Narrative: Alphabet Lacks Focus
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Narrative: Alphabet Lacks Focus (Jan 9, 2017)
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Alphabet’s Makani Wind Power Moonshot Unit Struggling (Aug 4, 2017)
Alphabet announced its Q2 2017 earnings this afternoon, and beat analysts’ estimates of revenue and earnings pretty handily, yet its stock still fell 3% in the first couple of hours afterwards, presumably because the stock has been bid up so much in recent weeks and there’s some profit taking going on. The results were pretty strong across the board, with no area of performance looking weak. The core Google business continues to grow rapidly, with the same three drivers – mobile, YouTube, and programmatic – cited once again, suggesting there’s still been no material longer term fallout at Google from the boycott against it earlier this year or the programmatic cutbacks that have followed. It’s clear that Google is investing heavily in its cloud infrastructure and personnel – CFO Ruth Porat said on the call that many of the 1600 new hires this quarter were once again directed at that part of its business. That business is still frustratingly buried in the broader Google “Other” segment along with disparate bits and pieces like Google Play and hardware revenues, so it’s impossible to parse precisely, but it’s likely that the growth of cloud services is a big contributor to overall growth in that segment. But hardware was also called out, though only Google Home and Google WiFi were called out specifically, suggesting Pixel sales are no longer such a big driver. My own recent surveys suggest Google Home in particular is selling well, taking about half the share that Amazon Echo does, with almost no other competitors in the market. The Other Bets continue to shrink their still massive losses, mostly by growing revenue faster, though the company has also reduced its capital expenditures significantly since the Google Fiber retrenchment began in late October last year. Alphabet did account for the EU fine, which it has not yet decided to pay, in its financials, but also provided a version of its profit figures which was more easily comparable with last year’s, and those showed strong growth in both revenues and profits. At this point, it’s hard to see a near-term reason for bearishness about Google or the broader Alphabet business – it now has several separate lines running well and throwing off decent profits, while it’s investing in others that should drive both in future. The one other thing worth noting, though, is that traffic acquisition costs for Google’s own sites continue to rise rapidly, with the rise driven by the payouts Google has to make to mobile vendors who send traffic its way, including Apple, Samsung, and to a lesser extent other Android vendors. That certainly doesn’t seem to be affecting profits yet, but it’s a sign of the increasing share of revenue Google is having to pay out to companies that control much of the traffic that comes its way on mobile.
Google Loses Another Fiber CEO, After Five Months on the Job (Jul 18, 2017)
Alphabet’s Verily Launches Baseline Health Study (Apr 19, 2017)
I did a deep dive on Alphabet’s Verily subsidiary a while back for my Beyond Devices Podcast, and also wrote up some of the key themes for Techpinions subscribers here. What I discovered is that Verily, perhaps more than any other Alphabet subsidiary, has been characterized by hubris in trying to solve the world’s problems with technology. Its two most high-profile early initiatives – a glucose monitoring contact lens and a Star Trek-like “tricorder” to check patients’ vitals – both turned out to be vaporware. But at the same time, Verily is doing enough interesting work that it’s managed to secure partnerships with some big names from the traditional pharmaceutical industry (see this chart from my Techpinions piece), and is working with two big research universities on what it calls its Baseline longitudinal health study. It’s that study that’s now kicking off in earnest (and for which the watch Verily announced last week will be used), as the first 10,000 participants come in for their first set of tests and measurements. The Bloomberg article here does a good job characterizing both the current state of Verily and its return to reality after that early hubris, as well as some of the issues that still dog the tech people who run Verily when it comes to privacy and other related issues. It’s very clear that some of the people in charge have very little common sense when it comes to those issues in the healthcare realm, something that’s been a problem for Google too. And of course the biggest problem with the Baseline project is that – as a longitudinal study – it will literally take years for it to deliver meaningful results. There’s nothing wrong with ambition, especially when it comes to solving the world’s big problems, but it has to be grounded in reality and good practices, especially in the healthcare realm.
Google details Talk transition, SMS removal for Hangouts, other G Suite changes – 9to5Google (Mar 24, 2017)
This has been a heck of a long time coming – Google’s various messaging apps have been a confusing mess for ages now, and it’s good to see some rationalization of the portfolio and a bit more clarity about which bits will survive and what they’ll be used for. SMS-style messaging now belongs in the Messages app, which doesn’t have an equivalent on the desktop, while the ages-old Google Talk will finally be retired in favor of Hangouts, which will carry over some but not all of its functionality, with the rest going away. Some users will no doubt be annoyed at some of the lost functionality, but on the whole this should be a good thing for users. Of course, there is still Google Voice, which combines elements of services also found in Hangouts and Messages, so this doesn’t clear things up completely.
After years waiting for Google Fiber, KC residents get cancellation e-mails – Ars Technica (Mar 20, 2017)
In some ways, this story is far from surprising – Google has publicly announced a scaling back of its Fiber activities, supposedly in favor of new technologies. However, in theory it’s also still committed to the small number of markets where it’s actually rolled out service, including Kansas City. And indeed a statement towards the end of this piece suggests Google is still rolling out fiber in new areas. What I suspect is happening here is that Google is cherrypicking the most attractive neighborhoods while scaling back on others, just as other providers have done (just in the past two weeks, I’ve commented on stories relating to AT&T and Verizon around this very problem). Selectivity about where to roll out was always a facet of Google’s Fiber strategy, and for every provider who does this that’s based on a calculus on how much rollout will cost, what percentage of households will buy the service, and how much they’ll spend on average. That then leads to a determination about which houses are worth serving based on some pre-determined threshold for profitability over a certain period of time. I’m guessing that what’s happened here is Google has just raised that threshold by another notch, putting some homes that once made the cut out of the running now, hence these cancelations. Which would make it another symbol of increased financial discipline and belt-tightening at Alphabet.
via Ars Technica