The shorter week notwithstanding, technology bellwethers had some big announcements that included Facebook’s FB video ads, Apple’s AAPL Music launch and Google’s GOOGL search deals.
Facebook to Share Revenue with Video Creators
Facebook’s “Suggested Videos” feed could give the folks at Google’s YouTube some sleepless nights. It’s one thing to have video thrown at you in the newsfeed and quite another to go find it for yourself in a video feed even if you have to wade through some ads. If things go as planned, content providers will flock to the platform and, sometime in the future, you might just go to Facebook to check out some TV show, movie or other video without ever spending a cent. Or, you could buy it right there and then watch from the comfort of your chair.
Facebook figures this is such a good proposition that it’s charging the same 45% of ad revenue that YouTube makes. We were taking the 4 billion daily views with a grain of salt since a few-second pause over an auto-loaded video qualified as a view according to Facebook. But the social networking company is now also turning on the sound and tracking how long you watch for good measure. Now is it going to make videos as easily searchable as YouTube? That definitely seems to be the next step.
Apple Music Launches, Minus Bells & Whistles
Apple unveiled its service earlier in the month, finally launching on Jun 30. But in what is a first for the iPhone maker, it announced that the service will be available on Android as well (later this year). That’s because Apple Music is not an exclusive on iOS devices and is in a pretty crowded market comprising Spotify, Deezer, Rdio, Pandora, Google Play Music and Xbox Music. Apple has no free tier unlike Spotify and some of the others and it has a curated radio channel called Beats 1.
Prices are also in line with industry standards despite the fact that it will have some great content. Two things still look special: the first being “Connect” where artists can interact with fans and the other being Siri integration, which could actually get some iOS users to switch. Especially since Apple has one of the most extensive collections in the market.
Good or Bad for Google Search?
Google’s search business appears to be in all kinds of trouble what with Yahoo displacing it in the Mozilla browser (in some geographies) last year, Microsoft MSFT displacing it in AOL last week and Apple’s Safari browser expected to do likewise some time this year.
But even as we were wondering whether Google’s search app and lower TAC costs (revenue share with partners) made these events a net positive, another story came to light: Yahoo YHOO is apparently testing Google search after gaining flexibility from its revised search deal with Microsoft earlier this year. We don’t know yet what this means exactly, so if it will result in a partnership, but all doesn’t seem so rosy for the still-reigning champion of search.
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Company |
Last Week |
Last 6 Months |
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AAPL |
-0.24% |
+15.65% |
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FB |
-0.82% |
+8.06% |
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YHOO |
-1.70% |
-22.57% |
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GOOGL |
-1.03% |
+1.07% |
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MSFT |
-1.89% |
-7.26% |
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INTC |
-1.50% |
-18.62% |
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CSCO |
-3.43% |
-3.60% |
Other stories you might have missed–
Corporate
Leadership Changes at Intel: Intel INTC announced the departure of three veterans: President Renee James, wearables chief Mike Bell and former head of the mobile and communications group Hermann Eul. Bell may continue at the company in a different role, but the others appear to be on their way out.
Josh Walden, the general manager of Intel’s New Technology group, will now head all R&D teams. Aicha Evans has been elevated to the management committee. Wendell Brooks, who heads M&A, gets an expanded role as the head of Intel Capital. Intel’s restructuring and reorganization efforts are intended to lower costs, streamline operations and better focus on its R&D efforts and growth.
Alibaba Building Delivery Hub Network: Cainiao Supply Chain Management Co, in which Alibaba BABA owns a 48% stake, has an ambitious target of setting up huge delivery hubs around five of China’s largest cities. The company will also set up a network in the U.S., Russia, Brazil and Spain. The two-year old company could be heading for an IPO to finance the massive venture according to President Judy Tong. China’s logistics system has for long been relegated to smaller local players many of which have come together as Cainiao to develop synergies.
Legal/Regulatory
Apple Loses Appeal in Ebook Case: A federal appeals court set aside Apple’s arguments in favor of its ebook deal with the leading publishers. In 2013, Apple had been found prima facie guilty under the Sherman Act for conspiring to raise ebook prices. The practical evidence showed that Apple’s agreements with publishers in fact raised prices. The publishers have already settled.
Apple said it is considering its next steps, and if it finally decides to settle, it will be required to pay $450 million, which isn’t a big deal for the company. The fight is a question of the company’s reputation and not much more at this stage.
YouTube Wins In Germany But Gets Slap on the Wrist: A Munich court ruled that Google would not have to pay the demanded $0.004 per view of some 1,000 videos that Gema, a group of 70,000 performing artists picked out. YouTube says it has over a billion users that upload 300 hours of video every minute, so it can remove any video only after it has been informed of a copyright violation.
And this is where it lost a battle at a Hamburg regional court. The court ruled that of the 12 instances cited by Gema in this case, YouTube hadn’t acted promptly enough to remove the infringing material in 7. The court said that YouTube had no responsibility in case of the other 5.
But the ruling feels ambiguous because it apparently also said “If such a service provider has been made aware of a clear violation of the law, it must not only remove the content, but also take precautions to avoid further infringements of copyrights.” The ruling will be published in two weeks when the parties will decide their courses of further action.
Supreme Court Won’t Hear Google Appeal: The Supreme Court has avoided getting into the fight just yet, although being the ultimate court of appeal, it might have to consider it at a later date, when further facts and arguments are available. For now, all we know is that Google cant speed things up by getting the Supreme Court to weigh in at this stage.
The court that overturned a prior ruling in favor of Google said that APIs are subject to copyright protection until “either the Supreme Court or Congress tells us otherwise.” An API is a building block and open-source APIs are used by developers to facilitate interoperability.
The case appears to be assuming greater importance because of the changing nature of computing that is increasingly moving to the cloud. The inability to copyright and commercialize APIs in this context could make development more expensive. Yahoo and Hewlett-Packard are reportedly siding with Google while Microsoft, EMC and NetApp are taking the opposite view.
Yelp Attacks Google: A Yelp-funded report has been prepared by academics and presented to regulators in Europe where the local site alleges that Google deliberately degrades search results. The problem cited by Yelp in this case is Google’s One Box, which is displayed at the top of the search results and intended to answer customer queries without so much as a click.
The largely flawed argument is unlikely to draw much attention with regulators but could be used to keep Google in court rooms. A recent survey by Mizuho Securities between Jun 15 and 19 showed that of the 1,000 participants, 43% used Google Search or Google Now apps, 21% used the Google Maps app and 15% used the Yelp app when searching for local information like restaurants and stores.
New Technology/Products
Facebook’s New Plan to Spread Internet: Facebook is apparently working on a new laser technology to spread Internet access across the world. The company’s earlier Internet.org initiative hit a snag in some geographies, because it offered free access to select services from a handful of companies, indirectly hurting others. This was particularly an issue in India where “net neutrality” made the headlines for quite a while, alienating local support from news sites and others for the Facebook initiative.
Microsoft to Offer Skype Business Services: Microsoft is building on its Office 365 cloud offerings by adding Skype Meeting Broadcast, PSTN Conferencing and Cloud PBX with PSTN calling services to the package. The service will be available for U.S. users later this year, at which time pricing will also be available.
The meeting service will connect up to 10,000 people through browser or mobile. The calling services allow companies to replace or supplement landline services and Microsoft says it has the necessary agreements with telecom partners. The company is targeting $20 billion in corporate cloud service revenue by 2018.
Baidu Latest Entrant Into China’s Online-To-Offline Market
M&A and Collaborations
Cisco to Acquire OpenDNS: Cisco expects the IoT market to jump to 50 billion devices by 2020, so along with others, it provided initial funding to develop OpenDNS technology (replacing the service provider’s DNS servers with OpenDNS ones). Cisco will now pay $635 million to these others to gain sole access to the technology and its 65 million users. The technology, which is offered as-as-service will add another layer of security to Cisco networking solutions and enable customers to take greater control of their own security.
Alibaba Wants Stake In India’s Paytm: Sources with knowledge of the discussions told Reuters that the two companies are in advanced talks for Alibaba to invest $600 million in online payments platform Paytm for a 40% stake. Ant Financial, Alibaba’s finance arm, already owns a 25% stake in Paytm’s parent. The fresh cash infusion values Paytm at $4 billion. This was neither affirmed nor denied by the companies officially.
Alibaba Entertainment Deal in China: Alibaba has joined hands with film maker DMG Entertainment and Hunan Satellite TV to bundle subscription-based Internet, cable and mobile entertainment through its Tmall set top box for the first time. The initial audience being targeted is Hunan’s six million cable TV subscribers. It promises games, movies and TV shows to customers. If successful, the arrangement will be expanded to all of China, or that is certainly the plan according to an Alibaba spokesperson.
Pandora Closes Next Big Sound Acquisition
Some Numbers
Apple Gains Smartphone Share: According to comScore MobiLens and Mobile Metrix, Apple gained more U.S. market share in the three months ended May 15 to end at 43.5% with Samsung quite a distant second at 28.7%. The next three positions went to LG, Motorola and HTC.
While the iPhone continues to do extremely well, demand for the Watch appears to be trailing expectations. Last week, Pacific Crest lowered expectations slightly (2015 units down to 10.5 million from 11 million and 2016 units down from 24 million to 21 million). Factset estimates indicate that the average expectation for 2015 is 4.2 million and the average for 2016 is 14 million. For a little perspective, Smartwatch Group estimates that total smartwatch units sold from all players in 2014 were 6.8 million.
Facebook and Google Apps Most Popular: A Forrester survey of 2K people between Oct and Dec 2014 found that they spent 13% of their time inside Facebook apps and 12% of their time inside Google apps. The survey only considered those apps that were downloaded by users and didn’t consider pre-loaded apps like Apple's Mail, iMessage, Calendar and Safari browser.
Yelp Ads Overpriced: A Pacific Crest report quoted by Marketwatch says that based on an analysis of the restaurant industry and its use of technology, the review site is expensive for small businesses and independent restaurants. Larger chain restaurants also appear to be moving away, citing negative reviews.
Yelp derives a significant percentage of its revenue from the segment and has been losing credibility with customers because of the past practice of removing negative reviews. It appears that the company is wooing the wrong set of customers.
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