Feb 4, 2020
Google's parent Alphabet finally shows off YouTube Read More It's my time to shine... YouTube finally got its moment in the Alphabet earnings spotlight. First, the Google-parent reported a disappointing performance for its core search-ads biz. Then, for the first time ever, Alphabet revealed YouTube and cloud revenues (probably to distract from its buzz-kill ad earnings).
YouTube: Needs no introduction. Google bought it in 2006 for $1.6B and just revealed that YouTube brought in over $15B revenue in 2019 (up from $11B in 2018). Your "Babies & Puppies Compilation" views are sandwiched with ads — YouTube says it forwards most of those ad bucks to video creators.
Cloud: That includes G-Suite favorites like Google Drive, Docs, and Sheets, which "magically" save your edits and make them shareable in real-time (aka, the internet). Those upgraded storage cloud accounts brought in almost $9B, compared to nearly $6B in 2018.
Back to the core biz... Google's an ad company. Its overall revenue, mostly made up of online ads, rose only 16.5%, sending shares down 5%. Profits still topped estimates though, thanks in part to an extremely low tax rate for the quarter. Alphabet set aside just $33M for taxes (0.07% rate), down from $1.1B in the same quarter last year.
The Takeaway:YouTube may get milked... Despite the less-than-expected revenue, last month Alphabet became the 4th US company to hit a $1T valuation (that's 1,000 billions). But with success comes fresh challenges: government investigations threaten to break up Google's biz, while rivals like Amazon are gaining in the ad space. That could affect YouTube:
Alphabet might have to start milking more profit out of YouTube.
Google's CEO: There is “significantly more room” to make money off YouTube’s users.
Jan 23, 2020
Google's big new move — We're calling it "Camouflaged Ads" Read More If you thought your ads had disappeared... look again. Google just made ads harder to distinguish from organic search results. These "camouflaged ads" subtly launched last week, blurring the line between what you were actually looking for, and what companies are paying to show you.
Before last week: It was easier to recognize (and gloss over) ads — a squared-off green "Ad" label next to promoted links at the top of a Google search page.
Now: Meet, "favicons." They're like little logos that Google now sticks next to search results. Ads now look exactly like organic search results, except with the black word "Ad" where the favicon should be.
The Problem: No more bright colors or boxing off. Less intuitive, more misleading. It's an ad that's trying to fly under the radar (like when you wave back at someone who wasn't waving at you).
Slow burn... Over the years, Google has slowly but surely made its ads harder to spot. After all, Google is an ads biz — 85% of its $40B in revenue last quarter came from ad sales. Here's Google's visual ad evolution:
Up until 2007: Ads were obvious on the page, stuck against a blue background.
2008-2010: Google experimented with other, lighter colors (remember violet?).
2011: That ad space background was changed to less-bold yellow.
2013: Then it became a paler yellow.
2016: No more yellow background — just a small green "ad" label (until now).The Takeaway:Another pros before cos scenario... That's "profits before customers." Users are less likely to avoid clicking on paid ad results if they can't tell it's an ad. Advertisers get more clicks, Google gets more $$$, and users get less clarity on valuable/desirable search results. Google's motto used to be "don't be evil" (now it's "do the right thing"). Making money from hard-to-spot ads isn't evil, but it's way less transparent. Jan 2, 2020
Google is ending the ol' "Double Irish, Dutch Sandwich" tax elimination strategy Read More New New Year's Resolution... Stop using a sketchy international scheme with a charming name to sneak out of US taxes. Instead of going to the gym more, Google's parent company Alphabet will end its "Double Irish, Dutch Sandwich" tax minimization strategy in 2020 — they saved billions and only paid a single-digit tax rate on money earned outside the US through this structure loophole.
It sounds like a bar order, and reads like a Spring Break itinerary... but it's actually a perfectly legal travel route for money that won't trigger US income taxes or Europe's witholding taxes — and those happen to be most of Google's profits abroad. Here's how the cash moves:
The $$$ earned abroad is funneled to an Irish subsidiary ➡️ then moved to a Dutch holding company ➡️ then sent to an Irish shell company in Bermuda
That Bermuda part is key because the island has no corporate income tax — So that's where Google reports the income earned internationally.
$25B of Google's money made this voyage last year, up from $23B in 2017.The Takeaway:Tax policy can move economies... It isn't just that the corporate tax rate for US companies has been cut from 35% to 21%. The Tax Cuts and Jobs Act of 2017 now lets American companies bring back cash they made/hoarded abroad without paying additional US taxes. Now Google can bring back its billions in overseas cash to potentially invest in the US — or return to shareholders as dividends. Dec 4, 2019
Alphabet loses Sergey Brin and Larry Page... the co-founders of Google Read More End of an era... Alphabet (aka Google's parent company) suddenly/shockingly announced that Google's co-founders will retire as CEO and President of Alphabet. ASAP. They're replaced by Sundar Pichai, an Indian-born, Wharton-educated 15-year Google vet who worked on the hugely important Chrome and Android divisions — then he became Google CEO in 2015. Here's Sergey and Larry's take on their new roles as mere board members and muggle shareholders:
"We believe it’s time to assume the role of proud parents — offering advice and love, but not daily nagging!"
DON'T BE EVIL... It's right there on page 5 of Google's S-1 document from their 2004 IPO. Sergey and Larry founded Google to enable moonshot ideas to change the world (and to help people cheat at trivia). But Google's highly googleable motto conflicts with its recent controversial moves:
Project Maven involved Google's artificial intelligence helping military drones.
4 Googlers were just fired, and they claim it was for trying to organize a labor union.
Thousands of Googlers protested the company's soft handling of sexual harassers last year.
Project Dragonfly was Google's attempt to make a special censored search engine for China.The Takeaway:Alphabet needs 1 decisive leader... Larry and Sergey founded Google in 1998 under the religion of do-gooder-ness, collaboration, and trust falls. Today, it's picket lines, political scrutiny, and employee unrest. That recent chaos requires 1 leader, not the awkward trio it had until yesterday. Wall Street rewarded the fresh CEO by inching shares higher Tuesday night after news broke.
Nov 14, 2019
Google plans to launch checking accounts, but it doesn't want to be a bank Read More Codename: "Cache"... It's money. And it's tech. That's what Google stealthily calls its checking account project, which will launch next year with Citibank's help. Alphabet's financey move follows Apple (its new credit card is powered by Goldman Sachs) and Facebook (it just unveiled Facebook Pay while also working on a global cryptocurrency). But here's Google's plan:
Contact-less: You'd pay via Google Pay. If you're nostalgic for a physical card, you'll stick with your old school bank.
Fees?: Unclear. Google didn't mention if it'll charge the fees you hate paying.
Follow the money... Even if Google doesn't charge fees, it could make money off this. It's said it won't sell your spending data, but didn't say it won't eyeball your spending habits... then target you with better ads (which Google can charge more for). Half of Americans use debit cards daily, so picture this:
If you splurged for the fancy premium Ikon ski pass, Google could target you with ads for an Arc'teryx parka ($$$$).
If you stuck with the lower-priced budget Ikon ski pass, Google could target you with ads for that Columbia jacket ($$).The Takeaway:Silicon Valley wants to be your bank, but doesn't want to become a bank... Banks are regulated. Hardcore. Alphabet and Apple aren't interested, so they're letting actual banks handle the backend while they look good up front. It's like those Bathtub Fitter commercials. Big Tech doesn't get the business benefits of being a bank, but it's more embedded in your daily life through your payments. Oct 16, 2019
Google's kills VR headset on same day it unveils Pixel 4 smartphone Read More A chair that reads your Gmail and orders new pencils... Not a thing yet, but Google's getting close. At its annual product unveil day in New York, Google did its best turtleneck-free Steve Jobs impression and revealed its newest gadgets — the focus was to ensconce your life in Pixel-branded tech. The 2 highlights:
Pixel 4 phone ($800) features a radar technology that lets you interact with the screen without touching it.
Pixel Buds 2 ($179) to take on Apple AirPods cord-free.
But the real highlight is what's gone... Daydream — Google's virtual reality platform is designed so you can "Dream with your eyes open." Its headset though will be discontinued because (per a company spokesman) “there hasn’t been the broad consumer or developer adoption we had hoped.” Google's definitely been trying, having unveiled Google Glass twice and also $15 cardboard VR headsets for the masses.The Takeaway:Virtual reality has been a disappointment... but that doesn’t mean Google's given up on it. Instead, Google is “Androiding” this thing — it's applying the strategy it uses with its Android phones to the early stages of virtual reality: It'll focus on the software, but let someone else make the hardware (like the VR headsets). Oct 15, 2019
Apple is reportedly going down-market with a $399 iPhone in Q1 2020 Read More You overpaid for your iPhone by like $400... On the same day Apple inched past Microsoft to return to the #1 most valuable US company (iPhone 11 is apparently selling well), we get this shocker from a research analyst with a very particular set of skills:
The legendary Ming-Chi Kou studies Apple's supply chain for clues about the number of iPhones produced and the next model coming.
He just reported that an "iPhone SE 2" will be unveiled in Q1 2020.
The new creation boasts an iPhone 8 body with an iPhone 11 brain — for $399.
Going down-market, Apple?... This could finally compel frugal Apple buyers to upgrade. It may even convert some of the Android flock to Apple's ecosystem.
Upgrades: An estimated 200M humans stubbornly still use the iPhone 6 or 6s (can't believe that model is 5 years old).
New converts: Over 80% of the world's smartphone users and 51% in the US are on Android, Alphabet's operating system. And most Android phones are much cheaper than iPhone.The Takeaway:Phone profits aren't the priority anymore... The last Apple budget phone was iPhone SE (great for her jeans pockets). It annoyingly stole sales from higher-end iPhone 7s, hurting Apple's profits. But now Apple just wants more Earthlings with iPhones in their hands so it can make money monthly on recurring "services." More phones = more potential iEverything customers (iCloud, Apple Music, Apple TV+, Apple News+, Arcade...). Oct 11, 2019
Waze, the driver-powered carpool app, is one of Alphabet's secret weapons Read More Police in 0.4 miles... Ease off that accelerator. Waze gives its users the handy heads-up via emoji-ish car icons. Google dropped $966M in 2013 to acquire the Israeli app, and now it's Alphabet's other navigation app. Last month, a bank analyst knighted Waze a "buried treasure" for Google-parent Alphabet. Here's why.
Network effects: The more people wazing, the more data Waze has on traffic and your ETA. More users ➡️ better product ➡️ more users ➡️ better product. Repeat (infinitely).
Daily habit: 75% of smartphone users regularly use a navigation app.
Near-monopoly status: Google Maps and Waze combined capture over 80% of the navigation app market — It's a shocker (and mistake in our opinion) that Google was allowed to acquire its main competitor.
"You can let me out right here"... Now that it's pretty much as good as Google Maps, Waze is differentiating itself with a carpool feature. If you're heading to work, you can use Waze to pick up fellow commuters. A 5-minute detour could earn you $5 driving Katie to that 9am all-hands meeting. Waze hopes that steals business from the ride hailers.The Takeaway:High engagement = High profit potential... Google Maps and Waze are some of Alphabet's least-monetized assets — so the analyst thinks Waze will start packing in ads to become a profit puppy for the parent company. Picture this:
Take exit 13 to pick up your Waze carpool.
Continue East on Hudson Parkway for 2 miles.
There's a Starbucks just 0.1 miles away offering a refresher for this 98-degree sweltering summer day. Oct 3, 2019
Microsoft failed smartphones. So it invented a new Smartphone-ish foldable device. Read More It's product unveil season... We expected Microsoft to show us new Surface tablets for your aunt's holiday wish list. We didn't expect a smart device that defies labels. The dual-screen Surface Duo arrives next year — Picture 2 iPhones connected book-style at the spine so they fold. We call it the "Phonebook." Just don't call it a phone (Microsoft hates that).
Bill Gates' has accepted his destiny... The billionaire co-founder's #1 mistake was letting Android (owned by Alphabet) become the leader of mobile phone software. Software was Microsoft's thing (just ask Clippy). Now Microsoft's new hardware runs on Android's operating system — shocking for the company defined by its historic operating system domination.The Takeaway:Microsoft has its swagger back... It embarrassingly missed on smartphones the 1st time — it acquired Nokia in 2013, didn't do much with it, then killed its Windows phone in 2017. Since then, Microsoft's stock has grown 90% and it's now the most valuable publicly-traded company on Earth. With that confidence, it's taking on Apple and Samsung on their turf.
PS: CEO Satya Nadella says this "device" has two screens so you can be creative on one side, productive on the other (like a brain). Oct 1, 2019
Alphabet's self-driving car company loses 40% of its value (but is still worth over $100B) Read More 50% lower price than Uber, 100% less driver... That's the service Waymo wants to offer in the next few years. The self-driving car unit of Alphabet leads the race to offer up futuristic, no small talk, tip-unnecessary transport of the future. But Morgan Stanley just downgraded what the bank thinks Waymo is worth: From $175B to $105B.
Discounted cash flow modeling... Young bankers learn to wield the valuation method like it's the Patronas charm. Morgan Stanley tossed Waymo's numbers into some spreadsheets to determine how much profit Alphabet will make the next couple decades. They decided Waymo's self-driving dreams could experience less revenue and more costs than previously thought for 2 reasons:
It's taking too long. Waymo missed targets to roll out a commercial robo-taxi service, currently still testing them out in Arizona (Waymo sticks its software into Chrysler minivans).
Humans are expensive. Waymo will have a backup human safety driver behind the wheel for a while before it's safe enough for those minivans to cruise sans-driver.The Takeaway:Don't ever forget this: Google is an ad company... but it's moving to diversify. Google actually made 87% of its revenue last quarter by infiltrating your Google search, Youtube, Google Maps, and Gmail with online ads. Saving the world wasn't a revenue source. But it's got a breed of young businesses it hopes can become healthy profit puppies someday:
Transport "Other Bets" (that's what Alphabet calls them): Waymo for humans and Wing to drone-deliver packages.
Other "Other Bets": Google Fiber (internet/phone service) and Verily (health data). Sep 20, 2019
Google teams up with FedEx and Walgreens for drone delivery next month Read More 'Drone delivery team, assemble'... Alphabet doesn't just own Google — it also owns Wing, the drone delivery startup developed in its experimental "Google X" lab. Starting next month, Wing will be flying Advil, Tums, and Kit-Kats around for Walgreens, FedEx, and (randomly) a regional gift store charmingly called Sugar Magnolia. It'll deliver "within minutes." Bold claim.
Heads-up, Virginia... The most ambitious drone pilot program yet kicks off in Christiansburg, VA — conveniently near the US Department of Transportation. Wing has been testing with the DOT since 2016 to prep for this moment. Here are the key numbers.
78%: That's how much of the US lives within 5 miles of a Walgreens — and a large portion needs prescriptions consistently or pills ASAP.
10 miles: That's the range of a Wing drone, so the pilot is keeping things local.
wing.com/virginia: If you're in the area, that's where you can sign up to be an early user (tweet us at @RobinhoodSnacks how it goes).The Takeaway:Wing is a model for tech & regulator cooperation... Wing become the 1st drone operator to be verified by the FAA. Only after that did it pursue these partnerships — and it's doing them in the regulator's backyard (compare that to Uber bulldozing rules to enter new cities). Wing first asked for permission, not forgiveness — and regulators seem to let things move along at a nice pace. Wing should send them an apple pie via drone. Aug 22, 2019
Waymo gives away a key advantage — its gigantic dataset — to competitors Read More 10M... That's how many test miles of pavement Waymo has pounded without a driver gripping the wheel. And it just opened up its memory for all its competitors to see in. The self-driving car division of Alphabet, Waymo is making its dataset free for researchers in order to make the self-driving revolution happen ASAP. No charge. It's a big leadership move.
Why did the schnauzer cross the road?... To see if the robocar would stop. Waymo's street smarts lie in this intensely labeled dataset that converts real-life scenarios into code that sensors and processors can understand and react to. Here’s how this public good will be used:
The competition: The key for autonomous driving is machine learning — teach the car what to do when it encounters as many street scenarios as possible. Waymo's divulging its lifetime of self-driven experiences for Uber, GM, or Ford to play with.
Researchers: PhD candidates are fist-pumping for “the impact of level 4 autonomous driving on hopscotch in semi-gentrified neighborhoods” thesis this dataset just made possible.The Takeaway:Reveal your secret sauce to save yourself... It's a paradox. And it's Waymo's bold new strategy. Waymo's greatest challenge isn't rivals — it's the self-driving dream failing. GM indefinitely postponed its robot-taxi launch date, and Uber's self-driving tests killed someone. Waymo thinks cooperating-over-competing is the fastest way for the industry to start making $$$ while you Netflix-and-drive.
SnackFact: Some investors think Waymo is worth over $100B — that's more than Ford and GM's valuations. Combined. Jul 25, 2019
Google jumps 8% — despite Earth's internet growth slowdown Read More Fact... Internet growth is slowing. That freaked out Google's parent, Alphabet, when revenues inched up just 13% last quarter. It was depression-worthy for Google investors, who were used to 25% revenue growth. So the bar was low this time, but Google cleared it (and then some) with a 19% surge in revenues.
Fun Fact: Google's budget-friendly $400 Pixel 3A helped double sales of its smartphones.
Webster's should strike the word "search" from the internet... Google's dominance in online search is astounding (93% of worldwide searches) — and so are the ad dollars it harvests year after year. Now it's dishing out some of the $63B in profits it's made the past 3 years by buying-back shares of itself — That can make each remaining share worth more in the near term.The Takeaway:This 21-year-old has 2 problems... Investors look at Alphabet's ~$800B market value and think: should this be worth more or less? Google faces 2 major obstacles to up its growth game:
Shockingly slowing internet growth: Mary Meeker's famous Internet Trends Report showed that internet users around the globe are growing at just 6% annually. That's the slowest growth ever, so Google's making up for it by sticking more ads in Google Maps and YouTube.
Major antitrust vibes: The federal government started an investigation this week into Google and its gigantic internet friends for allegedly just being way too dominant for society. Jul 17, 2019
3 Congressional hearings. 4 scrutinized tech giants Read More 1 four-pack of shade... coming right up for Silicon Valley. The main event yesterday was David Marcus, Facebook's head of cryptocurrency, who suffered a grilling by the Senate (he hits the House tomorrow). But all 4 of America's tech-powered giants sent lambs to get questioned and criticized by elected officials.
Facebook: Defending Zuck's new cryptocurrency, Marcus promised Libra wouldn't launch until it "fully addressed regulatory concerns." Politicians from both sides didn't like Facebook's crypto-moves given its marred privacy record. PS: Bitcoin dropped 10% on DC's overall anti-crypto tone.
Google: President Trump said he would investigate whether Google has been infiltrated by the Chinese military. That's based on a claim from Peter Thiel (Facebook board member) that Google is an unpatriotic company engaged in treason.
FB, Google, Apple, and Amazon: Execs from all four faced a different set of lawmakers who accused them of breaking rules set up to protect consumers from monopolies as well as for having a bias against conservatives in search results.The Takeaway:Despite the politi-hate, record highs... The stocks of all these companies are close to their record highs. They've scaled their business models across the world and kept growing as people in developing countries adopt smartphones and the internet. And 2+ years of tech as a political punching bag hasn't resulted in laws or policies to rein in profits. Jun 26, 2019
Alphabet's futuristic smart city division ("Sidewalk Labs") unveils its Toronto plan Read More 1 city + 1 tech company = Sidewalk Labs... Toronto solicited proposals from private companies to redevelop an empty waterfront neighborhood. Sidewalk Labs won. It's a sister company of Google, a subsidiary of Alphabet, and just unveiled a 1,500-page, multi-volume smart city plan. If Toronto approves, then one corner of the city gets elegantly coded.
DWI = Driving While Incognito mode... This neighborhood ("super-hood?") will be built from scratch with every detail optimized for internet-connectedness. Here are a few of them:
Smarts: The sidewalks would expand into a lane of traffic before/after rush hour.
Reimagined: Nobody likes loud trucks, so freight delivery would happen underground.
Random: This "giant raincoat" is supposed to protect buildings from snow (it's basically just a big awning).
Earth-loving: Everything would be built with "mass timber," which is apparently better for the world than steel and concrete (and more hygge).
Money: Sidewalk Labs would invest $1B in housing (20% "affordable", 20% "middle class", and 60% probably very expensive), office space, retail stores, and community centers like parks.
The Takeaway:It's not trying to take your data... Sidewalk's PR got out ahead of privacy concerns: "Sidewalk Labs does not share urban data, user data, or personal data with Google." Instead, Sidewalk will make money on rent in Toronto. And if other cities buy Sidewalk's plan, it'll charge for its smart-city tricks learned in Toronto. Picture real estate development meets tech.
WeWork has perfected how to build modern offices.
Sidewalk Labs is perfecting how to build modern neighborhoods.
Jun 20, 2019
YouTube considers a major change for kids (because it's under investigation) Read More This is why babysitters need references... According to WaPo, the FTC is investigating YouTube (owned by Alphabet) for violating children's privacy. YouTube has a history of conduct parents wouldn't approve of — and the WSJ reports that YouTube's considering two big changes to try to fix its kid problems:
"YouTube Kids": Pushing all kids content to a separate children's app, insulating them from vids that would keep you up at night.
Kill "Auto-play": Parents can put on a wholesome "Dude Perfect" video for the twins, only to be smacked by something totally R-rated right after. YouTube could cut the risk by cutting its favorite feature.
One of the best buys ever: YouTube... Google dropped $1.6B for a budding video website back in 2006 — Today, it's estimated to be worth between $75B and $160B. YouTube says humans are watching 1B hours on it daily, generating billions worth of ad dollars. But it's also been used for child exploitation and can radicalize people.The Takeaway:When kids need regulation, it actually happens... Paralysis in DC is constant. But children's safety is bipartisan. Google could be preempting future regulation by regulating itself for the kids. A couple fresh examples of kid-catalyzed business regulation:
Since 2018, new cars are required to have backup cameras. The reason? Protecting toddlers from backing-up cars.
This week, San Francisco voted to ban the sale of vape products and there's a growing push to raise the tobacco age to 21. The reason? Protect kids. May 21, 2019
Google whips out $999 "superpower" smartglasses Read More Smile... You're being filmed by the smartglasses on the early-adopting human staring at you. Google is graduating its Google Glass from experiment to official Google product as the $999 Glass Enterprise Edition 2. They're like smartwatches. But for your eyes. And they're packed with buzzwords:
Fancy optics: The lenses are by Smith, the brand behind your ski goggles.
Augmented & virtual reality: They're designed with new chips to handle both.
Easy apping: Using Google's Android operating system makes it easier for developers to pop out new glass apps (picture potential "blink to pay" features).
Universally hated... The original Google Glass arrived in 2013. It was swiftly panned for violating the privacy of everyone in eyesight. But this new version isn't for you. It's for business:
Google retargeted the specs to be worn by factory workers and surgeons. Support and data on the job = higher productivity and fewer mistakes.
The value prop, in one sentence: This gives workers "superpowers"
The Takeaway:Pivot — Don't kill it... Glass originated in Google's X-department, aka "The Moonshot Factory" where they "create radical new technologies to solve some of the world's hardest problems." And instead of shelving version 1.0 of Google Glass, the team found a new customer segment to target. 
