Daily Tech Snippet: Wednesday, March 18

• Facebook continues edging into commerce - introduces free friend-to-friend payments through messages: (More here and here) Facebook‘s instant messaging service isn’t just for sending smiley faces and photos anymore. Now you can use it to send money instantly to your friends. Facebook, the social networking company, announced Tuesday that American users of its Messenger app would be able to link their debit cards to the service and use it to message money to one another just as easily as they send a snapshot or text. Given Facebook’s huge size and reach, the introduction of its payments feature — which has been highly anticipated by Wall Street — is likely to cause tremors in the nascent market for instantly sending money to individuals, known as peer-to-peer payments. And analysts said that if the payment system succeeded, Facebook would extend it to other types of purchases, such as consumers’ buying of products directly from advertisers. “Facebook could use this as a back door to get people’s debit cards to enable the buy button,” said Robert Peck, an Internet analyst with SunTrust Robinson Humphrey. WeChat, which is essentially the Facebook of China, and other Asia-based communications services like Alipay already allow their hundreds of millions of users to send money via instant message. But the technology is only beginning to appear in the United States, where email payment services like PayPal have long been more popular. As messaging has begun to eclipse email as the preferred form of electronic communication, especially among younger users, Facebook has sought to dominate that market much as it dominates social networking. The company’s Messenger app is one of the largest platforms in the world, with more than 500 million monthly users. And last year, Facebook spent nearly $22 billion to buy WhatsApp, a separate messaging platform that now counts more than 700 million active users globally. In the United States, a host of peer-to-peer money transfer services have emerged and are trying to capture the wallets of messaging enthusiasts.

• "Insights as a service" - IBM introduces twitter-fueled data services for business: IBM is betting a fair share of its future on exploiting large troves of data for its business customers, and Twitter is a big-data fire-hose with 6,000 tweets a second, more than half a billion each day. And Twitter’s data-licensing business, though still a small part of the company, is growing rapidly. IBM and Twitter are bringing out the first products on Tuesday, developer tools and cloud-based data analysis services that mine Twitter data. The data services run on IBM’s Watson artificial intelligence technology and on its flavor of Hadoop, the open-source software for processing big data across computer clusters, IBM BigInsights. The developer tools will allow people to write applications that pull in Twitter data. In recent months, IBM has trained more than 4,000 engineers and consultants on using Twitter data in business projects. Its goal is to have 10,000 IBM employees with Twitter data-handling skills. And IBM has worked with more than 100 corporate clients so far, in a range of industries and projects. “We thought the early interest would be in consumer products and marketing, but it has turned out to be much broader than that,” said Alistair Rennie, general manager of IBM’s analytics business. The early work, he said, included companies that want to tap the Twitter data to help guide product development and plan manufacturing schedules. IBM is not naming the companies that have tried out its Twitterized technology, but it did describe a few examples of what it calls “insight as a service.” It combined tweets with hyper-local weather data to help predict where disgruntled telephone or cable customers, whose service might be impaired by severe weather, were most likely to switch suppliers. Using the data-fueled predictive models, customer churn was reduced by 5 percent, IBM says. Another case involved an unnamed drink and food retailer with thousands of shops. IBM blended Twitter data with sales tracked on loyalty cards and smartphone apps, as well as employee data. It found that the company’s best customers were the ones most influenced by turnover in the chain’s sales associates. In short, the human touch matters most to your most loyal customers. IBM has plenty of competition in mining social media data for insights. Rivals include big companies like SAS Institute, Adobe, Oracle and Salesforce, and start-ups like Crimson Hexagon and DataSift. IBM’s deal with Twitter is not exclusive. But David Schubmehl, an analyst at IDC, said that more than its competitors, IBM was focused on applying the Twitter data to a wide range of uses, beyond marketing to tasks like churn analysis, talent management and product development. IBM, Mr. Schubmehl said, is ahead of most of its rivals in its knowledge of many industries. “And it’s the combination of internal corporate data and external data from sources like Twitter where the real payoff is going to come from,” he said.

• Apple, banks at odds over who is to blame for high fraud rates on Apple Pay: A raft of headlines over the last week about unusually high fraud rates from thieves using stolen credit numbers on Apple Pay has exposed what many of the banks privately acknowledge they have been trying to fix for months. An industry consultant, Cherian Abraham, put the fraud rate at 6 percent, compared with a traditional credit card fraud rate that is relatively minuscule, 10 cents for every $100 spent. Mr. Abraham wrote in a blog post, one of the first to spotlight the issue, that the Apple Pay fraud “is growing like a weed, and the bank is unable to tell friend from foe. No one is bold enough to call the emperor naked.” It is not clear, however, that Apple is the naked emperor. More likely it is at least as much the banks’ fault, if not more. Apple Pay itself should, in theory, cut down on fraud because it makes stealing credit card information almost impossible. Each time a transaction takes place, Apple generates the equivalent of a new credit card number so the merchant never actually sees a customer’s information. The vulnerability in Apple Pay is in the way that it — and card issuers — “onboard” new credit cards into the system. Because Apple wanted its system to have the simplicity for which it has become famous and wanted to make the sign-up process “frictionless,” the company required little beyond basic credit card information about a user. Nor did it provide much information to the banks, like full phone numbers and addresses, that might help them detect fraud early. The banks, desperate to become their customers’ default card on Apple Pay — most add only one to their iPhones — did little to build their own defenses or to push Apple to provide more detailed information about its customers. Some bank executives acknowledged that they were were so scared of Apple that they didn’t speak up. The banks didn’t press the company for fear that they would not be included among the initial issuers on Apple Pay. Within weeks of Apple Pay’s introduction, a second set of banks joined: Barclays, Navy Federal Credit Union, PNC Bank, USAA and U.S. Bank. It also appears that banks set up a flawed process to deal with the credit cards that it did flag. Affected users were directed to a customer care phone center, not a fraud prevention center. A customer care center’s mission is to help customers use their cards, leading more fraudulent cards to be approved for use on Apple Pay. Call centers are a poor approach for two reasons,” Mr. Abraham wrote. “One — fraudsters are better at social engineering than call center reps are at sniffing out fraud. In some cases, fraudsters are calling the call center themselves to ‘alert the bank about a trip out of town’ so that fraud rules looking for transaction anomalies (like a customer living in California and transacting in Miami) do not trip them up.” Some Apple supporters have sought to discredit Mr. Abraham based on his affiliation as an adviser to a company that is based on Apple’s main competitor, Android. While he may indeed be conflicted, he has rightfully raised an important security issue that all sides have acknowledged is a problem, though perhaps not to the extent he has contended. All of this has led to a thriving black market in which thieves enter stolen credit card numbers into iPhones, essentially turning the devices into physical credit cards, which they in turn take to stores and walk out with merchandise. Thieves have even used Apple Pay at Apple Stores. In a statement, Apple put the problem squarely on the shoulders of the banks: “During setup, Apple Pay requires banks to verify each and every card and the bank then determines and approves whether a card can be added to Apple Pay. Banks are always reviewing and improving their approval process, which varies by bank.” Apple has now begun providing additional information to the banks that should help deter some of the fraud. The banks, which are responsible for the costs of the frauds, have toughened standards to review customer sign-ups on Apple Pay. No bank executive would speak with me on the record for fear of upsetting their company’s relationship with Apple. If you’re asking yourself, “Why are criminals more inclined to use Apple Pay than just use stolen credit cards at an online retailer?” it’s a good question. It is apparently much easier for banks to catch thieves using stolen credit cards with online retailers because of the delay in shipping a product — it can often take days — as well as the extra information that every online retailer requires, like an address where the product is to be shipped.

• Oracle quarterly earnings: revenue $9.33B, 0% Y/Y. Shares up 1.7% on dividend hike, strong PaaS revenues: Oracle Corp. reported fiscal third-quarter sales that missed analysts’ estimates, hurt by a rise in the U.S. dollar and weak corporate demand for cloud software. Revenue in the period that ended Feb. 28 was little changed from a year earlier at $9.33 billion, and profit before certain costs was 68 cents a share, the Redwood City, California-based company said Tuesday in a statement. On average, analysts projected $9.47 billion in sales and profit of 68 cents, according to data compiled by Bloomberg. Without the effect of the stronger dollar, revenue would have gained 6 percent, Oracle said, sparking optimism that the company is making headway with its push into corporate cloud services and sending the shares up in extended trading. The software maker also boosted its dividend by 25 percent to 15 cents a share, up from the prior payout of 12 cents. The company last raised its dividend in 2013, according to data compiled by Bloomberg. Oracle shares rose 1.7 percent in late trading following the report and dividend increase. The stock fell 1.2 percent to $42.87 at the close in New York, leaving it down 4.7 percent this year. Third-quarter net income fell to $2.5 billion, or 56 cents a share, from $2.57 billion, or 56 cents, a year earlier. Combined sales in Oracle’s cloud software, platform-as-a-service -- known as PaaS -- and infrastructure businesses were $527 million, up 29 percent from $408 million a year earlier. The company started disclosing cloud revenue in June. In the long term, Oracle’s transition to the cloud should benefit the bottom line, Catz said on the conference call. “For every million dollars of license we sell, we expect to collect another million dollars of support over five years for a total of $2 million,” she said. “While for every million of PaaS we sell, we actually expect to collect $5 million over five years.”

• Adobe quarterly earnings: revenue $1.11B, shares slide 3.8% on weakness in cloud sales: Adobe shares fell late Tuesday after the company reported lower-than-expected subscription growth for its Creative Cloud service and forecast second-quarter earnings and revenue below analysts’ estimates. Adobe increased its Creative Cloud subscriptions 28 percent to 517,000 in the fiscal first quarter, missing the 575,000 average of two analysts’ estimates compiled by Bloomberg. The company projected second-quarter sales of $1.125 billion to $1.175 billion and profit, excluding some items, of 41 cents to 47 cents a share. Analysts expected $1.18 billion and 48 cents, according to the average of 19 estimates. Adobe has introduced cloud-based marketing and creative-design tools as part of its push to generate more sales from subscriptions instead of software installed on computers. Revenue and profit declined in 2013, the year after the transition began, but have recovered as customers are getting used to the new way of buying software. “People are realizing they don’t necessarily need the full suite,” said Norman Young, an analyst with Morningstar Inc., who has a hold rating on the stock. “Our worry is, how are they going to raise prices over time and get people to move over from the point solutions to the full suite?” To encourage people to buy more products, Adobe will add more services, such as stock photos from Fotolia, a company it acquired last quarter. The new offerings should lead to a boost in revenue per user “this year” from that integration, Chief Financial Officer Mark Garrett said in an interview. Adobe fell 3.8 percent to $76.66 in extended trading at 7:25 p.m. New York time. The San Jose, California-based company had gained 17 percent in the past 12 months through the close. Sales were $1.11 billion and profit, excluding some items, was 44 cents a share in the period ended Feb. 27, Adobe said Tuesday in a statement. Analysts had on average projected revenue of $1.09 billion and profit of 39 cents, according to data compiled by Bloomberg.

• Rumor negates rumor: Alibaba may not invest in Snapdeal: Alibaba may scrap plans to invest in Indian online marketplace Snapdeal, technology website Recode reported, citing a person who was familiar with the matter. Last week, a person informed about the deal had told Reuters that Alibaba was in talks with Snapdeal over a potential cash investment in what could have been the Chinese e-commerce giant's first direct investment in India. Alibaba has held discussions with Snapdeal about a possible investment, but the Chinese company is leaning away from investing in Snapdeal right now, Recode said. Snapdeal competes in India with bigger rivals Flipkart.com and Amazon.com, and media reports had said it was seeking $1 billion in its latest funding round to fuel growth. Alibaba and Snapdeal's talks, however, did not involve a deal close to the $1 billion number reported, Recode cited the source as saying.

• Pinterest valued at $11B on new round of fund-raising: Less than a year after being valued at $5 billion, Pinterest has joined the 11-digit valuation start-up club. Pinterest, an online scrapbooking service, disclosed on Monday that it raised about $367 million in a new round of financing from new and existing investors. It valued the company at $11 billion, putting the start-up in roughly the same range as the Silicon Valley darling Dropbox and the data analysis company Palantir Technologies. In a regulatory filing, Pinterest disclosed that it could raise as much as $211 million in additional financing, bringing its potential haul to $578 million. That would be on top of the $764 million that the nearly five-year-old start-up has raised in previous rounds. Interest has been so ardent that the start-up has nearly tripled its valuation in just about a year and a half. Pinterest has shown strides in expanding and developing revenue, especially with so-called promoted pins that advertisers can buy. Advertising will continue to be a main focus this year, company executives have said.