Daily Tech Snippet: Thursday, July 30

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• Facebook Revenue Tops Estimates; Shares Drop as Spending Surges: Facebook, buoyed by robust advertising sales, signaled that it will keep up its brisk pace of investments to attract users and advertisers. Spending climbed 82 percent in the second quarter as the social-media company increased hiring, poured money into data centers and boosted marketing. While that was more than double the rate of sales growth, Facebook still managed to top analysts’ revenue estimate, crossing the $4 billion mark for the first time. Net income shrank to $719 million from $791 million a year earlier, while the operating margin, a measure of profitability, narrowed to 31 percent from 48 percent. Revenue rose 39 percent to $4.04 billion. Yet Facebook also signaled that it wouldn’t let investments grow uncontrollably. The company forecast that expenses will rise 55 percent to 60 percent this year, compared with a previous range of 55 percent to 65 percent. Facebook is improving tools for advertisers and expanding the audience for its mobile applications beyond Facebook itself, including Messenger, Instagram and WhatsApp, which have yet to contribute meaningfully to revenue. Monthly active users for Facebook’s main social network jumped 13 percent to 1.49 billion, with 1.31 billion people logging in at least once a month via mobile. Shares of Menlo Park, California-based Facebook fell 3.4 percent in extended trading, after advancing 1.8 percent to $96.99 at the close in New York. The stock is up 24 percent this year. Facebook’s ability to keep adding users and keeping them engaged stands in stark contrast to Twitter, which is struggling to break past 300 million people. The total number of Facebook users who logged in daily rose to 968 million in June, the company said, slightly less than the 970.5 million projection of four analysts surveyed by Bloomberg.


• Samsung Electronics cautious on outlook, says mobile business environment tough: Samsung Electronics offered a downbeat outlook for the third quarter after April-June profit dropped on a supply shortage for one of its main smartphone models, underscoring continued headwinds for the tech giant. Samsung remained the world's top smartphone seller in the second quarter, but investors and analysts say the South Korean firm's inability to meet demand for its curved-screen S6 edge smartphones likely cost the firm in April-June. Second-quarter operating profit fell 4 percent to $5.9 billion, matching an estimate issued by the company early this month. But the firm doubled its interim dividend payout to 1,000 won per common share. The firm said on Thursday that the mobile division faces a tough business environment as smartphone market growth slows. On the bright side, the chips division reported an operating profit of 3.40 trillion won, up from 1.86 trillion won a year earlier on the back of healthy demand for memory chips and sales growth for its mobile processors. Overall, annual profit is expected to rebound from a three-year low marked in 2014, thanks to robust semiconductor profits and some stabilization for the mobile business. In addition to the supply shortage for the S6 edge model, some analysts are worried by softer demand from China and Europe. Research firm TrendForce last week cut its forecast for 2015 global smartphone shipment growth to 8.2 percent from 11.6 percent, citing a weaker world economic outlook.


• Alibaba cloud unit sets sights on Amazon in $1 billion global push: Alibaba said on Wednesday it would invest $1 billion into its Aliyun cloud computing arm to challenge Amazon.com's lucrative Web Services division, opening a global front in the battle between the two e-commerce giants. With the global cloud computing market estimated by analysts to be worth about $20 billion, Alibaba said in a statement the investment would go toward setting up new Aliyun data centers in the Middle East, Singapore, Japan and Europe. The firm also plans to strike business partnerships with telecom and enterprise technology providers in those regions. Although Alibaba and Amazon have so far avoided competing directly in their core business of e-commerce outside China, Aliyun's international expansion takes aim squarely at Amazon Web Services (AWS), an increasingly central and profitable division of the Seattle-based company. Amazon shares soared last week after the company reported, among other items, an 81 percent revenue increase for AWS, which hosts Web customers like Netflix and Airbnb. As it expands, Aliyun will face stiff competition from some of the biggest names in technology. Amazon led the global cloud infrastructure market with a 28 percent share in 2014, trailed by Microsoft, IBM and Google Inc at 10, 7 and 5 percent, respectively, according to Synergy Research Group. After Amazon made a limited "beta" entry into China last year, where cloud adoption rates by businesses are far lower than in the rest of the world, Aliyun opened a data center in Silicon Valley in March to serve U.S. customers. "Our goal is to overtake Amazon in four years, whether that's in customers, technology, or worldwide scale".


• Steep Discounts a Boon for Customers, but a Gamble for Start-Upsh: Jet.com, a well-funded new shopping site, opened to the public last week and celebrated the debut by sending reporters a big box of swag. I got a T-shirt with a company logo, fuzzy socks, stickers and $1,400 in oversize, fake $100 bills. Jet is a discount site, so I suspect the funny money was meant to illustrate the cash I’d save by shopping there. But the faux bills immediately evoked a more cautious reminder — of all the money Jet plans to spend to become the next force in online shopping. It isn’t just Jet. On a venture-capital high, tech start-ups are burning through vast cash reserves to offer rock-bottom prices, and to sign up new customers with discounts, giveaways and other deals that may sound too good to be true. Jet, a Costco-like members-only discount company that has raised more than $225 million from investors before opening its doors, is only the largest such example. Forget the fake bills; for Jet, as well as for many of its smaller start-up kin, giving away real money is a key part of business. This sounds fishy. But there’s an upside: While investors’ cash lasts, consumers could be in for a boon. After all, from the perspective of customers, what’s so bad about companies giving away their venture-funneled cash? Jet’s prices may be the most ambitious. In May, I found the company was vastly undercutting Amazon, and The Wall Street Journal recently ordered a basket of goods from the site for which it calculated that Jet lost nearly $243 on a single order. In an interview, Mr. Lore was unfazed by these numbers, because, he said, they were already built into his projections. “We understand really well what these costs are now and how they’ll come down over time, and it’s simply a matter of understanding how much capital it’s going to take,” he said. In fact, he added, losing money on each order isn’t his biggest worry; instead, it’s failing to draw enough orders to get to scale. “The hard part is, can you get to $20 billion in five years?” The only way to get there, Mr. Lore said, is to keep spending. Whether or not he’s right, enjoy it.


• E-commerce firms boost Indian postal department revenues: With e-commerce platforms increasingly turning to the Indian Posts to deliver their orders to customers, the fast flourishing e-retail business has become a revenue generator for the state-run agency, whose traditional operations are dented by the deep penetration of e-mail and mobile phones. Realising the potential, the Postal Department has set up a dedicated e-commerce and parcel processing center in the country’s commercial hub Mumbai. Spread across 12,000 sq ft, the facility at Parel in the city has bagged good business in a short span, handling around 5,000 orders a day. The department officials expect at this pace the traffic would soon increase to 10,000 parcels per day. The facility has a capacity to process 30,000 parcels per day.


• Google Loon To Cover Entire Country Of Sri Lanka With Internet: Google is working on many things, and that includes balloons that fly high in the sky to bring Internet infrastructure to locations that can’t be wired for it easily. Today, Sri Lanka announced that it’s the first country to ever get universal Internet access from Google’s Project Loon. Thanks to a partnership with Google, the country promises “affordable high-speed Internet” for all of its residents. Google Loon was announced in 2013, with only incremental and anecdotal information hitting the presses up until now. This is a landmark moment for Loon, and clearly for Sri Lanka.


• GitHub Raises $250M Series B Round To Take Risks: GitHub, the software development collaboration and version control service based on the popular open source Git tool, today announced that it has raised a $250 million funding round led by Sequoia Capital. Andreessen Horowitz, Thrive Capital and Institutional Venture Partners also participated in this round. The company, which was founded back in 2008, has now taken a total of $350 million in outside funding. While the company isn’t talking about its valuation, the WSJ reports that it’s currently hovering around $2 billion. GitHub’s 2012 Series A round was led by Andreessen Horowitz. At the time, the company’s valuation was said to be around $750 million. As GitHub CEO and co-founder Chris Wanstrath told me shortly after the new round was announced, the company plans to use this new round to accelerate growth and expand its sales and engineering team (as most companies do when they raise). He also stressed, though, that the round isn’t just meant for that. “The round is not just to accelerate, but also to allow us to think bigger and take larger risks,” Wanstrath said. This means GitHub acquisitions are likely on the horizon, but he also noted that the company wants to push its international strategy forward. It recently opened an office in Japan (and hosted its first meetup there) and other locations will likely follow. There can be no doubt that Git has become something of a de facto version control system for many startups and GitHub currently leads the charge among companies that essentially offer Git as a service. Atlassian, Microsoft, GitLab and others offer similar services, both cloud-hosted and on premise, but GitHub has clearly attracted most of the mindshare in recent years. GitHub says it currently has about 10 million users who are in collaboration on over 25 million projects (that’s up from 10 million in January 2014). Given that the company offers free accounts, it’s not clear how many of these users are actually paying for the service, though (pricing starts at $5/month).


• Caller ID App Truecaller Is Raising $100M At A $1B Valuation; India Is Its Biggest Market: Communications apps that strike a chord with users across different markets are hot property these days, and it looks like another one of them may soon enter the so-called unicorn club. TechCrunch has learned that Truecaller — a caller ID app that now has 150 million users — is looking to raise around $100 million at a $1 billion valuation. We’re hearing that Truecaller has hired Morgan Stanley to lead the process, and there are term sheets out. The round is likely to have previous and new investors. To date, True Software, maker of Truecaller, has raised around $80 million. Previous investors include Atomico, Kleiner Perkins Caufield Byers, Sequoia Capital, Access Partners and Open Ocean. The plan will be to use the funds to grow the product. Truecaller, founded in Sweden, has seen a lot of traction in markets like India, its biggest market at 80 million users. Now it wants to expand elsewhere, like the U.S., and will be building out the company’s office in the Bay Area. The company is projected to hit 300 million users this year. Truecaller works by aggregating directory services via deals with white pages companies, and platforms like Yelp to bring in businesses. It complements this with crowdsourced information from the app’s users. That includes accessing your own address book, although you can opt out. Individual users can also opt out from being listed. It then uses big data analytics and machine learning to offer additional services beyond caller ID such as predicting who you might want to call next based on where you are and what time of day it is, or what the top-reported spam number is in your area at the moment. Other features include spam blocking, directory services and “smart” SMS services. The company makes revenues through in-app purchases for premium features, as well as advertising within the app. The company’s country manager for India has also reportedly said that Truecaller may launch a paid version by the end of this year.

Daily Tech Snippet: Friday February 20

• A Year Later, $19 Billion For WhatsApp Doesn’t Sound So Crazy: Without WhatsApp, Facebook’s international situation would look a lot dicier. And if a competitor like Google acquired it instead, it could have been disastrous. Instead, Facebook possess the most popular messaging app, and has neutralized the biggest threat to its global domination of social networking. No apps get opened as often as messaging apps. While you might spend longer in total scrolling through Facebook, Instagram, Twitter, or Pinterest, the frequent short sessions with chat apps make them a vector for other experiences. That means they’re more valuable than they might first appear. How do you monetize chat? It’s a tough question. Sure there’s stickers, but there’s too much competition to charge much upfront for an app and its too interruptive to show ads. But platforms, hubs, portals — whatever you want to call them — hold plenty of opportunities to cash in. The messaging apps from Asia are proving this as we speak. China’s WeChat also lets you call a taxi, pay friends, search, shop, buy movie tickets, and more. Japan’s Line hosts Line Pay, Line TV, and an identity platform for games. Why fumble with a bunch of different apps, passwords, and payment methods when you can do it all while you chat? Even Snapchat is expanding far beyond messaging. Its Stories product for broadcasting sequences of photos and videos is a hit with star content creators. Its Snapcash feature lets you quickly pay friends through Square Cash. And its new Discover portal collects Snap-formatted content from premium producers like Comedy Central, CNN, ESPN, and Vice. A lot of critics wondered how Facebook could earn money from messaging on WhatsApp, considering it’s vowed not to show ads and only charges its skimpy $1 subscription fee in a few markets. The answer is it doesn’t have to. By taking a cut of commerce, or charging for promotion of content, it could keep chat lean and clean while monetizing other parts.

• HP becomes a reseller of networking equipment; move away from hardware in quest of software-company margins takes aim at Cisco: Hewlett-Packard said on Thursday that it would sell a new line of networking switches that are manufactured by a Taiwanese company and depend on Linux-based, open-source software from another company. HP, once at the center of high-tech manufacturing, will not make the new networking equipment but will act as a reseller, providing both online ordering and worldwide support for the product. It is the most consequential announcement from HP since its chief executive, Meg Whitman, announced last October that the company would split into two separate enterprises. One will be focused on business, and the other on consumer-type products. The networking move, firmly in the area of business technology, shows the type of changes HP and other older tech giants must make to survive in a transforming marketplace. In its last fiscal year, HP took in $2.6 billion from its proprietary networking business, which started in earnest in 2009. In the long term, cheap, open-source networking equipment could threaten HP’s existing business, particularly if the open-source products make expected gains in power and capability. HP is not the only networking equipment maker threatened by the changing marketplace. Cisco Systems is still by far the biggest maker of networking gear, with $47 billion in annual revenue, and it depends heavily on proprietary products. Networking gear has been considered an important part of HP’s future, however. “We see a shift,” said Mark Carroll, the chief technology officer of HP’s networking business. “The traditional market, the one-vendor market, is transitioning to many suppliers.” By offering an open-source product consisting largely of mass-market chips, the thinking runs, HP will be in a position to dislodge Cisco. Mr. Carroll called HP’s embrace of open source “an evolution” of his company’s strategy. “You look at which markets are growing and go there,” he said. Sold complex and proprietary combinations of servers, data storage, networking and software for decades, customers are now demanding systems that can be arranged in different ways, with open-source software they can tinker with in-house. The new methods promise advantages in speed, cost and innovation. In addition, new entrants are affecting the business. Companies now rely on Amazon’s computing-rental business for many needs. Facebook last week announced an open-source switch intended to undermine prices and speed innovation in the industry. Mr. Carroll said HP “absolutely” sees Facebook’s switch “playing in the same space” as HP’s open-source networking. The actual manufacturer of the HP boxes, Accton Technology, has been making gear for HP for 20 years. The open-source software will be supplied by Cumulus Networks, which last year announced it would supply Dell with software for inexpensive networking boxes. The Cumulus relationship with HP is not exclusive, and HP could add more suppliers in the future. HP “wants the software and service margins and to get rid of being in the hardware business,” said JR Rivers, chief executive and one of the founders of Cumulus. “You’ll see other networking providers get on board with this.” The initial target customers for the product, available in March, are telecommunications and financial companies. Both use a lot of cloud computing, mobility, social media and big-data resources in their data centers.

• Being fully transparent in pricing can be costly, finds online ticket seller StubHub : In January 2014, StubHub attempted something radical. Addressing the frustration of its customers, the online ticket reseller began including its bevy of fees in the first price a customer sees, rather than tacking them on just before purchase. Now when you click “buy,” a pair of tickets listed at $100 will cost $100, not $125. According to StubHub, customers said they wanted—and say they love—the transparency. But the change hasn’t improved sales. Because StubHub, which generated $500 million in revenue last year, baked its fees into the list price, its tickets looked more expensive than those of rivals. Sales for the company fell more than 10 percent in the months that followed the pricing change, according to Wedbush Securities, as competitor Ticketmaster gained market share. StubHub further trimmed its profit margins by cutting its take from each sale. By November, Chris Tsakalakis, who championed the new pricing, was out as president. (He declined to comment.) Still, the ticket reseller has stuck with the policy, which spokesman Glenn Lehrman says is among the most popular moves the 15-year-old company has ever made.

• Startups continue to try and crack the attribution problem of omnichannel shoppers and cross-device conversions: The proliferation of smartphones and tablets has given rise to the “omnichannel shopper,” a retail industry term for a customer who might scope out a product from their phone, computer and local store before making a purchase. Major retailers are waging advertising wars across an increasing number of screens and storefronts in an effort to win these shoppers’ business. After all, that customer could decide to buy at any point. But serial entrepreneurs Hemang Gadhia and Christopher Brown discovered a simple albeit significant problem: Retailers have a hard time tracking when that customer using their app, visiting their Web site and entering their store is actually the same person. The pair’s latest venture, District-based Revmetrix, uses software to identify omnichannel shoppers as they move from smartphone to computer to tablet to store, then helps retailers determine what will motivate that specific customer to actually spend money. How will Revmetrix track omnichannel shoppers? Data, of course. As customers visit retailers online and in stores, they leave digital footprints along the way, such as the make and model of a smartphone, an IP address and a geographic location. That information can then be matched with information the retailer may already collect about its customers, such as their online shopping habits, purchase history and demographic data. At present, Gadhia said the Revmetrix software can identify the same customer on different devices with more than 80 percent accuracy. The more data that’s collected, the more accurate the technology becomes. “The problem that we’re solving is a problem that exists for every single large retailer on the planet,” Gadhia said.

• Flipkart is valued at more than AirBnB, as billion-dollar startups proliferate; as Snapchat proves, though, these rankings change very quickly though: Flipkart Internet Pvt. is now valued at $11 billion, making it the fifth-most valuable startup on the list. That puts Flipkart ahead of Airbnb, a company that is challenging the business models of global hotel giants with its online room rentals, and online storage firm Dropbox. These rankings are volatile though: Less than 12 months after investors valued Snapchat, the red-hot messaging app, at about $10 billion, the start-up is again in the market for money — and poised to nearly double that valuation. A range of other popular start-ups are also poised to propel their net worths to similar multibillion-dollar heights, including the virtual scrapbooking service Pinterest and the ride-hailing app Lyft. Uber, Lyft’s top competitor, has raised more than $3 billion in the last year and now has an eye-popping valuation of $40 billion. Giant sums of money and sky-high valuations are nothing new in the technology industry. But the latest burst of activity has put on clear display the frenzied pace of investors, who are eager to catch the next blockbuster company like Facebook. The action is also again spurring talk that overeager investors are poised to relive the dot-com boom and bust at the turn of the century, when overinflated start-ups led to a quick and painful downturn. For investors, the hunt is for the next proverbial so-called unicorn, a nascent business worth $1 billion or more — on paper, at least. Just last year, 38 privately held companies backed by venture capital joined the billion-dollar club, putting the membership of that group at 54, according to the data firm CB Insights. Digi-Capital, a mobile Internet advisory firm, estimates that the total value of mobile Internet start-ups worth $1 billion or more increased $28 billion in just the last quarter of 2014.