In the first results from Alphabet or the TechGiantformerlyKnownasGoogle since their corporate rejig, we learned more about the balance between their core business and the moon shots this finances. The data on the ad business is pretty good - volume of clicks is up and they have reduced the slowed the decline in cost per click driven by the move to mobile.
The health of their core business was stressed in the call noting that Gmail now has 1 billion monthly active users - joining 6 other Google divisions with that level of usage; Search, YouTube, Chrome, Android, Maps and Google Play. Mobile advertising was strong as were YouTube and Programmatic.
They describe the rest of Alphabet as Other Bets and we learned they lost $3.5bn over the year on these, which is virtually covered by their rise in Operating Income over the year. In the call it was noted that some of the output from the moonshots was starting to be useful in the core business; machine learning and natural language processing.
Outside of the results there is lots going on at Google too; their head of Search is leaving to be replaced by the head of Googles AI and Machine Learning. The influence of machine learning was made clear last year when it was announced that a system called RankBrain was now the third most important signal in ranking. One tweet said that this change was on a similar level to Jonny Ive leaving Apple, which we think is a little over the top. But it’s a big change and emphasizes how Search is still evolving. On that note it’s interesting that Microsoft are seeing some success with Bing.
Apple has the power to reshape the search market by switching Google out for Bing in Safari on the iPhone – just as they have already done with Siri. If the new regime at Microsoft is taking Bing more seriously, maybe they will increase pressure on Apple and offer to pay more than the $1billlion plus a 33% revenue share Google pay as we mentioned last week? One Biz Dev deal and Bing is back in search in a big way whilst Google is hurt quite badly. Someone is undoubtedly trying to get that deal done, right now.
Google are also fighting with Facebook and have improved how they support app downloads – still the key sector in mobile advertising and hugely profitable for Facebook, even though install costs are rising. Everyone we talk to is looking for viable alternatives, so Google might do well here.
It looks like Yahoo is in play – their CFO admitted that people had expressed interest in Yahoo. Verizon have been public with their interest – looking to add to their recent AOL purchase - and various PE firms have been circling for a while.
Plans to cut costs may be seen as rearranging the deckchairs, but Yahoo does still have a lot going for them. With huge reach they are attractive to Agencies who are generally keen to spend money with anyone who isn’t Google or Facebook, but need scale to make it worth their while.
A Facebook post from Fix friend and GroupM supremo summed up one opportunity
Amazon results showed the problems of Wall Street – the figures were good but not as good as expected. But Amazon doesn’t really care about Wall Street – they just keep executing against their long term strategy.
The story this week about them planning 400 physical bookstores has had lots of press even though it may not be true. But it does make some sense. To better facilitate the last mile, having high street stores as pick up centres and a place of discovery solves both customer problems and business ones. Within 10 minutes walk of our house we have 3 great bookshops and they are a constant source of delight as I discover new books I would love to buy. When HMV was faltering we speculated they would be a good acquisition for Amazon and the idea of them buying Argos keeps circulating in the City – but it looks like Sainsbury have beaten them to it.
The huge success of Amazon drives the huge growth in ecommerce, but it is a pretty fragile business; lots of businesses get traction, pick up lots of VC funding and then struggle. This look at the many ecommerce fads and their rise and fall is a good reminder that retailing of any type is hard to get right. And we think a key factor is discovery – the problem isn’t not finding what I know I want, but finding something I didn’t know I want. A recent Ben Evans post on Lists and Curation gets into this and we keep coming back to it on our parked RCKSCK project.
Interesting examples of how businesses can embed themselves within Messaging keep popping up around the world. For example with Line you can now order a Motorbike taxi in Jakarta. But we now western brands getting involved.
Over the past few months we have seen various betas but can now share one of the smartest integrations we have seen – real time medical info delivered through chat on Telegram and Slack. YourMD have exclusive rights to the NHS database and have used AI and Machine Learning to develop a personalised service. Really worth spending some time with, as this is a glimpse of our (near) future.
More evidence of this is the Economist publishing their charts on Line. As we believe there will be a land grab it’s time to experiment. I only want one taxi service in my Messaging service and just one food delivery firm, so we probably will see a winner take all scenario in most sectors. What are you waiting for?
It is interesting that YourMD have chosen to launch with Slack as well as Telegram. Their openness and the ease with which you can write and launch Bots makes them a good choice. But the work environment is interesting too. With a world of Bring Your Own devices the tools we use for work now get compared to the tools we use to live our life. As the ease of using world class apps like Uber and Google Now educate users and raise the bar for everyone else, legacy systems and tools are vulnerable.
Tools like Slack, Yammer and UK stealth startup Blink are getting chosen over Lotus Notes and old legacy systems. Microsoft who now own Yammer are pushing this opportunity hard
Facebook for Work have updated their app and announced their biggest UK partner to date with the 100k staff of RBS.
You have to wonder whether LinkedIn is under threat? Despite all the value inherent in having over 4000 contacts on there – hundreds of whom I actually know – could a better user experience switch my attention? Facebook have a chance. As we mentioned last week people are using it in place of Twitter so its already getting more work related content on there.
A thread running through most of this weeks Fix, and much of what we talk about with clients, is AI. Artificial Intelligence is now a significant factor in modern digital services and the UK has a great position with our universities turning out top talent. The acquisition of SwiftKey by Microsoft is a good example as is the fact that Googles’ Deep Mind team have built a bot that can beat an expert at Go
The scale of mobile at Facebook came up a lot this week and their turnaround from 2012 is a great example of what needs to be done if you are to take full advantage of mobile growth. It is absolutely clear that mobile is the first screen for hundreds of millions of people and will soon become the first for billions. But people will continue to use other screens too and the smart people at Intercom argue this makes Mobile First outdated. We disagree. There are still too many businesses leaving large amounts of money on the table by having poor, or barely adequate, mobile sites and apps. Some still don’t have any mobile assets. Smart brands are Mobile First but remember the need to work across screens and across devices – which is why we work with Responsive Ads as it make sense to develop advertising that works whatever the screen
The FT point out that Ad Fraud deserves - and will probably get – more attention given the scale and the consequences. Too much of the industry thinks of it as an annoyance but unless we clean up our act someone else will do it for us.
One of the most interesting things about digital is how business models evolve. This is a long but good read on the various business models being tried in the content business. Lots of the thinking is applicable to other verticals.
A bunch of VCs were asked to product the future – what is going to be most important over the next 5 years. All the topics covered are things we dig into in Fix, and in our consulting work with Brands and Tech firms. I am going to shamelessly plug our 2002 future gazing video yet again – substitute PDAs for Smartphones and we got quite a lot right. Understanding how tech changes peoples lives and what that means for businesses is what we do.
Finally – a bit of self promotion…. I have taken Board Advisor positions with TamoCo and with Responsive Ads – two companies that I believe are shaping the future of the marketing business. I am also digging into Programmatic and helping Brands figure out how they profit from these amazing opportunities - either by collaborating with their current partners or bringing in new skills as necessary. How can I help you grow your business? Or accelerate the pace of growth? Lets discuss.
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