Tech Brew Ride Home - Wed. 04/29 – Here Come the Tech Earnings…

Episode Date: April 29, 2020

The biggest tech earnings season in a while kicks off and so far, it’s so good for Alphabet. Spotify says its holding up as well. Though Uber might lay off 20% of its workforce, Ford is delaying its self-driving road map, and that has me asking again, why isn’t this the perfect moment for self-driving tech? Sponsors: Tovala (text TOVALARIDE to 710-23) Metalab.co Links: Alphabet earnings hit by ‘significant slowdown’ in ad sales, but revenue boosts stock (Marketwatch) Google Meet video conferencing is now free for anybody (The Verge) Spotify Q1 beats on sales of $2B with monthly active users up 31% to 286M (TechCrunch) Uber Discusses Plan to Lay Off About 20% of Employees (The Information) Ford postpones autonomous vehicle service until 2022 (TechCrunch) How a handful of Apple and Google employees came together to help health officials trace coronavirus (CNBC) 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 Wednesday, April 29th, 2020. I'm Brian McCullough today. The biggest tech earning season in a while kicks off, and so far it's so good for Google. Spotify says it's holding up as well. Though Uber might lay off 20% of its workforce, Ford is delaying its self-driving roadmap. And that has me asking again, why isn't this the perfect moment for self-driving tech? Here's what you missed today in the world of tech. Well, as discussed, this earning season is going to be more impactful than most because it's going to tell us how tech is holding up in the current environment. It might also tell us how things in the overall economy are holding up, although, as discussed on weekend episodes, that remains to be seen. Maybe tech is going to do just fine while the rest of the economy is in the pooper. Who knows? But the first signs are tech seems to be holding up well. Alphabet reported, revenue of $41.2 billion yesterday, up 13% year over year, with net income of $6.8 billion, up slightly

year over year. Google Cloud revenue increased 52% to $2.7 billion, driven by what is called significant growth in Google Cloud Platform and, quote, ongoing strong growth in G Suite. The other bets operating losses grew to $1.1 billion, so no change there. And also note that the headcount at Alphabet grew to 123,000 up 20,000 people, but again, Alphabet has already told us that's probably going to be on pause for a little while. So what do it all mean? Well, Alphabet did say that the global pandemic was responsible for a, quote, significant slowdown in ad revenue. That wasn't enough to spook investors. Alphabet stock opened up 9% this morning. Why? Well, you can probably guess, actually, quoting MarketWatch.

Though $33.8 billion of Google's total quarterly revenue of $41.16 billion came from advertising, a reflection of its continued reliance on a battered market, there is a silver lining. Sales from Google Cloud and YouTube continued to surge, underscoring versatility in the company's overall product line. YouTube ad revenue increased 33.4% to $4.04 billion from $3.03 billion a year ago, while Google Cloud. cloud sales grew 52% to $2.78 billion from $1.83 billion. During a conference call with analysts late Tuesday, Alphabet CEO Sundar Pichai described Q1 as, quote, a tail of two quarters, a strong start that quickly tailed off because of COVID-19.

He said the transparent, cost-effective nature of search offers promise in pivoting to adapt to the economic crisis, and Google is more diversified now with cloud services. than it was during the Great Recession of 2008-2009. Quote, At the inception of the crisis, the increase in user interest was for information about COVID-19 and related non-commercial topics. Alphabet chief financial officer Ruth Perot said in the call,

although we have seen some very early signs of recovery and commercial search behavior by users, it is not clear how durable or monetizable this behavior will be, end quote. Parat added that Google's non-advertising business remained strong throughout the quarter, especially the performance of Google Cloud, YouTube, and Google Play, end quote. Now, let's throw in some necessary caveats, right? This is Q1, and as Google itself acknowledged with that tail of two-quarters statement,

you had most of a normal quarter in Q1, and that was reflected in those numbers, before the COVID-related slowdown hit in March, right? So Q2 could be significantly worse. though Alphabet Brass wasn't exactly setting the table for doom and gloom in the earnings call, and they would have had to do that if they were seeing bad signs in Q2 already. What about China? China locked down first, right? Yeah, but Google doesn't do business in China. So that's not an issue for them. And Google did only grow ad revenue by 14% in the U.S. and 12% in Europe, which that's at the low end of historical numbers for both of those markets. That does feed into the narrative that Google slash alphabet has a limited availability of growth levers in those markets.

That maybe growth is hitting its natural wall. But the counter argument would be they still grew by double digits in both of those markets in the face of what is, frankly, an ad holocaust for the rest of the ad industry. Let me underline one other thing. Google's teleconferencing service, Meat, is apparently adding three million new. users per day. That's up from 2 million new users per day earlier this month. Meet now has 100 million daily active users compared to Zoom's 300 million Dow number. Speaking of, Google Meet video conferencing is now free to anyone with a Google account. Meetings can also have up to 100 people concurrently in Google Meet, but quoting from The Verge, that Google account requirement

is a hard one. People won't be able to just click a link and join a meeting. They'll need to be logged in. That is so meetings can be better controlled by their hosts, hopefully eliminating the possibility of Zoom bombing. Google will also introduce other safety measures. People not explicitly added to a meeting via a calendar invite will be automatically entered into a green room when they try to join a meeting and only be let in when approved by the host. The free version will also not offer landline dial-in numbers for meetings, end quote. which again will make me not want to participate in meet meetings, as I've outlined before, my browser accounts still haven't recovered from the one meeting that I actually joined,

not by dialing in, but instead using my browser. Although, maybe that's the solution. Maybe I have to join another meeting. If I do a second meeting, maybe magically all of my settings would go back to normal. And one more on the earnings front. Spotify, beat analyst estimates with Q1 revenue, of 1.8 billion euros and net income of 1 billion euros, with MOWS up 31% year over year to 286 million people, and premium users up 31% to 130 million people. Ad-supported monthly active

users were up 32% to 163 million, and keeping with our theme today, this is the lead from TechCrunch, quote, the coronavirus may be decimating some corners of the economy, but the impact on the digital music scene, as evidenced by the world's biggest music streaming company, Spotify, appears to be minimal. The numbers underscore the positive signals we've had from the wider industry. More generally, we have seen a huge boost in streaming media services, including video as well as more people are staying home and looking for ways to be entertained. Furthermore, earnings this month from at least one music label, Universal Music Group, also showed little impacts from the coronavirus pandemic. Quote, despite the global uncertainty around COVID,

19 in our Q1, our business met or exceeded our forecast for all major metrics, Spotify wrote in its introduction to shareholders. For Q2 and the remainder of the year, our outlook for most of our key performance indicators has remained unchanged, with the exception of revenue, where a slowdown in advertising and significant changes in currency rates are having an impact, end quote. In other words, while overall numbers appear to be stable, that is not to say there hasn't been pockets of decline for the company in specific markets and product areas. For example, example, Spain and Italy, two traditionally strong markets for Spotify, have been some of the hardest hit by COVID-19 and its wider economic impacts. And in line with that, Spotify said it saw,

quote, a notable decline in daily active users and consumption in these markets. And in keeping with the countries both seeing a stabilization in their new cases, both are now starting to rebound and recover, end quote. So again, if Spotify was worried that Q2 was going to be disastrous, probably would have taken the time to telegraph that. So whether or not we've all been Italy and Spain these last few weeks, Spotify doesn't seem to think that will affect their operations overall and reflecting investors' feelings about that sort of an outlook. Spotify stock opened up 12.5% this morning. And yet, there's no denying some sectors of even the tech economy have to have been hit hard by all of this. For example, a source is telling the information

that Uber executives have been discussing layoffs of around 20% of Uber's 27,000 strong workforce in the coming weeks. Also, interesting thing to note, Uber's veteran CTO, Dwan Pam, has resigned. But back to those job rumors. Possibly hardest hit inside Uber if layoffs do come, the 3,800-person engineering group, which could lose 800 people in the coming weeks, quoting the information. cutting 5,000 people could save Uber close to $1 billion annually on salaries and associated expenses according to rough estimates by the information. Last month, CEO Dara Koswashiahi told analysts that even if an 80% decline in Uber's

rides business persisted until the end of the year as a worst-case scenario, Uber would still have $4 billion in cash. That means Uber would burn around $4 billion between now and then, given that it had roughly $8 billion as of mid-March when the COVID-19 crisis took hold on. on its core markets. That was before the current layoff plans began to take shape. The Uber Eats business in recent weeks has been growing by at least 70% compared to last year, and one of its biggest costs, bonuses for drivers to deliver hot food, has shrunk considerably as such labor becomes cheaper. With ride-hailing, disintegrating in the past six weeks,

many Uber drivers have found fewer opportunities to make money and have flocked to food delivery services such as Instacart and DoorDash. Drivers are contractors, not Uber employees, and aren't included in the planned layoffs, end quote. Back to the details surrounding that CTO leaving, quoting again, Bam's resignation from Uber means no one from the executive team under Travis Kalanick, Uber's prior CEO before scandals befell Kalanick in 2017, will remain at the company. Kalanick and Pam were known internally for shunning the idea of running Uber on public cloud services from AWS and others, unlike other,

fast-growing internet companies such as Airbnb. Instead, they chose to largely manage their own online servers. While that led to some rocky moments early on, people who have worked at the company have said Uber was able to save substantially on costs as a result, end quote. And Ford has announced it is delaying the commercial launch of its self-driving vehicle services, which were being developed in conjunction with Argo AI, to 2022 in order to reassess its strategy amid COVID-19. Quoting from TechCrunch, the news was shared as part of Ford's quarterly earnings, which were released after the market closed Tuesday. Ford reported a $2 billion loss in the first quarter compared to a profit of $1.1 billion in the same period last year. The company warned

that losses during the second quarter will widen as the COVID-19 pandemic continues to disrupt its business. Ford is a bit different from other companies that have launched autonomous vehicle pilots in the United States. The automaker has been pursuing two parallel tracks that were supposed to eventually combine ahead of a planned commercial launch in 2021. The automaker is testing and homing in on what its AV business model might look like, while separately, developing autonomous vehicle technology. Argo AI, the Pittsburgh-based company into which Ford invested $1 billion in 2017, is developing the virtual driver system and high-definition maps designed for Ford's self-driving vehicles. Ford has been testing its go-to-market strategy

through pilot programs with partners like Walmart, Domino's and Postmates, and even some local businesses. Ford said Tuesday that it needs to study the long-term impacts that the COVID-19 pandemic will have on customer behaviors, end quote. Now, you know how I've been saying that I've been looking for various technologies like drone deliveries and AI and stuff like that to step up in this moment of time, to present possible solutions to our current troubles that these kind of technologies are sort of ideal for? Well, along those lines, wouldn't this be a perfect time for self-driving cars to step up, as Zach Weinberg of Flatiron Health tweeted, quote, New York City now feels like a perfect opportunity for Waymo. Instead of high-risk cross-town buses, how about a fleet of individual self-driving Waymo cars?

Maybe on 14th Street, as an example, which is already closed for non-essential cars. Wouldn't this make for a perfect safe city test? If successful on 14th Street, you could expand to all cross-town streets. eventually to critical routes where a high-risk subway is the only real option, and New York City can close streets to passenger cars on that route, end quote. Yeah, I saw a story this morning that suggested that most real-world self-driving tests have been shut down in favor of simulation tests during the lockdown, because, remember, you still need actual humans in the cars to test the vehicles

when they're out in the real world. But, I mean, if you could find ways to work with or around that, wouldn't this be the perfect time to double down on real world tests on real roads, since traffic is likely way down in a lot of these urban areas that are the thorny top of the pyramid challenge for self-driving technology? I don't know anything about anything. I'm just asking. And finally today, speaking of tech stepping up in the current moment, this is a bit of a long read, but instead of saving it for Friday, here you go. friend of the podcast, Christina Farr, has a piece up outlining how a handful of employees at Apple

quickly pushed forward the development of that contact tracing API and pushed for tight collaboration with rival Google for the project all in less than a month. Quoting from the lead, but as always, the whole piece is worth reading. It's the last link in the show notes. Quote, one of the most ambitious projects in Apple history launched in less than a month and was driven by just a handful of employees. In mid-March, with COVID-19 spreading to almost every country in the world, a small team at Apple started brainstorming how they could help.

They knew that smartphones would be a key to the global coronavirus response, particularly as countries started relaxing their shelter-in-place orders. To prepare for that, governments and private companies were building so-called contact-tracing apps to monitor citizens' movements and determine whether they might have come into contact with someone infected with the virus. Within a few weeks, the Apple Project, codenamed Bubble, had dozens of employees working on it with executive-level support from two sponsors. Craig Federigi, a senior vice president of software engineering, and Jeff Williams, the company's chief operating officer and de facto head of health care. By the end of the month, Google had officially come on board, and about a week later, the two companies, two CEOs, Tim Cook and Sundar Pichai, met virtually to give their final vote of approval to the project.

that speed of development was highly unusual for Apple, a company obsessed with making its products perfect before releasing them to the world. Project Bubble also required that Apple joined forces with its historic rival, Google, to co-develop the technology that could be used by health authorities and countries around the world, end quote. And this last bit from the end, I thought was interesting, quote, Marcel Salathay, a prominent Swiss researcher and epidemiologist noted on Twitter last week that he is surprised to see two tech companies take privacy so seriously, while some governments advocate for more intrusive approaches. Quote, I've made a few correct predictions about COVID, he tweeted, but I would not in a hundred years have predicted this. U.S. tech

companies provide a privacy-preserving framework to do digital contact tracing, and some European countries are lobbying them to lower the standards, end quote. As promised, here's my review of the Facebook portal. Frankly, it's great. Like, I don't do FaceTime at all anymore. I got the TV version of the portal, and I bought my parents the cheapest standalone gadget version. And let me explain why this has been a game changer for us.

Right now, as I type these words, the portal is on downstairs in the living room. The kids are on the couch down there. They're talking to grandma. I believe she's reading them a book or something. It's literally like a cliche of a commercial for this product. But the best part is my wife and I don't have to even be in the room physically acting as videographers anymore. The kids can just come and go and the portal camera tracks them.

And it's great. Like that might just be the only thing I want to point out. Not having to hold your phone to do video chat. That's why I like it better than FaceTime. Even when I call my folks now, I do it over the portal because I can sit comfortably on the couch and just chat hands-free. And they can sit comfortably in a chair and just chat hands-free. My wife can chat while still working on our laptop or whatever. Plus, the way we've actually been using it is this.

I turn it on in the morning and then we just leave it on. Like, we leave the connection going all day long and my parents do. and they leave it in their kitchen, we leave it in our living room. And then both of us, if we just swing through the room and we see something's happening on the other side of the portal, then, you know, we stop and interact. If no one is on camera, then we just walk by. It's like our two houses were like next to each other, and we had adjoining windows and we just left the windows open all day.

And then if you pass by and notice somebody in the other window, you just stop and have a conversation. It's like that. It's really great. Now, you know, it's Facebook, privacy, yada, yada, yada. And I mean, I don't ever use my Facebook account anymore for anything, at least before this. But look, what can I tell you? We use Portal every day. This is completely unpaid.

And believe me, I couldn't imagine that I would be telling you this. But Portal, it's pretty awesome. So take that for what it's worth. Talk to you tomorrow.