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Mark Zuckerberg Pens a Personal and Facebook Manifesto (Feb 16, 2017)
Mark Zuckerberg has posted a combination personal and Facebook manifesto to the site, and has also been speaking to a variety of reporters about it over the last day or so. The manifesto is long and covers a ton of ground, some of it about the state of the world but much of it at least indirectly and often quite directly about Facebook and its role in such a world. In some ways, this builds on comments Zuckerberg made at the F8 developer conference last year, and it mostly stays at a similar high level, talking about grand ideas and issues at the 30,000 foot level rather than naming particular politicians or being more specific. To the extent that Zuckerberg is talking about how to use Facebook as a force for good in the world, this is admirable at least to a point. He clearly now both recognizes and is willing to admit to a greater extent than previously the role Facebook has played in some of the negative trends (and I believe this piece contains his first proactive use of the phrase “fake news”), and wants to help fix them, though much of his commentary on what’s going wrong spreads the blame more broadly. I’m also a little concerned that, although many of the problems Facebook creates stem from the service’s massive and increasing power over our lives, the solutions he proposes mostly seem to be about increasing Facebook’s power rather than finding ways to limit it. To some extent, that’s natural given who he is, but it suggests an ongoing unwillingness to recognize the increasing mediation of our world by big forces like Facebook and Google and the negative impact that can have. Still, it’s good to see more open communication on issues like this from a major tech leader – I’d love to see more of this kind of thing (as I wrote last summer in this piece).
I think the framing here is exactly right – this is part of the broader crackdown at Alphabet on some of its longer-term and less financially viable projects. The new approach – targeting balloons at specific regions rather than trying to blanket the globe – always seemed like the more obvious way to go, but of course balloons are inherently hard to navigate, so I’m intrigued to know how they will manage that. Two big questions remain: firstly, whether Internet access delivered from the sky can ever be really good (see existing satellite-based Internet access, which tends to be slow and bandwidth limited), and whether Alphabet should be in the access business at all (see also yesterday’s Google Fiber item). At least it sounds like this particular project might generate revenues sooner rather than later (and eventually even profits!) but it’s still not clear that it’s going to benefit the core Google business much.
AT&T Expands Access to Unlimited Data (Feb 16, 2017)
Well, that didn’t take long at all – at the beginning of this week neither of the two largest US wireless carriers offered unlimited data plans to all customers, and by the end of the week both will. This has financial implications for both carriers, though they’re hard to predict – both have had unlimited customers before but have been slowly weaning them onto tiered data plan, and taking the limits off again could lead to dramatically higher usage especially if many users switch to these new plans, which are fairly aggressively priced. At AT&T, though, there’s another impact, which is that it has been using unlimited data as a marketing strategy to drive DirecTV subscriptions, because that was the only way to get on one, but that will now go away, so we may see lower DirecTV net adds going forward (AT&T added 1.2 million of these bundled subs in Q4, and had almost 8 million at the end of the year). Next quarter’s earnings season for the wireless carriers will be very interesting – it’s going to be one of the hardest ones to predict in a long time.
“Just like Alexa” is a bit of a stretch here, because the whole point of Alexa’s ordering is that you know the products will come from Amazon. Google Home, by contrast, will order from a range of different Google Express merchants, only some of which are available nationwide. And because most people don’t have a Google Express account set up yet, they’ll have to do that first before they order anything. Lastly, unlike items bought using a Prime subscription, shipping will be charged extra after a short promotional period. Despite all that, this is obviously an area where Alexa has had unique capabilities and where Google Home has now closed the gap a little. By far Home’s biggest disadvantage is still its lack of awareness and distribution.
I’ve never been a big fan of these kinds of ranking exercises – they’re often arbitrary, designed to make news as much as come up with the right answer, and basically meaningless in the real world. So why am I including this item here? It’s about the specific reason why Apple was chosen here: its silicon chips. This is so overlooked as a source of leadership and differentiation for Apple and yet it’s absolutely critical. It took the acquisition of PA Semi and lots of other work besides, but Apple has spent years perfecting its chip design and it now pays off in massive ways for the company. No wonder you see Xiaomi and others pursuing their own chip strategies, but no-one should assume that’s a straightforward or quick process.
I think the shorter version of this story is that Apple hasn’t been able to revolutionize TV because the traditional TV industry isn’t willing to let it, at least not yet. More than in any other industry, the traditional players still hold pretty much all the cards when it comes to future services from a licensing and content perspective, and until that starts to break down, no outside player is going to make a meaningful difference. That means we’ll continue to have a mosaic of partial replacements for pay TV, mimicking some of the features and content but not others, and leaving users to pull it all together in custom bundles. Apple is part of that aggregation layer today, but doesn’t really play anywhere else – the Apple TV box and the TV app are partial solutions for the fragmentation problem, but are incomplete – you still can’t watch a full slate of traditional pay TV on your Apple TV, and the TV app excludes Netflix among other content providers. Both the box and the app are still useful, but they’re not revolutionary, and the intransigence of the old guard is the single biggest reason. In music, Apple was able to get the labels on board because they were panicking about Napster and file sharing, but the TV industry isn’t yet at that crisis point. In the next couple of years they’ll get there, but in the meantime Apple either has to continue to tinker around the edges or do something that looks less like a pay TV replacement and more like something different, a la Netflix.
Facebook has one of the biggest global audiences – perhaps the biggest – of any technology company, and it seems constantly tempted to try to leverage that audience for more things, with the next on the list recruiting services a la LinkedIn. I’m hugely skeptical about this – it’s one thing to know that a potential employer might scour social media accounts, but quite another to serve up your personal account directly in the application. I just don’t think most applicants want their Facebook profile to be front and center in their job hunting. In addition, even in the unlikely event Facebook were to match LinkedIn’s scale in this business, that’s a half-billion-a-quarter business, or about a tenth of Facebook’s current revenues. In other words, this is unlikely to take off, and even if it does, it won’t make a huge difference to Facebook’s business.
via USA Today
Lenovo Reports December 2016 Quarter Results (Feb 16, 2017)
Lenovo continues to be a business in three quite different parts: in PCs, it’s the world’s largest vendor, grew slightly year on year, and is profitable; while in data centers and mobile it’s shrinking fast and unprofitable. Lenovo’s mobile business in China has collapsed by about 90% in the past two years, to the point that Lenovo didn’t even report China shipments at all this quarter, while it’s likely held up a little better outside of China, though it’s very focused on low-end shipments. Lenovo basically focused its whole earnings presentation on the PC business, with much less detail than usual on mobile, and the usual short shrift for data centers. This was a business that looked really good a couple of years ago, but looks much less so now. Another cautionary tale about the challenge of today’s smartphone market, especially for Android vendors, but also about the dangers of expanding too quickly through acquisitions.
Unlike last week’s changes, which were mostly about changes in the user interface of non-abusive users, this change is directed specifically at limiting the reach of abusive users, which feels like a more important and urgent priority. The limits are only temporary – no-one is getting kicked off the platform for this abusive behavior, merely having their reach limited for 12 hours or so in the cases so far. I wonder if – by analogy to an iPhone lock screen – the lockout period will be longer after each offense until eventually the user is banned; that’s something Twitter doesn’t seem to have commented on yet publicly. But it’s also not clear that there’s an appeal mechanism, which is a bit worrying because Facebook, Twitter, and others have sometimes blocked innocuous users either by mistake or through mis-application (or over-zealous application) of policy. I’m all for Twitter cracking down on abuse – it should be a key priority – but it needs to happen in a way that’s transparent and appealable. So there’s definitely progress here, but we still need more.
Snapchat Parent Snap Inc. Sets Valuation at $19.5 Billion to $22.2 Billion as IPO Approaches – WSJ (Feb 16, 2017)
It’s hard to avoid the sense that this valuation coming in at the low end of the previous target range is a sign of dampening excitement in the Snap IPO following the release of the S-1 and other worrying signs. That’s a sign of a certain amount of humility and realism from the company, which is a good thing. It’s still a massive valuation for a company at Snap’s stage of maturity, and it’s always possible the valuation will come down still further (or go up) following the roadshow, as investors get to kick the tires a little more. I’m more curious than ever what happens when the IPO finally kicks off because – as I wrote the other day – Snap is debuting at a terrible time in its history.
Google has officially released its Android-apps-on-Chrome beta and it’s getting fairly terrible reviews. While Google is legendary for attaching the beta label to things that feel like they’ve long outgrown it (see especially Gmail), in this case the label actually feels premature, since the experience on these new Chromebooks sounds much more like an alpha than a beta. The software is very buggy, and the implementation of Android apps on ChromeOS is if anything even worse than it long has been on Android tablets. Getting Android apps onto a laptop sounds really compelling – all the apps you’re used to on your phone, now on your PC! – but the reality for now sounds extremely disappointing. It’s hard to avoid the sense that this is a misstep by Google, which promised these launches a few months back but clearly isn’t ready to deliver on them yet. In fact, these devices appear to suffer from some of the same lack of readiness as the recent Android Wear 2.0 release, although that was supposedly a finished product. This is uncharacteristic for Google, and it’s a worrying sign that things are being rushed out of the door to meet deadlines rather than because they’re ready.
HTC has another tough quarter, with revenue down 13% YOY, but smaller losses – TechCrunch (Feb 15, 2017)
I don’t typically track HTC’s financials that closely, because they’re so small (just $700 million in revenue last quarter) and such a minor player at this point, but it’s worth checking in from time to time, especially as HTC expands beyond its traditional smartphone business into VR and ODM manufacturing for Google. Interestingly, there’s very little sign of any meaningful bump in revenues or profits from either of these initiatives, which either means that their contribution is tiny or that the traditional smartphone business is declining even faster than in the past. Revenue was down 13% year on year, and the company has had negative operating margins for seven straight quarters and most of the last three years. On the Q3 earnings call, HTC said that it was near breakeven on its smartphone business, and blamed the VR business for the overall losses. It also refuses to talk about the Pixel business at all on earnings calls, citing the lack of public disclosure by Google (which is odd because Google has confirmed it). Regardless, it’s worth noting that the company’s gross margin is just barely in the double digits, which obviously doesn’t leave much room for marketing and other corporate costs. HTC is one of a number of what were major Android vendors a few years back which have faded considerably, and unlike Sony it doesn’t yet seem to have figured out how to make the business work at its new smaller scale.
Further evidence here that if tech is to disrupt TV, it’s often going to do it without the support of the traditional TV industry, which is in some cases starting to pull back its content to its own platforms while leaving others like Hulu out in the cold. Viacom’s new CEO said on its recent earnings call that the company would be pulling back from SVOD services, and this is the first sign that he meant what he said. This is also the single biggest reason for SVOD providers to invest in a big way in original content which can’t be yanked away due to skittishness on the part of content providers. Hulu is a unique animal in this space, with several of its its owners among its biggest content providers, but it’s still vulnerable to this kind of thing, and the other big streamers even more so.
Google Fiber and Alphabet’s broader Access unit within which it sits has been somewhat in limbo since late last year, when it lost its leader and canceled all its expansion plans. The story the company told then – and still seems to be telling today – is that it intends to pursue the same goals in new ways, principally through wireless. The fact that a new head has actually been appointed means that it’s at least somewhat serious about that goal, and isn’t just going to sell off or shut down the whole business, but it’s still possible that it might sell its fiber assets even if it pursues wireless technologies in future. Meanwhile, I still don’t think there’s a good reason for Google to be in the access business at all at this point.
Amazon just shared new numbers that give a clue about how many Prime members it has – Business Insider (Feb 15, 2017)
I had missed this earlier in the week, but we got some juicy new numbers from Amazon as part of its 10-K filing, and they’re quite illuminating when it comes to Prime. This article specifically talks about Prime subscriber numbers, but the same underlying figures from the 10-K can also be used to derive some other interesting conclusions about Prime revenues and so on. I put together an in-depth blog post just now on all this, which you might want to check out too (my subscriber numbers are a little different from Morgan Stanley’s).
via Business Insider
99% of Mobile Malware Targets Androids Because of Open Store and Infrequent OS Updates – F-Secure (Feb 15, 2017)
This data comes from the blog of F-Secure, a European cyber-security company which tracks malware. The key finding here shouldn’t be a surprise – Android sees 99% of malware activity on mobile, for three simple reasons: it has by far the largest share, its app stores are open and often weakly policed, and Android devices are often very slow to get OS updates and software patches, although it has been doing better on that last point recently. Interesting, there’s still far more malware being created for Windows PCs than Android, even though there are fewer of them, but the range of malware being created for Android is approaching that which targets PCs, even though the main focus is still trojans. All of this, of course, only serves to reinforce the narrative about Android being insecure.
This is well trodden territory, but what’s new here is really the sources connected to various entities Apple has had negotiations with in the past, who suggest that its negotiating tactics are a major factor in its ability to get big deals done. But I still think this article is missing the single biggest factor when it comes to Apple and major acquisitions: cultural fit. Apple’s culture is unique and arguably its single biggest asset, but almost every company Apple might consider buying will have a different culture. When it’s a tiny acqui-hire, that doesn’t matter so much – it’s more akin to hiring new employees, and you can both test each one for fit and train them appropriately. That’s much harder to do on a scale of hundreds or thousands of employees, which is why Apple tends to make small technology acquisitions, often in the early stages of their business, rather than big buys. Even Beats, its biggest acquisition to date, was actually a fairly small team, since manufacturing was outsourced, and fit largely into two small pockets within Apple rather than having to be integrated into the company as a whole. To my mind, it’s this issue of cultural fit rather than the price tag or the negotiating tactics that prevents Apple from making bigger acquisitions, and it’s the single biggest question everyone should be asking if Apple ever does pull the trigger on a really big one.
HTC will launch mobile VR device as follow-up to Vive – CNET (Feb 15, 2017)
I covered HTC’s Q4 results yesterday, and it was clear that VR was not yet making a big positive dent in the business yet. Part of the reason is that Vive, like Oculus Rift, is a marginal play – it relies on heavy duty existing hardware and is itself expensive. It’s no coincidence that the top selling VR headset today is Samsung’s Gear VR, with over 5 million units, because it’s compatible with many smartphones and costs very little. HTC is smart to move into this territory too, though of course if this device really is limited to one of its own smartphones, that’s a pretty small addressable market too.
If only the device you use as a voice assistant had phone functionality built in! I’m being facetious, but it’s interesting to watch Amazon and Google potentially working backwards from a non-phone device to something capable of making calls. This is a logical extension of a voice search for a local business – I already regularly do this using Siri, especially while driving, and it’s very useful. As with yesterday’s Nest story, this is a great illustration of the benefits of software-based products – you can provide meaningful additional functionality through an update and suddenly the device you already have becomes more functional. I would guess that Amazon would need a partnership for local business search, whereas Google of course has that functionality in house – it’s in domains like this that Google has an advantage over Amazon despite the latter’s early big lead. I’m very curious how far out these efforts are – unusually, the WSJ is reporting on both companies’ efforts at once here, but they may well be at quite different stages of development. And of course Google famously stayed out of the phone business when it launched Google Fiber because of all the regulatory headaches and fees that go along with being a fully-fledged phone provider – it might try to stop short of going that far this time around too.
Caavo’s $400 streaming box unites Amazon, Apple, and everything else into one TV interface – The Verge (Feb 14, 2017)
This feels like an absurdly large, heavy, and expensive (albeit attractive) box for simply switching inputs on your TV. That’s a shame because the device has a great pedigree, but this is just inserting yet another box between all your various boxes on the TV. This Variety piece actually does a better job of explaining the user interface than the Verge one, but it still doesn’t sound like nearly enough to justify the price and size here. The problem here is we’re still trying to solve this problem in the same way – by pulling together multiple inputs rather than creating a single input that does everything you want natively. That’s still a long-term hope rather than a proximate reality at this point, but several boxes are getting closer and I think we’ll see more progress this year.
via The Verge