Start up: Apple’s $8bn tax bill?, the tech funding squeeze, Friends Liquidated, Samsung ‘Live Photos’+ more


At least you knew that the advert might be seen by real people. No such assurances in the online world. Photo by University of Pittsburgh Libraries on Flickr.

You can now sign up to receive each day’s Start Up post by email. You’ll need to click a confirmation link, so no spam.

A selection of 12 links for you. Use them wisely. I’m charlesarthur on Twitter. Observations and links welcome.

Why you should never consider a travel planning startup » Tnooz

Nadav Gur, principal at NG Vanguard Enterprises:

First, you need to acquire users. Guess what — if they’re not planning a trip, they’re not interested in travel planners. They don’t even acknowledge their existence.

People are bombarded by new websites/apps/brands all the time, and they filter for what’s relevant.

That’s what you see GEICO ads on TV all the time – cause the only way to get your attention those 1–2 times a year when you give a damn about insurance, is to be in front of you all the time.
No matter how much press/word-of-mouth/viral exposure you’re getting, it only registers if/when it happens to be relevant.

Inevitably this means that you too have to advertise a lot. And no, free user acquisition schemes like SEO do not work in 2015 at scale in established markets.

The Priceline Group spends over $2bn per year on Google Ads alone. Guess why?

Not so easily disrupted. And that’s before you get to the question of how many people spend enough on travel for any affiliate amounts to be worthwhile.
link to this extract


Tech faces hour of reckoning as fundraising drops, layoffs rise » USA Today

Jon Swartz:

Is tech in for a rude awakening this year after a magic carpet ride the past few years?

The numbers, and recent actions by once-highflying start-ups, would seem to suggest so.

Consider: Mega-rounds, defined as funding of more than $100 million for venture capitalist-backed companies, are in free fall. The rate of private start-ups attaining unicorn status — a valuation of at least $1 billion — are grinding to a crawl. Friday layoffs at tech start-ups, deemed Black Fridays, are increasing. Bellwether tech stocks such as Apple, Google, Facebook and Amazon have been taking it on the chin.

“It’s a time to re-calibrate — so many companies can’t burn extraordinary amounts of money forever,” says Sunil Panel, co-founder of Sidecar, a pioneer in the crowded ride-sharing space that shuttered operations on Dec. 31.

Last year, Silicon Valley projected unbridled swagger. Today, “there is definitely an era of reckoning,” says Chris Sacca, a venture investor with stakes in Uber and Twitter. “Reality is setting in.”

Not sure about “grinding to a crawl” (note to USA Today subs: things grind to a halt, or slow to a crawl), but the slowdown in stupid ideas is palpable.
link to this extract


European antitrust chief takes swipe at privacy issue » The New York Times

Mark Scott on the EC’s Margrethe Vestager’s speech at the DLD conference:

“If a few companies control the data you need to cut costs, then you give them the power to drive others out of the market,” Ms. Vestager said at the DLD conference, a gathering of digital executives and policy makers.

She said that “it’s hard to know” how much data is given up when using an online messaging service.

“But it’s a business transaction, not a free giveaway,” she continued. “As consumers, we need to be treated fairly.”

Ms. Vestager’s warning shot in the often-rancorous privacy debate comes ahead of a Jan. 31 deadline for Europe and the United States to reach a new data-sharing agreement…

…A number of European executives echoed Ms. Vestager’s fears about how a small number of American tech companies could use their large-scale data collection to favor their own services over those of rivals. Among them was Oliver Samwer, the German entrepreneur who co-founded Rocket Internet, one of the region’s most high-profile tech companies.

“If someone like Google or Facebook has all of the data, then that’s not good,” Mr. Samwer said here on Sunday.

link to this extract


Whatsapp goes free, says it won’t introduce ads » Mashable

Whatsapp readily acknowledges that killing its only source of income will raise questions about introducing third-party ads. But the company has a different idea.

“Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from. That could mean communicating with your bank about whether a recent transaction was fraudulent, or with an airline about a delayed flight,” the post reads.

We reckon Whatsapp will charge organizations and business for establishing channels with their users through the service, though no details were announced. The idea is by no means new; a Bloomberg report in May 2015 claimed Whatsapp might foray into B2C messaging in the “longer term.”

Perfectly sensible business idea, and could also turn it into a platform like WeChat (whose capabilities and inclusions dwarf those of any western app).
link to this extract


Friends Reunited website to close down » BBC News

Zoe Kleinman:

Friends Reunited launched in the year 2000 and was bought by broadcaster ITV for £175m ($250m) in 2005.

However, it failed to keep pace with other social networks.

It was sold to comic publisher DC Thompson for only £25m in 2009 and Mr Pankhurst wrote in a blog post that the company had offered it back to him a couple of years ago.

Pankhurst and business partner Jason Porter agreed to take on the site for a trial period to see if they could revitalise it.

“It became clear that most of the actual users coming to the site were using it purely as a messageboard,” wrote Mr Pankhurst.

“And I also realised that of the more than 10 million users registered, a lot had done so over a decade ago and hence their contact details were out of date. But importantly – it hasn’t covered its costs and like any business this can’t continue indefinitely. Therefore, whilst it’s sad, I believe it’s time to move on and put Friends Reunited to bed.”

Quite why ITV or DC Thompson bought it is one of those mysteries of business; it was never remotely a fit with either. So after ruining many marriages (of people who looked up old school flames), it’s handing that particular torch over to Facebook, where people can do exactly the same…
link to this extract


Pakistan lifts ban on Youtube after launch of own version » Reuters

Tommy Wilkes:

Pakistan said on Monday it had removed a three-year ban on YouTube after the Google-owned video-sharing website launched a local version that allows the government to remove material it considers offensive.

Pakistan banned access to YouTube in September 2012 after an anti-Islam film, “Innocence of Muslims”, was uploaded to the site, sparking violent protests across major cities in the Muslim-majority country of 190 million people.

The Ministry of Information Technology and Telecom said in a statement that under the new version of YouTube, the Pakistan Telecommunication Authority can ask for access to offending material to be blocked.

“On the recommendation of PTA, Government of Pakistan has allowed access to recently launched country version of YouTube for Internet users in Pakistan,” the ministry said.

“Google has provided an online web process through which requests for blocking access of the offending material can be made by PTA to Google directly and Google/YouTube will accordingly restrict access to the said offending material for users within Pakistan.”

link to this extract


November 2013: Bitcoin under pressure » The Economist

The Economist doesn’t name writers, but I happen to know this is by Glenn Fleishman, writing back in 2013:

Server farms with endless racks of ASIC cards have already sprung up. But as part of Bitcoin’s design, the reward for mining a block halves every 210,000 blocks, or roughly every four years. Sometime in 2017, at the current rate, it will drop to 12.5 Bitcoins. If the returns from mining decline, who will verify the integrity of the block chain?

To head off this problem, a market-based mechanism is in the works which will raise the current voluntary fees paid by users (around five cents per transaction) in return for verification. “Nodes in the peer-to-peer network will try to estimate the minimum fee needed to get the transaction confirmed,” says Mr Hearn.

Bitcoin’s growing popularity is having other ripple effects. Every participant in the system must keep a copy of the block chain, which now exceeds 11 gigabytes in size and continues to grow steadily. This alone deters casual use. Bitcoin’s designer proposed a method of pruning the chain to include only unspent amounts, but it has not been implemented.

As the rate of transactions increases, squeezing all financial activity into the preset size limit for each block has started to become problematic. The protocol may need to be tweaked to allow more transactions per block, among other changes. A further problem relates to the volunteer machines, or nodes, that allow Bitcoin to function. These nodes relay transactions and transmit updates to the block chain. But, says Matthew Green, a security researcher at Johns Hopkins University, the ecosystem provides no compensation for maintaining these nodes—only for mining. The rising cost of operating nodes could jeopardise Bitcoin’s ability to scale.

Following Mike Hearn’s farewell the other day, I think Fleishman is allowed to say “told you so”.
link to this extract


“Bitcoin Boulevard” no longer booming » Marketplace.org

Elizabeth Miller:

It’s been almost two years since a group of businesses in a Cleveland suburb started accepting digital currency bitcoin as a form of payment. The response at first was huge.  Visitors from around the world stopped at what became known as “Bitcoin Boulevard.” But now, the bitcoin hype has subsided. 

Along a lane of small retail stores, restaurants and bars, nine independent Cleveland Heights businesses banded together to form Bitcoin Boulevard in May 2014. But today, two of those businesses have closed, one is not actively accepting bitcoin, and a wine shop ceased most of its bitcoin transactions after the Ohio Division of Liquor Control banned alcohol purchases with the digital currency.

Mitchell’s Fine Chocolates is one of the original nine businesses. Owner Bill Mitchell says he started seeing a drop in bitcoin payment when its value dwindled at the beginning of 2015.

“Since the latter part of the winter of this year going through the end of October, it’s been deader than a doornail,” said Mitchell.

Mitchell isn’t the only one seeing a drop in bitcoin business. Shawn Paul Salon says it has only had six bitcoin transactions in the past 18 months. That’s a lot less exciting than everyone had hoped.

Reality check.
link to this extract


The problem with Adgorithms’ prospectus » Investors Chronicle

Alex Newman, on the AIM-listed ad tech company whose shares have plummeted by 80% from their IPO:

So what went wrong? This is what the company said in its first profit warning, on 9 October, explaining a “significant” and indefinite impact on revenue:

“In recent weeks, the online advertising market has experienced severe disruption, resulting in a loss of supply for major online advertising exchanges and a drop in demand from major media buyers.”

In fact, this disruption had begun several months before, even prior to Adgorithms’ listing. In April, media trading platform news site adexchanger.com reported that AppNexus – which, together with fellow ad exchange Adap.TV related to the majority of Adgorithms’ 2014 revenues – had started screening out unverifiable media inventory. AppNexus’ chief executive, who followed several other ad exchanges when he launched the clean-up in November 2014, later acknowledged that more than half of the impressions flowing through his platform were failing the test. This has had the dual effect of suppressing Adgorithms’ revenues and – according to Peel Hunt analyst Alex DeGroote – increasing the cost of digital media.

Adgorithms certainly should have known about AppNexus’ clean-up plans before listing, and was aware that at least one of its peers had been hit by the broader changes. In April, fellow Israeli ad tech group Matomy Media (MTMY) issued a profit warning, citing the “implementation by one of the leading media trading platforms [this was AppNexus] of a new media verification and screening tool that resulted in an immediate decrease in the amount of digital media available for purchase”.

“Unverifiable” inventory is what can also be called “fraudulent” ads – shown to bots on sites that humans never visit. It’s worth visiting the AdExchanger link (“screening out unverifiable…”) which points to just how much junk and fraud there may be going on.

Seriously, online ads have ended the age of “half of what I spend on advertising is wasted”. Now you have no idea what proportion it may be if you’re using an ad network.
link to this extract


Samsung to launch Live Photos rival called Vivid Photo with Galaxy S7 » Android Geeks

Marius Maria:

Back in September, Apple launched the iPhone 6S which comes with Live Photos, a feature which captures 1.5 seconds of video before and after a picture is taken. HTC’s Zoe Capture was capable of doing the same thing long before Live Photos, but this gimmick only became cool now because Apple has it on its phones.

But Samsung wants to jump into the Live Photos bandwagon, too. According to one of our sources the software engineers of the South Korean phone maker are testing a Live Photos-like feature that is supposed to debut with the Galaxy S7 later this year.

Not sure about the “But” beginning that second paragraph. All sorts of words fit better: “Now”, “Predictably”, “Unsurprisingly”. Cold comfort for HTC.
link to this extract


App economy jobs in the United States (Part 1) » Progressive Policy Institute

Michael Mandel:

Is 1.66 million a reasonable figure for US App Economy employment? This figure is based on our estimate of roughly 550,000 core app economy workers. That’s out of roughly 5 million people employed in computer and mathematical occupations or as computer and information systems managers. In effect, core app economy workers make up roughly 11% of the tech workforce.

Informal discussions with tech executives suggest that it’s reasonable to attribute roughly 11 percent of the tech workforce to the App Economy in the United States. Large portions of software development involve backend systems, such as financial and operation databases, which are not mobile specific. On the other hand, software development focused on online consumer or individual interactions must necessarily involve apps, because Americans increasingly access the Internet via their smartphone or other mobile devices. Going forward, mobile is likely to become more important rather than less, further pushing up the number of App Economy jobs.

We can do another comparison. In 2007, before the introduction of the iPhone, there were roughly 3.9 million people employed in computer and mathematical occupations or as computer and information systems managers. Since then tech employment has risen by 1.1 million, suggesting roughly half the net gain in tech occupational employment since 2007 has come from the App Economy.

For the job breakdown, it puts iOS at 1.4m (87%), Android at 1.1m (70%), BlackBerry at 107,000 (6%) and Windows Phone/Mobile at 45,000 (3%). Adds up to 166% because some people (two-thirds?) work on multiple ecosystems. (Via Horace Dediu.)
link to this extract


Apple may be on hook for $8bn in taxes in Europe probe » Bloomberg Business

Adam Satariano:

The European Commission contends that Apple’s corporate arrangement in Ireland allows it to calculate profits using more favorable accounting methods. Apple calculates its tax bill using low operating costs, a move that dramatically decreases what the company pays to the Irish government. While Apple generates about 55% of its revenue outside the US, its foreign tax rate is about 1.8%. If the Commission decides to enforce a tougher accounting standard, Apple may owe taxes at a 12.5% rate, on $64.1bn in profit generated from 2004 to 2012, according to Larson, a litigation analyst for Bloomberg Intelligence.

Apple is perhaps the highest-profile case of US companies facing scrutiny from officials in Europe. Starbucks, Amazon and McDonalds also have had its tax policies questioned.

Several senators came to the defense of US companies on Friday. In a letter to US Treasury Secretary Jack Lew, bipartisan members of the Senate Finance Committee asked the administration to make sure that European regulators won’t impose retroactive penalties like those that would hit Apple.

Odd if Google, Microsoft, Facebook and Twitter aren’t also in this.
link to this extract


Errata, corrigenda and ai no corrida:

Start up: Google’s Europe problem, spyware (and Syria), why do bigger bras mean larger sales?, and more


“Get me to the Alibaba bikini sale!” Photo from Xinjiang by Manal on Flickr.

A selection of 10 links for you. Come on, it’s Friday. I’m @charlesarthur on Twitter. Send me links or observations.

 Spyware 2.0 >> Aral Balkan

Spyware 2.0 is not cloak and dagger. It’s not hiding in the shadows; it’s hiding out in plain sight like some saccharine Ronald McDonald statue. Spyware 2.0 is all cute doodles and loveable dinosaurs. It’s all the colours of the rainbow. Spyware 2.0 is so damn adorable that you just want to hug it as tightly as you can and never let it go. Spyware 2.0 loves you like a kitten.

The only difference between Spyware 1.0 and Spyware 2.0 is that the purveyors of spyware in the Internet era are not doing it entirely in secret.

I say entirely because they are not completely transparent either.


High costs and errors of German transition to renewable energy >> SPIEGEL ONLINE

“Join in and start today,” [German environment minister Peter] Altmaier writes in the introduction. He then turns to such everyday activities as baking and cooking. “Avoid preheating and utilize residual heat,” Altmaier advises. TV viewers can also save a lot of electricity, albeit at the expense of picture quality. “For instance, you can reduce brightness and contrast,” his booklet suggests.

Altmaier and others are on a mission to help people save money on their electricity bills, because they’re about to receive some bad news. The government predicts that the renewable energy surcharge added to every consumer’s electricity bill will increase from 5.3 cents today to between 6.2 and 6.5 cents per kilowatt hour – a 20% price hike.

German consumers already pay the highest electricity prices in Europe.

Phasing out the nuclear plants (in reaction to Fukushima) turns out not to have been so smart.


How Alibaba is using bra sizes to predict online shopping habits >> Quartz

Alibaba’s rival JD.com booked over 14m orders on Singles Day, using information on what shoppers are buying to make decisions on future inventory. “When you have a sale where you have 14m data points in a single day, that’s going to be extremely helpful to your strategy,” Josh Gartner, senior director of international communications at JD.com, told Quartz.

But data can also befuddle. JD.com found that iPhone 5 sales during Singles Day were nine to 10 times higher than usual. Gartner isn’t sure why. In 2012, Alibaba was surprised to find bikini sales on Singles Day were the highest in the landlocked western region of Xinjiang.

There’s an explanation, but you’ll have to read the article.


Uber’s Android app is not ‘literally malware’ >> The Next Web

Owen Williams:

Let’s nip this one in the bud: it’s incredibly unlikely that Uber’s app is any kind of malware, and from our investigations, the worries in the original post are unfounded. The majority of the permissions listed in the post that calls the company out for being too broad with permissions are required by Android to do many of the app’s basic functions.

Despite what some are claiming, there’s no evidence that Uber accesses any data on your phone other than that used explicitly for the purpose of getting you a ride, nor does it send any of your SMS’, images or other data off your phone.

There’s no reason for Uber to collect data beyond what it needs; it’s certainly not in the company’s best interest.

It’s just that standard Android permissions are so difficult to distinguish from malware, perhaps.


Google only has itself to blame if Europe succeeds in breaking up the company >> Business Insider

Jim Edwards:

Merely being a monopoly is not a transgression, even in Europe. (It’s often a sign of natural success.) Rather, EU antitrust law applies when companies abuse their monopoly to manipulate markets around them unfairly.

On that measure, Google has more than qualified for scrutiny over the way it distorts markets that have nothing to do with search.

The best evidence for that came from Yelp and a coalition of companies it has formed who believe they are being screwed out of their natural, “organic” ranking in search results because Google simply dumps its own — often unhelpful — content on top of the “real” search ranking of which sites are best.

Yelp’s evidence was elegant and simple: It used Google’s own search API to create a browser extension that displayed Google search results without results that include promo boxes generated from Google+, the unpopular identity/social network product that Google launched to counter Facebook. The extension shows you the “real” result generated by Google’s algorithm, without the self-promotional fluff that Google layers on top of it.

The difference is alarming.


Meet Telecomix, the hackers bent on exposing those who censor and surveil the internet >> Forbes

Andy Greenberg:

As the globally-distributed hackers combed Syria’s networks and posted their findings in a crowd-sourced document, one American member of the group, who uses the handle Punkbob, spotted a Windows FTP server filled with data he recognized: logs from a Proxy SG 9000 appliance built  by the Sunnyvale, Calif.-based company Blue Coat Systems. In Punkbob’s day job at a Pentagon contractor, he says, the same equipment had been used to intercept traffic to filter and track staff behavior. The Syrian machine’s logs showed the Internet activity of thousands of users, connecting the sites they attempted to visit and every word of their communications with the IP addresses that pointed directly to their homes. In short, he had discovered American technology being used to help a brutal dictatorship spy on its citizens.

They downloaded 600GB of data, showing precisely which sites the Syrian government was blocking – using Blue Coat’s products.


Microsoft to unveil Windows 10 consumer features at January event >> The Verge

Microsoft is planning to detail the consumer features of Windows 10 at an event in January. While Microsoft will be present at the Consumer Electronics Show in early January, sources familiar with the company’s plans tell The Verge that Microsoft will hold a separate press event in late January to unveil the consumer preview of Windows 10. Microsoft previously promised “early 2015” for a discussion on consumer features, and it appears the company is on track.

I thought Microsoft had given up going to CES. Apparently there’s a new touch interface “dubbed Continuum” for switching between touch and non-touch environments.


Anita Sarkeesian battles sexism in games, #gamergate harassment >> Businessweek

Sarkeesian is the front-cover story (which is good). This part in the story seems telling:

The industry’s main trade group, the Entertainment Software Association, tries to emphasize how mainstream the industry is, even as many of the games themselves undermine its message. The ESA trumpets the fact that the proportion of women playing all video games—not just on Xbox-style consoles, but also on tablets and other devices—has grown to 45%, and that 51% of U.S. households own at least one video game console.

The range of games being produced overall has grown, with a far broader swath of the population engaging in online play as it’s become a fixture of smartphones and iPads. But a single hit console game, such as Call of Duty, can generate more than $1bn in revenue a year, and anything that might disturb that revenue stream presents obvious economic risk.

A clip from the latest instalment in the Grand Theft Auto franchise, produced by Rockstar Games, a subsidiary of Take-Two Interactive, features a first-person character who picks up a sickly looking hooker on the street, has sex with her in his car, then gets annoyed with her chattering and punches her in the face before running her over and driving away.

Films show bad things happening, and being done by people with bad intent too. But where are the romcom video games? As the article points out, it’s pretty rare to find strong women characters. And also:

At one point, Sarkeesian spent two days replaying every game to satisfy a hunch that first-person characters had the capacity to stare at the butts of female characters, but not at the backsides of men. She was right.


Europe gets [Android] One too >> CSS Insight blog

Peter Bryner:

Karbonn’s Sparkle V runs Google’s Android One version of KitKat on a quad-core MediaTek 1.3 GHz processor. It has a 4.5in display, 1GB of RAM and 4GB of storage and a microSD slot. Android One devices have not been particularly popular in India, partly because of limited support by brick-and-mortar retailers, which have been reluctant to support such low-margin products.

But the real story here isn’t this particular device or the holiday price but rather Karbonn’s push into Western markets. While Karbonn already sells smartphones in countries outside India, including Bangladesh, Nepal and Sri Lanka, this is the company’s most ambitious market expansion yet. It’s too early to say if Karbonn can establish its brand in Europe. Its products are already available in Spain and an entry into the highly competitive UK market is a key step. In addition to Android phones, the company is also expected to sell Windows Phone devices.

Other Indian phone makers such as Micromax are certainly watching Karbonn’s European holiday push closely. The market is getting crowded and commoditised. Some established brands will have to pay the price.

This could cost brands such as HTC, Samsung and Sony some market share.

Given the market segment Karbonn is aiming it, seems more likely to hurt Samsung than either of the others, which are premium brands. But perhaps Android buyers are more price-sensitive than brand-sensitive?


Most motherboard players to focus on gross margins in 2015 >> Digitimes

Asustek’s annual motherboard shipments are expected to return back to 22m units in 2014, but the increased volume will come mainly from its competitors, especially second-tier players such as Micro-Star International (MSI), ASRock and Elitegroup Computer Systems (ECS), not growth in the overall motherboard market.

With motherboard demand from China expected to slow down in 2015, Gigabyte Technology has turned to focus on pushing high-end motherboards to maintain its profits.

ASRock has been impacted the most from the price competition in terms of both shipments and profitability. MSI’s gaming notebook business is expected to contribute strong profits in 2014, helping the company to cover its motherboard business’ decline. But for 2015, the two players will both stop pushing for shipments and will try to keep their businesses profitable.

However, China-based motherboard vendors are seeing their market shares shrinking rapidly. Large players such as Colorful, Onda and Maxsum are struggling to survive with profits sliding each year, while small players such as Jwele, Topstar, Jetway and M-One may soon be eliminated from the market.

I’m fascinated by the motherboard market; there’s hardly any information about quite where the products go (self-build? Repair? OEMs whose products are then counted by IDC and Gartner in the “Others” column of PC shipments?). But it’s clearly suffering a squeeze. Would love to know more about its distribution.