Facebook Inc. continues to sweep digital advertising, alongside rival Google, despite unrest among marketers about how their advertising is handled.
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Facebook on Wednesday said first-quarter profit surged 76% to $3.06 billion, allaying concerns that questions over video-ad performance and the spread of violent and graphic content would mar growth. The social network’s soaring results echoed strength at Google parent Alphabet Inc., which last week reported 29% growth in net profit despite a backlash that began late in the quarter from companies upset about their brands being advertised against objectionable videos on its YouTube video platform.
Facebook and its photo-sharing app, Instagram, are the « two most important mobile-ad platforms, » Chief Financial Officer David Wehner said in an interview.
Facebook and Google dominate the online advertising market. The two tech giants snatched 99% of the online-ad industry’s revenue growth last year, estimated Pivotal Research analyst Brian Wieser using data published by the Interactive Advertising Bureau. Facebook holds 16% of the global digital-ad market, behind Google’s 33% share, says forecasting firm eMarketer.
Marketing executives « acknowledge they’re concerned about fake news and the problems Facebook has had with live video, » said eMarketer principal analyst Debra Aho Williamson. « They’re concerned that at some point this will affect users — but they haven’t seen that yet. So that’s why spending keeps going up. »
Facebook’s growing market share in digital advertising has helped drive its stock up 29% over the past year. Other metrics were also strong: the number of users who check into Facebook at least once a month rose to 1.94 billion, for example. However, its share price slipped in after-hours trading on concerns about whether new ad formats will be able to replace the booming growth it has experienced with its news feed ads.
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The 49% jump in quarterly revenue to $8.03 billion was a sign of how marketers are increasingly embracing Facebook and Instagram. Marketing-technology company Kenshoo, which manages about $6 billion in marketing spending a year, said its clients were spending 41% more on social-media ads, largely Facebook.
Years ago, Chief Executive Mark Zuckerberg put mobile at the heart of the company, a focus that has fueled Facebook’s growth for years. Facebook’s ad prices jumped 14% during the first quarter, while the number of ad impressions increased by about a third, as users spent more time on their mobile apps. « Mobile continues to be the driver of our business, » Mr. Wehner said.
Now Mr. Zuckerberg is weaving more video throughout Facebook’s products, adding more opportunities for Facebook to show more-expensive video ads — but also creating new uncertainties.
Video and Instagram could pick up the slack from an anticipated slowdown in advertising in the news feed. On Wednesday, Mr. Wehner reiterated his warning from last year that Facebook’s ad revenue growth will « come down meaningfully over the course of 2017. » Facebook also expects the ad load — the number of ads it can jam into its main news feed — will play a smaller role in driving revenue growth after mid-2017.
Facebook is fielding pitches for TV-like original programming, in the hopes that weekly shows on Facebook will change the way people currently use the platform and eventually draw marketing dollars that have traditionally gone to television.
Facebook is now testing a way to profit from those longer videos through « ad breaks » — ads that appear in the middle of a video — in both live broadcasts and on-demand videos. It also tweaked a setting so sound is on by default in some videos, a move designed to appease advertisers.
If successful, these « ad breaks » will help Facebook convince publishers to create longer videos without the platform paying them outright, executives said. Advertisers are concerned that users will drop off a video once they see an ad in the middle of a video. In addition, Facebook users aren’t accustomed to watching longer videos on the site.
But advertisers aren’t entirely sold on Facebook’s nascent video-ad products. Facebook’s video product remains « uncertain ground, » according to a new report by GroupM, the ad-buying unit of WPP PLC. For every 20 video ads served in the news feed, just one was watched for 10 seconds or longer and three watched for at least three seconds, the report said.
Some of that skepticism lingers from concerns over how Facebook measures video-ad performance, sparked by the company’s disclosure last fall that it had vastly overestimated average viewing time for video ads on its platform for two years.
In addition, concerns about Facebook’s handling of violent, graphic content, especially on its live-video product, could give advertisers pause, some analysts said. Facebook Live, the venue for some of the new video advertising, has been the subject of recent controversy after users broadcast violent videos such as a Cleveland man fatally shooting another man.
Earlier Wednesday, Chief Executive Mark Zuckerberg pledged to hire 3,000 more content reviewers over the next year so inappropriate material is removed from the site more quickly. Last month, Facebook promised to conduct a review of its reporting process.
But demand for Facebook ads isn’t expected to decline anytime soon. According to a RBC Capital Markets survey, 65% of advertisers buying Facebook ads plan to spend even more. Nearly 40% told RBC that they spend more than a fifth of their online budgets on the social network, up from 31% in February 2016, according to the survey published in late March.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com
Facebook Inc will add 3,000 people over the next year to monitor reports of inappropriate material on the social media network and removing videos such as murders and suicides, Chief Executive Officer Mark Zuckerberg said on Wednesday.
Zuckerberg, the company’s co-founder, said in a Facebook post the workers will be in addition to the 4,500 people who already review posts that may violate its terms of service.
The hiring spree represents an acknowledgment by Facebook that, at least for now, it needs more than automated software to improve monitoring of broadcasts on Facebook Live, a service that has been marred since its launch last year by instances of people streaming violence.
Last week, a father in Thailand broadcasted himself killing his daughter on Facebook Live, police said. After more than a day, and 370,000 views, Facebook removed the video. Other videos from places such as Chicago and Cleveland have also shocked viewers with their violence.
Zuckerberg said: « We’re working to make these videos easier to report so we can take the right action sooner – whether that’s responding quickly when someone needs help or taking a post down. »
Facebook is due to report quarterly revenue and earnings later Wednesday after markets close in New York.
English cricket officials have been taken to town after a new marketing campaign ahead of the Ashes fell flat with fans.
The England team recently announced a new partnership deal with New Balance, and part of the advertising campaign involved the players signing a letter addressed to their potential next Test player.
Addressed to player No. 677, the poem acts as a call to arms for talented young players.
« DEAR 677…Whoever you might be, » it reads.
« This is England. The home of cricket. Forget what you’ve done before. None of it matters. We’ve taken wickets. Scored runs. Held catches. You’re on the first step of a never ending flight of stairs to success. So start climbing. Do that and you’ll be one of us.
« We’ll teach you. Protect you. Guide and welcome you. But what we can’t do is carry you. So hear this. Out run us, out bowl us, out work us. Take our place in the team. Because if you do that, we’ll win it all. One-day internationals. Twenty Twenty. Tests.
« Being the best in the country is one thing. Being the best in the world is another. Because one thing’s for sure…greatness isn’t given. »
The deal with New Balance also includes new-look uniforms, which captain Joe Root recently said he was a big fan of.
« It’s as traditional as it gets, isn’t it, it’s what Test cricket is about, » Root recently told The Telegraph.
« The guys in 2005 who won the Ashes wore the old cable knit jumper and there are some great iconic moments in English cricket that are associated with clothes like this so hopefully there will be much more in the future.
« It feels like I’m a kid again, playing my first couple of games. It’s like my first woollen jumper my grandma knitted me so it takes it all back to the beginning and it’s a nice way to remind yourself that even though there are times when we’re under a lot of pressure it’s a game we enjoy playing. We have to embrace the occasion, go out and enjoy it. »
But not everyone agrees:
Well the new England cricket kits are awful…whoever thought that was a good idea wants sacking. pic.twitter.com/NKo5CxeY7Q
CHICAGO — Former President Barack Obama unveiled plans for his future presidential center Wednesday, painting a picture of a buzzing hub for youth and community programs on the South Side of Chicago where he raised his family and launched his political career.
Obama fielded questions from residents at a forum near the site, delving into nitty gritty details of traffic patterns, green space and job creation, while avoiding any mention of his successor in the White House.
“What we want this to be is the world premiere institution for training young people and leadership to make a difference in their communities, in their countries and in the world,” he told the friendly crowd that included Mayor Rahm Emanuel, his one-time chief of staff.
It was Obama’s second public appearance since he left office, providing another glimpse of post-presidential life. Last week, he participated in a University of Chicago panel with students, saying young people are the key to solving the nation’s most pressing problems and he hoped his center would play a role in it.
The Obama Presidential Center will feature three structures, including a tower-like museum and tree-lined walkways. The Obama Foundation displayed drawings and a miniature model of the center, which will also include a public plaza and classrooms.
Obama said construction of the center — up to 225,000 square feet (20,900 square meters) overall — would take about four years, but programming would begin this year. He said he and former first lady Michelle Obama, who also attended, would personally donate $2 million to summer job efforts in the city. He says Chicago has a lot to offer, but most people outside the city only see headlines about the violence.
“We don’t want to wait for a building,” he said. “This is about reaching out right now.”
He said there would be future community meetings to discuss other aspects of the center in Jackson Park, and hoped it could be used to spurn economic activity to the area, which includes several downtrodden neighborhoods. Obama projected the center would create thousands of jobs, including temporary construction jobs and up to 300 permanent positions.
The Obama Foundation has said much of the exhibition design work for the museum will be performed by minority- and women-owned businesses. New York-based Ralph Appelbaum Associates will head a team of several firms and individuals with expertise in media, lighting and acoustics in designing exhibits. The project is expected to cost hundreds of millions of dollars, but officials did not discuss cost on Wednesday.
Obama said he envisioned recording studios where musicians could help young people work on music and space for movie directors could take on community storytelling. The center will also have exhibits with campaign memorabilia and personal artifacts.
“Let’s face it, we want to see Michelle’s dresses,” he joked.
The event was held at the South Shore Cultural Center, a park facility where the Obamas held their wedding reception 25 years ago. Obama also noted that he lived not far from the site and his daughters were born at a nearby hospital.
He also squashed any notion that the library was ever going to be elsewhere. Multiple locations in three states — Illinois, New York and Hawaii — had initially pitched proposals.
“The best things that have happened to me in my life, happened in this community,” he said. “Although we had a formal bidding process to determine where the presidential library was going to be, the fact of the matter was it had to be right here on the South Side of Chicago.”
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Follow Sophia Tareen on Twitter at https://twitter.com/sophiatareen .
Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
PARIS — The Latest on France’s presidential election (all times local):
11:30 p.m.
Far-right presidential candidate Marine Le Pen says that France is a “nation with a culture, a people, hope,” but would be a “trading floor” if rival Emmanuel Macron is elected.
The populist Le Pen said in a televised debate on Wednesday that vision of Macron, a former investment banker and economy minister, was “absolutely not” hers.
The 2 ½ hour-long debate started and ended with insults and heated barbs from both candidates.
Macron said that Le Pen resembles her father, Jean-Marie Le Pen, who reached the runoff presidential vote in 2002 and was thrown out of the National Front party he co-founded for making anti-Semitic comments.
He said Marine Le Pen’s platform is based on “fear and lies” and that France must move away from system that produced her far-right party.
Macron told Le Pen: “You are its parasite.”
Le Pen interjected “What class!”
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11:25 p.m.
French presidential candidate Emmanuel Macron has told far-right rival Marine Le Pen that “France deserves better than you.”
The centrist Macron said near the end of a heated one-on-one debate with Le Pen on Wednesday night that he was standing up to her views that marginalize some French residents as “dirty” foreign people.
He added that Le Pen’s far-right party “doesn’t look like France” while he respects all French voters, including those who cast ballots for her because they “are angry”.
Le Pen accused Macron, a former banker and economy minister, of lying down for banks.
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11:20 p.m.
The two French presidential candidates wrangled relentlessly and insulted each other during more than two hours of debate, and it’s still not over.
Far-right leader Marine Le Pen said her rival for the presidency, centrist Emmanuel Macron, had gone to Berlin to “seek the benediction” of German Chancellor Angela Merkel.
Le Pen says that after Sunday’s runoff election, whoever wins, herself or Macron, “France will be led by a woman, me or Madame Merkel.”
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11:10 p.m.
French presidential hopeful Emmanuel Macron says he is “against everything Marine Le Pen said” on European issues and the euro currency during a televised debate.
Macron insisted the goal of his far-right rival in the presidential race to exit the European Union and the euro currency is “dangerous” and would lead to a potential devaluation of the French currency by 20 to 30 percent.
Le Pen has proposed returning to the French franc following negotiations with other EU members and a voter referendum on the issue.
Macron says France is stronger as part of the EU.
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11:05 p.m.
Far-right French presidential candidate Marine Le Pen says that France has “no reason for a Cold War with Russia.”
She spoke during a debate Wednesday with centrist rival Emmanuel Macron.
The populist leader of the National Front party says she is the politician best-placed to hold talks with Russia, the United States under President Donald Trump or Britain as it prepares to depart the European Union.
Le Pen says she’s not concerned about the state of U.S.-Russia ties, but “I hope they will be the best in the world.”
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10:50 p.m.
French far-right presidential candidate Marine Le Pen says that if elected, she would call a referendum on making France more independent of the European Union once she has obtained some measure of sovereignty for the country from the EU.
She says a referendum to restore the French franc at the nation’s currency and adopt other steps toward France independence from the bloc would be held a minimum of six months after she takes office.
She says it also could happen later than that because “I don’t want to create chaos.”
The populist Le Pen spoke Wednesday in a lively debate with her rival for the presidency, pro-EU centrist Emmanuel Macron.
She said she’d would call a referendum once she has obtained assurances from the EU and then ask them if the result was sufficient.
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10:20 p.m.
French presidential candidate Emmanuel Macron says his far-right rival Marine Le Pen would lead France to civil war and give Islamic extremists what they want by infringing on the rights of Muslim residents.
Le Pen accused Macron during a televised debate Wednesday night of being complacent on extremism. Macron countered: “What the terrorists expect, it’s civil war, it’s division, it’s heinous speech.”
Le Pen has pledged to shut down a powerful fundamentalist federation linked to the Muslim Brotherhood, known as the Union of Islamic Organizations in France.
Macron insisted he would be “inflexible” and “fight against Islamic terrorism on every front” without exacerbating the problem.
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10:05 p.m.
Far-right presidential candidate Marine Le Pen accused her centrist rival of being “complacent” about Islamic fundamentalists.
Le Pen said during a debate with Emmanuel Debate ahead of the Sunday runoff election vote that “we must eradicate the Islamist ideology.”
She has pledged to shut down a powerful fundamentalist federation linked to the Muslim Brotherhood, known as the Union of Islamic Organizations in France, or UOIF, and said it supports Macron.
Le Pen also has proposed a series of measures to stamp out the possibility of another new terrorist attack in France, including expelling all foreigners with a file and revoking the French citizenship of dual-nationals under suspicion.
She said to Macron, “You are waiting for an attack” rather than taking proactive measures.
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9:45 p.m.
Centrist French presidential candidate Emmanuel Macron is promising to lower taxes for all workers.
During a televised debate with far-right rival Marine Le Pen on Wednesday night, the former economy minister also pledged to grant unemployment benefits to independent craftsmen, merchants and farmers who go bankrupt but are currently not eligible for the benefits.
Macron acknowledged he would raise taxes on retirees who are well-off financially.
He also accused Le Pen of not having a plan to finance the policies she has proposed.
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9:40 p.m.
Far-right French presidential candidate Marine Le Pen says she’s the candidate of buying power and her centrist rival is the candidate of buying.
Le Pen and Emmanuel Macron exchanged barbs and insults on Wednesday during their sole televised debate ahead of Sunday’s runoff election.
Le Pen said to Macron, a former economy minister and investment banker: “I’m the candidate of buying power. You’re the candidate of buying, buying up France.”
The nationalist Le Pen’s campaign is being watched as a barometer of the appeal of populist politicians in Europe.
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9:28 p.m.
Far-right French presidential candidate Marine Le Pen has clashed in a heated debate with her centrist rival Emmanuel Macron over how to jump-start the floundering French economy and create jobs.
The two presidential candidates came out fighting at the start of Wednesday’s debate, the only face-to-face confrontation ahead of Sunday’s runoff election.
The anti-European Union Le Pen told Macron, a former economy minister and one-time investment banker, that for him, “the law of the strongest must apply.”
She said “radical” changes are needed to reduce the country’s 10 percent unemployment rate.
Differences included how to negotiate the 35-hour work week currently in place. Len Pen advocates talks by sector instead of by company.
She claimed Macron’s choices amount to “fratricide” because they pit one group, class or company against another.
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9:12 p.m.
Centrist French presidential candidate Emmanuel Macron has derisively referred to far-rival Marine Le Pen as “an heir,” reminding voters that the name Le Pen has been an inglorious part of French politics for 40 years.
Macron told Le Pen at the start of their televised debate Wednesday: “You are the heir of a name, of a political party.”
It was a reference to her father, National Front party co-founded Jean-Marie Le Pen. He was expelled from the party in 2015 after he reiterated anti-Semitic comments.
Jean-Marie Le Pen ran five times for the presidency; Marine Le Pen is making her second attempt.
Macron is a newcomer in politics and unknown to French people until he became Socialist President Francois Hollande’s economy minister. He launched a political movement last year to support his presidential bid.
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9:00 p.m.
France’s presidential candidates have started debating on national television in their only televised one-to-one before the runoff election.
The far-right leader of the National Front party, Marine Le Pen, and independent centrist Emmanuel Macron sat a table facing each other, with photos of the Elysee palace projected behind them.
They being are questioned in the Wednesday debate by two journalists from TF1 and France 2, the country’s major television channels.
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8:30 p.m.
Far-right presidential candidate Marine Le Pen and untested centrist Emmanuel Macron have arrived at a television studio outside Paris ahead of a high-stakes debate and shown there is unlikely to be any common ground in their verbal showdown.
Their one-on-one debate on Wednesday is scheduled to be the only direct confrontation between the candidates ahead of Sunday’s runoff election for the presidency.
Between the anti-EU Le Pen and pro-European Macron, the two offer polar-opposite platforms.
Le Pen said upon her arrival at the studio that she hopes the debate will help the millions of undecided French make up their minds between “continuity or change that I represent.”
Macron says he wants to show that Le Pen’s platform “cannot respond to the challenges of the country.”
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11:55 a.m.
Emmanuel Macron and Marine Le Pen are preparing for their one-on-one televised French presidential election debate, with much at stake for both contenders.
They are expected to square off for more than two hours Wednesday in their final showdown before Sunday’s runoff vote.
The latest opinion polls show the pro-EU Macron holding a strong lead over his far-right rival Le Pen.
Macron, who has been criticized for his early celebrations after he finished nearly three points ahead of Le Pen in the first-round vote April 23, needs to convince leftist voters that his pro-business and liberal stance should not deter them from supporting him. Le Pen is expected to hammer home her favorite themes of security and identity.
Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
FBI Director James B. Comey gave his most exhaustive defense yet Wednesday of his role in politically sensitive investigations, telling a Senate panel that despite feeling “mildly nauseous’’ at the thought his decisions about a probe into Hillary Clinton might have affected the election outcome, he had no regrets.
He also said he was confident in the FBI’s handling of an ongoing probe of any contacts between Russian officials and associates of President Trump.
Through nearly four hours of sometimes combative questioning from Democrats and Republicans on the Senate Judiciary Committee, Comey offered his most full-throated explanation of his actions to date, and he never wavered from his core contention — that the FBI has stayed above the political fray even as its investigators probed senior aides to both the Republican and Democratic presidential candidates.
“Lordy, has this been painful,” he said. “I’ve gotten all kinds of rocks thrown at me and this has been really hard, but I think I’ve done the right thing at each turn.”
Comey appeared to win few new converts to his way of thinking, given the intense partisanship still swirling around both the now-closed probe of Clinton’s use of a private email server while she was secretary of state, and the current investigation into whether any Trump associates may have coordinated with Russian officials to interfere with the election campaign.
After the hearing, Sen. Patrick J. Leahy (D-Vt.) said he was unswayed and that he still believed Comey did the wrong thing by telling Congress days before the election that he was reopening the Clinton probe to examine thousands of emails found on the laptop of a spouse of a senior Clinton aide.
“I would have been satisfied if he had done what all Republican and Democratic administrations have done in the past,” Leahy said. “The Justice Department has a procedure. You do not release information like that just before an election.”
In defending his decisions, Comey offered some new details about what FBI agents found last fall, after they realized a laptop belonging to former New York congressman Anthony Weiner (D) contained thousands of work emails involving Clinton. At the time, Weiner was married to Huma Abedin, who was a senior aide to Clinton. Agents were looking at Weiner’s laptop because he was under investigation for possibly inappropriate communications with a minor.
“Somehow, her emails were being forwarded to Anthony Weiner, including classified information,’’ Comey said, adding later, “His then-spouse Huma Abedin appears to have had a regular practice of forwarding emails to him for him to print out for her so she could deliver them to the secretary of state.”
After Comey notified Congress of the Weiner laptop issue on Oct. 28, the Justice Department got a search warrant to examine some 3,000 messages that were work-related, Comey said. Of those, agents found a dozen that contained classified information, but they were messages investigators had already seen.
Abedin and Weiner were investigated for the potential mishandling of classified material, but the FBI ultimately dropped the matter.
“Really the central problem we had with the whole email investigation was proving people . . . had some sense they were doing something unlawful. That was our burden, and we were unable to meet it,’’ he said.
Three days before Election Day, Comey notified Congress that the emails on the laptop did not change the FBI’s view of the case.
Democrats argued that by that point, Comey had critically damaged the Clinton campaign. At an appearance Tuesday, Clinton said that if the election had been held the day before Comey’s first letter, she would have been elected president.
At Wednesday’s hearing, Comey said he was confronted with a difficult choice to “speak or conceal” and that the first was a really bad choice, while the second was “catastrophic,’’ because when voters learned of the issue after the election, they would have suspected a government coverup.
He added: “It makes me mildly nauseous to think we might have had some impact on the election. But honestly it wouldn’t change the decision.”
Comey said he has been interviewed by the Justice Department’s inspector general as part of an internal investigation into how he, his top deputy and the FBI handled the Clinton case.
“I want that inspection. I want my story told,’’ he said. “If I did something wrong, I want to hear that.’’
But he added that he thinks he behaved appropriately and had no regrets about his decisions.
The chairman of the committee, Sen. Charles E. Grassley (R-Iowa), opened the hearing by saying that “a cloud of doubt hangs over the FBI.” Grassley demanded that the bureau reveal more about how it has handled the probes, and at one point he exclaimed “ye gads!’’ in frustration at his inability to get more information from the FBI.
“We need to know whether there was anything improper going on between the Trump campaign and the Russians, or if these allegations are just a partisan smear campaign that manipulated our government into chasing conspiracy theories,” Grassley said.
Sen. Lindsey O. Graham (R-S.C.) asked Comey what threat Russia posed to future U.S. elections. “In my view the greatest threat of any nation on earth given their intention and their capability,’’ Comey answered, adding that although Russia did not alter vote tallies in 2016, it has tried to do so in other countries and U.S. officials should expect Russia to replicate that effort in future U.S. elections.
Democrats repeatedly contrasted Comey’s decision to talk about the Clinton email investigation while not disclosing that the FBI had begun secretly investigating in late July whether any Trump associates might be working with Russian officials to meddle with the presidential campaign.
“It’s still very unclear — and I hope, Director, that you will clear this up — why the FBI’s treatment of these two investigations was so dramatically different,” saidthe top Democrat on the committee, Sen. Dianne Feinstein (Calif.).
Comey said he treated both cases consistently and that the biggest difference was that one investigation was over or nearly over, and the other was just beginning.
The FBI has concluded that Russian intelligence hacked into Democratic computer systems and email accounts, stealing information that was published by WikiLeaks during the campaign.
Asked about WikiLeaks, Comey said he thought the anti-secrecy group was engaged in something more sinister than journalism.
“To my mind, it crosses a line when it moves from being trying to educate the public and instead becomes about intelligence porn, quite frankly,” Comey said. A “huge portion” of WikiLeaks’ activities “has nothing to do with legitimate news activity,” he said, “… but is simply about releasing classified information to damage the United States of America.”
The Washington Post reported last month that the Justice Department is trying to determine whether it can bring criminal charges against those working for the anti-secrecy group.
During his testimony, Comey also disputed a claim from Trump on Tuesday night that the FBI director “was the best thing that ever happened to Hillary Clinton in that he gave her a free pass for many bad deeds.”
Asked whether he gave Clinton “a free pass,” Comey said: “No, that was not my intention certainly. . . . We conducted a competent, honest and independent investigation.’’
Brown’s action reflected particularly negatively on his team because coach Mike Tomlin, unaware of the live broadcast taking place, unleashed some profane references to the New England Patriots.
Unfortunately, there are no take-backs in live-video streaming.
While this technology has progressed since the 1990s, the increasing popularity, since 2016, of Facebook Live has given rise to its use as a free marketing tool and has reinvented branding on a personal level. In fact, the immediacy of live video has the potential to make or break the public’s opinion of a brand.
So, what should you/shouldn’t you do with this popular tool? Here’s a look at the fine line between using and abusing live video marketing, and its impact on branding:
The good: Use video to showcase your brand’s values.
In a June 2016 survey Cisco predicted that online video will be responsible for four-fifths of global internet traffic by 2019.
Buzzfeed proved its own marketing power in August 2016 by live video-streaming two employees trying to explode a watermelon using rubber bands for 45 consecutive minutes. The video was not related to a specific product or service but at its popularity peak attracted 807,000 viewers.
The Buzzfeed live video succeeded because it intrigued viewers’ curiosities and kept their attention through escalating tension. The video also showed the brand was fun, innovative and exciting — making a solid ploy to its primarily millennial audience.
See what Facebook Live can do for your brand: Form a committee to monitor and analyze video’s impact on social media in you target market. Do this to determine what your audience members value through their shares and engagement. Then, plan a unique marketing campaign through live video to allow your audience to relate to your brand, by showing how their interests align.
Focus on ways to promote the brand without actually saying its name, but rather showing what, in practice, the company values. Showcasing live-video streams of employees expressing why they believe in the company or something it stands for is another great way to build trust and loyalty in the brand.
The bad: Head off live video misconduct.
Popeyes corporation was condemned for an employee’s behavior in a video released in January, showing an unidentified worker preparing food on the floor. After the incident, Popeyes was forced to do damage control due to the viral video’s devastating effect on the company brand.
Employees are the living embodiment of what the company represents and have a major influence on the public’s perception of the brand. It’s critical that employees be aware of what actions are acceptable and how their behaviors reflect on the company.
Decide what conduct would make the organization look bad as a team. Generating a list of do’s and don’ts collectively will encourage employees to consider how they use live video and under what circumstances it could negatively affect the brand.
Write a cohesive paragraph containing an overview of how the company expects employees to behave on live video, and be sure this policy is visible to employees. It can be communicated as push notifications when an employee logs onto a social media platform through office devices, and posted in the break room as a reminder.
In order to effectively enforce such live-video policies, it’s imperative that you make employees aware of under what circumstances certain consequences will occur, and what those disciplinary actions will be, especially if one of them is termination.
In a companywide training seminar, stream videos — both good and bad — and openly discuss employees’ reactions. Educate staff about how they personify the company brand and how their actions and attitudes affect your company’s brand promise.
The ugly: Beware of controversial video marketing.
Thailand-based Seoul Secret launched a huge controversy in January 2016 with the release of its beauty-campaign video for its skin-lightening product Snowz. “White makes you win,” was the message that veteran Thai actress Chris Horwang promoted, naively contributing her complexion to her professional success.
The video unleashed a storm of criticism, sparking racial labels and discriminatory accusations. The company was forced to remove the video and issue a statement about its intentions amidst speculation that the video had been an intentional marketing ploy.
In order to prevent an event of this kind from happening to you, use concept testing; determine a video’s value and how it will be perceived. Run concept ideas or even sample material past small groups of your targeted audience.
Test for inconsistencies, and then test again. Catching and revising missteps in live-video messaging before it is released to the public will prevent a PR catastrophe and resulting damage from happening to your company brand.
Andre Lavoie
Andre Lavoie is the CEO of ClearCompany, the talent-management solution that helps companies identify, hire and retain more A players. You can connect with him and the ClearCompany team on Facebook LinkedIn and Twitter.
In recent years, videos have been making inroads in digital marketing, emerging as a powerful promotional tool for businesses to promote their wares in an exciting and engaging way. Though when it comes to video marketing, there’s some pretty definitive ‘rules’ businesses should stick to in order to get their videos right. Get them wrong and marketing videos can be more hindering to a company than profiting.
Fortunately, if you’re a business looking to embark on an effective video marketing strategy, you’re in the right place, as Small Business Trends explores 25 tips for creating marketing videos.
Tips for Creating Marketing Videos
Tell a Story
Instead of being overtly salesy, an effective video tells a story. As the Digital Marketing Institute notes, businesses should utilize the emotive power of video by appealing to their customer’s needs and desires.
Make Sure the Introduction Stands Out
A little like how we are unlikely to click on an email if we’re not inspired by the subject line, an incredible one fifth of viewers click off a video within 10 seconds if they’re not interested in what they see. With this in mind, the introduction of the video is vitally important and should be made inspiring, entertaining and informative, to hook the viewer and encourage them to view the whole of the video.
Create a Stimulating Title
By the same token, your video’s title should be stimulating and eye-catching in order to grab a viewer’s attention. Furthermore, by using relevant keywords in a title, the video is likely to show up on the search engines when viewers search for the topic.
Focus on the Mission and Less on the Product
Instead of being overtly focused on the product and all its benefits, channel the message of the video into the mission of the product. Dove, for example, are hailed are being experts in creating emotional viral videos that focus less on their product and more on their mission.
Don’t Be Boring
Who wants to watch a boring video? It goes without saying, if you want your business’s video marketing campaign to be successful, create exciting and inspiring videos that can never be considered boring.
Get a Little Bit Risqué!
While too much naughty content is unlikely to do the credibility of your business many favors, as Inc. writes, just the right amount can be good for page views — as long as not overdone.
Make it Mobile Friendly
With more and more people using mobile devices to get online, it’s imperative corporate videos are mobile friendly. In fact, according to YouTube, mobile video consumption increases 100% every year! Marketing videos therefore need to be able to be downloaded and enjoyed on mobile devices.
Think About SEO
Quite simply, Google loves video content and an effective video marketing campaign should have Search Engine Optimization (SEO) in mind. To ensure maximum SEO value from your videos, accompany the video with a well-written description that is tagged with relevant keywords to help boost the video’s SEO.
Include Your URL in the Video
Displaying your website address in a marketing video is a good way for companies to get exposure and generate traffic to their website through a video.
Educate Your Audience
As the Digital Marketing Institute informs, one of the most powerful ways to implement effective video marketing is to educate viewers. Often videos that offer advice, information, tips and other informative content can be more effective than a solely promotional video.
Make the Video More Atmospheric with Music
Music is a powerful tool on video content, evoking a myriad of emotions. Don’t be afraid to use music in your video that fits the mood of the message and crafts a more exciting and emotive video.
Use Video Content Generated by Customers
Putting your customers behind the camera to talk about how they have used and benefited from your product, can be a powerful way to engage viewers and appeal to prospective customers.
Include a Call to Action
Similar to how all blog posts and content should have a call to action at the end, which invites the reader to take further action, such as signing up to a newsletter, or visiting a website, so too should a marketing video. Ask yourself, what do you want viewers to do when they’ve watched the video and then encourage them to do so without being overtly salesy.
Take Viewers Behind the Scenes
Consumers love to get up close to a brand and video marketing offers the perfect opportunity to take customers behind the scenes and into your business’s ‘natural surroundings.’
Include Tutorial Videos
Posting tutorials that are relevant to your niche is a great way to connect and engage with customers. Tutorials shouldn’t give away all your industry secrets, but should be enough to entice the viewer with informative and useful content, leaving them wanting to learn more.
Keep Them Short
Online viewers often don’t have much time to spare before they’re off looking on a new site and at a new video. In this sense, shorter marketing videos can tend to work better than long ones. As Helen Klein Ross told Kiss Metrics:
“The less you say, the more likely people are to remember.”
Use a Professional Voice
Words spoken with clarity and professionalism will always come out better in a corporate video than an amateur speaker, whose lack of experience speaking on the camera is obvious. With this in mind, it might be a good idea to have an employee that is experienced on speaking in front of the camera record for the video, or even think about calling in a professional.
Use Micro-Video Apps
Along with all this talk of keeping videos short for the viewer, it’s also true shorter content is a better format for most social platforms. As Forbes notes, short, concise content triumphs over longer forms of content, particularly on social media channels. Video marketers should consider using micro-video apps, which shorten videos to less than 10 seconds, so they’re ideal of sharing on the likes of Instagram and Twitter.
Pose Questions
Strive to create engagement and conversation with your video by asking viewers questions. Ask viewers to leave answers to the questions in a comment section below the video.
Don’t Be Preoccupied with Perfection
Videos for marketing purposes aren’t Hollywood movies and nobody expects perfection. Whilst you want the video to look professional, don’t become too obsessed with perfection that on the 50th take you still haven’t got in right.
But Don’t Forget Production Quality
That said, it’s important a marketing video is produced professionally. From the camera work to lighting, edited to voice overs, it might be a good idea to call upon the expertise of a professional video production company to ensure the video is produced in a high quality.
Use Videos to Help You Create Your Own Effective Video Marketing Strategy
Head to the likes of YouTube to see how businesses are already building videos that have managed to go viral. Featuring the likes of Coca-Cola, these ‘10 Epic Viral Marketing Videos’ on YouTube will give you some pointers on how some of the biggest and well-known brands are producing a video designed to go viral.
Build Hype Around the Launch of the Video
Instead of just going ahead and launching your video, build hype around the video by promoting its launch date on your website, blog and social media channels.
Provide Some Humor
Not all corporate videos need to be serious. On the contrary, some humour can work well in generating more interest in your video. Vidyard gives an example of a humorous marketing video that proved hugely successful — a parody by cloud invoicing provider Taulia of the award-winning commercial series ‘Get Rid of Cable’ by Direct TV. As Vidyard writes:
“The video not only delivers a laugh, but this kind of humorous take on B2B solution can really get your customers feeling connected with your brand and help you stand out in what can be a stuffy market.”
Embed a Video in Landing Pages
Think strategically about where you are going to place your marketing video. Statistics show that embedding videos in landing pages can raise conversion rates by as much as 80 percent.
With video forecast to claim more than 80 percent of all web traffic by 2019 and 90 percent of customers reporting that product videos help them make purchasing decisions, it is imperative companies create videos that resonate with their audience and ultimately help sell their services and products.
A.M. Sacconaghi, Jr. – Sanford C. Bernstein Co. LLC
Simona K. Jankowski – Goldman Sachs Co.
Jim Suva – Citigroup Global Markets, Inc.
Operator
Good day, everyone, and welcome to this Apple Incorporated second quarter fiscal year 2017 earnings release conference call. Today’s call is being recorded.
At this time for opening remarks and introductions, I would like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead, ma’am.
Nancy Paxton – Apple, Inc.
Thank you. Good afternoon and thanks to everyone for joining us. Speaking first today is Apple CEO Tim Cook, and he’ll be followed by CFO Luca Maestri. After that, we’ll open the call to questions from analysts.
Please note that some of the information you’ll hear during our discussion today will consist of forward-looking statements, including without limitation those regarding revenue, gross margin, operating expenses, other income and expense, taxes, future business outlook, and plans for capital return and debt issuance. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in Apple’s Form 10-K for 2016, the Form 10-Q for the first quarter of 2017, and the Form 8-K filed with the SEC today along with the associated press release. Apple assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
I’d now like to turn the call over to Tim for introductory remarks.
Timothy Donald Cook – Apple, Inc.
Thanks, Nancy. Good afternoon and thank you for joining us.
Today we are reporting strong March quarter results, with accelerating revenue growth and earnings per share up 10% over last year. We feel great about this performance. Revenue was $52.9 billion, near the high end of our guidance range. Global revenue was up 5% year on year, with growth accelerating from our December quarter performance. That’s despite a $1 billion year-over-year revenue headwind from foreign exchange in the March quarter and a larger iPhone channel inventory reduction this year versus last year.
iPhone sales were line in line with our expectations, and we’re thrilled to see the continued strong demand for iPhone 7 Plus with its beautiful large display and dual-camera system. Our active installed base of iPhones grew by double digits year over year. And based on the latest data from IDC, we gained market share in nearly every country we track.
Late in the quarter, we released the stunning (PRODUCT)RED Special Edition versions of iPhone 7 and iPhone 7 Plus in recognition of 10 years of our partnership with RED. This relationship has given our customers an unprecedented way to contribute to the global fund and bring the world a step closer to an AIDS-free generation. We’ve seen wonderful customer response to these eye-popping new iPhones.
For the second quarter in a row, our Services revenue topped $7 billion, and it’s well on the way to being the size of a Fortune 100 company. We’re very happy to see the deep level of customer engagement with the Apple ecosystem across all of our services.
App Store momentum is terrific, with revenue growing 40% year over year to an all-time quarterly record. The number of developers offering apps for sale on our store was up 26% over last year, and we’re thrilled to see their success.
We also saw double-digit revenue growth from Apple Music subscriptions and iCloud storage and overall very strong growth in the total number of paid subscriptions for our own services and the third-party content we offer on our stores. Paid subscriptions now exceed 165 million.
Apple Pay is experiencing phenomenal traction. With the launch of Taiwan and Ireland in the March quarter, Apple Pay is now live in 15 markets with more than 20 million contactless-ready locations, including more than 4.5 million locations accepting Apple Pay in the U.S. alone.
We’re seeing strong growing usage as points of acceptance expand, with transaction volume up 450% over the last 12 months. In the UK, for example, points of acceptance have grown by 44% in the last year, while monthly Apple Pay transactions have grown by nearly 300%. In Japan, where Apple Pay launched last October, more than 0.5 million transit users are completing 20 million Apple Pay transactions per month. And we’re always excited to see our partners bring their customers new ways to use Apple Pay. You can now even send a Starbucks gift card via iMessage with just a touch.
We’re seeing great momentum from our powerful advances in Messages. In fact, at one point during the Super Bowl in February, customers were sending 380,000 Messages per second, more than double the previous year. A few weeks ago, we introduced Clips, a new app that’s another great example of how we’re continually making our products even more engaging, and it’s off to a great start. With Clips, it’s fun and easy to combine video, photos, and music on an iPhone or an iPad into great-looking expressive videos with great visual effects and titles just using your voice, then share your clips with friends through the Messages app or on social media.
We had great Mac results during the quarter. Revenue grew 14% to a new March quarter record and gained market share thanks to strong demand for our new MacBook Pros. Our Mac business has generated over $25 billion in revenue over the past four quarters. We’re investing aggressively in its future, and we are very excited about the innovation we can bring to the platform.
We also updated our most popular sized iPad with a brighter Retina display and best-in-class performance at its most affordable price ever, and customer response to date has been very strong. iPad results were ahead of our expectations, and we believe we gained share during the March quarter in a number of major markets, including the U.S., Japan, and Australia. iPad remains the world’s most popular tablet, and it’s the primary computing device for millions of customers across the globe.
Building on the momentum from the holiday quarter, Apple Watch sales nearly doubled year over year. Apple Watch is the best-selling and most loved smartwatch in the world, and we hear wonderful stories from our customers about its impact on their fitness and health.
We’re also seeing great response to AirPods, with a 98% customer satisfaction rating based on a recent Creative Strategy survey. Demand for AirPods significantly exceeds supply, and growth in Beats products has also been very strong. In fact, when we combine Apple Watch, AirPods, and Beats headphones, our revenue from wearable products in the last four quarters was the size of a Fortune 500 company.
In Greater China, we were very pleased to see strong double-digit revenue growth from both Mac and Services during the March quarter. We also had great results from our retail stores in mainland China, with total store revenue up 27% over last year and comp store revenue up 7%. These results contributed to our improving performance in Greater China. Through the first two quarters of fiscal 2017, our year-over-year comparisons improved significantly over the last two quarters of fiscal 2016. First half revenue was down 13% year over year, about a third of which was attributable to FX. That’s in contrast to a 32% revenue decline in the second half of last year. Our March quarter results were in line with our expectations, and similar to the year-over-year performance we experienced in the December quarter. We continue to be very enthusiastic about our opportunity in China.
We set a new March quarter record for India, where revenue grew by strong double digits. We continue to strengthen our local presence across the entire ecosystem, and we’re very optimistic about our future in this remarkable country with its very large, young, and tech-savvy population, fast-growing economy, and improving 4G network infrastructure.
Apple Retail is entering an exciting chapter with new experiences for customers and breathtaking new store designs. With the opening of our newest store in Dubai this past weekend, we now have 495 retail locations worldwide. The new Apple Dubai Mall is a truly international store, with employees who collectively speak 45 languages, and are already welcoming customers from around the world.
As Luca will discuss in a moment, today we’re also providing an update to our capital return program. Given our strong confidence in our future, we’re increasing the program size by $50 billion, bringing the total to $300 billion, and we’re extending the timeframe through March of 2019. We’re adding to our share repurchase authorization and increasing our dividend for the fifth time in less than five years.
We’re very excited about our upcoming Worldwide Developers Conference taking place in San Jose next month. The conference is significantly oversubscribed, and we’ll be welcoming thousands of attendees. We look forward to helping them learn about breakthrough technologies across all four of our software platforms – iOS, macOS, watchOS and tvOS – that enable developers to create incredible experiences for every aspect of customers’ lives and improve the way they manage their homes, cars, health, and more.
I’m very proud to mention that we recently released our 10th annual Environmental Responsibility Report, reflecting our amazing progress. In 2016, 96% of the electricity used at Apple’s global facilities came from renewable sources of energy, reducing our carbon emissions by nearly 585,000 metric tons. We’re now 100% renewable in 24 countries, including all of Apple’s data centers. There’s much more work to be done, but we’re committed to leaving the world better than we found it.
Closer to home, we’re excited about moving into our new corporate headquarters, Apple Park, our new center for innovation. The main building on Apple Park is designed to house 13,000 employees under one roof in an environment that fosters even greater collaboration among our incredibly talented teams.
We have many more ongoing investments in the United States economy, since Apple is a company that could only have been created in America. Through our innovative products and the success of our business, we’re incredibly proud to support more than 2 million jobs in all 50 states, and we expect to create even more. Last fiscal year, we spent more than $50 billion in the United States with American suppliers, developers, and partners, and we continue to invest confidently in our future.
Now for more details on the March quarter results, I’d like to turn the call over to Luca.
Luca Maestri – Apple, Inc.
Thank you, Tim. Good afternoon, everyone.
Revenue for the March quarter was $52.9 billion, and we achieved double-digit growth in the U.S., Canada, Australia, Germany, the Netherlands, Turkey, Russia and Mexico. Our growth rates were even higher, over 20% in many other markets, including Brazil, Scandinavia, the Middle East, Central and Eastern Europe, India, Korea and Thailand.
Gross margin was 38.9%, at the high end of our guidance range. That’s a sequential increase from 38.5% in the December quarter, which is particularly impressive given the seasonal loss of leverage, sequential foreign exchange headwinds of 100 basis points, and cost pressures on certain commodities. Operating margin was 26.7% of revenue and net income was $11 billion. Diluted earnings per share were $2.10, an increase of 10% over last year, and cash flow from operations was strong at $12.5 billion.
For details by product, I’ll start with iPhone. We sold 50.8 million iPhones, and we reduced iPhone channel inventory by 1.2 million units in the quarter, compared to a reduction of about 450,000 a year ago. So our iPhone performance was slightly better than last year on a sell-through basis.
We had very solid iPhone growth in four of our five operating segments and experienced especially strong results in Western Europe, the Middle East, and our Rest of Asia-Pacific segment, all areas of the world where iPhone sales were up double digits. iPhone ASP was $655, up from $642 a year ago, thanks to a strong mix of iPhone 7 Plus and in spite of unfavorable foreign exchange rates. We exited the March quarter within our five to seven-week target channel inventory range.
Customer interest and satisfaction with iPhone are very strong, not only with consumers but also with business users. In the U.S., the latest data from 451 Research on consumers indicates a 96% customer satisfaction rating among iPhone 7 owners and 98% for iPhone 7 Plus. Among corporate smartphone buyers, iPhone customer satisfaction was 95%. And of those planning to purchase smartphones in the June quarter, 79% plan to purchase iPhone.
Turning to Services, we generated $7 billion in revenue, an increase of 18% year over year and our best results ever for a 13-week quarter. We’re very happy with the strong level of growth, especially given the tough compare to last year, as the busy week between Christmas and New Year’s fell within the March fiscal quarter a year ago but was included in the December fiscal quarter this year. As we said last quarter, our goal is to double the size of our Services business by 2020.
The App Store established a new all-time revenue record and grew 40% year over year. We continue to see growth in average revenue per paying account as well as the number of paying accounts across our content stores during the quarter. In fact, the quarterly increase in the number of paying accounts was the largest that we’ve ever experienced. And according to App Annie’s latest report, the App Store continues to be the preferred destination for customer purchases, generating twice the revenue of Google Play during the March quarter.
Next I’d like to talk about the Mac. Revenue was up 14% year over year and set a new March quarter record. We sold 4.2 million Macs, up 4% over last year, compared to zero growth in the PC market according to IDC’s latest forecast. Demand for MacBook Pro was very strong, helping to drive overall portables growth of 10%, twice the growth of the portables market. We ended the quarter at the low end of our four to five-week target range for Mac channel inventory.
Turning to iPad, we sold 8.9 million units, which was ahead of our expectations despite supply constraints throughout the quarter. We are very pleased to see iPad growth in the U.S. during the March quarter and revenue growth worldwide for our 9.7-inch and larger iPads over the last four quarters. iPad channel inventory was essentially flat from the beginning to the end of the quarter, and we exited just below our five to seven-week target range.
iPad remains very successful in the segments of the tablet market where we compete. Recent data from NPD indicates that iPad had 81% share of the U.S. market for tablets priced above $200. And in February, 451 Research measured consumer satisfaction rates for iPad that range from 95% for the 9.7-inch iPad Pro to 100% for the 12.9-inch version. Among U.S. consumers planning to purchase a tablet within the next six months, purchase intention for iPad was 69%. Corporate buyers reported a 96% satisfaction rate and a purchase intent of 68% for the June quarter.
All our products continue to be extremely popular and drive more buying transformation in the enterprise market. We set a new enterprise revenue record for the March quarter, and we expect this momentum to continue for the remainder of the year.
Recently, Volkswagen selected iPhone as their corporate standard smartphone, so 620,000 employees around the world have the opportunity to enjoy the best-in-class mobile experience that iPhone offers. And Capital One has reimagined the customer banking experience by empowering their associates with Mac and Apple Watch and over 40 native iOS applications now running on nearly 30,000 iPhones and iPads.
We’re also seeing strong momentum with our enterprise partners, who are helping us deliver long-lasting innovation and differentiation for iOS versus competing platforms. The Deloitte partnership is off to a great start, with more than 115 customer opportunities in the pipeline across 15 different industries.
SAP released the SAP Cloud Platform SDK for iOS at the end of March, and over 3 million SAP developers now have an even better means to develop powerful iOS-native apps for the enterprise.
The partnership with Cisco enables optimized performance of iOS devices over their networks and is generating a large and growing pipeline of sales opportunities across multiple verticals, including healthcare and financial services.
And our partnership with IBM continues to drive greater productivity and innovation, with IBM Mobile First for iOS apps now in more than 3,300 client engagements. And with its Mobile at Scale offering, IBM recently closed an agreement to deploy 11,000 iOS devices at Santander Bank to drive digital transformation.
Our retail and online stores produced great results, with strong revenue growth in all our geographic segments and 18% growth overall. Visitors to our retail and online stores were up 16% over last year, and we added four new stores during the March quarter. And with the opening of our store in Dubai last week, we’re now at 495 stores in 18 countries.
Let me now turn to our cash position. We ended the quarter with $256.8 billion in cash plus marketable securities, a sequential increase of $10.8 billion. $239.6 billion of this cash, or 93% of the total, was outside the United States. We issued $11 billion in debt during the quarter, bringing us to $88.5 billion in term debt and $10 billion in commercial paper outstanding.
We returned over $10 billion to investors during the quarter. We paid $3 billion in dividends and equivalents, and we spent $4 billion on repurchases of 31.1 million Apple shares through open market transactions. We also launched a new $3 billion ASR, resulting in initial delivery and retirement of 17.5 million shares. And we retired 6.3 million shares upon the completion of our ninth accelerated share repurchase program in February. All these activities contributed to a net diluted share count reduction of 66.3 million shares in the quarter. We have now completed $211.2 billion of our $250 billion capital return program, including $151 billion in share repurchases.
As Tim mentioned, today we’re announcing an update to our program, which we are extending by four quarters through March of 2019, and increasing in size to a total of $300 billion. Once again, given our strong confidence in Apple’s future and the value we see in our stock, we are allocating the majority of the program expansion to share repurchases. Our board has increased the share repurchase authorization by $35 billion, raising it from the current $175 billion level to $210 billion. We will also continue to net share settle vesting employees’ restricted stock units.
In addition, we’re raising our dividend for the fifth time in less than five years. As we know, this is very important to many of our investors who value income. The quarterly dividend will grow from $0.57 to $0.63 per share, an increase of 10.5%. This is effective with our next dividend, which the board has declared today, payable on May 18, 2017 to shareholders of record as of May 15, 2017. With over $12 billion in annual dividend payments, we’re proud to be one of the largest dividend payers in the world, and we continue to plan for annual dividend increases going forward. In total, with this updated program, during the next eight quarters we expect to return $89 billion to our investors, which represents about 12% of our market cap at the current stock price.
We expect to continue to fund our capital return program with current U.S. cash, future U.S. cash generation and borrowing from both domestic and international debt markets. We will continue to review capital allocation regularly, taking into account the needs of our business, investment opportunities, and our financial outlook. We’ll also continue to solicit input on our program from a broad base of shareholders. This approach will allow us to be flexible and thoughtful about the size, the mix, and the pace of our program.
As we move ahead into the June quarter, I’d like to review our outlook, which includes the types of forward-looking information that Nancy referred to at the beginning of the call. We expect revenue to be between $43.5 billion and $45.5 billion. We expect gross margin to be between 37.5% and 38.5%. We expect OpEx to be between $6.6 billion and $6.7 billion. We expect OIE to be about $450 million, and we expect the tax rate to be about 25.5%.
With that, I’d like to open the call to questions.
Nancy Paxton – Apple, Inc.
Thank you, Luca, and we ask that you limit yourself to one one-part question and one follow-up. Rebecca, may we have the first question, please?
Question-and-Answer Session
Operator
First we’ll hear from Katy Huberty with Morgan Stanley.
Kathryn Lynn Huberty – Morgan Stanley Co. LLC
Yes, thanks. My first question is for Luca around gross margins. How were you able to expand gross margins sequentially and guide rather seasonally for the June quarter in light of what’s going on in the memory market. And maybe if you can, comment in particular whether the whole back of payments to Qualcomm is benefiting you at all on gross margins year on year, and also whether your contracts around commodity prices is likely to hit gross margins by more in the back half of this calendar year.
Luca Maestri – Apple, Inc.
Thank you, Katy, a lot of questions. Let me take them one by one. Let me start with our performance for the March quarter, which we were very happy with. As you said, we were up 40 basis points sequentially. And this is in spite of the fact, as you know, that we lose leverage as we go from the December quarter to the March quarter. The foreign exchange headwind on a sequential basis was 100 basis points. Obviously, that was also a negative. And as you said, we started to experience some level of cost pressure on the memory side, particularly on NAND and DRAM. To offset that, and actually do better than that, we had very good cost performance on other commodities. And the fact that our Services mix increases as we go through the year, that is of course also helping, given the profile of our gross margin for Services. So that answers the question around Q2.
As we move into the June quarter, as you know, we tend to have some level of gross margin compression as we go from the March quarter to the June quarter. Again, the majority of that comes from the sequential loss of leverage. We also have a different mix of products as we move into the June quarter, and the cost pressures on memory will remain. We expect to offset partially these impacts with other cost efficiencies, and again, with a mix shift towards Services. The impact on NAND and DRAM will continue to be there, and we expect it to be there. You know we don’t guide past the June quarter, but we expect it to be there for the time being.
On Qualcomm, I just want to make it very, very clear that we are accruing. We do not expect to be paying more than what we are accruing right now. So we didn’t get any benefit in our PL, in our margins, during the March quarter, and we’re not getting any benefit during the June quarter either.
Kathryn Lynn Huberty – Morgan Stanley Co. LLC
Okay, thank you. And just a follow-up for Tim, as you noted in your remarks, the iPhone 7 Plus demand, it’s selling incredibly well. And this was a product that was pretty severely supply-constrained in the December quarter. And I just wonder whether there are any lessons learned as you go forward into future product launches around how you manage the timing of announcing a product when there are supply constraints, and how you might work with the supply chain differently around ramping some of these components that have particular difficulties around the yields early on.
Timothy Donald Cook – Apple, Inc.
Katy, one of the things that we did not get right was the mix between the iPhone 7 and the iPhone 7 Plus. There was – wound up that demand was much stronger to the iPhone 7 Plus than we had predicted. And so it took us a little while to adjust all the way back through the supply chain and to bring iPhone 7 Plus into balance, which occurred early this past quarter.
What did we learn from it? Every time we go through a launch, we learn something. And you can bet that we’re brushing up our models, and we’ll apply everything we learn to the next time.
Kathryn Lynn Huberty – Morgan Stanley Co. LLC
Thank you.
Nancy Paxton – Apple, Inc.
Thank you, Katy. Could we have the next question, please?
Operator
We’ll go to Shannon Cross with Cross Research.
Shannon S. Cross – Cross Research LLC
Thank you very much. Tim, can you talk a bit about what’s going on in China and give us some more color, especially as you’re going through the year? And then obviously you won’t talk about the next product launch, but just are there any shifts in demand with Greater China down 14%? Was it all iPhone, or a mix? Anything you can provide, and then I have a follow-up.
Timothy Donald Cook – Apple, Inc.
Yes, thanks for the question, Shannon. We saw in Q2 a performance that combined with Q1 to form the first half of the year was much better than what we experienced in the second half of last year. And if you look at what was driving that, iPhone 7 Plus, we sold the highest number of Plus models in the first half than ever before, compared to 6s Plus or compared to the 6 Plus. Also, the Mac business did extremely well. The Mac revenue growth was up 20% in China, and we had extremely strong Services growth during the quarter in China.
As I mentioned in my comments, our retail and online stores did well overall and in China. They grew by 21%, which is an acceleration from what we had seen in the previous quarter. And traffic – which for us is incredibly important in the retail stores because we do a lot more than sell – traffic was up 27% year on year. And now seven of our top ten highest traffic stores in the world are in Greater China. And so that’s the set of things that went in our direction, so to speak.
On the flip side, currency devalued by 5%, and so that’s not an insignificant headwind. And our performance continued to be weak in Hong Kong, which has been hit a bit harder as the tourism market continues to slump. Also, where the iPhone 7 Plus did well, we didn’t perform as well on some of the previous generation iPhones. And so that’s the set of things on the plus and minus side.
We did perform about where I thought we would. At least I thought it would be similar to the previous quarter, and it was. What I now believe is that we’ll improve a bit more during this current quarter, not back to growth, but improve – but make more progress. And we continue to believe that there’s an enormous opportunity there. And in the scheme of things, our business is pretty large there.
Shannon S. Cross – Cross Research LLC
Great, thank you. And then I don’t know if Luca wants to take this, but thoughts on cash usage. You increased your program, but you still have I think $160 billion of net cash and obviously continue to generate cash. So I’m curious as to, given some of the commentary that’s come out of the administration, which I think most companies were expecting some sort of return, how do you generally think about what you need to run the business from a cash perspective, how you think about the balance sheet from a strength perspective as we look forward to what hopefully will come through?
Luca Maestri – Apple, Inc.
Shannon, you know how we run our capital return program. We’ve been pretty consistent during the last five years. Essentially for the last five years, the way we’ve run the company is essentially to return our free cash flow to our investors. That’s what we’ve done with the program until now, and the expansion of the program that we’ve announced today goes in the same direction. We know how much we need to invest in the business. We will never underinvest in the business. We’re in a very fortunate position that we generate cash beyond the needs that we have. And given the current capital structure that we have, we decided that until now we return about 100% of the free cash flow to investors.
It’s difficult for us to speculate about what might or might not happen. The program that we’re announcing today reflects the current tax legislation in this country, and there’s a lot that still needs to happen there, and we’ll see. Obviously, we will reassess our situation if things change.
Nancy Paxton – Apple, Inc.
Thank you, Shannon. Can we have the next question, please?
Operator
From JPMorgan, Rod Hall.
Rod Hall – JPMorgan Securities LLC
Hi, guys. Thanks for taking my questions. I wanted to start off just going back to the 165 million subscriptions and ask Tim or Luca if you could comment on the unique number of users there. And I think you had made a comment, Tim, in your prepared remarks that the average revenue per user was up, or maybe that was you, Luca. But if you guys could just talk about any more color around that average revenue per user, it would be interesting to us. And then I have one follow-up to that. Thanks.
Luca Maestri – Apple, Inc.
Yes, I’ll take it, Rod. We don’t disclose into the number of subscriptions. Of course, we’re just giving you the total count of subscriptions that are out there. Of course, there are several customers that subscribe to more than one of our services. There is some level of overlap, but the total number of subscribers is very, very large, obviously less than 165 million. But it’s very good for us to see the breadth of subscriptions that we offer and that customers are interested in. It’s a large number.
And if you remember, we quoted the same number a quarter ago and we talked about 150 million. So when you think about a sequential increase of 15 million subscriptions from the December quarter to the March quarter, it really gives you a sense for the momentum that we have on our content stores. It’s quite impressive to add 15 million subscriptions in 90 days.
As we look at the dynamics that are happening on our content stores, particularly on the App Store, which is the largest, we see fairly consistently two things. We see that the number of paying accounts is growing a lot. And I mentioned the increase in number of paying accounts that we value in this last 90 days is the largest that we’ve ever had. So this very large number of people coming into the ecosystem, experiencing the ecosystem, which is obviously improving all the time in quality and quantity, and then start paying and transacting on our stores, and that number is growing very, very strongly, strong double digits.
What we’re also seeing as we look at people that start paying on our stores, we see a pretty common trend over time. And we keep track of that across cohorts of customers, that as people come into the ecosystem and start paying on the ecosystem, we see a spending profile that is very similar around the world. People start at a certain level and then they tend to spend more over time. And so obviously, the combination of people spending more over time and adding more people that are now actually spending on the stores contributes to this 40% growth that Tim mentioned for the App Store on a year-over-year basis.
Rod Hall – JPMorgan Securities LLC
Okay, thanks, Luca, and then I had a follow-up for Tim. Tim, I wanted to just ask. The Services revenue keeps growing, and of course the profit contribution from that is growing. And we’ve also at the same time I think seen you maybe a little more aggressive than Apple has been historically in pricing certain key technologies, let’s call them, that maybe you want to penetrate the market with. I just wonder if you could just comment a little bit on your strategy there in terms of the usage of that extra profit contribution from that Services business, how you intend to apply it to the rest of the business. Thank you.
Timothy Donald Cook – Apple, Inc.
Rod, the way that we think about pricing is we come up with a price that we think is a good value for the product that we’re delivering, and we do that on the hardware side as well as on the Services side. And so that’s how we think about it. We’re really not thinking about taking profits from one to subsidize the other or vice-versa.
Rod Hall – JPMorgan Securities LLC
Great, thank you very much.
Timothy Donald Cook – Apple, Inc.
Yes.
Nancy Paxton – Apple, Inc.
Thanks, Rod. Could we have the next question, please?
Operator
From UBS, Steve Milunovich.
Steven M. Milunovich – UBS Securities LLC
Thank you. Tim, could you comment on the opportunity in wearables? The watch, some people consider disappointing, had what seems to be a very good quarter, and ironically the competition almost seems to be fading in that part of the market right now. The AirPods of course are doing well. Do you see wearables: A), expanding over time into a broader product line; and B), increasingly being independent of the iPhone longer term?
Timothy Donald Cook – Apple, Inc.
Thanks for the question. We have seen the watch as a really key product category for us since before we launched it. We took our time to get it right, and we’ve made it even better with the Series 2 offering. And we’re really proud of the growth of the business. The watch units more than doubled in six of our top ten markets, which is phenomenal growth, particularly in a non-holiday quarter. And so we couldn’t be more satisfied with it.
As some people are doing when you begin to combine the watch revenues with the revenues for AirPods, and as you know, this was the first full quarter of shipments for AirPods. It’s still very much in the ramping mode, and we’re not coming close to satisfying the demand. And then add the Beats products that a group of our customers really enjoy as well, and look on the trailing 12 months – so this is not a forecast – that business was well into the Fortune 500. And so as I look at that, that’s pretty fast to come that far. The watch hasn’t out very long and AirPods has been out there for three, four months, and so we feel really great about it.
Where does it go? I wouldn’t want to comment on that, but we do have a really great pipeline here. And I think in terms of competition falling out and so forth, the watch area is really hard. It in essence from an engineering point of view is similar to a phone in terms of the intricacies and so forth. And so I’m not very surprised that some people are falling out of it. But we’re very committed to it and believe that – it’s already a big business and believe over time it will be even larger. Thanks for the question.
Steven M. Milunovich – UBS Securities LLC
Thank you. And then there was a – you mentioned the 451 Research survey. They did have a couple findings that were interesting. One is a nine-year low in iPhone purchase intent, and that might just be where you are in the cycle. And the other was a declining retention rate in the U.S. toward 80%. Any comment on either of those and whether you’re concerned?
Timothy Donald Cook – Apple, Inc.
I only glanced at it, and so I haven’t had time to study it. But in general, what we are seeing, we’re seeing what we believe to be a pause in purchases on iPhone, which we believe are due to the earlier and much more frequent reports about future iPhones. And so that part is clearly going on, and it could be what’s behind the data. I don’t know, but we are seeing that in full transparency.
Steven M. Milunovich – UBS Securities LLC
Thank you.
Timothy Donald Cook – Apple, Inc.
Thanks for the question.
Nancy Paxton – Apple, Inc.
Thank you, Steve. Can we have the next question, please?
Operator
From Bernstein, we’ll go to Toni Sacconaghi.
A.M. Sacconaghi, Jr. – Sanford C. Bernstein Co. LLC
Yes, thank you. I have two as well. First, Tim, I’m wondering if you can comment on your recent decision and the rationale for withholding royalty payments to Qualcomm. And really specifically, I wonder what you believe is the risk that Qualcomm could have a detrimental response, such as withholding modem chip sales or potentially even getting an injunction on iPhones in select geographies around the world. And I’d like to understand your perspective on whether either of those are real risk to any degree. And why would Apple potentially take on those risks just in advance of what will arguably be your most significant and largest product launch in history?
Timothy Donald Cook – Apple, Inc.
Anyone that has a standards-essential patent has a responsibility to offer it to everyone that would like it under what are called FRAND terms. FRAND stands for fair, reasonable, and non-discriminatory terms. That’s both the price and the business terms. Qualcomm has not made such an offer to Apple. And so I don’t believe that a – I don’t believe anyone is going to decide to enjoin the iPhone based on that. I think that there’s plenty of case law around that subject, but we shall see.
In terms of why we’re withholding royalties, you can’t pay something when there’s a dispute about the amount. You don’t know how much to pay. And so they think we owe some amount, we think we owe a different amount, and there hasn’t been a meeting of the minds there. And so at this point, we need the courts to decide that. Unless we are able to, over time, settle between us on some amount, but right now we’re depending upon the courts to do that. And so that is the thinking.
The reason that we’re pursuing this is that Qualcomm’s trying to charge Apple a percentage of the total iPhone value. And they do some really great work around standards-essential patents, but it’s one small part of what an iPhone is. It’s not – it has nothing do with the display or the Touch ID or a gazillion other innovations that Apple has done. And so we don’t think that’s right, and so we’re taking a principled stand on it. And we strongly believe we’re in the right, and I’m sure they believe that they are. And that’s what courts are for. And so we’ll let it go with that.
A.M. Sacconaghi, Jr. – Sanford C. Bernstein Co. LLC
Thank you. I was wondering if I could just follow up a little bit on iPhone demand. If I try and adjust for the drawdown in inventory and the extra week last quarter, I think sequentially iPhones declined about 27% if I make those adjustments. And that’s actually quite a bit lower than the normal seasonality we would see from Q1 to Q2, which is typically closer to 20%. I understand your comments around China, but your comparison was 40 points easier this quarter relative to last quarter. And the growth rate improved only marginally, I think, when you adjust for the extra week. And then you made a final comment around a pause on iPhones.
So I’m wondering if you could maybe elaborate on, was the below sequential, at least by my calculation, growth rate in Q2 attributable to a pause? And can you characterize what you think upgrade rates are doing, perhaps broadly by geography, to help us better understand what might be happening, or whether there are competitive dynamics that also are at play here that, again, might be contributing to that pause and that sequential decline that I referenced? Thank you.
Timothy Donald Cook – Apple, Inc.
There are a lot of questions there. Let me give you some color as I see it. In this quarter, we reduced channel inventory by 1.2 million units. And so if you look on a year-over-year basis, which is primarily what we look at from a unit point of view because it would have the seasonality embedded in that, we grew sell-through on a year-over-year basis. Last quarter, I’m sure other folks remember, was a 14-week quarter, and so you have to adjust the rates last quarter to get at what the underlying sell-through growth was. And so I think that when you do that, you’re going to find that actually the year-over-year performance is similar between the quarters.
In terms of upgraders, we saw the largest absolute number of upgraders ever in any six-month period in the first half of this year, first half of this fiscal year to be precise. And we saw the largest absolute number of switchers outside of Greater China in the same period that we’ve ever seen. And so in four of the five operating segments, as I think Luca mentioned in his comments, we had very good growth. And it was really propelled by the demand for iPhone 7 Plus, which is growing incredibly fast around the world. And so that’s kind of the color I would add there, and hopefully some of that is useful for you.
Nancy Paxton – Apple, Inc.
Thank you, Toni. Could we have the next question, please?
Operator
We’ll go to Simona Jankowski with Goldman Sachs.
Simona K. Jankowski – Goldman Sachs Co.
Hi, thank you. I had a question for Luca first. Last year, you had a 4 million-unit channel inventory reduction for the iPhone in the June quarter. So just curious what you’re expecting for this year just so we have an apples-to-apples comparison as we think about your guidance.
Luca Maestri – Apple, Inc.
As you know, Simona, we do not provide guidance around units and around channel inventory reduction, but our goal is always to have the right amount of weeks of inventory in the channel. And if you look at our history over the last several years, we have fairly consistently reduced channel inventory in the June quarter, so I think it’s a fair expectation to have.
Simona K. Jankowski – Goldman Sachs Co.
Thank you, and then just for Tim. Tim, you’ve been excited about the India market for some time and have made strides in establishing a retail, manufacturing, and RD presence there. So just curious as you look at that market and the rollout of 4G there, is it reasonable for us to assume that Apple can sell something on the order of 10 million to 20 million iPhones there next year and then grow from there?
Timothy Donald Cook – Apple, Inc.
We make it a point not to forecast by geo. We just provide a current quarter forecast. But as hopefully you’ve seen as we began to give you more information about India, we’ve been investing quite a bit. We have a ton of energy going into the country on a number of fronts, and it is the third largest smartphone market in the world today behind China and the United States. And so we believe, particularly now that the 4G infrastructure is going in the country and is continuing to be expanded, that there is a huge opportunity for Apple there. And so that and the demographics of the country is why we’re putting so much energy there.
Simona K. Jankowski – Goldman Sachs Co.
Thank you.
Nancy Paxton – Apple, Inc.
Thank you, Simona. Could we have the next question, please?
Operator
Jim Suva with Citigroup.
Jim Suva – Citigroup Global Markets, Inc.
Thank you very much and congratulations on returning to growth consistently. That’s great. I believe, Tim, in your prepared comments you mentioned India was growing double digit, which is great. But I believe if you look at geographic information, India is really underpenetrated from an Apple reception perceptive, but yet they have LTE, you have the iPhone SE, a lower priced iPhone. Do you think that say this next 12 – 18 months is going be a turning point, or is it more you need to work with the government to have Apple-owned stores or production there? Or what’s it really going to take to get India going along because we think it’s just truly a great opportunity?
Timothy Donald Cook – Apple, Inc.
We think it’s a great opportunity too, and so we’re bringing all the things that we brought to bear in other markets that we’ve eventually done well in, and that’s from channel to stores to our ecosystem and so forth. Phil [Schiller] was just over there opening a developer center last quarter, and so there are a ton of things going on there. And we agree that we are underpenetrated there. Our growth rates are good, really good by most people’s expectations, maybe not mine as much. And so we’re putting a lot of energy in, just like we have in other geos that eventually wound up producing more and more. So I’m very excited about it.
The 4G network investment really began rolling in in a significant way toward the last quarter of last year, as you know. But they are moving fast. They’re moving at a speed that I have not seen in any other country in the world once they were started, and it is truly impressive.
Jim Suva – Citigroup Global Markets, Inc.
Great, thanks so much for the detail. That’s greatly appreciated.
Timothy Donald Cook – Apple, Inc.
Yes.
Nancy Paxton – Apple, Inc.
Thank you, Jim. A replay of today’s call will be available for two weeks as a podcast on the iTunes Store, as a webcast on apple.com/investor, and via telephone, and the numbers for the telephone replay are 888-203-1112 or 719-457-0820. Please enter confirmation code 3540172. And these replays will be available by approximately 5:00 PM Pacific Time today.
Members of the press with additional questions can contact Kristin Huguet at 408-974-2414. And financial analysts can contact Joan Hoover or me with additional questions. Joan is at 408-974-4570, and I am at 408-974-5420. And thank you again for joining us.
Operator
Ladies and gentlemen, that does conclude today’s presentation. We do thank everyone for your participation.
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