Curated Insights 2018.04.15

Mark Zuckerberg: “We do not sell data to advertisers”

There is a very common misconception that we sell data to advertisers, and we do not sell data to advertisers. What we allow is for advertisers to tell us who they want to reach and then we do the placement. So, if an advertiser comes to us and says, ‘Alright, I’m a ski shop and I want to sell skis to women,’ then we might have some sense because people shared skiing related content or said they were interested in that. They shared whether they’re a woman. And then we can show the ads to the right people without that data ever changing hands and going to the advertiser. That’s a very fundamental part of how our model works and something that is often misunderstood.


Sen. Harris puts Zuckerberg between a rock and a hard place for not disclosing data misuse

So to sum up: in 2015, it became clear to Facebook and certainly to senior leadership that the data of 87 million people had been sold against the company’s terms. Whether or not to inform those users seems like a fundamental question, yet Zuckerberg claimed to have no recollection of any discussion thereof. That hardly seems possible — especially since he later said that they had in fact had that discussion, and that the decision was made on bad information. But he doesn’t remember when this discussion, which he does or doesn’t remember, did or didn’t take place!


Google and Facebook can’t help publishers because they’re built to defeat publishers

Here’s the problem: No matter how hard Google and Facebook try to help publishers, they will do more to hurt them, because that’s the way they’re supposed to work. They’re built to eviscerate publishers.

Publishers create and aggregate information and present it to users in return for their attention, which they sell to advertisers. And that’s exactly what Google and Facebook do, too: Except they do a much better job of that. That’s why the two companies own the majority of digital ad dollars, and an even bigger chunk of digital advertising growth. (Yes, those numbers can change — but if anyone displaces Google or Facebook, it will be another tech company.)

Amazon’s next mission: Using Alexa to help you pay friends

Mr. Bezos gave employees a mandate last year to push financial services as a key initiative, according to a person briefed on the matter. The company also restructured internally to add its digital wallet, Amazon Pay, to its team that focuses on Alexa as part of plans to make voice commands the next wave of commerce, according to other people familiar with the company’s plans.

If Amazon can move more transactions to its own rails or get better deals from card companies, it could save more than an estimated $250 million in interchange fees each year, Bain & Co. consultants say.


Is Amazon bad for the Postal Service? Or its savior?

An independent body, the Postal Regulatory Commission, oversees the rates that the Postal Service charges for its products. By law, the agreements it cuts with corporate customers like Amazon must cover their “attributable costs” that directly result from their use of the postal network.

While the Postal Service is subject to Freedom of Information Act requests, there is an exemption in the federal law that allows it to avoid releasing particulars of its deals with private businesses like Amazon.


Amazon is not a bubble

Thanks to its significant time-lag between selling an item and paying a supplier (estimated at 80 days by Morningstar) Amazon has been able to self-fund its growth almost entirely from cash from operations over its 25-year corporate history. In fact they last tapped the equity markets for funding in 2003, and in the last quarter of 2017 reported $6.5bn of free cash flow.

Ensemble Capital Q1 2018: Netflix

In the US, it has more subscribers than all of the cable TV companies combined, and it has a penetration rate of about 40% of all US households. And it’s still growing. Based on its massive global subscriber base, Netflix is now the 2nd largest pay TV service in the world behind just China Radio & TV. Yet Netflix is still growing subscribers at a 20% clip.

None other than the “Cable Cowboy”, John Malone, the business genius who pioneered the development of cable TV, shares our view on this topic. Talking to CNBC last year, Malone said that the most important question in the TV industry is “Can Netflix get enough scale that nobody really can challenge them?” and then went on to say that in his opinion the traditional pay TV companies no longer have any chance of overtaking Netflix. When the interviewer asked if the pay TV industry could band together to create their own Netflix-like service as Malone had been urging for years, he simply replied “It’s way too late.”


Apple now runs on 100% green energy, and here’s how it got there

At the moment, this conversation involves a healthy dose of education. “What we say is that we’ll be there with you,” Jackson recounts. “We’ll help you scout deals, we’ll help you evaluate whether they’re real, we’ll help you know what to negotiate for, because most of these folks, they’re trying to make a part, and so what we can do for them is be sort of their in-house consulting firm.” But she adds that there will likely come a time where Apple will require suppliers to run their businesses on clean energy as a condition of a business relationship.


[Invest Like the Best] Pat Dorsey Return – The Moat Portfolio

Chegg is a company we own right now where the historical data looks awful and it’s because they just sold a business, and the performance of this asset intensive textbook rental, that’s what’s in the historical data. The performance of the asset light, super high incremental margin study business is buried in the segment results…

The legacy business for Chegg is textbook rental…of course, this is a business that’s fairly easily replicable, there are very low barriers to entry and so Amazon and Barnes and Noble essentially crushed them in the textbook rental business. The founders were fired by the venture capitalists who poured $220mn into the business, a new CEO was brought in, and he realized that the only asset Chegg had at that point was a brand. They had 60%, maybe 70% unaided name recognition on college campuses…so, they invested in a bunch of other businesses and the one that’s worked out really well for them is essentially building a digital library of step-by-step answers to end of chapter study questions. So, if you took engineering or math or organic chemistry, there’s going to be a series of questions at the end of the chapter, so did you understand what you just read, and if you didn’t you probably won’t do so well on the test. What they’ve done is gotten exclusive licenses for 27,000 ISBNs and answered every single question and indexed it on Google, that being pretty important because the college student today copies and pastes. They copy the question and they put it in Google and search on it. Chegg comes up as the first organic result, which is how their user base has gone up 2.5x in 3 years with marketing costs being the same as they were 3 years ago…

Now Chegg has to pay money, big money, for those licenses to get that content, and so to some extent the publishers – Pearson and McGraw Hill – do have a lever over Chegg in that respect. We think those relationships are good, they recently renewed one of their licenses at similar cost to what it was a few years ago, largely because the publishers themselves are struggling and this is a very high margin source of income for them. And most college students, they’ve never heard of Pearson, that name means nothing to them. So if Pearson were to take all their textbooks and try to do this themselves, we think the marketing costs would be enormous…you do have some crowd sourced competitors to Chegg, where students basically post their own answers but here’s the thing. When you think about the value to a student of getting a 3.5 instead of a 3.0 GPA or passing a certain class that’s required of their major, the marginal benefit of paying $14.95/month for Chegg and knowing it’s the right answer…vs. just crowd-sourcing it on reddit, it’s a good cost-benefit.

So Workiva, they have 96% client retention, 106% revenue retention because they keep upselling clients. And what they did is create a product that lets companies do SEC filings much more efficiently than the old way, which was mark up a pdf and send it to RR Donnelley and the Donnelley sends it back to you and then you mark it up and send it back to them…so needless to say, [Workiva] went from 0% to 50% share in 6 years. In fact, the people who do external reporting – they’ve got 80% share of the Fortune 500 right now – people actually won’t go to work for another firm that doesn’t use Workiva…

It’s not an easy product to create because essentially what they had to do was replicate Excel in the cloud and enable it for scores of simultaneous users. There’s no check-in/check-out the worksheet. And then also the data points get linked inside your enterprise and so you might way we need to report this EBIT line, well that’s the function of Bob here and Jane over there, and their numbers roll up into mine and I link that inside my enterprise, so if you had a new product you’d have to break all those links and re-integrate it. So, not impossible but external reporting teams, even Wal-Mart, a huge company, their external reporting team’s like 20 people, so it’s feasible to do a rip-and-replace. But where things get interesting for this business and where the TAM gets much larger is internal reporting, where you’re rolling up data across the entire enterprise and then putting it together for the CFO/CEO or whatever, because then the linkages get much greater and the number of users becomes much bigger and the more users you have within an entity whose workflow would be disrupted if you got a new product, the stickier the product becomes…

In Workiva’s example, their customer acquisition costs really spiked about a year and half, two years ago because instead of going after the broader internal reporting market, they tried to pivot going from the SEC market to the Sarbanes Oxley market, SOX reporting, which didn’t work very well because with external reporting you were just saying ‘hey, you should just use Wdesk instead of Donnelley or Merrill…our product is superior’. Customer goes ‘why, yes it is.’ There is no SOX product, there is no product for SOX reporting, it’s a whole bunch of cludged together internal processes, so that’s a much harder sale, going in and saying ‘pay money for a product that is replacing an internal process that you’re not actually paying money for, it’s just sort of wasting people’s time’. That’s harder to put a number on if you’re a CFO or CEO, so that really spiked up their customer acquisition costs. Once they pivoted back to enterprise sales and frankly just reorganized their sales force geographically instead of functionally – which means less travel – customer acquisition costs came back down.

The U.S. states most vulnerable to a trade war

How to understand the financial levers in your business

Whatever your business, build a business model that includes all of your assumptions — and build the model so you can pressure-test variables and find your levers. Once you’ve identified them, build MVPs to test those assumptions in more detail. It’s really important to experiment early and get some good data on what works (and what doesn’t), before you start ramping up and pouring lots of money into marketing and execution. Some changes can have exponential effects — for better or for worse.

Want to keep your wine collection safe? Store it in a bomb shelter

Shipping wine in the country is tightly controlled by a web of state laws, and it is illegal for individuals to ship wine themselves across state lines. Having wine storage in different states can ensure that collectors get the wine they want regardless of where they live.

Storage fees can be as low as $1.25 a month per case of wine, which holds 12 regular bottles or six magnums. Of course, wine collectors rarely store just one box, and they are not putting it there for just a month.


What it takes to out-sleuth wine fraud

Ms. Downey offered advice and provided counterfeit-detection tools for seminar participants, including a jeweler’s loupe, a measuring tape, a UV light and UV-visible pens. She outlined her authentication process, which begins with careful scrutiny of the wine bottle—the loupe proved handy here—notably the label, the paper it’s printed on and the printing method and ink, as well as other components such as the capsule and the cork. Ultra-white paper, detectable under UV light, wasn’t in commercial use until the 1960s. With the aid of a microscope, one could detect if the paper was recycled, which would mean the wine couldn’t have been produced before the 1980s, when recycled paper was introduced for labels.

Above all, she emphasized that wine fraud isn’t a victimless crime. “It affects people who work very hard to make good wine, who are proud of their wines and their appellation,” she said. “It ruins their reputation and it destroys all their hard work.” With the right tools and a gimlet eye, she believes, we can all play a part in protecting that work.

Earnings Call Digest 2017.11

Facebook (Q3 2017 Results) – Earnings Call Transcript

Our community continues to grow, now with nearly 2.1 billion people using Facebook every month and nearly 1.4 billion people using it daily. Instagram also hit a big milestone this quarter, now with 500 million daily actives.

The reason I’m talking about this on our earnings call is that I’ve directed our teams to invest so much in security on top of the other investments we’re making that it will significantly impact our profitability going forward, and I wanted our investors to hear that directly from me. I believe this will make our society stronger, and in doing so will be good for all of us over the long term. But I want to be clear about what our priority is. Protecting our community is more important than maximizing our profits.

Over the next three years, the biggest trend in our products will be the growth of video. This goes both for sharing, where we’ve seen Stories in Instagram and Status in WhatsApp grow very quickly, each with more than 300 million daily actives, and also for consuming video content.

In messaging, today already more than 20 million businesses are communicating with customers through Messenger. Now we’re starting to test business features that make it easier for people to make the same kinds of connections with businesses through WhatsApp.

We’re now using machine learning in most of our integrity work to keep our community safe. When Hurricane Maria hit Puerto Rico, we used AI to look at satellite imagery and identify where people might live and need connectivity and other resources. Progress in AI can unlock a lot of opportunities.

Facebook has over 6 million active advertisers, and we recently announced that Instagram has over 2 million advertisers. The vast majority of these are small and medium-sized businesses, which are a major source of innovation and create more than half of all new jobs globally. These businesses often have small ad budgets, so the ability to reach people more effectively is really valuable to them.

Video is exploding, and mobile video advertising is a big opportunity. Until recently, ads were only eligible for Ad Breaks if they also ran in News Feed. But in Q3, we gave advertisers the option to run ads in videos alone. We’re seeing good early results, with more than 70% of Ad Breaks up to 15 seconds in length on Facebook and Audience Network viewed to completion, most with the sound on.

I would say not all time spent is created equal. That’s why I tried to stress up front that time spent is not a goal by itself here. What we really want to go for is time well spent. And what the research that we found shows is that when you’re actually engaging with people and having meaningful connections, that’s time well spent, and that’s the thing that we want to focus on.

I do think your point is right that not all kinds of content can be supported by ads, no matter how effective we make that. That said, the current model that we have for at least getting some of the lighthouse content onto the platform is to pay up front. And what we would like to transition that more to over time and what an increasing amount of the content is, is revenue shares for ads shown in the videos. And as we do better and better on the monetization there, that will support people with higher production costs and doing more premium production and bringing their content to the platform. And we’ve certainly found on the Internet and YouTube and in other places that there are whole industries around creators with different cost structures than traditional Hollywood folks who can produce very informative and engaging content that a lot of people like and enjoy and that builds communities and that helps people connect together in a way that definitely can be supported by this ad model.


Apple (Q4 2017 Results) – Earnings Call Transcript

Turning to Services. Revenue reached an all-time quarterly record of $8.5 billion in the September quarter. A few quarters ago, we established a goal of doubling our fiscal 2016 services revenue of $24 billion by the year 2020, and we are well on our way to meeting that goal. In fiscal 2017, we reached $30 billion, making our Services business already the size of a Fortune 100 company.

The reason I’m so excited about AR is I view that it amplifies human performance instead of isolates humans. And so as you know, it’s the mix of the virtual and the physical world and so it should be a help for humanity, not an isolation kind of thing for humanity…Apple is the only company that could have brought this because it requires both hardware and software integration, and it requires sort of making a lot of – or giving the operating system update to many people at once. And the software team worked really hard to make that go back several versions of iPhone so that we sort of have hundreds of millions of enabled devices overnight.

But in terms of price elasticity, I think it’s important to remember that a large number of people pay for the phone by month. And so if you were to go out on just the U.S., since that tends to be more of the focus of this call, you look at the U.S. carriers, I think you would find you could buy an iPhone X for $33 a month. And so if you think about that, that’s a few coffees a week. It’s let’s say less than a coffee a day at one of these nice coffee places…In terms of the way we price, we price to sort of the value that we’re providing. We’re not trying to charge the highest price we could get or anything like that. We’re just trying to price it for what we’re delivering.


Alibaba Group (Q2 2018 Results) – Earnings Call Transcript

In the 18 years since Alibaba was founded, China’s per capita GDP grew by a compounded annual rate of 14%. By comparison, the per capita GDP of the United States grew 3% during the same period. We all understand the magic of compounding. When you compound at 14% rate over 18 years, which is the life of Alibaba, the average Chinese citizen is 10 times better off today than in 1999 with per capita GDP growing from $870 to $8,100.

Today, China’s per capita GDP is still only 1/7 of the per capita GDP of the United States. Based on the track record of sustained income growth over the past years as well as on the backbone of a modern Internet infrastructure and productivity gains from technology, I’m very optimistic that China will continue to experience real income growth for years to come. This will translate into a rising middle class characterized by ever-increasing and higher-quality consumption. And this long-term secular trend bodes well for Alibaba.

Our cloud computing business continues to defy gravity. Revenue increased by 99% year-over-year. We continue to multiply our product portfolio, including the introduction of a new relational database and a state-of-the-art server developed in-house that serve the needs of large enterprise customers.

Mobile MAUs on our China retail marketplaces reached 549 million in September, an increase of 20 million over June quarter. Annual active consumers on our China retail marketplace reached 488 million, a net add of 22 million from the 12 months period ended June.

And the key thing is that the data-driven logistic network, actually we are – Cainiao is not going to be a logistic company and we are not interested into building another logistics company. Instead, we will work with a lot of logistic companies, delivery companies to build a network across the world.


Live Nation Entertainment (Q3 2017 Results) – Earnings Call Transcript

Our concerts business is our flywheel, attracting over 30 million fans to shows globally in the quarter, which then drove record results in our onsite ticketing and advertising business. Through October, we have sold 80 million tickets for concerts in 2017, up 20% year-on-year. Digging deeper into concerts, strong global demand for concerts through the third quarter drove a 16% increase in attendance to 65 million of fans at our 20,000 shows in 40 countries.

With the success of the concert flywheel, we’re promoting more shows for more fans, more effectively pricing and selling tickets and delivering a better experience than ever. As a result, we will spend over $5 billion producing concerts this year, making Live Nation far and away the largest financial partner to musicians.

With over 1,000 sponsors across our onsite and online platform, Live Nation is a global leader in music sponsorship, providing brands with opportunities to reach our core audience.

There is no artist that’s dying to put tickets on a secondary platform as a solution. That isn’t how they build their brands with their fans. What they want to do is figure out how to price it right and then make sure their fans actually have a shot to buy the ticket, not deliver it to the on-sale, have the scalper buy it, and their fan in Boston ends up paying 3 times the price.

We think Fan Verified and then you add on presence from the digital perspective are a real important combination for these artists of the future, who now believe they have some shot at controlling and delivering to their fans the price point at the exact price they want. And so, we think this is a pivotal product – suite of products that we’ve developed in Ticketmaster. It’s under a new division within Ticketmaster called Artist Master where we have a new leadership team waking up every day, making sure that we can deliver artist products, so the artists can deliver their tickets to their fans at better pricing and at the price they want.


Tesla (Q3 2017 Results) – Earnings Call Transcript

In fact, there’s 10,000 unique parts, so to be more accurate, there’re tens of thousands of processes necessary to produce the car. We will move as fast as the least competent and least lucky elements of that mixture. So while the vast majority are going incredibly well, there are some problem areas.

The primary production constraint really, by far, is in battery module assembly. So a little bit of a deep dive on that. There are four zones to module manufacturing it goes through four major production zones. The zones three and four are in good shape, zones one and two are not. Zone two in particular, we had a subcontractor, a systems integration subcontractor, that unfortunately really dropped the ball, and we did not realize the degree to which the ball was dropped until quite recently, and this is a very complex manufacturing area. We had to rewrite all of the software from scratch, and redo many of the mechanical and electrical elements of zone two of module production.

The ramp curve is a step exponential, so it means like as you alleviate a constraint, the production suddenly jumps to a much higher number. And so, although it looks a little staggered if you sort of zoom out, that production ramp is exponential with week over week increases.

There’s vastly more automation with Model 3. Now the tricky thing is that when one automation doesn’t work, it’s really harder to make up for it with men and labor. So with S or X, because a lot less that was automated, we could scale up labor hours and achieve a high level of production. With Model 3, it tends to be either the machine works or it doesn’t or it’s limping along and we get short quite severely on output.

I think that we will be able to achieve full autonomy with the current hardware. The question is, it’s not just full autonomy, but full autonomy with what level of reliability, and what will be acceptable to regulators. But I feel quite confident that we can achieve human level – approximately human level autonomy with the current computing hardware. Now regulators may require some significant margin above human capability in order for a full autonomy to be engaged. They may say, it needs to be 50% safer, 100% safer, 1000% safer, I don’t know. I’m not sure they know either.



Qualcomm (Q4 2017 Results) – Earnings Call Transcript

We are very excited about the increased momentum in 5G around the world. We are leading the industry and are accelerating the commercial launch of 5G across millimeter wave and sub-6 gigahertz in early 2019. We recently announced the world’s first 5G data connection achieved on the Snapdragon X50 modem chip set, and our leading 5G 3GPP standards development, ongoing prototype efforts and are supporting global 5G new radio trials.

Gigabit LTE is the first step in network operator’s transition to 5G, and there are now 41 operators in 24 countries supporting Gigabit LTE. We have demonstrated download speeds of greater than 1 gigabits using our X20 LTE modem in the U.S. with both Ericsson and Verizon, as well as Nokia and T-Mobile. Most leading device-makers are rapidly adopting Gigabit LTE into their device portfolios.

In the premium tier, our gigabit-enabled Snapdragon 835 now has more than 120 designs launched and in development, including recent flagship devices like the Samsung Galaxy Note 8, Pixel 2 and Pixel 2 XL, LG V30, and the Xiaomi Mi MIX 2. We have also introduced new high-tier and mid-tier Snapdragon products to further expand our competitive position in China across all tiers.


Trupanion (Q3 2017 Results) – Earnings Call Transcript

Lifetime value of a pet grew to $701 in the quarter, reflecting improvements in retention and in optimizing our cost-plus pricing strategy by subcategory. As lifetime value increases, we are able to increase our allowable tax spend and invest more aggressively in testing of new acquisition initiatives, with a goal of understanding whether they can meet our internal rate of return targets over time.

Total enrolled subscription pets increased 15% year-over-year to approximately 359,000 pets as of September 30. Monthly average revenue per pet for the quarter was $52.95, an increase of 9% year-over-year. Average monthly retention was 98.61%, consistent with the prior year period.

We want to be cash flow positive. The other guardrails are internal rate of return. And for any significant investments that we’re making, we are targeting internal rates of return of greater than 30% and hopefully, closer to 40%. When we’re doing some different testing or some long-term initiatives, maybe they’re a little bit lower, but on a blended basis, we want to be over 30%, internal rate of return closer to 40%. So those are probably the guardrails that we’re using. When I talk about how much more we’ve learned, it’s really driven around increasing the velocity of hospitals in our same-store sales initiatives. And order of magnitude may be we’ll invest an additional $2 million or $3 million next year than we otherwise would have anticipated. So definitely inside of our guardrails, but long term and foundational.

Well, the biggest opportunity, this is the overall market. I mean, we’re still in a very low underpenetrated market. And I’ll be saying this for the next 5 years. If you look at the number of pets that have some form of medical insurance, we’re over 1%, but we’re still under 2%. We want to try to grow the category growth. When we think about how to do that, it’s all around veterinarian first and making it normal and key. We have historically been growing the company by adding stores. Over the next few years, we feel it will become important for us to work on the same-store sales.

So as a reminder, our goal is to eliminate a slow cumbersome reimbursement model, where a pet owner fills out a bunch of paperwork and puts it in the mailbox and wait for 2 to 3 weeks to see if they are going to get paid. We think the problem we’re solving for pet owners is making it easier for them to budget for if and when their pet become sick or injured. And part of solving that problem is being able to pay hospitals directly at the time of invoice. Part of that solution is being able to integrate with practice management software in a way that makes the process very quickly. Our goal is to pay these invoices in under 5 minutes from the time those created. We like the results that we’re getting. But we want to speed up the velocity of the – number of places that we’re rolling it out now that we’re better at it. And we’re still in relatively early days to learn how to speed up the velocity, now that we like the results we get on a per hospital basis.


Tucows (Q3 2017 Results) – Earnings Call Transcript

The General Data Protection Regulation, or GDPR is a piece of legislation passed by the European Union to enforce tougher more consistent guidelines on organizations that operate across the region and particularly, global Internet companies and deals with customer data and product deployments. These guidelines impact the millions of domain names that we have registered to European end-users. So, we need to comply along with everyone else by May 25, 2018. This will require a significant investment in engineering. However, its work that needs to be done by everyone across our industry and across many industries and it plays to our engineering strengths. Also, other governments are starting to the EU’s lead and pass their own legislation. So, while the work will cause some pain in the short-term if we do it well better and faster than others, it could create some opportunities in the future.

This deal gives us access to the Otono eSIM platform. eSIM allows mobile users to choose and switch between networks without needing to insert and activate traditional SIM cards. In coming quarters, eSIM should allow Ting to support high-profile smartwatches and other exciting new connected devices. In coming years, eSIM should allow Ting customers to move seamlessly between networks on almost any device imaginable.


Chegg (Q3 2017 Results) – Earnings Call Transcript

In just four years the results have been dramatic, which Chegg now serving nearly ten million visitors in a month according to ComScore and we expect to have around four million paying customers in 2017. Further, we expect to have more Chegg Services subscribers than textbook customers for the first time in our history. Our Chegg Services revenue has grown from just $25 million in 2012 to what we expect will be over $180 million in 2017.

And given our new adjusted EBITDA guidance today, we will go from a company who was losing $16 million in adjusted EBITDA right before our IPO, to a company that is now forecasting nearly $45 million in adjusted EBITDA for 2017. This turnaround has helped us go from a company using over $100 million in cash each year to support a slow growth textbook business to a high growth, high margin learning company that now produces free cash flow. It’s been a successful transition and we feel like we’re just getting started.

As powerful as Chegg Study is already, we believe the service will become even more relevant to an increasing TAM, as we continue to expand its content and capability. To that end, we recently announced the acquisition of Cogeon, developer of the app Math 42, an adaptive A.I.-driven Math application, which has been downloaded over 2 million time. Math is the universal need and unfortunately a universal problem as 64% of U.S. students are not prepared for college level math, and over 40% of U.S. students take at least one remedial math course.

Even though students look to A.I.-driven tools to help augment their learning, we know that one-on-one human help will continue to be critical in the learning process, which is why we continue to invest in Chegg Tutors. In the third quarter, we saw the time students spent on the site increase, with an average student now spending 188 minutes in tutoring sessions throughout the semester in key subjects like computer science, calculus, statistics, finance and accounting.

The magic of what we are building is the ability to have access to millions of millions of millions of students and their records and their history, all the data about them it’s in our proprietary student graph, and then the ability to do matching based on that uniquely done by how we are capable of doing it versus others. So, we met with all the players in the space. Obviously, everybody would like access to this Chegg audience, but we believe what working on is going to be special and unique and has the opportunity to be huge.

So, we don’t see a reason with such high gross profit margins to change the price. But we do know we have significant pricing power, given the fact of not only the test results which you can just look at the usage. We have record usage in terms of how often they use it, how many pages they consume, what they use for the number of questions that they’re asking, the number of the subjects that they’re asking it in. I mean Chegg Study has become a beast, and we just — what we want to do is be able to grow as big as we can and invest in as much as we can and continue to increase the TAM. So we don’t have to think about pricing at this point, but we do know we have pricing power.

We actually believe and we try to say this on the last couple of calls which is the more we invest in the product, the more content, the more formats that we deliver that content, the more subjects, the greater the Q&A that we add. That the TAM is probably two to three times the size just in the U.S. alone about original number we gave out. And that’s because, it will cover the other 50% of subjects that we don’t cover. And it will go deeper in the subjects that we do cover. So we want wide at first now we’re going deeper. So we’re freshmen all the way through the seniors on key majors and that was not a year ago, the plan.


Workiva (Q3 2017 Results) – Earnings Call Transcript

…our ability to integrate Wdesk with more than 100 cloud, SaaS, and on-premise applications including Oracle ERP Cloud has expanded our TAM to $16.2 billion.

We continue to gain market share in the SEC compliance market, where Wdesk is considered a best practice. We’re also seeing more demand for Wdesk from foreign private issues that use IFRS taxonomy because they’ll be required to submit their SEC filings with XBRL tagging starting December 15.

We finished Q3 with 2,991 customers, a net increase of 295 customers from Q3 of 2016, and a net increase of 83 customers from Q2 2017. Our subscription support revenue retention rate excluding add-ons was 96.5% for the month of September 2017, compared with 96.1% in June 2017, and 95% in September 2016. Customers being acquired or ceasing to file SEC reports, accounted for a majority of the revenue attrition, consistent with our experience to date. With add-ons, our subscription support revenue retention rate was 108.6% for the month of September 2017, compared with 106% in June 2017, and 108.7% in September 2016. Increased subscription revenue on non-SEC use cases from existing customers continues to be the primary driver of our add-on revenue retention rate.

 

Earnings Call Digest 2017.08

Apple (Q3 2017 Results) – Earnings Call Transcript

Services revenue hit an all-time quarterly record of $7.3 billion representing 22% growth over last year. We continue to see great performance all around the world with double digit growth in each of our geographic segments. Over the last 12 months, our services business has become the size of a Fortune 100 company, a milestone we’ve reached even sooner than we had expected.

Sales of Apple Watch were up more than 50% in the June quarter and it’s the number one selling smartwatch in the world by a very wide margin.

We’re also seeing incredible enthusiasm for AirPods with 98% customer satisfaction based on Creative Strategy’s survey. We had increased production capacity for AirPods and are working very hard to get them to customers as quickly as we can, but we are still not able to meet the strong level of demand.

We are very focused on autonomous systems from a core technology point of view. We do have a large project going and are making a big investment in this. From our point of view, autonomy is the mother of all AI projects. And the autonomous systems can be used in a variety of ways and a vehicle is only one.

The App Store was a major driver of this performance. And according to App Annie’s latest report, it continues to be by a wide margin the preferred destination for customer purchases, generating nearly twice the revenue of Google Play. Revenue from our Apple Music streaming service and from iCloud storage also grew very strongly. And across all of our Services offerings, the number of paid subscriptions reached over 185 million, an increase of almost 20 million in the last 90 days alone.


Square (Q2 2017 Results) – Earnings Call Transcript

One of the drivers of our results is our work on automation, which I mentioned is an area of increased focus for us this year. Automation has always been a core differentiator for us. We’ve used machine learning and data science to manage risk since the beginning of Square. We’re constantly looking for ways to make our services more automated and more self-serve and machine learning is perfect for that.

First, automation allows us to give more people access to the financial system. More than 90% of sellers are automatically approved and self-onboard to process payments, and we’re able to onboard individuals to Square Cash with just a zip code and an e-mail address or phone number. We’ve extended this approach to risk management in Square Capital to provide financing to the underserved.

Second, automation helps us scale as we grow. For example, we currently automate risk assessment for more than 99.95% of transactions. We’re also able to make improvements to our manual handling; our fraud models have already allowed us to resolve 40% more cases every week, compared to beginning of the year.

And third, automation allows us to help our sellers grow. You can see this in our unique suite of CRM tools. We leverage our deep understanding of the customer to build marketing and loyalty programs that are easy to use, measurable and effective. Our loyalty programs are tracked and managed by Square point-of-sale and our technology automatically recommends programs optimized for the seller’s particular business.

Subscription and services-based revenue nearly doubled on a year-over-year basis as Instant Deposits, Caviar and Square Capital all benefited from stronger adoption, both within our installed-based and for bringing new customers to the Square ecosystem.


Tesla (Q2 2017 Results) – Earnings Call Transcript

What we have ahead of us, of course, is an incredibly difficult production ramp. Nonetheless, I think we’ve got a great team, and I’m very confident that we will be able to reach a production rate of 10,000 vehicles per week towards the end of next year. And we remain – we believe on track to achieve a 5,000 unit week by the end of this year.

So, if you can sort of see where we came from, the Roadster – we were making only 600 units a week where the non-powertrain portion of the car was made by Lotus. And we did the powertrain and final assembly of the car, and then we went from that to 20,000 units a year of the Model S, a far more complex car, where we did the whole thing. And then with Model 3, we are more vertically integrated. I think people should really not have any concerns that we will reach that outcome from a production rate.

…We’re also thinking hard about, where do we put Gigafactorys three, four, five and six? We expect to keep the majority of our production in the U.S., but it’s, obviously, going to make sense to establish a Gigafactory in China and Europe to serve the markets there, because it’s not to build cars in California and truck them halfway around the world, particularly when you’re trying to make things as affordable as possible – that really hurts. We really want to make our cars as affordable as possible. And so that does require some amount of local market production, particularly for the mass market vehicles in order to make it as accessible as possible.

Model Y, or our compact SUV – it’s called Model Y. It may or may not be – would be a totally new architecture. Upon the council of my executive team – thank you. Thanks, guys – who reeled me back from the cliffs of insanity – much appreciated – the Model Y will in fact be using a substantial carryover from Model 3 in order to bring its market faster. Yes. So that will really accelerate our ability to get to Model Y to market faster, because fundamentally people prefer a sedan, people prefer an SUV. And in fact, the SUV market is larger. It’s the biggest single product I believe in the world.


Tableau Software (Q2 2017 Results) – Earnings Call Transcript

With subscription, our customers get the full power and simplicity of Tableau but with lower risk and a lower initial investment. And the move to subscription also creates recurring revenue streams, generates more predictable results over the long-term and expands the overall market.

For example, this quarter TransUnion, a credit reporting and global risk information provider that serves over 45,000 companies and more than 500 million customers, standardized their analytics on Tableau across multiple areas from credit reporting to health care and auto lending, amongst many others. By signing a subscription agreement, TransUnion will be able to flexibly scale their deployment as they grow and build out their analytic solutions…We continue to believe that subscription is the right long-term decision for all of our stakeholders and will only help us to sharpen our commitment to our customers on a daily basis.

Our passionate customer base is not just a U.S. phenomenon; it’s global. And it’s been incredible to see our community thrive around the world, across various user groups, training groups and conferences. For example, in the UK, Jet2.com, a leading British leisure airline and package holiday specialist, recently chose Tableau to visualize complex data that was difficult to analyze and access within Excel. With Tableau, Jet2 is now able to better analyze a range of data to attain faster speed to insight.

And in APAC, Mercedes-Benz expanded their self-service analytics capabilities with Tableau in their China Financial Services Group. Now the company, including the most senior management has real-time visibility on the organization’s auto financing, leasing and insurance performance and now makes daily strategic business decisions from a single source of truth through Tableau.

Turning now to customer momentum in the cloud, we’re seeing strong demand from customers who want to be able to run their analytics in the cloud. And with Tableau, customers can deploy on their choice of cloud, whether it be AWS, Azure or Google or a fully managed SaaS solution via Tableau Online. That flexibility and choice has already attracted thousands of customers running on Tableau Online and thousands more running Tableau on the public cloud. In fact, over one-third of our Tableau server trials today are deployed in the public cloud.

Turning now to product, I want to focus on two important areas: giving our customers choice with how they connect to their data and enriching our smart analytics offering via machine learning recommendations. Tableau now has over 65 native data connectors from on-premises databases like Oracle and SAP, Hadoop systems like Cloudera and Hortonworks, and cloud databases like Amazon Redshift and Google BigQuery.


IAC/InterActiveCorp (Q2 2017 Results) – Earnings Call Transcript

…it is a very – the SVOD market is very crowded and cost were skyrocketing.

In terms of new M&A, the thing that worked well for us are this concept of product – the scale improved the product, not just the price. That is the way – the way we think about network businesses or marketplace businesses and that’s what we’re looking for.

…there is again a natural tailwind today are in terms of the online migration, in terms of video being more relevant in a lot more places than it used to be, to a lot of businesses than it used to be, to lot more individuals than it used to be.


Activision Blizzard (Q2 2017 Results) – Earnings Call Transcript

We invest in creative and commercial excellence in order to expand reach, deepen engagement and provide more opportunity for player investment which then allows for reinvestment in creative and commercial excellence and for the growth cycle to continue.

Let’s start with audience reach, which was 407 million monthly active users this quarter. Blizzard did not have any new full game releases this quarter, yet a strong stream of content updates across Blizzard franchises drove an all-time MAU record of 46 million, up 38% from last year and up 12% from the last quarter. Blizzard’s community has now more than doubled in MAUs since early 2015, underscoring the ability to grow audience reach across the portfolio of platforms, regions, genres and business models.

As illustrated by the frequency with which players reengage each month, it remains at an all-time high. To put this in perspective, the time spent per player per day inside King franchises is 35 minutes, higher than that of Instagram or Snapchat.


Workiva (Q2 2017 Results) – Earnings Call Transcript

A large regional bank is using Wdesk for its call reports which are quarterly filings required by the FDIC. A large sporting-goods company is now using Wdesk for corporate performance management. The company will use Wdesk to consolidate spreadsheets into a linked workbook, thereby reducing manual data entry. The treasury department of a private electrical products manufacturer is using Wdesk for debt compliance reporting.

We remain focused on our leadership in the SEC compliance market. We continue to add new customers at both large and small public companies, because we believe that Wdesk is widely regarded as the best practice for SEC reporting and XBRL. In the first quarter of 2017, Wdesk was used to file 53% of all XBRL facts with the SEC. So as you can see, we have room to grow in this market. Customer press releases this quarter reported that a multinational agri business is achieving an ROI of 266% and reaping more than $677,000 in total savings and benefits over 3 years by using Wdesk to streamline its management reporting.

We finished Q2 with 2908 customers, a net increase of 286 customers from Q2 2016 and a net increase of 83 customers from Q1 2017. Our subscription and support revenue retention rate, excluding add-ons, was 96.1% for the month of June 2017 compared with 95.1% in both March 2017 and June 2016. Customers being acquired or ceasing to file SEC reports accounted for a majority of revenue attrition, consistent with our experience to date. With add-ons, our subscription and support revenue retention rate was 106% for the month of June 2017 compared with 106.6% in March 2017 and 110.2% in June 2016. Increased subscription revenue on non-SEC use cases from existing customers continues to be the primary driver of our add-on revenue retention rate.


Etsy (Q2 2017 Results) – Earnings Call Transcript

There has been much speculation about the size of the market for handmade. But handmade is not a purchase occasion nor is it representative of all of our 45 million listings. Etsy is about so much more than handmade. Buyers come to us when they want something special. And being the destination for something special is powerful because special can’t be commoditized.

But how big is the market for special? We believe the market for special is huge. Etsy shines specifically in three types of purchase occasions. Celebrations, gifting and style. If you think about it, these types of occasions happen regularly throughout the year. These occasions drive purchases across six primary categories, clothing and accessories, home and living, jewelry, craft supplies, art and collectibles, and paper and party supplies. Not surprisingly, these are also Etsy’s top six categories based on GMS.

First, we are building trust and reliability throughout the buyer experience. Trust is essential for any marketplace but is even more so for one that’s both on original and unbranded goods. Our goal is to bolster trust not just in the item and the seller, but in the Etsy brand.


NVIDIA (Q2 2018 Results) – Earnings Call Transcript

Data center is a very large market, as you know, and the reason for that is because the vast majority of the world’s future computing will be largely done in data centers. And there’s a very well accepted notion now that GPU acceleration of servers delivers extraordinary value proposition. If you have a data-intensive application, and the vast majority of the future applications in data centers will be data intensive, a GPU could reduce the number of servers you require or increase the amount of throughput pretty substantially. Just adding one GPU to a server could reduce several hundred thousand dollars of reduction in number of servers. And so the value proposition and the cost savings of using GPUs is quite extraordinary.

Cryptocurrency and blockchain is here to stay. The market need for it is going to grow, and over time it will become quite large. It is very clear that new currencies will come to market, and it’s very clear that the GPU is just fantastic at cryptography. And as these new algorithms are being developed, the GPU is really quite ideal for it. And so this is a market that is not likely to go away anytime soon, and the only thing that we can probably expect is that there will be more currencies to come. It will come in a whole lot of different nations. It will emerge from time to time, and the GPU is really quite great for it.

Volta was a giant leap. It’s got 120 teraflops. Another way to think about that is eight of them in one node is essentially one petaflops, which puts it among the top 20 fastest supercomputers on the planet. And the entire world’s top 500 supercomputers are only 700 petaflops. And with eight Voltas in one box, we’re doing artificial intelligence that represents one of them. So Volta is just a gigantic leap for deep learning and it’s such a gigantic leap for processing that – and we announced it at GTC, if you recall, which is practically right at the beginning of the quarter.

A neural net in terms of complexity is approximately – not quite, but approximately doubling every year. And this is one of the exciting things about artificial intelligence. In no time in my history of looking at computers in the last 35 years have we ever seen a double exponential where the GPU computing model, our GPUs are essentially increasing in performance by approximately three times each year. In order to be 100 times in just four years, we have to increase overall system performance by a factor of three, by over a factor of three every year.

And yet on the other hand, on top of it, the neural network architecture and the algorithms that are being developed are improving in accuracy by about twice each year. And so object recognition accuracy is improving by twice each year, or the error rate is decreasing by half each year. And speech recognition is improving by a factor of two each year. And so you’ve got these two exponentials that are happening, and it’s pretty exciting. That’s one of the reasons why AI is moving so fast.

The second major component is our self-driving car platforms, and a lot of it still is infotainment systems. Our infotainment system is going to evolve into an AI cockpit product line. We initially started with autonomous driving. But you probably heard me say at GTC that our future infotainment systems will basically turn your cockpit or turn your car into an AI. So your whole car will become an AI. It will talk to you. It will know where you are. It knows who’s in the cabin. And if there are potential things to be concerned about around the car, it might even just tell you in natural language. And so the entire car will become an AI.

The next revolution of AI will be at the edge, and the most visible impactful evidence will be the autonomous vehicle. Our strategy is to build a ground-up deep learning platform for self-driving cars, and that has put us in pole position to lead the charge.


The Walt Disney (Q3 2017 Results) – Earnings Call Transcript

It’s been clear to us for a while with the future of this industry will be forged by direct relationships between content creators and consumers. Given our incomparable collection of strong brands that are recognized and respected the world over, no one is better positioned to lead the industry into this dynamic new era, and we’re accelerating our strategy to be at the forefront of this transformation.

With this strategic shift, we’ll end our distribution agreement with Netflix for subscription streaming of new releases beginning with the 2019 calendar-year theatrical slate. These announcements marked the beginning of what will be an entirely new growth strategy for the company, one that takes advantage of the opportunities the changing media and technology industries provide us to leverage the strength of our great brands.

But we’ve already begun the development process at the Disney Channel and at the Studio to create original TV series and original movies for this service. So if the Studio makes, let’s call it, roughly 10 films a year or distributes 10 films a year – that includes Marvel and Pixar and Star Wars and Disney-branded and Disney Animation. We’ve commissioned them to make, to produce more films with the incremental films being produced very, very specifically and very exclusively for this service. So this will represent a larger investment in Disney-branded intellectual property, both TV and movies.

I think there are forces, whether they’re technological in nature or sociological or economic in nature, out there that are changing the way media is consumed in general, and I don’t think this is either going to hasten them or exacerbate things in any way. What it does do, though, is a couple of things. First of all, it gives us the ability to leverage the strength of our brands, which a lot of our peers and competitors do not have. Secondly, it gives us what we’d call optionality. It’s a word I’ve not used very much in my life, but it gives us the flexibility, really, to move our product to the consumer in many new ways, ways that we’ve not been able to do before, because of just how strong this platform is that we bought control of.


TripAdvisor (Q2 2017 Results) – Earnings Call Transcript

We have large app penetration and a great ability to offer attractions to our users, so marketing efficiency, but then just operational efficiency as well. So initially, a lot of manpower going into both site development as well as supply expansion and we’re now reaping some of the leverage benefits from that going forward. So you are right, we are managing the business not for profitability. We’re managing it for growth. There’s just tremendous opportunity in terms of the TAM of this – particularly the attractions market space. We feel we have an early lead and we continue to invest aggressively to capitalize on that advantage. So, we’re not seeking margin expansion, and going forward, we will continue to emphasize revenue growth. But the way the business has evolved has allowed us to see some margin expansion this year.

In terms of the monetization, there’s likely to be always a delta between monetization on desktop and on the phone. It is just more plausible that you book a larger trip, a multi-day, multi-destination trip on your desktop in the comfort, obviously, on your big screen and more detailed photos and skew the more immediate purchases to the phone.

As we are working on our conversion improvements, they’re all aligned with matching our advertising campaign and matching our value proposition that delivering to travelers of helping them save money on this trip. We’re so well known for reviews, which is wonderful, incredible differentiator. It’s hard to imagine anyone could ever make a serious inroad to us in terms of being a competitor in that space. But as we move the product, the display, the visibility and the impression of TripAdvisor on the part of our travelers, to view us as that review site, that review site that actually saved me a ton of money because it offered me a great value hotel that I wouldn’t have otherwise find with a better price or it helped me find the best place to actually reserve a room at this hotel that I want to go at, and that’s kind of a new piece and so part of the site redesign was clarity. Part of the site redesign was easier shopping experience, but one of the things that we love the most from our testing that we’ve achieved in this redesign is that we are educating our users, our travelers that we’re helping to save them money, that we’re finding them great prices. And we see that come through in our surveys, we see that come through in those anecdotes in the stories, and that matches, of course, the big message in our brand campaigns.


MakeMyTrip (Q1 2018 Results) – Earnings Call Transcript

The latest estimates from IAMAI, the Internet and Mobile Association of India, indicates that India now has roughly 420 million mobile Internet users and this base is expected to keep growing rapidly.

Large opportunities for new user growth will likely come from the non-urban parts of the country where penetration levels are estimated at 16%. Affordable smartphones and data plans are easily available via the recent disruptive offers from the telecom players led by Reliance Jio.

Additionally, a significant government initiative which can facilitate online penetration is the unified payments interface app called BHIM, which creates a common nationwide payments platform for simple and quick transfer of money.

Indian carriers collectively have already placed more than 1,300 new orders, with 250 planes expected to be put into service over the next two to three years. Furthermore, demand for air travel is expected to increase with the launch of the government’s regional air connectivity program called Udan by operationalizing up to 100 regional airports out of a total 400 unserved or underserved domestic regional airports by fiscal year 2019.


DISH Network (Q2 2017 Results) – Earnings Call Transcript

I think each carriers offer a little bit different strategy today. I mean, obviously AT&T is getting more heavily into the content side of the business. Verizon’s got more of a small cell strategy and T-Mobile is just taking away a lot of the pain points that are out there. So each have strategies that those guys are a lot more knowledgeable about the wireless business than I am, so each of the – there’s no reason that each of those strategies can’t work.

So, all those things are going to happen. The only thing I know for sure is that if you’re born today in the United States, you’re probably not going to have one second of your life you’re not connected. And you’re going to use a lot of data during your lifetime. And there’s going to be – and that’s just people. And every microprocessor and every light and every other thing is going to have a sensor that’s going to be connected. And that’s just – it’s going to make us more productive. And it’s going to save companies money. And so there’s going to be very large companies coming out of the connectivity business on a big scale, and we hope to play a part in that.

You can’t have all the profits going to three or four companies and have the guys that are – the companies that are providing them the raw material to make that money, not get wake up one day and get a little smarter. That’d be my guess, but I don’t know if that’s going to happen. But at some point, all the money going one direction, a lot of people are enabling that. They’re going to wake up and say maybe they should get – I’ve been through this business long enough to know that the money ebbs and flows between distribution and content. It’s probably going to continue to do that today. And a lot of the content companies, probably the distribution guys, probably are going to be in position to get a more of it. Then it may go the other direction.

The average smartphone probably consumes, I don’t know, 5 gigs a month. Use cases that are being discussed around 5G that will start to materialize in the early 2020s, they’re going to dwarf that in terms of the amount of data consumed whether that be drone network or autonomous vehicles or healthcare or massive connectivity. So to look at the marketplace in terms of today’s four big competitors and the new entrants, I think you have to really think about how the market will get redefined in the next five years to seven years to ten years.


The Home Depot (Q2 2017 Results) – Earnings Call Transcript

We’ve had obviously a protracted recovery here, and it has been clearly driven from housing which has been a steady but slow recovery in the market. You know we continually look at months of supply, there is 4.3 months of supply in the market of housing availability against a historical norm of six, that clearly is helping to drive improvement in home value appreciation, but housing starts haven’t returned to their norm yet either. The only thing that’s kind of run on an historical averages is housing turnover. So, we see this housing favorability continuing as we look forward. And I think the watch out for us is, you wouldn’t want to see affordability become an issue, but that at this point doesn’t seem to be a concern for us at all.

Right. As we look at the affordability index, it stands at 153%, so long ways to go before that would be a watch out for us. And recovery is a difficult thing to put your arms around. But if you look at simply PFRI dollars they’ve only recovered 70% of the loss. The other thing that’s really interesting to us is the age of the housing stock. We’ve talked to you a lot about 66% of the housing stock being older than 30 years. Did you know that 51% of the house stock is older than 40 years and as houses age, well, they need more of repair.


TJX Companies (Q2 2018 Results) – Earnings Call Transcript

Our key pillars for growth remain driving comp sales and customer traffic and our global store expansion. Our consistently strong performance tells us that our strategies to drive customer traffic and comp sales are working. Further, we see enormous global store growth potential for TJX. We have plenty of white space or markets to fill in throughout our current countries. Long-term, we see the opportunity to open 5,600 stores with just our current banners and that’s about 1,700 more stores than we have today. We continue to see store openings as an attractive investment and a very good use of capital. We are convinced that these growth drivers will allow us to continue to capture additional market share both in the U.S. and internationally.

We see our treasure hunt shopping experience as an advantage. As today shopper spends more on personal experiences, particularly millennials they constructed dollars further in our stores in both our apparel and non-apparel categories. We are very pleased that across our major divisions we continue to capture a broad age demographic with new shoppers skewing towards younger customers. We see this as a great indicator for our future.

In closing I would like to emphasize that the key advantages that I have discussed today are all built on our 40 years plus of experience in building, developing and refining our off-price retail model. While we were trying to keep our business simple and focused, the ability to operate and highly integrate international – to operate a highly integrated international off-price retail business doesn’t happen overnight and we believe would be extremely difficult to replicate. We have decades of experience to build international teams and infrastructures that we see as key advantages. We believe our buying organization of more than 1,000 associates is best-in-class. We have great longevity among our buyers which we attribute to our very strong corporate culture. Our worldwide vendor universe also took us decades to build. We see ourselves as a global sourcing machine. Our processes, systems and logistics are all built to support our off-price opportunistic buying. Further, we have been operating internationally for well over two decades and are the only major international off-price apparel and home fashions retailer.


Tencent Holdings (Q2 2017 Results) – Earnings Call Transcript

We have been investing heavily in AI but relatively quietly, as we view AI as an essential capability that enhances user experience and empowers us to capture the new exciting opportunities to grow our businesses for the future. We’re confident that our existing strength in computing power, data, engineering, technologies as well as use cases coupled with our proactive build-up of AI content — talent will give us a favorable position in this strategic initiative. Especially a wide and diversified business scope creates a variety of use cases for AI research and application across a range of AI fundamental research areas, such as machine learning, computer vision, speech recognition and natural language processing. We will be persistent but patient with our AI investment, because we believe it is a long-term initiative, and we do not necessarily require a research to generate revenue directly in the short-term. On the other hand, AI will significantly benefit all of our existing products, services and businesses in many ways.

There is a lot of usage, more and more people are watching online video at longer and longer time, on a daily basis. But at the same time — and at the same time, advertising revenue has been increasing, and there is also an increasing willingness from consumers to pay. So, the subscription number as well as revenue has been increasing quite rapidly. On the other hand, the flip side of this is the cost of content has been increasing, even faster. So, what we see is that over time, we believe the content will continue to increase, but the rates would probably be lower. And the subscription, as we continue to increase, would deliver higher revenue per active user. So, we will get closer to a more equilibrium between cost and revenue at some point in time. But I think unfortunately at this point in time, the net loss of the business is still increasing.

It’s a little bit tough to make advertising revenue from that because we usually — these video are relatively short; and depending on how aggressive you are in terms of balancing user experience and monetization, I think if you really care about user experience and the trends of putting advertising on these short videos are more limited.

In terms of the advertising, I think most of the growth has actually been from the click-through rates as well as the improvement in targeting technology. As a result, the pricing achieved has been higher. There is some help from the other two factors, which is slight increase in terms of the inventory and an increase in terms of the general traffic. But, I think from the inventory angle, we have achieved a second ad for some cities, but within a 24-hour period, not everybody is seeing two ads. So, compared to our international peers, I think the amount of inventory is relatively small. And at the same time, the traffic increase has been most significant around Moments. Then, if you look at our performance ads, it’s across pretty large number of different properties. So, the traffic growth in the other areas might not be as great as the Moments traffic increase.

At this point, my guess is that the big advertisers have a certain budget for television and then for online video and then they have a separate budget for social and a separate budget for search and so forth. And then, the migration between those buckets happens relatively slowly, typically at the beginning of each year rather than happening on a month-by-month basis.

In terms of providing AI-as-a-service, I think this is definitely a one direction that we are going into in our cloud business already and we are seeing a lot of demand on that. And we have been able to sign up a lot of customers because of our ability to offer them AI capability. And that’s just the beginning. Over time, I think we will do much more on that.

In terms of games and targeting, if you look at games playing globally, particularly on the personal computer, it’s moved from being media driven to being increasingly community driven. 20 years ago, people discovered new games on the PC in the U.S. and Europe through computer magazines; now, they’re discovering them through reddit, through Twitch, through those kinds of more communal venues. And some of the same trends are underway in China. And what we’re trying to do is working with the game developers to make sure that we target their games to the users who are likely to be most receptive.


Alibaba Group (Q1 2018 Results) – Earnings Call Transcript

The macro way of looking at the landscape is e-commerce accounts for 15% of total retail in China. The retail segment in China is about $5 trillion economy in value. 15% of e-commerce still leads, 85% of retail that is offline.

In this new world of consumption expectations, the distinction between online and offline would disappear.

Mobile Taobao is the Chinese consumers’ leading destination for online shopping and the total MAU for mobile apps with access to our China retail marketplaces has grown to 529 million. No other commerce app in the world compares to mobile Taobao’s consumer engagement and user stickiness. Our user stickiness measured by the DAU divided by MAU ratio continues to remain above 40% due to our relentless focus on more content and community-driven engagement on the approximately, allowing consumers to enjoy the fun of discovery and exploration. We not only satisfy existing user needs but more importantly we’re able to stimulate new demand as user experiences have become more content-driven by community of consumption-related content generators, such as influencers and key opinion leaders have emerged alongside buyers and sellers in the ecosystem.

What unifies the businesses in the Alibaba economy is our mission, to make it easy to do business anywhere. We believe the path to value creation becomes extremely clear when we focus on a single mission. In the next 5, 10, 15 years, you will see an unfolding of how we execute the new retail strategy as it becomes an integral part of the Alibaba economy. Shareholder value will follow when we create value for our customers. So, understanding this is important to understanding a long view of Alibaba.

Our cloud computing business continues to enjoy high growth at scale with annualized revenue growth well exceeding $1 billion, while paying customers surpassed 1 million. An important milestone in a landscape where every industry is seeking to migrate to the cloud, we believe 1 million is merely a starting point.

Regarding 30-minute delivery, as an example of where new retail can be very disruptive to existing ecommerce. Consumer demand is generated from an in-store experience and then that consumer says, well, I am going to a movie, so I don’t want to a carry bag with me, so I am going to have it delivered to my home within a very short period of time. That’s where logistics — your traditional e-commerce logistics infrastructure can be disruptive because you’ll need to fulfill out of that retail location as opposed to out of a warehouse that is not even in the city center. So, the expectation becomes 30 minutes and not overnight or 24 hours. So, that’s going to be very, very disruptive to existing infrastructure and investments that have been made.