Tech Brew Ride Home - Wed. 8/01 - Is Google Returning To China?

Episode Date: August 1, 2018

Google has a secret plan to return to China, the Apple earnings analysis, Masayoshi Son goes “Brandless” and in praise of microfilm! Links:GOOGLE PLANS TO LAUNCH CENSORED SEARCH ENGINE IN CHINA, LEAKED DOCUMENTS REVEAL (The Intercept)Apple tops 300 million paid subscriptions as it reportedly preps new subscription services (Digiday)This No-Brand Startup Won $240 Million to Fight Amazon on Price and Quality (Bloomberg)Microfilm Lasts Half a Millennium (The Atlantic) 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 Techmeme ride home for Wednesday, August 1st, 2018. I'm Brian McCullough. Today, Google has a secret plan to return to China, the Apple earnings analysis you've been waiting for,

Masseyoshi Son goes brandless, and in praise of microfilm. Here's what you miss today in the world of tech. Even more than taking the explicit words, don't be evil, out of its mission statement, this news is possibly the biggest indication that. that Google is now a different company that it once was, or at least it might be willing to tolerate things that it didn't used to. The Intercept is reporting that according to sources it is spoken to as well as leaked internal documents they have seen,

Google is planning to launch a censored version of its search engine in China. In case you weren't aware, for a long time, Google hasn't been accessible in China because it is blocked by the country's famous Great Firewall. And for years, Google has made it a point of pride, that it would not play ball with China's censorship regime because to do so would run counter to its core mission of organizing the world's information

and making it freely accessible to all. China also censors the likes of Facebook, Instagram, Twitter, and others, to varying degrees, by the way. But apparently, there is an internal project codenamed Dragonfly, which has been underway at Google since the spring of last year to create a version of the search engine that would blacklist websites and search terms relating to things like human rights, democracy, and peaceful protest.

Specifically, Google has apparently been developing a customized Android app that has even been demonstrated to the Chinese government. If the government signs off, the final version could launch in six to nine months. It's worth noting that Android is the most popular mobile operating system in China with 80% market share, but without Google's search. China has the largest number of internet users of any country with 750 million. Quoting from the Intercept piece, quote, documents seen by the Intercept marked Google Confidentials say that Google's Chinese search app will automatically identify and filter websites blocked by the Great Firewall. When a person carries out a search, banned websites will be removed from the first page of results, and a disclaimer will be displayed stating that some results may have been removed. due to statutory requirements. Examples cited in the documents of websites that will be subject to the censorship

include those of British News Broadcaster BBC and the online encyclopedia, Wikipedia, end quote. Later on in the piece, quote, within Google, knowledge about Dragonfly has been restricted to just a few hundred members of the Internet Giants' 88,000 strong workforce, said a source with knowledge of the project. The source spoke to the Intercept on condition of anonymity as they were not authorized to contact the media. The source said that they had moral and ethical concerns about Google's role in the censorship, which is being planned by a handful of top executives and managers at the company with no public scrutiny. I'm against large companies and governments collaborating in the oppression of their people and feel like transparency around what's being done is in the public interest,

the source told the Intercept, adding that they, They feared, what is being done in China will become a template for many other nations, end quote. Google originally operated a censored version of its search engine in China, but in March of 2010, Google pulled its search out of that country to great fanfare. The story mentions that Google CEO Sundar Pichai met with Chinese government officials in December of 2017, and that Google has been slowly introducing various apps in China that aren't quite related to search. Also, again, quoting from the piece, Google's search engine chief Ben Gomez told staff at a meeting last month that they must be ready to launch the Chinese search app at short notice in the event that, quote, suddenly the world changes or President Donald Trump decides his new best friend is Xi Jinping, end quote. Apple's march toward a trillion dollar valuation continues. In fact, at the time of this recording, shares have opened up over 4%, making Apple's market. cap $984 billion. This has come after Apple reported Q3 earnings yesterday, with revenue coming in

up 17% year over year at $53.3 billion. Net income of $11.5 billion, up 40% from $8.7 billion this time last year. And the key number for Apple, as always, iPhone unit sales came in at $41.3 million up from $41 million last year. quote, we're thrilled to report Apple's best June quarter ever and our fourth consecutive quarter of double-digit revenue growth, said Tim Cook. Our Q3 numbers were driven by continued strong sales of iPhone services and wearables, and we are very excited about the products and services in our pipeline, end quote. So let's pick through some of the interesting numbers and details here. The average selling price of the iPhone was $724 versus $6,000. the previous year, indicating that that big bet on the more expensive iPhone 10 might be paying

off after all, quoting from 9 to 5 Mac. Apple noted that the iPhone 10 is still the best-selling model. So Apple's most expensive iPhone, the one that some worried would price the company out of the market, is the one more people buy than any other, end quote. But bad news for Mac fans, 3.7 million Macs were sold this quarter, which is down 3.3.3 million max were sold this quarter, which is down 13% year over year and even down 9% quarter over quarter. What about wearables? The news is better there. Apple's quote other products revenue came in at $3.74 billion up 37% year over year. Apple Watch and AirPods live in that other products category,

according to Apple at least, as well as Apple TV and HomePod. Apple didn't break out specific numbers for the Apple Watch, but did note that revenue from wearables saw 60% year-over-year growth, and that wearables revenue exceeded $10 billion over the course of the last four quarters. Wearables, of course, would be the Apple Watch, but also the AirPods, specifically. Apple Pay had more than one billion transactions in Q3, and Apple Pay will be coming to Germany and CVS and 7-Eleven stores here in the U.S. And given what we were talking about last week, vis-a-vis Facebook's earnings myths and diversifying into other categories, Apple reported $9.55 billion in service revenue, up 31% year over year, beating analysts $9.21 billion estimate. Apple's stated goal is to

reach $14 billion in quarterly services revenue by 2020. Services includes everything from the App Store to AppleCare, Apple Pay, iTunes, and cloud services. Digidae noted that Apple has topped 300 million paid subscriptions, an increase of more than 60% over the last year alone. So that includes things like Apple Music, of course, but also the 30,000 or so apps that sell subscriptions via the App Store. Still, subscriptions are subscriptions. There are credit card numbers and recurring revenue that Apple has in the bank.

And, of course, that long-rumored Netflix-style subscription video service is still scheduled to come down the pike next year. Neil Seibert had an interesting tweet, quote, overall revenue growth last quarter. Facebook, 42%, Amazon, 39%, Alphabet, 26%, Microsoft, 17%, Apple, 17%, end quote. So Apple is the bottom of the barrel in terms of growth. Facebook is by far the best,

and yet Facebook gets clobbered to the tune of 120, billion dollars. An abject lesson, I guess, that when it comes to Wall Street, it's the type of growth that matters. Speaking of smartphone sales, a couple of interesting items with a couple of interesting numbers here. According to IDC, 342 million smartphones shipped worldwide in Q2 of 2018, which is down 1.8% year over year. The smartphone market has basically matured globally. That's the third consecutive quarter which saw the smartphone market shrink. For the first time, Apple is not the number one or number two smartphone company in terms of market share. Samsung remained the number one seller of smartphones, and Huawei clipped Apple to number two with 27% share of the market.

Apple is number three worldwide and Jaume number four. But interestingly, Jaume has pulled ahead of Samsung as the number one smartphone seller in India. Also, interestingly, Counterpoint Research has a report out noting that the Chinese smartphone market declined 7% year-over-year in the second quarter of 2018. That would mark the fourth consecutive quarter of a declining market in China. The number one smartphone maker in China, Huawei, followed by Apo, Vivi, and Xiaomi. Apple, a distant fifth with 9% market share. So, as I've said previously, when Masayoshi Son pulls out his checkbook and invests in a Ceyon. startup, it gets my attention. Brandless is an e-commerce startup that does what it says. It offers

brandless versions of all sorts of consumer staples. There's brandless toilet paper, brandless peanut butter, brandless kitchen tongs. Because these are all generic, literally brandless products, they tend to be way cheap. Most of the products that brandless offers on its website are $3. So it's sort of like Amazon and the dollar store had, a baby. And SoftBank's Vision Fund just invested $240 million in that baby, valuing Brandlis at more than $500 million. Quoting from Bloomberg, it's tough to wow, Masseyoshi Son with a bargain. But during a meeting this spring, Brandlis left the SoftBank Group chief executive officer a bit flabbergasted. Yes, the startup founders assured the billionaire. Every product he picked up from the table,

from the extra virgin olive oil to the carbon steel eyelash curler was just $3. The trick, it's all-store brand, and there's no alternative. The site will only sell one kind of toothpaste or coaster or tree-free toilet paper. Hope you like it, end quote. Well, Massassasson liked it. The problem with any e-commerce startup is Amazon, of course. If you get big enough, there have only been a few scenarios. Sometimes Amazon just outright buys you, see Zappos and Qudisi, or sometimes you present a strategic opportunity to one of Amazon's rivals.

See, for example, Jet.com. So it'll be interesting to see if having Masayoshi Son in your corner can give you enough firepower to keep Jeff Bezos at bay. Finally, today, one of the dominant concerns of historians and archivists is the preservation of material, of course. When the whole world went digital, the idea was information would be preserved forever, right? But the problem isn't just the long-lastiness of the data. It's also about the long-lastiness of the technology that makes the data legible. Think about all those VHS home movies that you got transferred to DVD years ago. Do you think your grandkids will have a DVD player?

Okay, so upload it to the cloud, right? But where? Facebook, ICloud, AWS. What is the staying power of any cloud service? Sure, Google lets you upload all your photos automatically, but Google also has a tendency to sunset non-core products if you so much as look at them twice. The Atlantic has an interesting piece up singing the praises of microfilm. Microfilm lasts 500 years, by the way.

It's super easy to store, and it has specific search and retrieval advantages over anything digital. Today's digital searches allow a reader to jump directly to a desired page and story, eliminating one downside of microfilm. But there's a trade-off. Digital documents usually omit the context. The surrounding pages in the morning paper or the rest of the issue of a magazine or journal vanish when a single specific article can be retrieved directly. That context includes more than a happenstance encounter with an abutting news story. It also includes advertisements, the position and size of one story in relation to others, and even the overall design of the page at the time of its publication.

A digital search might retrieve what you're looking for. It also might not. But it can obscure the historical context of that material. Digital searches also turn search activity into data that someone else can surveil, compare, quantify, and visualize. The user's own thinking becomes the object of search and retrieval, not just the documents that the user hopes to find. None of this happens when using a microfilm machine. A library can record what materials a user requests or checks out,

but the microfilm reader itself cannot track what someone looks at when using the machine. It is not networked to all other searches. No entity, corporate, or governmental uses algorithms to analyze microfilm's readers' habits and predilections. The microfilm reader does not read you, your emotions or your political or consumerist desires, end quote. As always, link in the show notes, and I really recommend reading it. You get a cool history of a specific technology going all the way back to the early 1800s, how various information technologies can evolve,

and the story includes such historical tech and nerd luminaries as Vannever Bush and Ray Kurzweil. Check it out. FYI, the mothership has launched a new ad product. contextual ads under stories. Check out the Techmeme.com homepage right now to see an ad where Yelp is dragging Google. Buy an ad for a given keyword or category and have it show up on TechMeme.com. If you're a brand looking to own your space, the news around your space, check it out. Contextual at Techmeme.com is the email for more info.

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Podcast at techmeme.com, if you're interested, Anyway, I'm Brian McCullough at Brian MCC. If you're interested in hearing what I have to say on Twitter, talk to you tomorrow. Oh, and I know you're listening, Ma. Happy birthday.