Earnings, earnings everywhere and some a stock to sink. That’s the case if you’re Twitter, or Amazon, or Apple. If you’re a tech chip giant, the future shines like a newly-minted smart chip. If you’re into mobile, Google offers a bright spot. If watching paint dry is the key to your heart, then join a task force. Sizzles and Fizzles await.
FIZZLE
Task Forces
The road to regulatory Hades is often paved with bigly-staffed commissions and task forces – just ask anyone who ever served on one. For example, 660 members across two Fed-initiated task forces are tasked with pondering “what’s next” in payments (e.g. faster – with 500 members)) and security (e.g. more and better (160). The Fed yesterday announced the formation of its Payments Security task force and has launched an online survey to collect comments on payment identity management, and data protection. That survey is open till Nov. 8 and responses will used to help determine just where efforts to improve security should lie.
This sounds to us like Shades of the Fed’s Faster Payments Task Force which, three years past the issuance of is policy position paper, just released its task-force developed guidelines on how to make payments faster. It has said that it will issue its first of two reports on recommended strategies in January 2017, and then the second report at mid-year.
Meanwhile, the private sector keeps marching along, and any number of firms, from Visa to Mastercard to Early Warning to Ingo to Same-Day ACH have been guns a-blazing doing stuff to make payments faster and safer. If past is prologue, well, then the payments security task force should be making its recommendations public in about the year 2021. By then, we could all be fizzled.
Appliances
Remember when a refrigerator was that stainless steel box in the kitchen that kept butter and milk cold? These days, they are that and more as cyber fraudsters turn them into cyber attack animals (alongside DVRs, webcams and baby monitors). The Denial of Service hack that felled the Internet a week ago — or parts of it anyway — gives pause to those who would love nothing more than to have the fridge make sure that Chobani pumpkin spice yogurts never ever run out. And where there’s a backdoor vulnerability for hackers to attack, there’s a creepiness factor that can stymie what had seemed a cheerful march toward smart devices. Could be that sizzling appliances might need to be safer before we need them to be smarter.
Amazon Stock
Shares sank six percent in the aftermarket on the heels of a quarter that missed expectations. The culprit? Continued investment in retail initiatives such as Amazon Web Services (for retail, naturally), higher shipping costs (consumer want it NOW), web programming and a host of other initiatives, none of which are surprising. But the current quarter sales forecast also falls short, at least of what people want to see on the Street — and it includes the mega important shopping season. Caution at the buy button this Christmas? Gulp.
SIZZLE
Silicon
You know those appliances we said needed to be smarter? Intel agrees that they need to be smart and safe. “Intel Inside” logo really goes inside as it announced a number of initiatives that will apply to all manner of smart devices at the most basic level, sand — or more specifically, silicon — to make sure that the devices are hack-proof at the most basic building block (that would be chips). And to build even more functions into its chips, the company has been buying up firms like Saffron Tech to build upon what is known as associate tech, tied in part to extracting useful knowledge from huge swaths of data and Visa to enable tokens in any connected device – to make commerce safe wherever those chips happen to be.
Artificial Intelligence
More than just the airs you put on during that first date (c’mon, you’ve all Googled your prospective love’s interest in Monet, or yoga, or baseball and feigned a shared love, too)…AI is the hottest thing since well, ET. Witness Watson, where IBM is pushing AI across energy companies, and car companies, and even Staples’ buying mechanism. AI is powering bots (they have a little way to go, though, to put the intelligence inside the artificial, fraud detection and prevention systems. The key is using data — the big kind — efficiently and quickly, across industries as diverse as health care and finance.
OK, part of Alphabet, so maybe the sizzle should be Alphabet — but among the shining moments in a quarter that beat expectations: Google websites saw sales up 23 percent, ad revenues up 18 percent and mobile continues to grow as do initiatives in the cloud. Maybe worthy of a YouTube video?
Fizzle Of The Week
Twitter’s Ongoing Troubles
If Twitter had hoped to escape scrutiny by releasing its quarterly earnings results early in the day — it was a plan that surely whiffed. If anything, it seems to have raised interest in them some — as TechCrunch and many, many others reasoned that if Twitter is announcing early (4 am PST), surely it must mean something…
And while bets were being placed throughout the week on an acquisition, going private through a leveraged buyout or massive layoffs — Twitter maintained that the early release time simply reflected a courtesy to the East Coast investors and a lot of competition on the day (since Google and Amazon were also announcing).
So, as the news hit the wires this morning — it was not quite exciting as an acquisition or a leveraged buyout — nor was it quite a “nothing to see here folks” move along. The latest earnings report was not quite a total disaster either — Twitter did manage to beat expectations — but the the layoffs have come — and in force. Also, in the surprise move of the day, Twitter is shutting down Vine. The optimists at Buzzfeed think that’s a positive sign of things to come since it suggests Twitter is doubling-down on its destiny as a live, real-time news source. Everyone else, though, thought it looked more like a sign of weakness, and that – coupled with the weak earnings pictures and the big staff cuts – all adds up to a fizzle for this week.
Fizzling By The Numbers
The figures weren’t what Twitter’s investors wanted to see.
Revenue growth has been small and glacial for the third quarter in a row and Twitter lost another $100 million. Revenue rose just 8.2 percent, compared with over 50 percent growth in the year-ago quarter. Last quarter marked its smallest quarterly growth and marked the ninth straight period of a slow down.
Sigh.
Losses were down — and Twitter affirms that the goal for next year is “driving toward” profitability.
The company has racked up net losses since going public in 2013, though they have narrowed each quarter this year. In the latest period, the loss shrank by 22 percent and beat expectations.
“We’re getting more disciplined about how we invest in the business,” Chief Executive Jack Dorsey said during a conference call with analysts. “We’ve fully funded our most critical initiatives.”
Discipline aside, however, Twitter’s user growth has been inconsistent and slowing — fluctuating between 0 and 1.7 percent over the last year and half. Twitter added 4 million monthly active users in the latest three months to bring it to 317 million. And with only 67 million monthly active users — Twitter is also seeing itself being passed by social media rivals like Snapchat and Pinterest.
“Twitter has gotten caught up in a conversation about slower growth and earnings,” said Adam Berke, president and chief marketing officer of AdRoll, which helps advertisers build ad campaigns on sites including Twitter and Facebook. “Even though that’s often unrelated to the effectiveness of their ad product, it affects their perception in the market as an interesting option.”
Bye-Bye Vine (And 9 Percent Of The Staff)
The most eye-catching news of the day was the revelation that Twitter will be cutting about 350 jobs — mostly in sales, partnerships and marketing. That round of layoffs represents about 9 percent of their workforce — and certainly lead most of the headlines.
Twitter noted the cuts were necessary as part of that big drive toward actual profit.
The other big news is that Twitter will be killing Vine — its fairly popular six-second looping video app (acquired in 2012).
“We see a significant opportunity to increase growth as we continue to improve the core service,” Jack Dorsey, the chief executive of Twitter, said in a statement. “We have a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth.”
And while some noted that getting ride of Vine was cutting unnecessary fat — many saw it as a sign of defeat.
“I was told many times by people inside of Twitter that Vine never recovered from Instagram’s video launch a few years back. That threat of stealing users and market share was real, and it worked,” reported the NY Times.
The rest of the internet – particularly those using Twitter, responded with the same calm equanimity that the world has come to associate with internet commentary.
“You can rip my 4 million Vine loops out of my cold dead hands,” one user Tweeted.
And, when your users — the loyal enthused ones — are using the phrased “cold dead hands” to describe your latest choice; combined with firing 9 percent of the workforce — well, it’s hard not to get a Fizzle rating.
Though we will note that among the fanboys and girls the read on the latest is that Twitter is starting to get all grown up — and that though it doesn’t look like much today — they are setting up the Sizzle sure to come.
We’ll keep you posted when and if it gets here.
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