WSJ : Musk’s Alarm Over Twitter Bots Isn’t Matched by Advertisers

Musk’s Alarm Over Twitter Bots Isn’t Matched by Advertisers
Marketers have ways to gauge the performance of Twitter ads despite the presence of fake accounts, some experts say

Elon Musk has continued to pressure Twitter Inc. over fake accounts on its platform, saying his $44 billion deal to buy the company “cannot move forward” until it satisfies him on the subject.

With an uncertain number of bots running Twitter accounts, “how do advertisers know what they’re getting for their money?” Mr. Musk asked in a tweet. “This is fundamental to the financial health of Twitter.”

But the trouble with Twitter bots isn’t as dire for the ad industry as Mr. Musk implies, some marketing executives said.

“Perhaps the type of content and the type of mechanism or bot, so to speak, or fake account is different, but I don’t think the susceptibility is higher or greater on Twitter than many of the other platforms,” said Stefanie Smith, head of social media and executive vice president at Dentsu Media U.S., a subsidiary of advertising giant Dentsu Group Inc.

The question of how to properly measure and justify ad spending on social media isn’t new or particular to Twitter, said Abe Blackburn, director of technical solutions at Social Element Inc., a marketing agency. “It concerns every platform, and I’ve personally never seen a client restrain spend due to potential bot misuse.”

Marketers that rely too heavily on the number of ad impressions as a measure of success could wind up wasting money on fake users, said Mx. Blackburn, who uses the gender-neutral honorific. But that is a question of strategy, they suggested.

“Advertisers should be looking to deepen engagement with humans rather than spread the reach of their message,” Mx. Blackburn suggested.

Twitter Chief Executive Parag Agrawal this week described in several tweets the company’s fight against spam, which he said was an important effort because fake accounts hurt the user experience. Twitter locks millions of accounts each week that it suspects of being spam and continually updates its systems and rules to try to stay ahead of bad actors, Mr. Agrawal wrote.

Twitter’s internal reviews have regularly estimated that spam accounts comprise less than 5% of monetizable daily average users, he added. External examinations, which Mr. Musk suggested should be used to count spam Twitter accounts, wouldn’t work because they would lack important private data on users, Mr. Agrawal added.

Mr. Musk responded with a series of tweets, including one with a poop emoji.

Most marketers are aware of bots on Twitter, including the permitted automated accounts that perform functions such as posting recent headlines. Then there are the accounts that people set up for their pets and other uses, said Brian Wieser, global president of business intelligence at ad-buying giant GroupM. “It is hard to be precise about the impact of a campaign given the uncertainty of how many people are on the platform,” Mr. Wieser said.

That is why advertisers often get metrics from outside companies to help track their campaigns’ impressions as well as any effects on consumers’ perception or recall of brands, Mr. Wieser said.

Services from third-party fraud detection and verification tools can be used to discern deception in paid social campaigns, but usually fraudulent activity is indicated by a sudden flurry of activity or unusual data trends, said Erica Patrick, senior vice president and head of paid social at ad-buying firm Mediahub, part of Interpublic Group of Cos.

DoubleVerify Inc., a measurement and ad verification firm, partnered with Twitter in 2020 to help marketers evaluate the reach of campaigns on the platform.

It would be bad for advertisers if the number of bots on Twitter are higher than the company’s 5% figure, as Mr. Musk has suggested they are, according to Michael Baggs, strategy director at Social Element.

“That creates challenges for everyone, but double-so for certain highly regulated industries who need guarantees that their content isn’t reaching people under the legal purchasing age, or people in markets where their product isn’t legally available,” Mr. Baggs said. “If Twitter can’t guarantee that content isn’t being shown to bots, how can it guarantee who else is seeing it?”

But improving Twitter’s direct-response advertising capabilities would do more to help the social-media platform than eliminating bots, said Eric Seufert, an analyst at Mobile Dev Memo, a mobile-industry website.

Twitter has generally been used as a brand-awareness platform by advertisers, with about 85% of its annual advertising revenue deriving from budgets focused on driving interest about a company or event, the company said last year.

Only about 15% of its revenue comes from direct and performance-based advertising, which asks consumers to take an action such as making a purchase or visiting a website. Mr. Agrawal has said Twitter wants to increase that part of the business to create an even split between brand and direct response advertising.

Direct-response advertisers, as it happens, measure campaigns with more than just the clicks and views that bots are capable of generating, Mr. Seufert said.

They are gauging success with signals including actual sales, a result that is much less likely to involve a bot, he said.

“The big problem that Twitter has from a value creation standpoint is it just can’t serve direct response advertisers at scale,” he said.

FT : Daimler Truck: heavy vehicle is engineered for weighty challenges

Daimler Truck: heavy vehicle is engineered for weighty challenges
The Ukraine conflict will weigh heavily on customers for at least the year ahead

“Oh Lord, won’t you buy me a Mercedes-Benz?” sang Janis Joplin, satirically. Vehicles bearing the tristar badge are unironically prized by truckers as well as by many car drivers. However, component supply shortages cast a pall over the sales of Daimler Truck, the Mercedes brandholder for heavy vehicles. These are only deepened by the war in Ukraine.

The German automakers provided a ray of sunshine this week with first-quarter results. Jochen Goetz, chief financial officer, said bottlenecks in semiconductor supply would improve in the second half, as should North American sales. High order backlogs are evidence of a “strong demand environment”. Adjusted earnings before interest and taxes rose to €651mn in the first three months, from €588mn a year before.

Ukraine is the hazard missing from that glance ahead and behind. Suspending all business activities in Russia left Daimler Truck with a modest €170mn impairment. Analysts who point out that many engine blocks are sourced from South Africa — which is less directly dependent on Russia for energy — are also substituting detail for sweep. The bigger issue is the impact of the war on the European economy.

The conflict will weigh heavily on customers for at least the year ahead. The final impact depends on military and economic developments no sensible pundit can do more than guess at.

The business is at least heading for trouble from a position of relative strength, as reflected in the recent profits performance, and with a middle scenario priced in. Daimler Truck has decent operating margins, sustainable gearing and a portfolio of strong truck brands of which Mercedes-Benz is just one.

Those merits are reflected in a forward price/earnings ratio of more than seven times — a premium to rivals Traton and Iveco, according to S&P CIQ.

The shares themselves trade in line with European industrials on a tight beta, which means they are modestly below their listing price following a partial demerger from carmaker Mercedes-Benz last year. Some sunshine on the dashboard in the quarterly results will hearten passengers. Casual hitchhikers — Joplin sang a song about those too — bailed out in February when Russian tanks rolled.

FT : Mercedes axes cheaper models in bid for luxury brand status

Mercedes axes cheaper models in bid for luxury brand status
Chief Ola Källenius targets profit margins closer to those of rivals Porsche and Ferrari

Mercedes-Benz will axe three cheaper models and spend the vast majority of its cash on developing top-of-the-range cars in a bid to convince investors that it ranks alongside luxury goods groups such as France’s LVMH.

The focus on more expensive products would help Mercedes achieve profit margins of between 13 and 15 per cent by the middle of the decade, chief executive Ola Källenius said, assuming market conditions were “favourable” at the time.

This would still leave Mercedes far behind LVMH’s 27 per cent operating margin in 2021, and behind the 25 per cent achieved by luxury auto leader Ferrari last year, but closer to German rival Porsche.

“If you want to drive your margins upwards, you need to trim the tree at the bottom, and you need to try to expand at the top,” Källenius said ahead of a Mercedes’ event on the French Riviera to showcase new models.


The group would reduce the number of so-called compact cars it offered from seven to four, he added, and “redefine the entry point of the Mercedes-Benz brand”. 

While Källenius refused to name the models that would be phased out, people close to the company have suggested that Mercedes will eventually axe its A and B-class ranges. The cheapest versions retail at €30,000.

Mercedes will focus instead on the performance-focused AMG brand, the off-road G-Class, and luxury marque Maybach, all of which will offer electric models in the next few years, as well as the electric EQ range and the recently relaunched S-Class saloon.

More than 75 per cent of the group’s investments would be targeted at developing these models, as well as the E and C-Class ranges, Källenius said.

Such a move would mark a reversal for Mercedes, which pioneered the Smart car — one of the smallest vehicles on the market — before separating the brand into a joint venture with China’s Geely in 2019.

It also comes as the car industry continues to post record profits, despite severe supply constraints, with strong consumer demand helping carmakers fetch higher prices for the few models available.

This enabled Mercedes to achieve a 16.4 per cent profit margin on car sales in the first quarter of the year, higher than the 13 to 15 per cent targeted by Källenius for the middle of the decade.

But the Mercedes boss said a margin of above 16 per cent was not sustainable because of the “higher variable costs” in the “transformation” to electric. He has pledged to sell only electric cars by 2030, “where market conditions allow”.

He also pledged that Mercedes, which doubled its profits in 2021 in comparison with pre-pandemic 2019, despite selling 400,000 fewer cars, would not attempt to sell significantly fewer units overall in the future.

Competitor Volkswagen said last month that it would axe dozens of models by the end of the decade and sell fewer, more profitable cars.

“Scale still matters,” Källenius said of Mercedes, which delivers roughly 2mn cars a year, compared with luxury rival Porsche’s 300,000 and Ferrari’s 11,000.

“We don’t want to shrink the company . . . but we want to grow the company in a financially sensible way.”

FT : ECB to target ‘empty shell’ operations at big investment banks

ECB to target ‘empty shell’ operations at big investment banks
Central bank ramps up push for non-EU lenders to increase staff and capital within bloc

The European Central Bank has warned the biggest Wall Street and City of London investment banks that it has lost patience with their use of “empty shell” EU trading desks since Brexit and plans to force them to shift more resources.

The move ramps up the ECB’s long-running push for big investment banks based outside the EU to increase the staff and capital they locate in their financial market operations within the bloc, which started when their European businesses were split because of Brexit.

Andrea Enria, head of supervision at the ECB, said in a blog post on Thursday that “empty shell structures . . . are a very real concern”.

“The ECB is not setting specific targets for the relocation of banking business to the euro area. Instead, we want to ensure that incoming legal entities have onshore governance and risk management arrangements that are commensurate, from a prudential perspective, with the risk they originate,” he added.

The central bank has completed the first phase of an assessment to establish how widely seven international banks transfer the risk of eurozone operations outside the bloc, in particular to the UK, where many had based their European operations before Brexit.

The ECB is focused on eight big banks, one of which it already dealt with in an earlier assessment. They are JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, HSBC, Barclays and UBS.

Out of 256 trading desks at the seven banks, it found that 70 per cent were using back-to-back models, which allow them to offset EU trades with their London entities and effectively manage the risk from the UK. Another 20 per cent used desk-splitting, in which they handle EU clients or assets jointly from desks both in the bloc and in the UK.

Enria said the ECB had identified the 56 most material trading desks and would “issue binding decisions” to their parent groups, requiring them to beef up their eurozone operations or face fines.

WSJ : China Insists Party Elites Shed Overseas Assets, Eyeing Western Sanctions

China Insists Party Elites Shed Overseas Assets, Eyeing Western Sanctions on Russia
An internal Communist Party directive bars senior officials from owning property abroad or stakes in overseas entities, whether directly or through spouses and children

HONG KONG—China’s Communist Party will block promotions for senior cadres whose spouses or children hold significant assets abroad, people familiar with the matter said, as Beijing seeks to insulate its top officials from the types of sanctions now being directed at Russia.

The ban, outlined in an internal notice by the party’s powerful Central Organization Department, could play a role in Chinese leader Xi Jinping’s efforts to increase his influence at a twice-a-decade leadership shuffle scheduled for later this year.

Issued in March, the directive prohibits spouses and children of ministerial-level officials from holding—directly or indirectly—any real estate abroad or shares in entities registered overseas, the people said.

Senior officials and members of their immediate families would also be barred from setting up accounts with overseas financial institutions unless they have legitimate reasons for doing so—such as study or work—the people said.

It isn’t clear if the rules apply retroactively, but family members of some senior officials have sold shares in overseas companies in order to comply, the people said. It isn’t known if the directive will be made public.

The directive came as Mr. Xi seeks to minimize geopolitical risks for the Communist Party amid concerns that officials with overseas financial exposure could become a liability if the U.S. and other Western powers impose sanctions against Chinese leaders and their relatives, similar to what was done against Moscow following Russia’s invasion of Ukraine, the people said.

“Leading cadres, especially senior cadres, must pay attention to family discipline and ethics,” Mr. Xi told the party’s top disciplinary agency in January. Officials must “lead by example in managing their spouses and children properly, being a dutiful person and doing things in a clean way,” he said.

The Central Organization Department didn’t respond to a request for comment.

Officials must sign pledges declaring compliance with the new rules, a requirement that would give Mr. Xi more leverage over the political elite ahead of the party’s 20th national congress, which is set to take place late this year.

Mr. Xi is expected to secure a third five-year term as party chief at the congress while packing his leadership bench with more trusted associates, in an effort to shore up his status as China’s most powerful leader in decades. The compliance pledges would give Mr. Xi leverage over any official found violating the overseas-assets rules, as the offending cadre would become liable for serious offenses like disloyalty and dishonesty to the party.

Since taking power in 2012, Mr. Xi has waged a high-profile campaign to fight corruption and curb displays of extravagance among officials, saying that the party faced an existential battle against moral decay within its ranks.

In 2014, the party said it discovered some 3,200 “naked officials” who sent spouses and children abroad and stashed financial assets overseas and demoted about a third of them, citing their seniority and their families’ refusal to return to China. Beijing has also gone after offshore assets linked to economic fugitives, as part of its “Fox Hunt” and “Sky Net” campaigns against alleged white-collar criminals and corrupt officials.

The party has demanded greater financial disclosure from its cadres over recent decades, albeit only to internal monitors. The requirements still fall short of a so-called sunshine law, as advocated by some scholars, which would require officials to publicly declare their personal assets. The party introduced rules in 1995 that required leading cadres to report their income and has since added regulations asking officials to disclose more personal and financial information, including details of their spouses’ and children’s employment, as well as real estate and investment holdings.

In the early 2010s, public debate over wealth-disclosure requirements for officials evolved into a series of protests by activists demanding greater transparency into the family assets of senior officials. Authorities later arrested many members of the campaign.

China’s mounting tensions with the West have fueled concerns that any financial exposure that senior Chinese officials have overseas could be used as leverage against Beijing, particularly after seeing how the U.S. and European governments unleashed far-reaching sanctions against Russia after its Ukraine invasion, some of the people said.

China doesn’t prohibit its citizens from setting up or investing in offshore firms, which can serve legitimate purposes but have also been used to evade taxes and funnel illicit funds abroad. Relatives of party officials are known to have used offshore companies to hold assets.

In 2016, the International Consortium of Investigative Journalists issued a report that linked the relatives of two senior party leaders—both since retired—to offshore commercial activities conducted through law firm Mossack Fonseca & Co., citing a leaked trove of documents known as the “Panama Papers.”

The consortium reported the names of members of elite party families identified as directors or shareholders of offshore companies, including a brother-in-law of Mr. Xi, as well as relatives of Mao Zedong, former party chief Hu Yaobang and former Vice President Zeng Qinghong. The report didn’t accuse any individual or organization of wrongdoing.

The U.S. has imposed sanctions on a number of Chinese officials in recent years, including freezing any U.S.-based assets they may control, citing their alleged roles in directing rights abuses in the northwestern region of Xinjiang and suppressing civil liberties in Hong Kong. Targets included two members of the party’s 25-member Politburo, specifically Wang Chen, a senior official in China’s legislature, and Chen Quanguo, the Xinjiang party chief from 2016 to 2021.

In April, U.S. Deputy Secretary of State Wendy Sherman said she hoped Beijing “takes the right lessons out of the Russia-Ukraine crisis,” suggesting that the West would impose heavy sanctions on China should it use military force against the democratically self-governed island of Taiwan, which Beijing claims as its territory. Chinese Vice Foreign Minister Le Yucheng insisted that “China won’t be scared” by the threat of sanctions similar to those applied against Russia.

“What kind of storms haven’t we weathered in the more than 70 years since the founding of ‘new China,’” Mr. Le told a forum. “Not only has China not collapsed, but it is still thriving and developing at a rapid speed. What else should we be afraid of?”

WSJ : Chinese Developers Get State Help to Tap Bond Market

Chinese Developers Get State Help to Tap Bond Market
Country Garden, Longfor and Midea Real Estate are making use of credit derivatives to help get new deals done

China is helping some stronger developers tap the domestic bond market, the latest move to support the ailing property sector amid a broader economic slowdown.

With the industry in crisis, markets in mainland China and abroad are mostly shut to privately owned developers. The new deals address that problem by packaging some bonds with credit derivatives, so that buyers are shielded against the risk of default.

The initiative follows other measures, including a cut by the central bank in mortgage rates for first-time home buyers, and easing in different regions for things like down payments and home-purchasing restrictions.

Still, investors and analysts warn it will take time to stabilize the property market, with sentiment weak among prospective home buyers and financial distress widespread among developers. Meanwhile, stringent lockdowns in many cities have dealt a further blow to consumer confidence and disrupted new apartment sales.

Country Garden Holdings Co. 2007 1.65% , Longfor 960 0.38% Group Holdings Ltd. and Midea Real Estate 3990 2.52% Holding Ltd. are selling domestic bonds in yuan this week, prospectuses show. The three developers, which aren’t state-backed, are aiming to raise a total of up to 2 billion yuan, equivalent to $296 million.

Private developers have only sold 11.8 billion yuan of onshore bonds so far this year, Wind data shows, compared with 190 billion yuan issued by their state-owned peers.

The deals’ underwriters and China Securities Finance Corp. will also sell credit derivatives to accompany some of the debt, according to deal messages viewed by The Wall Street Journal, and people familiar with the Longfor bond sale.

The Country Garden and Midea deals will be accompanied by credit-default swaps, the messages showed, while the Longfor deal could either make use of such a swap or another similar instrument known as a credit risk mitigation warrant, the people said.

Buyers of those swaps and warrants will pay an extra premium to reduce their credit risk, meaning their investment ultimately resembles a safer but lower-yielding government bond. Current prices in China’s credit markets mean they are still set to earn a higher interest rate than on a risk-free sovereign bond, despite using credit-default swaps as a form of insurance.

The default risk will instead be borne by the underwriters and CSFC, which is owned by China’s major exchanges and one of the country’s clearinghouses.

Country Garden confirmed that default-swap contracts would be written alongside its bond deal. The other two developers didn’t respond to requests for comment.

Financially weaker developers are unlikely to be able to do similar deals, analysts said. Brokers would be reluctant to bear the increased default risk, even if it meant collecting higher swap premiums, and Chinese regulators limit institutions’ overall CDS exposures.

The system will work for developers with relatively strong fundamentals whose existing bonds aren’t trading too cheaply, said Yao Yu, founder of YY Rating, an independent Chinese credit-research firm. “As people say, it is easy to convince people to push the boat with the current, but very hard to convince them to do so against it,” Mr. Yao said.

“This is a top-down thing, facilitated by regulators,” he said, adding that securities firms treated it as a political task.

Credit-default swaps have been used internationally for decades but were only introduced in China in 2016 by the regulator of the interbank bond market, one of China’s main debt markets. They became more widely used in 2018 when onshore defaults by privately owned enterprises started to pick up.

The credit warrants are similar to default swaps, but unlike those instruments they are publicly traded, and only insure against an issuer failing to meet its obligations for a single specified bond.

Recent data has underscored the scale of the challenge facing China’s property sector. Government statistics released Monday showed new-home starts and home sales by value in April fell 44% and 47%, respectively, from a year earlier, while mortgage demand also plunged.

Even the comparatively sedate official data is flashing a warning signal, with a monthly measure showing new-home prices had fallen on an annual basis for the first time in more than six years.

An eventual market recovery wouldn’t be of that much help to developers with imminent funding needs, said Kaven Tsang, an analyst at the credit-ratings firm Moody’s Investors Service. “The market is definitely going to be polarized, with the stronger ones taking over more market share from the weaker ones,” Mr. Tsang said.

>>> US Research Calls

Research Calls

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    • Public Storage (PSA) upgraded to Outperform from Market Perform at BMO Capital Markets; tgt lowered to $370
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    • CSX (CSX) downgraded to Neutral from Buy at Citigroup; tgt lowered to $35
    • Healthpeak (PEAK) downgraded to Neutral from Buy at BofA Securities; tgt $32
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    • Physicians Realty Trust (DOC) downgraded to Underperform from Neutral at BofA Securities; tgt $18
    • Primerica (PRI) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $148
    • Schnitzer Steel (SCHN) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets
    • Target (TGT) downgraded to Hold from Buy at Stifel; tgt lowered to $185
    • Thor Industries (THO) downgraded to Underperform from Neutral at DA Davidson; tgt $60
    • Under Armour (UAA) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $11
    • Union Pacific (UNP) downgraded to Neutral from Buy at Citigroup; tgt lowered to $235
    • UWM Holdings (UWMC) downgraded to Underweight from Neutral at Piper Sandler; tgt lowered to $3
    • Winnebago (WGO) downgraded to Neutral from Buy at DA Davidson; tgt $52
    • Wipro (WIT) downgraded to Underweight from Neutral at JP Morgan
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    • Ardagh Metal Packaging S.A. (AMBP) initiated with an Equal-Weight at Morgan Stanley; tgt $7.20
    • Dorman Products (DORM) initiated with a Buy at MKM Partners; tgt $129
    • Futu Holdings (FUTU) assumed with a Buy at China Renaissance; tgt lowered to $51.80
    • UP Fintech (TIGR) assumed with a Hold at China Renaissance; tgt lowered to $3.80

WSJ : Spirit Airlines Board Urges Shareholders to Reject JetBlue Offer

Spirit Airlines Board Urges Shareholders to Reject JetBlue Offer
Carrier continues to support $2.9 billion tie-up with Frontier

Spirit Airlines Inc.’s SAVE -5.91% board is urging shareholders to reject a hostile takeover bid from JetBlue JBLU -2.94% Airways Corp. and vote in favor of a tie-up with Frontier Group Holdings Inc. ULCC -2.88%

The board said in a statement that the unsolicited $30-per-share offer from JetBlue isn’t in Spirit’s best interest given the substantial regulatory hurdles the deal would face.

The directors are urging shareholders to instead vote for a $2.9 billion merger with Frontier.

Spirit Chairman Mac Gardner said that JetBlue’s offer hasn’t addressed the risk that the deal may not get past the finish line and that doesn’t offer enough protections for Spirit shareholders.

“The proposed combination of JetBlue and Spirit lacks any realistic likelihood of obtaining regulatory approval, while our company faces a long and bleak limbo period as we await resolution,” he said in a statement.

Shares of all three airlines fell slightly in premarket trading.

The rival low-cost carriers have been playing tug of war over Spirit, which rejected JetBlue’s offer for a $3.6 billion acquisition over concerns that the deal would be blocked by antitrust regulators.

JetBlue on Monday launched its hostile takeover attempt for Spirit, taking its case directly to shareholders in an attempt to pressure Spirit management to re-engage in negotiation.

Spirit agreed in February to be acquired by fellow low-cost airline Frontier in a cash-and-stock deal. Both airlines cater to budget-conscious travelers with low base fares and fees for everything else, from bottled water to carry-on bags.

JetBlue later came in with a higher offer, arguing that a combination of JetBlue and Spirit would create a more formidable competitor to the current airline market.

Spirit has continued to stick with the Frontier offer, over regulatory concerns that a combination with JetBlue would be blocked. JetBlue has pledged to shed assets to win regulatory approval and pay a $200 million breakup fee if it is unable to complete the proposed deal due to antitrust concerns.