Daily Tech Snippet: Thursday, November 19

• Square prices shares at 52% discount to last valuation in disappointing turn to long-awaited IPO: sources: Mobile payments company Square Inc priced shares at $9 late on Wednesday, according to people familiar with the matter, further discounting the company's valuation before it begins trading Thursday morning. Square has raised $243.5 million in its Wall Street debut, about $80 million less than expected. The price set on Wednesday puts Square's market capitalization at $2.9 billion, a 52 percent drop from the $6 billion valuation it had earned at its last private funding round. San Francisco-based Square, led by CEO Jack Dorsey, earlier this month set a price range of $11 to $13, well below the $15.46 per-share price of its most recent private financing. The steeper discount to $9 - a 42 percent drop from what investors were willing to pay a year ago - suggests widespread uncertainty about the profitability of the payments industry and the future of Square itself, which has seen slowing revenue growth. "The way that Square was valued as a private company is they were just going to disrupt everything and change payments," said Andrew Chanin, CEO of PureFunds, an exchange-traded fund for mobile payments companies. "And the reality is not that." Compounding concerns is Dorsey's dual role running Twitter Inc., a social media company struggling for a turnaround. Founded in 2009, the company started as a way for small businesses to accept credit card payments through mobile devices. It has evolved to a suite of small business services, relying on partnerships with companies such as Apple and Visa. The valuation cut triggered a ratchet, or protection investors wrote into previous funding rounds, that requires Square to sell several million additional shares. Square will begin trading Thursday on the New York Stock Exchange under the symbol "SQ". Square is one of the most prominent "unicorns," or private companies valued at $1 billion or more, to plan a public debut this year. Many have held up Square as an example of how fleeting - and at times nonsensical - private market valuations can be. There are more than 140 "unicorns" globally.

• Match Prices Its IPO at Bottom of Proposed Range as Tinder CEO Breaks Quiet Period Rule with a Bizarre Interview ("Models Beg Me For Sex") Match has priced its IPO at $12 per share, raising $400 million . The company will begin trading on the Nasdaq tomorrow, under the ticker symbol ‘MTCH.’ The $12 per share is at the bottom of the anticipated $12 to $14 proposed price range and gives the company a market cap of roughly $2.9 billion. Square, which is also going public tomorrow, just priced its IPO at $9, below the $11 to $13 price range. Match owns a group of dating companies, including OkCupid and the infamous Tinder. That particular subsidiary came under fire today after its leader gave a bizarre interview that may have broken SEC-mandated “quiet period” rules. Tinder CEO Sean Rad: Models Beg Me for Sex:, Dick Pics Aren’t Cool: Tinder’s parent company, the IAC-owned Match Group, is going public tomorrow. As the most attractive and valuable part of the company, it makes sense that Tinder’s CEO, Sean Rad, is talking to media outlets to drum up excitement for the IPO. This morning, a fresh Tinder PR disaster dropped in the form of an interview with journalist Charlotte Edwardes in the London Evening Standard. In it, Rad talks about the number of women he’s slept with (“Is 20 low?”), confuses the word sapiosexual for sodomy and condemns fame-hungry journalists. It makes sense that Rad would say some really, really stupid things in an interview. Rad was the dude who mishandled a sexual misconduct scandal (and the resulting lawsuit) that led to the exit of co-founder and CMO Justin Mateen last year. Rad stepped down as CEO last November, but got a second chance at the top job after his successor, former Microsoft exec Chris Payne, was canned in the wake of a memorable Twitter meltdown. The interview is very long and there are many different great parts. Below is perhaps the best selection from it (here’s another one: “I do not condone penis pictures — that is just not who I am”). I’m sure it will inspire a lot of confidence in investors looking to buy Match Group stock tomorrow: He’s desperate to impress on me how gallant he is, citing the fact that a “supermodel, someone really, really famous” has been “begging” him for sex “and I’ve been like, no.” She’s “taunted” him, he says, and “called me a prude.” “She’s one of the most beautiful women I’ve ever seen but it doesn’t mean that I want to rip her clothes off and have sex with her. Attraction is nuanced. I’ve been attracted to women who are …” he pauses “… well, who my friends might think are ugly. I don’t care if someone is a model. Really. It sounds clichéd and almost totally unbelievable for a guy to say this, but it’s true. I need an intellectual challenge.” He continues: “Apparently there’s a term for someone who gets turned on by intellectual stuff. You know, just talking. What’s the word?” His face creases with the effort of trying to remember. “I want to say ‘sodomy’?”

• How Amazon’s Long Game Yielded a Retail Juggernaut: Shares of Jeff Bezos’s company have doubled in value so far in 2015, pushing Amazon into the world’s 10 largest companies by stock market value, where it jockeys for position with General Electric and is far ahead of Walmart. There is a simple explanation for Amazon’s rise, and also a second, more complicated one. The simple story involves Amazon Web Services, the company’s cloud-computing business, which rents out vast amounts of server space to other companies. Amazon began disclosing A.W.S.’s financial performance in April, and the numbers showed that selling server space was a much bigger business than anyone had realized. Deutsche Bank estimates that A.W.S., which is less than a decade old, could soon be worth $160 billion as a stand-alone company. That’s more valuable than Intel. Yet the disclosure of A.W.S.’s size has obscured a deeper change at Amazon. For years, observers have wondered if Amazon’s shopping business — you know, its main business — could ever really work. Investors gave Mr. Bezos enormous leeway to spend billions building out a distribution-center infrastructure, but it remained a semi-open question if the scale and pace of investments would ever pay off. Could this company ever make a whole lot of money selling so much for so little? As we embark upon another holiday shopping season, the answer is becoming clear: Yes, Amazon can make money selling stuff. In the flood of rapturous reviews from stock analysts over the company’s earnings report last month, several noted that Amazon’s retail operations had reached a “critical scale” or an “inflection point.” They meant that Amazon’s enormous investments in infrastructure and logistics have begun to pay off. The company keeps capturing a larger slice of American and even international purchases. It keeps attracting more users to its Prime fast-shipping subscription program, and, albeit slowly, it is beginning to scratch out higher profits from shoppers.

• Goldman Says to Buy Apple Because It's Becoming a Services Company: It's time to stop thinking of Apple as a hardware company and start thinking of it as a service company. At least, that's what Goldman Analyst Simona Jankowski and her team are telling clients as they add the stock to their "conviction buy" list and call for a price of $163 in the next 12 months.  "We expect that over the next year, the focus will shift from unit growth (which is slowing given a maturing smartphone market) to installed base monetization and recurring revenues (“Apple-as-a-Service”). Apple’s model has already tilted that way with its new iPhone 6s installment plans, and we see the upcoming TV service as a powerful next step." Due to Apple's large and loyal customer base, the team argues that there is a "significant multi-year opportunity" for the tech giant to boost monetization. Jankowski's team estimates that over 90 percent of those purchasing iPhones are repeat customers, which will make it much easier for Apple to become a service-like company, especially as it launches a TV service. The timing might prove perfect for a foray into the TV space as well, with Goldman pointing towards acceleration in cord cutting as millennials are more apt to use what it refers to as "over-the-top media consumption," and the skinny bundles such as Sling TV and Vue become more common. "Theoretically, Apple could transition other products to installment plans as well, and charge customers a monthly bill that also includes its other services such as Apple TV and Music. We think a potential live TV service from Apple would be a key enabler of this transition to an “Apple-as-a-Service” business model." The shift to a service model could prove to dramatically increase Apple's average revenue per user (ARPU). Jankowski estimates that Apple's current ARPU would be $42 operating with a service business model.

• As Lyft Seeks $500M in New Funding, Leaked Lyft Financials Show the Struggles of Being No. 2 Behind Uber: In the first half of the year, the ride-sharing company generated less revenue, lost more money, and added fewer customers than projected in February. Ride-sharing pioneer Lyft is heading back to the fundraising till, but its numbers may not look that rosy to investors. The company lost $127 million in the first half of 2015 on $46.7 million in revenue, according to private fundraising documents obtained by Bloomberg. Lyft, the second-biggest U.S. ride-hailing service, is raising roughly $500 million as the company burns through tens of millions of dollars a month, according to a fundraising presentation compiled by Credit Suisse. It highlights tepid financial performance at Lyft and reveals that the company has repeatedly underperformed its own expectations. In the first half of the year, Lyft generated less revenue, lost more money, and added fewer customers than projected in February. The numbers suggest Lyft has had to burn through cash as it chases growth in a competitive industry. The willingness to spend big on growth is a costly strategy that’s becoming increasingly common in Silicon Valley. Public market investors have expressed concern about the high valuations of private technology companies recently. Fidelity Investments, BlackRock, and others wrote down their stakes in some startups this year.In the first half of 2015, Lyft spent $96.1 million on marketing. That’s more than twice Lyft’s net revenue during the same period. In one document, Lyft promotes its ability to attract new drivers and riders, even as it does so at a sizable loss. Customer discounts represent a big portion of Lyft’s marketing costs. This year, Lyft has also purchased billboards in New York’s Times Square and on Market Street in San Francisco, in addition to paying drivers big bonuses.