Facebook Ad Spending Is Solid Despite Privacy Issues (Podcast)

It's about forty five of global ad spending went to the Internet. We're starting to see some of those big internet companies report their first quarter earnings. We had some good numbers out of Twitter, Stock ran up big time. Snap had some pretty good numbers. And after the Clothes tonight we have Facebook help us talk about all things digital advertising. We welcome back Mark Douglas. Mark is a CEO of Steelhouse based in Los Angeles, California. Mark, thanks

so much for joining us. Boy, business seems pretty good for these big digital media companies. What are you thinking about Facebook after the close? Yeah? I think Facebook, Um, what's going to be really confusing for a lot of people is Facebook faces and has face and continues to face all this turmoil about privacy and other issues. But the bottom line is they don't really have much competition. They don't have much competition in terms of what other

social networks consumers are going to use. Is not just Facebook, bails don't Instagram and WhatsApp. And on the advertising side, they have even less competition. So we're not seeing at field House, we're not seeing any kind of decline in spend on Facebook and Instagram. If anything, we're seeing an

increase in spend on Instagram in particular. Did Twitter kind of show us that there is a shift though among advertisers that they're willing to pay for quality i e. Human beings rather than thoughts, sort of encouraging Facebook to possibly uh clear out take accounts or you know, ones that kind of come from dubious providence. Um, they're definitely. Twitter definitely seems to be investing in making sure that all their accounts are valid, they're real humans, Um, things

like that. The issue there is scale. So as an advertiser, Um, it's a lot of work to create ads, it's a lot of work to create and manage these campaigns, and so Twitter just doesn't have anywhere close to scale as Facebook and Instagram. I mean, I think Facebook is eleven times bigger, and then when you add Instagram into that, then it's you know, you're probably approaching twenty times larger.

And so they're doing a good job, I think Twitter, but they just don't have the scale to really capture the advertising dollars and the revenue that that Facebook can. You know, speaking of Twitter, it's was reported that Jack Dorsey, the CEO of Twitter, met with President Trump yesterday. Boy, I would have love to been a fly on the wall for that one. What do you think was going

on there? Um that? I, you know, it's an interesting meaning I read about that also, Um, I the strategy at Twitter seems to be, UM, don't get blamed for the election cycle. The election cycle, so UM seems to be part of the strategy. So I think, UM kind of being in front of that, UM, this seems like maybe it's a party of its strategy or maybe Jack Dorsey,

you know, just like going to Washington might show well. Ever, right now, uh, we are getting some color around it, saying that Jack Dorsy was explaining to President Trump that some of his eliminated followers were bought, and that was part of the issue. I am wondering, from your perspective, what you're looking for. If Facebook is such the dominant player in the advertising space and doesn't really have a

whole deal of competition, what do you care? What are you looking for in the earnings that will sort of indicate to you either the pricing power for advertising or whether there's any shift toward any of its competitors. Yeah, for years, Facebook's um CPM kind of the cost per thousand ads, which is what aver how you price ads in the digital ad stace. What has been going up for Facebook? I think in recent times it's been kind

of floating down. Part of that is new markets with the pricing is not as strong, But I think part of that is Facebook itself, although they don't have a lot of competition, the platform itself just doesn't have the engagement that it wants at and so I think, you know, the general feeling is eventually Facebook as a property is just feels like it's on it's a downward slope, and I think everyone's trying to look for, you know, kind

of is that accelrating? When is that? You know, when is that going to become a problem, and so that's what those kind of metrics would I'd be looking for. It's more the long term investment, not the near term. So that raises a good question mark if if you know, Facebook feels from an advertising perspective and uses perspective maybe

a little bit mature. To what extent do you think, uh, Facebook and pull other levers, whether it's you know, increasingly monetizing Instagram, maybe even WhatsApp and Messenger, how successful do you think they'll be on pulling those levers? Yeah, I think on Instagram, the user growth on Instagram continue appears to continue to be strong. That's another metric I'd be trying to get some insight into. UM engagement is strong.

You can just even feel it as an individual, just like I know among my friends and yeah, I can just just see, you know, kind of how often UM Instagram is used. So I think that's you know, kind of the saving grace of the company right now. I think the other thing is stories. So stories and in Instagram are not monetized nearly as effectively as the feed,

and so one just kind of personal prediction. As someone in the ad business, I think stories some of those stories, some of the most popular ones will probably be moved into the news feed, and they will make them more monetize herble. That's not something Facebook has told me. I just think that it's a logical step and it's something

I'd want to see as an appetizer. We're speaking with Mark Douglas, chief executive of Steelhouse, who used to run the engineering for e Harmony, and Steelhouse is focused on AI driven self service advertising sort of targeted ads, and I'm just wondering, you know, we are expecting these earnings, but just broadening out what's the latest in terms of artificial intelligence and targeted ads that you specialize in. Yeah, so what's happening in that space is that the ads

business has traditionally been very human focus. You have media buyers and kind of a lot of people involved in the ad in the ad buying cycle. But with the scale you have now, and especially the movement to connected television where people everyone is watching TV on demand, You're seeing that the ad buying is now becoming more and more automated. And so that's kind of technology we provide, I think where the industry is moving to pretty rapidly.

So Mark, just you mentioned that, you know, there's not a lot of I guess it's pretty well known as well, that's not a lot of competition in the digital ad space. You kind of have Facebook, you have Alpha that to what extent do you think Amazon can become a viable third player in that space? Amazon is kind of in a different place. So the what their ad business has grown,

um obviously tremendously into multibillion dollar business. But really what they did is they started monetizing what they were giving away for free. So you went to Amazon, you did the search, and you've got the search results, and that you know, Amazon didn't charge anyone to be to have a higher placement in those search results. And so Amazon start a business where now if you want to be at the top of the search results, just like on

a Google search, UM, you can pay for that. UM, you can bid on that, you can pay for that. I don't really consider that being in in you know, kind of like in roads into the app business. I just consider that attacks on their retailers essentially that they

figured out they can charge. But they're starting mentor phase UM where they potentially are going to go beyond just kind of search results in Amazon and UM and start to really compete potentially with Google, and I think also because of Amazon Prime connected television, the choices to what they start doing running UM selling ads based on Amazon Prime and other connected TV is kind of where the

real competition potentially be. That's the massive shift in digital advertising is the shift from linear television to connected television. Mark Douglas, chief executive officer of Steelhouse based in Los Angeles, Thank you so much for your time. This year has been a tremendously good year for US equities, including the hospitality sector. I'm looking right now at the sub indext for the SMP five hundred focused on hospitality and it's returns nearly nine year today joining us to talk about

the latest and greatest in the industry. We're lucky to have Guilda Perez Alvarado. She is chief executive officer of j L L Hotels and Hospitalities. J L L Jones lang Lassalle is actually one of the biggest in the space operating in in the hotel and hospitality sector. I'm just wondering, Guilda, what do you think is really behind the incredible boom that we've seen, at least in the share prices of the hospitality sector so far this year.

Thanks Lisa, Very happy to be here. Listen, fundamentals are very very strong right now. So we're in the tenth year of the recovery. We are expecting um for there to be positive reugh park growth still. Uh, travel and tourism patterns are also very positive. And you know, as the economy goes so it dust hotels. We're very much related to GDP growth. So what's going on in the M and A space here? We see a lot oftentimes when a big hotel trades uh, you know, it makes

front page news. How are the trends M and A wise in the hospitality space. It's great question. Listen. We are at record level of fundraising activity at the moment um. There's more investors, not necessarily hotel investors, but more generalist investors looking to make um entryway into our segue into the space. I think, um, you know, from an M and A activity, consolidation is extremely important. So bigger is better.

And let's say said, with the level of fundraising that we've had right now, people are looking at mean uh meaningful ways of the capital deployment at the stage. One thing I'm struggling with is. On one hand, people seem to be increasingly confident about the economy and the United States anyway. I mean, other there seems to be sort of a lack of faith in the ongoing strength that we've seen in the economy. There are a lot of people wondering when are we gonna see the extra session?

How are you seeing that playing out in the hotel sector? Are people increasing their spending on vacations right now or they kind of hanging in there, hanging steady, or even reducing it in preparation for perhaps some kind of leaner times. Listen, I think people are still a bit cautious, but there's no you know, there's no indication right now that we're heading into a recession, right, So totally agree, But you

still hear people talking about it. So I have to wonder, you know, are you seeing it actually affect business sediment? You know, from a business perspective, No, From a travel demand pattern no. Um, And I would say from you know, hotel I'm an activity, definitely not. What are some of the areas you know, eminently you've talked about fresh capital chasing hotel properties. Are there certain regions of the world

that are better hotter than others. Yea, So we just wrapped up an investor road show in Asia last week. Before that we were in Europe and prior to that we were in the Middle East. I would say, um, you know, the two most sought after geographies the United States in the UK even with Brexit. So what tie ups are you expecting or could you see happening in terms of activity? Listen, what are people chasing right now?

So people love resorts, people love select service portfolios. I think it's a flight to quality and the reason why London and New York continued to be the first and second most liquid markets is people want to go in and then to your point, Lisa, what happens if they have to sell. There's a ton of liquidity here, so you can always sell. Okay, we just but I'm wondering are their names in terms of what acquiring others are we looking at? You know, Hilton? Then they're all very

active right now. I mean, let's look at what's happened, um in the past several months. So you have I acquiring six senses. That's a really interesting spotlight into what people are focused on with wellness. That's going to be really exciting. You have now the concept of the urban resort, so they're playing into that. Uh Marryed buying Starwood, Um, you know, not too long ago, and we're still seeing the benefits of that consolidation. So I do expect more

to happen, and I think there should be. She's very very impression experience. She just come off the road show. She's verse. But one thing I want to when I read you know about you know, looking at resorts and things like that in the website, say, talk about experiential travel. What is that isn't traveled by definition and experience? I think you're absolutely right. That's a very fancy, um fancy name.

Right now. It's anything and everything memorable. I think the traveler right now it doesn't want a cookie cutter experience. And if you look at where people are focused on, it's all about you know, experiences, right. That's Airbnb's angle into the hotel space, Live like a local, right, it's experience, live like a local. I'm just thinking, I mean, you show up to the hotel, it isn't there, You're giving a tent. I mean that's an experience that's memorable. I mean,

what's the bar here I'm just wondering. I don't know, go figure one real quick question for you. I'm interested in some of the areas where there's been a lot of hotels built, and thinking of New York City, for example, is there evidence that you are seeing some weakening there and that that's going to kind of be captain and decline the huge wave of supply. I think it's behind us, right. There's still more rooms being to of heard in New York, but the pace at which those are being delivered is

definitely way down. UM I would say, yes, investors are very much focused on supply growth, but there's markets like New York, Boston, San Francisco, London that are going through huge transformations in the city from an infrastructure perspective. So maybe hotel US get a little bit ahead of themselves. But now you have office and you know, all of these real estate investment and infrastructure investments supporting more demand. Gilda Press Avarado, thank you so much for joining US.

Guild does A CEO America's Hotel and Hospitality Group for j L L joined us on our Bloomberg Interactive Broker studio. Twalls Fitzpatrick joining US now Managing director if we're e NP a research at sun Trust. Robinson Humphrey coming to us from Houston, Texas. Well, thank you so much for being with us. So it does appear that Occidental Petroleum is starting a bidding war for Anadarko Chevron. Of course, the other suitor here, bitter. Who do you think is

a better potential winner of this fight? Hey, good morning. Yeah, it's back to exciting times in the in the oil patch, I think, and I think the market is telling us it would agree that Chevron is a little bit better as a natural fit here. Uh, the acreage overlaps are really pretty pretty rock solid. I mean they fit like a puzzle. Oxy you know, a fine company of course, good permian overlap, but you know, they'd be newer to Colorado, they'd be newer to the l n G game, they'd

be newer to the Gulf of Mexico. So I think I think Chevron is a little bit better of of a fit. And I think that the market is telling us that with with Oxy down call it seven per cent since since the news came out, and uh, the the e M P Index up about the same, up about seven percent as well. So well, what do you think Chevron is going to do here, what's the response is going to be. I think they have to come

back at it. I mean, you know, uh Mr Worth was was on TV and he pretty pretty definitively said that, you know, when we step into a deal, we intend to close that deal. Uh, So you know, he laid it out there. I think that they have to come back with something that being said, you know, looking through uh through the finally material, it's clear that that that uh Anadarko prefers the Chevron bid UM. So you know, do they really have to come back and top seventies

six uh significantly or can can they match it? And uh and maybe the board will go with them. I think that they can. I think that they can match it. I think that they're in the advantage position again, both from a balance sheet perspective obviously, and from a market reaction perspective. It's just it's tough for a management team when you've underperformed by almost fifteen percent since this new is to be able to really dig in your heels.

So here's what I'm struggling with right now. The fact is that most people in the market think that Chevron is gonna win this bidding war if it turns into a bidding war, So is occidental basically just saying, all right, we're gonna punch a hole in our competition by forcing them to overpay for this deal. I mean, is that basically what's going on here? Um? You know, I think they really want it. I really do. UM. You know,

OXY is they're in a position. They do have great acreage in the permium, but they're gonna be thrown off a lot of cash going forward, especially from some of these international projects that they have, and they want to plow it back into something. Uh. So I don't think

that they're necessarily doing anything to to harm Chevron. I think that they want the acreage because they want to be able to, uh to feed the free cash flow that's coming to them into an asset that's going to be able to give them solid or turns Anadarko clearly fits that bill. Now you know, I would agree with you. I'm a little bit surprised. There's there's plenty of other

companies that fit that bill for for a similar price tag. So, uh, you know, to come back in and to basically you know, to be uh call it a bantam weight and you decide to to to pop a heavy weight in the nose and go for a bidding more. I mean, that does seem a little bit aggressive, especially when when the e MP space in general is selling at the bottom end of its multiple range. So there's there is a decent amount of opportunities, a decent amount of folks you

could go after. So well, let's talk about that a little bit. I mean, I'm sure energy bankers are picking up the phone this morning and you know, dialing up all their clients, trying to get some deals on the table, trying to shake the trees a little bit. Do you expect a pick up an M and eight or maybe this will spark a pick up an M and A in the space. Yeah, I think it will. I mean, you know, you have a couple of things that are happening for the first time in a while. Scale really matters.

You don't want to be running one or two rigs. It's really just not that efficient. But more importantly, for evaluation perspective, there's about a two term multiple discrepancy between the mid and large cats That obviously makes it a

little bit easier to pay the premium. Uh, it makes a little bit easier to get these deals done because you have a little bit of a natural arbitrage, but also you your incentives are lining up uh better, you have more activists coming into the space and um and I know this is a little bit a bracer to some, but but the managements are getting pretty big payouts on the way out, and honestly, when I talk to investors,

that's something that they're really encouraged by, somewhat counterintuitively, because there's been a feeling that the pay packages are better for the management teams than anything they might get on the way out, even with the twenty premium. UM. So, actually, these investors seem pretty happy to see, uh, these golden parachutes coming back because I think it will lubricate the

M and A just real quickly at twenty seconds. Well, give me a couple of names you think could be pop up on the screen in terms of M and A targets. Yeah, absolutely, I say. If you're looking for asset overlap, Noble and PDC are almost perfect overlaps. If you're looking for the blessing on the Colorado regulated regulatory stuff, it's going to be s r C extraction. And of course, if you want to go after the Permian, which is where most of the speculation has been. Uh, you'd want

to look at Pioneer and Parsley. Excellent good names. Thank you. I think you know, I think there's going to be more M and A is what while we're here in this space and interesting to get some names there. Well. Fitzpatrick, Managing director for EMP Research at Untrust, Robinson humphreca Well, the time has finally come for the market to find out just how ugly Tesla's first quarter was. Expectations for the period have been lowered sharply in recent weeks, especially

after disappointing delivery numbers renounced order this month. To get the low down, we turned to Liam Denning Energy, Mining and commodities columns for Bloomberg Opinion. He joins us here in a Bloomberg Interactive Broker studio. Liam, thanks so much for joining us. I want to start with the event that the company held. Um, I guess yesterday about the autonomous vehicle Any news out of that? What was that? What was it? Good question? So? UM, I think some

people are calling it a smoke screen. Don't look at my production problems, look at my vehicles. Something something shiny. Well, I think, I think any any investor day like that with any company is usually geared towards saying, hey, we're doing something here that you guys aren't fully appreciating, and therefore, you know, you should be valuing our stock higher and embed the value of this in the stock, etcetera, etcetera.

I mean this really matters for for Tesla because remember, as these these numbers coming out tonight quite likely to show the value of Tesla is all in the multiple, it's not really in the earnings. And so if Tesla can demonstrate hey, we're actually you know, better at autonomy than people give us credit for, that's one way of boosting that multiple. Now, the reaction to the actual day

was pretty lackluster. It didn't really do anything. Um. It reminded me a little of what happened when they unveiled the model why last month, which again should have been, you know, based on past form a big deal but actually was met with some skepticism. Um. And you know, for me, one of the important things here. People have focused on the share price, obviously, as as they should be with Tesla. Um. But last night the spread on on Tesla's bonds its highest level yet just over you know,

six D basis points. Um. So Tesla's coming into these results tonight, um having you know, whether people call a smoke screen or or whatever. But but it definitely tried to move the narrow tip and it doesn't seem to have done much. Just to give some perspective here, Tesla shares are down about so far you're to date. One thing that I find interesting is it's been relatively controlled in terms of decline based on your lazing your eyebrows. It's not a big it's not very controlled its decline

in you know, let's say less than four months. But I will say, yes, you can be skeptical. I see your skepticism in your eyes. Um, but but I do think you know, it's not sort of the massive plunge with a lot of short sellers have been expecting. It's been sort of a steady decline throughout the year now. Yeah, I mean it's it's been reasonably steady. And obviously short sellers always always hope for more and actually around that around that to sixty level, which is where it is now.

That's kind of been a flaw for the stock over the past, um a couple of years. You look at the share price Chartum, it generally bounces from that level. What's going to be interesting to watch is what happens after these results. Now, to a certain extent, skepticisms already priced in. People are expecting these results to be bad.

After the sales numbers came out, you look at what's happened to consensus estimates, which you know, frankly with Tesla, you know you might as well lick your finger and put it in the air anyway on on any quarterly numbers. But um uh, those have certainly been you know, coming down quite sharply heading in. So you know, the number I'll be watching probably most closely tonight is the level of cash on the balance sheet. They had this big

bondary payment. Um, clearly sales were not that great. Calls for them to raise equity, which never really go away, have been ramping up again. Um So for me, that will be the key number to watch. So give us just an update on and I'm sure obviously get a big updated for the close tonight when the report, But just the status of the production issues at the company. I mean, we know that the car, the cars are really cool, the technology is called but building these things

is tough. What's the latest on kind of where they are with their production capability. That's an interesting question because, um, you know, various targets have been thrown out by Tesla over time as to where particularly production of the Model three was gonna go. You know, originally the target was to get to ten thousand of these a week. UM. You know, I think a while ago. Actually, UM, what we saw in the first quarter was weekly production was

still not at five thousand on average. UM, it went up about three percent I think versus the fourth quarter, the fourth quarter average UM. Elon Musk clearly keeps talking about, you know, raising that target quite considerably, and you know, by tweeting about it, has has got back into trouble with the with the sec UM. I think, you know, for me, one of the things about the production number is and just coming back to the autonomy day the other day, you know, muskmates some very bold claims about

the company's autonomy capabilities. UM. Some of them are quite interesting, although the way he framed in, particularly criticizing some other strategies, did make me wonder how credible can that be if investors are also looking at the fact that you're struggling to build and deliver these cars. Tesla the gift that keeps on giving. Liam. I'm sure you are excited to

write your next column. Yeah, he looks thrilled. Liam Denning is Energy Mining and Commodities Calmness for Bloomberg Opinion, joining us here in our interactive broker's studios. Always love speaking with him. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyds. I'm on Twitter at Lisa A. Bramoit's one before the podcast.

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