|Bid||205.01 x 1400|
|Ask||205.05 x 1000|
|Day's Range||204.00 - 205.87|
|52 Week Range||142.00 - 233.47|
|Beta (3Y Monthly)||1.09|
|PE Ratio (TTM)||17.26|
|Earnings Date||Jul 30, 2019|
|Forward Dividend & Yield||3.08 (1.52%)|
|1y Target Est||212.08|
Executives from Alphabet Inc., Amazon.com Inc., Apple Inc., and Facebook Inc. should brace for tough questions around antitrust as federal probes gain steam.
China released its second-quarter GDP report today. The country’s GDP expanded 6.2% in the second quarter, marking its slowest growth since 1992.
(Bloomberg) -- Two key Republican senators pressed the Federal Trade Commission to investigate how Facebook Inc., Alphabet Inc.’s Google and Twitter Inc. decide what content appears on their social media platforms, calling the companies’ power a potential threat to democracy. Senators Ted Cruz of Texas and Josh Hawley of Missouri made their demand in a letter sent to the FTC on Monday, a day before a hearing by a Senate panel into social media bias that will feature testimony from a top Google executive. The letter and hearing come just days after President Donald Trump aired similar grievances at a White House summit of conservative tech critics, fringe social media voices and GOP lawmakers including Hawley. “Big tech companies like Google, Facebook, and Twitter exercise enormous influence on speech,” the two Republican senators wrote in the letter, which Hawley’s office provided. “They control the ads we see, the news we read, and the information we digest. And they actively censor some content and amplify other content based on algorithms and intentional decisions that are completely nontransparent.”The request comes as Republicans increasingly allege that the companies engage in systematic anti-conservative bias, an unsupported claim. But the possibilities for abuse “are alarming and endless,” including potentially swaying elections, the senators said.Like Trump, both senators have been vocal about claims that social media silences conservatives. Cruz, chairman of the Senate Judiciary Subcommittee on the Constitution, is scheduled to hold a hearing Tuesday on Google’s “censorship.” The company’s global policy chief, Karan Bhatia, will testify, he said in a Monday opinion piece.“We go to extraordinary lengths to build our products and enforce our policies in such a way that political leanings are not taken into account,” Bhatia wrote in Fox News.All three companies have previously said they don’t make content decisions based on politics, though they have acknowledged occasional mistakes in taking down or limiting the reach of content or accounts of conservatives.“Importantly, these mistakes have affected both parties and are not the product of bias,” Bhatia wrote in his opinion piece. Spokesmen for Facebook and Twitter declined to comment on Monday.Cruz has said his views are based on anecdotes rather than rigorous data, which he blames on the opaque nature of the companies’ decisions regarding content.Hawley has previously proposed legislation that would require tech platforms to prove to the FTC that they’re politically neutral in their content decisions if they want to keep a key liability shield that protects them from lawsuits over content that third parties post on their platforms. Hawley was the featured speaker during Trump’s summit, during which the president called his bill “very important.”Almost 65% of Republicans or those who lean Republican believe big tech companies support liberal views over conservative ones, and 85% think it’s at least somewhat likely the companies are intentionally censoring political viewpoints, according to a Pew Research Center survey from last year.The FTC has authority to collect non-public information from companies and study matters related to competition and consumer protection, even if the issue isn’t related to a law enforcement matter. It has opened an investigation into how Internet service providers collect and use consumer data, and the agency has also started a task force to probe potentially anti-competitive conduct by tech giants.The Justice Department and FTC also have taken the first steps toward specific investigations of four big tech firms for antitrust violations. The Justice Department has taken responsibility for Google and Apple Inc., while the FTC will oversee Facebook and Amazon.com Inc.(Updates with Google response from fifth paragraph)\--With assistance from David McLaughlin.To contact the reporter on this story: Ben Brody in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Sara Forden at email@example.com, Mark Niquette, Linus ChuaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Investors are giddy about Amazon.com Inc.’s fast-growing pool of advertising sales, which largely come from merchandise sellers buying commercial messages to make their goods more prominent on Amazon’s website.Calling this “advertising” is true, but also a misnomer that leads investors to imagine a Google-like marketing machine inside Amazon. It’s not – or not yet, at least. Amazon’s advertising is better understood as an additional tax the company imposes on the millions of businesses that sell through its vast digital mall. It’s one more toll extracted from sellers to access the fast lane of Amazon’s beautiful freeway for shopping.Ads may be a justified expense for merchants to access Amazon’s hundreds of millions of shoppers, and it’s a common business tactic to juice revenue. But it’s also risky for Amazon to milk its merchants for a higher effective commission than most businesses of its kind can command. And as regulators and politicians question whether the superpowers of U.S. tech are using their popular services to unfairly advantage themselves, Amazon may pay a cost in reputation the more it squeezes cash from its hold on online shopping. More than half the items bought on Amazon come from independent merchants that sell slacks or bocce sets through the e-commerce king. Amazon in some cases handles a lot of the leg work, in exchange for commissions and other fees. In recent years, Amazon has given those “marketplace” sellers and product manufacturers more options to buy Google-like advertisements, in part based on product searches, for an additional cost. Someone typing "dog beds" into Amazon’s search box, for instance, might first see results from the FurHaven brand or a merchant that resells pet products on Amazon, with an icon that notes those listings are “sponsored.” RBC last year estimated that about one out of every six product results on Amazon’s app was a sponsored listing. Products from companies without paid listings are pushed further down the page.As Amazon kicks off its annual Prime Day fake shopping holiday, it appears the company is offering even more paid product promotions. All those advertisements make up most of Amazon’s $11 billion yearly sales in a category that also includes fees for its branded credit cards. In my conversations with businesses that sell products on Amazon or advise merchants, there isn’t much hostility about Amazon charging them for promotion on top of other fees. Companies realize that paying to make their merchandise front and center on Amazon is a cost of doing business, and they generally say those paid placements generate enough sales to justify the expense. In a survey of businesses that sell on Amazon, the merchant services firm Feedvisor found three-quarters of respondents were satisfied with Amazon’s advertising platform. Ads, of course, also transfer money from merchants to Amazon’s wallet. The company on average takes about 26 cents of each dollar of transactions made by its marketplace vendors, according to Bloomberg Opinion estimates from Amazon’s disclosures. Add in an estimate of Amazon's revenue from the merchants’ advertising — which, again, is mostly an added fee paid by goods sellers and product manufacturers as a cost of doing business — and Amazon’s average haul per transaction likely tops 29 cents on each dollar.(2) In 2015, the company’s take was closer to 20 cents. Other marketplace businesses that connect sellers with customers — eBay Inc., Airbnb Inc. and Grubhub Inc., for example — tend to take an effective commission of 15% to 25% on each transaction, including advertisements if available.(3) Consider that some makers of apps, including Spotify and the company behind the the Fortnite video game, have complained that Apple Inc.’s up to 30% commission on transactions in its iPhone app store is far too high. Amazon itself doesn’t sell its e-books, movie downloads or other digital goods in the company’s iPhone apps, to avoid giving Apple a cut of 30 cents on every dollar — about what Amazon takes from its merchants.To be fair, Amazon is doing a lot of work for its cut of sales. It provides a vast customer base for merchants, often stores inventory for them and handles shipments, and takes responsibility for customer service and payments. That’s arguably far more work than Apple does for its 30% commission on a purchase of an iPhone game.(1) And all advertising is, in a way, a toll levied by a powerful distributor. Businesses buy ads on Facebook and Google to ensure their products and services don’t get drowned out by a sea of other information. Frito-Lay pays a supermarket extra to ensure its chips are on visible spots on shelves. Alibaba and eBay sell ads similar to those that Amazon offers to merchants. There’s nothing particularly unusual about what Amazon is doing in carving out room for merchants to market themselves, for a fee.But there is also something perverse about paying Amazon a kind of tax to make sure your product is seen on Amazon, so people will buy the item on Amazon. Even Google’s ad empire isn’t this kind of a closed loop. And if one Amazon merchant doesn’t purchase an ad, one of its competitors’ dog beds — or Amazon's own brand — might instead nab an eye-catching display and wrest a sale instead. Amazon is just different, in a way that makes typical business tactics a little icky. Amazon’s growing cut from its merchants is one reason why the company's revenue is increasing more quickly than its merchandise sales. Amazon is extracting a bigger share for itself. Like other powerful tech companies, Amazon is able to charge more to the partners that rely on it, because they don't really have a choice. (Updates the “Take a Cut” chart to include an average effective commission for Airbnb instead of the high end of listed commission rates.)(1) This estimate is based on recent company disclosures that for the first time enabled calculations of the total value of goods sold on Amazon's digital mall. My calculation of Amazon's effective commission is the company's 2018 reported net revenue from commissions and other fees paid by marketplace vendors, $42.7 billion, out of roughly $166 billion in total merchandise sales made by those independent merchants. The effective commission including advertising is a rougher estimate, because it assumes 58% of Amazon's "other" revenue of $10.1 billion in 2018 -- primarily ads but also other services -- are paid listings purchased by Amazon's marketplace merchants. (That percentage corresponds to the merchants' share of total sales on Amazon.) The figure may overestimate Amazon's take from merchants, but probably not by much.(2) These companies’ effective take of transactions in some cases isn't entirely comparable to Amazon’s, because they do more or less work for their commissions and other fees. But they each get paid for their role as middlemen.(3) Earlier this year, my Bloomberg colleague Spencer Soper wrote about the mixed feelings among companies that sell on Amazon. Many of them find customers they couldn't have reached without Amazon, but some also grouse about the growing array of fees they pay the e-commerce giant or other downsides of selling goods there. Some merchants told Soper that Amazon is taking upwards of 40% of each sale.To contact the author of this story: Shira Ovide at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shira Ovide is a Bloomberg Opinion columnist covering technology. She previously was a reporter for the Wall Street Journal.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Second-quarter earnings are usually pretty sleepy, with forecasts for the back-to-school and holiday periods tucked away for later review amid summer vacation schedules. You may want to pay attention this year, though.
Shares of Amazon (NASDAQ:AMZN) have been bursting higher, rallying past $2,000 per share this week and helping lead the charge on new record highs for the Nasdaq. Unlike the Nasdaq though, Amazon stock is not yet at new record highs. Will it be able to get there?Source: Shutterstock The stock is trading is at its highest level since the first day of the fourth quarter. Since then, it has embarked on numerous rallies and deep declines. The way the charts are setting up, a test of the prior highs or a run to new highs is certainly possible. Trading AmazonAs you can see on the chart below, the Amazon stock price breached the $2,030 level twice. These moves came in early September and early October, before cascading lower. Amazon stock bottomed out just above $1,300 in December, down more than 36% from its highs. Click to EnlargeInvestorPlace - Stock Market News, Stock Advice & Trading TipsThe peak-to-trough decline was better than a number of high beta stocks, but almost twice that of the PowerShares QQQ ETF (NASDAQ:QQQ). * 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond Amazon is not yet overbought, as indicated by the RSI reading at the top of the chart (blue circle). If the overall market can hold up, Amazon can continue to power its way higher. After all, its most recent earnings report in April was strong, it just happened to come right ahead of a major fall in the market.Those earnings results could give investors optimism for the upcoming report later this month, helping to bid shares higher ahead of the report. Further, Prime Day is just a few days away (starting on July 15th). That's an event investors are apparently buying ahead of, and it may set up for a sell-the-news situation as a result.The Prime Day catalyst could actually time up perfectly with a run up toward its all-time high at $2,050.50. If Amazon's rally sputters and pulls back ahead of earnings, it could be an opportunity for investors to buy the dip. That's particularly true if AMZN stock dips down to $1,950 and this level acts as support.Those are now the two levels to watch: $2,050 on the upside and $1,950 on the downside. Amazon vs. FAANGA few weeks ago when the S&P 500 was hitting new highs, the Nasdaq was not. We pointed out that it didn't have the participation from FAANG.Of the group, only Amazon was less than 10% off its all-time highs. In fact, Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) were all at least 13% off their highs at the time.Even with Amazon carrying the load (along with Microsoft (NASDAQ:MSFT), which has been a beast) how long can the Nasdaq hit new highs without its biggest components doing better?For now, FAANG (minus AMZN) is still at least 7% off its all-time highs. Imagine the boost the Nasdaq would catch if big money started flowing back into these names again. In that case, imagine how well Amazon stock would do, given that it already has bullish momentum.FB and NFLX may be leading in year-to-date gains, but AMZN doubles the next best performer on the one-year timeframe.Simply put, this name is crushing its peers. Bottom Line on Amazon StockWith Prime Day approaching and the Nasdaq drifting higher, Amazon stock could continue to rally. A move up toward the $2,050 level may be met by sellers initially, but a pullback would all be too healthy for bulls. Particularly if they're optimistic ahead of earnings.The stock continues to perform well and is outrunning its FAANG peers at the moment. On July 11, for the first time in almost a year, Amazon stock topped a $1 trillion valuation.Long-term investors who like the name should take advantage of large swoons in Amazon. It dominates in various secular growth themes and has clearly positioned itself as a leader in tech.Its strong earnings growth (estimates call for 35% growth this year and 40% growth in 2020) makes the valuation more palpable. Even better? AMZN has been crushing earnings estimates over the last seven quarters, while its immense cash flow buoys any financial worries from investors.That said, we saw a 35%+ correction in Q4 and ~15% pullback in the month of May. These are the types of swoons to take advantage of for those looking for longer-term entries.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AAPL, AMZN and GOOGL. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy for Less Than Book * 7 Marijuana Stocks With Critical Levels to Watch * The 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond The post This Is Why Amazon Stock a Must-Buy Amid the Nasdaq Rally appeared first on InvestorPlace.
Is Social Security in a crisis? Starting next year, the Social Security Administration will be paying out more in benefits than what is paid into the system. Making this already-dire situation even worse, according to some: The Social Security system’s large current reserves don’t really exist.
Stock futures: The stock market rally continues with Amazon Prime Day, Facebook regulatory fears and Citigroup earnings in focus. Amazon, Facebook, Citigroup are all in buy range.
With markets at all-time highs, we have entered earnings season. And one of the first notable companies to report its earnings is eBay (NASDAQ:EBAY). It is slated to announce its second-quarter results on Wednesday, July 17 after the market closes.Like the shares of many other tech companies, Ebay stock has been on fire. In 2019, eBay stock price has surged an impressive 43%. That is actually better than arch rival Amazon.com (NASDAQ:AMZN), which has gained about 34%.Yet until this year Ebay stock had been a laggard. For the past five years, eBay stock price has risen by an average of only 9.2%, versus the average 44% gain of AMZN stock over the same period.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSo what can we expect from eBay earnings? For the top line, analysts, on average, are calling for an increase of 2.6%, while their consensus earnings per share estimate is 62 cents per share, up from 53 cents in the same period last year. * 3 Earnings Reports to Watch Next Week But Ebay earnings may actually get overshadowed next week because on July 15 and July 16 Amazon.com will hold its mega sale, Prime Day. That will definitely suck up a lot of the attention of business-news media outlets and of investors.Yet eBay will not sit idly by. The company has announced its "Crash Sale" program, which, according to eBay, is being held on July 15 in case Amazon's website crashes, as it did during last year's Prime Day. To this end, eBay has put together a new website called "The Brand Outlet," which has plenty of items from top brands like Apple (NASDAQ:AAPL), Samsung, KitchenAid and Garmin (NASDAQ:GRMN) with discounts of as much as 70%.According to eBay's VP and COO of the Americas, Jay Hanson: "eBay is primed to deliver exactly what shoppers want during this year's crash (sale). July has become a massive shopping season, and our summer sales include blockbuster deals that will not disappoint."The company has made other moves that have helped to boost Ebay stock. Here's a look at some of them: * Over the past year or so, eBay has been transforming its marketplaces to improve users' experience. While the transition has been choppy, the long-term results should be positive. Keep in mind that buyers have indicated that the new system is better and will encourage them to buy more products on eBay. * eBay has launched a digital- ad business, enabling it to more effectively monetize its users. * In early March, eBay launched a strategic review. This was the result of pressure from activist investors Elliott Management Corp. and Starboard Value LP, which have both taken large stakes in eBay stock. The firms now have two seats on eBay's board between them. As part of the review, eBay will also explore other potential moves, including selling assets, such as the StubHub website and eBay Classifieds Group. * eBay has announced that it plans to return $7 billion in capital back to the owners of eBay during the next two years. Given Ebay stock has a market cap of $34.6 billion, $7 billion is a sizable amount of money. The Bottom Line on eBay Stock PriceEven after the rally of Ebay stock, its valuation is still reasonable, as its forward price-earnings ratio, based on analysts' average estimate, is 13. By comparison, the forward PE ratios of Facebook (NASDAQ:FB) and AAPL are 22 and 16, respectively.Granted, Ebay stock is still facing major risks. Its growth is uninspiring, as its gross merchandise volume fell 4% in Q1. And analysts don't think GMV rebounded much in Q2. eBay also continues to have difficulties making inroads against Amazon.com.But the good news is that the company appears to be serious about getting things on track and is focused on increasing the value of Ebay stock, as seen by its responses to the requests of Elliott Management Corp. and Starboard Value. And besides, expectations for eBay's Q2 results are muted - and should be beatable.Tom Taulli is the author of the upcoming book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy for Less Than Book * 7 Marijuana Stocks With Critical Levels to Watch * The 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond The post How Will eBay Stock Be Impacted by the Company's Q2 Results? appeared first on InvestorPlace.
(Bloomberg) -- Brian O’Kelley built AppNexus Inc. to help companies advertise anywhere on the internet. Its software plugged into virtually every digital ad-trading hub, including those from Google, the biggest ad seller, and Google’s YouTube video service. By 2014, AppNexus was valued at $1.2 billion.Then, in 2015, Google stopped letting companies buy ads on YouTube using outside software. The move got more marketers to use Google ad services. It also created a glaring hole for AppNexus: The startup could no longer give customers access to the largest supply of online video. It never really recovered.“They crushed our growth and ruined our product," said O’Kelley, who stepped down as AppNexus chief executive officer last year. YouTube represented a huge portion of the video inventory that AppNexus offered to advertisers. Those marketers couldn’t just ignore YouTube "because it’s pretty much a monopoly in that space," he added. "It’s not a supply-and-demand problem. It’s a ‘You just broke our entire business’ problem.’”The story is familiar to advertising and media entrepreneurs who built businesses around YouTube, only to be hobbled when the video giant changed the rules of engagement. Google used YouTube’s popularity to lure creators, media companies and tech firms onto the service, gaining access to more videos and ad space. YouTube then used that supply to control ad prices and amass data about viewers, squeezing out anyone that tried to compete, according to interviews with more than a dozen partners, rivals and former employees. Many asked not to be identified discussing sensitive information about a powerful industry player.YouTube didn’t wipe out competition in one fell swoop, or act maliciously, according to these people. Instead, YouTube made decisions to consolidate the video ad-buying process, with little regard for partners or competition, and few regulatory checks. That left a graveyard of failed companies in its wake and fewer choices for advertisers, the people said.In digital video advertising, YouTube has no peers. The U.S. market harnessed $16.3 billion in ad spending last year, according to the Interactive Advertising Bureau. YouTube accounted for the majority of that. Globally, the video giant generated $16 billion in 2018 sales, BMO Capital Markets estimates.YouTube disputes this depiction of its dominance. The company said it shares more than half its ad sales with video producers, and competes in a much bigger market than just online video ads. "Viewers have never had more choice when it comes to where to watch their favorite videos," YouTube spokeswoman Andrea Faville wrote in an email. "Similarly, advertisers have a wide and growing array of options, including traditional television, which still accounts for the majority of video ad spend."But U.S. regulators and politicians are now listening to claims that Google and YouTube may have run afoul of the law. The Department of Justice is considering an antitrust investigation of Google. The Federal Trade Commission is probing allegations that YouTube violated privacy laws protecting children, Bloomberg reported earlier this year. Congress, which has multiple investigations into Google and its peers, recently requested an interview with a former YouTube business partner, according to some of the people who spoke with Bloomberg.“If you’re looking into Google, it would be remiss not to look at YouTube,” said Sally Hubbard, director of enforcement strategy for Open Markets Institute, a think tank. “You’ve got monopolies upon monopolies.”YouTube may be preparing for scrutiny. Its executives recently reached out to partners to ask how its practices have affected their ad sales, according to one of the people who spoke with Bloomberg. YouTube did so as part of typical partner relationship management efforts, but this person interpreted the outreach as a sign of YouTube nerves about antitrust regulation.Vevo humbledFew companies show YouTube’s grip on the digital video market better than Vevo, which distributes music videos online from two of the three largest record labels.The company was conceived by Doug Morris, then head of Universal Music Group. Founded in 2009, Vevo collected music videos and original programming, and distributed those clips across the internet – on YouTube, on Yahoo and on Vevo.com. The ultimate goal was to turn Vevo’s site into the MTV of the internet and get higher advertising rates, Morris said.At a lunch with Morris, then Google CEO Eric Schmidt embraced the idea. Vevo could share ad revenue with the internet giant when Vevo clips ran on YouTube.As YouTube grew, though, the relationship frayed. Vevo music videos were popular on YouTube, and advertisers loved them. But YouTube couldn’t sell ads on these clips because Vevo had exclusive rights in every market where it operated. The Google unit set out to take control of this valuable inventory through aggressive contract negotiations, sneaky sales tactics and even an effort to buy its rival outright, according to the people who spoke with Bloomberg.In late 2012, YouTube proposed a new contract that would have allowed it to also sell ads on Vevo videos, and would have reduced Vevo’s share of the revenue from those ads. Google also offered to buy Vevo. When the record labels balked, YouTube said it would take down Vevo music videos before the existing contract expired, according to the people who spoke with Bloomberg.Vevo’s leadership called an emergency board meeting. The company stood to lose millions of dollars if it disappeared from YouTube, which then reached about 1 billion people a month and accounted for most of Vevo’s audience and sales.Vevo executives told YouTube they would file an injunction describing what they said was bullying tactics, and asking a judge to block the video giant from removing Vevo videos, according to former employees and music industry executives. The gambit worked. YouTube agreed to a new deal that let Vevo keep exclusive rights to its ad inventory.In July 2013, Google acquired a minority stake in Vevo. That didn’t give it full control, but offered more visibility into Vevo’s business.YouTube’s attempts to stifle Vevo continued, according to people familiar with the efforts. While it couldn’t access Vevo’s ad inventory, the video giant could reduce its influence, the people said.YouTube encouraged artists to go around Vevo by creating their own YouTube channels to replace the ones operated by Vevo, the people said. Faville, the YouTube spokeswoman, said the company encouraged artists to consolidate their presence on a single "official" channel to avoid confusion. "This product change was a net benefit to fans and artists," she added.YouTube also flirted with the limits of its Vevo deal. Some of YouTube’s sales pitches to advertisers included the Vevo logo and artists such as Rihanna, according to people who saw the documents. The documents suggested that YouTube could run ads on Vevo videos even though YouTube was contractually prohibited from doing so. Vevo executives flagged the problem to YouTube executives, who apologized and blamed the sales team, the people said. Faville called this a one-time error.Vevo tried to send viewers to its own website and mobile app, but YouTube’s algorithms made that risky. The software recommended videos that were watched a lot on YouTube. If Vevo clips were seen elsewhere, those views were not counted by the Google unit. The result: Vevo videos didn’t perform as well on YouTube, according to industry executives. Faville said YouTube’s algorithms don’t factor whether videos direct viewers elsewhere.In 2018, Vevo stopped competing with YouTube for a large consumer audience, shutting its app and website, and cutting product and engineering staff. Around the same time, YouTube secured a deal that gave it what rivals say it wanted all along: the right to sell Vevo’s ads.In thinking about what went wrong, Morris remembers discussing Vevo with Steve Jobs. “Why won’t Vevo be worth billions?” he asked before the Apple Inc. co-founder died in 2011. Jobs said Google already effectively owned Vevo because YouTube had a lock on Vevo’s viewers. "They’ll control it," Jobs warned, according to Morris.Once envisioned as a site that would compete with YouTube for views and ad dollars, Vevo is now mostly a logo with a small sales team.Machinima’s demiseMachinima Inc., like Vevo, started out as an asset for YouTube. In YouTube’s early days, it didn’t have an advertising sales team nor staff managing relationships with individual video creators. Machinima was one of the first companies to assemble a network of YouTube channels and creators. It sold ads on the channels’ behalf, struck deals with brands and developed YouTube stars, including PewDiePie, one of the most popular video bloggers. That success spawned clones, including Maker Studios, Fullscreen and AwesomenessTV. Known as multi-channel networks, or MCNs, they were seen as the cable networks of the future.But the relationship soured as MCNs got big enough to compete for ad dollars. YouTube executives didn’t want third parties getting in between viewers, video creators and advertisers, according to former MCN executives and employees. So YouTube made MCNs superfluous by replicating many of their offerings, while limiting their access to data and tools that would have helped them build their own businesses, these people said.In November 2013, YouTube instituted a policy that made it clear MCNs would need to look beyond YouTube if they wanted to thrive. The company said it would take 45% of ad sales from all partners on YouTube, up from the 30% it collected from some large media companies. Solo creators could survive on a 55% share, but the MCNs couldn’t support their growing staff and expansion plans.“These companies realized advertising sales weren’t enough,” said Peter Csathy, founder of advisory firm CREATV Media. “Too much of a share had to go to YouTube.” YouTube’s Faville said revenue sharing agreements with MCNs didn’t change.The MCNs tried using collective power to get more favorable terms. They wrote a letter asking YouTube to consider changes, but that went nowhere. Some MCN executives pitched their boards on going to the Justice Department to file an antitrust suit against YouTube, but directors refused to fund what would have been a long and expensive legal battle, according to people familiar with the deliberations.Relations between MCNs and YouTube deteriorated under Susan Wojcicki, who took over as chief executive officer of YouTube in 2014. The veteran Google advertising leader corralled the company’s huge digital sales force to focus more on YouTube. She also created Google Preferred, a package of the best-performing videos on YouTube that advertisers could buy.YouTube already sold more video ad space at attractive prices than any media company online. With Google Preferred, YouTube could also compete on quality. Google offered advertisers similar videos as Machinima at lower prices, with better targeting and more volume. YouTube had the relevant clips – and, with data from Google’s other popular services, it knew more about what viewers wanted to see. Smaller media companies like Machinima could not sustain their sales forces selling less-targeted ads at the lower rates offered by Google and YouTube.One by one, the MCNs either shrank, sold themselves or died. Earlier this year, Machinima laid off its remaining employees and ceased operations.AppNexus’s ordealBrian O’Kelley’s AppNexus had a similar experience. It flourished in a market that Google helped create: programmatic online advertising. For years, ads were placed with handshake deals between marketers willing to spend and websites willing to sell. With programmatic software, buying ads became more automated, effective, cheaper and faster. Several firms raised millions of dollars to pursue this opportunity. Rocket Fuel Inc., went public in 2013 valued at more than $2 billion. The Rubicon Project Inc. did an initial public offering in 2014, and AppNexus was tipped to follow.But in 2015, Google made a move that showed how powerful it was in this market. Google removed YouTube inventory from ad exchanges run by other companies including AppNexus. With a few exceptions, any advertiser that wanted to market on YouTube had to use Google’s software or ad exchange.Google saw a business rationale behind the decision. Outside exchanges handled less than 5% of YouTube’s ad slots at the time, according to the company. Also, YouTube’s most popular ad format -- a skippable one that ran before videos, called TrueView -- was "not supported" on external exchanges, YouTube’s Faville said. Keeping such a small slice of ads available to buyers through other exchanges wasn’t worth the extra work.However, O’Kelley and others in the ad-tech industry saw the move as a clear example of Google using YouTube’s assets to favor other parts of its business -- in this case, Google’s ad software -- at the expense of rivals. Five percent of YouTube ads may not be important for Google, but it’s a vast amount for smaller competitors.Dina Srinivasan, a former executive at ad agency WPP Plc, compared Google’s 2015 move to a company decreeing that investors can only trade popular shares on one stock exchange, and through one brokerage firm.Google ad prices are set in an auction and not public. But taking YouTube off outside exchanges probably reduced the number of marketers bidding on its ads, lowering prices, according to Srinivasan. “Google may have absorbed a loss in YouTube revenue for some other reason,” she added. “The question regulators will be asking is whether that reason was to drive out competition.”Despite a short-term dent in YouTube sales, the ploy likely increased the long-term value of Google by billions of dollars because it strengthened the company’s grip on advertising technology, according to O’Kelley. "That’s kind of how monopolies roll," he said.There’s a “no economic sense” test in U.S. antitrust law that may apply here, according Srinivasan. The Justice Department’s top trustbuster Makan Delrahim discussed this in a recent speech about big tech companies. When oil refineries refused to sell themselves to Standard Oil in the late 19th century, the giant cut prices to drive them out of business. Lower prices are the essence of competition, but a powerful company is not allowed to do things that make no business sense just to make it harder for rivals to catch up, he said.YouTube said its tactics were sensible. "Like any business, we make changes to how we operate to reflect the current climate," Faville said. "We make all these decisions with the same goal: to improve the YouTube experience for our users, creators, and advertisers."Since Google changed the YouTube ad-buying process, much of the rest of the programmatic market has withered: Rubicon Project is trading about two-thirds below its IPO price; Rocket Fuel Inc.’s valuation fell below $100 million before it was acquired. The AppNexus IPO never happened and it sold to AT&T Inc. last year for $1.4 billion. The Trade Desk Inc. is a rare thriving player, but it operates in China and other markets where Google is less active.In 2016, several ad tech companies, including AppNexus, met with Justice Department and Federal Trade Commission to discuss the industry, and some complained about YouTube’s behavior, according to O’Kelley. The response was tepid at best, he said.“We had a really hard time getting them to pay attention," O’Kelley recalled. "They would say, ‘It’s hard to understand.’" A spokeswoman for the FTC declined to comment, and the Department of Justice didn’t respond to a request for comment.But now, O’Kelley may have a more attentive audience. In May, he testified before the Senate Judiciary Committee on digital advertising. "This is not a functioning market," he said. "It enables Google, which doesn’t produce content, to monopolize all aspects of the programmatic business and take a disproportionate tax for its trouble."Later, over the phone, O’Kelley was less grim about the political response. "Maybe now they’re paying attention," he said.To contact the reporters on this story: Lucas Shaw in Los Angeles at firstname.lastname@example.org;Mark Bergen in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Alistair Barr, Emily BiusoFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
In the latter part of 2018, bearishness took hold of Apple (NASDAQ:AAPL) stock and sent shares to the $150 range as AAPL stock investors took in the news that the company would no longer issue unit sales numbers for its iconic iPhone device.Source: Shutterstock CEO Tim Cook reasoned that subscription and app sales mattered more for profitability. By that logic, Apple could afford to offer less transparency into its business each quarter. Now that the shares have recovered, there are three reasons investors should buy Apple stock. Weaker iPhone Sales ExpectedInvestors have had more than six months to accept that unit sales for iPhones will fall. Average selling price (ASP) is significantly higher with each successive release of the device. And although loyal customers will hold off upgrading to the latest iPhone, their device will stay in the iOS ecosystem. Even if revenue falls, Apple will enjoy healthy profit margins from sales of iPhone 8, X, XR, and XS Max.InvestorPlace - Stock Market News, Stock Advice & Trading TipsExpect the total profit per user to hold steady or increase, driven by more customers signing up for Apple Music. In April, The Wall Street Journal reported that Apple had 28 million subscribers, 2 million more than Spotify Technology (NYSE:SPOT). SPOT stock trades at similar price/sales and price/book multiples compared to Apple. Yet Spotify's price/forward cash flow multiple is 75, compared to 20.5 times for Apple. * 7 Retail Stocks to Buy for the Second Half of 2019 Don't forget that Apple recently launched its News App. By sending notifications for timely news, users who use the app often may end up subscribing to the service. In doing so, they get Apple News Plus, which gives users access to premium newspapers and more than 300 digital magazines. Look for Earnings Beat on July 30When Apple reports quarterly earnings on July 30, the company may beat the Q2/2019 EPS estimate of $2.12.Source: TipranksLast year, Apple reported earnings of $2.34, topping the $2.17 estimate. Strong revenues are possible because Apple Music subscription growth is gaining momentum. The iPad and iPad Mini refresh could drive device sales higher. Conversely, the iPad Pro faces stiff competition from Microsoft's (NASDAQ:MSFT) Surface book and Surface tablet. Still, Apple has the AirPod, Watch, and HomePod to offset a drop in Pro sales.In the unlikely scenario that AAPL stock falls after reporting strong results, the drop gives investors a chance to average down. Most who invest in Apple are in it for the long term. Viewing short-term drops in the stock as entry points played out well in the last decade. * 10 Stocks to Sell for an Economic Slowdown To be sure, weak iPhone sales could spook investors and send Apple stock lower. Yet if consumers are simply holding off on upgrades in general, Apple is not losing market share. So if users are not leaving the iOS ecosystem for Android, Apple subscription and software sales will return high profits. Service Revenue Will Drive GrowthThe second quarter 2019 saw Apple report its best quarter ever for Services, as revenue topped $11.5 billion. Even as worldwide iPhone revenue fell 17%, Services grew to new heights, with more than 390 million paid subscriptions at the end of March, up 30 million in the last quarter. During 2020, Apple expects to surpass 500 million subscriptions.That is a phenomenal rate of growth. And the strong uptake of Services will include growing App sales. In Q2, the number of paid third-party subscriptions increased by over 40%. Apple has a well-diversified source of revenue from apps; the biggest third-party subscription app accounted for just 0.3% of its total Services revenue.Apple forecast revenue of $52.5 billion - $54.5 billion for the upcoming report for the June quarter. Gross margin will be around 38%. Operating expenditures will be $8.7 billion - $8.8 billion. Your Takeaway on AAPL StockApple is confident about the growing revenue from the product category level. More importantly, it expects iPhone sales improving Y/Y in the upcoming Q3 report. Cash flow generation is so strong that AAPL stock repurchase authorization and its quarterly dividend. A dividend hike is unlikely but if Apple does so, look for Apple stock continuing its uptrend.Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy for Less Than Book * 7 Marijuana Stocks With Critical Levels to Watch * The 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond The post 3 Reasons to Buy Apple Stock Ahead of End-of-Month Earnings Report appeared first on InvestorPlace.
(Bloomberg Opinion) -- The share of income and wealth going to the so-called “1%” has incensed protesters and agitated economists around the world. From the Occupy Wall Street movement to the work of academics such as Thomas Piketty and Gabriel Zucman, attention has zeroed in on what the super-rich earn and own, and on how governments should use taxes for redistribution.Such policy ideas have taken center stage in the primaries of the U.S. Democratic Party, which decide who will challenge President Donald Trump in 2020. One of the runners, Senator Elizabeth Warren, advocates a 2% wealth tax on fortunes above $50 million. She has found unlikely billionaire allies, including the investor George Soros and Facebook Inc.’s co-founder Chris Hughes, who say they’d accept a levy on their riches to “help address the climate crisis, improve the economy, improve health outcomes.”These are all smart people but there’s a danger they may be missing something here. The French economist Philippe Aghion points out that there’s a direct correlation between high levels of inequality in favor of the top 1% and innovation (the creation of new technologies). Given that every country is eager to foster innovation – because it brings huge economic benefits – might there be an argument that a concentration of wealth at the top isn’t necessarily a great evil?Aghion’s view is that instead of seeking to punish the 1%, the main priority for governments should be to ensure that the top strata of the wealthy isn’t allowed to remain a closed shop – that is, new innovators must be free to challenge and replace incumbent companies. Given the entrenched positions of giant technology companies such as Alphabet Inc., Apple Inc. and Microsoft Corp., this is going to need a bit of work.The London School of Economics professor, who presented his findings in Paris last month, also said there was no evidence that faster innovation would produce more inequality further down the income scale. This is only about the difference between the 1% and the rest. And he said increases in innovation were linked to better social mobility. Aghion believes that new inventions give people the chance to rise up the ladder faster.Indeed, mobility (admittedly at the top end) is the prime motivation for all those technology pioneers in the first place. They want to make enough money to join the ranks of the very wealthiest. Aghion’s conclusion, in line with the tradition of the Austrian economist Joseph Schumpeter, is straightforward: Companies come up with new processes and products to generate and appropriate “rents.” Governments shouldn’t target these extra profits excessively since it would stifle the desire to innovate.This doesn’t mean there’s no role for public policy. Quite the opposite. Aghion also showed how all is not well in innovation-land. The growth rate of total factor productivity, a measure of efficiency, rose sharply in the 10 years after 1996 but then declined. In particular, productivity growth among tech companies and firms that are the biggest technology users appears to have peaked respectively in the mid-1990s and in the mid-2000s, and has slumped subsequently.Meanwhile, as the academics Jan De Loecker and Jan Eeckhout have shown, companies are becoming ever more able to charge markups in excess of their costs. Yesterday’s innovators are enjoying a quietly untroubled and lucrative life today, which may well be down to the barriers to entry they themselves have erected.While many on the left hanker after higher taxes to shrink the share of income and wealth of the 1%, it’s not even clear that they’re an effective tool. Aghion looked at the tax reforms introduced by the French president Francois Hollande in 2012, including a 75% tax on earnings above 1 million euros. He found that the changes prompted more of the ultra-rich to leave France but that any improvement in social mobility – measured as the number of people who have moved upward in the bottom 95% of the income scale between 2011 and 2015 – was extremely limited (although it’s too soon to draw strong conclusions).So if we want to encourage the bursts of innovation that actually support genuine upward mobility, tackling the quasi-monopolistic practices of the biggest companies might be a better use of political energy. For years, Amazon.com Inc., Facebook Inc., Google and their ilk have been subject to relatively little antitrust scrutiny. This may be changing: The European Union has fined Google three times for a total of about 8.2 billion euros ($9.3 billion) for abusing its dominant position. There are signs too that U.S. antitrust authorities are finally waking up to this problem.Of course, proponents of higher taxes on wealth and income believe they can foster competition and social mobility. If they fund improvements in education, such thinking goes, that may help today’s poor become tomorrow’s champions. But France’s experience in 2012 poses questions about how much can be raised before wealthy individuals move abroad. In the U.S. there’s a vocal debate over how much Warren’s wealth tax would actually bring in.The rise of left-wing politicians such as Warren and Britain’s Jeremy Corbyn suggests a hunger among younger voters for much greater redistribution. While higher taxation may make the world fairer, there’s little evidence it will make the economy innovate more or grow faster. Robust competition enforcement is a better answer. Before you bash the rich, try busting the trusts.To contact the author of this story: Ferdinando Giugliano at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Ferdinando Giugliano writes columns on European economics for Bloomberg Opinion. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The financing activity in the cash flow statement measures the flow of cash between a firm and its owners and creditors.
Heavy buyback action has contributed to outperformance by tech stocks in 2019, but the cash available for future share repurchases is running low.