Daily Tech Snippet: Monday, March 23

• Fidelity, T. Rowe Price, BlackRock, all giant US money managers, are adding Uber, Airbnb, Pinterest and other private tech investments to mainstream portfolios: Tech Money Sends Funds on the Hunt for Unicorns: The retirement accounts of millions of Americans have long contained shares of stalwart companies like General Electric, Ford and Coca-Cola. Today, they are likely to include riskier private stocks from Silicon Valley start-ups like Uber, Airbnb and Pinterest. Big money managers including Fidelity Investments, T. Rowe Price and BlackRock have all struck deals worth billions of dollars to acquire shares of these private companies that are then pooled into mutual funds that go into the 401(k)’s and individual retirement accounts of many Americans. With private tech companies growing faster than companies on the stock market, the money managers are aiming to get a piece of the action. Fidelity’s Contrafund includes $204 million in Pinterest shares, $162 million in Uber shares, and $24 million in Airbnb shares. Over all, there were 29 deals last year in which a mutual fund bought into a private company, and they were worth a collective $4.7 billion, according to CB Insights. That was up from six such deals, worth a combined $296 million, in 2012. T. Rowe Price was the most active big investor, making 17 investments in private tech companies. Because these tech companies are not required to issue financial reports and are not traded on traditional exchanges, they are the sort of speculative investments not normally found in retirement accounts. Increasingly, however, investors are betting that these companies will be bought or go public at prices that exceed their latest funding rounds, a prospect that is anything but guaranteed. “I think it goes beyond what mutual funds were set up to do,” said Leonard Rosenthal, a professor of finance at Bentley University in Waltham, Mass. “It’s great for the portfolio manager, but it’s not necessarily in the interest of the shareholders of the fund. If investors are looking for a portfolio of risky securities, there are plenty of stocks to trade in the public market.” The dilemma for big fund managers is that fast-growing technology companies are so reluctant to sell private stock to the public that there is now a term — “unicorns,” reflecting just how wonderful and magical they are considered to be — for the dozens of private firms worth $1 billion or more. Several, including the ride-hailing company Uber, the room rental site Airbnb and the digital scrapbook Pinterest are worth more than $10 billion. Those lofty valuations, combined with the eagerness investors show in bidding them up, have created a shadowy market for private stock issued to tech companies’ early investors and employees. For the last few years, mutual funds have sat on the sidelines. Now, they are racing to get in. “More and more, the big lopsided growth is happening away from the public markets,” said Andrew Boyd, head of global capital equity markets at Fidelity. Take Uber, which was valued around $40 billion in its latest round of financing, up from $3.5 billion in mid-2013. That is more than 1,000 percent growth, compared with 28 percent for the Standard & Poor’s 500-stock index over the same time period.

• China’s Internet Boom seems to fade: Half of the 14 Chinese dot-coms that debuted in the U.S. last year are now trading below their initial sale prices. Even Alibaba Group Holding Ltd., one of those still up in price, has dropped 28 percent from its record high in November. On average, the 14 Chinese shares are down 3.1 percent this year, compared with a 6.1 percent advance in the Nasdaq. Investor confidence, so high when Alibaba brought its record $25 billion initial public offering to market last September, is being undermined now by a wave of poor earnings at Chinese technology companies. Those that went public last year including Weibo Corp., the microblogging service, and mobile dating app developer Momo Inc. have failed to deliver the revenue investors were expecting. Sixteen of 28 Internet and technology firms in Bloomberg’s China benchmark reported fourth-quarter earnings below analysts’ forecasts, including search engine Baidu Inc. and video website Youku Tudou Inc. The percentage of stocks that slid below their IPO levels this year was the highest since 2011, when a series of corporate scandals eroded investor confidence, data compiled by Bloomberg show.

• Shoppers on Lazada last year spent $350 million as ecommerce booms in Southeast Asia: Rocket Internet’s Amazon-esque Lazada saw more than US$350 million in consumer purchases in 2014, group CEO Maximillian Bittner tells Tech in Asia. US$70 million of that spending (termed gross merchandise volume, or GMV) happened in December alone, due to Christmas and special promotions like the 12/12 sales day. The 2014 spending tally represents strong growth for Lazada from US$89 million in 2013. Lazada is this week celebrating its third anniversary. It operates in Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. Lazada started out doing only direct sales to consumers from its own warehouses, but that changed in the fall of 2013 as the company launched a marketplace for third-party merchants. Those merchants now take in 70 to 75 percent of the consumer spending on the estore, Bittner reveals. They’re a “core driver of growth” on Lazada, he adds. There are now 15,000 merchants using the site as an online storefront. “It’s not a target to be a 100 percent marketplace,” Bittner emphasizes. “It depends on the best price for consumers” and other factors such as whether Lazada itself or third-party merchants have better purchasing power. Indonesia is Southeast Asia’s largest single market, and Bittner says the archipelago is the top market for Lazada. Indonesia’s shoppers made up over 30 percent of Lazada’s 2014 spending tally. While Indonesia has an array of homegrown rivals to Lazada – from well-funded Tokopedia to the new Matahari Mall – Bittner says the nation is not necessarily a tougher market than the other Southeast Asian countries. “There’s a growing dynamic of excitement” about Indonesia’s ecommerce scene right now, adds Bittner. He adds that exclusive online gadget sales for brands like Xiaomi and Motorola have helped Lazada greatly in Indonesia. Xiaomi uses Lazada as its sole sales channel in both Indonesia and the Philippines.

• Touted by some as the next Facebook, Meerkat is living the dream of every app creator. Three weeks after launching, it is enjoying viral growth. It’s been the talk of SXSW. Presidential candidates and celebrities are using it. It’s been called the new technology that will affect the 2016 presidential election. Prominent investors want to help fund it. 1. Its numbers are multiplying. Meerkat told me Thursday that its user base is growing 30 to 40 percent a day since SXSW started March 13. It signed up 120,000 users in its first two weeks, so should be closing in on the one million user mark. (Thirty-five percent daily growth compounded over a week would put it just short of one million) 2. Its founder is a genuinely likable guy. In a recent interview with Re/code, chief executive Ben Rubin corrected an interviewer who credited him as “the man behind the app Meerkat,” saying “We’re the team behind the app Meerkat.” 3. Meerkat is obsessed with making its user comfortable. If you talk with anyone on the Meerkat team, they’ll almost certainly use the word “comfortable.” It’s a value that’s guided their decisions, including embracing the trend toward vertical video on smartphones. “We wanted to lower the barrier to entry and make the behavior as comfortable and as familiar as possible given that the medium is still pretty unfamiliar to a lot of people within the context of social media,” community director Ryan Cooley told me at SXSW. Rubin made a really interesting parallel between smartphone live-streaming and the first photographs, during a recent interview with host Ryan Hoover on Product Hunt Radio. “When the first cameras arrived, people weren’t smiling. It was weird to smile in a picture. People don’t have that habit of taking a picture or being in a picture. It evolved,” Rubin said. “With live video, we don’t have this habit. My mother didn’t live stream, I didn’t live stream when I was a kid.” The challenge for Meerkat is to make everyone — especially people who aren’t early adopters– comfortable with live streaming. Because Meerkat videos aren’t stored and can’t be rewatched later, it’s a less intimidating experience. You don’t have to worry about slipping up, and having that mistake be re-lived forever. You simply hit a button on your phone, and suddenly people are digitally right there with you.

• Google launches Retail Search Ad with local inventory offering: Early success as Sears Hometown store visits jumped 122 percent: Sears Hometown and Outlet Stores, a retailer fighting for every sale, has evidently found a weapon in Google's Local Inventory Ads that it says works to drive consumers to its stores. The digital marketing product is still fairly new from the search giant, launched last year, and holds the promise of finally helping brick-and-mortar brands take advantage of the online world rather than always getting beaten by it. With that in mind, the Sears spinoff company has been running Google's shopping ads that target by location and reveal whether a product is actually in a location. As part of a Google report today, the retail company claimed that such information has worked to generate 122 percent more visits to its 1,240 shops under the Sears Hometown and Outlet Stores brand. The Hoffman Estates, Ill.-based chain's click-through rate was 16 percent higher on inventory ads when compared to other ad products. "The ad unit is terrific for a mobile experience," said David Buckley, CMO of Sears Hometown and Outlet Stores. "It's highly relevant to where you are, and it's served with an image, price attributes, and how far you're standing from that product. It's the ultimate search ad product for mobile. You can't ask for more than that."

• Ola diversifies to add a mobile-only food ordering option: Online cab booking service Ola (formerly Olacabs), run by Mumbai-based ANI Technologies Pvt Ltd, has expanded its business area by adding a location-based online food delivery option under Ola Cafe. Unlike its core business, where one can book a cab ride through the web or through the mobile app, the food ordering option is restricted to its app, making it a mobile-only feature. The new feature is available on the latest update of the Ola app. The firm said this is currently in beta stage. The company plans to go pan-India but, to begin with, it has started the service in four cities — Mumbai, Delhi, Hyderabad and Bangalore. Moreover this is not for ordering from restaurants across the city but only from those located near to the user and in some identified areas. The service can be availed from 12 pm to 11 pm. The company did not disclose the number of restaurants it has tied up so far. It did not say if it proposes to use cabs in the vicinity, which do no have a passenger on board yet, to make the deliveries. Users can pay by either Ola money (it’s closed online wallet) or cash on delivery. The delivery person will call customers to confirm the address, just the way a driver of cab or auto currently calls to confirm addresses for pick-ups. Users can also track the person handling the food delivery via the app, like one can do a cab approaching the user.

• Hackers Attack GreatFire.org, a Workaround for Websites Censored in China: For years, a group of anonymous activists known as GreatFire.org has monitored online censorship in China, provided access to blocked websites and collected messages deleted by censors. This week, unidentified hackers have tried to put an end to those activists’ efforts with an unprecedented attack. In a post to its blog Thursday, GreatFire.org said it has experienced a massive so-called denial of service attack. The method is one that hackers frequently use to foil websites by flooding them with multiple requests — so many that they go offline and viewers see a blank page. GreatFire.org creates encrypted versions of 12 websites that are blocked in China. These are known as mirrored websites and grant users within China access to the content. On Thursday, GreatFire.org said it was receiving 2.6 billion requests an hour for its mirrored websites. On Friday, access to the mirrored websites was inconsistent in China. GreatFire.org’s name is inspired by the Great Firewall, the term often used to describe China’s Internet censorship. About two million people in China access GreatFire’s websites each month, a co-founder of the group who uses the pseudonym Charlie Smith, wrote in an email exchange. It was unclear who was responsible for the attack, which began Tuesday from inside and outside China, Mr. Smith wrote. GreatFire.org noted in its blog post that its tactics were the recent subject of a report in The Wall Street Journal, which appeared online Monday. The timing for the attack was a mystery. “Maybe that WSJ story,” Mr. Smith wrote. “Maybe because there have been some excellent Chinese-language news pieces and perhaps somebody who supports the authorities took issue with them. In the past there has rarely been rhyme or reason on the timing of such attacks.” GreatFire.org’s mirroring services provide unrestricted access within China to a range of websites, including itself and the Chinese language version of The New York Times, which has been regularly blocked in China. Some of the others are Deutsche Welle, BBC News, China Digital Times, Google.com, and Boxun, a Chinese-language news website. GreatFire.org says it does not mirror The Wall Street Journal. GreatFire.org works directly with some, but not all, of the websites it mirrors. GreatFire.org is partly funded by Open Technology Fund, a United States government-financed initiative under Radio Free Asia. Last year it provided $114,000 in funding, according to its website. Mr. Smith declined to comment on any financial backing. The Chinese government has in the last year ramped up efforts to prevent its citizens from accessing critical news coverage from abroad and from communicating on social media platforms that the government cannot directly censor. China has long disrupted many of Google’s services. Facebook, Twitter and YouTube remain blocked. LinkedIn agreed to censor its content to operate in the Chinese market last year. GreatFire’s mirroring websites circumvent the Great Firewall by channeling Internet traffic through cloud services, such as one available from Amazon. The difficulty for the Chinese government is that it can’t just shut off Amazon’s service, because it is used broadly by many major Chinese corporations. Emails to the Chinese Foreign Ministry and the Chinese embassy in Washington went unanswered as of Friday evening.

• Web-hosting giant GoDaddy files for $481M IPO, seeking $2.87B valuation: US-based GoDaddy.Inc, an internet domain registrar and web hosting solutions provider, has fixed the price band for its initial public offer (IPO) which may raise $480.7 million, including the portion allocated to the underwriters. It proposes to list on the New York Stock Exchange (NYSE), as per a disclosure this week. The firm is offering shares at $17-19 a unit which would value the company as much as $2.87 billion. GoDaddy first attempted to go public in 2006 but ultimately withdrew. It had refiled for an IPO in June 2014. The IPO proceeds will primarily be used for repaying some of the debt the company. took on as part of a 2011 buyout by private-equity firms Silver Lake, KKR & Co. and TCV Investments. GoDaddy currently manages 57 million domains which accounts for around 21 per cent of the world’s registered domains. Since its buyout, it has acquired other services, including Mad Mimi, which helps small businesses promote themselves by email, and Locu, which makes software that manages business-contact information across sites like Yelp and OpenTable. Services made up 8 per cent of its revenue in 2014. The company’s revenue last year was $1.4 billion, up from $1.1 billion in 2013. Its 2014 net loss, which included $85 million in interest costs to service debt, narrowed to $143 million from $200 million a year earlier. As of December 31, 2014, it had approximately 12.7 million customers, and in 2014, it added more than 1.1 million customers. In 2014, the firm generated $1.7 billion in total bookings up from $939 million in 2010, representing a compound annual growth rate, or CAGR, of 16 per cent.