News You might have missed: Week of February 9, 2018

Nest is rolled back into Google

On Wed. Alphabet Inc announced that it rolled Nest into its hardware group. Under the new org structure, Nest CEO Marwan Fawaz reports to Google’s hardware chief, Rick Osterloh, a former Motorola executive who took charge of all Google’s consumer devices in 2016. That includes Google Home smart speakers, Pixel smartphones, and Chromecast streaming devices.

Via Reuters

  • With Tony Fadell gone, you might remember he left Nest in the summer of 2016, and with Google renewed focus on hardware it makes sense for Nest to fall under Rick Osterloh’s organization.
  • As I pointed out on Twitter if you followed the Pixel 2 launch you had to know this change was coming. At the event, the new Nest Camera was playing very nice with Chromecast and Google Home devices, yet it was not as deeply integrated as it could have been.
  • This very point is the main drive behind this move. Google is playing catch up in the home to Alexa and with Amazon getting into security cameras and God knows what else in the future, Google has to make sure that Google Assistant is as deeply entrenched into our homes as it can possibly be.
  • We have seen Google offer bundles of devices, last year, for instance, there was a deal that paired Nest products over $100 with a free Google Home Mini and these type of offers will help penetration.
  • While bundling is important it is more developing solutions with Google AI right insight those products and if Nest remained an independent company Google would have had to treat it in the same way as it would have any other hardware partner. There is no question, however, that deeper integration, especially when it comes to an Assistant, is the best solution for both users and Google. It allows staying true to the vision Google has, offers better alignment with hardware and ultimately drives richer user engagement.
  • One big criticism that was put to Nest was how slow it has been moving in developing products with its biggest line up announced only a couple of months ago. It will be interesting to see if that will change now under Osterloh.
  • It also remains to be seen if there is anything that Google can do on current announced products that have yet to ship or if it is simply too late in the cycle and we need to wait for a new set of products that will be co-designed and engendered.

Twitter turns Profitable, at last!

Twitter reported a profit of $91 million in the last three months of 2017, compared with a loss of $167 million in the fourth quarter of 2016.  After aggressively slashing spending over the past few years, Twitter will invest in products this year that increase audience engagement, which will cause expenses to “more closely align with revenues,” Chief Financial Officer Ned Segal said during a conference call. Twitter will be doing more experimentation to make its timeline more “personalized and relevant” to people, Dorsey said. He also emphasized a focus on matching people with their interests as fast as possible. There will be “a much more cohesive strategy” around events, like seeing sports scores during live games, Dorsey said. New product tweaks, like Twitter’s decision to increase the character limit to 280, have increased engagement and minimized confusion, he said.

Via Bloomberg

  • The company said it had 330 million average monthly users in the fourth quarter, up 4 percent from the prior-year period, but flat from the third quarter. The number fell short of expectations, but Twitter pointed to the crackdown on bots and fake accounts which ultimately will improve experience across the board.
  • Interestingly the number of subscribers grew internationally during the quarter but dropped in the US. Considering the recent discovery of Russian bots accounts that were used to influence not just the elections but US politics overall, the trend checks out as the majority of the accounts killed by Twitter would have been US accounts.
  • The big question is whether or not the subscribers’ numbers will grow next quarter as while I am sure fake accounts and bots will continue to get to Twitter, I would imagine the bulk of the spring cleaning.
  • Lack of subscribers growth will substantially temper today’s optimism as it would push Twitter to squeeze more advertizing revenue from current subscribers rather than being able to spread over a bigger base.
  • COO Anthony Noto’s recent departure has raised concerns over future quarters performance and continued to turn around, which is a valid concern. One would hope that the wheels are in motion from a business perspective to prioritize engagement to make the platform more attractive to advertizers.

Goldman Sacks might finance Your next Apple Product

Apple is in talks with its investment bank Goldman Sachs about the possibility of offering customers financial loans when buying Apple products, according to a report by the Wall Street Journal on Wednesday. Right now, customers can get financing through Citizens Financial Group when they use the iPhone Upgrade Program, which offers interest-free cash for 24 months. Apparently, Goldman Sachs wants a part of that action, although whether it would be as a replacement for CFG or an additional option isn’t clear.

Via Macrumors 

  • If true, Goldman Sacks would provide these loans through Marcus, an online lender created in 2016 that helps people refinance credit-card debt. Apparently there are plans for the company to be building a ‘point-of-sale’ financing business that will offer loans to shoppers at checkout basically helping consumers not to crank up that credit card debt in the first place.
  • Many received these speculations positively for Apple, but given the lack of detail, we are left with more questions than answers. First, if the Goldman Sacks loans are supposed to just take over the current Citizen Finance Group’s loans, it would not help Apple expand the opportunity unless Apple is getting a better deal and they are able to lower repayments. I doubt that the approval process would be different as it would imply a bigger risk for Marcus. The offer might expand to iPhones that are on longer cycles which might be less appealing to Apple but, longer term, might alleviate the replacement fatigues of the higher priced model.
  • There are also speculations that the loan offer will expand beyond iPhones. The current financing option for non-iPhones is provided through a Barclays credit card, which is interest-free for a certain number of months based on the amount purchased. If you get a Barclaycard Visa and buy an Apple device within 30 days, you can get the device with no extra charge as long as it is paid off within 6-18 months, depending on how much is put on the card. For the higher ticket items, 6 to 18 months is likely still limiting Apple’s addressable market. Goldman Sachs apparently is planning on offering a loan at a 12% interest rate for customers who might want to take longer to pay off a device than what the current options allow
  • As I mentioned in my Apple earnings analysis, With iPhone prices increasing and replacement cycles lengthening, Apple would be smart in looking at different financing options, especially in the US market where there is a bigger opportunity for its flagship models. We’ll certainly keep an eye on this development.

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Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

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