Amazon Begins Selling Apple TV Hardware Again (Sep 26, 2017)
Amazon has quietly begun selling Apple TV hardware again, as part of the thawing in relations between the two companies. Apple has already announced that an Amazon video app is coming to the Apple TV shortly, so this is the first half of that two-part move, suggesting that the other shoe should drop soon. As I said a few months back, though some have suggested there was some tit-for-tat in Apple and Amazon’s frosty relations, the reality is that the barriers to playing nicely were all on Amazon’s side – the company could have built an app for the Apple TV as soon as the platform launched an App Store, but chose not to. I assume that was because of the App Store cut, but that’s been a feature on iOS too, and hasn’t stopped Amazon from launching video apps for that platform. Regardless, it’s likely that Apple has made some concessions on the App Store cut, and that that’s finally got Amazon on board as one of the last holdouts from the Apple TV, which should further increase the appeal of that hardware platform for those willing to pay the Apple premium to get their Transparent or Man in the High Castle fix.
A year ago today, Instagram debuted its Stories feature, which took Snapchat’s feature of the same name and adapted it slightly, something I criticized at the time in a blog post, arguing that the sheer brazenness of the copying should be beneath Instagram. Whatever the ethical shortcomings of such a move, it’s clear that it’s been very successful, with over 250 million daily users of the feature a year later, and Instagram hasn’t been shy in gloating about its milestones, especially where they make for favorable comparisons versus Snapchat. We’re getting more of that today, with Instagram offering up new data on time spent in its app among different age groups, which again compare nicely with Snapchat’s equivalent metrics. Snap Inc said on its Q1 earnings call that its users spend on average over 30 minutes per day in the app, up from a range of 25-30 minutes described in its S-1 filing a few months earlier. Instagram, meanwhile, says that under-25s now spend an average of 32 minutes in the app per day, while older users spend an average of 24 minutes per day. That’s very close to Snapchat’s numbers, but of course at rather larger scale: Snapchat’s most recent daily active user number was 166 million, whereas Instagram now has 700 million monthly active users, meaning that total time spent on Instagram is vastly higher than on Snapchat. All of this is making life tough for Snapchat, which has grown much more slowly since Instagram’s Stories launched, and which will continue to struggle to convince advertisers that it’s worth spending money on reaching its narrower audiences with inferior ad tools versus reaching Instagram’s much broader and larger audience with better targeting, tracking, and ultimately results.
Lyft’s Gross Bookings Growing at Higher Rate Than Uber’s (Jul 25, 2017)
Bloomberg has some inside data from Lyft that suggests its gross bookings grew by 25% year on year in the second quarter, which would be higher than the mid-teens growth Uber had told investors to expect in a preliminary call earlier this month. As with other recent signals that Lyft may be gaining on Uber, it’s tempting to read this as evidence that there’s some kind of backlash against Uber over its recent troubles, but I continue to see very little evidence of that. Rather, it’s likely that Lyft’s big push into new markets in the first half of this year has helped it grow bookings significantly during this period, while the Uber scandals have made a far more limited impact. And of course Uber’s results are on a much bigger base, meaning that its dollar growth is likely far larger than Lyft’s even if its percentage growth rate is lower. I’m happy to see Lyft gaining on Uber – it’s always struck me as a more ethical company with a leadership with more integrity than Uber’s, and I’ve been using Lyft pretty much exclusively when traveling recently. But I see very little evidence that Lyft is gaining on Uber broadly for this reason, and in using Lyft it’s often been clear just how big an edge Uber has – at airports, there are multiple times as many Ubers in the pick-up area as Lyfts, and at least half my drivers have been drivers for both services, often skewing heavily towards Uber in their actual share of driving (which often turns to a 100% share on specific days given the bonuses Uber offers for driving over a certain amount).
Uber Adds Tipping and Makes Other Driver-Friendly Changes (Jun 20, 2017)
Uber Pool Burned Through Cash for Months in San Francisco (May 31, 2017)
Backchannel has a piece out this week which argues that the iPhone’s declining market share in China is due to the poor competitiveness of its services, notably Apple Music and Apple Pay. The piece is well worth reading, but it offers few real answers. It states that Apple fails to compete effectively with its music and payment services in China, but then also says that the music and payments markets in China have been sewn up by strong local competitors, with music rights in particular subject to exclusives from Chinese services. As such, it’s really not clear what Apple could have done differently in these categories. At the end of the day, Apple’s lack of competitiveness in services in China is a symptom of a much broader issue, which is that Apple doesn’t bend much to local custom when it comes to pricing or service structure (see also India). It does localize content stores, and indeed is one of the strongest players in that respect globally, but China is such a massive market, has so many homegrown competitors, and is run by a government which is not afraid to disadvantage foreign interlopers, that it’s hard to see how Apple could compete effectively there on services. As such, I think it’s smart to compete more on its devices, its growing retail presence, and its non-content software and services. But that does mean that the ecosystem Apple has built elsewhere is missing some of the appeal it has elsewhere.
But all that is to ignore the central premise of the argument being made here, that it’s this services weakness that’s at the root of the recent decline in iPhone market share in China. I think that’s debatable at best, and it’s worth remembering that that decline isn’t about ownership but sales, and Apple went through a massive cycle earlier off the back of the iPhone 6 in China, and then came down to earth over the ensuing year, so that change in market share is reflective of cyclical rather than permanent trends, with some signs of recovery recently with the iPhone 7. So overall this piece feels like it makes some interesting points, some of them legitimate with regard to Apple’s services competitiveness in China, but overdoes the narrative about its impact.
Google Forced to Unbundle Services from Android and Open to Search Competitors in Russia (Apr 17, 2017)
The EU is currently taking action against Google over what it sees as anticompetitive practices including bundling of its own services and blocking competing ones from being pre-installed in Android. As such, this Russian case takes on more importance than it might otherwise have, because it presents one possible outcome of the EU case, which is forcing Google to unbundle its own services from Android and allow competing search engines like Yandex to be pre-installed. That’s certainly a possibility in the EU case too, and would mirror the action taken years ago against Microsoft over browsers in Windows. If that were to happen, I’m skeptical many people (or OEMs) would choose alternative search engines on an Android phone, but it would potentially threaten Google’s Android business model, which is entirely about the apps and services it runs on the device (and the advertising they enable). For what it’s worth, as I wrote in this piece at the time the EU action was announced, I still think it’s misguided.
Uber Had a Program Called Hell Designed to Undermine Lyft (Apr 13, 2017)
It sounds like this it has now ended, but Amir Efrati at The Information has a report that Uber used to run a program named Hell which was designed to undermine its major US competitor, Lyft. The program pretended to be multiple Lyft customers and was therefore able to track where Lyft’s cars where in an effort to lure drivers to drive exclusively for Uber. One interesting side effect was that Uber actually offered bonuses to these non-monogamous drivers compared to what it paid those who drove for Uber exclusivity, which must seem a little perverse to those loyal Uber drivers. Amir also argues that Uber’s misuse of Lyft’s app was a violation of its terms of service and might also have broken the law, though I doubt Lyft will sue over it. This certainly isn’t the first time we’ve heard about Uber engaging in underhanded tactics to beat Lyft – there were lots of stories a couple of years ago about Uber reps calling Lyft cars and canceling, or getting in the cars and then trying to get the drivers to switch. It’s all part of the win-at-all-costs mentality that has always prevailed at Uber, and which has had nasty side effects both for drivers and for its employees.
via The Information
There’s some good analysis here from the FT around a couple of different metrics relating to the performance of larger and smaller companies in the US tech industry. Specifically, the FT suggests larger companies’ shares have performed better, and that they vastly outspend smaller companies on R&D, something that makes it extremely tough for smaller companies to compete on a level playing field. This absolutely rings true: over the last few years, not only scale but also broad scope have become extremely important as competitive differentiators as companies increasingly build not just individual products and services but interconnected ecosystems. Those companies also regularly acquire smaller companies that develop interesting new technology, using M&A as another form of R&D on top of the billions they already spend organically. All of that makes it extremely difficult for smaller companies not only to compete but to grow to any decent size. Snap is one of the few big consumer tech companies to get large enough to reach IPO stage in recent years, and only because it has explicitly rebuffed acquisition offers along the way. Even then, it’s still a tiny fraction of the size of the big players in terms of revenue or user base. Companies that make it this far have always been the exceptions, but that’s only going to become more extreme going forward.
via Financial Times
Comcast Introduces Its Mobile Service (Apr 6, 2017)
Comcast today finally unveiled the wireless service it’s been working on for years off the back of a long-standing agreement to use the Verizon Wireless network as the underlying carrier. It should be a compelling offering for at least some customers, especially the premium 25% or so of its base to whom Comcast will offer preferential pricing. However, the unlimited offering caps out at 20GB per month before throttling kicks in, whereas the traditional carriers’ throttling kicks in at higher points and only in times of congestion, making Comcast’s unlimited in name only. WiFi is a major selling point from Comcast’s perspective, but I’m very skeptical that it’ll be a big part of users’ experience, given how few hotspots Comcast actually has in places where people spend time out of residential neighborhoods, and the fact that WiFi is often now slower rather than faster than LTE. Comcast is going to keep costs down by selling online and in its existing stores and marketing through existing channels, as well as keeping bad debt expense down by marketing to existing customers who pay their bills on time and offering only auto-billing on credit cards. Comcast will likely sell this service to up to 10% of its base in the next couple of years, which will be a nice boost to its revenues and profits, but will make only a tiny dent in the overall US wireless market – 10% penetration of its broadband base would be just 2.5 million customers, which is less than the number of new customers the big four carriers added last quarter alone.
There were reports earlier this week that Sprint was ditching its 50% off promotion, which has run since 2015, and it has now confirmed that news. Instead, Sprint is now focusing exclusively on unlimited services, ditching its tiered plans as well, and offering a $10 per line discount through June 2018 on new plans, making them in some cases 30-40% cheaper than equivalent Verizon or AT&T plans. Sprint’s 50% off plan became untenable when the two larger carriers reintroduced unlimited plans, because in practice under the promotion Sprint had seen most customers keep their spend at the same level as at their previous carrier while moving to a higher speed tier, which isn’t possible when switching from unlimited, meaning Sprint really would be charging 50% less for the same service. Instead, then, it’s competing on price in a less dramatic way going forward, but it’s worth remembering that price discounts in wireless have a direct correlation to perceptions of network quality. As such, these ongoing price discounts are a recognition that Sprint can’t be competitive unless it’s charging quite a bit less than competitors, because of poor perceptions of its network, perceptions that are unlikely to change at its current historically low network investment levels.
Amazon and Walmart are in an all-out price war that is terrifying America’s biggest brands – Recode (Mar 30, 2017)
This is a fascinating article that looks at the competitive dynamics between two of the most powerful companies in retail: Amazon and Walmart. Walmart is legendary for the pressure it puts on its suppliers to conform to price expectations, but it appears that it’s going even further in demanding that those suppliers get their costs and prices down so as to allow it to compete with Amazon more effectively. Meanwhile, Amazon is pricing in a way that’s not necessarily rational or consistent with generating profits, which means that the competition between the two, while great for customers in the short term, is likely unsustainable for both the retailers and their suppliers, and something will eventually have to give. No surprise, then, that some of the CPG companies are starting to look to alternative channels, though realistically no big brand can afford to be off either of these companies shelves – in warehouses or stores – for long. This is likely to get a lot uglier before it gets any better. Meanwhile, that means that we may see more slowing of growth at Amazon along the lines for what we saw a little of in Q4 last year, while Walmart and its ilk will continue to pursue stronger growth at lower margins.
This App Annie analysis is interesting for two reasons. Firstly, it’s one of the first times I’ve seen anyone attempt to quantify the whole Android app ecosystem including the third party app stores, which are a factor globally but particularly important in markets like China, where Google Play basically doesn’t exist. That provides a much better view of the whole ecosystem, but of course Google only benefits directly from the part it controls, which is Play. Secondly, though, the forecast that this ecosystem combined will surpass Apple’s app ecosystem by the end of the year is striking because the Android user base has been much larger than the iOS user base for years, and only now is the app ecosystem (on this more inclusive basis) starting to rival Apple’s. That, in turn, is a symptom of just how completely Apple has dominated the premium users within the smartphone market, those who are more likely to pay for content and apps. But all of this is also a great refutation of the idea that apps are somehow dying or about to be replaced with something else – the sheer growth numbers here are astonishing.
Another crazy wrinkle in the ongoing set of regulatory and legal actions against Qualcomm over anticompetitive practices: the Korean regulator responsible for the fine against Qualcomm last year says that one of the conditions of the contract between the companies was that Samsung would not be allowed to sell its own Exynos chips to any other vendors. What’s particularly crazy here is that Samsung is both Qualcomm’s biggest customer for chips and a contract manufacturer of those chips, so the two are inextricably intertwined here but are still going through this painful process. Samsung isn’t suing Qualcomm as Apple is, but it’s still likely cooperating with the authorities who are looking into its dealings in various markets. Just another sign of how far relationships between Qualcomm and some of its biggest customers have got, that they’re willing to start airing their grievances despite their close ties.
Netflix: The Monster That’s Eating Hollywood – WSJ (Mar 24, 2017)
The headline here is indicative of the language used by some TV execs in the article, but that rhetoric feels pretty overblown, along with the suggestions that Netflix is somehow singlehandedly doubling the fees actors ask for or squeezing other players out of the business. Yes, both Amazon and Netflix are raising prices for acquisitions of indie movies at Sundance, but no, they’re not having that dramatic effect on the entire industry, not least because they’re still just a fraction of the size of the industry as a whole. The reality is that competition has been intensifying for years because the industry is getting tighter in an age of shrinking audiences and higher standards, and Netflix and Amazon aren’t to blame. Having said all that, the article is likely indicative of a souring of relationships between Netflix and traditional media companies, and if that continues we’ll likely see more content pulled from Netflix and other SVOD services, which just validates Netflix’s massive investment in original content which no-one can take away.
The reintroduction of unlimited plans by AT&T and Verizon in February makes this one of the least predictable periods in the recent history of the US wireless industry. The presence of unlimited plans at Sprint and T-Mobile and their absence at the two larger carriers has been a defining characteristic of the market for so long that the rapid turnaround is likely to lead to quite a bit of change in competitive dynamics and growth rates. Here’s the first evidence of that in the form of comments from Sprint’s CFO at an investor conference that churn will be stable rather than down this quarter as originally anticipated. T-Mobile hasn’t really commented yet, but has been introducing a set of promotions throughout the second half of the quarter in an attempt to keep its own growth going at previously expected rates. The impact in Q1 will actually be a little muted because the changes didn’t kick in until halfway through the quarter – it’s in Q2 and the rest of the year where we’ll see the biggest impact, though the exact scale and nature of that impact is still up in the air.
This is interesting data which confirms something that I’ve always suspected but never had more than gut feel to go on: that matters of principle rarely cause large scale and lasting changes in consumer behavior. In other words, even with the high profile and almost continuous coverage of everything going on at Uber at the moment, only relatively small numbers of people seem to be switching to Lyft, and they seem to be doing so fairly temporarily. The article cites spend data from a company called TXN which shows only a brief and switch of spending from Uber to Lyft in a couple of cities, which appears to represent roughly 5-10 points of market share at its peak. Convenience, habit, peer pressure and a myriad of other factors all likely weigh as heavily or more so in decisions to use a service or not, and Lyft’s big problem is that in many cities it’s simply not as big as Uber is. In the two cities cited here, it looks like Uber had two thirds and four fifths of spending at its nadir following the negative news, and that’s likely representative of many other cities where both operate (and of course there are still cities where Lyft doesn’t operate at all despite its recent expansion). That makes it tough to capitalize in a major way even when Uber appears to be stumbling significantly, especially because those stumbles haven’t affected the user experience in the slightest.