me that people focus on revenue but the real value is in the demographic info, and even better, the click thrus, searches, etc. Which is to say that your behavioral data is more valuable to FB and Google than your money.

Most of us tend to think of Google as a search engine, but there's a whole class of people who see Google as the Internet. These are the people who don't click in the location bar and type "facebook.com", they have google as their homepage and type "facebook login" into the search box to go to facebook. This is FB's real battle. As to the point that FB is losing younger users, yes, I'm sure they're concerned, and I'm sure Whatsapp plays into that as well.

A big key to Whatsapp was that they wrote versions for J2ME that can run on "feature phones", i.e. what 80% of the world is running. Writing for iOS & Android is great if you're willing to write software for North America and western Europe. Immediately extends FB's reach in mobile. I think you're right on that the key is going to be in monetizing the tech. There have been lots of famous shitty tech acquisitions, but OTOH, with something like YouTube, Google probably got a steal of a deal at $1bn.

[WestCoast]

^ yep. You got it.

Remember all the laughter about the google YouTube deal? Blockbuster hit.

People think too small and think $20M in revs that sucks!

It doesn't matter.

I want to know who you are, when you are going to buy, what drives your emotions and I want no one else to have access to the information

I said this before, anyone talking about valuation on profitability doesn't know the first thing about tech and will end up getting embarrassed in a few short years. People think wayyyyyy too small. The value is never in the revenue line. It's behind the closed doors.

It's even more hilarious when people say they are starved for money... Come on man just read a filing their revenue was up 55% year over year in 2013... They did $7.87B in revs and over a billion dollars in profit. They don't have any liquidity or growth issues they have tech issues they need to solve before google catches them.

[Hotwheels]

Quote:

You're just talking about the IP address and them tracking where you go. That's not good enough. They need to place the ad when and where you're going to buy based on previous web interactions, out bid google for the slot and then take the payout.

And that is exactly what retargeting is.

I'm not seeing where you are finding the difference in what FB is doing.

Yes, they can track your behavior when on one of their apps. Google does the same thing when you are using Chrome or have a google toolbar. I'm sure they do with Android as well.

I do it by having tracking on my site with adroll, google, etc.

Many don't know this, but a lot of the ads you see out there are actually google display ads. They do not look like typical google ads. They are on FB for example. POF as well. They buy chunks of adspace and serve you ads based on your browsing history.

FB bought more data with the purchase of Whatsapp.

[WestCoast]

^ man that is not what I am talking about, keep reading past the bold part it says "out bid google" that is a key part of the entire thing.

Basically stealing their ad revenue ya know what I mean?

We are definitely talking past each other.

You are basically talking about this:

I search for the newest air Jordan's on nordstroms then I go on FB and see ads for those same Jordan's on FB.

I am talking about this: Facebook no longer needs to advertise solely on Facebook, also on a mobile platform and I can "out tech" google, bid them out steal the revs and print money

[Soma]

(02-23-2014 05:36 PM)WestCoast Wrote:  

I said this before, anyone talking about valuation on profitability doesn't know the first thing about tech and will end up getting embarrassed in a few short years. People think wayyyyyy too small. The value is never in the revenue line. It's behind the closed doors.

I distinctly remember this, almost verbatim, being said 15-17 years ago.

[WestCoast]

^ okay and the good ones are still around. Your point is moot.

Valuations do get out of hand but the legit companies last go pull up a stock chart on amazon.

Back then IPOs were on shitty tech companies because no one knew the technology behind them. You had valuations on shit cap stocks going to 100M plus.

This will likely happen again with a few choice tech stocks but telling me you can value a technology better than mark Zuck = don't make me laugh. I know I can't obtain that vision.

Hell if anything you guys should be supportive since Instagram was a no brainer at this point right?

Valuation for tech on a software company or web scale on profitability is seriously not even worth a conversation.

[WestCoast]

@hotwheels here is the best way I can describe the difference if the above doesn't make sense.

It is different from retargeting because retargeting is taking outside info and delivering ads within its platform. Very much like adsense but instead of content sites like Google this time theyre doing it on 3rd party mobile apps that they do not own

Now you see the value in security right? Crazy implications.

[Hotwheels]

I do think we are talking past each other a bit, however if they get data collection on par with google that will likely bring margins down as webmasters will have FB and Google bidding against one another for ad placement while advertisers will have options for buying quality traffic from two sources versus the one they now have.

Sure, there are plenty of sources for traffic out there but no one comes close to Google on quality AND quantity and the prices reflect that. I hope FB does kill it with targeting and gaining ad placements as it will mean a lower ad spend for me.

I see them splitting the market IF the plan works out which will definitely increase FB's revenue while impacting G's. However the increased competition for ad placement on websites "outside the platform" will likely lower the ROI of both, while increasing it for the advertisers and publishers.

[WestCoast]

^ I think we are closer to the same page now. What you're saying is true which is as such

google has quality conversions, fb converts higher off the frontend

This is why people like you should be giddy and hoping they can pull this off.

[worldwidetraveler]

(02-23-2014 05:57 PM)Hotwheels Wrote:  

Sure, there are plenty of sources for traffic out there but no one comes close to Google on quality AND quantity and the prices reflect that. I hope FB does kill it with targeting and gaining ad placements as it will mean a lower ad spend for me.

Directly advertising with websites that have Google ads would be the best scenario and cheaper than paying Google to be the middle man. You also don't have to fuck around with that stupid quality score bullshit.

Have you been testing out POF for your new site?

[RockHard]

(02-23-2014 05:47 PM)Soma Wrote:  

(02-23-2014 05:36 PM)WestCoast Wrote:  

I said this before, anyone talking about valuation on profitability doesn't know the first thing about tech and will end up getting embarrassed in a few short years. People think wayyyyyy too small. The value is never in the revenue line. It's behind the closed doors.

I distinctly remember this, almost verbatim, being said 15-17 years ago.

So do I. And I remember watching Jerry Yang on TV in 1997 talking about how they wanted to do things like have you pay for your movie rental by taking a demographic survey, about how Yahoo would track your browsing history to recommend purchases... I remember when Amazon first put out recommendations, when Netflix awarded $1M for a better recommendations algorithm (that incidentally they never used).

The fact that Google is what it is doing what it's doing points to the power of the idea when it works. When it's executed by a bunch of chodes who don't know what they're doing, as you had in 1999. People were flooding in to fund anyone who might have a chance. The fact that most people can't execute doesn't change the truth behind the concept. The fact that small investors got burned playing a rich man's game (as a VC, trying to make 100 bets in hopes that one will pay off $1000 on the dollar invested) doesn't change the truth of it.

[Hotwheels]

(02-23-2014 05:57 PM)WestCoast Wrote:  

@hotwheels here is the best way I can describe the difference if the above doesn't make sense.

It is different from retargeting because retargeting is taking outside info and delivering ads within its platform. Very much like adsense but instead of content sites like Google this time theyre doing it on 3rd party mobile apps that they do not own

Now you see the value in security right? Crazy implications.

I can use retargeting to put my site on your mobile right now, through a 3rd party app you already have installed assuming they sell ad space to Adroll, Google, Perfect Audience, etc, etc, etc.

That's not revolutionary.

The app outfits sell ad space and have for quite some time.

So no, I don't really see the big deal with security and I doubt many of the people downloading this app do either.

[Hotwheels]

(02-23-2014 06:01 PM)WestCoast Wrote:  

^ I think we are closer to the same page now. What you're saying is true which is as such

google has quality conversions, fb converts higher off the frontend

This is why people like you should be giddy and hoping they can pull this off.

I definitely hope they do. I wish a couple more would as well. Competition is great for lowering prices.

[dtf]

(02-23-2014 05:41 PM)WestCoast Wrote:  

I am talking about this: Facebook no longer needs to advertise solely on Facebook, also on a mobile platform and I can "out tech" google, bid them out steal the revs and print money

So essentially a "Facebook Adsense" where webmasters or website operators can embed a FB Adsense strip on their website (or mobile app developers/operators showing ads on their app screens) and get paid and FB makes more money from more ad impressions outside of FB.

Where would be the relevance of the security?

[Veloce]

This is a damned interesting thread.

So WC if you can't valuate a company based on profitability, then how do you determine its value? What does FB have going on behind closed doors that somehow gives it a completely different metric when determining the company's value?

I might be small-minded but I agree with Soma that this is all stuff we've heard before, that if you aren't investing in tech then you're stuck in the stone age, have no imagination, etc...And yes many of those dot-coms are still around but the fact remains that a LOT of people lost a LOT of money by following much of the same commentary going around today.

[Hotwheels]

(02-23-2014 06:01 PM)worldwidetraveler Wrote:  

(02-23-2014 05:57 PM)Hotwheels Wrote:  

Sure, there are plenty of sources for traffic out there but no one comes close to Google on quality AND quantity and the prices reflect that. I hope FB does kill it with targeting and gaining ad placements as it will mean a lower ad spend for me.

Directly advertising with websites that have Google ads would be the best scenario and cheaper than paying Google to be the middle man. You also don't have to fuck around with that stupid quality score bullshit.

Have you been testing out POF for your new site?

Agreed. Just so many hours in the day at the moment, however that is something I am looking at.

I have done some testing with POF without much success so far. They are so picky on creatives it's a pain to get anything decent through and the ones they do approve don't pull the eyeballs.

The targeting is pretty good except for the fact the guys are likely on a free site for a reason.

[worldwidetraveler]

(02-23-2014 06:10 PM)thedude3737 Wrote:  

This is a damned interesting thread.

So WC if you can't valuate a company based on profitability, then how do you determine its value? What does FB have going on behind closed doors that somehow gives it a completely different metric when determining the company's value?

I might be small-minded but I agree with Soma that this is all stuff we've heard before, that if you aren't investing in tech then you're stuck in the stone age, have no imagination, etc...And yes many of those dot-coms are still around but the fact remains that a LOT of people lost a LOT of money by following much of the same commentary going around today.

It's kind of difficult to know what FB's objective is for purchasing. I do think the success of WhatApp isn't easily duplicated even if you have a lot of money to throw at it.

You can see this a lot in the tech field where companies, like Microsoft, throw money and fail miserably trying to duplicate the success of a company.

Now Facebook could use it's resources to speed up adaptation of users. Hard to say what strategies they had in mind. Maybe even linking Whatsapp to facebook somehow. I don't see how this can be comparable to the dot com period. I would say this purchase was more than likely something that was a necessity to their long term plans.

[dtf]

(02-23-2014 05:36 PM)WestCoast Wrote:  

I said this before, anyone talking about valuation on profitability doesn't know the first thing about tech and will end up getting embarrassed in a few short years. People think wayyyyyy too small. The value is never in the revenue line. It's behind the closed doors.

profitability is what they focus mostly on Shark Tank. Like 90% of offers are based on profitability. Their are a lot of companies with series B or C financing that aren't profitable.

[WestCoast]

Hotwheels my man we are still talking past each other! Damn it all. It's not retargeting!

Think about it if the 3rd party app is secured you actually can't retarget into the 3rd party app using google.

@dtf stated above it is not an adsense copy, I explained how adsense moved out instead it is a different set up on the third party app but if the app is locked down google can't touch it.

Anyway this has steered well off course. But glad to see a few people are at least questioning the masses immediate outburst that it was a crap acquisition.

Thedude: technology stocks can only be valued on the technology. That's it. Similar to biotech stocks and med tech. No one cares about the earnings they care about the solution.

Look at a med tech stock and tell me the "sales multiple" it can easily fetch 100x+ lol.

This is why talking about tech valuations when you can't even explain how the tech works is pretty much laughable.

DTF using shark tank is a horrific example. Go to the valley and go to a real funding meeting and tell me when people start taking about net income. I'll be waiting lol. You have a decent working knowledge of technology you can simply get on second market and find the numbers yourself.

The "PE" multiple will always be the same "Not available" haha.

[RockHard]

(02-23-2014 06:10 PM)thedude3737 Wrote:  

This is a damned interesting thread.

So WC if you can't valuate a company based on profitability, then how do you determine its value? What does FB have going on behind closed doors that somehow gives it a completely different metric when determining the company's value?

I might be small-minded but I agree with Soma that this is all stuff we've heard before, that if you aren't investing in tech then you're stuck in the stone age, have no imagination, etc...And yes many of those dot-coms are still around but the fact remains that a LOT of people lost a LOT of money by following much of the same commentary going around today.

I want to hear WestCoast's take on this too, but if you're asking about this as an investor, you have to remember that this is a rich man's game and a highly speculative area. There are other companies in a position to profit off Big Data from a tech perspective (Splunk, VM Ware, Citrix, a bunch of storage plays) that you absolutely value in traditional metrics. But companies like Twitter, Facebook, Google, even Yahoo... these guys are playing a different game and these guys are working in a market that's not really developed and not very well defined. I think where people get suckered is that they say "well, tech, you can't value that traditionally" and most of the time you can. But in this area they're really dreaming big and if they execute, they'll win big. So you have to really look for execution. I don't invest in TWTR or FB because I don't have a good handle on it, but I'm not in the camp that says FB is the next MySpace. From where I sit, they're executing too well.

You also have to remember that people who really lost big in 2001 did really stupid things, like going way too far into margin, or putting their entire retirement portfolio into a single stock.

[dtf]

(02-23-2014 06:10 PM)thedude3737 Wrote:  

What does FB have going on behind closed doors that somehow gives it a completely different metric when determining the company's value?

Sounds like its the number of users and the richness & freshness of personal data they have on each user. This is the gold mine for advertisers.