Daily Wrap Up - internet Financial News

Location-Based Services To Reach $2.2 Billion

Global consumer location-based services (LBS) subscribers and revenue are on track to double in 2009, according to Gartner.

Despite an anticipated 4 percent decrease in mobile device sales, LBS subscribers are forecast to grow from 41 million in 2008 to 95.7 million in 2009 while revenue is predicted to increase from $998.3 million in 2008 to $2.2 billion in 2009.

Gartner defines LBS as services that use information about the location of mobile devices, derived from cellular networks, Wi-Fi access points or via satellite links to receivers in (or connected to) the handsets themselves.

"The LBS industry has matured rapidly in recent months through a mixture of consolidation, improved price/performance of the enabling technologies and compelling location applications," said Annette Zimmermann, senior research analyst at Gartner.

"Factors driving the increase in the next year or so include higher availability of GPS-enabled phones, reduced prices and appearance of application stores."

Gartner predicts that ad supported or "free" (excluding data charges by mobile carriers) will gain more traction as user adopt it as a way to manage costs. Mobile carriers that stick with the business model of charging users $5 to $10 per month plus date plans will experience high churn rates as users will look for free alternatives. In North America and Western Europe, the share of users opting for free services is about 10-15 percent today and is expected to grow to 40-50 percent in 2013.

"The competitive landscape will change and most mobile carriers need to alter their approach toward offering LBS and dealing with developers," said Ms Zimmermann.

"Subscriber growth will hinge on "free" - disregarding data charges - services. Mobile operators' initiatives to open up the application programming interface (API) to third-party developers will help them compete against other players in the market and will also be beneficial to the different parties involved, down to the end user."

Google Invests More Money In 23andme

23andme is a biotech company that was cofounded by Anne Wojcicki. Anne Wojcicki just happens to be married to Google cofounder Sergey Brin. And now, according to an SEC filing, 23andme has become $2.6 million richer thanks to Google.

Google made an initial investment of $3.9 million in 23andme some time ago. Considering that Google's in the business of search and advertising, and that 23andme tests people's spit for diseases (or more accurately, genetic predispositions to disease), this crossover raised a few eyebrows.

As Scott Morrison reports, the situation looked even iffier once people learned that "[t]he funds from Google's first investment in the biotech group were used in part to repay a loan of approximately $2.6 million that Brin had earlier provided to 23andMe."

But anyway, the SEC document makes Wojcicki's and Brin's relationship clear, and points out that Brin put in a lot more money - $10 million - this time around. The filing also states, "Google continues to hold a minority interest in 23andMe as a result of the Series B investment," so it seems that no under-the-table-takeover has occurred.

Google's investors appear to be perfectly okay with the move, as well, since the search giant's stock rose by 1.46 percent today.

Nothing was said about where the two companies might go from here.

Top Disk Storage Vendors See Revenue Declines

Sales of disk storage systems saw an 18.2 percent decline in the first quarter of 2009, compared to the prior years first quarter, according to market researcher IDC.

"The disk storage system vendors are really seeing the impact of the global economic downturn in the first quarter revenues," said Steve Scully, research manager, Enterprise Storage at IDC.

"However, while total revenues declined year over year, the overall storage capacity shipped continued to grow. These contrasting results are due to a combination of currency implications, lower overall sales, shifts in product mix, and aggressive pricing actions."

EMC held on to its lead in the disk storage systems market with 20.7 percent revenue share in the first quarter, followed by HP and IBM in a statistical tie for the second position with 11.5 percent and 11.3 percent revenue share respectively. Dell and Hitachi finished the quarter in a statistical tie for fourth place with 9.8 percent and 9.4 percent revenue share respectively.

All vendors in the top five saw declines in first quarter revenue growth. HP was hit hardest dipping 19.6 percent for $482 million compared to the first quarter of 2008. EMC saw a decline of 16 percent for $871 million followed by IBM with a 15 percent drop for $476 million in revenue.

"Although the economic crisis was fully realized by the enterprise storage systems market in the first quarter of 2009, the quarter wasn't without its bright spots," said Liz Conner, research analyst, Storage Systems. "Entry-level price bands ($0K - $14.99K) showed 9.9% year-over-year growth and the midrange price band ($15K - $49.99K) was flat year over year, supporting IDC's belief that storage products are still in demand, with customer spending trending towards more modular, price point options."

"In addition, the high-end price band ($300K-499.99K) saw a 14.5% year-over-year growth as vendors discounted their very high-end products, shifting the ASV's into lower price bands in order to meet the demand for high-end storage while accounting for reduced IT budgets."

Gates Says Tech Can Help U.S. Out Of Recession

Microsoft Chairman Bill Gates believes that technology can help lift the United States out of the recession and aid the globe's struggling markets.

"The drug companies will get back in high productivity mode. The software, IT revolution -- we're just at the start of that," said Gates at Microsoft's annual CEO Summit at the company's campus near Seattle.

"What we can do for education, communication, and what that looks like for the efficiencies of world markets, we are just at the beginning of that."

Gates made the remarks on Wednesday at the private event, and they were made public on Thursday.

"The opportunities for innovation are stronger today than ever," Gates told the audience, which included billionaire investor Warren Buffet, News Corp Chairman Rupert Murdoch and Amzon.com Chief Executive Jeff Bezos.

Microsoft Chief Executive Steve Ballmer was also optimistic stating that the business world is only "coming into halftime" of the Internet revolution.

"The VCs are pulling back," said Ballmer. "The seventh, eighth, and ninth copy of the idea won't get funded today, but most good propositions are still going to get funded. There's plenty of venture capital out there, relative to ideas."

He was also positive about research and development spending remaining strong.

"I don't know anybody in our industry actually who's cutting their R&D budget," said Ballmer. "I know people who are doing a lot of different things, but most people are not slashing their R&D budget."

Online Retailers Bullish On Web Sales

The economy is causing online retailers to rethink their marketing strategies in order to acquire and retain customers, according to findings from "The State of Retailing Online 2009," study from Shop.org conducted by Forrester Research.

While Internet sales continue to outpace traditional retail sales, companies are realistic about current challenges. According to the survey, half of respondents (54%) expect overall retail growth to slow during the next 12 months and 57 percent say the economic slowdown is hurting their company's bottom line.

That said, companies are optimistic about online operations with four out of five retailers say the Web is better suited than other channels to withstand the recession and on third say the downturn has helped them to capture greater market share.

"Retailers everywhere are trying to get their arms around a pullback in consumer spending, and online retailers are no exception," said Scott Silverman, executive director of Shop.org.

"Online retailers are trying to weather this economic storm by doing more with less, making smart spending decisions, and leveraging effective, affordable tactics like email to grow their businesses."

Almost half of retailers surveyed (46%) have no plans to cut back original budgets and will spend as planned on their online business, while 24 percent of retailers will spend more on their Internet business than originally planned. Companies planning to spend more will increase investment in a number of areas, including search (80% of respondents), email (65%), and social marketing (60%).

"Because consumers continue to spend online, interactive marketing spend to drive web sales remains a lucrative investment," said Sucharita Mulpuru, Forrester Research principal analyst and author of the report.

"While other retail channels struggle, eCommerce managers have a unique opportunity to drive more sales and test different tactics that resonate with consumers."

Google Q1 Earnings Mostly Positive

Google has once again surprised analysts and investors by beating expectations in the first quarter of 2009.

Google reported revenues of $5.52 billion for the quarter, an increase of 6 percent compared to the first quarter of 2008, but a decrease of 3 percent compared to the fourth quarter of 2008.

Estimates of earnings per share were in the $4.90 to $4.95 range, Google posted earning per share of $516 beating Wall Street analyst's expectations. Paid clicks were up three percent over the fourth quarter of 2008.

"Google had a good quarter given the depth of the recession -- while revenues were down quarter over quarter, they grew 6% year over year thanks to continued strong query growth. These results underline both the resilience of our business model and the ongoing potential of the web as users and advertisers shift online," said Eric Schmidt, CEO of Google.

"Going forward, our priority remains investing for the long term to drive future growth in our core and emerging businesses."

Google also announced that Omid Kordestani, formerly senior vice president, global sales & business development will now be senior advisor office of the CEO and founders.

Nikesh Arora will move form president of international operations to his new role as president, global sales operations & business development. Arora will have responsibility for all of Google's revenue and customer operations, as well as marketing partnerships.

Online Coupons Gaining Popularity

A new survey finds that 34 percent of female consumers are using coupons more frequently than they were six months ago, according to Burst Media.

The survey which polled more than 4,500 women 18 years or older found that nearly 70 percent of respondents would print and redeem an online coupon for a product they would be interested in purchasing.

"The use of the Internet as a source for coupons has soared," said Chuck Moran, VP of Marketing for Burst Media. "The advantage of Internet coupons over their paper counterparts is that advertisers can more finely target their offers - whether through content, geographic or even behavioral targeting."

"Additionally, the immediacy and ability to measure performance on the Internet allow marketers to run last minute promotions and react to changing market conditions."

Although the Sunday newspaper is still the primary source of coupons for 29.2 percent of respondents, that percentage is down from 35.3 percent in 2002. The survey revealed a substantial increase in the use of the Internet for coupons - rising from 3.8 percent in 2002 to 16 percent today.

Other media cited as a respondents' primary source of coupons include in-store circulars (14.9%), mail packs/direct mail (13.5%), weekday newspapers (8.3%), in-store dispensers (5.4%) and magazines (2.2%).

Additionally, the survey found that Internet coupons are particularly effective in attracting consumers' attention. Three-quarters (75.2%) of women 35-54 years old indicated they would print and redeem an Internet coupon - this compares to 62.2 percent of women 18-34 years and 67.7 percent of women 55 years and older.

Global Digital Media Reaches $74 Billion

The leading 27 digital media companies in the world increased earnings by more than 20 percent, to $74 billion in 2008, up from $61.5 billion in 2007, according to new research from Strategy Analytics.

Out of the top five digital media companies globally, Apple's "Other Music Related Products and Services" segment, which includes iTunes, was best-in-class- growing 32.7 percent in 2008, while Yahoo saw positive growth, it grew the least with 3.4 percent.

"While growth in the digital media sector has been slowing as a result of the global economic downturn, the industry still grew a healthy 20.5% in 2008 and Strategy Analytics projects a further 7% - 9% growth in 2009," said Jia Wu, Analyst at Strategy Analytics' Digital Consumer Practice.

The research also found that most of the companies focusing on consumer paid-for media, such as music and video downloads, are currently withstanding the economic downturn better than most of the companies focusing on online advertising.

"The fact that, in 2008, most of the companies focusing on consumer paid-for media in the Strategy Analytics Digital Media Index performed much better than most of the companies focusing on online advertising, could be an early indicator that we are approaching a watershed moment in the nascent digital media market, and that more focus will be put on consumer paid-for online media in the difficult years ahead," said Martin Olausson, Director of Digital Media Research at Strategy Analytics.

Ecommerce Spending To Rebound In 2010

U.S. ecommerce sales will decline for the first time this year, according to a revised forecast from eMarketer.

The firms revised forecast for ecommerce says consumers will spend 0.4 percent less online in 2009, falling to $133 billion.

"We're seeing a very sober picture - it's going to be rough this year," said Jeffrey Grau, a senior analyst at eMarketer told the New York Times. "However, maybe as early as next year, things will begin to pick up where they left off."

Grau says as the economy improves online sales will return to double-digit growth rates seen before 2008.

"The core Internet shopper is an affluent consumer. They're being hit now like everybody else, but we think once the economy improves, there will be a lot of pent-up demand and we'll see more spending," said Grau.

The ecommerce sales forecast for 2010 have online sales growing 9.8 percent for a total of $146 billion. By 2011 ecommerce sales are expected to be back to double-digit growth, growing 13.3 percent to $165.6 billion, according to eMarketer.

"The real contribution of the Internet may be people who research online and make store purchases that are influenced by their online research," said Grau.

"Our forecast is optimistic, because there are some economists saying it could be a lot worse this year."

Online Banking Usage Up In Down Economy

U.S. consumers are paying closer attention to their finances and using online banking more frequently to manage their accounts during the current financial crisis, according to a study by Forrester Consulting conducted for Fiserv.

Nearly three quarters (71%) of consumers said they are keeping a closer watch on their finances then they did a year ago. More than three-quarters said they use online banking, with non-users making up the remaining one quarter.

Online banking usage increased more than any other banking channel, with 28 percent of consumers saying they are using online banking more then they did a year ago, and 63 percent said managing all of their accounts online from one site would help them feel more in control of their finances.

"In these difficult times, financial institutions are looking for new ways to reach out to consumers and provide value," said Todd Lesher, division president, Fiserv Electronic Banking Services. "This survey indicates that online banking is still a great opportunity for financial institutions looking to strengthen their ties with consumers."

"Consumers are using online banking more frequently to monitor their cash flow, manage their finances more actively and save money on stamps. Financial institutions are playing an important role by providing new and innovative online tools to help consumers weather the financial storm."