Rovio – One trick bird.

Reply to this post

 

 

 

 

 

Angry birds fly the coop.

  • Rovio’s dependence on Angry Birds has been thrown into sharp relief as the fading popularity of the franchise triggered a dreadful profit warning that caused the shares to halve in value in just one trading session.
  • Q4 17 revenue / EBIT was EUR73.9m / EUR10.4m which was disappointing as investments in acquiring users have had to increase more than expected.
  • I see increasing user acquisition cost is a major red flag with regard to the strength of a franchise.
  • However, the real pain was felt in the 2018 guidance where revenues / EBIT margins are expected to be EUR260m – EUR300m (-12% – 0% YoY) / 9% – 11%.
  • This is 17% below consensus of EU337m and triggered real concern that the company’s best years are now behind it.
  • Angry investors felt that they had been misled by the company which had been communicating in a much more positive tone just a few months ago.
  • This, combined with a high valuation that clearly needed correction, was the main reason for the size of the sell off witnessed.
  • Rovio is not alone in its troubles as its much bigger compatriot, Supercell, is also having a difficult time as its core franchise ages and it struggles to refresh it (see here).
  • Furthermore, I see an overall weakening in the market for games on mobile phones as data from App Annie indicates that spending has switched away from gaming towards media consumption services like Netflix, Hulu and so on.
  • This, combined with a franchise that is quickly weakening following the surprise success of the Angry Birds movie in 2016, leads me to believe that there may be downside to even this very disappointing guidance.
  • The one place Rovio should now look is Asia as there are no signs of the games market on smartphones weakening there and this could provide the company with much needed support.
  • While this could provide some temporary relief, Rovio needs to address the issue of its flagging franchise if it wishes to remain a viable independent entity.
  • Of this there is no sign, and I suspect that things may worsen from here leading to further weakening of the valuation and an opportunistic bid from one of the big digital ecosystems.
  • Tencent would be top of my list but as it already has Supercell, its motivation to also own Rovio will be much more muted.
  • Rovio is no bargain even at these levels.

Android for Enterprise – What elephant?

Reply to this post

 

 

 

 

 

Google continues to dodge the elephant.

  • Google is having another go at cleaning up Android’s act in the enterprise, but while it continues to ignore the elephant in the room, it is unlikely to make any progress.
  • Android’s position in the enterprise almost the exact opposite of what it has in consumer where 80% of all smartphones globally use the Android operating system.
  • 4 billion data points from Egnyte, indicated that 82% of all enterprise mobile activities were carried out on iOS devices with only 18% being on Android.
  • To counteract this, Google has released an enterprise device recommendation program that lists a series of requirements to ensure the best enterprise experience as well as a list of devices.
  • This list contains mostly Android handset makers that make the least modifications from stock Google Android which makes the devices much easier manage as the differences between them are consequently much less.
  • This is why Samsung is excluded from this list as it does more tinkering with Android and preloads more software than almost anyone else prior to sale.
  • Samsung’s absence will further hurt this cause as a substantial percentage of all Android phones in the hands of users today are made by Samsung.
  • To make matters worse, this number is even higher at the top end of the range which is where one will find all of the enterprise devices.
  • However, I think that all of this is irrelevant as while Google ignores the elephant in the room, its enterprise push is likely to go nowhere.
  • This elephant remains the endemic fragmentation that exists within the Google Android ecosystem and Google’s inability to quickly patch its devices when flaws are found.
  • This results in an inconsistent experience for users but most importantly, it means that Android devices remain very insecure.
  • This is something that no enterprise can tolerate which is the main reason why Android is so badly represented in the enterprise.
  • Surprisingly, it is quite a simple process to make an Android device secure by completely locking the phone down allowing no modifications, upgrades or downloads.
  • However, in an age where most users bring their own devices into the enterprise, this is not an acceptable solution which has led to most enterprise users choosing iOS.
  • I have long believed that the only option for Google to solve its Android problems both in consumer and in the enterprise is to take Android fully proprietary like iOS.
  • Then it can create a consistent, secure user experience that will work well for both enterprises and their users.
  • Google’s progress in this direction has been glacial and it continues to make a habit of avoiding tackling this issue head on.
  • Unfortunately, the only victim of this dithering is Google itself as its usage, loyalty and penetration in the enterprise will continue to suffer until this issue is addressed.
  • The real winners here are Apple which looks set to maintain its dominance in the mobile enterprise and Microsoft which will have an easier time seeing off Google’s incursions into its patch while Android remains irrelevant in the enterprise.

 

Spotify – Speaker’s corner

Reply to this post

 

 

 

 

 

A smart speaker makes no sense.

  • Job postings indicate that Spotify is jumping into hardware and, while I think that a smart speaker makes no sense at all, there may be something in a device that makes dumb speakers work really well with Spotify.
  • Spotify is recruiting operations and project managers for hardware in a move that indicates that it intends to move into production with a hardware product that, I assume, is deeply integrated with its music service.
  • Everyone is going to assume that Spotify is going to launch a smart speaker to compete with HomePod, but I think that this makes no sense at all.
  • There are two reason for this.
    • First, Digital assistant. Spotify has no digital assistant in any form.
    • This means that it will need to use one of the others from which Alexa, Google Assistant, SoundHound and Cortana are all viable choices.
    • This may be where SoundHound makes more sense as it has a passable digital assistant (called Hound) as well as a music recognition service like Shazam.
    • Although a music recognition service does not make a lot of sense in this setting, there is a strong and well developed music related AI domain in SoundHound that may compliment Spotify’s existing music AI nicely.
    • Furthermore, SoundHound and Cortana are the only two that do not have a competing music subscription business.
    • The fact that all smart speakers except the HomePod, allow Spotify to be set as the default music service pretty much obviates the point in making a smart speaker in my opinion.
    • Second, audio: While Spotify knows a lot about categorising and understanding music tastes, its know very little about the increasing complexities of making high quality speakers with intricate microphone arrays.
    • This means that any speaker that it makes is unlikely to be better than something from one of the established players like Sonos or Harman Kardon.
    • These speakers all have the ability to set Spotify as the default music service and so I fail to see what benefit there is for Spotify in creating a competing product.
  • However, there are already millions of Bluetooth enabled speakers present in the market today that are very dumb with no intelligence embedded.
  • Millions of Spotify users play music through these speakers on a daily basis and so there could be a benefit to be had from a device that makes these speakers smarter.
  • This could take the form of a plug-in module or Bluetooth streaming device that includes microphones and is integrated with one of the mainstream digital assistants that has been optimised to make the Spotify music experience better.
  • The Spotify user experience through both Amazon Alexa and Google Assistant is basic at best and so something that has been optimised to allow better voice control of the Spotify music service could improve user loyalty and stickiness.
  • This is the kind of product I expect Spotify to create as it makes far more sense a business perspective.
  • The streaming music market remains dominated the two major players and while Apple has gained some momentum recently, it does not appear to have made a meaningful dent in Spotify.
  • I expect music streaming to remain the only engine of growth in the music industry going forward.

Windows on ARM – PC lite.

Reply to this post

 

 

 

 

 

Microsoft has learned from the RT disaster.

  • The limitations of Windows on ARM are significant, but I suspect that for light usage and low-end prosumer purposes the devices will be good enough to occupy a niche in the market.
  • Microsoft accidently published a list of the shortcomings of the new Windows on ARM PCs that it quickly redacted but not quickly enough to prevent tech bloggers from picking it up.
  • The limitations are as follows:
    • First, x64. Only 32bit apps are supported.
    • This is because Microsoft has not put support into the OS yet.
    • Microsoft already has this on the roadmap making this a temporary limitation.
    • Second, drivers. Windows on ARM can’t use x86 drivers meaning that many older peripheral devices will not work with these devices.
    • Third, games. Any game requiring a version of OpenGL later than 1.1 or one that required OpenGL hardware acceleration wont work.
    • Given that OpenGL is currently on version 4.6, this could be a lot of games.
    • However, it is worth noting that gaming is unlikely to be a priority for those that buy these devices and hence this is not a big limitation in my opinion.
    • Fourth, shell extensions. Anything that uses a shell extension may not work.
    • There many apps that use these that often include their functionality in the menu that pops up on a right-click.
    • These types of applications need to be recompiled to run on natively on ARM.
    • This includes apps like Dropbox which could be an issue for prosumer usage.
  • The most critical of these limitations is the inability to support x64, but this is likely to be fixed in a future release.
  • Consequently, for light weight users doing pretty basic stuff with Office as well as browsing and watching video, this version of Windows on ARM could be good enough.
  • Consequently, the advantages of the long battery life and always on connectivity enabled by using a Snapdragon processor should shine through and outweigh the limitations.
  • I suspect that there is a niche for this category but one that has been made much smaller due to the vast majority of the “light” PC users having already deserted PCs for smartphones and tablets.
  • Hence, this does not represent a massive threat to Intel and where there is erosion it will be in the lower end, lower margin processors where Intel will feel it least.
  • Hence, I see no meaningful impact on Intel from this category yet.

Google, Amazon and Apple – Battle for the smart home pt. VII

Reply to this post

 

 

 

 

 

Google’s race to lose.

  • Google appears to be catching Amazon more quickly than I expected when it comes to smart speaker share and I think that rapid commoditisation of answering simple questions will increasingly pass the advantage further to Google.
  • Recent research by Edison research and NPR (discussed here) found that Google had increased its share of smart speakers to 25% in Q4 17 from almost nothing a year ago.
  • In 2017, I was cautious on the Google Assistant because of its inability to really connect into the smart home but after its humiliation at CES in 2017, Google’s renewed efforts in this direction are starting to pay off.
  • Almost all smart device manufacturers are now supporting the Google Assistant or have it on their immediate roadmap and the same cannot be said for HomeKit.
  • This combined with the fact that Google Assistant generates far more traffic than Alexa, led me to reverse my position and forecast that this market will end up being dominated by Google.
  • I am no longer the only person who appears to have this view as Loup Ventures are forecasting that Google will gain share again in 2018 to 32% and will become the market leader by 2022.
  • By 2022, I think that neither Google or Amazon will be making the speakers, but that it will be the more traditional speaker manufacturers that are making the hardware while Google and Amazon supply the brains.
  • I also see that the simple answering of questions, which to date has been a good measure of a digital assistant, will rapidly become a commodity.
  • Recent tests across a range of categories with 781 questions revealed Google in the lead at 81% correct, Alexa in second place with 64%, Cortana third at 57% with Siri in last place on 52%.
  • In this instance, Siri was tested on the HomePod which runs a separate and distinct version of Siri which reviewers have found to be far less capable than the one resident on the iPhone.
  • This is just one example of the disadvantages of having Siri resident on the device which I have discussed in more detail here.
  • Hence, I think that this test is unfairly penalising Siri which and my own tests, I have found it to be broadly inline with Alexa.
  • Either way, I think that the simple answering of questions will soon become an obsolete way to test a digital assistant.
  • This is because although Google Assistant can get 81% of the questions right, it is still frustratingly stupid when it comes to getting stuff done.
  • This is why it is increasingly important for these assistants to understand more than just the words but to be able to get a sense of what the user is actually asking for.
  • Combining this with the ability to understand context and circumstance should enable a deeper, richer and more intuitive experience where the assistant saves time and is useful.
  • In all but the most simple use cases it is simpler, quicker and easier for the user to complete the action himself.
  • This is a very tricky AI problem to solve meaning that those with the best AI and the most data are likely to come out on top.
  • This leads straight to Google and Baidu who remain my No. 1 and No.2 globally, when it comes to excellence in AI.
  • In terms of investment, Baidu is just getting back on its feet after a very difficult 18 months and offers and attractive entry point into the AI theme although it is China only.

Apple – Apples and oranges

Reply to this post

 

 

 

 

 

Apple doesn’t quite reach 50%.

  • While the finding that Apple generated over half of all revenues in the smartphone market in Q4 17 is factually accurate, I believe that it is misleading because Apple is monetising far more than just hardware.
  • Consequently, I think a more balanced picture would be achieved by including Google’s mobile advertising revenues from Android which RFM estimates was somewhere in the region of $5bn.
  • The reason for this is that through the sale of its devices, Apple is monetising both its hardware and its ecosystem.
  • In contrast, Android handset makers are monetising only hardware because they all carry the Google ecosystem which Google then monetises separately.
  • RFM’s ecosystem monetisation model describes three methods of monetisation for any digital ecosystem:
    • First: Own the hardware and keep the ecosystem or the service exclusive to that hardware and charge a premium for the hardware to get access to the ecosystem.
    • This is what Apple does so effectively and where the Android makers are really struggling.
    • Second: Make the ecosystem or service available on as many devices as possible and sell advertising based on usage.
    • The experience is “free” and money is earned by using users’ personal data to generate advertising or relevant marketing.
    • This is Google, Facebook, Baidu, Twitter and so on.
    • Third: Charge the user a per month fee to get access to the service and keep it free of annoying advertising.
    • This is just beginning to emerge for ecosystems but individual services like Netflix, Spotify, Amazon Prime, Tencent Games and Xbox Live are already well established.
  • I have long believed that if Apple were to sell exactly the same device but with Google Compliant Android on it rather than iOS, its gross margins would be much closer to 20% than 50%.
  • There are plenty of Android handset makers who attempt to do exactly this but fail to make a decent return.
  • Consequently, I conclude that the difference is a result of the iOS ecosystem rather than the hardware.
  • The devices Apple sells are merely the conduit by which it distributes its software and ecosystem to its users with the majority of the value residing in the ecosystem.
  • Apple is very vertically integrated making both hardware and ecosystem while the Android makers make only the hardware and get the ecosystem from Google.
  • Therefore, to make a fair comparison one would either have to subtract the ecosystem portion of revenue from Apple (very difficult) or add in Google’s revenues that it generates from Android devices (much easier).
  • Adding $5bn to the Strategy Analytics figure to level the playing field gives a total $125.2bn of which Apple had 49% in Q4 17.
  • The fact that the total has only slightly moved also reinforces another finding of RFM’s monetisation research which is that monetisation using hardware is many times more effective than monetisation via advertising.
  • Consequently, while I believe that Apple has not quite achieved 50%, it is very nearly there underlying just how effectively Apple is earning a return from its ecosystem.
  • While Google Android remains a fragmented and out of date experience (it takes 5 years for a new version to fully penetrate the user base), there is very little to challenge Apple’s position.
  • That being said, Apple’s valuation has fully priced in this reality and is not nearly as attractive as it was to long-term investors which is why I remain pretty indifferent.

Supercell – Look east.

Reply to this post

 

 

 

 

 

Supercell looks like it is out of ideas.

  • Supercell has had a difficult 2017 driven by its failure to release a new game but also by a shift in spending in Western markets away from gaming towards media consumption.
  • During 2017, Supercell suffered a 14% drop in revenues to EUR1.8bn and a 21% drop in EBITDA to EUR729m.
  • The cause is the fall is obvious as Supercell did not release a new game in 2017 and its long-standing winner Clash of Clans is starting to show signs of ageing.
  • Supercell’s games are all pretty similar in that they involve strategic warfare for control of the board.
  • Supercell has four of these including Clash Royale, Boom Beach and Hay Day in addition to its long-standing showrunner Clash of Clans.
  • The games are free to play but rely on in-app purchases that accelerate the user’s progress through the game or provide upgrades.
  • Clash of Clans is clearly showing its age as it has slipped to No. 7 in the App Annie top grossing charts on iOS from No. 2 in 2016 and Supercell’s other titles are also falling.
  • The last 12 months have also seen a shift in spending as 2016 was dominated by games but now the money is being mostly generated by paid media streaming services such as Netflix, Pandora Music, YouTube, HBO Now and Hulu which are all now in the top 10.
  • This is a sign that the market appeal of this genre of games may be flagging and that Supercell needs to do much more than just release a fresh new game in its historically successful category.
  • Of this there is no sign.
  • However, the same is not true in China, South Korea, Singapore and Japan where the iOS top grossing charts continue to be dominated by gaming.
  • This is why I suspect that Supercell has said that it is focusing on Asia to restore growth in 2018 which should be greatly aided by the fact that it is majority owned by Tencent.
  • While, this may help Supercell to restore growth, its declining relevance in Western markets (especially USA) will make it more difficult for Supercell to become the lynchpin in Tencent’s strategy to expand beyond China.
  • While Tencent dominates at home, its content is not relevant overseas which is why it has been taking stakes in a range of digital assets such as Supercell, Snapchat and Spotify.
  • This could help Tencent to stitch together a portfolio of digital assets into a digital ecosystem offering for developed markets.
  • However, progress to date has been very slow and I begin to wonder whether Tencent is beginning to miss the window of opportunity for this strategy.
  • Tencent remains my favourite digital ecosystem globally but the time is approaching for this position to be reconsidered.

Baidu & Uber – Time to pivot

Reply to this post

 

 

 

 

 

Both need to change to fare well.

Baidu

  • Baidu reported good Q4 17 results as it has put the tribulations of the 18 months squarely behind it and is now focused on becoming the preeminent supplier of AI in China.
  • Q4 17 revenues / EPS were RMB23.6bn ($3.74bn) / RMB15 ahead of consensus estimates at RMB23.1bn / RMB13.
  • With its new, more selective ad system in place, advertisers have returned to Baidu pushing mobile revenues to 76% of total revenues, an all time high.
  • 2017 has been a difficult year for Baidu and its strategy is now shifting away from being a fully fledged digital ecosystem to focusing on products and services that are entirely driven by AI.
  • This is why the loss making iQIYI has now filed for an IPO and I suspect that 2018 will see some movement around the ownership of its other loss-making e-commerce venture; Nuomi.
  • Baidu’s main AI assets are Apollo (autonomous cars) and Duer OS (digital assistant) and in both of these, it is far and away the leader in China.
  • How these will be directly monetised is less clear at this stage, but it is clear that:
    • First: AI will have a major impact on the ability of ecosystems to differentiate their digital life services over the next 10 years.
    • Second: Baidu is the undisputed leader in China with both Tencent and Alibaba miles adrift despite protestations to the contrary.
    • This puts Baidu in a very strong position to partner or licence to the have nots in Chinese AI (which I think is almost everyone).
  • Hence, with the core business now looking to be back on an even keel, I think Baidu represents a cheap entrance to what its likely to be the biggest investment theme of the next decade.

Uber

  • Uber reported headline figures for Q4 17 that showed some progress but, in my opinion, not nearly enough given its precarious position in the US market.
  • Q4 17 revenues and adj-net income were $2.2bn / LOSS $1.1bn compared to $2.01bn / LOSS $1.46bn in Q3 17.
  • This is good progress but given the sizes of the losses in Q3 17 and the fact that they increased meaningfully from Q2 17, I suspect that there was a lot of low hanging fruit.
  • Revenue growth remains strong at 66% YoY but all of the momentum at the moment remains with Lyft which I see as being on the cusp of causing Uber real problems.
  • Uber is still dominant in its home market (USA) with 66% share but this is substantially down from the 80% that it held at the beginning of 2017.
  • Ride hailing businesses are marketplaces and as such are subject to the rule of thumb that I described over two years ago which still seems to be holding firm.
  • This rule of thumb states that a company that relies on the network must have at least 60% market share or be at least double the size of its nearest rivals to begin really making profit (see here).
  • Hence, I see 2018 as the time when Uber needs to begin looking at making some money and at the same time ensuring that Lyft bleeds badly just to stay in contention.
  • Uber needs to neuter Lyft now because when it comes to autonomous driving, Lyft is a long way ahead via its relationship with Waymo.
  • Should things stay the way they are, then Uber could be in real trouble once autonomous vehicles start making a real appearance in the market.
  • Fortunately, this is still some way off but the threat is there and 2018 needs to be a year where Uber re-establishes its dominance in the home market especially after embarrassing loss of both China and Russia.

Digital Assistants – Dissociative identity

Reply to this post

 

 

 

 

 

Siri’s fragmentation could be her undoing.

  • Apple’s focus on devices has meant that there are multiple different implementations of Siri which is starting to cause problems.
  • If the digital assistant is to become the next generation OS, then it is Google, Baidu and Amazon that are in the driving seat as history has repeatedly shown that software fragmentation is extremely detrimental for the user experience.
  • Fortunately for Apple, I think that this is a problem that it should be able to fix.
  • Put simply, the problem exists because of the decision that Apple has made to run Siri locally on devices rather than have the intelligence sitting in the cloud.
  • This is an understandable decision from a company so rigidly focused on devices and differentiating with security and privacy.
  • However, this decision is now beginning to show some problems.
  • Siri is now present on iPhone, Apple Watch, Apple TV, Mac, iPad and HomePod and each instance is slightly different and has a different skill set.
  • For example, Siri on Apple TV has a different set of skill domains than on the iPhone and the HomePod is incapable of doing some of the most basic things that are available on the iPhone.
  • Furthermore, the third-party skills are all implemented on the device meaning that if the user enables Siri on the iPhone to call an Uber, all of his other devices will remain unable to do it.
  • This is because SiriKit is a client-side SDK meaning that all the extensions run only on the client resulting in the limitation that I have outlined above.
  • By contrast Google, Amazon and Baidu have implemented the intelligence and the third-party extensions in the cloud meaning that there is only one version sitting in the cloud that can be accessed from any enabled device.
  • When a skill is enabled on one device, it is enabled on all of them giving complete uniformity of user experience.
  • Google Assistant is now so good at this that if two devices are in range of the voice it will answer the request on the device that is most suited to delivering the answer or service requested.
  • As voice becomes more important in controlling electronic devices, Siri’s fragmentation is going to lead to frustration and disappointment among users.
  • We are already starting to see this in the HomePod where the consensus review opinion is: fantastic speaker, poor digital experience.
  • Hence, this is a device that competes almost entirely on hardware which will work for a while and then cause real problems as competition catches up.
  • Harmon Kardon, JBL, Sonos etc are the real competitors for this product and their flexibility around digital assistants and third-party services may well give them an edge.
  • Some time ago, Apple put together its disparate AI research efforts but it seems to me that it has not gone far enough.
  • It would appear that there is a central repository where the master code line of Siri is developed which is then checked out and customised by product teams to make it more applicable for the device they are creating.
  • This results in fragmentation and inconsistency that wastes R&D resources and hurts the user experience.
  • This is exactly the problem that contributed to Samsung’s and Motorola’s inability to mount a serious challenge to Nokia in feature phones 15 years ago.
  • In Apple’s case I think that this still a reasonably straight forward fix by moving Siri and SiriKit completely to the cloud which would be a great feature to announce at WWDC this year.
  • Failure to make this change will simply hand the advantage even more to Google, Baidu and Amazon who are far and away the leaders in this space.
  • The question is whether Apple has the depth of character to make this change as it now has a massive business that is at the peak of its power and the requirement not to risk put this at risk will make it hesitate.
  • This is exactly the hesitation that made innovation at Nokia very difficult and sank its smartphone business.
  • This is why I think Apple must make this change, because if a high quality digital assistant becomes a requirement in the user’s purchase decision, Siri in its current form will start to play against users when purchasing digital ecosystem devices.

Alibaba – Offline grab pt. II

Reply to this post

 

 

 

 

 

Alibaba adds an offline vertical and cleans house

  • Alibaba is yet again increasing its assault on the offline portion of the Chinese retail market with more investments that will help it to become the dominant player in retail both online and offline.
  • Alibaba is buying 15% investment in Beijing Easyhome Furnishing for $865m and 38% holding in Shiji Retail Information Technology Company for $486m.
  • Beijing Easyhome Furnishing has 239 stores in 29 provinces and, as the name suggests, is a player in furniture, DIY, building materials as well as home refurbishment design services.
  • This will expand Alibaba’s offline retail presence into a new retail vertical alongside hypermarkets, mall operators and electronics.
  • Offline retail in China is stalling, but still massive at $4.5tn per year.
  • This is despite the rapid expansion of e-commerce and it remains a great example of why online and mobile have been so successful in the Chinese market.
  • Chinese offline retail is a fragmented and frustrating experience where decent service and information with regards to inventory, product lines and so on is routinely not available.
  • Consequently, when an online offering appears where information is clear and one is able to easily purchase goods and know when they will be delivered, shoppers quickly adapt.
  • It is the terrible offline experience with regards to almost everything that has allowed so many other goods, services and activities in China to rapidly migrate from offline to mobile.
  • I think that Alibaba’s strategy with its offline retail investments is all about turning them into a high quality and efficient retailers using the technologies and logistics expertise that it has gained with the development of its e-commerce business.
  • This is why the investment in Shiji Retail Information Technology makes complete sense as this could become the backbone of the infrastructure that allows Alibaba to make the necessary improvements.
  • It is also highly relevant that this investment will take Alibaba over 50% and majority control as its Taobao subsidiary purchased at 15% stake in 2014.
  • However, it is worth noting that in 2014 Alibaba paid $446m for a 15% stake giving a valuation of $2.97bn whereas now it is paying $486m for a 38% stake giving an implied valuation of $1.28bn some 57% below where it was four years ago.
  • Hence, I suspect that Shiji has got itself into trouble along with the rest of offline retail in China, which has enabled Alibaba to take control at a greatly reduced valuation.
  • I suspect that Shiji’s technology will be rapidly migrated to Alibaba Cloud giving Alibaba the infrastructure to leverage its online knowledge into its offline investments.
  • Given that Chinese retail is such a vast market, steady market share gains here has the scope to keep growth going at Alibaba (albeit at lower margins) once e-commerce begins to slow down.
  • It also offers Alibaba the opportunity to move into other sectors of off line retail once it has licked its current holdings into shape.
  • Hence, I think this move makes complete sense for Alibaba as there is a very clear opportunity for it in China which is completely different to that being followed by Amazon.
  • I am warming up to Alibaba as it is beginning to understand the importance and opportunity presented by the data its digital assets generate.
  • While it is behind Tencent in Digital Life coverage, I am increasingly of the opinion that it is moving more quickly to understand the opportunity offered by the digital ecosystem.
  • Hence, when Tencent runs out of steam, I will be considering this one very carefully as a possible switch.