Tech Brew Ride Home - Tue. 02/04 - Tech Is the Angle In Iowa

Episode Date: February 4, 2020

We finally know how big a business YouTube is, the tech angle on that Iowa Caucuses mess IS the only angle, Mastercard explains why it pulled out of Libra, and why has the US Government decided to break up Big Razor, before it gets around to Big Tech. Sponsors: Capterra.com/ride WarbyParker.com/tech Links: YouTube is a $15 billion-a-year business, Google reveals for the first time (The Verge) This Is The Buzzy Democratic Firm That Botched The Iowa Caucuses (HuffPost) Some Google Photos videos in ‘Takeout’ backups were sent to strangers last November (9to5Google) Mastercard chief speaks out against nationalism and Facebook (Financial Times) Asana Says It’s Filed to Go Public Through a Direct Listing (Bloomberg) Chip Industry Had Worst Sales Year Since Dot-Com Bubble Burst (Bloomberg) Top Antitrust Official Is Said to Recuse Himself From Google Inquiry (NYTimes) The US government is breaking up Big Razor before it gets to Big Tech (Recode) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the tech meme right home for Tuesday, February 4th, 2020. I'm Brian McCullough today. We finally know how big a business YouTube is.

The tech angle on that Iowa caucuses mess is the only angle. MasterCard explains why it pulled out of Libra, and why has the U.S. government decided to break up Big Razor before it gets around to Big Tech? Here's what you miss today in the world of tech. Well, it turns out that as this earnings season winds down, it was actually Google who had the most. interesting report. Alphabet overall reported Q4 net income of $10.67 billion up from $8.95 billion

last year, and its fiscal 2019 revenues came in at $162 billion, up 18% year over year. Quarterly revenue was a bit of a miss coming in at $46.08 billion, which was slightly less than analysts expected. Alphabet's stock is down around 3.5% at the time of this recording. But that wasn't the surprise. The surprise was, for the first time ever, Google broke out revenue numbers for YouTube as well as its cloud division. But let's hit YouTube first, because for years, people have wondered how big a business YouTube actually was, and now we know. Alphabet said that YouTube ads generated $4.7 billion in revenue in Q4 and $15.15 billion in all of fiscal 2019, which was up from $11.16 billion in fiscal 2018. So, YouTube is a $15 billion

business. YouTube contributes nearly 10% of Google's entire business. YouTube's ad business is about 20% the size of Facebook's. It is a six times bigger business than Twitch. And by itself, YouTube represents about 20% of the entire US TV advertising spend. And quoting the verge, separately, Google says YouTube has more than 20 million subscribers across its premium, ad-free YouTube, and music premium offerings, as well as more than 2 million subscribers to its paid TV service. Alphabet says revenues from those products are bundled into the other category,

which made $5.3 billion last quarter, and also includes hardware like pixel phone and Google Home speakers. That makes it hard to gauge the specific performance of any one product bundled under that category, end quote. But back to the YouTube specific disclosures, how much has YouTube paid out to creators? That one's a little murky. On the earnings call, YouTube's CFO said they had paid out a, quote, majority of revenues earned via ads to creators. But we didn't get a dollar figure. YouTube did report $8.5 billion in content acquisition costs. One would imagine that that is where the payouts to creators is accounted for. I'm not saying that they paid out eight and a half

billion to creators, but whatever they paid out, it is some portion of that $8.5 billion. Alphabet also, as I said, broke out revenue for its cloud division for the first time, saying that it generated $8.92 billion in fiscal 2019, up from $5.84 billion the year previous, which is impressive growth. But when you look at the overall numbers, remember that that's the full year of revenue for their cloud sector. and Microsoft just reported $11.9 billion for its cloud business in just the most recent quarter. AWS reported $9.9 billion for just the most recent quarter.

So, you know, room to grow there, I guess. Also, as always, those other bets, revenue for everything from Verily to fiber to Waymo rose to $172 million in the quarter. But losses jumped to $2 billion up from $1.3 billion in losses year over year. So revenue miss. Advertising business sort of meh. Other bets, losses increasing. I think we can see why Alphabet chose to break out YouTube numbers now. It's sort of a way to say to investors, hey, don't worry about all that.

Look over here. Look at this monster business we've got over here. Yeah, it turns out there's a tech angle to the mess that's going on with the Iowa caucuses. In fact, the tech angle is kind of the whole story. As you've heard, it was an app that was at the... root of the problem last night, an app that was supposed to make reporting the results of the caucuses quicker and easier, turned out not so much. Well, who was behind this app, quoting the Washington Post? A tech company affiliated with and funded by acronym, a Democratic digital

nonprofit group that has rapidly expanded in recent years, was responsible for building the Iowa caucus app that contributed to delays in reporting Monday night's results in the first vote in the party's presidential race. Multiple Democratic sources. including one of the presidential campaigns confirm the app's creator. State campaign finance records indicate the Iowa Democratic Party paid Shadow, a tech company that joined with acronym last year, more than $60,000 for website development over two installments in November and December of last year. A Democratic source with knowledge of the process said those payments were for the app

that caucus site leaders were supposed to use to upload the results to their locals. Gerard Nimira, a veteran of Hillary Clinton's presidential campaign, is the head of Shadow. He previously served as Chief Technology Officer and Chief Operating Officer of Acronym, according to his LinkedIn page. In 2019, David Plouf, one of the chief architects of President Barack Obama's wins, joined the Board of Advisors for acronym. Acronym spokesman Kyle Tharp put out a statement distancing the group from Shadow saying that acronym is merely an investor in the for-profit company, end quote. hopefully by the time you are hearing this, the results of the caucus will have been made public. I just checked and they still weren't available. Oh, and apparently this same app was supposed to be used in the upcoming Nevada primary.

So, yay. Google has this service called Google Takeout, which allows you to download your data from Google Apps as backup for use with other services. Unfortunately, some users of Google For example. photos had videos that were backed up to takeout, exported and sent to complete strangers for a period of time between November 21st and November 25th of last year. Quoting 9 to 5 Google. Google this evening began alerting takeout users about the, quote, technical issue. From November 21st to November 25th of 2019, those that requested backups could have had

videos in Google photos, quote, incorrectly exported to unrelated users' archives, end quote. In requesting a backup, some of your videos, but not pictures, might be visible to random users that were also downloading their data through Google Takeout. The company did not specify what media was affected beyond, quote, one or more videos in your Google Photos account was affected by this issue, end quote. Google has been emailing users affected and says that less than 0.01% of Google Photos users who used Takeout were affected. though it's also worth pointing out that one billion people use Google Photos, so potentially with any snafu like this, even a small percentage of users could represent a large number of actual people. And also, if even one person's private video was sent to a complete stranger, isn't that basically the nightmare scenario of possible scenarios when it comes to photo and video

storage? I've been waiting for something like this to emerge. The Financial Times spoke to MasterCard CEO, Jay Benga, who detailed why exactly his company pulled out of the Libra Association. Basically, Benga says the company had concerns about how Libra was morphing from an, quote, altruistic idea, to Cah Libra, what he essentially called a proprietary wallet. Quote, Mr. Banga likes the idea of a global currency and join the Association of Companies backing Libra, but concerns over compliance and the business model led him to withdraw. The association's key members would not give a hard commitment to, quote, not do anything that is not fully compliant with local law. He points to due diligence considerations such as know your client, anti-money laundering,

data management, quote, all that. Every time you talk to the main proponents of Libra, I said, would you put that in writing? They wouldn't, end quote. He also did not see how Libra would make money. And, quote, when you don't understand how money gets made, it gets made in ways you don't like, end quote. Finally, he was alarmed that Facebook had positioned Libra as a financial inclusion tool,

but then proposed linking it to a proprietary digital wallet, Calibra. Quote, it went from this altruistic idea into their own wallet. I'm like, this doesn't sound right. For financial inclusion, the government has got to pay you in this currency. You've got to receive it as an instrument you can understand, and you have to be able to use it to buy rice and cycles. If you get paid in Libra coin, which goes into calibras, which go back into pounds to buy rice, I don't understand how that works, end quote.

Of course, there's also the small consideration that a global blockchain-based payment network, if it were to take off, would likely be an existential threat to a payments company like MasterCard. Workplace productivity software company Asana says that it is the latest tech company to file a tech company to file, go public via a direct listing. Asana has raised about $213 million to date, was last valued at around $1.5 billion, and has some pretty famous folks behind it. It was co-founded by Facebook co-founder Dustin Moskowitz, quoting Bloomberg. The company makes productivity and task management software for businesses. Its investors have included Facebook chief executive officer Mark Zuckerberg and his wife, Priscilla Chan, former U.S. Vice President Al Gore also has been a backer. Direct listings have been touted as a way for companies that don't need to

raise new capital to go public while also saving on fees paid to banks and allowing current investors to sell shares without waiting for a lockup period to expire. So far, direct listings have been used by only two major companies, Spotify and Slack, end quote. Asana is a much smaller company than either Spotify or Slack. So going public via direct listing suggests that Asana probably doesn't really need any big infusion of cash and probably just wants some liquidity for those fairly famous insiders. The global semiconductor industry had its worst slump in almost two decades last year, as revenue fell 14 percent to $412 billion, the biggest drop since 2001 when the dot-com bubble burst. The culprit? That trade war with China and the United States, quoting Bloomberg.

Memory chips were the hardest hit. Prices of those commodity chips fell as production outran demand. Memory revenue dropped 33% from 2018, led by declines in computer memory. All regions experienced a decline in demand. Sales in China, whose consumers and factories that supply finished products to the rest of the world account for more than one third of global consumption of the electronic components fell 8.7% according to the SIA. Sales in the Americas dropped the most of any region at 24%. The rate of decline last year abated with sales growing slightly in the fourth quarter from the preceding three-month period, the Semiconductor Industry Association said. For that to continue, China and the U.S. need to build on the phase one trade agreement announced last month, end quote. The whole antitrust thing with big tech has gone quiet lately, as we're basically waiting for the investigations to wrap up and whatever shoes that might drop actually drop probably later this year. but one quick note that they are still continuing and that the DOJ's top antitrust official,

McCann Delrahim, has had to recuse himself from the DOJ's probe into Google because of a conflict of interest related to his past work for the company, quoting the New York Times. In 2007, Mr. Delrahim, who was in private law practice at the time, had a contract to lobby for Google's acquisition of the ad technology company Double-click, according to the people who spoke on condition of anonymity because the details are confidential. Quote, as the technology review progressed, assistant attorney general McCann del Rahim, revisited potential conflicts with the previous work with the Department of Justice's Ethics Office. He and the Ethics Office have decided that he should now recuse himself from a matter within the Tech Review in an abundance of caution, end quote. No word, though, on why this recusal has happened now, given that the various probes have been going on,

for months. Mr. Delrahim apparently also did legal work and consulting work for Apple. But I would think that it would have always been notable that Mr. Delrahim basically lobbied for one of the biggest acquisitions that the whole breakup big tech crowd have been pointing to as a possible acquisition to retroactively break up the double-click acquisition by Google. Finally today, this is not really tech, as I always like to say, but we have been talking about direct-to-consumer companies recently, so I wanted to note that the Federal Trade Commission is suing to block the $1.37 billion sale of Razor startup Harry's to Edgewell, the parent company of the Shick Razor brand. Quoting Recode. In evaluating the deal, the FTC looked at competition in what is called the wet shave market. Basically, razors used for face shaving, but not including electric razors.

It's not yet clear how the FTC may have defined the relevant market beyond that for this merger evaluation. According to the research firm Euromonitor, Jolette held 47% of the U.S. men's razor market in 2018 with Edgewell's brands, which includes Schick and Wilkinson's Sword, combining for 13.6% of the industry. The Harry's brand, which started selling online but now has a large presence in both Target and Walmart stores, had just 2.6% share at the time, according to Euromotor. According to the FTC's complaint published Monday afternoon, the agency saw Harry's arrival in brick and mortar retail chains, first target and later Walmart,

as the main impetus that forced Edgewell to lower prices on its shick razors. Quote, in the end, competitive pressure generated by Harry's successful launches at Target and Walmart defeated Edgewell's plan to maintain prices, the FTC complaint alleges. By the end of 2018, Edgewell had reduced its prices significantly, end quote. So I guess the government has decided that it's going to break up Big Razor before it gets around to Big Tech. That is all for today. Given the tech angle I mentioned on the Iowa caucuses, brouhaha, might I suggest this would be a good day to head over and check out the election ride home podcast? Because I'm sure Glenn will be explaining it all to you in greater detail.

Talk to you tomorrow.