Daily Tech Snippet: Monday, May 4th

• Jet.com First Look: Prices Are Fantastic but Amazon Prime Shoppers Won’t Switch Over: Over the past year, yet-to-launch shopping site Jet.com has garnered a lot of attention for the gobs of investment dollars it has procured and the radically unique discounting model it’s building. Jet sells a $50 annual membership, a la Costco, which it says gives its members access to the best prices anywhere on the Web. CEO Marc Lore, who had started Diapers.com and eventually sold it to Amazon, has told Re/code that the company will make its profit from membership fees. That will free the company up to offer the lowest prices online by discounting its products with the commission fees it gets from the partnering retailers that sell stuff through Jet’s marketplace. But up until this week, there was no way for most people to know whether the site worked as promised. Two days ago, Jet.com gave me access ahead of yesterday’s private launch to 10,000 people who had signed up early. I played around with the site for a few hours, which was enough time to get a feel for how it worked and to do some price comparisons. It’s important to note that this is a first look, and that Re/code’s stellar reviews team will likely do a thorough review in the coming months. That said, here are a few thoughts. I compared prices between Jet and Amazon, and Jet won. But let’s get this out of the way at the start: It’s going to be very hard for Jet to convert Amazon Prime members to Jet membership. There are several reasons why I think Prime members, who pay $99 a year for membership, will stay put. First, Amazon sells hundreds of millions of products in the U.S. Jet sells five million products today and will offer 10 million by the time it launches publicly later this spring, according to Lore. Secondly, one of the beauties of Prime is there’s no delivery minimum, so if you only need one $20 product, you don’t have to worry about adding more products to your shopping cart to reach the free-shipping threshold. Jet’s free-shipping minimum is $35 and it charges $5.99 for orders under that threshold. Also, many Prime members don’t do much price comparing because they trust they’re getting a fair deal. They also value the two-day guaranteed delivery time that comes with Prime. Some Jet.com products — like diapers, toilet paper and cereal — will be delivered in one to two days. Other stuff, like clothes and electronics, will take two to five days to arrive. There are also additional Prime perks that Jet isn’t matching: Free same-day delivery in a growing number of cities; a large selection of free movies and TV shows to stream; and free photo storage, among other things. Lore says all of this is fine with him because there’s still more than $200 billion of online shopping sales at stake in the U.S., even when you exclude sales made on Amazon. Additionally, Jet offers savings of anywhere from eight cents more on the soap to $19.98 on the TV if I waived my right to return the item. This is a feature I haven’t seen on any other major shopping site. What’s more, Jet will deduct another quarter of a percent for paying with a Visa or MasterCard credit card or 1.5 percent if you pay with a Visa or MasterCard debit card. There’s no discount if you pay with American Express. Again, this is a unique discounting structure I haven’t seen elsewhere on large shopping sites. My experience above shows that Jet, at least now, is living up to its pricing hype. But a lot will depend on whether this discounting strategy is really sustainable and how aggressively other retailers try to match it. It’s also too early to tell whether Jet will honor its delivery times and how good its customer service will be, too.

• Tencent shares surged to an all-time high this month after the operator of the WeChat messaging service posted a jump in online advertising revenue. Hong Kong equities rose to levels not seen in seven years, boosted by Chinese investors buying through the Shanghai trading link. “Tencent’s valuation may look expensive but it’s still acceptable compared with peers in the mainland,” said Sam Chi Yung, a Hong Kong-based strategist at Delta Asia Securities Ltd. “They have new opportunities such as advertising on WeChat as well as e-commerce initiatives that may become growth engines.” Tencent advanced 43 percent this year and traded at 50 times trailing earnings, according to data compiled by Bloomberg. On the mainland, tech stocks have soared, with valuations at an average 211 times reported profits. That compares with an average multiple of 156 for U.S. companies on the Nasdaq Composite Index in March 2000. Tencent posted record net income of 23.8 billion yuan ($3.8 billion) for 2014 as Chairman Ma Huateng found new ways to make money from instant messaging and online gaming through advertising and payment services. Profit is expected to increase to 29.9 billion yuan this year and 38.4 billion yuan in 2016, according to analysts’ estimates compiled by Bloomberg. Tencent released an operating system for smartphones and smartwatches Tuesday that provides voice recognition and includes payment systems. It’s been steering shoppers to partner JD.com Inc. and expanding its game lineup to compete with Alibaba Group Holding Ltd. Tencent is trying to reach more users with deals to stream content such as HBO’s “Game of Thrones” and to make WeChat among the first applications integrated with Apple Inc.’s smartwatch.

• IHS: Apple Inc's Watch has the lowest ratio of hardware costs to retail price across any Apple phone, according to a preliminary estimate by research firm IHS after a teardown study. The hardware cost of an Apple Watch Sport model was about 24 percent of the suggested retail price compared with 29-38 percent for the iPhone maker's other products, IHS said on Thursday. (bit.ly/1zuOZMq) The Apple Watch Sport 38 mm costs $349 and the teardown shows a bill of materials of $81.20 with the cost of production rising to $83.70 when $2.50 in manufacturing expense is added, IHS said. Preliminary estimate shows Apple Watch Sport hardware costs only about 24 percent of MSRP; lowest of any Apple product examined by IHS There are several new features and manufacturing methods used in the Apple Watch Sport, including: a Pulse Oximeter, Force Touch sensor, "Taptic Engine" feedback, encapsulated modular printed circuit board (PCB) assembly and stacked-die integrated circuits (IC). “While these features have been promoted by Apple and none are necessarily revelatory,” Keller said. “It is noteworthy that many features are appearing for the first time – in combination – in one device. It could be a bellwether for other future Apple products.”

• Tesla’s Home Battery Announcement is a big deal: The coming revolution in energy storage: Late Thursday, the glitzy electric car company Tesla Motors, run by billionaire Elon Musk, ceased to be just a car company. As was widely expected, Tesla announced that it is offering a home battery product, which people can use to store energy from their solar panels or to backstop their homes against blackouts, and also larger scale versions that could perform similar roles for companies or even parts of the grid. Late Thursday, Tesla unveiled a suite of new battery products for homes, business, and even utility scale applications. The home product, dubbed the Tesla Powerwall, will store either 10 kilowatt-hours worth of energy (for $ 3,500) or 7 kilowatt-hours (for $3,000). Importantly, though, these costs do not include the cost of installing the battery or the cost of a power inverter, meaning that what a customer actually pays could be substantially more. The company says it will start to deliver the batteries in “late summer.” For those closely following developments in the energy storage space, there are two key details here that are worth considering — the cost of the battery itself, and what it would actually mean to have 10 kilowatt-hours of backup energy or energy storage in your home.When it comes to price, these numbers are hardly cheap, but they’re also lower than some analysts were suggesting — figures like $13,000 were common in press coverage prior to Tesla’s announcement. “The price points of the two Powerwall options for residential and small commercial segments will surely give minor jolts to the industry,” Ravi Manghani, an analyst with GTM Research, said in a statement. The prices are “slightly lower than what the world has come to expect of an expensive electric vehicle manufacturer. This announcement is expected to result in similarly aggressive price offers by other storage technology and system vendors.” So there are a lot of details about the energy storage future that need to be worked out, especially as the market continues to grow. But for today, Tesla definitely seems to have gotten people pretty excited.

• After a Decade of Running Shy, Start-Ups Try to Challenge Google, at Least on Mobile Search: After a decade in which entrepreneurs and investors steered clear of Google’s home turf, venture capitalists have plowed hundreds of millions of dollars into dozens of search start-ups because they say they believe the Internet giant cannot dominate search on mobile devices the way it has on personal computers. “There has been no great solution for mobile search,” Mr. Lo said. Venture capitalists financed 27 search companies in 2014 and 33 the year before — the two most active years on record, according to CB Insights, whose data on the venture capital industry goes back to 1999. The biggest jump has been in mobile search companies, according to a report CB Insights released in March, particularly companies that use “deep links” to connect mobile applications the way websites are linked on the web. Search is still a tiny start-up category, especially compared with red-hot services like ride-hailing or grocery delivery. “But as the spate of early-stage investments in mobile search matures, the area could see funding totals increase as well as the entrance of more start-ups,” CB Insights said in its report. Mobile also has several special challenges for an entrenched player like Google. With its constellation of apps and competing operating systems, mobile is a highly fragmented universe, making it harder for one company to index all of the most relevant information the way Google has indexed the web. Also, the answer to many of the most common — and lucrative — queries is neatly structured inside popular applications like Yelp, the local directory service, making it easier to create focused search products that are unlikely to sink Google but could give it “a thousand tiny leaks,” said Jeremy Kressmann, an analyst at eMarketer who covers the search business. Behind the new companies is a conviction that people use mobile phones so differently than they do desktop and laptop computers that the search business is ripe for an overhaul. “Anytime there is a platform change, everything is up for grabs,” said Keith Rabois, a partner at Khosla Ventures, which has backed a mobile search company called Relcy. “No entrepreneur would start, and nobody would fund, a new search product for the web.” The most obvious difference with mobile is that people have their phones with them all the time, giving search companies lots of contextual clues — like location — for what they might want.