Daily Tech Snippet: Wednesday, May 6

• Ahead of Earnings, Alibaba's Shares are at Post-IPO Low, Even as Rivals JD, Tencent have Surged: After Alibaba Group Holding Ltd. raised a record $25 billion last year, founder Jack Ma said the Chinese e-commerce company faced the danger of high expectations. He might be right. About $70 billion of market value has evaporated since Ma made that statement in November as investors worry about slowing growth. Alibaba’s dominance at home as a marketplace for buyers and sellers of goods is being undermined by a Chinese economy projected to grow at the slowest pace since 1990 and a consumer shift to mobile shopping that crimps advertising revenue. While investors have punished Alibaba, an index of U.S.- traded Chinese companies has jumped by 17 percent this year. Rival e-commerce operators have also surged with JD.com Inc. rising 46 percent in New York and Tencent Holdings Ltd. gaining 40 percent in Hong Kong through Tuesday. The two companies have joined forces to compete against Alibaba. Tencent is trying to drive the 1 billion users of its WeChat and QQ chat apps to JD.com, which recently started a service to speed imports to Chinese buyers. As JD.com, China’s second-biggest e-commerce company, “ups its game,” said Mark Tanner, founder of China Skinny, a Shanghai-based research and marketing agency, Alibaba’s previous growth “seems unsustainable in the medium term.” Ma’s push outside China also has yet to gain traction -- its presence in the U.S. and much of Europe remains negligible. Results due Thursday are expected to show that the pace of Alibaba’s revenue expansion fell below the average of the previous seven quarters. Shares of Alibaba closed Tuesday at $79.54 in New York, 33 percent below their November peak and the lowest since the Hangzhou-based company sold stock at $68 apiece in its initial public offering in September. Alibaba currently gets less than 5 percent of its revenue from outside China, Ma said in March on a company Twitter account. Alibaba’s sales probably rose 41 percent in the fourth quarter to 16.9 billion yuan ($2.7 billion), according to the average of 23 estimates compiled by Bloomberg. That compares with an average of about 50 percent during the past seven quarters. The company’s strategy of expanding in under-served regions of China and overseas is driving up marketing costs as more consumers shop on mobile devices, where ads typically generate less revenue than those on desktop computers. Operating income will probably shrink 18 percent to 4.5 billion yuan, according to the estimates.

• Brand Safety and Twitter's Porn Problem: Twitter Scrambles for an Ad Fix as Nielsen's Promoted Tweets Show Up in Porn Feeds TV company pulled its campaign today. Twitter has a porn problem, and it caused one brand to temporarily halt a campaign today. Nielsen, the television and digital data company, pulled the plug on its Promoted Tweets after they appeared near adult content on the site. Nielsen's promos showed up on Twitter profile pages called "Daily Dick Pictures" and "Homemade Porn." Ads are not supposed to appear on a profile page if X-rated content is posted there, and a bug was to blame, a source familiar with Twitter's technology said. "As Twitter works to resolve this issue, we have temporarily suspended our campaign," a Nielsen spokesman told Adweek. Nielsen was not alone, either. Marketers' promos from Duane Reade, NBCUniversal and Gatorade also showed up in feeds of pornographic photos and videos. Brand safety is an issue across the digital advertising ecosystem, where it is difficult to police every website and social media post. Twitter rivals like YouTube and Facebook also have dealt with racy or offensive content that concerned advertisers. Twitter is in a particularly tough position—it has to monitor 300 million active accounts filled with user-generated content—and its troubles with not-safe-for-work material have been raised before. The San Francisco tech company has been trying to clean up its site—not just accounts that share NSFW pictures, but also those that support terrorism or harass other users. It recently introduced a quality filter that removes abusive or offensive tweets from a user's timeline. But just last week, Robert Peck, a SunTrust Robinson Humphrey analyst, wrote a report warning that Twitter ads were appearing near pornography and that brands would pull back on spending if the problem became more widely known. Peck estimated there could be as many as 10 million Twitter accounts dedicated to sharing pornography and that Twitter needs to do a better job of blocking them.

• Aftermath of Secret's Shutdown: Google Ventures Managing Partner Criticizes Founders for 'Taking Money Off the Table': For many in Silicon Valley, the rapid rise and precipitous fall of Secret, the prominent start-up that recently closed its doors, will most likely serve as a cautionary tale of how not to run a company. For Google Ventures, one of Secret’s earliest backers, it will also be a reminder of the type of company not to invest in. The product of two former Google employees, David Byttow and Chrys Bader, Secret attracted intense media interest early in its life. The app let users anonymously share “secrets” to their network of close friends and friends of friends, an activity that quickly caught on among founders, investors and the media of Silicon Valley. It also helped that Secret took some early rounds of funding from Google Ventures and Kleiner Perkins Caufield & Byers, two big venture capital firms. After the flurry of attention and just a few months later, Secret opted to raise another round of financing, this time seeking $25 million. Bill Maris, managing partner of Google Ventures, did not think it was a good idea and the company did not participate. “We advised them against it,” Mr. Maris said in an interview, referring to Secret’s leaders. “We told them they didn’t need the money. And raising that much money that soon, it was going to be impossible to meet the expectations in the future.” The discussion could be considered a case of life imitating art, or perhaps vice versa: In a recent episode of Silicon Valley, the satirical HBO series, a young start-up founder is offered millions of dollars from multiple venture capital firms at high valuations. Ultimately, the founder is advised to instead accept a lower offer, in order to make future funding rounds more achievable and growth targets reasonable. That is not what the founders of Secret chose to do. The company completed its $25 million financing led by Index Ventures and Redpoint Ventures, along with a variety of individual angel investors. In that round, the two founders each wanted to take $3 million off the table for themselves, a practice that is commonplace for more mature companies, but less so for very young start-ups. Not joining the $25 million round proved to be a wise choice for Google Ventures. Downloads of Secret declined over 2014, according to App Annie, an app analytics service. Secret redesigned its entire app to look like a near-perfect clone of Yik Yak, a competing service, but traffic did not improve. Many employees, including Mr. Bader, left the company. Last week, Mr. Byttow said he was shutting down his company, and would return the remainder of the money to the venture capital firms. Neither Mr. Byttow nor Mr. Bader have said if that includes the $6 million the two of them took off the table and deposited into their bank accounts.

• In 2014 Jabong’s GMV grew 2.5x to Rs1320Cr; Ended Year with INR 289 Crore Cash; Lost INR 454 Crore on EBITDA Basis: Rocket Internet-incubated lifestyle e-tailer Jabong.com more than doubled its gross merchandise value (GMV) to Rs 1,320.6 crore during the calender year ended December 31, 2014. The firm’s GMV captures value of total transactions, excluding taxes and shipping costs but including value of paid vouchers and coupons. The firm had ended 2013 with GMV of Rs 511.4 crore, data pulled from its latest annual statistics show. The data is net of returns and cancellations. Jabong shipped 8.7 million orders last year of which 5.9 million transactions represented products sold by Jabong while another 2.8 million orders or close to one in three orders were through its marketplace. This means the firm handled on an average 23,835 orders a day last year as compared to 16,164 in 2013. The company’s net revenues (which captures the sales by the firm as against GMV which includes sales by third party vendors too, for which the company just gets a listing fee) grew 2.3x to Rs 811.4 crore last year. Meanwhile, its loss at an operating level as captured by EBITDA (adjusted for share based compensation) rose to Rs 454 crore as against Rs 236 crore in 2013. This means, for every Re 1 worth of sales it books directly (not covering third party vendors), it is losing around 56 paisa. This is still an improvement over the previous year when it was booking operating loss of over two thirds (68.5 per cent) of whatever it sold. The firm did see its cash position dwindle as a result ending 2014 with Rs 289.4 crore as against Rs 853.2 crore the previous year.

• Home Depot Aiming to Put Apple Pay in Its 2,000 Stores: Home Depot Inc. has the goal of offering Apple Inc.’s mobile-payment platform at its more than 2,000 stores, which would make it the largest retailer yet to accept Apple Pay. Customers already were able to use Apple Pay at some of Home Depot’s stores despite there not being an agreement. The world’s largest home-improvement retailer could accept mobile payments at those locations because its checkout terminals have near-field communication readers. Those devices have now been turned off for the past few weeks during an upgrade of its point-of-sale system, Holmes said. That led to some inaccurate reports that Home Depot had dropped Apple Pay. If it pushes ahead with the plan, Home Depot would join chains like Macy’s Inc. and Whole Foods Market Inc. in embracing Apple Pay at stores. Many other retailers are betting on a mobile-payment option from the Merchant Customer Exchange, which was founded in 2012 by companies such as Wal-Mart Stores Inc. and Target Corp. That offering, CurrentC, is still being developed.

• 3-D Printing Is Saving the Italian Artisan: Italy’s craftsmen turn to a new tool in their competition with cheap products from China. Northeast Italy’s industrial heartland stretches roughly from Milan to Venice, along the floodplains of the Po River all the way to the Adriatic. Like much of the rest of the country, however, the region has fallen on hard times. Italy’s craftsmen have been undermined by competition from China and other parts of Asia. Since the beginning of the global economic crisis, the northeast’s industrial sector has shed about 135,000 jobs—some 17 percent of its total workforce. Techniques such as the 3D printing used by Pomini and Armani have helped turn northeastern Italy into an unlikely hothouse of innovation. Last year growth in the region was positive for the first time since 2007, at 0.5 percent. Exports rose by 3.5 percent in 2014 and are expected to keep climbing. In the province of Trento, for instance, the public and private sectors together invest some 2 percent of gross domestic product in research and development. At the Centro Moda Canossa—a trade school in Trento for children age 14 to 18 specializing in fashion design and tailoring—the faculty recently added a class in which students incorporate 3D printing, laser cutting, and microcontroller chips into their designs. “You can’t offer a job from the past. Nobody will come,” says Michele Bommassar, 36, the school’s vice director. “You have to offer the jobs of the future.” He points to a student project, a purse with a laser-cut pattern on its flap and an interior that lights up when it’s opened: “It’s beautiful, but we believe it is also necessary. The alternative is to be eaten by others.” At their best, these technologies inject elements of the digital economy into the physical world, allowing a galaxy of small companies to compete with multinationals, in much the same way homemade YouTube videos hold their own against traditional video production. The advent of rapid prototyping and other innovations means “you can compensate for your disadvantages with variety, customization, and a rapid response to what the market is demanding,” says Paolo Collini, a business professor and the dean of the University of Trento. Or, as Armani puts it: “If something doesn’t work, you simply stop producing. You haven’t filled a warehouse. For a designer, it’s a dream. You can take more risks.”

• Salesforce shares spike on report of Microsoft evaluating bid: Shares of Salesforce.com Inc (CRM.N) jumped as much as 6.4 percent on Tuesday after a Bloomberg report that Microsoft Corp (MSFT.O) was evaluating a bid for the cloud software provider. Salesforce shares rose from $71.4 to $75.82 in about a minute late Tuesday afternoon, after which trading was temporarily halted. The stock closed 1.6 percent higher at $72.75. Microsoft shares closed down 1.3 percent at $47.60. Microsoft is evaluating a bid after Salesforce was approached by another potential buyer, Bloomberg reported, citing people with knowledge of the matter. Microsoft is not in talks with Salesforce, and no deal is imminent, the report said. Bloomberg had reported last week that Salesforce was working with financial advisers to help it field takeover offers after being approached by a potential buyer. The news sent the company's shares up as much as 17.3 percent to an all-time high of $78.46 last Wednesday.