Telecom providers plans to strike at mobile ads

Recent news reveals that global telecom providers may “bomb” the mobile ad space by blocking ads on phone networks, in order to get a share of the Internet advertising cookie. The telecom providers believe that since they have paid for the infrastructure they are entitled to some of the profits reaped from mobile ads.

Never mind the CPM

Mobile ads are on the rise, no doubt. Across all channels we are seeing 50%+ mobile market share. The problem with mobile users is that they are generally a lot worse customers. E-commerce sites generally experience a significantly lower conversion rate from mobile users than desktop users and mobile ads are more often than not worth a fraction of desktop ads.

If telecom providers are going to demand a share of the smaller pie, well, we are going to see some very unhappy shareholders at Google and Facebook. Though I would argue that Facebook would suffer less than Google as most of Facebook ads are on facebook.com or their app, on an https connection. Unless the telcos plan to issue MITM prone certs, I don’t see how they will easily be able to extort ad money from Facebook.

Google has a significant portion of ads from off-site ads via their Adsense programme. These are the likely target for the bomb. I don’t doubt that Google with their technological prowess could work around this block but they may not want to play cat and mouse with global telcos who could, in a fit of anger, throttle mobile visitors to bandwidth heavy Google properties like YouTube.

What will happen?

If the big telecom providers decide to launch the bomb I suspect that we will see a string of lawsuits, probably anti-trust and net neutrality related. Even if the advertisers don’t bend to the demands for revenue sharing, the lawsuits will cost time and money for all parties.
With text messages decreasing rapidly and mobile data becoming ever cheaper, at least in Sweden, the telcos are feeling the pressure. It used to be the case that buying a phone off a telco was more expensive in the long run but these days it tends to be cheaper than buying the phones straight off, say Apple. Data is also way more expensive than texts for the telcos and this means that their margins are shrinking quite rapidly. We should expect more schemes like this in the future as margins and stable revenue shrinks.

It is unlikely that this scheme will succeed in the long run as the technical prowess of the big advertisers are like to be enough to work around the majority of blocking attempts like this but telecoms providers double-dipping may well be the future as shareholders demand growth in a soon to be saturated market.

-P

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Is SnapChat Worth $3 Billion?

Snapchat Logo

Snapchat Logo

SnapChat recently rejected a $3 billion offer from Facebook. With rumours of offers from both Tencent and Google. The trendy app is certainly popular among teenagers (where Facebook starts to lag behind). But they have no revenue and no discernible plans on how to generate said revenue. Their clientèle isn’t exactly the most wealthy and they could very well leave the app in case it starts charging money.

Yesterday an user on Hacker News asked: Ask HN: How much do you think SnapChat is really worth?

So far the replies have ranged from $0 to $3b+.  No one really knows today how much it is worth but most seen hesitant regarding SnapChat’s valuation. It simply has no revenue, to quote the current top poster:

$0

I hadn’t heard of SnapChat until this acquisition story broke. I guess I’m out of touch or something?

Anyway, no revenue and no real hope of revenue = $0. VC can blow smoke up your ass until they collapse, blue in the face, but it’s not a winning proposition.

Ignoring the distaste for VCs that the poster has, it is a fair point. SnapChat will have a hard time to actually generate the revenue to merit a $3 billion valuation.  My comment on the matter leads more towards another issue (in my mind): Lawsuits. Teens are the demographic that heavily use SnapChat, sending photos to each other. Often times they  send nude photos…. I can just smell the lawsuits coming. Maybe not now but sometime there will be a lawsuit, a very expensive lawsuit.

That should worry every corporate lawyer. There are immense risks in my opinion. What is it worth? Who knows, to the right buyer it may be worth $3+ billion. I doubt they will generate much revenue though. The younger audience is notoriously price sensitive, if they start charging money for the service they are going to end up in deep trouble. They don’t store much private information (I hope…. Aren’t those photos supposed to disappear!) about their users, which makes selling relevant ads harder.  Below is my comment on the matter in that HN thread:

The problem I see with Snapchat is that:

a) currently no revenue, I imagine it is harder to monetize Snapchat than Facebook et al. But it is not my area of expertise so I can give them the benefit of the doubt that they can monetize it.

b) They are one lawsuit away from blowing up. I can see a future where they get hit with a child porn lawsuit or something similar. I assume they have good lawyers but it is still a rather significant risk.

I think it was a mistake not to take one of those billion dollar deals but I have been wrong before. If they can monetize their service and avoid lawsuits it could become huge.

-P

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Google HR Boss on Recruitment: Brainteasers and GPA are irrelevant

New York Times published an interview with Laszlo Bock, SVP of People operations at Google. What he had to say about recruitment and the factors that influence the success of recruitment endeavours was quite interesting. In short: GPA and most interviews are lousy predictors for good employees.

On the hiring side, we found that brainteasers are a complete waste of time. How many golf balls can you fit into an airplane? How many gas stations in Manhattan? A complete waste of time. They don’t predict anything. They serve primarily to make the interviewer feel smart.

Brainteasers are a waste of time? Who would have thought! They are not really predictive of anything other than the fact that you have learned how to answer them. It might give an appreciation of general affinity for guesstimating numbers (assuming no preparation) but that has very little to do with real world problems. It is like exam that have you memorising a lot of simple facts, it serves little read world purpose to remember all the parts that make up the business model canvas, when you can easily look it up.

Behavioral interviewing also works — where you’re not giving someone a hypothetical, but you’re starting with a question like, “Give me an example of a time when you solved an analytically difficult problem.”

Behavioural interviews make sense why they work, as you have a situation where the interviewees have to talk about themselves, how they acted and why. People love to talk about themselves and the it enables the interviewer to judge the interviewee based on the actual actions, thus enabling them to judge if the interviewee would fit in with the organization. I have answered a few of these questions and while they are quite hard to answer as I am not the best story-teller, they are more interesting and tells more about yourself than “How many golf balls can you fit into an airplane?”

One of the things we’ve seen from all our data crunching is that G.P.A.’s are worthless as a criteria for hiring, and test scores are worthless — no correlation at all except for brand-new college grads, where there’s a slight correlation. […] After two or three years, your ability to perform at Google is completely unrelated to how you performed when you were in school

That GPAs and test scores are irrelevant for future careers should be no surprise, university/school work is fundamentally different from the work in the real world and you the social aspect of the real world is much more important who can answer the questions in a way the teachers want or  who is best at cramming in raw information.  While relevant for judging how well the individual is at absorbing information, it does not really have much bearing on their ability to be productive employees.

All on all, interesting summary by Google, based on data they have found. I recommend reading the article and making up your own opinion on the matter. I do believe that some of the interview clichés are overrated but as Laszlo mentions,  recruitment is hard. We all know this and a failed recruitment can be VERY costly.

-P

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