Britain to target online giants with new ‘Digital Services Tax’

Britain said it would tax the revenues of online platforms like Google, Facebook and Amazon to create a fairer tax system that had not kept pace with changing digital business models.

“It’s clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business,” finance minister Philip Hammond said in his annual budget on Monday.

The tax will be designed to ensure established tech giants, rather than start-ups, shoulder the burden, Hammond said. The Treasury said profitable companies would be taxed 2 percent on the money they make from UK users from April 2020.

Source: Reuters

Snap shares sink as two million users move on

Snap Inc shares plunged 14 percent on Friday after the Snapchat-owner posted its second straight quarter of user losses and forecast further declines, a boost for Facebook Inc’s Instagram ahead of its results next week.

At least four Wall Street analysts cut their price target as Snap’s much-criticized app redesign continued to weigh on daily active user numbers (DAU), particularly in Europe and the U.S.

A revelation for teenage users and twenty-somethings worldwide when its vanishing-post model was first launched in 2011, Snap’s user growth has stalled in the past two years as Instagram mimicked its best features.

Its 186 million users in the third quarter compares to the Facebook-owned app’s more than 1 billion.

JP Morgan and RBC Capital Markets cut their targets for Snap stock by half.

“We believe that Instagram is much more penetrated in these demographics, and it will be challenging for Snap to pull users away from Instagram,” JP Morgan analyst Doug Anmuth wrote in a note.

Shares of the company were down 12.2 percent at $6.14 in trading before the bell.

A redesign at the start of this year aimed at rebooting the app spurred a backlash led by celebrity users including Kylie Jenner, who threatened to boycott the photo-messaging app. “Some users may be leaving the platform because it has lost its novelty, which would prove to be a bigger long-term concern,” Pivotal Research Group analyst Brian Wieser said.

Snap’s DAUs have now declined by five million since the first quarter, which the company blamed mainly on the Android app rollout.

With the company anticipating further declines, Jefferies analyst Brent Thill fears these losses could spill over to 2019.

Snap shares have fallen more than 50 percent this year, while Facebook’s, hurt by the fallout of the Cambridge Analytica privacy scandal, have lost about 14 percent.

Of the 36 analysts covering the stock, 16 now rate it “hold” and 13 rate it “sell” or lower. The median price target on the stock is $10, down 15 percent from a month ago.

Analysts have said the number of advertisers active on Snapchat, though small, have been steadily growing. However, the social media app is still at the mercy of its user count.

“While monetization trends in Q3 are promising, we don’t think the stock can recover until the user base is growing solidly again,” Canaccord Genuity’s Michael Graham said.

Source: Reuters

Charter signs up more internet subscribers than expected

Charter Communications Inc said on Friday it added more internet subscribers than Wall Street analysts had projected for the third quarter, making up for a drop in video subscribers that was less severe than expected.

The company added 266,000 residential internet customers in the third quarter, above the consensus estimate of 234,000, according to research firm FactSet.

More and more subscribers are deserting pay TV bundles and switching to cheaper streaming services like Netflix and Amazon.com’s Prime video.

That has pushed companies including Charter and Comcast Corp to focus on their high-speed internet business as a strategy to survive in the rapidly changing media landscape.

Comcast beat Wall Street estimates for internet subscribers on Thursday by adding 363,000 subscribers during the quarter.

Charter reported a loss of 66,000 residential video customers in the quarter, well below the 104,000 it lost last year. Analysts had forecast a loss of 85,000 video subscribers.

Net income attributable to shareholders was $493 million, or $2.11 cents per share, in the quarter ended Sept. 30, compared with $48 million, or 19 cents per share, a year earlier.

Total revenue rose 4.1 percent to $10.89 billion from $10.46 billion. Analysts had expected the company to report revenue of $10.94 billion, according to Refinitiv data.

Source: Reuters

Twitter monthly usage drops, company warns it will fall again

Twitter Inc on Thursday reported a larger-than-expected decline in monthly users in the third quarter, its second straight quarterly drop, and predicted the figure will fall again in the current period.

The company posted revenue and profit ahead of Wall Street estimates though as advertising sales surged 29 percent.

It blamed the declines in users on efforts to clean up the site from suspicious users, including accounts used in political influence operations, as well as its response to new privacy regulations in the European Union.

Monthly active users fell to 326 million in the third quarter, below the average analyst forecast of 331.5 million, according to FactSet. Twitter said it expects them to drop below 326 million in the current quarter, missing the average forecast of 333.4 million.

Twitter is fighting for its reputation by cutting and blocking fake users, but the toll on traffic is undermining faith in is ability to grow. Recent business progress has focused on getting current users to click on more ads, which has helped Twitter turn to a profit.

Analysts have warned that Twitter needs to stem declines in user growth so it can better compete for ad spending with rivals including Alphabet Inc’s Google, and Facebook Inc . Investors pay close attention to monthly user data because it is seen as a key indicator of future revenue, the bulk of which comes from ad sales.

Twitter’s usage has been stagnant for more than a year, causing analysts to worry that growth may have peaked.

“The lack of meaningful user growth in the last 18 months lends credence to the thesis that Twitter has maxed out on users,” SunTrust Robinson Humphrey analyst Youssef Squali said in an earnings preview note to clients.

Those concerns have been somewhat offset by increases in advertising sales from video which suggest the company is succeeding in efforts to generate more cash from each user.

Quarterly advertising revenue jumped 29 percent from a year earlier to $650 million, boosted by advertiser interest broadcasts from media companies including Live Nation Entertainment, Major League Baseball and Major League Soccer.

That helped push revenue up 29 percent from a year earlier to $758 million, handily beating the average analyst estimate $702.6 million. The company reported adjusted profit of 21 cents per share, beating the average forecast of 14 cents.

Investors are looking to understand the financial impact of Twitter’s moves to clean up its platform by deleting accounts used for fraud, hate speech and election interference.

Twitter has removed millions of suspicious accounts this year including those that belong to Alex Jones and his conspiracy site Infowars.

“We’re doing a better job detecting and removing spammy and suspicious accounts at sign-up,” Chief Executive Jack Dorsey said in a statement.

Twitter said the number of its daily active users rose by 9 percent year-on-year, weaker than an 11 percent jump in the previous quarter and its slowest growth rate in two years. The company does not disclose the total number of daily users.

Twitter shares tumbled 19 percent when the company reported quarterly results on July 27. Its stock has fallen 36 percent since that earnings report, compared to a 6.4 percent decline in the S&P 500 index.

Of the 40 analysts polled by FactSet, 10 have a buy rating on the stock while 24 have a hold rating. Six have a sell rating. The average target price is at $32.91, about 16 percent higher Tuesday’s close of $27.54.

Source: Reuters

WPP shares plunge as ad group falls behind in post-Sorrell era

WPP lost a fifth of its market value on Thursday after problems at its New York and London creative agencies forced it to cut sales and profit forecasts, showing the scale of the task facing its new boss after the acrimonious exit of founder Martin Sorrell.

Mark Read, a softly-spoken veteran of the world’s biggest advertising group, said turning around WPP would take time as he sells assets, halts acquisitions and brings in new talent at its storied agencies such as JWT, Ogilvy and Y&R.

The third-quarter results wiped 2.8 billion pounds ($3.6 billion) off WPP’s market value, and were all the more startling as they came after solid updates from peers Omnicom, IPG and Publicis, showing the problems are specific to the British group.

The results showed the high-margin and previously strong media units that buy ad space and plan campaigns are struggling.

“We need to have stronger creative agencies,” Read told Reuters. “We do have good people, we need more of them. This isn’t going to happen overnight. We need to be realistic about the speed at which the business is going to turn around.”

Sorrell, the world’s most famous advertising boss, built WPP from a two-man office in central London into the world’s most powerful advertising company offering creative work, media buying, public relations, consultancy and data analytics.

The group outperformed for years, helped by Sorrell’s ability to buy companies and win pitches, but growth disappeared at the start of 2017 due to competition from consultancies and tech groups Facebook and Google, which enable clients to cut out the middle men and place ads directly.

Clients have also complained that WPP, in 112 countries, is too unwieldy, forcing them to deal with multiple agencies within the group to get one service. Some clients are also taking marketing work in-house to save costs.

Analysts said it was impossible to say if Sorrell’s departure had had an effect on recent contract losses, but they noted the pressures had been building before he left in April over an allegation of personal misconduct, which he denied.

“The challenges we’ve seen in the third quarter reinforce our determination to take more radical action and to move more decisively,” Read said. He will set out a new strategy in December.

RADICAL ACTION

It will for now start by selling a stake in its underperforming data analytics group Kantar, valued as a whole at around 3.5 billion pounds by analysts.

That will help to lift overall growth and add to the 16 non-core assets it has already sold, raising 704 million pounds. The efforts will help to lower its almost 5 billion pounds of debt.

Sales were particularly weak in the United States and Britain, and a very poor September forced WPP to lower its full-year guidance, saying net sales could fall as much as 1 percent versus a target of 0.3 percent growth just three months ago.

The operating margin is likely to fall by 1-1.5 percentage points, compared with a previous prediction of down 0.4.

WPP shares were down 17 percent at 1100 GMT, taking them down 35 percent in the year to date and giving the group a market value of 11.1 billion pounds.

Analysts say the stock is now inexpensive compared with peers, trading at 9 times 2019 forecast earnings compared with IPG on 13.6, but it has little momentum after a string of account losses from groups such as Ford.

“WPP has delivered a proper profit warning,” analysts at Citi said. “Third quarter organic growth is materially below expectations and having raised guidance at the beginning of September the group has cut it hard today.”

WPP also said Finance Director Paul Richardson would step down after 22 years in the role. ($1 = 0.7748 pounds)

Source: Reuters

High-speed data boom drives Comcast profit beat

Comcast Corp’s quarterly profit and revenue topped Wall Street estimates on Thursday as strength in its high-speed internet business offset a less severe drop in cable TV subscribers.

The largest U.S. cable company’s third-quarter results demonstrated a resilience to industry forces that have buffeted its rivals.

As U.S. subscribers have continued to dump pricier pay-TV services in favor of cheaper streaming services, Comcast has managed to slow down defections, at least for a quarter, while growing its broadband services, on which all other products, including Netflix Inc and Amazon.com video, depend. High-speed internet is now the centerpiece of a strategy to survive a rapidly changing media landscape.

It also has remained the standalone among the big league players to resist the temptation to restructure to court consumers directly with streaming video products, as AT&T Inc and Walt Disney Co have done.

“We’re looking at different ways to accelerate our business in terms of streaming,” said Steve Burke, Chief Executive of NBCUniversal, which is owned by Comcast, on a conference call with analysts on Thursday. Burke added that it would not be a substitute for its existing pay TV business.

Shares rose 4.5 percent to $35.66.

BLUE SKIES

To diversify, Comcast beat Rupert Murdoch’s Twenty-First Century Fox in an auction to buy European satellite TV broadcaster Sky for $40 billion in September.

Comcast Chief Executive Brian Roberts defended what was widely considered a high bid for Sky and said the company “was misunderstood and mispriced,” citing the difference in the European pay-TV markets compared to mature U.S. markets.

In a morning conference call, Sky Chief Executive Jeremy Darroch discussed investments in key categories such as original content and defend its leadership position in sports and movies.

Darroch also said Sky could easily capture 10 percent more of the remaining 78 million households that do not yet subscribe to a Sky product across its European territories, which would add 8 million customers. “It’s more than achievable,” he said.

He also vowed to “stick around,” which will help assuage investors concerned he would flee after the merger.

STRONG RESULTS

The results showed revenue from high-speed internet rose 9.6 percent to $4.32 billion in the quarter as the company added 363,000 internet subscribers, beating an average estimate of 294,000, according to research firm FactSet.

Comcast said it was the best performance for the division in ten years.

Net income attributable to Comcast rose 9.2 percent to $2.89 billion, or 62 cents per share, from $2.64 billion, or 55 cents per share, a year earlier.

Excluding items, the company earned 65 cents. Analysts were expecting 61 cents per share, according to Refinitiv.

Philadelphia-based Comcast’s revenue rose 5 percent to $22.14 billion, above the average estimate of $21.82 billion.

Comcast’s Xfinity Mobile, which operates off of Verizon Communication Inc’s network, added 228,000 net phone lines during the quarter, hitting 1 million total lines. CEO Roberts said that offering mobile with broadband has improved retention of broadband customers who buy both.

NBCUniversal revenue rose 8.1 percent to $8.63 billion.

Revenue from theme parks fell due to weather-related disruptions and natural disasters in Japan.

Source: Reuters

Tech industry under greater privacy scrutiny

Apple Chief Executive Tim Cook on Wednesday said customer data was being “weaponised with military efficiency” by companies to increase profit and called for a federal privacy law in the United States.

But Facebook CEO Mark Zuckerberg defended his company’s ad-based business model said users were aware of a trade-off for free services.

Cook, speaking at the International Conference of Data Protection and Privacy Commissioners, said Apple would support a U.S. privacy law and also touted the iPhone maker’s commitment to protect users’ data and privacy.

Apple, which designs many of its products so that it cannot see users’ data, has largely avoided the data privacy scandals that have enmeshed its rivals Google and Facebook this year.

“The desire to put profits over privacy is nothing new,” Cook told a packed audience of privacy regulators, corporate executives and other participants.

Issues over how data is used and how consumers can protect their personal information are under the spotlight after big breaches of data privacy involving millions of internet and social media users in Europe and the United States.

Cook in his speech cited former U.S. Supreme Court Justice Louis Brandeis who in a Harvard Law Review article in 1890 warned that gossip was no longer the resource of the idle and the vicious but had become a trade.

“Today that trade has exploded into a data industrial complex. Our own information, from the everyday to the deeply personal, is being weaponised against us with military efficiency,” Cook said.

“These scraps of data … each one harmless enough on its own … are carefully assembled, synthesised, traded, and sold,” Cook said.

“We shouldn’t sugarcoat the consequences. This is surveillance. And these stockpiles of personal data serve only to enrich the companies that collect them,” he said.

FACEBOOK’S AD-BASED MODEL

Zuckerberg, speaking via video message, said Facebook users were aware of the trade-off between a free service and advertisements.

“Instead of charging people, we charge advertisers to show ads. People consistently tell us that they want a free service and that if they going to see ads to get it, then they want those ads to be relevant,” he said.

Facebook was investing heavily in both security and privacy even as this impacts on its profitability, Zuckerberg said.

Google Chief Executive Sundar Pichai welcomed the global focus on privacy, saying that the company was doing its part by taking measures to allow users more control over their data.

“User trust is the foundation for everything we do, and privacy and security are fundamental tenets of that,” he said by video message. “We’ve been working for years to provide more transparency and control for our users, and we appreciate the input and partnership from data protection authorities.”

Cook also warned about governments abusing users’ data and their trust, a concern for many with elections coming up in several countries.

“Rogue actors and even governments have taken advantage of user trust to deepen divisions, incite violence, and even undermine our shared sense of what is true and what is false.”

Cook said Apple fully backed a federal privacy law in the United States, something Europe has already introduced via its General Data Protection Regulation.

“Users should always know what data is being collected and what it is being collected for,” he said. “This is the only way to empower users to decide what collection is legitimate and what isn’t. Anything less is a sham.”

Source: Reuters

Facebook launches searchable database for U.S. political ad spending

Facebook Inc on Tuesday unveiled a searchable database that will provide information on spending by advertisers for political ads and issues of national importance in the run-up to the midterm elections.

The move comes as social media platforms face the threat of U.S. regulation over the lack of disclosure on such spending. Facebook also has faced a barrage of criticism from users and lawmakers after it said last year that Russian agents used its platform to spread misinformation before and after the 2016 U.S. presidential election, an accusation Moscow denies.

The database called “Ad Archive Report” will be updated weekly with details on who spent how much for political ads. For example, a page supporting Texas Democratic U.S. Senate contender Beto O’Rourke, reveals spending of $5.4 million from May-Oct. 20.

The page name is “Beto for Texas”. The Trump Make America Great Again Committee, a fundraising organization for President Donald Trump, was second during the period with spending of $3.1 million. The report, which houses political ads for up to seven years, will be available to anyone regardless of whether they are a Facebook user or not, the company said Alphabet Inc’s Google launched a similar feature in August.

Source: Reuters

Netflix plans to raise $2 bln to fund new content

Netflix Inc said on Monday it plans to raise about $2 billion in debt to fund original shows, acquire content and for possible acquisitions.

The streaming giant said the debt will be in the form of senior notes denominated in U.S. dollars and euros.

Netflix, which plans to spend more than $8 billion in entertainment programming this year, reported blockbuster third-quarter results last week as heavy investment in original shows lured more customers to its fold.

Source: Reuters

Sony makes no concessions to EU regulators in EMI music bid

Sony Corp has not offered concessions to European Union antitrust regulators reviewing its $2.3 billion offer for control of EMI to become the world’s largest music publisher, the European Commission website showed on Monday.

EU antitrust regulators earlier this month asked rivals and users whether they think the Japanese group would use its greater market power to win better terms in digital media deals.

The deadline for proposed concessions in the European Commission’s preliminary assessment of the deal was Oct. 19. The EU executive’s website showed that Sony had not submitted any.

This could either mean Sony expects unconditional approval or for the Commission to open a full-scale investigation on Oct. 26 at the end of its review.

Sony, which owns a 30 percent stake in EMI, wants to buy Mubadala Investment Co’s 60 percent stake. In July, it acquired the estate of Michael Jackson’s minority share of EMI.

Sony’s new CEO Kenichiro Yoshida is making his boldest strategy move with the deal, which would give the company rights to 2.1 million songs from artists such as Drake, Sam Smith, Pharrell Williams and Sia.

Independent music labels group Impala and the European Composer and Songwriter Alliance have called for the EMI deal to be either blocked or cleared only with major concessions.

Source: Reuters