Twitter held talks to buy Clubhouse, Facebook removes fake reviews and other notable stories from this week
Welcome to "#SocialStocks," The Fly's weekly recap of Wall Street's reactions to social media stock news.
TWITTER HELD CLUBHOUSE ACQUSITION TALKS: Twitter (TWTR) previously held discussions to acquire Clubhouse, the audio-driven social network, Katie Roof, Kurt Wagner and Scott Deveau of Bloomberg reported, citing people familiar with the matter. The two parties reportedly discussed a potential valuation of approximately $4B. However, sources noted that talks have not continued and it has not been disclosed as to why they stopped. Clubhouse, which has been around for a little over one year, is now in talks to raise financing from investors in a round that would the company at approximately $4B. Following the failed Twitter talks, Clubhouse reportedly began to explore whether it made sense to raise funding at that valuation instead. The app allows users be the host of their own online radio shows. Listeners can utilize the app to listen to interviews or panel talks and request to participate in live chats .A Twitter spokesman declined to comment ,while Clubhouse has not responded to request for comment.
CMA CRACKS DOWN ON FAKE FACEBOOK REVIEWS: The U.K.'s Competition and Markets Authority reported that Facebook (FB) has taken down 16,000 trading groups with suspensions or bans for users who create groups and profiles that buy and sell fake product reviews. This latest action by the Competition and Markets Authority, or CMA, follows reports that fake and misleading reviews continued to be bought and sold on the social media platforms. In January of 2020, Facebook said it committed to better identify, investigate and remove groups and other pages where fake and misleading reviews were being traded, and prevent them from reappearing. Facebook gave a similar pledge in relation to its Instagram business in May 2020, after the CMA had identified similar concerns. A follow-up investigation found evidence that the illegal trade in fake reviews was still taking place on both Facebook and Instagram and the CMA intervened for a second time. Facebook has now removed a further 16,000 groups that were dealing in fake and misleading reviews. It has also made further changes to its systems for identifying, removing and preventing such content on its social media platforms to ensure it is fulfilling its previous commitments. Facebooks actions included:
Suspending users who are repeatedly creating Facebook groups and Instagram profiles that promote, encourage or facilitate fake and misleading reviews
Introducing new automated processes that will improve the detection and removal of this content
Making it harder for people to use Facebook’s search tools to find fake and misleading review groups and profiles on Facebook and Instagram
Putting in place dedicated processes to make sure that these changes continue to work effectively and stop the problems from reappearing
Andrea Coscelli, Chief Executive of the CMA, said: "Never before has online shopping been so important. The pandemic has meant that more and more people are buying online, and millions of us read reviews to enable us to make informed choices when we shop around. That’s why fake and misleading reviews are so damaging – if people lose trust in online reviews, they are less able to shop around with confidence, and will miss out on the best deals. It also means that businesses playing by the rules miss out." This move follows the announcement that a Digital Markets Unit will be set up within the CMA from April. Once the necessary legislation is in place, this will introduce and enforce a new code for governing the behavior of platforms that currently dominate the market. As part of this process, the CMA has been advising government on the design and implementation of a pro-competition regime for digital markets.
TWITTER EXPANDS NIELSEN INTEGRATION: Nielsen (NLSN) and Twitter announced the expanded integration of Nielsen's audience measurement and outcomes cross-media solutions into Twitter's video ad platform. The integration includes new subscription to Nielsen Media Impact and Nielsen Ad Intel and expanded access to Nielsen Total Ad Ratings. The companies said, "Together, these tools will enable Twitter to help video advertisers do more robust pre- and post-campaign planning, maximize ad inventory, understand cross-media planning, and deliver campaign results with increased speed and agility. To bolster its use of NMI and TAR, Twitter will leverage Nielsen's National TV Ratings data for added insights of ad campaigns across platforms."
TWITTER SEEKS PRESENCE IN AFRICA: Twitter said in a blog post, "Today, in line with our growth strategy, we're excited to announce that we are now actively building a team in Ghana. To truly serve the public conversation, we must be more immersed in the rich and vibrant communities that drive the conversations taking place every day across the African continent...As a champion for democracy, Ghana is a supporter of free speech, online freedom, and the Open Internet, of which Twitter is also an advocate. Furthermore, Ghana's recent appointment to host The Secretariat of the African Continental Free Trade Area aligns with our overarching goal to establish a presence in the region that will support our efforts to improve and tailor our service across Africa." The company said it has already partnered with Amref Health Africa in Kenya, Afrochella in Ghana, Mentally Aware Nigeria Initiative in Nigeria and The HackLab Foundation in Ghana.
ANALYST COMMENTARY: Wedbush analyst Ygal Arounian assumed coverage of a number of social media stocks. Arounian assumed Facebook at Neutral, down from the firm's prior Outperform rating, with a $340 price target, down from $375. While bullish on the social commerce initiatives the Facebook is building into its platform, Arounian is of the view that Facebook is the "most exposed to privacy risks" among the mega-cap tech stocks the analyst covers. Facebook has been the strongest digital ad platform at effectively tracking and targeting users across the web, but that gives it "the most to lose" if Apple's (AAPL) App Tracking Transparency efforts limit its tracking capabilities, Arounian told investors. The analyst upgraded Snap (SNAP) to Outperform from Neutral with a price target of $75, up from $52. Arounian views Snap as "uniquely positioned" as a video-centric platform with a younger, digitally native audience. The company has gained traction with advertisers and has improving momentum coming out of the pandemic, added Arounian. He also assumed coverage of Twitter with a Neutral rating with a price target of $75, up from $65.50. The analyst likes Twitter's efforts to improve development velocity, and opportunity from new product services, but believes upside on user growth and revenue product is now priced into shares. Lastly, Baird analyst Rob Oliver believes Sprout Social (SPT) investors will be rewarded for owning this "premier emerging SaaS growth story as the platform speaks to the burgeoning opportunity" in social commerce. He said social platforms are turning from something to monitor to something to monetize and continue to rise in importance for marketing departments. Oliver reiterated his Outperform rating and $42 price target on Sprout Social shares.
Keywords: Clubhouse, valuation, $4B, Competition and Markets Authority, fake product reviews, audience measurement, video ad platform, Africa, Ghana, team, bullish, digitally native audience, marketing