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Facebook ad revenue seen feeling brunt of Apple privacy changes

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October 25, 2021

By Sheila Dang and Nivedita Balu

(Reuters) – Ahead of Facebook Inc’s financial results on Monday, the social media giant is expected to be hurt more than others in big tech by Apple Inc’s iPhone privacy changes, investors fear, after Snap Inc missed revenue targets last week.

The Apple privacy updates, which began rolling out in April and prevent advertisers from tracking iPhone users without their consent, has had investors in digital ad companies on edge for fear that reduced access to data would upend the nearly $100 billion mobile ad market.

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Snap confirmed fears on Thursday when it reported the Apple changes hurt its ability to measure whether its ads led to website visits or sales, and a measurement tool provided by Apple did not perform as well as expected.

Snap’s shares fell 25% and dragged down shares of Facebook, Twitter Inc and Alphabet Inc, which all earn revenue by selling digital ads.

There can be “no more denying” the ramifications of Apple’s privacy push, Ygal Arounian, managing director of internet equity research at Wedbush Securities, said in a research note after Snap’s results.

Ad revenue of Facebook, the second-largest digital ad platform in the world after Alphabet Inc’s Google, is most likely to be hit compared with the company’s tech peers, Evercore ISI analysts said in a research note.

Like Snap, the bulk of Facebook’s ad business comes from direct response advertising, an industry term that refers to ad sellers and buyers who use data on information such as what devices consumers are using and what they are searching for, to place ads in front of interested audiences with the aim of quickly generating sales or website visits.

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Analysts are targeting $29.5 billion in revenue for the third quarter, a 37% increase from the year-ago period, according to IBES data from Refinitiv. Shares of Facebook have risen 19% year-to-date.

Last month, Facebook warned that the Apple changes caused it to under-report the results of its ads on iOS devices and said the changes had made it more expensive and difficult for brands to advertise on Facebook.

The social media network has been one of the fiercest critics of Apple’s updates, arguing they would hurt small businesses that rely on personalized advertising to increase sales.

On the other hand, Twitter, which reports third-quarter results on Tuesday, is likely to be spared because the social networking site is mainly used for brand advertising, said Audrey Schomer, a senior analyst at research firm eMarketer.

Brand advertising, which Twitter said in July constitutes 85% of its ad business, is a strategy employed by firms to boost consumers’ awareness of a company or its values. Such ads are not as highly targeted to specific users, and therefore less dependent on data from iPhones or a user’s devices.

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Google is also shielded from the iPhone privacy changes because much of its usage comes from desktops, and promoted results placed on Google searches are not dependent on iPhone data, Arounian said. Alphabet will report third-quarter results on Tuesday.

(Reporting by Sheila Dang in Dallas and Nivedita Balu in Bengaluru; Editing by Peter Cooney and Matthew Lewis)

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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins

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December 5, 2021

SAN SALVADOR (Reuters) – El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

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“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.

(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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Bitcoin falls 9.2% to $48,782

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December 4, 2021

(Reuters) – Bitcoin dropped 9.29% to $48,752.15 at 22:01 GMT on Saturday, losing $4,991.54 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 29.3% from the year’s high of $69,000 on November 10.

Ether, the coin linked to the ethereum blockchain network, dropped 3.61% to $4,070.52 on Saturday, losing $152.28 from its previous close.

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(Reporting by Juby Babu in Bengaluru; Editing by Daniel Wallis)

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Trump’s social media venture says it has raised $1 billion

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December 4, 2021

By Krystal Hu and Juby Babu

(Reuters) – Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

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Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement. They did not respond to requests to name the investors.

Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt. The social media venture is now valued at almost $4 billion based on the price of Digital World shares at the end of trading on Friday. Trump supporters and day traders snapped up the stock.

Many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE. Among those investors who participated were hedge funds, family offices and high net-worth individuals, Reuters reported on Wednesday. Family offices manage the wealth of the very rich and their kin.

Some Wall Street investors are reluctant to associate with Trump. He was banned from top social media platforms after the Jan. 6 attack by his supporters on the U.S. Capitol amid concerns he would inspire further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.

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“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

The deal also faces regulatory risk. U.S. Senator Elizabeth Warren asked Securities and Exchange Commission Chairman Gary Gensler last month to investigsate the planned merger for potential violations of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

Trump had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, according to a presentation on his company’s website.

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Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

FIRST-QUARTER ROLLOUT

Since Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency in 2024.

Special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along. Many of these investors were left with big losses after the companies that merged with SPACs failed to deliver on their ambitious financial projections.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022. It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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In a slide deck on its website, the company envisions eventually competing against Amazon.com’s AWS cloud service and Google Cloud.

(Reporting by Juby Babu in Bengaluru and Krystal Hu in New York; Editing by Daniel Wallis and Cynthia Osterman)

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