Amazon’s Web Services success and old tech

Below is a good article on the current state-of-affairs regarding ‘The Cloud’ and how Amazon’s success with their Web Services (AWS) business is getting the ‘old school’ technology providers attention.  We have summarized some of the highlights below:

  • Since Amazon (AMZN) started disclosing the results of its cloud service business back in April, the stock is up 68%, representing a $124 billion increase in stock market value
  • …the industrial giant [GE] could slash the cost of running an important oil and gas application over 90% by shifting to the cloud
    • Application updates that once took 20 days can now be implemented in two minutes
  • [Coca-Cola’s CTO] said “Our data centers have always had lots of servers, lots of cost, using a lot of energy, and this is not going to get us to the future,”
  • Amazon’s web services unit has already reported revenue of $5.4 billion for the first three quarters of the year, an increase of 70% over the same period a year ago.
    • Sales should exceed $10 billion next year and $16 billion in 2017
  • Cloud Winners, so far as of 2015, according to this article are AMZN, GOOGL and MSFT:

aws_111115

  • And the not-so-winners, so far as of 2015, according to this article are IBM, HPQ and EMC:

aws2_111115

Of course times are rapidly changing fast in ‘The Cloud’ marketplace and today’s winners certainly might be tomorrow’s losers but one thing is for certain and that is talk is cheap and actions are more important than ever in this Fad called “The Cloud”.

http://finance.yahoo.com/news/amazon-s-cloud-success-stokes-fears-of-old-tech-failures-163810909.html

Amazon’s cloud success stokes fears of old tech failures

 

 

LinkedIn Q4’12 financial results: Cloud/SaaS are fads.

Congratulations to LinkedIn, once again, on delivering great fourth-quarter financial results.  These outstanding results continue to demonstrate the fact that the ever-growing disparate nature between “business cloud” and “consumer cloud” which we wrote about here previously.

While “Facebook fatigue” starts to set in for many users, LinkedIn’s membership continues to swell at an incredible pace.

Facebook Fatigue:  “About 27 percent of Facebook users – and 38 percent of those ages 18-29 – said they plan to spend less time on the social network this year, and 61 percent have at one time or another taken a “Facebook vacation” lasting several weeks or more.

Of course Facebook’s overall user base of over 1 billion and revenue in the $5 billion territory dwarf’s LinkedIn’s numbers in the same categories but the viability of each companies business model is what separates these two cloud ‘social’ companies.

linkedin logo

LinkedIn Q4 2012 financial results:

  • Revenue jumped 81 percent to $303.6 million
  • User base rose 8 percent to 202 million

Almost all of Facebook’s revenue is based on advertising, while LinkedIn is a nice blend of advertising and subscriptions.  Advertising only is not a viable long-term business strategy.  It’s just too simple for advertisers to switch from one marketing medium to another and they do it all the time.  Whatever is the ‘hot’ advertising deliver platform at a particular time is where the money will surely flow.

As LinkedIn continues to establish itself as the most popular site for job seekers, the company is selling more subscriptions to help recruiters find the right people. Revenue from talent solutions, Web-based software that recruiters and employers use to fill jobs, climbed 90 percent to $161 million, accounting for 53 percent of total sales.

Bait-and-switch?

I personally am a big fan of LinkedIn and absolutely love their services however it’s also best to be cautious not to rely on just one such service.  Why?  Because we’ve seen it thousands of times previously where a once great service starts to let pure greed take over the corporate culture from what it once was.  When a company starts to focus on pure profit and forgets about delivering a quality product or service then they are doomed. In the case of LinkedIn it might be starting with this:

Starting in the second quarter, the company will raise subscription prices for products targeting recruiters and promoting job openings.

Of course LinkedIn has every right in the world to charge whatever they wish for their services but they should be careful to avoid the ‘How Netflix Lost 800,000 Members, and Good Will‘ effect.  What Netflix did was a classic bait-and-switch.  They on-boarded millions of loyal, and mostly satisfied, users and then arrogantly raised prices on their services.

Subscribers revolted and many dropped the service. The plan further tarnished a once widely respected Internet service that had already been wounded by an unpopular price increase in the summer.

Netflix temporarily lost yours-truly as a customer.  On a side-note, I admire Netflix mostly for their outstanding corporate culture.  View this slideshow if you want to learn more about the Netflix Corporate Culture.

I’m certainly not saying that LinkedIn is in danger of losing users due to this price increase but it’s always wise not to bite the hand that feeds you.

Fads

Just for fun I took the 2 year stock chart from Yahoo Finance and added today’s projected closing price of nearly $150 per share to the far-right portion of the chart.  As you can clearly see LNKD investors are certainly pleased with that they didn’t listen to all the ‘Cloud Is A Fad’ nay-sayers.

linked stock price 02 08 13

In summary, and in the true #CloudIsAFad spirit, I guess I will close by sarcastically pointing out that LKND on pace for over $1 billion annual revenue (~$16B valuation), CRM on pace for over $3 billion annual revenue (~$24B valuation) and even FB with over $5 billion annual revenue (~$69B valuation) are all just Fads.  #SaaSIsAfad.

You can read the entire article on ‘LinkedIn Profit, Sales Beat Estimates After Membership Swells’ here:  http://www.bloomberg.com/news/2013-02-07/linkedin-xxx.html?cmpid=yhoo

 

“Business” cloud and “Consumer” cloud. LinkedIn reports great Q2 earnings and revenue growth

Reading the news of LinkedIn’s great Q2 earnings report (http://finance.yahoo.com/news/linkedin-2q-net-income-falls-203904846.html) got me thinking about how seriously segregated the “business” market is becoming from the “consumer” market in regards to to cloud computing.

It’s becoming clear that investors, in the stock market and venture capital industries are only going to put their money with companies that offer serious business value instead of just relying on advertising as a revenue business model.  Some example of winners and losers as of this blog post (8/24/12) are as follows:

Winners

  1. LinkedIn  (+41.75% stock price over 1 year period)
  2. Salesforce  (+27.59%)
  3. Amazon  (+26.85%)

Losers

  1. Facebook  (-49.23%)
  2. Groupon  (-83.00%)
  3. Zynga  (-65.58%)

While the current stock prices, or the funding these companies are receiving, will certainly not dictate future results, the fact of the matter is that these types of indicators typically can accurately predict possible outcomes.

It’s clear to me that a business model such as LinkedIn where a good portion of their revenue comes from valuable ‘business’ services, as opposed to just advertising, is a winning formula:  “LinkedIn gets more than two-thirds of its revenue from fees it charges companies, recruiting services and other people who want broader access to the profiles and other data on its site. The rest comes from advertising.”

Congratulations to the LinkedIn folks on creating a great cloud service that people seem to sincerely enjoy, myself included.  Below are cliff notes from LinkedIn’s Q2/2012 quarterly earnings report:

  • LinkedIn Q2 Adjusted Earnings: $18.1 million (Q2/2012) versus $10.8 million (Q2/2011)
  • Revenue increased 89 percent to $228 million, from $121 million
  • The company raised its forecast for the year

They did, however, invest a lot of money in the future:

  • “Marketing, development and other expenses increased 93 percent to $215 million, from $111 million.”
  • “LinkedIn expects revenue of $235 million to $240 million for the current quarter.”

Here are the one year stock charts for the companies mentioned above for your viewing pleasure:

Winners:

LinkedIn

Salesforce

Amazon

Losers:

Facebook

Groupon

Zynga

Advice for the cloud vendors is to be a ‘business-class’ cloud services provider in order to grow a prosperous company.

Google Is A Fad

No one will ever trust Google with their information, no one *sarcasm*

  • 100 million active Google+ users
  • 350 million people now use web-based email app GMail
  • Web browser Chrome is “growing fast” with over 200 million users to date
  • YouTube has over 800 million monthly users
  • Twitter revealed it has 140 million active users in April
  • Facebook said it reached 845 million monthly active users in December 2011

http://news.yahoo.com/google-numbers-100-million-active-google-users-350-110834825.html