Comparing Apple To Apples

It would seem far more people I know personally anxiously awaited the earnings report for Facebook™ than I ever imagined. Soon after the report (which no matter how you slice it via Wall St. beat all expectations) I began receiving notes or calls with the underlying tone of  “How about that! Still think you’re right?” I almost felt as if I was being prepped for an upcoming deposition in court. In some ways I found it odd, and in others I found it somewhat invigorating. And here’s why.

Far too many change their minds like the wind as soon as what seems to be “new facts” emerge. These facts may indeed be game changers. And when they are one should indeed reevaluate their position and/or thinking. That of course is pragmatic logic. However: more times than not, many fold like a cheap suit at the first sign of push back to their arguments and/or reasoning. For they take these new arguments and/or facts as proof positive, de facto, unquestionable, undeniable, incorruptible, unassailable – facts. In other words; too many “facts” are given fact status primarily based and sometimes purely on “face value” reasoning. So, they are never evaluated properly.

Remember: correlation doesn’t mean causation. It’s a term that’s been around a long time and with good reason.

What exactly are “new facts?” And how do they affect and/or change an overall strategy or big picture concept? Not evaluating properly and simply changing one’s plans or ideas based solely on “face value” rather than putting or seeking other encompassing factors for reasonable arguments into the mix is where most plans, ideas, and more fail – and are abandoned far too early. This more times than not is what leads to failure. Not the other way around.

When it comes to my thoughts on Facebook for those that want to know: I saw the report, seen the metrics, listened and read countless analysts viewpoints, understand what they mean – and am still of the same viewpoint. i.e., Facebook (FB) is today’s iteration of AOL™. That’s as succinct as I can be. And nothing in that report surprised me. In fact, put into context – it’s just about what I thought it would be.

Let’s put a few facts into context of my argument so you might get a better idea of why I argue my point in the light that I am.

First: This report reflects advertising revenue for this past holiday season. It is FB’s most important reporting quarter for that’s where the largest ad buys originate. Second: Their mobile user base and interaction has shown great growth. I believe spectacular/phenomenal was the most common expressions I heard. All are fair points. However, let me ask you this and see how you yourself answer it with no influence from me other than to frame it. Ready?

Do you think FB was the beneficiary of ad sales revenue this past holiday season because it was the best for advertisers? i.e., Their ad campaigns via FB paid for themselves via conversion rates that exceed their cost by moving merchandise? Which by the way, is why one buys ads in the first place. Or…

Do you think FB was the recipient (more or less) of a “hail Mary” ad splurge by retailers this holiday season in a desperate attempt to try what they believed might be their only choice, as opposed to traditional avenues? For the reports (and first hand accounts) were suggesting this holiday season was going to be lackluster at best – pathetic at worst?

Once you decide which one represents your view the best. Here’s the back drop fact you must now hold that argument with…

This past holiday season was not just lackluster, it was by all accounts (and factual data points) pathetic. Within days of the holiday shopping season officially ending big ad buyers and retailers such as Macy’s™, Target™, Walmart™, and others announced massive layoffs, myriads of store closures, and more. The earnings report from many of the one’s that have reported thus far as of this writing have shown the carnage across the whole retail spectrum. Many an article or headline across the financial media has used the term “bloodbath” as to describe this past holiday season when talking about retailers. So, with that fact in hand…

Do you think they’ll do (i.e., repeat the same and spend even more) going forward with FB? That’s the question.

In regards to the “They get mobile” argument I heard used as if it was the be-all end-all argument. I’ll ask this: Was there really a question they wouldn’t if mobile is currently the biggest space in communication? I mean really, the argument that they made it easy as to get more people to post about what they had for dinner, or if they took a shower with a selfie to tell the world about – is far less of an accomplishment than it is for a device maker like Apple™ who created that means, and have convinced people to shell out nearly $700 at a near 40% profit margin adding $Billions of that profit to an ever-growing war-chest of nearly a quarter of a $TRILLION dollars.

However, if one listened to the media you would think Apple was finished and that a FB “like” via mobile was today’s newest currency. The comparisons or assumptions for future revenue and growth that I read or heard seemed more in common with just trying to explain in knee-jerk form the immediate price action of the moment rather, than anything resembling something in-depth. At times I was left slack-jawed from some of the analysis. (Don’t be surprised if the spike after hours was more based on short covering as opposed to anything else.)

As I’ve stated many times just to be clear: “I am an Apple fan boy” yet, that doesn’t mean I won’t criticize what I might see as a valid reasoned argument. I believe the comparison of business metrics as well as avenues between a company like Apple as opposed to a company such as FB are misguided. They are not, nor do they represent the same business construct for comparisons, and to do so is at one’s peril. (i.e., all put under the Silicon Valley umbrella)

Apple in my opinion is at a very critical juncture. I am of the opinion what Apple needs is to once again raise the pirate flag over some isolated spot within that new facility they’re building; get out of their way; and let do what it once did best – turnout the unexpected in a way that Jobs expressed as “makes you want to lick it!”

Apple can do that regardless of the economy, regardless if iPhone sales get cut in half for the next year. That’s a very big difference between a company like Apple and FB styled companies. Apple’s stock value yes may plummet. However, for a company like FB? Without an increase in ad sales revenue every forthcoming quarter, never-mind the same amount – FB turns face-down in my opinion. Period.

And as much as I state I’m an Apple fan boy (for I use their products to near exclusion) when the world was touting that Apple could do no wrong as its stock price ebbed ever higher making it the most valuable company in the world I penned an article titled “Did Apple Just Become Microsoft” This was in May of 2014 nearly 2 years ago. Such a thought was shunned as “naive” as well as “ill-informed.” Today, that’s all you are now hearing about Apple since their latest report just this week.

“Apple seems to have turned from a growth company to a value company” seems to be the new meme emanating from the financial media. They indeed may be correct in that assumption, for as I stated what they need is some sort of “black flag” innovation and gusto to be more forthcoming if they want to re-engage that edge of spectacular.

As for realizing this may be the fact. I’ll just state I was on the record (so against the grain was the call Market Watch™ quoted my thoughts along with none other than  Bob Lefsetz) nearly 2 years before it seemed to have even crossed the minds of the so-called “smart crowd.” All when Apple could do no wrong, and their stock price was at all time highs and pushing higher I stood by my argument. It now seems I was far more correct than wrong.

As FB is now following that same pattern I have looked back upon what I base my argument on, question its relevance as well as expectations, and asked myself: Do you think you’re wrong or looking in the wrong direction? To which I still answer – no. I’m still of that same mindset. Nothing I have seen shows me different. Not in an arrogant or stubborn fashion. Just based in what I believe to be the facts based on my knowledge of business. Nothing more.

For after all, when I posed the Apple/Microsoft argument most said I was clueless. I still am – as long as you don’t listen to those who called me that to begin with. For it is they who are now expressing what I expressed years ago.

Funny how that works. No?

© 2016 Mark St.Cyr