Daily Tech Snippet: Friday, May 1st

• LinkedIn, Twitter, Yelp - recent Internet darlings - each slumped by more than 20% this week on weak earnings: A trio of social media stocks is getting pummeled this week, a sign that Wall Street may be unwilling to overlook missteps at some of its Internet darlings. LinkedIn on Thursday plunged as much as 25 percent in after-hours trading after the professional social networking company forecast second-quarter sales that were weaker than Wall Street estimates. The drop followed the declines of two other social networking companies. Twitter shares are down around 25 percent this week after the company reported quarterly sales that fell short of expectations, while local reviews site Yelp plummeted 23 percent on Thursday, a day after it too posted sales that disappointed Wall Street. The performances illustrate the way investors are questioning whether social media companies can keep their growth rates vigorous enough to justify their valuations. The stocks of all three companies had traded at relatively high levels, reflecting Wall Street’s giddy projections. Yet all three shattered that perception in their own way. And while many of these stocks are often volatile, with investors on edge about the weak economy, interest rates and other issues, shareholders increasingly have little tolerance for the slightest misstep. “Based on where some of these stocks were trading, expectations were already very high and were priced for relative perfection,” said Colin Sebastian, a senior analyst for Robert W. Baird & Company. “The reaction when companies don’t achieve great results can be fairly severe.” Any continued rockiness in the stocks could cause repercussions. Last year, several technology companies — including the online storage firm Box — delayed their initial public offerings because of turbulence in tech stocks. A protracted swoon in public tech companies could also trickle into their privately held counterparts. These companies have been frothy lately, with start-ups daily hitting $1 billion-plus valuations and renewing talk of a bubble in Silicon Valley.

• Linked earnings: Q1 revenue $637M (+35% Y/Y), net loss $42M; shares slump 27% LinkedIn Corp slashed its full-year profit forecast, citing slower revenue growth at its hiring business and a delay in recognizing the contribution of lynda.com, the online education company it has agreed to buy. Shares of LinkedIn fell as much as 27 percent after the bell on Thursday. The professional social network operator agreed this month to buy lynda.com for about $1.5 billion and expects to close the acquisition in the second quarter. LinkedIn forecast 2015 profit of $1.90 per share, excluding items, on revenue of about $2.90 billion. It had earlier forecast earnings of $2.95 per share on revenue of $2.93 billion to $2.95 billion. Revenue growth from the company's hiring business slowed to 36 percent for the first quarter ended March 31. The business, which the company calls Talent Solutions, accounted for about 62 percent of total revenue. Mountain View, California-based LinkedIn reported a net loss attributable to shareholders of $42.5 million, or 34 cents per share, for the first quarter, compared with $13.4 million, or 11 cents per share, a year earlier. Revenue rose to $637.7 million from $473.2 million.

• How mental illnesses help entrepreneurs thrive. Michael A. Freeman had long noticed that entrepreneurs seem inclined to have mental health issues. The clinical professor of psychology at UC-San Francisco’s medical school spent a decade at a company where his clients were the founders of businesses. He estimates that about a third of them seemed to have some type of mental health condition. He still notices the trend today in his work coaching executives. Freeman and California-Berkeley psychology professor Sheri Johnson decided to take a deeper look at the issue. They begun polling entrepreneurs and found a strong link between mental health conditions and entrepreneurship. “The people that we admire for being entrepreneurs seem to come from the same gene pool as the people who are kind of socially stigmatized because of mental health conditions,” Freeman said. “They must confer some adaptive advantage otherwise they wouldn’t be so highly represented in the population.” Forty-nine percent of entrepreneurs surveyed reported at least one mental health condition. Nearly a third reported having two or more mental health issues, such as ADHD, bipolar disorder, depression, anxiety or substance use conditions. And half of the entrepreneurs who reported no mental-health conditions identified themselves as coming from families with a history of mental illness. This may seem counterintuitive. Why would an unstable person be most attracted and suited to launch a business? Freeman points out that there’s a beneficial side to these mental health conditions. Those weaknesses come with corresponding strengths that the average healthy person doesn’t have. For all of its ills, depression also brings empathy and creativity. Martin Luther King Jr. and Mahatma Gandhi attempted suicide as teenagers. Uncommon levels of empathy can allow a businessman to better understand a customer’s need. And a creative mind won’t be satisfied on the corporate ladder, but instead in a fast-moving start-up where he or she can unfurl ideas and dreams. Individuals with ADHD naturally make decisions faster, are comfortable working independently and are more creative, necessary skills at a start-up. They’re likely to be bored working for someone else.

• Rocket Internet-backed Foodpanda raises $100M led by Goldman Sachs: Foodpanda.com, a Rocket Internet-backed global, multi-location online food ordering marketplace (which operates under Hellofood brand in some markets), has raised $100 million funding led by global financial services giant Goldman Sachs, the company said. Existing investors including Rocket Internet also participated in the latest round. This round takes the total funding raised by Foodpanda to date to $310 million. Foodpanda will use the funding to expand its last-mile delivery operations and improve customer experience across 40 markets. The new investment comes barely two months after Rocket Internet led a $110 million funding round in the company. A few unnamed new investors also participated in that round. “We believe that Foodpanda has a tremendous opportunity to cement its emerging markets leadership position in the coming years. It is our expectation that the company’s innovative, value-added offerings will lead Foodpanda to be the winner in online food delivery within the markets in which it operates,” said Ian Friedman, vice president at Goldman Sachs Investment Partners. The company had raised $60 million from a group of investors, including existing investors Falcon Edge Capital and Rocket Internet last August. In February the same year, it had raised $20 million from Phenomen Ventures, a Russia-based venture capital firm, and a group of unnamed investors. Prior to that, Foodpanda had received $8 million in funding from iMena Holdings, an online consumer business group operating in the Middle East and North Africa (MENA) region in September 2013. Before that, it had raised over $20 million from a group of investors that included Investment AB Kinnevik, a Sweden-based investment company, and Phenomen Ventures. Existing investor Rocket Internet also invested in the round. “The emerging markets represent the largest opportunity in online food delivery and we are committed to create the most convenient way for ordering and delivering food,” said Ralf Wenzel, co-founder and CEO of Foodpanda. Founded in April 2012, Foodpanda features location-specific listing of restaurants on its site. Users can check out menus, along with special offers, post that they can order and get food delivered to their homes. One can also search for restaurants according to cuisine, and/or by other parameters such as vegetarian/non- vegetarian, healthy food, etc. According to the company, it has partnered with over 45,000 restaurants in 40 countries globally. Foodpanda had acquired two key rivals in India over the past few months—Just Eat India and TastyKhana—to cement its position as the top player in the business in the country. It is now facing a bunch of competitors with restaurant review site Zomato starting online food ordering and new VC-backed startups like TinyOwl among others. Recently it started its own food logistics business with last mile delivery from restaurants to the consumers who order online through its site. Earlier, Foodpanda was just an online ordering platform.

• Apple, IBM and Japan Post See Profit in the Old-Age Market: Japan is an incubator of aging. More than other country, it is a graying nation. Twenty-five percent of its population, or 33 million people, are age 65 or older, more than double the global average. IBM, Apple and Japan Post Group, a giant postal service, bank and insurer, declared on Thursday that they were joining to deliver a new technology service to the fast-growing market of older Japanese adults. The service involves equipping Japan’s silver generation with iPads loaded with software apps to help them communicate with family and friends, monitor their health, and buy goods and services. For IBM and Apple, the initiative is another step in the partnership they formed last year, mainly to create mobile apps for corporate workers. The project with Japan Post goes beyond the workplace into homes. Quality-of-life services for aging populations will certainly be a big, if broad and diverse, marketplace. And Japan is a prime test bed. Citing the nation’s geriatric demographics, Taizo Nishimuro, chief executive of Japan Post, said, “Many countries will be facing the same issue soon.”

• Leaked Lyft Document Reveals a Costly Battle With Uber: Behind the friendly pink mustaches and fist bumps, Lyft is spending furiously to maintain second place in the U.S. ride-sharing industry, and steal market share from the distant leader, Uber Technologies. The expensive battle plan helped Lyft claim a fourfold increase in active passengers on 2.2 million rides in December 2014, but growth is beginning to slow, according to a company presentation to investors that was obtained by Bloomberg. Lyft estimates $130 million in revenue for 2014, according to the document.The presentation offers a revealing look inside a company that's sweeping U.S. cities, and attracting the attention of venture capitalists and regulators. The presentation, compiled for its $530 million fundraising round announced on March 12, includes recent and projected revenue, ridership figures, marketing costs, and other data about the business. Lyft and Uber aren't publicly traded, and neither company discloses financial information about its operations. Lyft and Uber declined to comment In addition to providing a window into its business, Lyft had some choice words for its chief rival. The presentation describes Uber as a "top-down model," with an "exclusive mentality" and "anti-social culture." While the 40-page document does not detail Lyft's operating expenses or losses, it does illustrate the mounting costs of marketing the service. Lyft estimates that the company spends a combined $530 on marketing to each driver and 22 passengers in San Francisco, and it takes about nine months to recoup those costs through its Lyft Classic service—not to be confused with the carpooling option, Lyft Line. The company expects to spend 60.5 percent of its revenue on marketing in December 2015, the document says. A ride booked in San Francisco through the Classic service generates a 92-cent profit for Lyft, including marketing costs but excluding corporate expenses, such as software developers and office space. Lyft co-founder John Zimmer told Bloomberg in January that the company is profitable in San Francisco and its other most established markets. The $130 million in revenue for 2014 is based on the combined net revenue from Lyft Classic and gross revenue from Lyft Line during the month of December, which implies $10.8 million in revenue during that month. Using the same calculation, Lyft reports revenue of $12 million in 2013. (Tallying gross revenue from Lyft Line, which includes money paid out to drivers, has the potential to significantly distort the company's 2014 revenue and growth, as well as projections, because the service didn't exist in 2013. However, the document says it does so for the purposes of generally accepted accounting principles.) Lyft projects $796 million for 2015, a slowdown in growth but still an impressive 512 percent jump from 2014. In the interview from January, Zimmer said the company's revenue and rides rose fivefold last year. Despite ride-sharing companies' attempts to guard financial details, Uber has faced similar leaks. The company generated $22 million in revenue during a one-week period in November 2013, according to an internal dashboard posted to the blog Valleywag. Uber drivers were completing more than 100,000 trips per week in each of its largest cities, and San Francisco had about 70,000 active users a week in December 2013, according to a separate report in Business Insider. Uber said on Jan. 22 that it has more than 160,000 active drivers in the U.S. who give more than a million rides a day. Lyft has seen similarly staggering growth in the number of drivers and riders using the service. In December 2012, Lyft had 400 drivers giving 40,000 rides a month; by 2013, it had 7,000 drivers and 488,000 rides a month; in 2014, it was 51,000 drivers and 2.2 million monthly rides, according to the document. The number of people booking rides through the app each month rose from 9,000 in 2012 to 631,000 last year. Though currently unprofitable, Lyft's ride economics appear to be going in the right direction. The company increased its share of each fare from 6.7 percent in July 2014 to 25.7 percent in December, the document says. The increase is expected to be less dramatic this year, reaching 26.2 percent in December 2015, according to the company's forecast. The investor presentation also touts its progress with city officials, citing 28 new regulations in six states last year. The document illustrates Lyft's obsession with quick pickups. In San Francisco, the time between a ride request and the car's arrival in December 2014 was 2.62 minutes, an improvement from 3.1 minutes in August. The average time in all of Lyft's markets fell to 3.9 minutes from 4.18 minutes during the same period. It seems the war with Uber could be measured in seconds.