Daily Tech Snippet: Friday, May 8

• Leadership Change at Alibaba: In the surprise leadership change, Mr. Ma picked Daniel Zhang, who has been at Alibaba for eight years, to lead one of the world’s largest Internet companies. Mr. Ma, in a letter to employees, portrayed the replacement of the chief executive, Jonathan Lu, as a sort of changing of the guard. ”Alibaba Group is ready to completely hand over management leadership to those of you who were born in the ’70s,” Mr. Ma wrote, adding that several other experienced Alibaba leaders would give up some day-to-day control to allow younger executives to rise. Mr. Zhang, who was born in 1972, has become well known among employees at Alibaba for his public speaking and charisma. Leading Alibaba’s investment call on Thursday, Mr. Zhang’s polished English underlined the divide between himself and Mr. Ma, who, though once an English teacher, speaks a more unorthodox, self-taught brand of the language. Within Alibaba, there is admiration for Mr. Zhang’s cosmopolitan management style, in part honed during stints early in his career at Arthur Andersen and PricewaterhouseCoopers. Mr. Lu, who is only a few years older than his replacement, is scheduled to step down as chief executive on Sunday, exactly two years after he took over from Mr. Ma. At the time of his ascent, he was portrayed as a utility player who would help the ballooning start-up manage its rapid growth. Mr. Lu will remain on the board. To many Alibaba employees, Mr. Zhang, who led the rise of the company’s Tmall shopping site, is known as one of the most capable of the new generation of leaders. Mr. Zhang will need all the youthful energy he can manage to steer an e-commerce goliath that employs more than 30,000 people across the globe. He will very likely move quickly to address company inefficiencies that Mr. Ma identified last week in a speech to employees in Beijing. During the speech, Mr. Ma said the company would strive not to have a net growth in employees over the coming year. Instead, he said, Alibaba will work to transfer employees between departments and use technology to smooth operations.

• Alibaba Earnings: Revenue $2.81B, +45% Y/Y; GMV $97B , 40% Y/Y; Shares up 7% despite slowest growth in 11 quarters: Alibaba Group Holding Ltd (BABA.N) on Thursday posted a 45 percent rise in quarterly revenue, and shares of the Chinese e-commerce company jumped nearly 7 percent as investors cheered a smoother-than-expected transition to mobile transactions, which surpassed those from personal computers for the first time. The total value of transactions made on Alibaba's platforms, known as gross merchandise volume (GMV), grew 40 percent to $97 billion in the quarter ended March 31. This was the lowest rate of growth in at least 11 quarters, despite sales on mobile devices growing 257 percent year-on-year to account for 51 percent of overall GMV. Alibaba may also be facing e-commerce user saturation. The increase of annual active buyers, or customers who buy at least one product a year via Alibaba, was the smallest in 3-1/2 years, up 5 percent from the previous quarter to 350 million. The group will continue investing in areas such as digital entertainment, cloud computing and mobile Internet, Chief Financial Officer Maggie Wu told a conference call. Zhang will also take on decelerating profit growth. Alibaba's net income excluding extraordinary and one-off items grew 16 percent year-on-year, a far cry from 48 percent growth the previous year and triple-digit gains in the 12 months before that. Alibaba's quarterly revenue jumped 45 percent to $2.81 billion, beating the average analyst estimate of $2.77 billion according to Thomson Reuters I/B/E/S. Shares jumped 6.9 percent to $85.54 at midday in the U.S. trading session.

• Facebook Launches In-App Purchase Install Ads: Facebook is combining its lucrative app install ads with deep linking so a specific in-app purchase page opens once the app downloads. The result is a powerful new tool for direct marketers that sell products and services through apps. Direct marketing is popular on the web where users can see an ad for a specific product and quickly open it in a new browser tab to make a purchase. But on mobile if a merchant sells through an app, it first must convince people to download their app, then hope customers follow through by digging into the app for the purchase highlighted by the ad. Facebook is now letting deep linking handle that last chore instead, which could increase conversion rates to the point that app install ads and direct marketing can be one and the same. I call these “in-app purchase install ads”, and they could help Facebook blow past the $3.32 billion in ad revenue it earned last quarter. Imagine a Facebook mobile News Feed ad for HotelTonight. The business doesn’t just want downloads. It wants people to buy hotel rooms that earn it a commission. So it targets an ad to people currently in Los Angeles who normally live in San Francisco– people likely to be on an impromptu trip to LA. Previously, HotelTonight could entice app installs by making its ad say “Get a hotel room tonight in New York City”. But if a user clicked through and downloaded the ad in hopes of booking one of those rooms, they’d have to search for New York City once the app installs. That’s a lot of effort, especially when it can take a minute or so to download apps. Users might get distracted, forget why they downloaded the app, or just be too lazy. In this case, HotelTonight may have paid to get an app install, but didn’t earn money from a sale. Now, HotelTonight could configure its in-app purchase install ad to immediately open the search results for tonight’s available rooms in NYC, or the purchase page for a particular room it thinks you’re likely to want. You don’t have to remember much or do extra work. You start much closer to purchase conversion, and HotelTonight is much more likely to earn a return on investment. Facebook already sells app re-engagment ads that drive people to specific pages inside apps they’ve already downloaded. These are often used to catalyze purchases in an app someone might not remember they even have on their device. But by merging this deep linking with the instant gratification and high conversion rates of app install ads, and the urgent calls to action of direct marketing, Facebook has spawned a different ad type all together.

• With Stock at 2-year Low on Weak Earnings, Yelp seeks a buyer - shares surge 16% on news: Yelp Inc. shares surged 16 percent after the Wall Street Journal reported the online-review website is exploring a sale. The company is working with investment bankers and has been in touch with potential buyers, the paper said, citing people familiar with the matter. Shares of the San Francisco-based company were halted after the report, and jumped to $44.48 after trading resumed. Last week, Yelp’s stock plummeted to its lowest level in almost two years after slipping ad sales raised concerns the company is losing its share of major advertisers. Yelp operates websites that let users search local businesses for free and read reviews about them. The company charges for advertising on those sites. It had 142 million unique monthly visitors in the first quarter, an increase of 7.6 percent from a year earlier. Yelp, which has a market value of about $3.3 billion, would be a good acquisition for Google Inc., Yahoo! Inc., Facebook Inc. or even travel sites such as Priceline Group Inc. and TripAdvisor Inc., said Kerry Rice, an analyst at Needham & Co. “They’ve done a great job building out local advertising and weaving together the small and medium business market, which is a really hard market to be successful in,” Rice said. “I think it’s going to have to be a hefty premium considering how high their stock price has been.”

• Google, Dominant in Search, Tries Disruptor Role in Wireless and Broadband: In the stodgy wireless service industry, long dominated by AT&T and Verizon, with struggling Sprint and feisty T-Mobile a distant third and fourth, the possibility that a new competitor might upend this cozy oligopoly has long been considered a pipe dream. When the Justice Department sued to block the proposed merger of AT&T and T-Mobile in 2011, it concluded it was highly unlikely that other competitors would enter the market. Last year, Sprint abandoned its bid for T-Mobile after the Justice Department suggested that deal, too, would be anticompetitive. But now Google’s entry into wireless — named Project Fi — has changed the conversation about competition in that market, even though Google said the move was still an experiment. “I’m delighted that Google is doing this,” said Scott Hemphill, visiting professor of antitrust and intellectual property at New York University School of Law. “This is an industry that’s ripe for disruption.” Google’s wireless business certainly seems disruptive. It takes direct aim at the fat profit margins and high prices of the dominant firms. Google is charging $20 a month for basic voice and text service, and $10 for a gigabyte of cellular data, according to a blog post on the company’s website. And in a move unheard-of among traditional wireless providers, Google will rebate payments to customers for any unused data. Google’s service also uses a combination of innovative technology and partnerships with existing cellular providers to overcome its lack of wireless spectrum. Project Fi uses Wi-Fi networks whenever possible (hence its name) and, when Wi-Fi isn’t available, moves seamlessly to cellular networks. The cellular networks are provided by Sprint and T-Mobile, the current cell service underdogs. In the high-speed broadband market, even the prospect of Google’s coming to town has caused entrenched providers to improve their service in anticipation of a new competitive threat. After Google said it would bring its fiber service to the Charlotte, N.C., market, Time Warner Cable announced it was offering a free higher-speed upgrade to its customers there.