Daily Tech Snippet: Monday February 16

• Wall Street starts to get restless about Google's 'moonshots'; firm's R&D costs stood at highest-ever 12% of revenue in 2014, but returns were sparse: Last month, after years of promotion, Google ended a test trial of its Internet-connected glasses, called Glass. While the device seemed to have promising commercial applications in hospitals or on factory floors, its first pass at the consumer world was unsuccessful. The very public failure of Glass points to a bigger question. After patiently abiding a steep increase in research and development spending on efforts that range from biology to space exploration, Wall Street is starting to wonder when — and if — Google’s science projects will pay off. “We want companies to continue to push the envelope, but there has to be some financial responsibility around that,” said Ben Schachter, an analyst at Macquarie Securities. “We have no real insight into what’s going on.” So investors are left to guess. Two years ago, analysts estimated that Glass sales would be $3 billion to $11 billion by 2018. Google’s self-driving car project, which faces huge technological and regulatory hurdles, has been called a $200 billion opportunity by Gene Munster, an analyst at Piper Jaffray. “These are guesses at best,” he said. “Our price target is based on things that are tangible, but we say on top of that there are wild cards.” The wisdom of financing wild cards would not be under question if Google’s core advertising business — which accounts for about 90 percent of its revenue — were roaring. But its growth, while still up about 20 percent from a year ago, has slowed, and the company’s dominance in desktop search engines has been eroded as consumers spend more time on mobile phones whose tiny screens are a less lucrative ad space. Now, instead of pie-in-the-sky estimates for products that may never become reality, the focus is on more mundane issues like costs and profit margins. Research and development costs grew to about 12 percent of gross revenue last year, the highest share since the company went public in 2004. That includes the vast majority of engineers and technical expenses at the company.

• Reports that Snapdeal close to raising $400M at valuation of $4.5B - Alibaba apparently not in on the deal: Snapdeal.com, is in talks with new investors, including international hedge funds, to raise $400 million in a fresh round of funding, a person privy to the development told Techcircle.in. This round could see the estimated valuation of Snapdeal increase to $4.5 billion, more than doubling since October. Sources said the rumoured deal between Chinese e-commerce giant Alibaba and Snapdeal is not on. Snapdeal already counts eBay as a strategic investor in the company. In October last year, Japanese telecom and internet firm SoftBank Corp (which is the single largest shareholder of Alibaba) committed $627 million (Rs 3,846 crore) in Snapdeal. This is the third biggest fundraising round by an Indian e-commerce firm ever, after Flipkart’s record $1 billion funding round early in 2014 which was followed by another $700 million round later during the year. That round also included funding from other existing investors. Snapdeal has raised around $1 billion to date, the bulk of it in 2014 itself.

• China's two largest taxi apps, backed by Alibaba and Tencent respectively, to merge; post-deal valuation of $6B: Didi Dache and Kuaidi Dache, two of China's leading taxi-hailing apps, said on Saturday they would merge to create one of the world's largest smartphone-based transport services. The combined entity would be valued at roughly $6 billion, according to person familiar with the deal. The shareholding structure is unknown. The firms said the two companies, which have not announced a name for the combined entity, would operate independently under separate brands. Didi chief executive Wei Cheng and Kuaidi chief Dexter Chuanwei Lu would become co-chief executives and formally introduce the new business after the Lunar New Year, which begins on Feb. 19, the companies said. Didi and Kuaidi, backed by Chinese Internet giants Tencent Holdings Ltd and Alibaba Group Holding Ltd, respectively, have been locked in a bitter price war for the past year as each seeks to corner the massive Chinese market despite rumors of mounting losses. Didi was estimated to have a roughly 55 percent market share, with Kuaidi claiming nearly all of the rest in a December study by Analysis International.

• Apple Pay gets a vote-of-confidence from the US government: Apple chief executive Tim Cook announced on Friday a major new merchant for the company's mobile payment solution: the U.S. government. "Starting in September, Apple Pay will be available for many transactions with the federal government, like for example when you pay for admission to your favorite national park," Cook said at a White House organized cybersecurity summit at Stanford University. The company is also working with the government to make procurement cards issued to government employees for expenses compatible with the system, he said. More than 2,000 banks have already signed on with Apple to bring the service to their customers, Cook said, and it is working with the financial industry to deploy the technology to help distribute state and federal benefit programs, including Social Security benefits.The full scope of Cook's announcement was a bit unclear, but a White House fact sheet released in conjunction with the summit said Apple, Visa, MasterCard, Comerica Bank and U.S. Bank were committed to making Apple Pay "available for users of federal payment cards, including DirectExpress and GSA SmartPay cards." GSA SmartPay is the largest government payment program in the world, according to the General Services Administration — handling 87.4 million transactions worth $26.4 billion per year. That makes this a potentially big deal.

• Chinese smartphone users consume surprisingly little data - 200MB/month; only about a fourth of the global average: China has about 520 million active smartphone users right now. Unlike in most of Asia’s developing nations, China’s smartphone market is mature and close to its saturation point. Despite all this well-established growth, China’s smartphone users are still using surprisingly little data each month – in fact, they’re using just a quarter of the global average. New numbers from China’s tech ministry, MIIT, shows that mobile users in China now consume an average of 200MB of data each month (as spotted by Reuters). While that figure is going up, it’s still way below the global monthly average of 819MB. China’s mobile data usage has grown slowly from an average of 122.8 MB per month in mid-2013. 200MB is pretty small. It’s the equivalent of downloading or streaming 50 songs or two short TV shows.