Snap Seizes the Moment

Snap Inc. last week filed for a US$3 billion initial public offering.

The company’s private market valuation is $17.8 billion, but investors have valued it at between $20 billion and $25 billion, according to a Wall Street Journal report.

“Twenty-five billion dollars is just nuts, but that’s the market we’re in,” remarked Rob Enderle, principal analyst at the Enderle Group.

“This could provide an opportunity for the big gambler investors, but better to watch for the high and then short the stock,” he told the E-Commerce Times, because Snap’s prospectus “suggests profit will never arrive.”

Company revenue last year skyrocketed to $404.5 million, from $59 million in 2015. Losses totaled $514 million last year, compared to $373 million in 2015.

Most of Snapchat’s 158 million daily active users, or DAOs, are in the coveted 18 to 34 age group.

“These are the mainstream consumers of tomorrow,” noted Andreas Scherer, managing partner at Salto Partners.

That “means it can be the alternative to Facebook and Google that marketers are looking for,” he told the E-Commerce Times.

Snap, which has three classes of stock — A, B and C — is offering Class A common stock.

“Currently, the stock market’s on fire,” Scherer said.”Even though Snap is nowhere near other companies in this segment at the time of their respective IPOs in terms of revenue and profitability, the time is right for this offering.”

Risks Snap Investors face

Among the risk factors Snap has acknowledged are the following:

  • Its user demographic is not particularly loyal;
  • Its user metrics and other estimates are subject to inherent challenges in measurement;
  • The significant competition it faces will intensify;
  • Competitors — including Apple, Facebook and Google — are better funded, and changes in their OSes or hardware could impact Snap’s products adversely;
  • Its products require high-bandwidth data networks, so are vulnerable to data usage costs;
  • Google Cloud provides the vast majority of Snap’s computing, storage, bandwidth and other services, and Google has broad discretion to change and interpret its terms of service and other policies, which could be unfavorable to Snap;
  • Switching from Google Cloud to another provider would be difficult to implement and cost significant time and expense;
  • Snap has incurred operating losses in the past, expects to do so in the future, and may never achieve or maintain profitability; and
  • It has a short operating history and a new business model, which makes it difficult to evaluate its prospects and future financial results, and increases the risk that it will not be successful.

“It’s positive that Snap has put together two straight quarters of positive gross profits, which hopefully, combined with the 400 percent year-over-year revenue growth they demonstrated in the December quarter, means they’ll eventually have net profits,” observed Barry Randall, chief investment officer at Crabtree Asset Management.

However, “it’s negative that Snap’s cash is disappearing faster than a Snapchat photo,” he told the E-Commerce Times. “Their 2016 free cash flow had twice the burn rate of 2015 and was negative to the tune of $678 million.”

What Is Snap, Really?

Snap paints itself as a camera company, but the “day before yesterday, they were a social media company,” noted Trip Chowdhry, managing director at Global Equities Research.

“Yesterday, they were a hardware company,” he told the E-Commerce Times, but “today they’re a camera company.”

Identifying as a camera company might backfire, Chowdhry warned. “Haven’t investors learned from GoPro, which was a camera company? People will put action videos on media channels.”

Money for Nothing

Purchasers of Class A stock will have no voting rights.

Cofounders Evan Spiegel and Bobby Murphy each will have 22.4 percent of the company’s shares, and control all stockholder decisions. They will retain voting power and control even if they leave the company. If either dies, the other will have control.

Still, revenue growth and DAU growth “are decelerating pretty rapidly for a company this young,” Randall warned.

The IPO “will almost certainly be a success, given the slim pickings in the IPO market for high-profile tech companies,” Randall said. However, investors will be ready to sell their shares at the drop of a hat, “given the recent flame-outs of Zynga, Groupon, and especially Twitter after their IPOs.”


Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it’s all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon’s Law still hold true? You can connect with Richard on Google+.

Chan Zuckerberg Initiative donates $3.6M to fight SF Bay housing crisis


The rise of tech startups around San Francisco has contributed to a rise in rents that’s pushing families out of the Bay Area. Crooked landlords use legal loopholes to evict families so they can jack up prices and move in richer tenants. But now one of the Bay’s wealthiest families is putting a little of its fortune toward fighting back on behalf of longtime residents who can’t pay today’s rates.

The Chan Zuckerberg Initiative, the $45 billion philanthropic vehicle established by Facebook’s CEO and his wife, are donating $3.6 million toward housing crisis relief, The Mercury News reports.

The majority of funding, $3.1 million, will go to Community Legal Services in East Palo Alto to address the current hardships caused by the housing shortage in the San Francisco suburbs near Facebook’s headquarters. The organization provides legal assistance to individuals and families, such as legal defense in court during disputes with landlords. The money will allow the CLSEPA to hire several additional lawyers, and is expected to help 2,500 residents over the course of three years.

Facebook Engineering Office

Facebook’s new Menlo Park building features a park on the roof

A $500,000 grant also goes to the Terner Center for Housing Innovation at UC Berkeley to help generate long-range solutions to the region’s housing predicament. These include different business models and methods that could help the real estate and construction industries reduce the costs of creating additional housing.

The CZI’s president of policy and advocacy David Plouffe wrote, “Ensuring that people of all income levels can live and work in our communities is important to advancing human potential and promoting equal opportunity, the mission that guides our work.” He went on to note that half of long-term residents in East Palo Alto and Belle Haven had left in the last five years.

stock-housing-bay-area1

Despite widespread understanding that the demand for housing from the influx of tech workers has largely outstripped the pace of building new housing supply, progress toward fixing the problem or mitigating its effects has been slow. Homeowners in cities across the Bay have used their collective voting power to block housing creation that might prevent their properties to continue rapidly escalating in value. Often times, these homeowners claim to be trying to preserve the skyline or character of their neighborhoods to obscure their greedy motives.

While tech companies like Facebook aren’t the ones battling against housing for lower-income families, their growth and high wages are exacerbating the problem. Their employees contribute globally through their software and hardware development, but not locally the way traditional professionals and artists do. The swelling ranks of techies can thereby push out local culture, as San Francisco has seen with the flight of creatives to Oakland and the East Bay.

Zuckerberg has been embroiled with his own housing issues, recently dropping a lawsuit designed to clear the way for him to build a home on a large property in Hawaii. He called the lawsuit a mistake and is now working with the community to find a better path forward. Zuckerberg has previously served as a guest teacher in East Menlo Park, while Facebook pledged $20 million to push affordable housing in the city.

Tech and its money certainly can’t fix everything, and debates about the best solutions to the housing crisis make it tough to have clear-cut positive impact. Still, more leaders and tech philanthropists should follow Mark Zuckerberg’s lead in sticking up for the longtime residents their companies are inadvertently pushing out.

Facebook and Google join forces to wage war against fake news

Image: Bob Al-Greene/Mashable

“Fake news” is the crisis du jour for online media in 2017, and now, two tech giants are working together to stop it from wrecking a pivotal election.

…Well, another pivotal election.

Facebook and Google, along with newsrooms in France (including France 24, the partner for Mashable‘s French-language edition), are joining forces on a new project that will help verify or debunk viral information online. It’s called CrossCheck, and it’ll focus on the 2017 French presidential election. The initiative, billed as “a collaborative journalism project,” was originally conceived by First Draft, a nonprofit focused on verifying information in the digital age, and Google News Lab.

The French election fits nicely as a sort of “round two” for Google and Facebook, which failed to stem the rise of misinformation supporting Donald Trump before his election last November. France is at an inflection point, with an incredibly unpopular sitting president and an ascendant candidate, Marine Le Pen, who could overthrow the incumbent with her far-right, France-first platform.

CrossCheck has its work cut out for it.

And speaking of “fake news,” Le Pen has already benefited from an organized effort to discredit her opponents with fabricated online profiles, BuzzFeed reported last month. Pepe the frog, a stoner comic book character that became an unlikely icon for white nationalism in the U.S. last year, has leaped over the Atlantic to support her, as well.

So CrossCheck has its work cut out for it. But details about how the project will work are a bit sketchy. It sounds as though Google and Facebook will provide access to tools like CrowdTangle and Google Trends to help experts track how topics are being discussed on social media. 

According to a report in Le Monde, Facebook will also roll out a French version of a news-reporting tool that allows users to flag bogus content on the social network. Third-party fact-checkers will assess the content and a warning will be added to “disputed” links.

Disputed content may also be ranked lower in a user’s News Feed, per a Facebook update from the end of last month.

Facebook's news-reporting tool in action.

Facebook’s news-reporting tool in action.

Image: Facebook

“It is this element that decided it for us,” said Jérôme Fenoglio, director of Le Monde, as translated from French by Mashable. “For the first time, it would be possible to act [using] an algorithm when content poses an editorial problem.”

“Fake news” is the bleating scapegoat that’s come to define this era of American politics. Originally intended as a label for fabricated stories written with maximum virality in mind—often in support of President Trump—the term’s been co-opted by some authority figures to confuse the public into thinking that actual facts are falsehoods. 

President Trump has tweeted about “fake news”—often, in screaming capital letters— at least 16 times since December. But unlike the material CrossCheck’s concerned with, his “fake news” is typically-factual material that makes him look bad, and that he’s got a vested interest in turning the public against.

For example, President Trump tweeted early Monday morning that “any negative polls are fake news,” which really requires no unpacking. It’s been retweeted over 22,000 times.

Still, cutting down on how misinformation spreads on Facebook is a worthy pursuit. A recent survey from the Pew Research Center indicated that social media does indeed have the power to change what people believe—an idea that shouldn’t be ignored as yet another Western power prepares to decide its future.

BONUS: In stunning exchange, Trump refuses to answer question from CNN reporter

Pogue’s Basics: Have your iPhone announce your calls

I’ve got a friend whose home cordless phone (yes, she still has one of those) announces, out loud, who’s calling. It’s kind of cool, because if you’re making dinner or watching TV or something, you know whether it’s worth answering. “Call from Vantage Insurance,” it’ll say — a telemarketer — and she ignores it. “Call from David Pogue,” and, of course, she leaps to answer.

Turns out the iPhone can do that too. But not one person in a thousand knows.

<p type="text" content="Open Settings > Phone >Announce Calls. Here, you get to choose whenthe phone announces the caller’s name when it rings: Always, Never, Headphones Only, or Headphones & Car.” class=”canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm” data-type=”text” data-reactid=”11″>Open Settings > Phone >Announce Calls. Here, you get to choose whenthe phone announces the caller’s name when it rings: Always, Never, Headphones Only, or Headphones & Car.

The point of Headphones is privacy — it means, “Don’t announce the caller’s name at times when anyone nearby can hear; announce it only when I’m listening in private.”

And the point of “Headphones & Car” is a safety thing. When you’re driving, you don’t want to take your eyes off the road to see who’s calling.

All in all, a very cool feature that nobody knows about.

<p type="text" content="Adapted from Pogue’s Basics: Tech, by David Pogue, tech columnist for Yahoo Finance. He welcomes nontoxic comments in the Comments below. On the Web, he’s davidpogue.com. On Twitter, he’s @pogue. On email, he’s poguester@yahoo.com. You can read all his articles here, or you can sign up to get his columns by email” class=”canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm” data-type=”text” data-reactid=”15″>Adapted from Pogue’s Basics: Tech, by David Pogue, tech columnist for Yahoo Finance. He welcomes nontoxic comments in the Comments below. On the Web, he’s davidpogue.com. On Twitter, he’s @pogue. On email, he’s poguester@yahoo.com. You can read all his articles here, or you can sign up to get his columns by email

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Chinese photo-sharing app Kuaishou planning U.S. IPO later this year


We’re hearing from sources that Kuaishou — a hot photo-sharing application in China — is planning to go public in the U.S. later this year.

Sources tell us the app has more than 40 million daily active users against 100 million monthly active users, and was most recently valued at around $3 billion. The app is in some ways similar to Instagram, with photos (some of which load into videos) layered in a grid on the main page of the app. It’s available in the U.S. as the app Kwai. Naturally, it’s not that big in the U.S., but it’s huge in China.

The IPO is targeted for the back half of the year, though things could of course change for any big deal like this. Investors have been buzzing about Kuaishou for some time, where we first heard the company had taken money from Sequoia and has risen to a valuation around $3 billion. DST, Baidu and DCM are also investors, according to our sources. With mobile photo- and video-centric communications apps being one of the most attractive companies for investors right now, Kuaishou seems like a natural candidate for investor interest. Kuaishou users can buy “coins” for the app, giving it another way to monetize.

Hitting $3 billion with those investors isn’t necessarily that outlandish. Snapchat — with 150 million DAUs as of its most recent report — is expected to go public at a valuation of more than $20 billion. Marco Polo, another new and fast-growing video walkie-talkie app in the U.S., has also hit a reported $100 million valuation as investors have picked up on its rapid growth and thrown some money into it.

kuaishou app

Snap is expected to go public in March after publicly filing last week, which will set the tone for tech IPOs this year. Already its revenue growth is impressive — hitting around $400 million in revenue last year and up from $59 million in 2015. But its costs are also very high, and a mediocre reception for Snap may temper expectations for messaging and photo services like Kuaishou. Snap lost around $515 million last year and its costs continue to grow.

Kuaishou currently has the luxury of not having to compete with Facebook and Instagram in China, which has clearly given it a lot of breathing room to grow. It also doesn’t have to contend yet with Snapchat, which could give it the ability to grow into new similar features. While the engagement on the app — 40 million DAUs to 100 million MAUs — is high, it’s not quite at Facebook’s 66 percent overlap for DAUs and MAUs.

But for Kuaishou, this may be even more of a blessing. If Facebook or Snapchat are ever hoping to get into China they are going to have to contend with the ever-growing Kuaishou. While Facebook is massive, its growth continues to slow and eventually it will probably have to make its way into China. There, it’ll be competing with messaging apps like WeChat, and a successful app like Kuaishou will provide even greater inertia for Facebook or Snapchat to become popular there.

We reached out to Kuaishou for more information.

Update: A spokeswoman for the company claims the story is “not in accordance with facts,” but would not clarify which details of the story they are denying.

DARPA shows off its SideArm system catching drones mid-flight


Military-style fixed-wing drones are easy to launch, but difficult to land; DARPA aims to change that with SideArm, a portable drone-grabbing system that snatches the fast-moving craft right out of the air.

The basic concept, as suggested when SideArm was first proposed, is sort of a reversal of the classic aircraft carrier hook system.

The SideArm unit, which fits in a shipping container and can be set up and operated by 2-4 people, first launches the drone off a horizontally mounted rail catapult. When the drone is ready to land, the operators attach the grabber (no official name is mentioned) to the rail and the drone flies in directly under it.

ternconceptA hook protruding from the back of the drone snags on a line, which both slows the craft down and causes it to swing up into a waiting net, where nose barbs keep it in place.

You can see the lab tests and concept renders in this video:

[embedded content]

“SideArm aims to replicate carriers’ capability to quickly and safely accelerate and decelerate planes through a portable, low-cost kit that is mission-flexible, independent from local infrastructure, and compatible with existing and future tactical unmanned aircraft,” said DARPA’s Graham Drozeski in a press release.

The system is part of the Tern project, a joint venture between DARPA and the Navy aimed at making unmanned aircraft systems that don’t require costly and irreversible modifications to ships.

Featured Image: DARPA

Was Apple’s Outstanding Q1 a Fluke?

Apple had a good quarter, but if you look under the numbers there is a ton of trouble. It just dropped behind Google in brand value, and some analysts have predicted valuation will crater in a few months.

The iPhone 7 did well, but that shouldn’t be a surprise, given that its biggest competitor, Samsung, saw its phone literally go up in flames last quarter. The Galaxy 8 is coming, though — maybe sooner than anyone expects — and it looks really impressive. This suggests Apple’s one-up quarter is not repeatable, unless Samsung decides burning phones is a feature. (Just think of the marshmallows you could roast right in your car! Or “the Samsung S8 Burns Faster, Better, Hotter!”)

Apple has moved aggressively to get suppliers to cut costs — even going to court in an effort to move some of Qualcomm’s profit to its own bottom line (this rarely ends well). Apple apparently hit a wall on top line growth, even though it is threatening to raise prices. (Good luck with that, because raising prices in a very competitive market ALWAYS ends well.)

Looking back, the Steve Jobs cycle really worked only once. It may not be Tim Cook’s fault it is failing — maybe working once was all it could do.

I’ll explain and then close with my product of the week: the Microsoft Surface Book 2, the halo product in the tablet family that is going up as the traditional iPad goes down.

The Apple Cycle

The Apple product cycle was an amazing thing to watch — not least because it showcased how folks could have, but didn’t, compete with the once unbeatable iPod. When the iPod was at its peak, Sony, Samsung, Dell — and even Microsoft, with the Zune — tried to make a dent in its sales, but they bounced off the product like it was made of diamonds.

The only product that even worried Steve Jobs was a prototype from HP, and he was able to trick HP’s then CEO Carly Fiorina into licensing the iPod instead. Then he really took advantage of her. Imagine how different history would have been for both HP and Carly if, instead of being screwed by Apple, HP had been the only company to displace the iPod. Maybe Fiorina, not Jobs, would have been CEO of the decade. (OK, I doubt it too.)

As it happened, Jobs saw that the real risk to the iPod was the emergence of smartphones that could do what the iPod did better. Instead of defending the iPod, he did what Microsoft and Palm should have done, leading Apple to create the best MP3/phone bundle.

That was particularly embarrassing for Microsoft’s Steve Ballmer, because he’d disagreed with his internal team, which had wanted to do the same thing instead of creating the Zune. Ballmer wasn’t alone, however. Palm’s then CEO also killed a similar effort, saying something like “smartphones are just for business.” There is some irony in HP buying Palm and then burning it to the ground, given its iPod mistake.

The iPod became the iPhone — an even bigger hit — and suddenly we had what looked like an amazingly powerful cycle, which worked pretty well for a decade.

When the Apple Cycle Broke

That successful cycle broke with the iPad. You see, the iPhone was an iPod-plus, so the next product in the cycle should have built on the iPhone — but it didn’t. The iPad is built on the iPod — it basically is an iPod with a bigger screen.

The iPhone already had made the iPod redundant, and the iPhone’s screen eventually grew, so instead of the iPad being an extension of the iPod, the iPhone became an extension of both. Instead of the iPad expanding the market like the iPhone did, it peaked and then went into an impressive nosedive.

Granted, the iPad Pro, which is sort of trying to be a blend of the iPad and MacBook, is having some success — but largely as a result of Microsoft’s Surface efforts. It arguably is doing a better job of slipstreaming the Surface than Zune did the iPod, but a huge hit it isn’t.

Then the Apple Watch came along, breaking Apple’s naming convention. It basically is a small iPod touch with limitations in screen size, features and platform compatibility. The iPod worked with Windows and the MacOS; the Apple Watch should work with Android as well as iOS but doesn’t. As a result, the Apple Watch is a crippled wearable iPod, and there should be no surprise it isn’t selling that well, even though it is considered one of the best smartwatches in the segment.

Wrapping Up: One-Trick Wonder

What all of this means is that Steve Jobs really only got this right once. Granted, he was increasingly sick after the iPhone and was gone for the Apple Watch, so he might have figured it out had he been alive and well. This makes me wonder if it even would be possible to extend the iPhone further. Could you create an iWonder product that would expand the smartphone to embrace the PC, for instance?

That is what Microsoft imagined with Continuum — the idea that a smartphone truly could become a PC — and what makes this ironic is that once again, it didn’t execute on what might have been a true iPhone replacement.

If Jobs were around, I’d bet that’s where he would go. What then would be the next step? Maybe some kind of Hololens-like product that could eliminate virtually everything else in its final form? I wonder who is going to get that right?

Rob Enderle's Product of the Week

The most memorable launch of this decade, for me, was the Surface Book. That’s because it was introduced as a laptop computer — and to look at it, it is hard to tell the screen becomes a tablet. With a flourish and the release of an electronic latch, the presenter mirrored what Jobs used to do with his “one more thing” surprise, and I haven’t seen people get so excited about a PC since the 90s.

I carried the Surface Book for months, and I had just one major complaint — that it couldn’t play any decent games. When you travel as much as I do, there is a lot of down time in airports or between meetings when time just drags. It’s even worse on long flights, when you can’t even move for hours.

I do read a lot, but the way I can burn through hours is with video games. The typical trade-off is that you either get a notebook that is thin and light with good battery life, or you get one that is heavy and thick with lousy battery life, but that plays games. Games don’t pay the bills for me, though.

What is amazing about the Surface Book 2 is that it significantly ups the graphics performance and increases battery life by a third — from 12 to 16 hours — while adding only one-third of a pound of weight.

Surface Book With Performance Base

Surface Book With
Performance Base

Granted, you still aren’t at gaming laptop speeds, but this one now runs my current favorite game, Ashes of the Singularity, while the old one wouldn’t.

The Surface Book has never been a cheap date. It costs around US$2K for the sweet spot configuration of an i7 and 256M SSD drive, but the Surface Book 2 adds only $400 for a far more capable product with the same options.

It has a couple of shortcomings. To get it out before Christmas, Microsoft had to miss Intel’s latest Kaby Lake processor. Also, it doesn’t have USB-C ports — just the older USB 3.0 configuration. Still, given that most of what I have is still USB 3.0-compatible and that Kaby Lake was a minor upgrade, neither has been a problem.

Carrying the Surface Book is like carrying art. To my eye, it is arguably the best-looking laptop in the market. It can transform into a very attractive tablet that I rarely use — but most important, it will play games! As a result, the Surface Book 2 is my new carry box and my product of the week. It is a pretty thing.


Rob Enderle is a TechNewsWorld columnist and the principal analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends. You can connect with him on Google+.