Daily Tech Snippet: Friday January 30

• China is cracking down on long-tolerated VPN workarounds, making internet censorship even more pervasive: China has long had some of the world’s most onerous Internet restrictions. But until now, the authorities had effectively tolerated the proliferation of V.P.N.s as a lifeline for millions of people, from archaeologists to foreign investors, who rely heavily on less-fettered access to the Internet. But earlier this week, after a number of V.P.N. companies, including StrongVPN and Golden Frog, complained that the Chinese government had disrupted their services with unprecedented sophistication, a senior official for the first time acknowledged its hand in the attacks and implicitly promised more of the same. The move to disable some of the most widely used V.P.N.s has provoked a torrent of outrage among video artists, entrepreneurs and professors who complain that in its quest for so-called cyber-sovereignty” — Beijing’s euphemism for online filtering — the Communist Party is stifling the innovation and productivity needed to revive the Chinese economy at a time of slowing growth. Multinational companies are also alarmed by the growing online constraints. Especially worrisome, they say, are new regulations that would force foreign technology and telecom companies to give the government “back doors” to their hardware and software and require them to store data within China. Like their Chinese counterparts, Western business owners have been complaining about their inability to gain access to many Google services since the summer. A few weeks ago, China cut off the ability to receive Gmail on smartphones through third-party email services like Apple Mail or Microsoft Outlook. The recent disabling of several widely used V.P.N.s has made it difficult for company employees to use collaborative programs like Google Docs, although some people have found workarounds — for the time being. By interfering with Astrill and several other popular virtual private networks, or V.P.N.s, the government has complicated the lives of Chinese astronomers seeking the latest scientific data from abroad, graphic designers shopping for clip art on Shutterstock and students submitting online applications to American universities.

• Alibaba Q4 earnings disappoint: revenue $4.2B (+40% Y/Y), net income $964M, (-28% Y/Y), GMV $126.4B (+49% Y/Y), stock down 8%: Alibaba said that in the quarter that ended on Dec. 31, its net profit jumped to $2.1 billion, above the $1.9 billion estimated by 23 analysts polled by Reuters, using figures derived from nonstandard accounting rules. Alibaba’s revenue rose to $4.2 billion from a year earlier but missed the $4.5 billion estimate of 27 analysts polled by Reuters. Alibaba also reported net profit using generally accepted accounting principles of $964 million, a drop of 28 percent from a year earlier. The company cited costs related to stock awards before its listing, taxes and fees. 

• Amazon Q4 earnings: revenue $29B, +15% Y/Y; surprise $214M profit sends stock up 13%: Amazon reported a quarterly profit of $214 million Thursday, besting its own estimates and surprising investors. The news was enough to send the company's stock up more than 13 percent to about $350 in after-hours trading. Revenue was up 15 percent to $29.33 billion. But analysts were expecting $29.67 billion. Analysts were anticipating 17 cents a share in profits, according to Thomson Reuters. When the retailer earned nearly three times that — 45 cents — on improved margins, it was a sign that maybe the sizable profits that all true believers in Amazon expect are on the way at last. Profits, however, were down from the fourth quarter of 2013, when Amazon earned 51 cents a share. Prime is surging: Amazon’s delivery service, Prime, is surging. Amazon said its worldwide paid membership in Prime rose 53 percent in 2014. A price increase for Prime to $99 apparently discouraged few customers. Analysts say they think Prime has around 40 million members, although the company declined on Thursday to give a number or offer any hard facts about how much a new Prime member increases his shopping. India was called out at the Amazon earnings call: Among the big e-commerce battlegrounds in the near future will be India. Amazon said on Thursday that it was already India’s largest e-commerce operation, just two years after opening. “We think it’s very, very early,” Mr. Szkutak said. “We are investing.”

• Google Q4 earnings: revenue $18.1B, +15% Y/Y; net income $4.76B, shares flat on indifferent results: In the last three months of 2014, Google’s net revenue growth slowed to 10 percent when compared with the same quarter a year ago, according to an earnings report released Thursday. While impressive for a company with more than $60 billion in revenue, it is well short of the recent results of other tech industry standard-bearers, like Apple and Facebook. Google’s search business would still be the envy of most companies. Revenue from Google’s own sites, which includes things like its search engine and YouTube and accounts for a little more than two-thirds of the company’s business, increased 18 percent compared with a year ago. Indeed, Google’s share of search ad spending in the United States, including desktop and mobile devices, was 71.6 percent in 2014, according to eMarketer. In a conference call with Wall Street analysts, Google executives declined to answer questions about the company’s lesser-known businesses. But there were some indications of progress. Google said revenue in the “other” category — including the Play Store, where people can buy digital goods like mobile applications or streamed movies, and other services Google sells to businesses — increased 19 percent from the same quarter of last year, to $1.95 billion. The company reported revenue of $18.1 billion in the fourth quarter of 2014, a 15 percent increase from the same period last year. Net revenue, which excludes payments to Google’s advertising partners, was $14.5 billion. Net income was $4.76 billion in the quarter, compared with $3.38 billion in the fourth quarter of 2013. Earnings per share, not including certain charges, were slightly below analyst expectations. Analysts had also expected net revenue — the figure excluding advertiser payments — to be $14.8 billion, according to Bloomberg. Notably, research and development costs rose to $2.8 billion from $2.1 billion in the same quarter a year ago, stoking fears that efforts Google executives like to call “moonshots” — like investing in a private rocket company — are adding to expenses with no hope of a financial return in the near future.The report comes at a rough time for Google’s stock. Shares in the company, as of Thursday morning, were down about 10 percent since April 2014, a period in which the Standard & Poor’s 500-stock index has increased and peers like Facebook have rallied 25 percent. Google shares were up a little more than 1 percent in after-hours trading after the results were announced.

• Chinese government seems to back down on report criticized Alibaba: Hovering over the results was a white paper about Alibaba issued on Wednesday by the State Administration for Industry and Commerce, or S.A.I.C., a Chinese regulator. The letter said the agency had discovered “the long-term existence of illegal problems regarding the management of transaction activity and other issues.” The agency said that it presented findings to Alibaba executives in a July 17 meeting at the company’s headquarters in the eastern city of Hangzhou, but that it had kept the results confidential at the time so as “not to affect Alibaba’s preparations for a stock market listing.” Alibaba began trading on the New York Stock Exchange in September. Though the end result of the S.A.I.C. investigation is not yet clear, by Thursday afternoon Alibaba appeared to have scored a victory against the regulator when the white paper was removed from the agency’s website without explanation. In New York trading on Thursday, the company’s shares closed more than 8 percent lower.

• More Alibaba Stats: GMV Taobao marketplace reached RMB 494 billion (US$79.3 billion) in gross merchandise volume (GMV), That’s up 43 percent from the same period in 2013. Sister site Tmall hit RMB 293 billion (US$47 billion) in GMV, up 60 percent from 12 months ago. In total, Alibaba’s China estores saw RMB 787 billion (US$126.4 billion) in spending (GMV) in Q4, which is up 49 percent from the same period a year before. Annual active buyers on Taobao and Tmall grew to 334 million, up from 231 million the year before. Mobile GMV rocketed to RMB 327 billion (US$53 billion) in Q4, up 213 percent annually. Mobile GMV accounted for 42 percent of total GMV in Q4 2014, compared to 20 percent in Q4 2013. Mobile monthly active users (MAUs) grew to 265 million, which nearly doubled from the 136 million figure 12 months prior.

• AWS results will be broken out separately going forward; AWS will continue to dominate capex: One question investors always have about Amazon will soon be solved. The company said it would start breaking out numbers for its cloud computing platform, AWS, after the current quarter. AWS is growing much faster than Amazon as a whole, although price wars with other leading players are presumably cutting into profitability. Revenue in the “other” category, which is dominated by AWS, was $1.74 billion in the fourth quarter, up 41 percent. AWS is likely Amazon's most profitable division, some opine: Still, the shift is a good sign for investors, who have been clamoring for Amazon to disclose more about its fastest-growing and likely most profitable division that some analysts say accounts for 4 percent of total sales. The change seemed unlikely until AWS made up 10 percent of Amazon's net sales, the threshold at which U.S. securities regulators require disclosure. Szkutak also added that a large portion of Amazon's capital expenditure will go toward AWS, which has stepped up its efforts to win over lucrative contracts with large, corporate clients.

• Worryingly the gap between Amazon’s growth rate and that of the North American e-commerce industry narrowed to a sliver last year. The Seattle-based company’s growth is decelerating even as Chief Executive Officer Jeff Bezos invests in speedier delivery and gadgets. In 2014, Amazon’s sales in North America -- its biggest region by revenue -- rose 23 percent, compared with 16 percent for the e-commerce market in the U.S. and Canada, according to researcher EMarketer Inc. The seven percentage point difference is the smallest since at least 2009, the earliest that EMarketer started keeping track of such data. In 2011, Amazon’s North American sales grew at 41 percent, about 2.5 times the 17 percent pace of the e-commerce market. The diminishing gap highlights just how much Amazon’s once breakneck pace of growth has slowed. The online retailer is confronting challenges, including a large size that makes moving the needle on sales more difficult, as well as more competitors stepping up their online efforts.