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Youtube’s First Official Financial Result

It has been more than 13 years since Youtube was acquired for $1.65 billion by Google back in October 2006.

Founded in February 2005, with $11.5 million total venture funding and 65 employees at that time, Youtube commanded 46% of visits to U.S. online-video sites in September. That compared with a 21% share for the video activities of News Corp.’s MySpace site and 11% for Google Video. Youtube had close to 20 million monthly visitors in August 2006.

A year and half before Youtube’s acquisition, MySpace’s parent company Intermix Media Inc. was acquired by News Corp. for $580 million.

Back then, Google reported total revenues of $6.14 billion in 2005 and $10.60 billion in 2006, and had a market value of $132 billion. Its net income was $3 billion in 2006 with $3.6 billion cash flow from operations and more than $11 billion cash balance.

On Monday Feb 3, 2020, Alphabet first provided the breakdown for some of its non-Google-search businesses, including Youtube.

Year Ended December 31,
	2017		2018		2019
Google Search & other	$	69,811	$	85,296	$	98,115
YouTube ads⁽¹⁾	8,150		11,155		15,149

(1) YouTube non-advertising revenues are included in Google other revenues.

Youtube ads generated $4,717 million revenue in 2019 Q4 – a ~$19 billion run rate.

Using a multiple of 5.0x, Youtube could be valued at ~$100 billion – a 60 times return for google acquisition or an IRR of 37% for 13 years.

I guess the success formula is: with the right synergies, acquire early & provide support to grow it.

Alphabet 2019 10-K

2019 Q4 Earnings Call Transcript

「Video of the Week」Quantum Computing

This week, Amazon announced it is starting to offer quantum computing services (called “Amazon Braket”) on AWS.

Here is a videos to explain the basic unit in quantum computing, Quantum Bit, or Qubit.

CB Insights: Everything You Need To Know About What Amazon Is Doing In Financial Services

A 2018 report by CB Insights.

A good reading as I was thinking about future payment industry (also you can find a previous post on How Card Networks May Fail: Top Merchants With Gift Cards + Mobile Wallet)

Full report here; table of contents below

Amazon’s product strategy
Payments
Cash
Lending
Amazon’s Next Financial Pillar
Market strategy outside the US
India
Mexico
Rumors: What will Amazon do next?
Closing thoughts

Master Innovation And Development Plan By Sidewalk Toronto

Earlier this year, I shared 「Video of the Week」Future Cities by Sidewalk Labs.

Now we have many more documents from Sidewalk Toronto. Google is trying to build cities.

The plan will begin with Quayside in Phase I.

Map shows the proposed IDEA District and the Eastern Waterfront. The Quayside neighbourhood, on the northwest perimeter of the district, is blue, representing phase 1 of development. — Source: sidewalktoronto

There will be several focuses

Mobility. A transportation system that reduces the need to own a car by providing safe, convenient, connected, and affordable options for every trip.
Common & social areas. A system of streets, parks, plazas, and open spaces that encourages people to spend more time outdoors, together; health, civic life, learning, and workforce initiatives and facilities that enable people to thrive.
Buildings & Housing. Sustainable and adaptable buildings with mixed uses; affordable residences.
Environmental friendly as a climate-positive community.
Digitalize every possible part of the city.

「What’s News In China」

Gree Electric Appliances (格力电器) finalized the 15% stake sale for RMB41.7 billionIt is one of the most watched private equity deal in China. The deal, part of China’s efforts to reduce government ownership, will reduce the state-owned Zhuhai Gree Group’s stake to 3.2 percent. Hillhouse’s Zhuhai Mingjun with the newly acquired 15% stake becomes the largest single shareholder. Hillhouse through Zhuhai Mingjun can nominate 3 seats in the 9-member board (in addition to two board seats from Hillhouse’ Zhuhai Gaoling and alliance Pearl Brilliance) and agreed to an equity incentive plan of no more than 4 percent. // 36Kr

Baidu’s smart speaker leads in China in 2019 Q3. According to Strategy Analytics, Baidu (NASDAQ: BIDU) shipped 4.3 million smart speakers in 2019 Q3, growing 130% yoy, surpassing Alibaba and Xiaomi, whose product shipments follow closely. Before Baidu launched its smart speaker with proprietary DuerOS voice AI, Alibaba and Xiaomi were dividing up the market share in China. // StrategyAnalytics

Tencent is officially launching Nintendo Switch in China. Tencent held a press conference on Dec 4 in Shanghai, announcing that the official Chinese version of the Nintendo Switch will launch in mainland China next week (Dec 10). Tencent and Nintendo first announced the partnership in April this year. The Switch will include a copy of New Super Mario Bros. U Deluxe, selling for 2,099 yuan (~$297). // Tencent

SoftBank Has An Easy Strategy – Mobile Payment In Every Emerging Economy

SoftBank might be the investment firm outside of China that understands mobile payments the best.

Tapping Ant Financial and Tencent’s interests in overseas markets, SoftBank has investments in every major emerging economy.

Southeast Asia: Grab

SoftBank inject another $2 billion earlier this year into Grab. It first invested in GrabTaxi back in 2014 with $250 million Series D, making itself the largest shareholder. GrabTaxi then rebranded into Grab in 2016, entering into payment service with GrabPay and other businesses. It also acquired Kudo based in Indonesia in 2017 to beef up its payment platform.

[Also, in July, Softbank’s Vision Fund and GIC invested $300 million in e-wallet VNPAY’s parent company for Vietnam]

India: Paytm

This week, SoftBank and Ant Financial injected $1 billion into Paytm. The competition intensifies with Google Pay, payments from e-commerce and Facebook’s payment especially on WhatsApp.

Argentina: Ualá

On November 25, Ualá raised a $150 million Series C led by Tencent and SoftBank. Ualá is a mobile banking tech platform and allows users to transfer money, invest in mutual funds, request loans, pay bills and top-up prepaid services.

Mexico: Clip

SoftBank invested $20 million in Clip, leading a $100 million round in May. Clip offers Square-like products for merchant payments, as the country is more relying on cards.

Updates – Mexico: Konfio

On December 3, SoftBank invested $100 million into Konfio, which provides credit underwriting, or SMB loans.

Combining Konfio and Clip will create the Square or Clover in Mexico.

An easy model and bet on those economies.

「News of the Week」Japan’s New Internet Giant

WSJ – Yahoo Japan and Chat App Line Agree to Merge

SoftBank’s announcement

As part of the deal, SoftBank Group subsidiary SoftBank Corp. and Naver said they would buy all the shares in Line not already owned by Naver at ¥5,200 ($47.78) a share. Naver owns 72.6% of Line as of Monday. SoftBank Corp. and Naver will pay ¥170 billion ($1.56 billion) each to buy those Line shares, SoftBank said.

Line Pay has 37 million users and PayPay, operated jointly by SoftBank and Yahoo Japan, has 19 million. (Nikkei)

Dots to connect: competitions in ads, e-commerce, payment in Japan, monetization on 82 million Line MAU, Japan moving to cash-less, SoftBank’s consolidated financial performance, new superapp, etc.

「Video of the Week」Jumia

「What’s News In China」

Shanghai Green Valley Pharmaceuticals (Green Valley, 绿谷制药) today announced on Nov 2 that China’s National Medical Products Administration (NMPA) has approved Oligomannate (GV-971) as new drug for the treatment of “mild to moderate Alzheimer’s disease (AD) and improving cognitive function.” It is the first novel drug approved for Alzheimer’s disease globally since 2003. The company is also planning a global phase 3 trial with sites in the U.S., Europe and other parts of Asia in early 2020 to support regulatory filings around the world. // prnewswire | fiercepharma

On Nov 5, Nio (NASDAQ: NIO), long being seen as the Tesla in China, announced its partnership with Intel’s Mobileye to build self-driving EVs. Under the planned collaboration, Mobileye will provide NIO with the design of the self-driving system building on the Mobileye AV Series, a L4 AV kit comprised of the Mobileye EyeQ® system-on-chip, hardware, driving policy, safety software and mapping solution. NIO will take on the automotive-grade engineering, integration and mass-production of Mobileye’s system for both consumer automotive markets and for Mobileye’s mobility-as-a-service (MaaS) applications. In addition to integrating the self-driving system into its vehicle lines, NIO will develop a specially configured variant of electric AVs that Mobileye will use as robotaxis, deployed for ride-hailing services in global markets. // TechCrunch| intel

36Kr (NASDAQ: KRKR), a Beijing-based news and data provider, known for tracking fundraising and tech related news in China, raised $20 million in its Friday debut on NASDAQ. The company is similar to TechCrunch or Crunchbase (its affiliated Crunchbase News). // Crunchbase News

Meituan: Fighting Every War

The current Meituan (MeituanDianping) came from a merger between Meituan and Dianping in December 2015.

Once a company invested by Alibaba, Meituan has become more closer with Tencent after the merger.

At the beginning of 2016, MeituanDianping raised $3.3 billion from Tencent, DST Global and Temasek at a $15 billion pre-money valuation; meanwhile, Alibaba sold its stake for ~$900 million in the same month.

Later that year, in April 2016, Alibaba invested the $900 million in Ele.me and Ant Financial invested $350 million.

The war has already changed from Yelp and Groupon to more comprehensive areas – restaurants and other local services.

[Note – in 2014, Priceline (now Booking.com) agreed to buy restaurant booking service OpenTable for about $2.6 billion in cash. But in China, dining is not exactly scheduled by time but by getting a number into the line, determined by how many people are ahead of you.]

However, US and China are similar in the world of food delivery. Meituan and Ele.me are fighting in China while Uber Eats, DoorDash, GrubHub, PostMates are fighting in the US. The difference – China uses e-bikes and US uses cars.

And for other services like movies, Meituan spun-off Maoyan in 2016. Maoyan is competing with Tao Piaopiao, which raised ¥1.7 billion in 2016.

In the US, the market is led by Fandango and Atom Tickets. But the market is not limited to movies – it’s about all kinds of shows, concerts and exhibitions.

Meituan is also offering hotel & travel bookings, fighting in the war with Ctrip.

Going back to Meituan, it raised $4 billion in October 2017 from Tencent, Sequoia, GIC and Tiger Global.

Meituan Dianping introduced its ride-hailing operation Meituan Dache in February 2018.

In April 2018, Alibaba acquired Ele.me for $9.5 billion.

Same week , Meituan acquired mobike for $2.7 billion.

Later that month, Ant Financials led a round of $700 million for Hellobike.

Meituan went for IPO in Hong Kong in September 2018, raising $4.2 billion.

Another OTA, Tongcheng-Elong, with Tencent and Ctrip as major shareholders, went IPO in Hong Kong in November 2018, raising $180 million.

Summing up the wars Meituan is in: