Important Note
Tech Narratives was a subscription website, which offered expert commentary on the day's top tech news from Jan Dawson, along with various other features, for $10/month. As of Monday October 16, 2017, it will no longer be updated. An archive of past content will remain available for the time being. I've written more about this change in the post immediately below, and also here.
Silicon Valley tries to spread wealth to Trump’s America – USA Today (Jan 30, 2017)
Leslie Miley, who has been director of engineering at Slack, is working with Venture for America to start a program that will take employees of coastal tech companies and place them for one year at a time in new locations in the US, especially in minority communities, with salaries paid by their employers. Yelp and LinkedIn have signed up already. The initiative aims to break down a couple of facets of the tech industry’s lack of diversity, opening up opportunities for those in the communities served who may come from underrepresented groups, but also hopefully exposing the Silicon Valley types who participate in the program to new ways of thinking and lifestyles. This seems like a great initiative which should benefit both groups, and we should also see more from coastal tech companies investing in non-traditional locations in the US by putting offices and employees there. There are already several smaller tech hubs outside the traditional ones (including where I live in Utah), and they’re often able to attract great employees who don’t want to put up with the cost and other downsides of a Silicon Valley lifestyle.
via USA Today (see also Miley’s own blog post)
The Battle Between Uber And Lyft Has Become Political – BuzzFeed (Jan 30, 2017)
The tech industry’s response to the Trump administration’s executive orders on immigration has predictably become a competitive dynamic, with Uber customers boycotting the company over a perceived weaker response to the situation than major competitor Lyft. This BuzzFeed piece does a nice job drilling down a bit and separating the rhetorical and practical responses of both companies to the immigration moves, which is more nuanced than the boycott implies. But this raises two other big points. Firstly, to what extent will a failure to stand up for certain causes start to be used as a weapon against companies? We’re already seeing both a backlash against Uber from those who oppose the immigration ban and a backlash against Starbucks from those who dislike its commitment to hire more refugees. No wonder tech companies have been reluctant to take a stand – after such a divisive election, there are large chunks of every company’s customers and potential customers on each side of the issue, and these issues are complex. Secondly, how interchangeable are Uber and Lyft really, to the extent that a temporary boycott might shift meaningful usage from one to the other in a permanent way? I’ve argued in the past that the nastiness that’s characterized competition between the two stems from their fundamental lack of differentiation, which makes them that much more vulnerable to perceived differences and makes them fight that much dirtier to get and keep customers.
via BuzzFeed
Snapchat’s Streaks Drive Usage But Perhaps Not Ad Viewing – Bloomberg (Jan 30, 2017)
I changed the headline here both to capture the main point of the article and to avoid a different connotation with the word “streaker”, which appears in the original. Teenagers in particular, but also some young adult users, work hard to keep “streaks” of activity between themselves and friends on Snapchat alive as long as possible, much as Apple Watch users might try to keep a stand or move streak alive. But the Snapchat behavior verges on obsessive or addictive, and much of the actual sharing between friends ends up becoming meaningless as user post for the sake of posting. Snapchat deliberately encourages this kind of behavior, and it drives usage of the app, but it doesn’t necessarily drive meaningful engagement, which is technically something different. Those users aren’t necessary spending emotionally significant time in the app, and they’re not necessarily looking at the parts of the app where they’re likeliest to see ads. When Snap makes its IPO filing public, digging for signs of this disparity between usage time and real engagement with content and ads is going to be key. It’s really the Discover and other content tabs rather than the one-to-one sharing features that will drive ad viewing and revenue, and Snap needs to be transparent about where users are actually spending time.
via Bloomberg
Behind Apple’s new campaign: One Night on iPhone 7 – Apple (Jan 30, 2017)
It really feels like Apple is doubling down on the iPhone as camera marketing strategy – its recent ad “Take Mine” was very effective, and it’s been working with lots of publishers and independent photographers to showcase the iPhone 7’s photo-taking skills. It looks like it did a project back in November 2016 in which it invited lots of photographers to take pictures with the iPhone 7 on the same day, and then combined these into a campaign around its “Shot on iPhone” theme. The camera is definitely one of the standout points of the new iPhone (as I said both in my main review and my subsequent mini-review of Portrait Mode), so this is a smart strategy by Apple. But other device makers are producing really compelling cameras and camera features now too, with the Pixel also majoring on its camera among other things, and producing very good results in the process. Apple can’t just focus on the camera, and that’s why you’re seeing AirPods ads and ads starring other features too – it’s always been about the complete package with the iPhone, and that’s the argument Apple is making here: this is a phenomenal camera on a phone that also does lots more besides.
via Apple
Trump’s Next Move on Immigration to Hit Closer to Home for Tech – Bloomberg (Jan 30, 2017)
The executive orders on immigration blew up over the weekend, with most major tech companies finding their voices in opposing some of the policies of the new administration. But this article argues that the next set of changes to immigration policy might actually hit big tech companies even harder, putting the administration back on a collision course with the industry. As noted in my comment from Saturday, the responses from tech companies have ranged from moral condemnations to mere declarations that the policies would be disruptive to their businesses – any change to work visas would sit in that second bucket for many big companies, and they’d be likely to push back.
via Bloomberg
In Move to Facebook, Barra Leaves Unfinished Expansion at Xiaomi – Bloomberg (Jan 30, 2017)
This is a good overview of how the international part of Xiaomi’s business fared over the last several years, while Hugo Barra was in charge, and it argues that Xiaomi’s progress during that time was limited to some countries and mostly symbolic elsewhere – gaining mind share but not market share. And of course, it still hasn’t fully launched in the US, which can be considered the biggest failure of Barra’s leadership of the international business, with the company’s first big CES press conference one of his last official actions in the role.
via Bloomberg
Fitbit Announces Preliminary Fourth Quarter 2016 Results (Jan 30, 2017)
These are preliminary results from Fitbit, designed to flag to investors that revenues in Q4 were well down on previous forecasts, and to announce layoffs and other cuts to the business designed to realign costs with lower revenues. The company will lay off 6% of its workforce as part of an attempt to cut $200m (or almost a fifth) out of its operating cost run rate for the year. Bizarrely, it’s still characterizing its current troubles as temporary, even though it’s given very little evidence to back up this claim. Importantly, revenue in the first half of 2017 is likely to be down compared to H1 2016, because it had big new product launches a year ago. So even if we’re to believe the claims of a rebound, Fitbit concedes there won’t be any evidence of it until later this year. Fitbit continues to be by far the most successful standalone wearables company out there, but if even it is struggling in this way at this point, that’s indicative of broader challenges for the wearables industry.
via Fitbit
Silicon Valley’s responses to Trump’s immigration executive orders, from strongest to weakest – The Verge (Jan 28, 2017)
This is a good summary of the responses from the tech industry so far to President Trump’s executive orders on immigration from Friday. It also does a nice job sorting the responses by strength – there’s quite a range in the responses, from those focusing narrowly on the practical impacts on employees of each company to those issuing broader moral condemnations of the policy. This certainly won’t be the last we hear on this topic. It’s notable that as of right now Amazon is one of the major holdouts among the big consumer tech companies.
via The Verge
The Google Car was supposed to disrupt the car industry. Now Waymo is taking on suppliers – Recode (Jan 28, 2017)
This is a subtle shift, but an important one – one that began to become apparent a few weeks back. Alphabet is fundamentally a software, rather than hardware, company (Google’s recent push into first party hardware notwithstanding) – that’s where its skills have always lain, and where it has been able to add the most value both in its own products and in partnering with others. However, in the car space, it’s increasingly clear that Waymo will pair those software skills with developing hardware skills around things like LIDAR, and potentially attempt to sell packages of hardware and software or even complete systems, rather than just providing the software brains that will leverage hardware from other suppliers in cars. There are pros and cons here – on the one hand, Waymo doesn’t yet have great credibility in hardware in cars, and so trying to bundle the two together may threaten its ability to sell its software. On the other hand, it didn’t have much credibility in self-driving software either a few years back, but has earned it over time and now has partnerships with FCA, among others, so perhaps it can win trust in the same way with hardware as it makes progress here.
via Recode
For Apple’s iPhone Sales, Size Matters – WSJ (Jan 28, 2017)
This article is a good counterpoint to another I commented on recently, which suggested a shift to older devices and therefore lower average selling prices for the iPhone last quarter. As I said with regard to that piece, I’m seeing little evidence of the trend mentioned, and in fact I’d expect a shift to larger devices to push ASPs up, if anything, This WSJ piece quotes some data to that effect, and has some good numbers around the mix between the base and Plus models and how it’s shifted over time. Apple clearly does sell older devices too, so this mix shift among the 7 variants isn’t the only factor, but I still think ASPs should be pretty healthy when Apple reports its results for last quarter.
via WSJ
Digital media fell in love with Snapchat, and now Snapchat loves TV – Mashable (Jan 28, 2017)
This is a great bit of reporting on how Snapchat’s Discover feature has evolved since it first launched, and how Snap’s relationship with publishers and content providers has evolved with it. Discover continues to be the most obvious place for Snap to deliver growth in ad revenue, and having quality content is a big part of achieving that goal. Snap is also putting more emphasis on competing with TV for millennial viewers, an audience which is both overrepresented on Snapchat and underrepresented in traditional TV viewership. There are lots of good comments in this piece from publishers who have worked with Snap and seen good results, some of them driving decent profits from their channels and others merely experimenting with a new format. Well worth reading the whole thing.
via Mashable
Snap plans to publicly file for its much-anticipated IPO late next week – Recode (Jan 27, 2017)
I’m so looking forward to this filing being made public – it’s always a lot of fun to suddenly be able to dive deep into a formerly private companies finances and metrics. I’m very curious as to what they show and I’ll certainly write an in-depth analysis when I’m done investigating. The things I’m most interested in are revenue run rate and profitability. Snap has been trying to get commitments from media buyers to spend more in 2017, but I’m not sure there will be any evidence of that in the filing, which will typically be backward- rather than forward-looking. I’m assuming Snap isn’t profitable, but just how profitable and what the trajectory looks like there are big questions – Twitter famously still isn’t profitable several years after its IPO, while Facebook is one of the most profitable tech companies out there, so this is another area where Snap will want to demonstrate it’s more like the latter than the former.
via Recode
Google, in Post-Obama Era, Aggressively Woos Republicans – The New York Times (Jan 27, 2017)
Two politics stories today, as this one follows the Facebook story from earlier. This one also echoes an earlier story about big tech companies rethinking their political alliances both in the face of a possible shift to the right and now in the wake of an actual take over of both the executive and legislative branches by Republicans. It’s easy to see this as a swing from left to right, but I think it’s better seen as pragmatism about working with whoever is in power. The wrinkle is that Google had particularly strong ties with the Obama administration at multiple levels, and Eric Schmidt in particular was involved with the Clinton campaign, at least indirectly. Google / Alphabet arguably has the most to fear of the major tech companies from a backlash against tech companies based on their support for Democrats, and is clearly doing all it can to make nice now. Having said all that, the degree to which companies have to worry about such a backlash is surely much higher under this administration than any previous one.
China Smartphone Shipments Reached an All-Time High in 2016 – Counterpoint (Jan 27, 2017)
I cited some Counterpoint data on India the other day, and in that context said that they do a good job with these non-Western markets – these numbers are solid, although it’s interesting to see these results for China come out before Apple and several other companies have reported their results for the fourth quarter. Unlike India, China is a major contributor to Apple’s overall results, and there’s usually lots of commentary about the rate of growth there, so it’ll be interesting to compere these numbers with what Apple releases next week. In the meantime, there’s lot of interesting stuff here – over the full year, Xiaomi and Apple fared poorly out of the major vendors, though Apple’s Q4 sales held up a lot better than in Q1-Q3. Lenovo’s year in China was a disaster, and it will be very grateful once again that it has Motorola in the rest of the world to buoy things up a bit. The big story is Oppo and Vivo, which have broken into the top rankings globally off the back of a strong showing in China, but Huawei also did very well. It’s also interesting to look at the data in here on individual models, where the two iPhone 6s variants both score in the top 10, and two Oppo phones are in the top 5, including the number 1 slot. The whole post is well worth a read if you’re interested in the Chinese market.
via Counterpoint
Apple’s international iTunes business moves to Ireland on Feb. 5 – Apple Insider (Jan 27, 2017)
Interesting to see this move go ahead in the wake of the recent EU Ireland tax action. Ireland is obviously a big base for Apple in Europe, and this is mostly about moving the legal home of the iTunes business in Europe, rather than a big physical move. But it’s intriguing to see Apple double down on its presence – legal and physical – in Ireland with all the uncertainty over its tax status there. Apple is, of course, fighting the EU’s ruling with the help of the Irish government, but there’s obviously still a decent chance that things don’t go Apple’s way here.
via Apple’s international iTunes business moves to Ireland on Feb. 5
PayPal Has Been Talking With Amazon on Payments, CEO Says – Bloomberg (Jan 27, 2017)
This is an interesting but not unexpected development – PayPal already powers lots of payments for e-commerce purchases online, and the biggest past barrier to doing the same with Amazon was the close ties between PayPal and eBay. With that relationship now severed, PayPal is free to pursue this opportunity further, and with Amazon the largest e-commerce retailer in the US and a number of other markets, that could be a big boost. It’s less obvious that it will make a huge difference for Amazon, since it has credit cards on file for many of its regular customers, but it could well help reduce friction for occasional or first-time users, potentially providing a wider funnel for eventual Prime members. The other interesting wrinkle here, of course, is that even without the eBay angle, these two companies still compete with each other for web payments – Amazon has a much smaller third party payments platform which is used as an alternative to PayPal by some online retailers.
via Bloomberg
Mark Zuckerberg and Sheryl Sandberg Chime in on Trump Policies (Jan 27, 2017)
In the last day or so, both Mark Zuckerberg and Sheryl Sandberg have chimed in on different Trump administration policies in Facebook posts. Sandberg had been criticized for being so silent on some of the administration’s policies regarding women, given that she’s been such an advocate for women, and has now chimed in on abortion policy in overseas aid. Zuckerberg voiced opinions about immigration policy, specifically the restrictions on immigration which are apparently about to go into effect. I won’t comment on the specific policies in detail here, other than to say that like many people I’m disheartened by the speed with which immigration policy is changing in ways that will have devastating effects on many immigrants, whether refugees or people here on a green card. The point from the perspective of this site is that these are some of the first public statements from executives at major tech companies to critique specific policies of the Trump administration, while most tech companies seem to be treading very carefully at the moment, presumably for fear of becoming targets of angry tweets or threats. I wonder if we’ll see that change in subtle ways in the coming weeks and months, with Facebook potentially leading the way. Importantly, none of the comments from Zuckerberg or Sandberg are vitriolic, but instead are very measured (Zuckerberg’s in particular are quite balanced on several different issues within the broad umbrella of immigration policy). There’s clearly room for constructive engagement here.
via Mark Zuckerberg and Sheryl Sandberg (Facebook)
Apple Officially Joins Partnership on AI (Jan 27, 2017)
I commented on the reports that Apple was about to join the Partnership on AI yesterday, so I won’t revisit all of this today. Two notable things from today’s announcement, though: Apple’s representative will be Tom Gruber, who runs Siri at Apple, and that may be indicative of where Apple sees ownership of AI residing within the company (it has no formal head of AI); secondly, Apple has been involved with the Partnership from the outset, but hadn’t formalized its membership until today. That might signify that there were some details of Apple’s membership which needed to be worked out before it felt comfortable joining -I’d love to know what those were. Separately from Apple’s involvement, it’s worth noting that the board now has representatives from a number of other organizations beyond tech companies including several universities. So the Partnership won’t just be about driving the agenda of the tech industry here.
Microsoft FY17 Q2 (December 2016 quarter) Earnings – Microsoft (Jan 26, 2017)
Cloud was the big theme on Microsoft’s earnings call once again, with a $14 billion annual run rate and nearly 50% gross margins across its cloud businesses, and a 95% growth rate in the Azure business alone. Surface revenue was down a bit, predictably because the product line wasn’t refreshed as fully as in previous years, but not by much, and it seems commercial sales actually grew (probably a reflection of the long sales cycles in enterprise). The phone business continues to dwindle to nothing (just over $200m in revenue this quarter by my estimate, down 81% year on year), but that’s so small now it barely impacts results. Windows did well overall, with some revenue growth from slightly stronger shipments in the PC market, though the PC market overall was still down overall last quarter. Monetizing its consumer business continues to be one of Microsoft’s biggest challenges – its Office consumer subscribers appear to be plateauing at around 25 million, most of its other consumer apps are offered free, and gaming is performing decently, though overall gaming revenue was down year on year. Overall, the results feed the narrative that Microsoft is undergoing a comeback, though it’s a slow and subtle one from a financial perspective.
You might also be interested in the Microsoft Q4 2016 deck which is part of the Jackdaw Research Quarterly Decks Service.
via Microsoft (more on Techmeme)
Alphabet Announces Fourth Quarter and Fiscal Year 2016 Results – Alphabet (Jan 26, 2017)
One of the things I was most interested in as part of Alphabet’s results was what happened to the Google Other category of revenues, because that’s where sales of the new hardware devices will be reported. That category grew 62% year on year, but also includes Play store revenues as well as Google’s enterprise cloud service revenues, and has been growing at a decent clip already. I’d estimate around $600-700m in revenue from the new hardware products, which probably translates into 600-700k Pixel sales and sales of Home, WiFi, and Daydream hardware. That’s not a bad start, but of course supply was constrained and distribution limited, so there’s clearly potential for more here. Back in the core business, it’s striking how the number of paid “clicks” on Google’s own properties remains the one big driver of ad revenue growth, while total paid clicks on third party sites and the cost per click on all sites continues to fall. YouTube is the major driver here (those clicks include views of video ads where no-one actually clicks), offsetting the erosion of revenues from the shift from desktop to mobile, and was an obsession among analysts on the call. Sundar Pichai focused his remarks on machine learning rather than AI, although the two topics are closely related – it was interesting to hear Satya Nadella kick off the Microsoft earnings call an hour later with talk of AI.
You might also be interested in the Alphabet Q4 2016 deck which is part of the Jackdaw Research Quarterly Decks Service.
via Alphabet (more on Techmeme)