The Bold War

Minority Report

Late last week, Lloyds Banking group announced its mid-year results.  Lloyds, the UK's biggest bank, posted a half-year loss of £439 million.  The results were not surprising.  The tide of economic turmoil from mainland Europe hasn’t receded and the group is still facing the full wrath of PPI claims.   On the same day, a few hours later, Facebook announced its first ever mid-year results to a swarm of baying analysts.  Facebook posted a net loss of $157 million.  Having the UK’s largest bank and the world’s largest social media platform announce their respective losses on the same day was pure coincidence.  The content and tone of each results announcement was not.  By looking at the detail of both reports you can begin to understand the chasm that has opened up between the banking industry and the future of social interaction. 

The mid-year reporting season is always an intriguing period.  Commentators watch closely as different organisations adopt different strategies for announcing their results.  For some, mid-year results are an opportunity to get the bad news out the way.  They can be overly pessimistic to suit their cause.  They want to set a line in the sand and move forward.  Others use it as an opportunity for redemption.  We made a good decision and we want to tell you about it.  Whilst there are different intentions behind mid-year reporting, one thing is for sure, reports are a great reflection of the company’s current state of mind.  This is why investors and analysts are so eager to see the official results. 

Facebook’s results announcement came with the added twist of being their first.  As one of the most successful growth stories of the last decade the business has become a global pop icon.  The platform now has an utterly ridiculous 900 million users, half of which login every day.  The traffic is just plain scary.  At Facebook you would expect the staff to get sick of flying Champagne corks and spraying bubbly.  Not quite.   You see investors and analysts are starting to get nervous about the long term profitability of the service.  The main grey area is mobile.  Facebook hasn’t quite got mobile to work.  Even though they have invested billions in growing the channel through development and acquisition they haven’t quite convinced anyone that they can nail it.

Facebook’s lack of success in mobile has spooked analysts and investors and it’s easy to understand why.  There is little doubt that mobile will be the dominate form factor for the rest of this decade.  Investors therefore want to put their money with their mouth is, quite literally, in mobile.  They want to see businesses that have a proven capability to monetise the platform.  Facebook understood this expectation and attempted to calm speculation during their well-rehearsed results announcement. They knew that analysts wanted to understand the mobile strategy so they came prepared.  Both Mark Zuckerberg and Sheryl Sandberg talked at great length about the strategy on mobile. 

In comparison, the Lloyds announcement was rather bland.  There was the usual profit, provisions, before tax, after tax and cost statements by the group.  There was no mention of mobile.  There has been page after page written about Facebook’s struggles with mobile.  Why don’t banks fall under the same pressure to set a clear mobile strategy?  Mobile has now become the highest transaction channel for most banks.  The frequency and context of access has driven larger login volumes than anyone could have predicted.  Its time shareholders and investors knew how it was performing.  They should know the amount of investment in the channel, the performance against targets and when major initiatives are planned to be delivered.

I was hoping this year would be different.  At the end of last year I conducted a review of the major UK banks annual reports to see what coverage mobile received.  With most UK banks investing heavily in mobile I expected some decent coverage.  In the annual report documents of the big four there was only a handful of mentions.  Across a combined total of 1,300 pages, mobile was mentioned five times.  Yes, the word ‘mobile’ appeared just five times.  Of the big four, only Barclays did anything worth mentioning, with a 2 page spread about their mobile payments work.  Considering how much mobile technology is a part of their retail strategy it still felt like chump change. 

Why is this important?  Half year and annual reports tell the public what banks are thinking.  This proves that banks still think of themselves as just that - banks.  Can you imagine Facebook, Google or Twitter not talking about mobile at their mid-year or end of year results?  A press release or news conference barely goes by without them mentioning mobile let alone their official company reports.  The London Olympics were supposed to be the dawn of a new era of mobile commerce.  It’s starting to feel more like a sunset.  It’s time for banks to start taking mobile seriously and back the channel appropriately. Until it’s openly talked about from the top down, and not treated as a growth story, but ‘the story’, the better.

During the rest of the mid-year reporting period I will be watching with keen interest.  To some, PPI provisions, euro-debt management and investment ring-fencing strategies are interesting.  To me, I will be most interested in seeing if mobile banking starts to get the coverage it deserves.  How much banking has evolved will be reflected in these reports.  ‘We're investing very heavily in improving our mobile apps. We're integrating into mobile services as deeply as we can. Beginning to demonstrate that we can advertise effectively on mobile’.  This is an important message to get out to shareholders.  This was said by Mark Zuckerberg.  Hopefully one day a bank CEO will say the very same thing. 

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