Archive for the ‘Company researches’ Category

More than 400 million “snaps” (video messages and photos) are received on Snapchat every day, according to Snapchat CEO Evan Spiegel at AllThings D in Dec 2013. By comparison, Facebook and Instagram has approximately 405M photos shared at that time.

Bloomberg news just broke yesterday (July 30, 2014), Chinese commerce giant Alibaba (expect to IPO in USA in Sept this year) is in talks with Snapchat  on a round of funding valuing Snapchat at $10billion. I have 2 reactions to this deal.

Compared to Snapchat — $19 Billion for Whatsapp was cheap!

Last Nov, Snapchat rejected Facebook’s $3B acquisition offer. At that time, rumor also said Google and Tencent were jingling with $4B offers. Since then, Snapchat still remains independent and its MAU grew from 30M in Dec 2013 to 70M in Mar 2014 — 133% increase in a quarter.  Snapchat also said they are exploring advertising revenue for brands, no detail is offered.

2014-07-31 Snapchat MAU

 

We can do the math to find out the “acquisition cost per MAU”.  $10 billion for approximately 70M MAU (we can assume it probably grew to 120 million by now — i.e. $83/MAU) is indeed more expensive than Facebook’s Whatsapp’s $19B for 430M MAU in Feb 2014 ($47/MAU).  This makes Facebook’s $19B offer for Whatsapp a great deal.

My counter argument to this is: given that Snapchat is growing as fast as (or faster) Whatsapp plus Snapchat is projected to have revenue sooner than Whatsapp, maybe that’s why Snapchat is more valuable.

Should Blackberry’s BBM be valued at $5B or above?

We tend to ignore Blackberry’s mobile messaging application (BBM) out of the picture.   The last published BBM’s MAU data is 85 million on June 30 2014. It added 5 million compared to 80 million reported in March 2014 (which was still bigger than 70M from Snapchat).  If we use the same metric, should Blackberry’s BBM be valued at $7 billion?    (FYI, the current market cap of the whole Blackberry (BBRY) is $4.85 billion as of July 31 2014. Don’t forget BBRY also has the phone, the secure MDM, and the QNX OS businesses)

People can argue that Blackberry has different demographics — more business professionals who are less likely to click on ads, send messages/photos, or do any transactions via BBM (I would disagree this point).  Other analysts say BBM grows at a much slower pace or will be stagnate for long time, therefore, we should value BBM with huge discount.    How big should this discount be? 50% or 80%?   BBM would be worth $3.5 billion (50% discount from Snapchat metric) or $1.4 billion (80%).

The following iOS download data is published by Distimo from Oct-Nov 2013. You can clearly see the BBM downloads are as strong as Whatsapp in 5 different key regions, for sure outperformed Snapchat by big margins. Snapchat still looks notably soft in emerging markets.

2013-11 ios-download-charts

 

source: Distimo

Things could change since then.  My point is we shouldn’t underestimate BBM & undervalue Blackbery. After the launch last fall, Blackberry yesterday announced that BBM for Windows phone is available for download now.  I guess this will add at least 20 million new users to BBM.

I will discuss the investment thesis in BBRY in another section.

Disclaimer: I long BBRY.

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Line Files IPO for $10B

Back in April, I talked in depth about monetization strategy for mobile messaging app — Whatsapp – link to previous blog post. The battle in the mobile messaging apps has become red-hot since then.

Bloomberg reports (link) Asian mobile messaging Line (#1 in Japan) has confidentially filed for a U.S. IPO. Morgan Stanley is said to be running the offering. Line, controlled by South Korea’s Naver, has already filed to go public in Tokyo, while reportedly aiming for a ~$10B valuation. Pursuing a simultaneous NYC offering would allow the company to tap into strong U.S. interest in mobile messaging plays – interested heightened by the $19B Facebook/WhatsApp deal.

Comparison of dominant mobile messaging platforms:

2014-07-22 social messaging app comparison

With 470M+ registered users (not the same as active users), Line appears to be the world’s 3rd-most popular mobile messaging platform, behind WhatsApp (500M+ monthly active users) and Tencent’s WeChat (396M MAUs at the end of Q1, with the lion’s share in China).

Line had 2013 revenue of $338M, and Q1 revenue of $143M (up over 3x Y/Y).

WeChat Becomes a Threat to Alibaba

Chinese Shenzhen-based Tencent (0700.HK), worth over $120 billion by market value, has already spent more than $1.2 billion to develop e-commerce, online-to-offline (O2O) shopping, real estate, social network, and gaming onto its mobile messaging app platform – WeWhat – Weixin in Chinese. WeChat has become Whatsapp’s biggest rival in the world.

Tencent’s ambition is way bigger than Whatsapp’s. It believes mobile messaging platform will become a gateway for all users’ needs on smartphone. Chinese internet usage already surpassed USA back in 2012; while the mobile internet in China also surpassed USA in Q1 2013. In short, Tencent wants to be the largest mobile commerce platform in China, Asia, and then the world.

Chinese-mobile-users-surpass-Americans

Tencent’s previous efforts at e-commerce didn’t fare well against competition from the likes of Alibaba, which has an iron grip on online shopping in China with an almost 80 percent market share. To give you a perspective, Alibaba’s online sales volume and revenue is bigger than Amazon and eBay combined (discussed in my previous blog).  When Tencent invested in the second biggest Chinese online retailer – JD.com (JD) this year, it divested control of its e-commerce assets to the Alibaba rival.

For 3 months ended March in 2014, WeChat global monthly active user numbers rose 11.5 percent to just 396 million, and video games, with total revenue for smart phone games tripling to over 1.8 billion yuan (~US$290M) from the previous quarter.

“Our online games business achieved a healthy year-on-year increase in revenues, with growth across PC client games and mobile games,” Tencent said in its earnings filing to the Hong Kong Exchange. (source)

“If investors have to wait two or three years for mobile commerce to take off that’s fine, because in the meantime social and gaming revenues are a pretty nice bridge to that,” said Michael Clendenin, managing director of Shanghai-based RedTech Advisors..

 

 

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Celebrate FREEDOM! “Life, Liberty, and the Pursuit of Happiness.”  Happy Independence Day!

I just came back to Boston from my New Jersey business trip, great to be home with my wife and kid before the 4th holiday.   At NJ, I visited a recycling plant of one of our portfolio companies, called GlyEco (GLYE).  Even though I had to drive through 6 hours of traffic with thunder storm, it’s totally worth it. It’s eye-opening experience to see it in action at the NJ facility of how the company transforms hazardous glycol waste into clean & green products.

Glycols are a key chemical in products we use everyday, such as antifreeze, coolant, polyester, and de-icing agent.  U.S. alone produced 700M gallons of waste glycol in 2012 (out of 5.5B in the world). GlyEco tries to revolutionize the entire $40 billion glycol global market. I will publish more article and report on GLYE, please stay tuned!

2014 independence day

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Back in Feb, everyone chatted about Is Facebook Paying Too Much for Whatsapp?  I also posted an article 2 days before the acquisition announcement was made to discuss how Amazon, FB, and Google alike can learn from Alibaba and Tencent’s model of combining mobile commerce, banking and mobile communications.

Financially, Whatsapp would need to earn US$49 per user to justify a hefty valuation of $19B.  While WhatsApp has so far kept its messaging service simple and free of advertisements, rival apps like Line, Kakao Talk and WeChat have been scrambling to find ways to make money through additional services. Whatspp’s revenue stood at $20 million last year. The company says it charges a $1 annual subscription fee after one year of service and plans to offer voice-calling service later this year.

In this article, I will discuss 5 possible models Facebook can use to monetize Whatsapp in the future.  A lot of those have been proven by other messaging apps.

2014 Major Players in Messaging Apps

1. Brand Advertising

Businesses and celebrities can open an official accounts and pay fees to send a set number of promotional messages to the people who voluntarily add (“subscribe”) that business or celebrity to its contact list.   It’s similar to Facebook’s “fan” page or Twitter’s “follow” feature.  (In my opinion, if Whatsapp can implement this correctly, not to compromise user experience, it can easily eat into Twitter’s ad market share by a big chunk.)

Line, which is popular in Japan, Taiwan, and Thailand, has been advising corporate and celebrity to design messaging campaign, to keep message short and avoid sending them too often.  Line discontinued the traditional display & commercial ads model because it’s too disturbing and undermines their appeal as social messaging tool.

Kakao Talk, which is famous in South Korea, also use similar strategy by letting brands and celebrities like “Gangnam Style” singer Psy send messages and updates to their subscribers.

Likewise, WeChat (known as Weixin in China) has positioned itself as a service tool instead of an active marketing channel.  Many business users are advocates of WeChat marketing for customer service in order to highlight its value in consumer conversation, brand awareness and Social CRM instead of media coverage and sale conversion.

WeChat Subscriptions

WeChat – Subscriptions Account

2. Mobile Wallet and Commerce

Extension to the subscriptions mentioned above, big brands as well as local merchants can set up “stores” inside the messaging platform.

For example, WeChat separated services account from subscriptions account, in which services account can offer more complicated marketing campaigns, flash sales/promotions, and enable transaction all the way through payments.   WeChat last year added an electronic payment feature to the popular app – a step toward making money with small handling fees for transactions made within their messaging app.

In WeChat’s 5.0 update from 2013, Tencent already added a function that allows users to bind a bank card to their WeChat account for online and offline purchases. Since then, WeChat has let its users pay for taxi fares, movie tickets, lottery tickets, bill-splitting, and a few other goods and services.

Line and Kakao also try to explore the peer-to-peer transfer market by letting user send gifts (like a Starbuck coffee) to each other.   Further discovery services can be implemented in future within the messaging platform, for example a map search service for restaurants, post-offices, gas stations, etc. based on geo-location of your mobile phone.

This is not an imagination, you will see the convergence of online, offline commerce, and mobile messaging.  Perhaps, Amazon and Walmart will buy one of these messaging apps in near future.

WeChat services

WeChat Services Account

WeChat-Xiaomi 3 Flash Sales Promotion

WeChat-Xiaomi 3 Flash Sales Promotion

3. Mobile Banking / Financial Services

In addition to mobile commerce, one interesting trend set by the biggest 3 Internet giants (Baidu, Alibaba, and Tencent) in China is to let users set up online banking and investment brokerage accounts.

The new way to Bank

The new way to Bank

In 2013, Baidu, Alibaba, and Tencent have all launched wealth management products, hoping to cross-sell consumers in a country with sky-high savings rates on investment vehicles that deliver much higher returns than those provided by state-owned banks.

Baidu, after the wealth management platform,  is now heading a partnership that’s applying for a private banking license.  Alibaba’s Yu’e Bao platform has been especially successful, attracting 81M users who have collectively deposited nearly RMB500B ($81B).

Chinese Premier Li Keqiang, who has pushed for a slew of financial reforms, says he supports the “healthy development” of Internet banking services.  The possibility of Whatsapp offering financial services may be just a dream in the USA given the regulatory hurdle and market dominance of those Too-Big-To-Fail banks.

WeChat - user can deposit up to RMB 1 million in a new monetary fund

WeChat – user can deposit up to RMB 1 million in a new monetary fund

4. Mobile Gaming, Virtual Goods & Stickers

Offering mobile games and in-message stickers (emoticons) are  the most common ways to generate revenue on the messaging app.  Line, Kakao Talk, and WeChat all have game centers on their apps to offer free-to-play video games that make money from in-game purchases of virtual items and other services. Users can also purchase stickers (like emoticons, featuring cartoon characters) and send those as messages to their friends.

Line raised eyebrows in May 2013 when it revealed that it made $17 million from selling stickers during the first quarter of 2013.  Last July, Kakao Talk revealed that titles on its games platform generated 348 billion Won ($311 million) in revenue during the first half of 2013, up an impressive 194 percent from the final quarter of 2012.

Virtual Stickers on Whatsapp

5. Other Value-added Services with Partners — Music/Movie Downloads

Like WeChat, Whatsapp can charge fees for each transaction user initiated from various merchant services in a marketplace format.  Besides, there’re numerous opportunities for the messaging platform to white label any 3rd-party services and offer it as a valued-added service within the app.   Games center and financial services are already great examples. Whatsapp can also introduce a section/tab for “Music” for people to trial listen and pay to download songs; a “TV/Movie” for people to pay to watch shows.

Line's Partner Services

Line’s Partner Services

Final Words

The appeal of social messaging apps is open-ended. It allows you to gain millions of users, in different parts of the world, who are addicted to sending messages, sharing information, and even ordering convenience services via mobile device. The popularity of the applications is costing many mobile operators who will lose $32.5B in texting fees due to the trend.  Companies like Vodafone, America Movil, Verizon and other tech giants, such as Microsoft, Google, Softbank are forced to re-think their strategies, including buying these applications.

For sure, $19B is worth a lot of money, one day Whatsapp will be worth a lot more.

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Since Microsoft (MSFT) broke the news about its CEO replacement (Satya Nadella) around Jan 31st 2014, its share price enjoyed a ~18% rise from $34 a share to $40 as of March 21st. I am no better analyst than anyone to judge and value MSFT. But in my view, MSFT is getting way ahead of itself.    At this price level ($40 a share),  we have already priced in the hope (or illusion) that the new CEO would sail the giant cruise ship “direction-ally positive” in the future, ignorant of its past failed initiatives. In the following analysis, we find more downside risks than upside rewards owning MSFT at $40 a share. At the current price level, we could also find a few better alternative dividend-paying investments than MSFT.

2014-3-24 MSFT wants you to pay $100 for Office every year

Source: Microsoft

Goldman calls MSFT $29 a share

On Feb 24th, almost a month after Satya became CEO, Goldman Sachs reiterated a Sell rating on Microsoft with a price target of $29 a share.  Here’s an excerpt of its comments follow the report:

“We see MSFT’s price aggressive tactics as unsurprising as the company works to establish a more meaningful footprint in consumer compute. MSFT has been a laggard in tablets with 3% share in CY13, while the PC market has been in decline (-10% yoy in CY13 and -4% yoy in CY12), partly due to the rise of mobile computing. We note that both the PC and tablet categories are expected to see ongoing pricing pressure in the years to come, given changing demand dynamics and also new form factors.,” said analyst Heather Bellini.

“Ultimately, we see pressure to Windows pricing as presenting a challenge over time to MSFT’s overall gross margins for D&C Licensing (GSe: 91% in FY14, and contributing 28% of MSFT’s total gross profit) as price points on PCs and tablets continue to fall. We model total Microsoft gross margins of 69.6% in FY14 (Street: 69.7%) vs. 68.4% in FY15 (Street: 70.0%),” she added.

In a nutshell, Goldman thinks MSFT has not been able to turnaround and establish a significant market share in the mobile and cloud computing trends (since the beginning of iPhone and Amazon Web Services launches) while still facing huge price cutting pressure and declining revenue in the PC market.

Is Office iPad app a real killer to justify $40 a share?

Not surprisingly, many investors think bullishly about the Office iPad app launch reported on March 27th.  Office remains Microsoft’s biggest money-maker: Before changing up its reporting, Office has 1 billion users around the world. Last year, the company’s Business Division (dominated by Office) had FY13 op. income of $16.2B, well above the $9.5B produced by the Windows unit and the $8.2B produced by Server & Tools.  Both sales and profit grew 7% even though the latest version of Office was already two years old.

Source: Microsoft

The apps will require an Office 365 subscription, much like the Office iPhone and Android apps released last year. Since the release of those apps, Google has made its Quickoffice productivity suite free, and Apple has made its iWork suite free to buyers of new iDevices.

In a move viewed by some as a prelude to an iPad launch, Microsoft recently rolled out a Personal edition of Office 365 that goes for only $70/year, 30% less than Office Home Premium (supports up to 5 PCs). The real sales discounts to enterprise users would be much higher than 30%.  Basically MSFT needs to sacrifice profit margin to catch up with Apple and Google to gain market share in tablet and cloud computing market respectively.

Office and Windows OS made up 95% of the company stock price in 2012 and unfortunately this picture has changed in 2014.  The Trefis’ chart below shows the entice group of new products (search, phone, and games) are contributing less than 7% to the stock price.

Maybe MSFT would be worth $40 a share in 2016 however unless CEO Satya had a magic wand to build a new company without too much reliance on old product suite, I have doubt in any huge success in a year or two.

2014-3-24 Trefis MSFT product mix

Source: Trefis

The question is who is buying $100 a year subscription for Office 365 on iPad?

Office 2013 and Office 365 are a clear improvement over previous iterations. But there’s a larger question here about who Microsoft Office 2013 and Office 365 are really for.  For small businesses, it’s worth paying $1000 or more having all users on a standard, shared apps suite with free upgrade. However for simple tasks, online services like the very good (and very free) Google Docs work just fine.  For most of us, an existing copy of Microsoft Office — even one that’s years out of date — will also get the job done.  That means a growing number of Office customers are staying with the same version for five, six or even seven years, according to consultancy ITIC.  That doesn’t put money in MSFT’s pocket.

How about on the growing tablet market?   Well, how many of us need all the bells and whistles on a tablet — rich formatting options, plug-ins and cloud services, etc?  Not for the $140 price tag (for Office 2013’s most basic version) or $100 a year subscription fee (for Office 365) that Microsoft is charging.

MSFT hopes that subscription pricing will create more sticky, cheaper entry point and more predictable, fixed sales stream it can count on yearly. Well, this would be an upgrade most of us can afford to skip.

Should you book your gain for MSFT and invest in Apple?

I remember I studied MSFT case study in my MBA Value Investing class (probably a famous and commonly used case in many MBA schools).  Value investors were attracted to MSFT’s cash balance (~US$3B), about 4% dividend yield, and most importantly a “moat” which is its Windows OS and Microsoft Office software.   The case has been studies million times.   In a decade, MSFT share price never went up higher than $40,  a level it last saw in July 2000.   Therefore, crossing $40 is a big psychological win for lots of investors.  Question is always whether you shall value MSFT like a hi-growth technology stock or slow-growth dividend-paying traditional value stock?

2000-2014 MSFT stock performance

Wanted to leverage some findings and data points used in a Seekingalpha article to address the issues for declining yield, high R&D capex, and non-innovative product mix.

  • Declining Yield: MSFT’s technically trading at 15 P/E ratio, above its 5-year PE average at 13.18. Current dividend yield is declining from 4% range to 3% range. Even though Microsoft’s dividend growth so far has been impressive, other old tech names like Intel Corporation and Cisco Systems yield a lot more right now.
  • Ineffective  R&D Capex vs. Apple and Google: based on recent CNN article, Apple gets more bang for its R&D spend than most other companies do, in terms of sales increases. It’s easy to believe MSFT needs to spend lots of money creating innovation organically or via M&As in order to catch up with Apple and Google in both consumer and enterprise tablet and cloud computing market.
2014-3-24 MSFT spent way more than Apple in R&D

Source: CNN

  • Expensive to buy growth: MSFT’s PEG ratio (PE / growth) will be > 2.0, way higher than many of its peers.  If MSFT share price continues to rise in 40s, it’s hard to justify why you should invest in MSFT but not Apple.  I used data from Yahoo! Finance on March 24th to illustrate the comparison. 
    2014-3-24 MSFT comparsion to IBM AAPL INTC CSCO

*I don’t bring up Blackberry here as a comparison to MSFT because some people see Blackberry as a very risky bet.  But apparently both CEOs are selling turnaround stories. One is a first-time CEO (Satya Nadella) with lots of cash on hand, low risk to fail. Another is an experienced turnaround CEO (John Chen) who has limited time and cash to fight for survival. Probably it’s worth another blog post to compare and contrast. Who will have higher chance to surprise investors on the upside?

  • Over-Valuation: Today, Barron’s analyst Jack Hough exudes praise for Apple’s “hardware-as-a-service” business model, and thinks shares could rise 20% to $635, or 13.6x C2015E EPS, next year, given Microsoft currently goes for 14.4x C2014E EPS.  There is high chance that the price will go higher later at MSFT’s conference in San Francisco on 27th where CEO Satya will make his debut to talk about future strategy.  However to provide a market view for price target of MSFT, it’s though to convince value investors that $40 a share is very cheap buy-in.
    • 25 analysts on Yahoo Finance have an average price target of $38.84, 4% below the current share price.
    • 38 analysts on Marketwatch.com have an average price target of $39.4, 2% below the current share price.
    • Only Trefis.com has a price target above the market price and that too represents just a 5% upside.

Conclusion

As a value investor, Microsoft is still a great technology company to own with 2-3% dividend yield. A new CEO and iPad app brings a stream of hopes and optimism to pump the share price to historical high. How much imagination you could get from new CEO transformation story?  Instead of betting on any surprises to propel the share price higher, it makes more sense to look at MSFT’s fundamental and long history of slow to no growth. When there is high market euphoria on MSFT, it is easy to convince yourself you can better use your cash somewhere else.

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5 years ago, only less than 10% of the people I know actually heard of Chinese eCommerce giant – Alibaba. Nowadays (thanks to Yahoo!’s 24% ownership) almost every U.S. investor know how big is Alibaba.

Alibaba really blows me out what will be the “Next Big Thing” in eCommerce. It’s not Amazon’s flying delivery drones, Google glasses, nor self-driving cars but the Online and Offline Commerce ecosystem Alibaba has built beyond traditional online shopping, including search engine, micro blogging, navigation, mobile taxiing, mobile gaming, and even banking and wealth management services. Every one of these services is directly and non-intrusively making our lives easier and better.

Intro to Alibaba

Alibaba is not only a very successful disruptive company in China but also brings to the table a completely different business model than Amazon’s. While it is used to be called the Amazon.com of China, Alibaba is more a blend of eBay Inc., including its PayPal financial arm, and Google Inc.

Two major online marketplaces Alibaba operates are Taobao (300M retailers) and Tmall (branded products – Gap, North Face, Dell, etc.).  Many Chinese shoppers go directly to Alibaba and run a search for whatever they are looking for, instead of using more general search engines like Baidu Inc. While Amazon makes money from direct sales, marketplace, and other ancillary consumer services, Alibaba makes its revenue and profits not on product sales but on advertising and premium services. Alibaba also handles payments and billing services through Ali-pay online and offline.

Alibaba Growing Faster and More Profitable than Amazon

The Chinese ecommerce giant is still a privately run company and it has yet to choose a stock market venue for IPO. Rumor says it’s between US and Hong Kong but either way, it will be the world’s hottest big listing. Most polls of analysts give Alibaba a market capitalisation above $100bn and, increasingly, north of $150bn (larger than Facebook’s IPO).

To give you another perspective of the size of Alibaba relative to Amazon, Alibaba’s 2012 gross merchandise volume is bigger than Amazon and Ebay combined. Alibaba posted 51% revenue growth during July-Sept 2013 compared with a year prior while Amazon recorded 23.8% in the same period.

Mobile Gaming

Part of the reason that Alibaba is transacting nearly double the amount online than Amazon is that the Chinese company is serving a much larger pool of online shoppers. As of the end of June of 2013, there were 464 million mobile Internet users in China, according to the China Internet Network Information Center, three times the number in the U.S.

Alibaba, whose ambitions have been steadily expanding beyond e-commerce, plans to launch a mobile gaming platform for 3rd-party titles.

The service will be aimed squarely at Chinese online/mobile gaming leader Tencent, and will give developers a hefty 70% cut. Alibaba also plans to integrate the service with its Laiwang messaging app (competes with Tencent’s dominant WeChat) and the mobile app for its Taobao e-commerce platform.

Mobile Navigation and Taxi Calling

Alibaba bought out the remaining shares they have in the mainland’s navigation technology company called AutoNav with valuation of approximately US$ 1.451 billion. Not long ago, Ali also backed a mobile taxi-booking service called Kuaidi Dache, which compete directly with Didi Dache backed by another internet giant Tencent. Furthermore, Tencent’s popular instant messaging mobile app Wechat is linked to Didi Dache, while Kuaidi Dache is built into Alibaba’s leading payment management application Alipay.

The price war between the two taxi-booking applications, which has been ongoing for several months since 2013 fall, rapidly escalated in the last month, when one after another the companies announced they would offer cash rebates to their users if they booked taxis by connecting their bank accounts to the mobile applications.

Mobile Payment and Wealth Management

Alibaba launched its payments service – Alipay in June 2012, similar to Paypal, trying to conquer both online and offline point of sales. In 2013, Alibaba released an online wealth management platform (called Yu E Bao) in cooperation with mutual fund companies and insurance companies to sell financial products.

Alibaba is leveraging its integration with Sina’s Weibo micro-blogging platform to target and offer personalized financial services, such as money market funds, credit cards, loans, foreign currency exchange, and other financial products, to vast Weibo users.

Yu E Bao is offering a money market product named Zenglibao fund, managed by the fledgling Tianhong Asset Management Co, in June. The Zenglibao fund is the most successful fundraising by any mutual fund in China in 2013, attracting 55.7 billion yuan ($9.14 billion) in assets under management from 13 million customers as of Sept. 30 2013. The average expected rate of return is 7% annually, which is higher than most of products offered by other Chinese big banks.

Rivals Tencent Holdings and Baidu Inc have jumped on the bandwagon to launch their own financial services platforms, and Tencent has also applied for approval for various banking services, as China’s Internet companies shift away from their traditional online businesses in search of greater profit.

Alibaba founder Jack Ma has said in the past that if China’s banks don’t change, Alibaba would change the banks, and that a finance industry outsider was needed to “stir things up”.

Takeaways

I think while Twitter is still struggling to figure out how to monetize their tweets and users, Twitter can learn from Alibaba (and Tencent) how to transform, partner, and build a massive online and offline commerce ecosystem to engage their existing users, advertisers, and retailers/merchants. Also, I think Alibaba makes smart decision not to enter the hardware device business too quickly like Amazon or Google does.  Apparently Alibaba generates more stickiness and higher profit margins than Amazon.

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Transport-as-a-Service

In 2013 June, Global Equities Research upgraded Tesla (TSLA) stock to Overweight rating with a $150 price target.  His main thesis is that Telsa is creating a “brand new $100 billion industry ‘Transport-as-a-Service’ (TaaS).” 


This model includes not only manufacturing and distribution but also encompasses servicing, powering and loaning, among other factors. If the company executes well, Global Equities Research sees the ability for Tesla to capture 60% of this new TaaS industry, well ahead of the potential 20% he estimates for Google


Since then, the share price of Tesla has gone up to $200 on Feb 11 in 2014.  No one has seen and fully understood the detail of Tesla’s TaaS plan. I suspect that one of the key elements of TaaS is offering utility-based or subscription-based Supercharger Network for various brands’ EV in North America and Europe. Currently it’s free for the life of Model S to encourage Model S owners to take road trips. 

 


What is Supercharger Network

Superchargers provide Model S vehicle half a charge in as little as 20 minutes and are strategically placed to allow owners to drive from station to station with minimal stops.

TSLA has 80% of the U.S. population covered with the expansion of its Supercharger network, according to Elon Musk (CEO, founder of Tesla). Over the weekend, a driving team completed a trip from New York to Los Angeles using only the Supercharger network. The 3.6K-mile jaunt took 6 days at no gas expense. (source)

A team from Tesla is on the road right now attempting to smash the U.S. cross-country electric vehicle speed record. Closer to home, Musk says he will take his family on a New York-to-L.A Spring Break trip via the Supercharger network.

 

On teslamotorsclub.com (click here), a forum member took the map from the Wold Map of Model S Reservation Holders thread and drew some lines atop highways. As you can see, the “H” really does cover more than 80% of where the Reservation Holders are. There are over 700 reservations represented on the map, and I’d guess than less than 140 are not within 150 miles of the H.


BMW’s EV strategy different than Tesla’s

A top BMW executive (Herbert Diess) doesn’t think building out a public charging infrastructure is a top priority from his company’s perspective.  Most buyers of BMW electric i3 will live in urban areas and drive short distances. The EV strategy of Europe-focused BMW is different than that of Tesla Motors which has been busy building out its Supercharger network in the U.S.

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