State of the Art: Parrying the Latest Predictions of Facebook’s Demise

“There are now a number of revenue streams that are being driven by venture dollars,” Bill Gurley, a prominent venture capitalist who has been warning of a tech bubble, said recently in an onstage interview at South by Southwest in Austin, Tex. “Facebook and a little bit of Twitter’s revenues are now coming heavily from mobile downloads. These are ads for, like, Game of War with Kate Upton. Those ads are now an increasing percentage of their revenue, and they’re being spent by these excessive venture dollars.”

The notion that Facebook and other social networks will suffer most deeply when the bubble bursts sounds plausible because it rehashes the last tech boom and bust, when advertising revenue run-ups at huge web portals (remember those?) turned out to be funded mainly by venture capital investments. In 2001, revenue at Yahoo — the largest portal, and something like the Facebook of its time — plummeted by almost $400 million when start-ups stopped spending during the bust. Yahoo has never recovered its former glory. Could Facebook face the same fate?

Probably not — or not yet, at least. On closer inspection, the theory that Facebook’s growth depends on unsustainable venture capital is mostly overblown, another strain of Facebook Second Guessing Syndrome. It’s a story that misses important facts about Facebook’s advertising business. For one thing, as Facebook’s executives have repeatedly pointed out, ads from app companies make up a small percentage of the company’s overall business. Most of the social network’s revenue comes from video ads and ads for large brands.

The theory also misses two other points. Not all these ads are coming from unproved start-ups. And the ads are set to be adopted more widely because they actually work.

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The venture capitalist Bill Gurley, left, with Malcolm Gladwell this month during South by Southwest. Credit Robert a Tobiansky/Getty Images for SXSW

According to several app makers and observers of the industry, the ads are tremendously effective at leading paying customers to new apps. It’s the effort to reach these paying customers — and not venture funding — that is often the reason for all the money pouring into ads for apps.

App-pushing ads are known in the industry as app-install ads. They appear in your Facebook News Feed or Twitter stream and encourage you to download apps from companies that make mobile games and e-commerce and travel services; they also come from big brands like Target and Chase. When you tap the ad, you are sent to Apple or Google’s app store. Facebook and Twitter are paid for each click according to prices set by an online bidding process.

According to Cathy Boyle, an analyst at eMarketer, a research firm that studies the online advertising business, the market for app-install ads is growing rapidly. Ms. Boyle estimates that in the United States, app companies spent $1.67 billion on install ads in 2014. She expects that number to grow 80 percent this year, to about $3 billion. The market for app-install ads is growing faster than just about any other digital advertising category, Ms. Boyle said, but it is still relatively small. In 2015, these ads will account for about 10 percent of the American mobile ad market, according to eMarketer.

Facebook and Twitter would not specify the proportion of their revenue from app ads, but both have described it as far from the majority of their business. “We talk about our mobile ad business growing — mobile app ads are a small part of that, growing in line with our total business,” said Sheryl Sandberg, Facebook’s chief operating officer, in a call with investors in October.

One reason spending on these ads is growing is that the ads solve a problem faced both by businesses that make apps and by users who want apps: App stores are becoming ever more crowded, and it is increasingly difficult for new apps to find an audience. In this way, apps for ads on social networks perform the same function as the highly successful ads for websites that Google runs alongside its search results — they show people something that they might click on and pay for, based on a combination of users’ interests and a business’s willingness to pay.

App ads are also like search ads in that they are highly measurable. Marketers can target specific types of customers whom they want to present with an ad for a certain app, and they can also track exactly how much money they make from customers they get through an app ad. By contrast, the advertising boom that doomed the portal industry was not built on measurable ads. Those were mostly web banner ads, whose effectiveness has always been something of a leap of faith.

Acquiring new customers through app ads is “100 percent based on data,” said Bernard Kim, senior vice president for social and mobile publishing at the video game developer Electronic Arts. “We have the ability to track the players that we get through these networks very carefully, and we know what the profitability looks like on a player, so these ads are a very effective tool for us to bring in the players that we want to engage with our titles.”

Skeptics remain. One tech investor who has been critical of these ads pointed out that start-ups are often very bad at calculating the long-term value of new customers. This miscalculation often causes them to overspend on marketing. Several recent venture-funded flops, including Groupon and Fab.com, were tripped up by huge marketing spending that did not lead to lucrative long-term customers.

If today’s money-burning, venture-funded app companies — Uber, Lyft, Airbnb and many more — are also overestimating the value of new customers, could they wake up one day to find they’re spending too much on app ads?

Facebook does not think so. In an interview, Andrew Bosworth, the company’s vice president for advertising, argued that start-ups today were more disciplined than in the recent past, with many analyzing not just how much they’re spending to get new users but also whether those people are actually buying stuff. “That’s been the big shift. The big V.C.-backed Fab.coms of the world spent on acquisition but couldn’t actually convert,” he said. But when today’s start-ups look at these ads, “They’re asking, ‘Can you put a dollar in and get two dollars out?’ If you can, you spend, and if you can’t, you don’t.”

Sure, Mr. Bosworth’s argument is a variation of “this time is different,” which is the stock defense during every boom. But he added that Facebook wasn’t counting on app ads for its long-term survival. “I think this will be a stable ongoing market,” he said. “I think it will plateau at some point in terms of share, as smartphone growth plateaus. I don’t think it will shrink dramatically, but I just think there will come a point where it plateaus.”

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T Magazine: A Perfectly Simple Hermès Watch That’s Simply Perfect

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Credit Joanna McClure

The new Slim d’Hermès is an expression of luxurious minimalism. Unlike timepieces designed to measure your steps while tracking your pace, the French house has created a line of watches for both men and women ” its first series in over 20 years ” that marks the passing of time in the most spare and elegant way. Enclosed in a slender rose gold case, the luminescent dial of the watch shown here features numerals custom-created by Philippe Apeloig, a well-regarded French graphic designer. (Apeloig is also behind the signage for Jean Nouvel’s upcoming Louvre Abu Dhabi.) A sapphire crystal case back reveals the ultrathin automatic movement, manufactured at the prestigious Swiss watchmaker Vaucher, now owned in part by Hermès. As befits a company that started out making leather harnesses for European noblemen in 1837, the hand-stitched Havana alligator strap receives the same attention to detail as does a Kelly bag. Valuing creativity and craftsmanship above all, Hermès shows how perfect simple can be.

Slim d’Hermès watch, $18,500, hermes.com.

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T Magazine: Flowers in Vases, Illustrated

From a series for T in which the artist Leanne Shapton makes new artworks from pictures in old books.

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Apple Watch Success Will Hinge on Apps

For the Apple Watch to be remotely as successful, Apple will have to find a way to take that world of apps to the wrist. But a watch presents unique challenges with its tiny screen. And the way app developers make money from it will be different than with other Apple products.

Unlike the iPhone or iPad, the Apple Watch is not a stand-alone product. It relies on an iPhone to fully operate, partly because the brains of watch apps will live on the iPhone. So users will have to install watch apps on the iPhone as well.

The economics of that combination are tricky. Developers working on watch apps have to make an iPhone app first and expand it to include support for the watch. And it remains unclear whether they can double-dip. Apple has not said whether developers can charge for the iPhone app, then charge again for the watch extension.

Slide Show

Key Moments From Apple’s Event

CreditJim Wilson/The New York Times

Still, companies are trying, even though some are worried the watch’s tiny screen can limit features or — even worse — ads.

Christian Gaiser, chief executive of Retale, said his company found a path to using a watch app to complement its smartphone app. Retale’s iPhone app displays weekly deals for retailers like Walmart and Target.

Retale users who see something they want to buy in the iPhone app can push the nearest location of the retailer to the watch app, which will map out turn-by-turn directions on the watch screen. Retale collects fees from retailers whenever customers engage with their ads, so the watch app is meant to increase usage of the smartphone app, Mr. Gaiser said.

At its event, Apple also demonstrated an app from Uber, the ride-sharing service, to summon a car. The watch app shows where the driver is on a map, and from there, the user can place a phone call to the driver.

Apple also showed an app developed by Starwood Hotels. Starwood’s iPhone app can be used to book a hotel room. The watch app sends a notification to the watch wearer when he or she is near the hotel. When the guest arrives at the hotel, the watch app shows the room number, and after that the watch can unlock the user’s room door just with a hand wave over the lock.

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Guests of Apple’s media event tested out the new Apple Watch. Credit Jim Wilson/The New York Times

“The end goal is to build loyalty with our most valuable guests,” said Chris Holdren, who led development of the Starwood watch app. “It continues to deepen the relationship we have with them.”

Unlike past Apple products, the Apple Watch has a complex pricing structure. Because a smartwatch is both device and fashion accessory, Apple designed the watch to be highly customizable to suit the tastes of various users, from fitness buffs to collectors of luxury watches.

Apple will offer three models, each with a casing made of a different material: Watch Sport, a version with an aluminum case; Watch, which has a stainless steel case; and Watch Edition, which has a case made of 18-karat gold.

Each model comes in two case sizes — 1.5 inches and 1.65 inches. And for each watch, customers will be able to choose from a variety of interchangeable bands in different colors and materials.

The cheapest model is the Apple Watch Sport, the one tailored to athletes, which starts at $350. The larger Apple Watch Sport costs $400.

The next step up is the Apple Watch, with a more fashionable stainless steel case. The smaller version of this watch costs $550 to $1,040, and the larger one costs $600 to $1,100. The price range for both depends on the band.

The golden Apple Watch Edition is a sure sign that Apple has entered the luxury market. Pricing for this high-end version starts at $10,000.

Preorders start April 10, and the watches will go on sale on April 24. They will first be available in a select number of countries, including the United States, Australia, China and Japan.

At the event, Apple also stressed some of the signature features of the device.

The company has highlighted the crown as its latest signature innovation for controlling a device, similar to the mouse for the personal computer, the click wheel on the iPod and the touch screen for the iPhone. On the Apple Watch, the crown can be twisted to zoom in or out of the screen or to scroll through a web page.

You can take and even make phone calls, as long as your iPhone is nearby.

“I have been wanting to do this since I was 5 years old,” said Timothy D. Cook, Apple’s chief executive.

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Journalists, bloggers, and Apple employees waiting for Apple CEO Timothy D. Cook to talk about the new Apple Watch. Credit Jim Wilson/The New York Times

The watch includes a heart rate sensor and a sensor for tracking movement to complement fitness applications. It has a chip that helps it make wireless payments.

The watch also includes Digital Touch, an application that enables a new method of communication between watch users. Watch wearers can scribble sketches on the watch screen and send them to one another, or even send their heartbeats.

Apple also added to the watch a so-called taptic engine, which taps users on the wrist with a tactile sensation when they receive alerts, messages or notifications. Apple said the watch’s battery would last 18 hours.

Apple also announced a new MacBook laptop with a 12-inch high-resolution “retina” display. It weighs two pounds and measures 13.1 millimeters at its thickest point. It also includes a new port called USB-C. It is a versatile port that can be used for charging, plugging in a video monitor, or hooking up a USB accessory like a keyboard.

The MacBook’s starting price is $1,300 and it begins shipping April 10.

Apple on Monday also released upgrades for some of its other notebooks, including the MacBook Air.

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About Home

House Tour

Video: Scholten & Baijings’s Bright Ideas

A husband-and-wife team is brightening up the sober Dutch design world. They take T on a video tour of their colorful home, which they describe as a living still life.

From left: Marie Christophe in a hallway of her home in Gers, France; a bike made from her signature sculpted wire; preparatory watercolors.

Marie Christophe’s Delicate Balance

In rural France, the sculptor of whimsical objects finds a home for her urbane sensibilities.

The dramatist in his airy London studio, where he sometimes stages readings, with a table he was given by his first wife’s parents in 1970.

The Writer’s Room

Under the canopy of a tree, near a closet full of sweets, with the ghost of a famous painter, six authors on the spaces where they work.

T Magazine

Five Up-and-Coming Norwegian Design Talents to Know Now

The most exciting Nordic products available stateside aren’t sold at Ikea.

T Magazine
From left: the designer Trey Jones's Origami and Frame planter designs.

Planters as Pleasing as What’s Inside Them

A new collection from the Seattle-based interiors designer Trey Jones elevates simple terra cotta, copper and steel pots.

T Magazine
From left: Garza Marfa chaise lounge, $3,000, sawhorse table, $4,000, and upholstered “low-back” dining chairs, $765 each.

Garza Marfa’s Chicago Connection

The midcentury Modernist furniture company, whose entire collection is available only at its Texas showroom, brings its designs to a gallery in the Windy City.

Nicholas Mele’s photograph series of unconventional and unpretentious kitchens in Newport, R.I., mansions, or

A Question of Taste

Perhaps lazy summer days simply conjure understatement, but suddenly fancy kitchens and the hyper-styled meals they produce feel overcooked.

T Magazine

A Fancy Planter from Louis Vuitton

Designed by Damien Langlois-Meurinne, the Totem Floral was inspired by the fashion house’s classic Noé bag.

My Space

A Gloomy, Glamorous Los Angeles Apartment

The photographer Nicholas Maggio lives in sunny California but prefers a noir look out of the 1930s.

The architect and artist Chris McCullough in front of a picture of James Brown made from old cassette tapes.

Nintendo 64s and Vintage PlayStations as Home Décor

Old technology, like outdated computers and video game consoles, doesn’t just fade away. For some, it is reborn as home décor and art.

Manhattan-based designer Brad Sherman at the office he designed for Food52. Sherman creates offices with the comforts of home, and on a start-up’s budget.

Office Interior Design on a Dorm Budget

The designer Brad Sherman’s specialty is creating cozy, functional offices for start-ups, using a little budget and a lot of resourcefulness.

Domains
Facade: When the couple first saw the landmark house in 2003, it had been empty for three years and badly damaged by water from burst pipes. With the help of the architect Florian Höll, who largely preserved Arthur Korn’s floor plan, the villa was returned to its original design. The distinctive long, narrow window of the facade and the porthole beneath it form a kind of exclamation mark. Korn was influenced by the industrial architecture of the ’20s and ’30s, which relied heavily on the use of glass and steel. The villa is one of only about a dozen buildings Korn designed in Berlin, not all of which survived.

Exclamation-Point Architecture

The graphic designers Justus Oehler and Uta Tjaden live in a 1928 Bauhaus-style villa in Berlin.

T Magazine

A Graceful Midcentury Armchair by Gio Ponti

The D.154.2 chair is a manifestation of the Italian master’s twin ideals of harmony and joy.

Gardener, to Thine Own Self Be True

The writer and horticulturist Umberto Pasti believes that to make a garden, you must abandon yourself not only to your surroundings, but to your deepest desires.

T Magazine

In London, Creative Types Celebrate an Old Architect’s Restored Apartment

A section of Sir John Soane’s Museum will open to the public for the first time in 160 years along with an exhibition of new postcard artworks provided by the likes of Manolo Blahnik and Paul Smith.

They Built It. No One Came.

In Pennsylvania, two men with 63 acres and a communal vision of utopia learn the hard way that not everyone follows the leader.

Slide Show: A Look Inside the Kips Bay Show House

The annual designer showcase opens at the Arthur Sachs Mansion, with proceeds benefiting the Kips Bay Boys & Girls Club, which turned 100 this year.

T Magazine

Jamie Drake Picks His Favorite Rooms From Four Decades of the Kips Bay Show House

The annual event, which tasks prominent decorators with creating dream spaces for a Manhattan home, turns 43 this year.

The Clinton Hill, Brooklyn, building referred to as “Broken Angel” as it appeared in October 2006.

From ‘Broken Angel’ to Condos

A whimsical mascot in the Clinton Hill, Brooklyn, neighborhood, known as Broken Angel, with eclectic, stacked rooftop additions is being converted to luxury condominiums.

Clockwise from top left: Bee sconce for Dior; the Swans chandelier from 2010; a Christophe chandelier adorns a sitting room done in faded toile de jouy; fashioning a new work by hand.

Marie Christophe’s Delicate Balance

In rural France, the sculptor of whimsical objects finds a home for her urbane sensibilities.

What I Love

At Home With Michael A. Clinton of Hearst Magazines

Michael A. Clinton, the president for marketing and publishing director of Hearst Magazines, lives in a Manhattan apartment filled with mementos of his travels.

On Location: London

A London Loft Designed With a Nod to New York

A newly renovated apartment in South London was designed using the best attributes of places where the owner had lived, including SoHo and Woodstock in New York.

What I Love | James Klein and David Reid

In Queens, Ceramics, History, and a Bit of Mystery

The ceramists James Klein and David Reid live in Jackson Heights with their own and others’ works, vintage furniture and a few beloved unidentified objects.

What You Get

$1.2 Million Homes in Los Angeles, Philadelphia and Kansas City

A condo in Missouri, a contemporary in Los Angeles and a townhouse in Philadelphia

International Real Estate

House Hunting in … St. Martin

The real estate market in St. Martin continues to rebound after stagnating during the worldwide economic downtown in 2008; oceanfront property is the hardest to come by.

Design Notebook

When Profits Can Become Sawdust

Scott McGlasson uses organic materials to build heirloom furniture pieces. But is his method sustainable?

The Wassaic Project: A Festival, a ‘Beautiful’ Flood and Now Art

An artists’ community evolves in upstate New York.

Shopping With Antonino Buzzetta

Stylish Bedside Clocks

Now that smartphones have replaced the utilitarian alarm clock, the timepiece next to your pillow can simply be attractive.

Market Ready

Should I Remove Sports Memorabilia Before Showing My Home?

It may seem disloyal to your team, but most buyers would prefer seeing a clean, uncluttered, neutral space.

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Currents: Services: Custom Sofas From Interior Define

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Rob Royer believes there is a yawning abyss in the furniture market between the inexpensive cookie-cutter couch and the luxury lounge. So last year he founded Interior Define to bridge the divide. The company works with factories to manufacture its own sofas, each made to order. Customers are pampered with a degree of customization (sizes, fabrics and a few other features can be selected), but the prices reflect the savings the company makes by dispensing with warehouses and middlemen. Mr. Royer estimated that his sofas cost 30 to 40 percent less than comparable ones sold by conventional retailers. (The Sloan sofa, shown here, starts at $900.) Customers can see the collections in a Chicago showroom, where Interior Define thriftily has its offices, or peruse them online. Not all of the customization options are posted on the website, he said, so be sure to ask. Information: 872-802-4119 or interiordefine.com.

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Bedding: Fighting Bedbugs and Dust Mites With a Washable Mattress

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For anyone worried about dust mites or bedbugs, or about cleanup after bed-wetting, conventional mattresses have a notable weakness: They’re not washable. That’s one reason Michael Rothbard, the president of Sleep Studio, created Newton Rest, a mattress company that does away with springs and foam. Its mattresses are made with a zip-off casing containing Wovenaire, a spongy, porous block of food-grade polymer developed in Japan. Once unzipped, the casing can be washed, and the Wovenaire can be hosed in the shower. The mattresses are recyclable (the company plans to accept used-mattress returns) and highly breathable. “Air passes easily through it,” Mr. Rothbard said. “Any body heat or perspiration you have during the night dissipates.” A crib mattress ($295) is to be introduced in mid-April; adult mattresses ($1,350 to $2,450), a month later; 212-679-6679, newton.rest or newtonbaby.rest.

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Currents: Furniture: Franco Albini’s 1959 Tre Pezzi Armchair Revamped

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In a rare instance of graphic-design geekery intersecting with furniture, the Italian company Cassina is adding a new frame color to Franco Albini and Franca Helg’s 1959 Tre Pezzi (or Three Pieces) armchair to celebrate the 50th anniversary of the Milan subway system that they also designed together.

The Tre Pezzi Metropolitana ($4,250), available in New York this month, has a red frame with black upholstery, as a nod to the red handrails in the subway stations. The color was also used to denote the system’s first M1 line, as part of a coding system conceived by Mr. Albini’s colleague Bob Noorda, who designed the Metropolitana’s graphics, which were radical then. Mr. Noorda’s work in Milan helped him and Massimo Vignelli land the assignment to redesign the graphics for the New York City Transit Authority still in use to this day. Information: 212-228-8186, cassina.com.

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Currents: Deals: Sales at Love Adorned, Waggo, Ladies & Gentlemen Studio and Design Within Reach

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Love Adorned is discounting some bedding and home furnishings by 20 percent through March 12 (wool Pendleton Navajo Water blankets and Hidatsa Earth blankets, regularly $375 each, are $300); 269 Elizabeth Street (Houston Street), 212-431-5683, loveadorned.com.

Dishware is 30 percent off at Waggo Home through March 13 (the Lotta Dot serving bowl, originally $98, is about $69; the Dipped oval platter, originally $78, is about $55); 347-725-4339, waggo.com.

Ladies & Gentlemen Studio is discounting some wind chimes by 15 percent through March 27, with the promo code “chime15off” (Aura’s 10-inch single-ring chime, usually $195, is about $166; its 15-inch single-ring chime, usually $225, is about $191; the brass bell chime, above, usually $95, is about $81; mini chimes are about $49 each, down from $58); 425-610-7408 or ladiesandgentlemenstudio.com.

Thousands of items are 15 percent off at Design Within Reach through March 19 (the Reid sofa by Jeffrey Bernett and Nicholas Dodziuk, originally $4,150 to $5,200, is about $3,527 to $4,420; the Line console by Nathan Yong, originally $2,785, is about $2,367); 800-944-2233, dwr.com.

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