Category Archives: Instagram

Ads, Advertising, Earnings, Facebook, Instagram, Q3 2016

Facebook, Ad Load, and Revenue Growth

Note: this blog is published by Jan Dawson, Founder and Chief Analyst at Jackdaw Research. Jackdaw Research provides research, analysis, and consulting on the consumer technology market, and works with some of the largest consumer technology companies in the world. We offer data sets on the US wireless and pay TV markets, analysis of major players in the industry, and custom consulting work ranging from hour-long phone calls to weeks-long projects. For more on Jackdaw Research and its services, please visit our website. If you want to contact me directly, you’ll find various ways to do so here.

Facebook and ad load have been in the news a bit the past few days, since CFO David Wehner said on Facebook’s earnings call that ad load would be a less significant driver of revenue growth going forward. I was listening to the call and watching the share price, and it was resolutely flat after hours until the moment he made those remarks, and then it dropped several percent. So it’s worth unpacking the statement and the actual impact ad load has as a driver of ad growth a bit.

A changing story on ad loads

First, let’s put the comments on ad load in perspective a bit. It’s worth looking at what’s been said about ad loads on earlier earnings calls to see how those comments compare. Here’s some commentary from the Q4 2015 call:

So, ad load is definitely up significantly from where we were a couple of years ago. And as I mentioned, it’s one of the factors driving an increasing inventory. Really one thing to kind of think about here is that improving the quality and the relevance of the ads has enabled us to show more of them and without harming the experience, and our focus really remains on the experience. So, we’ll continue to monitor engagement and sentiment very carefully. I mentioned that we expect the factors that drove the performance in 2015 to continue to drive the performance in 2016. So, I think that’s the color I can give on ad loads.

Here’s commentary from a quarter later, on the Q1 2016 call:

So on ad load, it’s definitely up from where we were couple of years ago. I think it’s really worth emphasizing that what has enabled us to do that is just improving the quality and the relevance of the ads that we have, and that’s enabled us to show more of them without harming the user experience at all. So that’s been really key. Over time, we would expect that ad load growth will be a less significant factor driving overall revenue growth, but we remain confident that we’ve got opportunities to continue to grow supply through the continued growth in people and engagement on Facebook as well as on our other apps such as Instagram.

Some of that is almost a carbon copy of the Q4 commentary, but note the second half of the paragraph, where Wehner goes from saying 2016 would be like 2015 to saying that over time ad load would be a less significant driver. This is something of a turning point. Now, here’s Q2’s commentary:

Additionally, we anticipate ad load on Facebook will continue to grow modestly over the next 12 months, and then will be a less significant factor driving revenue growth after mid-2017. Since ad load has been one of the important factors in our recent strong period of revenue growth, we expect the rate at which we are able to grow revenue will be impacted accordingly…

These remarks turn “over time” into the more specific “after mid-2017”. Now here’s the Q3 commentary that caused the stock drop:

I also wanted to provide some brief comments on 2017. First on revenue, as I mentioned last quarter, we continue to expect that ad load will play a less significant factor driving revenue growth after mid-2017. Over the past few years, we have averaged about 50% revenue growth in advertising. Ad load has been one of the three primary factors fueling that growth. With a much smaller contribution from this important factor going forward, we expect to see ad revenue growth rates come down meaningfully….

Again, it feels like there’s an evolution here, even though Wehner starts out by saying he’s repeating what he said last quarter. What’s different now is the replacement of “less significant factor driving revenue” with “much smaller contribution from this important factor”, and “the rate at which we are able to grow revenue will be impacted accordingly” to “ad revenue growth rates come down meaningfully“. Those changes are both a matter of degree, and they feel like they’re intended to suggest a stronger reduction in growth rates going forward.

Drivers of growth

However, as Wehner has consistently reminded analysts on earnings calls, ad load is only one of several drivers of growth for Facebook’s ad revenue. The formula for ad revenue at Facebook is essentially:

Users x time spent x ad load x price per ad

To the extent that there’s growth in any of those four components, that drives growth in ad revenue, and to the extent that there’s growth in several of them, there’s a multiplier effect for that growth. To understand the impact of slowing growth from ad load, it’s worth considering the contribution each of these elements makes to overall ad revenue growth at the moment:

  • User growth – year on year growth in MAUs has been running in the mid teens, with a rate between 14 and 16% in the last year, while year on year growth in DAUs has been slightly higher, at around 16-17% fairly consistently
  • Time spent – Facebook doesn’t regularly disclose actual time spent, but has said recently that this metric is also up by double digits, so at least 10% year on year and perhaps more
  • Ad load – we have no metric or growth rate to look at here at all, except directionally: it rose significantly from 2013 to 2015, and continues to rise, but will largely cease to do so from mid-2017 onwards.
  • Price per ad – Facebook has regularly provided directional data on this over the last few years, but it’s been a highly volatile metric unless recently, with growth spiking as mobile took off, and then settling into the single digits year on year in the last three quarters.

So, to summarize, using our formula above, we have growth rates as follows: 16-17% user growth plus 10%+ growth in time spent plus an unknown growth in ad load, plus 5-6% growth in price per ad.

The ad load effect

Facebook suggests that ad load is reaching saturation point, so just how loaded is Facebook with ads today? I did a quick check of my personal Facebook account on four platforms – desktop web, iOS and Android mobile apps, and mobile web on iOS. I also checked the ad load on my Instagram account. This is what I found:

  • Desktop web: an ad roughly every 7 posts in the News Feed, plus two ads in the right side bar. The first ad was the first post on the page
  • iOS app: an ad roughly every 12 posts, with the first ad being the second post in the News Feed
  • iOS web: An ad roughly every 10 posts, with the first ad being the fourth post in the News Feed
  • Android app: an add roughly every 10-12 posts, with the first ad being the second post in the News Feed
  • Instagram on iOS: the fourth post and roughly every 10th post after that were ads.

That’s pretty saturated. You might argue that Facebook could raise the density of ads on mobile to match desktop density (every 7 rather than every 10-12), but of course on mobile the ad takes up the full width of the screen (and often much of the height too), which means the ceiling is likely lower on mobile. I’m sure Facebook has done a lot of testing of the tipping point at which additional ads deter usage, and I would imagine we’re getting close to that point now. So this is a real issue Facebook is going to be dealing with. I did wonder to what extent this is a US issue – in other words, whether ad loads might be lower elsewhere in the world due to lower demand. But on the Q2 earnings call, Facebook said that there aren’t meaningful differences in ad load by geography, so this is essentially a global issue.

So, then, if this ad load issue is real, what are the implications for Facebook’s ad revenue growth? Well, Facebook’s ad revenue has grown by 57-63% year on year over the past four quarters, and increasing ad load is clearly accounting for some of the growth, but much of it is accounted for by the other factors in our equation. Strip that ad load effect out and growth rates could drop quite a bit, by anywhere from 10-30 percentage points. Facebook could then be left with 30-50% year on year growth without a contribution from ad load. Even at the lower end of that range, that’s still great growth, while at the higher end it’s amazing growth. But either would be lower than it has been recently.

Of course, it’s also arguable that capping ad load would constrain supply of ad space, which could actually drive up prices if demand remains steady or grows (which Facebook is certainly forecasting). Facebook has dismissed suggestions in the past that it would artificially limit ad load to drive up prices, but this is a different question. Supply constraints could offset some of the slowing contribution from ad load itself, though how much is hard to say.

Ad revenue growth from outside the News Feed

Of course, Facebook isn’t limited to simply showing more ads in the Facebook News Feed. While overall impressions actually fell from Q4 2013 to Q3 2015 as usage shifted dramatically from desktop to mobile, where there are fewer ads, total ad impressions have been up by around 50% year on year in the last three quarters. Much of that growth has been driven by Instagram, which of course has ramped from zero to the significant ad load I just described over the course of the last three years. Multiplied by Instagram user growth (which isn’t included in Facebook’s MAU and DAU figures) and that’s a significant contribution to overall ad growth too. As I understand it, the ad load comments apply to Instagram too, but there will still be a significant contribution to overall ad revenue growth from user growth.

And then there are Facebook’s other properties which until today haven’t shown ads at all: Messenger and WhatsApp. As of today, Facebook Messenger is going to start showing some ads, and that will be another potential source of growth going forward. WhatsApp may well do something similar in future, too, although Zuckerberg will have to overcome Jan Koum’s well-known objections first.

Growth beyond ad revenue

And then we have growth from revenue sources other than ads. What’s been striking about Facebook over the last few years – even more than Google – is how dominated its revenues have been by advertising. The proportion has actually risen from a low of 82% of revenue in Q1 2012 all the way back up to 97.2% in Q3 2016. It turns out that the increasing contribution from other sources was essentially down to the FarmVille era, with Zynga and other game companies generating revenues through Facebook’s game platform. What’s even more remarkable here is that these payments are still the bulk of Facebook’s “Payments and other fees” revenues today, as per the 10-Q:

…fees related to Payments are generated almost exclusively from games. Our other fees revenue, which has not been significant in recent periods, consists primarily of revenue from the delivery of virtual reality platform devices and related platform sales, and our ad serving and measurement products. 

As you can see in the second half of that paragraph, Facebook anticipates generates some revenue from Oculus sales going forward, though it hasn’t been material yet, and later in the 10-Q the company suggests this new revenue will only be enough to (maybe) offset the ongoing decline in payments revenue as usage continues to shift from desktop to mobile.

Of course, Facebook now has its Workplace product for businesses too, which doesn’t even merit a mention in this section of the SEC filing. Why not? Well, it would take 33 million active users to generate as much revenue from Workplace in a quarter as Facebook currently generates from Payments and other fees. It would take 12 million active users just to generate 1% of Facebook’s overall revenues today. And that’s because Facebook’s ad ARPU is almost $4 globally per quarter, and $15 in the US and Canada. Multiplied by 1.8 billion users, it’s easy to see why Workplace at $1-3 per month won’t make a meaningful contribution anytime soon.

Conclusion: a fairly rosy future nonetheless

In short, then, Facebook is likely going to have to make do with ad revenue for the vast majority of its future growth. That’s not such a bad thing, though – as we’ve already seen, the other drivers of ad revenue growth from user growth to price per ad to time spent by users are all still significant drivers of growth in the core Facebook product, and new revenue opportunities across Instagram, Messenger and possibly WhatsApp should contribute meaningfully as well. That’s not to say that growth might not be slower, and possibly quite a bit slower, than in the recent past. But at 30% plus, Facebook will still be growing faster than any other big consumer technology company.

Copying, Instagram, Snapchat

Instagram Stories and Copying Competitors

Instagram today engaged in what was arguably one of the most transparent rip-offs of a competing company’s product in recent memory, as it launched Instagram Stories, apparently a clone of Snapchat’s Stories feature, right down to the name. In response, I’ve seen some people saying that such feature copying is actually good for users. Though I think I understand what those people are saying, those words need quite a bit more context. Here is some.

Steve Jobs and stealing

The reality is that copying at some level has always been part and parcel of the tech industry. Steve Jobs famously said in an interview for a 1996 TV show:

Ultimately it comes down to taste. It comes down to trying to expose yourself to the best things that humans have done and then try to bring those things in to what you’re doing. I mean Picasso had a saying he said good artists copy great artists steal. And we have always been shameless about stealing great ideas.

I’ve seen that quote interpreted in a number of different ways, but it’s important to understand what it does and doesn’t mean. Picasso likely didn’t originate the quote; TS Eliot did, as follows:

One of the surest of tests is the way in which a poet borrows. Immature poets imitate; mature poets steal; bad poets deface what they take, and good poets make it into something better, or at least something different. The good poet welds his theft into a whole of feeling which is unique, utterly different from that from which it was torn; the bad poet throws it into something which has no cohesion. A good poet will usually borrow from authors remote in time, or alien in language, or diverse in interest.

In this original version of the quote, Eliot implies that there’s an important difference between imitating and stealing. The imitator merely apes the original (often badly, thereby actually degrading it), while the thief takes it but makes it his own by improving on it. It’s very similar to the definition of fair use under copyright law: if you create a fundamentally new work, your use of the work of others is fair game, whereas mere copying is not. But the point here is that there has to be some improvement on the original – some standing on the shoulders of giants, one might say – in order to qualify.

Users can benefit from copying

Do users benefit from such copying? It’s arguable that they do. If someone finds the absolute best way to do something, it’s to some extent ridiculous to do it another way. The introduction of graphical user interfaces for computers are a good example here – the GUI was so clearly better than the command line for most users that it would have been nonsensical not to embrace it. Almost all progress in technology builds on what’s come before, just as in science. Ignoring the advances of others is simply bad practice.

There are limits, and Instagram has gone too far

The problem here, though, is twofold. Firstly, this only applies to the kind of “copying” we’ve outlined above – that which improves on something that came before, rather than simply aping it. And secondly, the baser sort of copying can quickly become circular and stifle innovation if not counterbalanced by real innovation by all companies in a market. Companies have to drive their own new, differentiating features in addition to borrowing the best invented elsewhere. The problem with what Instagram is doing here is that it’s so barefaced and unashamed, while not exhibiting any of the positive characteristics of what Eliot and Jobs referred to admiringly as stealing.

There’s essentially nothing in Instagram’s appropriation of Stories which builds in a meaningful way on Snapchat’s implementation and makes it something new and different. Right down to the name and somewhat unintuitive interface, Instagram seems to have literally stolen the whole thing. That’s problematic, because it’s a lot more like the sort of IP violation that Asian (and particularly Chinese) device makers have engaged in over the last few years. There’s really nothing to admire here except possibly Instagram’s sheer brazenness.

I think it’s inevitable that services that occupy similar spaces in the broader communications and content markets will end up building feature sets that look very similar on paper. But that ought not to mean that they also look similar when implemented in apps. That smacks of laziness and a lack of imagination, which is a shame from a company like Instagram, which has fostered real innovation in the past.

Instagram, Twitter

Twitter and Instagram’s Communication Screwups

Note: both the Beyond Devices blog and Podcast are now available as a channel on Apple News, which is available if you’re using a device running iOS 9. Click on the button below to read this article there and follow the Beyond Devices channel.

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Today, hundreds of Instagram accounts were suddenly filled with panicked posts about a change to way the Instagram feed worked, which filled certain account holders with dread that their followers would no longer see their posts. In the previous few weeks, there were similar panics among Twitter users about two purported changes to that product: removal of the 140-character limit for tweets, and an algorithmic timeline similar to that being contemplated at Instagram. What’s striking about all three of these examples is that the companies arguably only have themselves to blame for the negative reaction, which could have been avoided if only they had communicated properly with users of their respective services.

In the case of Twitter’s supposed removal of the 140-character limit, reports started to surface over the first weekend in January that Twitter was considering a change, and it took a Twitter post (one that ironically embedded a sizable text document as an image) from Jack Dorsey to address the situation.  The problem was that Twitter had allowed a rumor about a possible change to get legs for several days before the company officially addressed it. Ironically, this month Dorsey finally announced that the company wouldn’t be raising the limit after all, but that just goes to show how powerful the user backlash was.

Twitter’s actual change – to an algorithmic timeline – also met with a significant user backlash, primarily from the sort of power users likely to pick up on news reports about the service and also the users most likely to care about such a change. In the end, Twitter better explained how the algorithmic timeline would work and – importantly – made clear that it could be turned off. When many users first experienced the new timeline a few days ago, they didn’t like it, but were able to turn it off. In the end, things weren’t nearly as bad as some users worried, but Twitter did itself a huge disservice by not explaining this better from the beginning.

And now we have Instagram’s equivalent moment – the company announced a few weeks ago that it would be introducing an algorithmic feed which would show the most “meaningful” posts first. However, it didn’t make clear exactly how this would work, and importantly didn’t specify whether users would be able to choose between this new feed and the current feed. As a result, and given Facebook’s history of making a similar change, many brands and creators on Instagram were understandably worried that their posts would suddenly become invisible to users. Then, at some point in the last 24 hours, a rumor (false, as it turns out) began to spread that the change would happen today. Hence, something like a game of what we Brits call Chinese Whispers and Americans call Telephone happened, and you had all those panicked posts on Instagram.

In all these cases, if the companies had just done three things, all the user backlash could have been avoided:

  • Communicate about the change before (or immediately after) rumors start
  • Make clear exactly what is planned, and when it will take effect
  • Specifically make clear that the changes will be optional rather than forced on users. (To be clear, we still don’t know if this will be the case on Instagram, but it absolutely should be).

Instead, you have overreaction by users, a huge backlash against something that may not even be happening (or may not be as bad as people fear), and a PR nightmare, all of which could have been avoided. I expect that to some extent any change to a major service that’s used by hundreds of millions of users will trigger some amount of panic, but in all three of these cases, the reaction has been much worse than it needed to be, and the companies only have themselves to blame. Nature and the Internet both abhor a vacuum, and when companies fail to communicate clearly, their users often fill in the gaps with worst-case scenarios, which serves no-one well.

 

Apple, Instagram, Quick Thoughts, Twitter

More quick thoughts on Twitter and Instagram (and Apple)

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I posted some initial quick thoughts on Instagram hitting 300 million users yesterday, but there were two articles today that prompted some more quick thoughts on Twitter and some parallels (and important differences) when compared with Apple.

The first article was this one by Walt Mossberg on Apple, and it included this paragraph:

In my conversations with Apple executives, they vehemently insist that market share isn’t — and won’t be — their goal, and even go so far as to say that most public market-share numbers are somehow off the mark, though they decline to explain how.

There are two parts to this: one, Apple doesn’t think market share is the right goal for them to chase, and two, it doesn’t think market observers measure it right anyway.

Now, the second article, which is an interview with Ev Williams, one of the founders of Twitter, commenting rather forcefully on the news that Instagram has more users than Twitter:

Why is users the only thing we talk about? The crazy thing: Facebook has done an amazing job of establishing that as the metric for Wall Street. No one ever talks about, ‘What is a [monthly active user]?’ I believe it’s the case that if you use Facebook Connect—if you use an app that you logged into with Facebook Connect—you’re considered a Facebook user whether or not you ever launched the Facebook app or went to Facebook.com. So what does that mean? It’s become so abstract to be meaningless. Something you did caused some data in their servers to be recorded for the month. So I think we’re on the wrong path.

If you think about the impact Twitter has on the world versus Instagram, it’s pretty significant. It’s at least apples to oranges. Twitter is what we wanted it to be. It’s this realtime information network where everything in the world that happens on Twitter—important stuff breaks on Twitter and world leaders have conversations on Twitter. If that’s happening, I frankly don’t give a shit if Instagram has more people looking at pretty pictures.

Do you see the parallels here? First, a rejection of the metric of choice for comparisons between the company and its competitors, and second, a questioning of the accuracy of those metrics.

I think it’s fair for a company to suggest alternative metrics it wants to be measured by, especially if those relate better to (a) its own strategy and (b) its ability to generate growth and profits for its shareholders. That’s certainly the case for Apple, which generates several times more profits than any other player in the smartphone market despite its minority share, and also captures a great deal of the revenue. But it’s not the case for Twitter, which despite all its attempts over the last few months to point Wall Street at metrics other than MAUs, has failed to either provide alternative metrics in a reliable fashion or demonstrate that those are better indicators of its future profits.

For the record, I’ve no idea whether Williams’ assertion that Facebook counts Facebook Connect usage is accurate, but when Facebook’s users are multiple times Twitter’s users, I’m not sure that matters a great deal. Apple likely objects to market share numbers on the basis that they tend to measure shipments, and shipments are neither the same as sales to end users, nor is shipment market share the same as installed base market share,  and nor do they reflect the way in which those devices are actually used. But in Apple’s case, market share actually doesn’t matter to its business model or its ability to generate outsize revenues and margins from what share it does capture. Twitter’s problem is precisely that its MAUs are exactly the source of its current revenue streams, and it hasn’t yet demonstrated how it will monetize the broader bases of users it wants Wall Street to start thinking about. It’s all very well to jump on your high horse about the metrics you want others to use, but you have to back up your assertion in order to avoid looking bitter.

Facebook, Instagram, Quick Thoughts, Twitter

Quick thoughts: Instagram at 300 million

Facebook today announced that Instagram now has 300 million monthly active users. This has invited inevitable (unfavorable) comparisons to Twitter, which had 284 million MAUs at the end of last quarter. I wanted to talk about a couple of things in relation to those comparisons.

Facebook and Instagram

Firstly, I wrote a post a year ago which I titled “Instagram’s advertising problem” which was really about the challenge of serving relevant and timely ads, and the degree to which various services struggle to hit that sweet spot. Instagram’s core challenge as a standalone business was that it knew next to nothing about its users, especially before brands started being a big presence on the service. What’s becoming increasingly clear since then is that one of the biggest forms of synergy between Facebook and Instagram is the ability to use the data Facebook has on users to target Instagram ads. See this quote from the Wall Street Journal’s interview with Instagram CEO Kevin Systrom today:

We use Facebook to serve the ads to Instagram. Basically, we’re making it very clear that data is shared between the services under Facebook’s roof. Facebook helps us provide relevant ads to the users. You don’t want a 50-year-old male who’s interested in autos seeing an ad for a beauty-care product targeted at teens. If you ask users what they hate most, it’s not having relevant ads being served to them.

It’s also very clear that information doesn’t flow back the other way:

WSJ: Does my activity on Instagram affect the ads I see on Facebook?

Systrom: I don’t think we have plans for that right now.

That’s likely because there’s almost no useful information that could be sent back the other way, because Instagram activity provides almost no insight into user demographics or interests (except to the extent that users have explicitly followed brands). All this also raises an interesting question: to what extent do the two user bases overlap? Are the vast majority of Instagram users also Facebook users, who’ve built up enough of a profile there to provide targeted advertising on Instagram? For now, I think the answer is likely yes: many of the teenagers now swarming to Instagram likely had Facebook accounts already (even if they’re not using them as often), but what if future teenagers (or other Instagram adopters) skip the Facebook stage entirely, or never bother populating their Facebook profiles with enough material to effectively target ads?

Twitter and Instagram

So, on to that unfavorable comparison to Twitter. I actually want to talk about two things here: one is why Instagram is growing so much faster, and the other is addressing the idea that Twitter should have bought Instagram instead.

First, why is Instagram growing so much faster? I think the answer is that it basically mirror the network effects of Facebook itself, in that it’s built around a community of friends and family. It benefits hugely from the fact that once a critical mass of your friends joins, it becomes inevitable that you will join too, to avoid missing out. This is especially the case among what is (likely) one of Instagram’s strongest-growing demographics: teenagers. Twitter entirely misses out on this phenomenon, by being a platform that’s largely about connecting with people, brands, news sources and so on that you have no existing personal connection to. It also suffers from the fact that so much of its content is easily available to its famous “logged-out users”. Because it’s inherently a public platform, there’s no great benefit to being logged in (or even registered) for much of the content shared there.

As I’ve written about previously in various posts on Twitter (e.g. here, here and here – full archive here), Twitter’s focus seems to be on talking up the size of its existing audience, partly by expanding the definition of what that includes, but what it really needs to do is find ways to keep growing the core base. And it’ll do that only if it (a) lowers the barriers to entry (as I described in this piece), and (b) taps into those viral and network effects that true social networks enjoy.

Secondly, the issue of whether Twitter should have bought Instagram instead. Arguably, Instagram might have helped Twitter solve the very problem I’ve just been talking about: as a true social network, Instagram enjoys network effects Twitter doesn’t, and it could have both plugged a gap and served as a focal point for Twitter’s messaging and other efforts. Instead, it’s now trying to build those things around the core Twitter experience instead, and that’s going to be tough. So there are some good arguments for such a combination. But the biggest counter-argument goes back to the point I started with, which is that without Facebook, Instagram really had no way to monetize effectively, because it had no way to display timely, relevant ads.

With Facebook’s help, it now scores very highly on the relevancy side, because it can leverage Facebook’s data on its users where the two user bases overlap. Twitter, on the other hand, suffers from a very similar problem to Instagram itself: it knows something about its registered and logged-in users, though arguably not that much, but knows almost nothing on its own about the logged-out users. Instagram wouldn’t have helped with that, and without its own data on those users, and likely relatively small overlap between the two bases, it would have found it very difficult to effectively monetize Instagram. For all these reasons, though there is some logic behind a combination of Twitter and Instagram, it would have been enormously tough to justify financially for Twitter. I think it’s a much better fit for Facebook, but unfortunately that leaves Twitter struggling with the same old problems.

Ads, Advertising, Google, Instagram

Instagram’s advertising problem

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Companies participating in the consumer technology market have to generate revenue in one or a combination of these four ways:

  • Charging users for hardware
  • Charging users for services
  • Charging users for software
  • Charging advertisers for eyeballs.

If you don’t make hardware, then you’re limited to the other three options. The vast majority of companies that fall into that category are opting for the last option, because it lowers the barriers to entry for users, but perhaps also because it allows those seeking funding to avoid the difficult question of revenue generation until they have an audience.

The assumption seems to be that, as long as you have eyeballs, you can find a way to turn those into advertising dollars. And that’s true to a certain extent, but the ability of different consumer services companies to make money from advertising depends varies very greatly, in a way that is rarely talked about. This has come up a bit recently in the context of Spotify, because the ephemerality of the content is supposedly poorly suited to advertising. But there’s a much bigger problem that affects not just Snapchat but also many others in the current crop of messaging and photo sharing companies, which is that they know almost nothing about their users that’s relevant to advertisers. Continue reading →