19 March 2016 – I am in Rome for Easter Week, something my wife and I do in alternate years. This year I have the opportunity to tack on 2 days of learning/fun at Codemotion, the biggest tech conference in Italy and one of the most important in Europe, running across 20 cities in Europe. Call it an ecosystem of over 30,000 developers devoted to innovation, focused on coding. A number of attendees are Google folks and it is always a revelation chatting with them about tech.
A few weeks ago when I was at the Mobile World Congress in Barcelona I had a chance to chat with some Googlers about Twitter. And about robotics. So two bits of news this week struck a chord and we chatted some more at Codemotion.
When I was in Barcelona, Capital Market Laboratories was floating a report that suggested Google could be preparing to buy Twitter. Capital Markets does some eye-popping data analysis. I have used them for years. One of my favorite infographics they produced is about Apple and it puts into perspective the size of Apple:
The Capital Markets report was released in full this week and you can read it here.
It doesn’t seem so crazy. Google could certainly use Twitter to jump into social, while Twitter can save some face by getting shareholders out at a much higher than current price. Bill Maurer of Seeking Alpha (paid subscription; I cannot link) did a deep dive into the Capital Markets report and said:
- The Capital Markets report discusses multiple strategic initiatives over the past year between Google and Twitter, focusing on user and advertiser improvements.
- I think it would allow Twitter to be more successful on the advertising front, while Google gets its foot in a market projected to have almost 2.5 billion users by 2018.
- Google needs to look more to the future. Social is the one area where Google can improve (see Google Plus), so why not buy one of the established businesses in the space?
- It’s probably a better idea than trying to build your own platform from scratch, or trying to make a smaller name work and then fail, like Yahoo did with Tumblr.
Perhaps the most interesting aspect of a deal would be in regards to Periscope. Bill noted that Twitter CEO Jack Dorsey discussed on the Q4 conference call trying to scale the service, while Google has an established video platform already in YouTube. While Twitter monthly active users have hit a speed bump, Periscope users continue to soar. Given the growth in the live video platform, you could make a case that Periscope itself could be worth in the billions over the next couple of years.
Financially, this makes sense on a number of fronts. Google has been looking to make acquisitions in the past, and the company has plenty of cash to do so. Twitter closed Tuesday with a market cap of just over $11 billion, which comes down to about $9 billion when you exclude cash/debt on hand. A purchase price of $15 billion would only take up about half of the U.S. cash Google reported in its 10-K filing (yes, I still read those things). The company might even decide to use some debt given historically low interest rates.
And as DB’s media analyst Jeb Calloway opined:
The deal would fit perfectly into Google’s reporting structure as well. Everyone focuses on Google’s non-GAAP earnings per share, which exclude items like stock-based compensation. While Twitter reported a GAAP loss of more than $521 million last year, stock-based compensation was more than $682 million. Twitter’s non-GAAP net income was actually a positive $276 million according to its Q4 investor letter. As I’ve detailed in the past, Google’s GAAP numbers have not shown a lot of progress in recent years, and this deal would continue that trend. However, since everyone is mostly focusing on the non-GAAP numbers, Twitter’s addition to both revenues and non-GAAP EPS would actually help the situation.
Google turns its back on a robotic future .. for now
When Google relaunched itself last year as the holding company known as Alphabet, it was the apotheosis of tech ambition: the “Little Search Engine That Could” was finally cutting itself free to take on humanity’s grandest challenges. And where better to look than robots? Hal Varian, the company’s chief economist, said this was going to be the next trillion-dollar industry. If anyone was going to create the robot future, it was the Googlers.
So big news this week when Alphabet announced it would sell is most prominent robot unit, Boston Dynamics. As Richard Waters said in the Financial Times this weekend “it is one of those discordant moments that makes you question easy assumptions. It seems to say plenty about the current state of Alphabet — and of robots”.
For a start, surprise. Google has its head in the clouds, but its feet still on the ground. A long-running Wall Street concern about the company previously known as Google was that it was an out-of-control playground for geeks. Alphabet, while set up for “moonshots”, was meant to bring a new financial discipline to the ambition.
Bloomberg has been running a series detailing internal Google meetings leaked to one of its reporters (all kind of Machiavellian motives ensued) which suggest it would take Boston Dynamics 10 years to find a commercial use for its menagerie of scarily agile humanoids and mechanical “animals”. Apart from a happy synergy with Google’s YouTube, the latest Boston Dynamics video, of a robot being poked and prodded by a human with a stick, has been viewed nearly 15m times — that wasn’t enough commercial certainty for the new powers-that-be at Alphabet.
The sale may show that Google is rethinking how its big ambitions are seen in the world. The same leaks reveal internal worries about the way that Boston Dynamics’ videos have fed fears about “terrifying” robots stealing human jobs.
Funny, that. Google has never appeared to worry before about public reactions to its ambition. After all, it named its robot project Replicant, a reference to the near-human robots in Blade Runner. But things seem to be changing. It’s impossible to tell, though, whether it is just trying to dampen the impression of a technocracy that could get out of control, or really rethinking the long-range impact of some of its technology on the world.
And as I will detail in an upcoming report from the Mobile World Congress, this is also a moment for reality in robotics. The past two years have brought an unending stream of predictions about the coming “robo-calypse”. Just about the only thing left to discuss has been whether the robots will put us all out of work first, or whether a malignant AI will wipe us out.
It might all be just a wee bit more prosaic. Even Google didn’t have the patience to wait for a walking robot to step out of the lab and earn itself a living.