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Big Q4 Resultfest: Facebook, Google, Apple, Samsung, Amazon, Comcast, AT&T, BT…

[Ed: We are delighted to be partners of the GSMA’s Mobile World Congress in Barcelona, March 2-5 - and are making our plans for the week now. If you’d like to meet us there here is how, and here are our thoughts on why its worth going in general. We’ve also just published a new report on Telco-Driven Disruption: Hits & Misses (Part 1) as part of our new ‘Dealing with Disruption in Communications, Content and Commerce’ Service.]

Facebook ad prices surge ahead in Q4, Google’s sink; YouTube copyfights, default HTML5, search trouble; Instagram battles the robots

Facebook is two entirely different businesses, says Quartz, after its Q4 results this week show that it’s generating revenue in North America and Europe, but not adding users, and adding users in the rest of the world but not monetising them much if at all. Well, it’s generating revenue in North America; elsewhere not so much. But it’s getting close to an ARPU of $10 in the US and Canada.


As a result, it’s beginning to make substantial amounts of money, getting on for $3.5bn a quarter in sales and $701m in profit. Exactly how this is happening is really interesting, because the volumes of ads it serves up are actually falling.


To put it another way, Facebook has managed to move over from a volume business to something more like an exclusivity one, deliberately rationing the supply of ad inventory and vetting the content. The enormous majority of its revenue comes from mobile ads, which are only shown within the news feed, and they have reduced the numbers of ads served into the feed substantially, both in order to create scarcity and to protect the user experience. They also seem to have been filtering promotional content that isn’t channelled through their ads.

Meanwhile, a much-trimmed version of the app is coming for basic smartphone users.

Compare and contrast, Google. Google’s net income was up quite a bit for Q4 - $4.76bn vs $3.38bn a year ago - but the interesting bit is that their operating margins are steady falling, 24% vs 28% a year ago, and revenue missed expectations.

The drivers of this are twofold - first, although paid clicks were up 14%, cost-per-click was down 3% year-on-year and also 3% sequentially over Q3. CPC for Google’s own websites, which make up 69% of revenue and rising, was off 8% year-on-year. Interestingly, Network sites, i.e. third parties, did much better, up 6% year-on-year and 10% sequentially - but these days that’s just 20% of the business. So while Facebook’s ad pricing is going up, fast, Google’s ad pricing is falling.

The other driver is that Google remains a distinctly spendy sort of business. Bloomberg Businessweek points out that they are now spending more OPEX, $6.78bn in Q4, up 35% year-on-year, than Apple, who make more than five times as much revenue.

Perhaps opening up Google Now to advertisers will help? A vetted list of 30 or so brands will be allowed to push their stuff into it.

There’s been some distinctly tepid news from the core search business, too. In mid-January, Google began running messages on its home page - effectively own-account ads - encouraging Firefox users to change their default search engine back to Google. The explanation is that the deal between Yahoo! and Mozilla to make Yahoo! the default search engine in Firefox seems to be having a material effect on Google’s share of the search market. For the first time in years, Google has less than 75% of US search. The following chart shows very clearly that it’s the Firefox users.


On Google’s content side, this is interesting. YouTube creators who use Nintendo games in their work are facing a dilemma - should they take Nintendo up on its offer to pass them back 70% of YouTube ContentID ad revenue associated with their stuff, or does this implicitly accept that Nintendo has some sort of ownership in their work?

On the other hand, YouTube itself has picked a fight with cellist Zoe Keating. Google has a new product coming up, Music Key, basically a premium subscription version of YouTube. The problem arose when a YouTube representative threatened that if she didn’t agree to the Music Key terms and conditions, which are quite restrictive, they would stop paying out ad revenue on her existing works. Google denied it, but it turns out she recorded the rep. A campaign is heading to the FTC.

YouTube is also making a big technical change this week: by default, video will stream in HTML5 rather than Adobe Flash. And Google’s CFO reckons the Chromecast is now the most popular streaming device in the US.

NBC chose to stream the Super Bowl live on its TV Everywhere app, but this was a painful lesson that mass, live video streaming is not a solved problem. The stream repeatedly fell behind the game, so that viewers could hear TV viewers cheering before they saw who had just scored. Worse, they got the reaction on Twitter before they saw who scored.

YouView, meanwhile, has integrated the BBC’s Connected Red Button interactive-TV product.

And Instagram has launched a purge of spambots. With two days, 29% of all followers were zapped. The only problem is that some quite famous users believed they were real and are now all hurt about it.

Apple made ALL THE MONEY in Q4; Android shipments fall; Samsung sacks Qualcomm 810 chip, own software from GS6

Apple’s Q4 results dropped this week, with a bang. It was literally the biggest quarter ever for Apple, driven by enormous sales of iPhones, 75 million of them vs. 51 million a year before, against a consensus forecast of 66. Pretty much everything else was good, too. Gross margin was 39.9%, beating expectations. Revenue is up 30% year-on-year. Revenue in China is up 70% year-on-year, at $16bn, which means it will pass Europe sometime this year. Net profit was $18bn, or literally more than any other company has ever made in three months in the history of capitalism.

Apple is No.1 for world smartphone shipments again, and perhaps sweetest of all, shipments of Androids actually fell in Q4, for the first time ever. 217 million ‘droids shipped in Q3, but only 206 million in Q4, even though it’s the Christmas spike quarter. Even the rebel forkdroids dropped back by 1%.

Screenshot from 2015-02-02 13:27:48.png

It all makes the battle for third place between Lenovo, Xiaomi, and Huawei look a bit pathetic. Lenovo results are expected later today, with a forecast of $186m in net income.

Meanwhile, Samsung must respond or face the Applocalypse (NB we suggested a strategy for this last year in Samsung and Google versus Apple?). Its first step appears to be throwing away its TouchWiz Android skin and a variety of its own apps. Perhaps the South Koreans are thinking of those Korean War fighter aces who used to strip all kinds of supposedly vital equipment off their F-86s in order to go faster and catch up with the MiGs?

To be honest, as a Samsung user, the only thing wrong with the analogy is that the kit was thought to be vital and nobody has ever thought that about this stuff.

It must have been a week for big decisions at Samsung. When the Galaxy S6 arrives at MWC, it’s coming with one of Samsung’s own Exynos chips rather than the Qualcomm Snapdragons that powered most of the Galaxies since the S II. Qualcomm’s Q4 results showed strong sales and net income, but margins were down as it shipped more radios and fewer complete SoCs - almost certainly because the iPhone 6s paired a Samsung/Apple/ARM SoC with a Qualcomm radio. Crucially, Qualcomm also confirmed that it has lost a major customer, in the context of reports that Samsung had rejected the Snapdragon 810 because it kept overheating.

Samsung has in the past shipped Galaxy S devices with Exynos SoCs, but kept most of them for the Korean market and a few others, so it’s going to be interesting to see how the S6 does with the new engine.

Microsoft’s Lumia phones saw better volumes, lower prices, and margin of around 14%. They’re also investing in alternative Android ROM, Cyanogen. Ben Evans points out that the supply chain established to support the mass adoption of smartphones has generated a new ecosystem of low-power embedded hardware. Intel has bought an Infineon division specialising in IoT devices, as if to bear out the point.

As if to bear it out again, the Raspberry Pi 2 is here, with 6 times the power and twice the RAM of the original, at the same price, using an ARM Cortex A7 in a Broadcom SoC.

FCC moves on muni-fibre; Canadian, Dutch net neutrality; AWS-3 done; German 700MHz; OFCOM super-review coming?

Over at the regulators, the FCC is busy again this week, as it’s about to take steps to pre-empt state laws that ban muni-fibre deployments. “Pre-empt” here is a term of art that means “take the issue away from the state and put it under the feds’ control”. A draft NPRM should be circulated this week and a vote taken on the 26th of February. Opponents are trying to pass a bill through Congress to stop it, but President Obama can veto that and, in his newly aggressive mood on telecoms issues, probably would. A Republican FCC commissioner criticises the idea in a blog post, but as far as we know, he doesn’t have a majority.

Canadian regulators have asserted net neutrality with regard to Bell Canada and Videotron’s respective TV-anywhere apps, ordering them to stop zero-rating them for mobile data.

The Dutch regulator did something similar, imposing a fine on Vodafone.nl for zero-rating and another on KPN for jamming VoIP traffic on its WiFi hotspots. In other fines, AT&T was fined by the FCC for letting microwave backhaul radios operate outside their frequency band, and Verizon for failing to complete calls from some RLECs.

The AWS-3 auction is over, and $45bn has been spent by the US carriers. AT&T spent $18bn, mostly on downlink spectrum (details are here). Verizon Wireless spent $10bn. T-Mobile $1.8bn. But what is DISH planning with the $13bn worth of uplink-only spectrum it bought, bidding through nominees in order to snag special small business terms? Presumably, lobby like hell to get it refarmed?

Germany will be auctioning 60MHz of 700MHz spectrum in May. The spectrum will be auctioned together with the re-issue of the 900MHz and 1800MHz bands, whose licences expire this year. Successful bidders must commit to providing 98% population coverage, plus 97% population coverage in each province separately, with a data rate of at least 50Mbps per antenna sector and at least 10Mbps to the subscriber. They must also cover all motorways and high-speed rail routes. Expressions of interest are to be in by the 6th of March.

In the UK, Hutchison is preparing to face the OFCOM inquiry into its bid for O2. Hutch’s strategy will be to seek a full-dress competition review of the whole UK telecoms market, ideally including content, infrastructure, fixed, mobile, and wholesale, in the hope that this kills off the BT-EE deal. Interestingly, Sky and Vodafone are both likely to argue for this as well. To be honest, with the BT-EE and 3UK-O2 deals active at once, it’s going to be hard for the regulator to avoid a full review.

Get our in-depth coverage here - note that if OFCOM goes for a review encompassing fixed and mobile retail, content, infrastructure, and wholesale, that would be another good call from Telco 2.0 to go with these.

No wonder Benoit Felten thinks the digital single market is already here. Also, it looks like Hutchison has turned around to offer a piece of O3 to various sovereign wealth funds, with China, Singapore, or Qatar being mentioned. They might take a stake of up to 30%, substantially easing the challenge of finding the £10bn price tag. That said, Hutch has apparently already lined up a £6bn loan from HSBC.

And Cablevision is suing Verizon over who has the best WiFi.

Comcast becomes No.1 for broadband; more Google fibre; NTT DoCoMo quadplay; BT results

Under the FCC’s new dispensation, with broadband defined as at least 25Mbps downlink and 3 up, Comcast becomes by far the biggest provider of broadband in the US, with 57% of the subscribers. Interestingly, they argue that this might not be a problem for the Comcast-TWC deal because TWC’s network can’t quite cut it:

less than one tenth of TWC customers enjoy speeds at or above 25 Mbps, whereas more than half of Comcast customers enjoy such speeds

But when those nice new Broadcom cable modems start flowing, that might change pretty quick. Google, meanwhile, has announced four new locations for Google Fiber.

Here’s something interesting: the US’s independent fibre-to-the-cell providers. PEG Bandwidth has fibre to 2,000 cell sites scattered around the Midwest, Mid-Atlantic, and North-East, while WOW Business is planning to pull about 1,200 miles of new fibre around Chicago and reach 500 or so sites.

Teresa Mastrangelo argues that cable competition is the key driver of gigabit FTTH.

NTT DoCoMo has an interesting gigabit FTTH product, which bundles their mobile service with their fibre, but only the Layer 2 element of it - you get to pick from a list of ISPs running over the fibre. While we’re there, their results for the first 9 months are a bit poor, with OPEX rising at the same time as revenue fell sharply.

BT Openreach is promising 500Mbps using the G.fast evolution of VDSL2. A trial should start this year, with serious deployment around 2020. Some of the cabinets used for FTTC might be converted, which is important as the technology won’t work for a copper run of more than 250m, but this could be problematic from a power point of view.

By then, though, what will the cable world be offering? Even now, you can get 100Mbps from Virgin Media for £20/mo, admittedly a promotional gimme. And Zimbabwe is getting GPON fibre.

Meanwhile, Openreach claims it added 375,000 FTTC connections in Q4, of which 44% went to independent ISPs. It also claims to have passed 630,000 more premises under the BDUK programme.

BT Group’s Q3 and nine-month results were out, and rather unexciting; revenue was down 3% sequentially, but EBITDA up 2%, implying margins improved a bit. The pension bill for the next three years is settled at £2bn a year, a bit less. By far the biggest contributor to EBITDA (and free cash) was Consumer. No wonder Gavin Patterson wanted to talk about mobility!

AT&T Q4s: gadget giveaway; Oi “open to all options”; NokiaNet sales up, Ericsson down; $400 satphones; WHOOOSH!!

The Q4s roll in. AT&T had 854k postpaid net-adds over Christmas, beating the spread. Very impressive. When you break down the headline number, though, there were some 969k net postpaid tablets, so they must have net-lost 115k postpaid phone subscribers. In fact, the net-adds number for postpaid smartphones was only 148k, suggesting that Christmas involved a lot of tablets going out of the door as customer-retention gimmes. On the prepaid side, AT&T had a net loss of 180k subscribers, suggesting that the plan to consolidate GoPhone, Leap, etc. into Cricket isn’t working so well, and also lost 65k wholesale customers.

They did, however, gain 1.3m M2M devices. The picture of a massive gadget giveaway is confirmed by the revenue numbers - total wireless was up 7.7%, but service revenue was actually down 3.7%, while equipment sales were up 72.3%. Postpaid phone ARPU was off 10.7% year-on-year, and even including quick-upgrade plan billings, it was still down 4.1%.The net impact of all this was to drag operating margins down from 21.4% to 16.3%. Price war is for everybody!

Meanwhile, after they bought Nextel Mexico and Iusacell, AT&T CEO Randall Stephenson said they definitely won’t buy any America Movil assets in the country, but they will “leverage” the spectrum DirecTV owns elsewhere in Latin America. Nextel, for its part, is going to pour the AT&T money into CAPEX in its Brazilian unit.

Oi, meanwhile, says it’s open to all options.

Ericsson says its sales in North America declined about 5% in Q4 as LTE rollouts were finished for the time being. Nokia’s customers there obviously haven’t finished yet, because Nokia Networks sales in North America nearly doubled, helping to push up sales overall by 8% and get the company into profit.

TeliaSonera reported that its revenues from Eurasia were down 2.2%, and as a result, the bottom line was down 3.1%. Tele2 says its profits are up 78% on service revenue up 7%.

Thuraya reckons it can now deliver a satellite phone for $400, roughly on a par with a flagship smartphone, and its voice rates are comparable with mobile voice roaming prices. Zain lost 4% of its customers because the Sudanese government wanted to know who they were. They also had to put this bit in the Q4 release:

The escalation of political instability in Iraq during the second half of 2014 has seen several million people displaced internally. Additionally Zain Iraq endured frequent temporary network interruptions and associated higher network operational costs. These unavoidable occurrences had a drastic effect on Zain Iraq’s and consequently Zain Group’s overall key financial metrics…Political unrest in South Sudan also affected Zain Group’s results as the country also witnessed significant displacement of its people, with access to and repair of many network sites in parts of the country proved to be difficult, causing frequent interruptions and higher maintenance costs.

That said, their EBITDA margin is 41.8% so at least the shareholders won’t make any trouble. The Palestinians are having trouble deploying 4G because the other lot are being difficult. The last time this happened they asked Tony Blair to sort it out.

Vodafone Qatar, meanwhile, made a small loss for the first 9 months after a prepaid price war broke out, which actually seems to be more trouble than a real war.

3UK is turning up its 800MHz LTE, and VoLTE at the same time. Orange is taking a punt on some African startups. And the Bloodhound SSC land-speed record team has its own LTE network to provide voice, telemetry, and streaming video from the car, the chase plane, and a few other things, an ideal excuse for this video.

Amazon prepares to break out AWS numbers; Google-VMWare cloudmash; Line turns into a shop

Amazon reported its Q4s this week and, as usual, despite owning everything under the sun it didn’t make a penny. There was a net loss of $241m for the full year 2014, although Q4 was $214m in profit. AWS saw its sales up 90% year on year in Q4, and Amazon says it will start to break the division out in its accounts for their Q1. On the other hand, all they would say about the Fire Phone is that there is $80m worth of the things left in stock.

AWS, meanwhile, is going to start providing e-mail, specifically, an IMAP server in the cloud providing e-mail, calendaring, etc, with all the usual EC2 options.

Google, meanwhile, is integrating its Compute Engine cloud with VMWare’s vCloud Air. Would that be the first of those federated clouds we used to hear so much about?

Germany is worrying that its data centre sector isn’t growing as fast as that in Sweden or the Netherlands. They blame the price of electricity.

Microsoft is putting off the launch of new Windows Server until next year.

And Line, the Japanese messaging app, is branching out into groceries. It’s no stranger than a bookshop hosting servers….

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