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eBays Big Step Into Advertising

When EBAY was blow torched this week after AAPL unveiled Apple Pay at their investor event on September 7th, I saw the knee-jerk fear that Apple Pay would take down PayPal as one to raise an eyebrow, however considering the possible number of iphone6 and Apple watch sales (because it won't be available on current Apple products) versus worldwide usage of PayPal, this would not something that would immediately destroy the EBAY name.  On Wednesday I jumped in on EBAY calls (cheap at that point) feeling the reaction was over done.

Booyah!  Was I glad today that I did.  Dumb luck is definitely better than no luck at all.

Not only are other market participants now beginning to question the depth of impact from Apple Pay (again only available on the new iPhone6 or Apple Watch), but it's overall security in a day and age of endless hackers when it comes to one's digital wallet replacing their plastic card and cash.

Then today the news hit when EBAY announced they are set to launch an advertising network for its mobile app in this year’s final quarter, opening up a new avenue for marketers to reach the app’s roughly 4.6 million daily visitors.  “We know what these people bought, what they looked for, what they want to buy,” said Howard-Sarin. “We know exactly who the users are, so we know that the targeting will be relevant.”

By partnering with eBay, advertisers will have access to over 60 predefined audience segments, all powered by eBay's real commerce data.  With 149 million active users and 290 million hours of shopping activity each month according to their site, this step into advertising is nothing to sneeze at.

Market researcher eMarketer estimates spending worldwide on mobile advertising will nearly double this year to $32.7 billion this year, from $17.7 billion last year. The firm said it expects U.S.-based marketers to devote 37% of their spending toward mobile devices in 2014.

AMZN has been seeking to revamp its advertising, quietly working on a new network that could take on Google AdWords for search-related marketing and Facebook has already ventured into converting their user data into targeted advertising.  Now enter eBay.

The new network could help marketers more accurately target their advertising because the app requires a log-in, meaning eBay knows about users’ activity within the app, said Stephen Howard-Sarin, eBay’s head of display advertising, in an interview.  “For the first time, we’re giving you the opportunity to connect with eBay users throughout their entire shopping journey,” eBay said on a new page on its website. The company said that eBay users spend 150 minutes on its app per month, compared with 47 for its nearest, unidentified competitor.

The website said eBay can place advertisements across multiple mobile devices, including smartphones and tablets. EBay is working with St. Petersburg, Fla.-based Triad Retail Media to place the advertisements, according to the site.

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Unleash The Hounds. Alibaba Frenzy Month To Begin

When Jack Ma founded the Chinese e-commerce company Alibaba in 1999, one of his stated goals was to build a company that will last for at least 102 years so that it would span from the 20th to the 22nd centuries. Now with products, technology and marketing -- what Alibaba has done is a great combination of all three.

Chinese ecommerce giant Alibaba ($BABA) is expected to begin an eagerly awaited roadshow for what could be the largest ever IPO early in the week of September 8, and its shares could list as soon as September 18 or 19, according to a person familiar with the situation.

Expected to raise about $20bn when it lists on the NYSE rivaling the Agricultural Bank of China’s $22.1bn IPO from July 2010, currently the largest on record.

Alibaba’s ability to make a transition to mobile has been a focus of analysts and investors as China’s tech groups square off for customers glued to smartphones. Last week, the company announced a surge in mobile revenues for the second quarter.

A tenfold jump from mobile devices helped to drive overall revenues 46 per cent higher to Rmb15.8bn ($2.6bn).

Alibaba also increased its internal valuation to $140bn, from $133bn earlier this month and $119bn in June, according to regulatory filings.

Chinese and Silicon Valley tech entrepreneurs are watching closely what Alibaba will do with the proceeds of its listing. Alibaba has been carrying out a string of acquisitions recently, snapping up start-ups in whole or in part to fuel its ambitions at home and abroad.

Courtesy of ft.com

In 2012, the company’s annual net profit was still less than that of Baidu. But in just one year, the figure more than doubled.  For a peek at Alibaba's financials, checkout ChinaInternetWatch

If you are an investor in Equities or a beneficiary of a Pension Plan, you are likely going to own shares in Alibaba. Just so you have an idea of what you are owning, consider it the Chinese equivalent of all of the businesses below. In other words, this is an ENORMOUS company.  (Quartz)

Alibaba is the leading e-commerce site in China but to compare them to Amazon or Ebay seems quite an injustice when one considers all that they entail.  As they say 'there's an Alibaba for that".

If you need help valuing Alibaba, download Dr. Damodaran’s valuation framework and input your own assumptions.

The value of the operating assets in Alibaba, based on my assumptions, is $127.48 billion. Adding cash ($7,876 million), the value of cross holdings in other companies ($2,087 million) and Alipay ($3,000 million), netting out debt ($6,670 million) and the value of equity options granted to employees ($3,190 million) results in a value for equity of $130.59 billion. Finally, since this is an initial public offering that will raise money that is going to be kept in the firm (according to the prospectus), I added an estimated $15 billion (the rumored IPO target) to arrive at an overall equity value of $145.59 billion. Again, working with the 2368.67 million shares outstanding, including restricted stock units granted to employees, that works out to a value per share of $61.46/share.

Per (MusingsOnMarkets)

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Turnaround Tuesday Reads

  • Amazon ($AMZN) is developing plans to roll out it's own payment solutions program to compete with PayPal ($EBAY) but sorry guys.........no Bitcoin is not part of their master plan. Note Amazong already has over 200 million credit cards already in their registered accounts.  This after plans came out the Facebook ($FB) is planning the same.  We have been accumulating EBAY for months but all of this is not good news for the online name.
  • People's Bank of China disclosed it withdrew 172B yuan ($28B) through repurchase agreements. China's money supply grew at its weakest pace in over a decade during March. Shares of banks and brokerage firms in China stumbled on concerns of capital outflow. 
  • Many will be watching for a follow through up day in the indexes today as the Nasdaq bounced off of February support.  If this is the case, watch for precious metals to take a beating.
  • Investor confidence in Germany fell for a 4th straight month which has a depressing effect on sentiment because Germany is considered the engine room of growth in the euro zone.
  • Janice Yellen will be speaking this morning although a "canned" speech is anticipated. Three other Fed speakers today beginning at 3pm EST.
  • Margins, Multiples, and the Iron Law of Valuation. Hussman Funds

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Another Punch To Brick and Mortar Retail

Step aside Sears and Roebuck catalog.  As if brick and mortar wasn't already struggling against online shopping, EBay Inc is launching virtual stores called "shoppable windows" this month that the e-commerce company hopes will help retailers generate more sales from their existing physical store networks.

The screens, which have been Beta tested in San Jose the last few months, will now be expanded to four locations in NYC according to an eBay blog.

The new screens measure about 9 feet across and 2 feet (0.6 meter) high and will appear on the front windows of closed stores. Shoppers will be able to touch the screens to order and have products delivered to them within an hour via courier. Payment will be accepted by the couriers through PayPal Here, a mobile payment service developed by eBay.  Read more........

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