Tag Archives: Advertising/Marketing/Public Relations

Twitter Reports Surprising Drop in Revenue Amid Elon Musk Fight

Shares of Twitter fell 2% to $38.72 in premarket trading. Twitter’s results Friday follow rival social-media company

Snap Inc.

SNAP 5.42%

posting its weakest-ever quarterly sales growth because of “increasing competition for advertising dollars that are now growing more slowly.”

Twitter, in its news release, cited “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter.” The company won’t host an earnings conference call because of the pending transaction, which it is suing Mr. Musk to complete.

Twitter’s revenue dipped to $1.18 billion from $1.19 billion a year ago, and was below the average analyst estimate of $1.32 billion on

FactSet.

Advertising revenue rose 2% from a year earlier to $1.08 billion. In the first quarter, advertising revenue grew 23%.

“The digital ad metrics they’re holding are relatively firm despite a dark macro environment,” Wedbush Securities analyst

Dan Ives

said. “They’re not falling off a cliff like we saw with Snap.” Shares of Snap were down more than 30% in premarket trading Friday.

Twitter reported a loss of $270 million, or 35 cents a share, compared with year-ago earnings of $65.6 million, or 8 cents a share. Excluding items like stock-based compensation, the company reported an adjusted loss of 8 cents a share. Analysts, on average, were expecting an adjusted profit of 14 cents a share, FactSet shows.

The number of Twitter’s monetizable average daily active users increased to 237.8 million from 229 million in the first quarter and 206 million a year ago. U.S. users–who make up the company’s biggest market–grew to 41.5 million from 39.6 million in the first quarter and 37 million a year ago. The company said the increase was driven by product improvements and global conversation around current events.

At the release of its results in April, Twitter said it was withdrawing earlier goals and outlooks, and it wouldn’t provide forward-looking guidance. Before Mr. Musk’s courtship, Twitter had been working to achieve three main goals by the end of 2023: to surpass $7.5 billion in annual revenue, reach 315 million daily users and double the pace at which it produces new technology.

Earlier this week, Delaware Chancery Court’s chief judge granted Twitter’s request to fast-track its lawsuit against Mr. Musk. A five-day trial is scheduled for October despite opposition from the billionaire’s lawyers, who argued that a trial should take place on or after Feb. 13 of next year.

Mr. Musk has said his primary reason for backing out of the deal is a lack of faith in Twitter’s estimate that less than 5% of its monetizable daily active users are spam or fake accounts. He has said that estimate is probably too low.

Twitter has said for years in its securities filings that the number of fake and spam accounts on its platform could be higher than its estimates. The company said in its lawsuit against Mr. Musk that he has buyer’s remorse over the fall in share prices since he agreed to the deal in April.

In a recent court filing, Mr. Musk’s team said they became concerned about Twitter’s user numbers after the company disclosed in its April earnings report that it had overstated its user base for nearly three years through the end of 2021 because of an error in how it accounted for people linked to multiple accounts. The revision reduced the number of monetizable daily active users by 0.9% for the fourth quarter of last year.

The court filing also said Mr. Musk met with Twitter executives in May to discuss how the company measures spam and that he was “flabbergasted to learn just how meager” its process was and pointed to the absence of automated tools to help with the calculation.

Mr. Musk’s bid for Twitter has helped hold up the company’s stock price amid a sharp selloff in tech company stocks. Before Friday, Twitter’s stock price was down less than 10% so far this year, while the tech-heavy Nasdaq Composite Index has lost more than 20%.

The deal for Twitter values the company at $54.20 a share. Twitter shares closed at $39.52 on Thursday.

Elon Musk has cultivated close ties with Beijing to build Tesla’s business in China. Now that he is buying Twitter and focusing on free speech, WSJ looks at how China has used the social-media platform to promote its views, and why that’s raising concerns. Photo Illustration: Sharon Shi

Write to Sarah E. Needleman at sarah.needleman@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Lyft Lays Off About 60 Employees, Folds Its Car Rentals for Riders

Lyft Inc.

has shed about 60 people while hitting the brakes on renting its cars to riders and consolidating its global operations team, according to people familiar with the matter and an employee memo reviewed by The Wall Street Journal.

The cuts covered less than 2% of staff and mainly affected employees who worked in operations, the people said. In a memo to some staff sent Tuesday, the company said it was folding the part of its business that allowed consumers to rent its fleet of cars on the app.

“Our road to scaling first party rentals is long and challenging with significant uncertainty,” according to the memo, sent by Cal Lankton, vice president of fleet and global operations at Lyft. Mr. Lankton wrote that conversations about exiting the business started last fall and “then accelerated as the economy made the business case unworkable.”

Lyft shares rose around 8% Wednesday to close at $14.70, while the tech-heavy Nasdaq Composite Index climbed less than 2%.

The company said it is going to continue working with big car-rental companies. Lyft’s car-rental business had five locations while it has car-rental partnerships with

Sixt

SE and

Hertz Global Holdings Inc.

in more than 30 locations, a spokeswoman said.

“This decision will ensure we continue to have national coverage and offer riders a more seamless booking experience,” the spokeswoman said in a statement.

The company also is reorganizing its global operations team, consolidating from 13 to nine regions and closing a location in Northern California and its Detroit hub, according to the memo.

Lyft joins other tech companies that are trimming staff or scaling back hiring plans as economic challenges cool the once-hot sector. The industry has been hiring at a rapid pace for years, but easy money is drying up and share prices have been plunging amid the reversal of some pandemic trends, high inflation, supply-chain shortages and growing worries about an economic slowdown.

Lyft’s stock has fallen more than 70% in the past 12 months compared with the less than 20% decline in the Nasdaq Composite Index.

In May, rival Uber Technologies Inc. said it would slow hiring. Its stock has halved over the same period.

Last week, Alphabet Inc.’s Google said it will slow hiring for the rest of the year while Microsoft Corp. cut a small percentage of its staff, attributing the layoffs to regular adjustments at the start of its fiscal year. Rapid-delivery startup Gopuff cut 10% of its staff last week, citing growing concerns about the economy.

Earlier this month,

Facebook

-parent Meta Platforms Inc.’s head of engineering told managers to identify and push out low-performing employees, according to an internal post. Snap Inc. Chief Executive

Evan Spiegel

recently told staff the company would slow hiring, warning that the economy “has definitely deteriorated further and faster than we expected.”

In May, Lyft President

John Zimmer

said in a staff memo the company planned to slow hiring, reduce the budgets of some of its departments and grant new stock options to some employees to make up for its eroding share price. At the time, Mr. Zimmer said the company didn’t plan to cut staff.

After enduring the pandemic, ride-share companies like Uber and Lyft are now facing a new world of high inflation, driver shortages, and dwindling passenger numbers. WSJ’s George Downs explains what they’re doing to try and survive. Illustration: George Downs

Write to Preetika Rana at preetika.rana@wsj.com and Emily Glazer at emily.glazer@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Mark Zuckerberg issues dire economic warning to Meta employees

Mark Zuckerberg has issued a chilling message to Meta Platforms Inc. employees: The company faces one of the “worst downturns that we’ve seen in recent history” that will necessitate a scaling back in hires and resources.

The dire economic warning was delivered during an internal videoconference meeting on Thursday for Meta’s
META,
-0.76%
77,800 workers, according to a New York Times report. To underscore the ominous message, Zuckerberg told employees to expect to do more with fewer resources and that their performance would be more intensely graded.

“I think some of you might decide that this place isn’t for you, and that self-selection is OK with me,” Zuckerberg said on a call, according to the Times. “Realistically, there are probably a bunch of people at the company who shouldn’t be here.”

Buttressing Zuckerberg’s comments, Meta Chief Product Officer Chris Cox said in a separate memo that Meta faces “serious times” and economic “headwinds are fierce.”

The most obvious manifestation will be fewer hires — Facebook’s parent company now intends to add 6,000 to 7,000 engineers this year, down from an initial goal of 10,000, the Times reported. A former Facebook employee confirmed to MarketWatch that the Silicon Valley company has significantly reduced its hiring plans in recent months.

Meta’s advertising business has been badly battered by a change in privacy settings to Apple Inc.’s
AAPL,
+1.62%
mobile operating system, limiting the amount of user data that can be collected by Facebook and Instagram. Consequently, Meta has posted two straight quarterly profit declines for the first time in a decade. Meta lost some $230 billion in market value — its worst one-day hit ever — after it posted desultory results in February.

At the same time, Meta is pursuing a risky strategic pivot to the immersive world of the metaverse, which prompted the company’s name change last year.

Meta is one of several tech companies facing choppy economic waters as it navigates through inflation, a war in Ukraine, and supply-chain issues. In recent days, Tesla Inc.
TSLA,
+1.24%,
Netflix Inc.
NFLX,
+2.91%,
Unity Software Inc.
U,
+1.96%,
Coinbase Global Inc.
COIN,
+4.30%,
Stitch Fix Inc.
SFIX,
-0.81%,
Redfin Corp.
RDFN,
+8.74%
have announced deep job cuts.

Meanwhile, Twitter Inc.
TWTR,
+2.25%,
Intel Corp.
INTC,
-2.86%,
and others have announced hiring freezes.

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Google Charges More Than Twice Its Rivals in Ad Deals, Unredacted Suit Says

Google takes a cut of 22% to 42% of U.S. ad spending that goes through its systems, according to a newly unredacted lawsuit by state attorneys general, shedding new light on how the search giant profits from its commanding position in the internet economy.

The share the

Alphabet Inc.

GOOG -3.43%

subsidiary takes of each advertising transaction on its exchange—a marketplace for ad buyers and sellers—is typically two- to four-times as much as the fees charged by rival digital advertising exchanges, according to the suit, which is being led by Texas.

The unredacted filing on Friday in the U.S. District Court of the Southern District of New York came after a federal judge ruled last week that much of the antitrust suit could be unsealed.

“[T]he analogy would be if Goldman or Citibank owned the NYSE [New York Stock Exchange]” one senior Google employee said, according to the suit.

Google has called the lawsuit flawed. “This lawsuit is riddled with inaccuracies and our ad tech fees are actually lower than reported industry averages,” said Peter Schottenfels, a Google spokesman.

The suit alleges the company has deployed strategies to “lock in” publishers and advertisers and help the company’s ad buying tools win more than 80% of auctions on its exchange, a newly revealed figure. It gives a window into Google’s overwhelming dominance of advertising, citing Google documents that say the company served 75% of all online ad impressions in the U.S. during the third quarter of 2018.

The suit cites programs, with code names such as Bell, Elmo and Poirot, that helped Google generate more than $1 billion in sales.

The Department of Justice is investigating the U.S.’s largest tech firms for allegedly monopolistic behavior. Roughly 20 years ago, a similar case threatened to destabilize Microsoft. WSJ explains.

The case argues that Google’s business practices inflate advertising costs, which brands pass on to consumers in higher priced products. It also alleges that Google suppresses competition from rival exchanges and limits websites’ options for ad delivery.

Led by Texas Attorney General

Ken Paxton

and joined by 15 states, the suit complements a separate antitrust case by the U.S. Justice Department and 38 state attorneys general focused on Google’s search services, as well as a Utah-led lawsuit targeting Google’s Play app store. Those cases are set for trial in 2023 or later. The Justice Department is exploring a separate suit against Google’s advertising business.

Lawyers for the group of states in the Texas-led suit put a focus on the role of Google’s advertising exchange, called AdX, which they say charges a fee of between 19% and 22% of the prices advertisers are paying on the exchange to reach publishers. That is double to quadruple what AdX’s nearest competitors charge, according to the suit.

The company’s commanding market share in advertising helped it secure those larger fees, according to the suit.

Smaller advertisers pay even larger fees. Transacting on a separate system called Google Display Network, they pay fees ranging from 32% to 40% to Google. The rates are in line with Google’s public statements that publishers receive 68% of revenue from AdSense, a tool to serve ads to smaller websites.

In internal discussions about Google Display Network, executives said the company’s ad networks make “A LOT of money” in commissions because “we can,” according to the suit. “Smaller pubs don’t have alternative revenue sources,” a Google employee said.

When a system called header bidding opened Google’s ad auctions to rival exchanges about five years ago, a change that followed accusations that the tech giant’s systems were anticompetitive, a Google executive wrote in an email that the system posed “an obvious dilemma” that could reduce Google’s profit margins to “around 5 percent,” according to the unredacted suit.

The company deemed the threat of header bidding existential because the system would circumvent Google’s tools. In 2016, one employee worried that competition from rival exchanges would show that the 20% fee Google charged for its exchange “likely wasn’t justified,” according to the suit. Others strategized to “kill” it.

“AdX is the lifeblood of our programmatic business,” a company executive wrote in an email in 2017. “What do we do?”

The search giant sought to undermine header bidding through partnerships and software that protected its position, the suit says. Google offered an alternative to header bidding that appeared to be a concession to the competitive pressure, but the suit says it secretly developed a program called “Jedi” to ensure that Google’s exchange won auctions.

Google employees anticipated that the Jedi program could create blowback from clients and the public, saying it “generates suboptimal yields for publishers and serious risks of negative media coverage if exposed externally,” according to newly unredacted material.

The company’s staff also discussed playing a “jedi mind trick” on the industry by “getting publishers to come up with” the idea of removing rival exchanges “on their own”—primarily by fostering concern that header bidding would strain a publisher’s servers, the suit says.

In 2018, Google struck a previously-reported deal with Facebook that it code-named “Jedi Blue.” The complaint alleges that

Facebook

engaged in an “18-month header bidding strategy” to increase its leverage in such a deal.

The complaint alleges Google also developed Accelerated Mobile Pages, or AMP, a version of a website hosted on Google’s servers designed to load quickly on mobile phones, in part as a way to combat header bidding. Google explicitly designed AMP pages not to work well with header bidding, the suit alleges, and deliberately made ads that didn’t use AMP load with a one-second delay to give AMP what Google called “a nice comparative boost.”

Publicly, Google claimed the AMP sites loaded four times faster than non-AMP pages. But internally Google employees said they grappled with being asked to “justify” a system that actually made websites “slower,” according to the complaint.

Google internal documents show that AMP pages brought 40% less revenue to publishers, according to unredacted sections of the suit.

Texas Attorney General Paxton said that Google’s internal communications show it can’t justify its ad fees. “Only a monopolist can charge rates that are double the rates of its competitors and yet still increase their market share,” Mr. Paxton said.

Google’s Reach in Internet Economy

Write to Keach Hagey at keach.hagey@wsj.com and Tripp Mickle at Tripp.Mickle@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Amazon Earnings Show a Sharp E-Commerce Slowdown

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Aaron P. Bernstein/Getty Images


Amazon

shares are heading lower in late trading Thursday after the e-commerce and cloud computing giant reported mixed results for the June quarter, with better-than-expected profits but sales that fell shy of Wall Street estimates.

The miss reflects a shortfall in Amazon’s e-commerce business, which suffered a sharp deceleration from recent growth trends. The e-commerce slowdown was partially offset by better-than-expected results in the company’s cloud computing, advertising, and third-party seller segments.

For the quarter, Amazon (ticker: AMZN) posted sales of $113.1 billion, up 27% from a year ago, or 24% when adjusted for currency, right in the middle of the company’s guidance range of $110 billion to $116 billion, and a little shy of Wall Street’s consensus of $115.4 billion. Earnings were $15.12 a share, ahead of analysts’ $12.28 per share forecast. Operating income was $7.7 billion, toward the top of the company’s projected range of $4.5 billion to $8 billion, and just below the Wall Street consensus of $7.8 billion.

Revenue from online stores was $53.2 billion, up 16% from a year ago, or 13% adjusted for currency, well shy of the Street consensus forecast of $57.3 billion. That was below the 41% growth in the March quarter and 49% growth a year ago.

Amazon chief financial officer Brian Olsavsky said on a call with analysts that since May the company’s growth—aside from Prime Day—dropped into the mid-teens, from recent growth in the 35% ro 40% range, and 44% growth in the March quarter. The company sees growth for the September quarter int he 10% to 16% range.

Olsavsky pointed to wider availability of vaccines and consumers leaving the house more as factors in the slowdown, in addition to tough comparisons with a year ago.

Olsavsky added that the company expects a “pattern of difficult comps” to continue for the next few quarters until the company laps the pandemic period.

Third-party services revenue was $25.1 billion, up 38%, or 34% adjusted for currency, above the consensus forecast at $24.8 billion. But that was nonetheless a slowdown from 60% in the March quarter and 53% a year ago.

Amazon Web Services, the company’s cloud business, had revenue of $14.8 billion, up 37%, and well ahead of the Street estimate at $14.3 billion, accelerating from 32% growth in March and 29% growth a year ago.

“Other” revenue, mostly advertising, was $7.9 billion, up 87%, or 83% on a currency adjusted basis, well ahead of consensus at $7 billion, and consistent with recent strong advertising data from

Facebook,

Alphabet and other ad-driven businesses. Physical store revenue was $4.2 billion, up 11%, topping the Street view at $3.9 billion.

North American sales growth, excluding foreign exchange effects, slowed to 21% in the quarter, down from 39% in March and 44% a year ago. Operating margin in North America was 4.7%, down from 5.4% in March, though up from 3.9% a year ago. International sales were up 26%, down from 50% in the March quarter, and 41% in the year earlier quarter.

For the September quarter, Amazon is projecting sales of $106 billion to $112 billion, shy of the Street consensus at $118.6 billion, with operating income ranging from $2.5 billion to $6 billion, versus $6.2 billion a year ago. The company said guidance assumes about $1 billion in costs related to Covid-19. 

Amazon shares are down 7.1% in late trading. The stock is up 11% in 2021 , trailing the

S&P 500

‘s 18% gain.

Write to Eric J. Savitz at eric.savitz@barrons.com

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