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Cheng


Total Posts: 2798
Joined: Feb 2005
 
Posted: 2016-11-22 10:44
Digital advertising is probably not 100% Brexit-related Wink, but you have at least one avid reader, so keep 'em coming.

"He's man, he's a kid / Wanna bang with you / Headbanging man" (Grave Digger, Headbanging Man)

ronin


Total Posts: 169
Joined: May 2006
 
Posted: 2016-11-22 10:51
>I respectfully disagree.

@rowdyroddypiper,

Just to clarify what I meant by that.

Say FB. Any organic growth would have to come from new accounts acquisition (i.e. identifying large numbers of people who are not on Facebook, but would be if they were sold to properly), or revenue growth per account (showing more ads in the feeds, or charging more for ads). Both of these seem unlikely - show too many ads, and people go away. And there are not too many people who have never heard of Facebook.

GOOG - same thing. Is there some portion of the search market that they can acquire, or can they cram more ads in the existing results?

It is pretty much the same story across the board. The world's population can be roughly divided into those who are on Facebook (or use Google, Amazon or Netflix), and those who are deliberately not. And real estate for ads is already used to the full.

So the only meaningful growth that I see in most of these businesses is inorganic. And that doesn't justify p/e multiples between 50 and 300.

Your point is that there is more money to be spent on ads globally. Of course there is. But if you have reached the capacity of your own channel to show those ads, that means precisely nothing to you. Even if you acquire new channels. If you are in the business of showing ads to one set of eyeballs at the time, it doesn't matter if you have 1 or 20 channels - you can only show one ad to one pair of eyeballs at any time, and at some limited frequency.


>And yes, eventually nearly all advertising will be digital.

@EL,

I don't even agree with that. The sales pitch for advertising on London public transport claims that, every day, more people see an ad on the side of a London bus than an ad on social media. Haven't seen the data, but presumably there is basis for it.







"People say nothing's impossible, but I do nothing every day" --Winnie The Pooh

rowdyroddypiper
NP Wrestling Champion

Total Posts: 1172
Joined: Apr 2004
 
Posted: 2016-11-22 15:29
@ronin

I don't disagree that the multiples on FB and Goog will come down at some point. I just think that the earnings will grow faster than the multiples shrink. In terms of customer, both Google and FB do not have end users as customers, advertisers are their customers. The end users are inventory. As users spend more time online and engaged in other activities where FB and Google control the channel the inventory available for sale goes up. This is why they are making huge pushes to acquire video content, it's just more inventory to sell. Conveniently their true customers, the advertisers, are in real time competition to acquire inventory and as spending dollars shift to digital channels the cost per impression goes up. This is how I see that there is tremendous value for Google and FB especially going forward.

In terms of outdoor advertising like on a London bus, it's a rather meaningless statement. Could more people see an ad on a bus? Sure. But I could also dump money into a promoted social media post and eclipse that number easily. And more importantly than how many people see it is are the right people seeing it? Targeting and response measurement are the two features of digital advertising that give it the edge in attracting ad spend going forward.

So how about that brexit eh?

Revolution to the mean

ronin


Total Posts: 169
Joined: May 2006
 
Posted: 2016-11-22 17:29
@rowdy,

Last one on this topic, I promise.

FB is actually relatively close to home. A guy I work with (fundamental long short PM) had put up a meaningful position in FB some time in June, at around 120-121. He got to over 130 by September, and then I had pretty much this same conversation with him - how much higher do you think it can go, take the ten bucks and scale it down, I don't see more upside. He said no.

In the Q3 release in October, FB basically said the same thing I was saying (and still am) - slower revenue growth because ad real estate is saturated. FB was back to 120-121 where we started. A few days later, Donald came and dropped it to 117.

Today we seem to be back to 121 on a share buyback.

I don't see any upside on that.

I agree that they can acquire inventory (i.e. get somebody who spends 10 minutes / day on FB to go up to 15 minutes / day), but the days of double digit growth are over. And you need double digit growth just to sustain the 100+ range.

Anyways, let's get back to brexit...


"People say nothing's impossible, but I do nothing every day" --Winnie The Pooh

katastrofa


Total Posts: 346
Joined: Jul 2008
 
Posted: 2016-11-22 17:30
"Targeting and response measurement are the two features of digital advertising that give it the edge in attracting ad spend going forward."

Ad companies, I think, overstate a lot their ability to target accurately the ads in a way which does not turn people off.

Luciender


Total Posts: 71
Joined: Aug 2008
 
Posted: 2016-11-22 18:26
Also: ad-blockers. They are getting ever more wide-spread and might even shrink their inventory?

NIP247


Total Posts: 539
Joined: Feb 2005
 
Posted: 2016-11-22 18:38
"Ad companies, I think, overstate a lot their ability to target accurately the ads in a way which does not turn people off."

Quote from the article that Chiral linked to earlier: "One recent advertising product on Facebook is the socalled “dark post”: A newsfeed message seen by no one aside from the users being targeted. With the help of Cambridge Analytica, Mr. Trump’s digital team used dark posts to serve different ads to different potential voters, aiming to push the exact right buttons for the exact right people at the exact right times.

[...]

In this election, dark posts were used to try to suppress the AfricanAmerican vote. According to Bloomberg, the Trump campaign sent ads reminding certain selected black voters of Hillary Clinton’s infamous “super predator” line. It targeted Miami’s Little Haiti neighborhood with messages about the Clinton Foundation’s troubles in Haiti after the 2010 earthquake."

On your straddle, done on the puts, working the calls...

chiral3
Founding Member

Total Posts: 4970
Joined: Mar 2004
 
Posted: 2016-11-22 18:56
I had also read that dark posts were believed to target people with flaky voting histories that would likely vote HRC. The targeted data suggested that she was a guaranteed winner and these people stayed home.

Nonius is Satoshi Nakamoto. 物の哀れ

katastrofa


Total Posts: 346
Joined: Jul 2008
 
Posted: 2016-11-22 19:53
There will be a lot of such articles now. Democrats will believe in anything (Russian spies, data analyst from planet Krypton with BigData superpowers) to avoid accepting the reality of how they f***d things up.

NIP247


Total Posts: 539
Joined: Feb 2005
 
Posted: 2016-11-22 20:46
My point was not to comment on the election but rather on the slicing capabilities and potential higher revenues from mass-customisation and targeting of the ads. It's already happening.

On your straddle, done on the puts, working the calls...

rowdyroddypiper
NP Wrestling Champion

Total Posts: 1172
Joined: Apr 2004
 
Posted: 2016-11-22 23:19
@ronin I'm hard pressed to think of how 3 months of price action is predictive of long term prospects but I agree we can get the thread back on topic

@nip247 Ad guys call the activity you're talking about conquesting. Basically find some media that is negative about your competitor and place your ad there. It's very profitable to be able to run those kinds of campaigns well.

Revolution to the mean

katastrofa


Total Posts: 346
Joined: Jul 2008
 
Posted: 2016-11-23 11:46
Ad guys seem to be best in advertising their services :)

EspressoLover


Total Posts: 202
Joined: Jan 2015
 
Posted: 2016-12-08 20:46
Anyone have any color on what's going on with vol markets? Vol's rising substantially despite market hitting new highs. Depending how you're measuring it, the relative move over the past two days is +4 sigma. I don't see any real news or factors that are driving this.

Besides maybe everyone's scared shitless that things are over-valued, but managers can't liquidate because their benchmarks are rising too fast. So they stay fully invested and just buy protection. I don't know why everyone would have came to that realization in the past 48 hours though. Anyone have any insights?

sigma


Total Posts: 105
Joined: Mar 2009
 
Posted: 2016-12-08 22:43
Yes, the implied skew tends to increase after sharp upward moves. In a low vol and up-tranding market, it is typical for equity options that the volatility regime becomes sticky-strike when puts implied vols don't change (or even increase because of the convexity effect) when spot price moves up.

Another interesting observation during the past few days is that for large cap financials (JPM, BAC, WFC) the implied 1-2 ATM month vols are about 22-30% while the corresponding ATM vol for financials ETF (XLF) is about 15-17%. At this moment I don't have a tool to compute the implied basket vol out of the implied vols of the basket constituents, but in past I observed that both the sector ETF and the cap weighted stock vols had nearly equal ATM implied vols. Obviously, the sector ETF have a steeper skew but still 25-delta puts are cheaper for the XLF ETF. I can't find a possible explanation apart from ownership bias: there is a much larger ownership of large cap financial stocks (and everyone wants to hold and buy them now) vs financials ETF .

EspressoLover


Total Posts: 202
Joined: Jan 2015
 
Posted: 2016-12-09 20:58
@sigma

Interesting... Adding to vol peculiarities, Russell skew is way lower than S&P skew right now. I guess one could read more into this weirdness, but Occam would suggest that maybe it's just a deluge of dumb money. Amateur hour at the CBOE.

sigma


Total Posts: 105
Joined: Mar 2009
 
Posted: 2016-12-09 23:31
After a second thought, all large cap financials are reporting in January so it is typical for implied vols to increase into the earnings season. While the expectations are high, on the average, the positive/negative effect from any bank on the sector level should be neutral as expectations are still high for next year anyway (at least until we get some clarity from the president T.) so the impact of any individual stock on the sector-wide correlation should be zero. At the same time, we always have a possibility of a negative external shock (Italy, China, a tweet from the president T., whatever) in which case the sector-wide correlation will be close to one. With this in mind, it makes sense that the implied ATM vol on the sector ETF is trading at a discount to the ATM vol on the cap weighted basket.


About the Russel vs S&P skew: while it is true that the relative skew (say, a difference between 25-delta put and 50-delta put) is higher for the S&P 500, the absolute level of the implied vol for say 25-delta put is still higher for the Russel. Typically, the S&P 500 has the largest skew among all risk assets even though, ironically, is it the safest one among all of them historically (in comparison to say Stoxx 50, Nikkey, AUDJPY, etc). I think this is a manifestation of the fact that when people hedge against a truly global risk event (China, EU, etc) they rather buy an out-of-the money put with the cheapest vol because in the downside scenario all risk assets will move down. That is why the skew on the S&P 500 is so high relative to its ATM vol.

Single stocks and small cap broad indices like Russel tend to have nearly symmetric implied vols because for every person who wants to hedge the downside risk while owning the asset (by buying puts) there is another one who just wants to buy the upside (by buying calls).

In my understanding, the index/sector implied vol skew is all about what you expect to happen in the downside scenario (if all stocks will move down, then the puts skew is higher and ATM vol is lower) and the upside scenario (if some stocks will move up while some will move down - say the S&P 500 index including financials&industrial vs utilities&staples, then the call skew is lower and ATM vol is about equal to the cap weighted ATM vols).
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