Big tech's behind-the-scenes bets get bigger as Covid-19 slows economy

Many companies are retreating. But Amazon, Apple, Facebook, Google and Microsoft are placing bets to get even bigger.

Even as Facebook grappled this month with an internal revolt and a cascade of criticism over its refusal to take action on President Trump’s inflammatory posts, the social network was actively making other bets behind the scenes.

Late one Tuesday, as attention was focused on how Facebook might handle Mr. Trump, the Silicon Valley company said in a brief blog post that it had invested in Gojek, a “super app” in Southeast Asia. The deal, which gave Facebook a bigger foothold in the rapidly growing region, followed a $5.7 billion investment it recently pumped into Reliance Jio, a telecom giant in India.

The moves were part of a spending spree by the social network, which also shelled out $400 million last month to buy an animated GIF company and which is spending millions of dollars to build a nearly 23,000-mile undersea fiber-optic cable encircling Africa. On Thursday, Facebook confirmed that it was also developing a venture capital fund to invest in promising start-ups.

Other technology giants are engaging in similar behavior. Apple has bought at least four companies this year and released a new iPhone. Microsoft has purchased three cloud computing businesses. Amazon is in talks to acquire an autonomous vehicle start-up, has leased more airplanes for delivery and has hired an additional 175,000 people since March. Google has unveiled new messaging and video features.

Even with the global economy reeling from a pandemic-induced recession and dozens of businesses filing for bankruptcy, tech’s largest companies — still wildly profitable and flush with billions of dollars from years of corporate dominance — are deliberately laying the groundwork for a future where they will be bigger and more powerful than ever.

Google ordered to pay for news taken from publishers in France

The French antitrust agency gave the Alphabet unit three months to thrash out deals with press publishers and agencies demanding talks on how to remunerate them for displaying their content.

Google was ordered by French antitrust regulators to pay publishers to display snippets of their articles after years of helping itself to excerpts for its own news service.
The French antitrust agency gave the Alphabet unit three months to thrash out deals with press publishers and agencies demanding talks on how to remunerate them for displaying their content.

The search engine giant may have abused its dominant market power, causing “serious and immediate harm” to the media, the Autorite de la concurrence warned in its statement on Thursday.

European publishers have been pushing regulators for over a decade to tackle the power of Google, which has lured away billions of euros in advertising revenue. This is the first time they have landed a punch. The EU has failed to act on complaints that Google unfairly displays publishers’ content.

“What’s clearly out of the question now is that the talks end with the same result as before: zero,” said Adrien Giraud, a lawyer who represents a grouping of newspapers, including Le Figaro, Les Echos and Le Monde. He says Google can expect publishers to reach out “as soon as this afternoon”.

The move is the latest crackdown on Silicon Valley by the French watchdog. Last month, Apple was fined a record ^1.1 billion ($1.2 billion) after the US tech giant was criticised for anti-competitive agreements with two distributors over the sale of non-iPhone products such as Apple Mac computers.

Google said it would comply with the French competition authority’s order, known as interim measures, and pointed out that it had already begun talks with publishing groups.

Coronavirus: Facebook cancels conference, Microsoft withdraws from another

Microsoft now has plans to hold a digital-only event from March 16-18. Facebook has earlier pulled out of the Game Developers Conference set to be held in San Francisco.

(Reuters) - Facebook Inc said on Thursday it would cancel its annual developer conference due to fears over the coronavirus outbreak and Microsoft Corp followed suit by withdrawing from a gaming conference scheduled for next month.

"In place of the in-person F8 event, we're planning other ways for our community to get together through a combo of locally hosted events, videos and live streamed content," said Konstantinos Papamiltiadis, Facebook's director of platform partnership.

The conference, which attracted 5,000 people from around the world last year, was scheduled to be held on May 5 and 6 in San Jose, California.

Microsoft now has plans to hold a digital-only event from March 16-18. Facebook has earlier pulled out of the Game Developers Conference set to be held in San Francisco.

In California, a person was detected with coronavirus infection on Wednesday, bringing the total number of cases in the United States to 15, according to the U.S. Centers for Disease Control and Prevention.

The agency has warned of the possibility of a community spread of the coronavirus in the country.

Earlier this month, The Mobile World Congress (MWC), the annual telecoms industry gathering, was called off after a mass exodus by exhibitors due to fears over the coronavirus outbreak.

AT&T Inc , Verizon Communications Inc and International Business Machines Corp had earlier withdrawn from the RSA cyber security conference, set for Feb. 24 to 28 in San Francisco, due to coronavirus-related concerns.

Alphabet Inc's Google said its developer conference is still planned for May 12 to 14 as it monitors coronavirus developments.

Google parent Alphabet probes executives over relationships at workplace

Alphabet investigation includes the behavior of Chief Legal Officer David Drummond, a long time senior executive.

Alphabet Inc.’s board is investigating how the company dealt with accusations of sexual harassment and misconduct against some of its executives.

"As has already been confirmed in public court filings, in early 2019, Alphabet’s Board of Directors formed a special litigation committee to consider claims made by shareholders in various lawsuits relating to past workplace conduct," Alphabet said in an emailed statement on Wednesday.

The investigation includes the behavior of Chief Legal Officer David Drummond, a long time senior executive who has been accused of having relationships with employees, CNBC reported earlier on Wednesday. The board of directors has hired a law firm to help with the investigation and contact alleged victims, CNBC also said.

A 2018 New York Times report detailed three accounts of senior Google executives, including Drummond, having relationships with employees. Alphabet is the parent of Google. Two of those executives, Andy Rubin and Rich DeVaul, have since left the company, but Drummond remains.

In August, a former Google employee, Jennifer Blakely, who participated in the New York Times story, elaborated on accusations she made to the newspaper about Drummond, saying she was forced out of the company and that he refused to pay child support after their relationship ended.

Drummond has acknowledged the relationship with Blakely. "Other than Jennifer, I never started a relationship with anyone else who was working at Google or Alphabet," he said in a statement in August. He did not return an email seeking comment.

The New York Times also reported last year that Rubin, the founder of Android, was given a $90 million severance package when he left Google in 2014. That prompted a walkout by thousands of Google employees, and has spurred efforts to reform how the company handles sexual harassment and misconduct complaints.

Some shareholders have sued the company over this episode and other workplace conduct, and the Alphabet board’s special litigation committee is considering these claims, the Alphabet spokeswoman said on Wednesday.

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Half the world's banks are too weak to survive a downturn: McKinsey

Banks allocate just 35% of their information-technology budgets to innovation, while fintechs spend more than 70%, McKinsey said.

Business Standard : More than half of the world’s banks are too weak to survive a downturn, according to a survey from consultancy McKinsey & Co.

A majority of banks globally may not be economically viable because their returns on equity aren’t keeping pace with costs, McKinsey said in its annual review of the industry released Monday. It urged firms to take steps such as developing technology, farming out operations and bulking up through mergers ahead of a potential economic slowdown.

“We believe we’re in the late economic cycle and banks need to make bold moves now because they are not in great shape,” Kausik Rajgopal, a senior partner at McKinsey, said in an interview. “In the late cycle, nobody can afford to rest on their laurels.”

The decade since the global financial crisis has seen a wave of innovation in financial services, bringing new competitors from fintech startups to giants like Apple Inc. and Alphabet Inc.’s Google. Banks have pondered whether to compete with, partner with or acquire some of these newcomers. Some established firms have sought to rebrand as technology companies, in part to attract hard-to-get talent.

McKinsey, whose clients are some of the biggest corporations in the world, consults on topics ranging from strategy and technology to mergers & acquisitions, outsourcing and stock offerings. In its report, the firm said banks risk “becoming footnotes to history” as new entrants change consumer behavior. Most recent attempts by banks to boost efficiency have been “business-as-usual,” it said.

Banks allocate just 35% of their information-technology budgets to innovation, while fintechs spend more than 70%, McKinsey said. Combined with regulatory factors lowering the barrier to entry -- like open banking and looser requirements for startups -- the environment is increasingly conducive for newer firms to take share from banks.

The report points to Amazon.com Inc. in the U.S. and Ping An in China as examples of technology firms that are capturing financial-services customers. To make matters worse for the old guard, the new players tend to go after the business areas that create the highest returns at banks -- credit cards, for example.

Google is moving server hardware out of China to avoid US tariffs

Google has already shifted much of its production of US-bound motherboards to Taiwan, averting a 25% tariff, said the people, asking not to be identified discussing internal matters.

Alphabet Inc.’s Google is moving some production of Nest thermostats and server hardware out of China, avoiding punitive US tariffs and an increasingly hostile government in Beijing, according to people familiar with the matter.

Google has already shifted much of its production of US-bound motherboards to Taiwan, averting a 25% tariff, said the people, asking not to be identified discussing internal matters. While US officials have pinpointed Chinese-made motherboards as a security risk, Google didn’t bring that up during discussions with its suppliers, they said. Tariffs have also pushed American-bound production of its Nest devices to Taiwan and Malaysia, the people said.

The migration is taking place as companies both foreign and domestic seek to pivot their production away from China amid US President Donald Trump’s efforts to reset the perimeters for global trade and manufacturing. Beijing is showing growing signs also of clamping down on American corporations from Ford Motor Co. to FedEx Corp. within the world’s largest consumer market and production base.

That’s prompting US companies, long accustomed to using China as the world’s workshop, to explore alternatives. The Taiwanese contract manufacturers that make most of the world’s electronics, including Apple Inc. partner Foxconn Technology Group, have since 2018 accelerated the shift at their clients’ behest. Foxconn said on Tuesday that it has enough capacity to make all iPhones bound for the US outside of China if necessary, although Apple has so far not asked for such a shift.

While Google’s hardware production in China pales in comparison to the likes of Apple, its shift may herald a broader trend as tensions between Beijing and Washington escalate. The US search giant earns some advertising revenue from the country and had explored avenues to court consumers and corporations in the world’s No. 2 economy, from sharing artificial intelligence tools to even a censored search service. It’s also lobbying Washington for permission to continue supplying Android to Huawei Technologies Co., the Financial Times has reported.

It’s widening its footprint elsewhere: Google announced in March it’s creating a new campus in Taipei and expanding staff on the island, though it’s unclear whether that’s related to its manufacturing diversification. Google declined to comment on production adjustments.

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How Google's rocking ad revenue is keeping its troubles under wraps

The two best business models the internet has ever seen are still humming

In case you were worried, the advertising titans of the internet are doing just fine.
Facebook Inc. showed that last week by reporting a 30 percent jump in fourth-quarter revenue from a year earlier. It was the lowest growth rate in the company’s short history, and the company has many challenges to keep growing, but it turns out that Facebook keeps making bank because its ads work and the company is willing to plaster them all over its internet hangouts.

The same appears true for Google parent company Alphabet Inc. For the sixth consecutive quarter, the company’s advertising sales rose at least 20 percent, the company said Monday. It barely brushed that mark in the fourth quarter, but that’s a hard pace to keep up for a company with more than $100 billion in sales. Amazon does it, too, albeit with a fraction of Alphabet’s profits.

The list of worries for Google and Facebook is long. Growth is slowing and costs are climbing. The global market for advertising appears to be finite, and Google and Facebook already grab a large share of spending. Competition is fierce for web surfers at home and abroad.

But shut all that out, and the two best business models the internet has ever seen are still humming.
We're Good

One stunning number is telling about Google’s effectiveness as a business. The company said that in the fourth quarter, the number of clicks on advertisements on Google’s websites increased 66 percent from a year earlier. That means Google places many more commercial messages in more places, people are surfing Google hangouts more, and the ads are generating results for the companies that buy them.

The downside is average ad prices are shrinking as Google serves more commercial messages through computerized placements and on YouTube — both of which tend to have lower prices than Google’s traditional desktop PC web search messages. Ad prices dipped 29 percent on Google websites in the quarter.

And Google is spending a fortune. Operating costs climbed a bit faster than revenue, and Alphabet devoted an eye-popping $25 billion to capital expenditures in the last year. 1 The number of new employees — excluding contractors and the like — jumped 23 percent in a year to nearly 100,000. (The company said its growth in capital spending and hiring will moderate this year.) Stock watchers appeared to focus on the negative for Google. Shares dipped about 3 percent in after-market trading on Monday.

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YouTube to make new exclusive shows, movies free for users from 2020

YouTube's paid option will still remove ads from originals as well as all other videos, and it comes with music streaming privileges.

YouTube plans to make all future original programming available to users for free with advertising, as the video streaming unit of Alphabet Inc's Google seeks a bigger audience for shows and movies that had mostly been restricted to paid subscribers.

The shift in strategy means that starting in 2020, a YouTube Premium subscription will no longer be the only way to watch most original programs, with all users having some access.

YouTube's paid option will still remove ads from originals as well as all other videos, and it comes with music streaming privileges.

YouTube said earlier on Tuesday that the new strategy will kick in next year, but later noted that though it will apply to content planned in 2019, the actual programming will debut the year after.

YouTube has not disclosed the total number of subscribers for the paid offering, launched three years ago, which is available in 29 countries.

It said its move to make programming free was aimed at satisfying growing international user interest in original programming and advertiser demand to associate with special content. The move also gives the company more flexibility in marketing its programs.

Some future programming or behind-the-scenes content may remain exclusive to subscribers, if only for a brief time, a person familiar with the thinking said.

YouTube Premium costs about $12 a month in the United States.

The dozens of previously released shows and movies in YouTube Premium, such as the first season of popular action comedy "Cobra Kai," will remain behind the paywall, the company said.

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