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2017 in Tech: When Facebook and Twitter Met in Front of Congress

 8 min read / 

When Mark Zuckerberg founded Facebook some 14 years ago, one has to doubt he would have envisaged himself, or his company, testifying in front of Congress in relation to Russia meddling in the US presidential election. The same goes for Twitter’s Jack Dorsey.

However, 2017 saw both companies go far from where they started. Facebook sits comfortably above 2 billion users across platforms, and reported over $10bn in advertising revenues. While Twitter may not have fared equally in terms of financial achievements, it can pride itself as being the main platform of communication for the world’s most powerful leader: Donald Trump. And the two companies did cross paths at one crucial point this year: indeed, in front of Congress.

2017 has also proven equally challenging for other tech giants, such as Uber (the company lost its CEO and was rocked by multiple scandals) and Snap (its long-awaited IPO got off to a very rocky start). However, at the end of the day, stakeholders will agree that it often all comes down to one thing: profits. And as long as companies can deliver – or show significant promise they will in the future – missteps can be overlooked.

For Uber, the news that Softbank is acquiring a 15% stake for some $8bn will give new hope to interested parties – from shareholders to clients who have gotten used to the company’s nimble service and low prices. Facebook, in spite of some potential reputational damage, still brought in billions in revenues.

As such, it was not all gloom and doom. Here’s a what some of the main players did in 2017:


2017 has been a difficult year for Snapchat and its parent company, Snap Inc. After a promising first quarter, the technology and social media company’s net losses increased to $443m in Q3, failing to reach financial expectations. Adding just 4.5 million users between Q2 and Q3, Snap has also underperformed in accruing new unique users – analysts had expected around eight million.

Snap’s initial public offering on Wall Street stirred much enthusiasm and excitement from investors, but the IPO did not live up to expectations. Debuting on the stock market at of a price $17 per share, Snap is currently below its IPO price (sitting at approximately $15 at the time of writing).

In explaining reasons for the slow user growth, Snap CEO Evan Spiegel admitted that the difficulty of using Snapchat’s interface is a flaw of the business.

Another self-confessed mistake of the tech firm had been the overestimation of how many Snapchat spectacles (specially designed spectacles that allow users to take pictures via the application) would be sold, with a meagre 0.08% of Snapchat users purchasing the product. Spiegel aims to carry out a redesign of the Snapchat interface in 2018, in order to make the application more accessible (especially for the older generation) and to consequently increase the number of users.


2017 has proved to be a sound year for music streaming company Spotify. It is on course to earn $5bn in annual revenues and exceed 60 million paying subscribers (with an estimated 140 million monthly active users) internationally – twice as many listeners as competitor Apple Music. Spotify is expected to reach 68.6 million paying customers by the end of 2017 – an increase of over 20 million people year-on-year.

Towards the end of this year, the tech giant also purchased online music and audio recording studio Soundtrap, enabling artists to record and release a song directly via Spotify  – 2018 will likely see Spotify take strides towards its goal of not only hosting music, but also helping artists to create it.

With a valuation of approximately $20bn, the company might IPO next year. Imperative to note, however, is that Spotify is not yet making a profit, despite its huge user base and increase in revenues. This is due to the fact that Spotify must pay large licence payments to record labels, diminishing its hope of profitability. In the first half of 2017, Spotify made an operating loss of between $118m and $236m. Analysts, however, comment that the company could become profitable following its IPO.

The decision of Tencent and Spotify to purchase minority stakes in each other (just below 10%) this year suggests a collaboration for both companies going into 2018.


The company’s user and value growth throughout the year has been impressive. Its losses are gradually narrowing; from $991m in Q4 2016 to $645m in Q2 2017. In Q2 of this year, adjusted net revenue grew $250m from the previous quarter. Ride requests have also increased by 150% from last year.

Uber, however, has seen several challenges. The company has been blacklisted from several countries this year, including Italy, Taiwan and Denmark. Uber also admitted this year that that 2.7 million of its UK users were affected by a large-scale data breach – something it had concealed during the majority of the year.

In December, the European Court of Justice declared that Uber is a taxi service – a label that the company rejects, seeing itself instead as a digital platform that connects people. The main implication of this ruling is that the company will now face much stricter regulation across the EU. It also means that Uber will have to treat its drivers as taxi drivers, providing them with sick and holiday pay. This may significantly increase the company’s costs going into 2018.


Despite currently being under scrutiny from the US House Intelligence Committee, Facebook has had a good year.

In Q3, Facebook’s monthly active users increased by 66 million from the previous quarter. Furthermore, its daily active users increased by a sizable 43 million. Today, 1.37 billion people access the site daily – a sizable increase from 1.18 billion one year ago. Notably, its revenue in Q3 reached $10.3bn – exceeding the $9.84bn forecast. Investors will have been pleased by the social media titan’s money-making; it announced profits of $4.7bn in Q3.

Its stock price has also increased considerably since the beginning of the year. From $116 in January 2017, it currently stands at $178. It has also recently reported $10.1bn in advertising revenue for Q3 of this year, seeing year-over-year growth of just under 50%. Facebook-owned Instagram has also been contributory to the success of the company – since launching its ‘Instagram Stories’ feature, the photo-sharing application has added around 200 million daily users this year.

In 2018, Facebook plans to enhance its security; in the words of Zuckerberg, Facebook is “investing so much in security that it will impact our profitability.” The social media giant aims to add 10,000 more employees over the next 12 months in order to achieve this goal. On the alleged Russian meddling in the US election, Zuckerberg stated that  ‘what they did is wrong and we’re not going to stand for it.”

For 2018, the company is planning to release a cheaper VR headset. Oculus VR hopes to release the new headset called the ‘Oculus Go’ in order to make it more accessible to the mass market – its starting price will be $200 and it will not require a phone or PC to use, unlike previous models.


Tesla has seen steady growth in 2017, increasing from $216 per share at the beginning of this year to $328 at the time of writing. Announcements of car releases over the calendar year – such as the Model 3 and Roadster – have spurred excitement for investors. Indeed, revenue has increased by 30% compared to 2016 – from $2.3bn to just under $3bn.

Production of the new models has proven costlier than first envisaged, however. Initially expecting to produce 5000 models by the end of 2017, Tesla recently announced that this would be delayed until the end of Q1 in 2018 – Elon Musk has branded the past few months as ‘production hell.’ Tesla will aim to hasten the rollout of the Model 3 as much as possible. According to estimates, the company lost millions of dollars per day in Q3 of 2017 in the rush to begin manufacturing. The company also reported a higher loss per share than Wall Street projections – $2.92 compared to the forecasted $2.29.

Elon Musk also plans to unveil the new Model Y (not the official name of the vehicle, but the term that the company has given to its new release), a crossover all-electric vehicle built on the same generation as the Model 3. Tesla will also be attempting to further disrupt the industry of self-driving vehicles through enhancing its autopilot, vehicle navigation and mapping software; in his well-known flamboyant style, Musk has described it as a ‘major navigation overhaul’ that will be ‘light-years ahead of the current system.’

2018 is expected to be a busy year for the automaker. As Morgan Stanley reports, Tesla’s shares will be ‘extremely volatile’, and could reach highs of $400 before dropping to below the company’s current share price. And as the world doesn’t seem to be enough for the South African-born entrepreneur, Musk is also making inroads in space exploration. The businessman is expanding his aerospace company SpaceX (battling Amazon’s Jeff Bezos and Virgin’s Richard Branson) and he plans to send two citizens on a flight around the moon in 2018, launch 30 rockets into space and send a lander to Mars by the end of 2018.

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Carillion’s Collapse: It’s The Management, Stupid!

 5 min read / 

Carillion Collapse Management

When UK-based construction company Carillion PLC finally hit the buffers after months of pointless government efforts to prop up the public sector contractor, it wasn’t long before the finger of blame again pointed to Public Private Partnership (PPP) projects for the financial mess.

It’s a familiar argument that is promoted reflexively in a lot of the UK press because it fits an anti-corporate narrative. It follows the line that when public authorities invite private sector businesses to design, build and operate a public asset, the result will be huge profits for the contractor, its bankers and its shareholders while the public sector carries the bag for bailing out projects when they fail.

In the case of Carillion, that narrative got a boost from a National Audit Office report this week that stated that there’s still insufficient evidence to show that the UK’s Private Finance Initiative (PFI) program delivers value for money. It also said that the cost of PPP/PFI to taxpayers comes to £200bn, a particularly uninformative claim, considering that the equivalent public sector contracting almost always goes over budget and costs taxpayers untold billions of pounds through inefficiency, non-delivery and cost overruns, yet is rarely reported about in the press.

Boost for Nationalist Agenda

The NAO report will boost the Labour Party’s current position that all such projects should be nationalized, whatever the cost.

The only problem with the way that this has been reported is that PFI is not why Carillion collapsed.

In fact, the main reasons for Carillion’s collapse are that it failed to deliver on a wide range of contracted services, so it wasn’t being paid, even as it took on more projects and more and more debt, estimated to total £900m. The company also continued to boost dividends, despite a widening pension deficit, which now sits at £587m. Finally, Carillion incurred cost overruns and delays in the delivery of many public sector projects, of which only three were PFI.

The idea that PFI was to blame for Carillion’s collapse and that taxpayers are now on the hook for the many public sector projects is going to stick, even though it’s nearly as inaccurate as the claim that the company, its investors and its bank finance providers are profiting from the company’s demise.

The Guardian, for example, singled out three PFI investments, including two troubled hospital construction projects, for their contribution to the collapse of the company. These included the £335m rebuilding of the Royal Liverpool University Hospital and the £350m Midland Metropolitan Hospital, both of which ran into expensive delays.

But the media focus on Carillion’s mishandling of three PFI contracts ignores the larger issue, which is the company’s own inability to manage risks associated with the delivery of any of its services. 

There is a legitimate debate around whether PFI and its successor, PF2, deliver value for money to public sector institutions such as The National Health Service (NHS). This is because of the higher financing costs for private sector borrowing and thus the significantly higher cost to NHS trusts of having the private sector operate and maintain these assets once they are built.

Bottom Line Focus

At the end of the day, what matters most is the company’s ability to deliver. We’ve seen this before when another opportunistic PFI company, Jarvis, got in over its head and collapsed.

There have been more than 130 health-related PPP projects in the UK since the PFI scheme was established in 1992. Almost all of the large hospital projects were delivered on time and on budget using PFI during the Labour government from 2001 to 2010. This was followed by a sharp fall in waiting lists for surgery and other essential healthcare services across the country.

The issue in this instance should not be the delivery model, but rather the company that is responsible. In Carillion’s case, there is ample evidence that when it came to running the projects that were at the core of its business, nobody effectively managed the rising costs and declining receivables, even as they inexcusably boosted the dividend in each of the 16 years since the company was founded.

The end result, while enriching a few investors, was a precipitous share price decline since the middle of 2017 that more than erased those gains. The company’s lenders are also reported to have started writing down the £835m of committed bank facilities and £140m in short-term facilities, though their exposure could be much higher.


Own Work

Business as Usual?

Despite all the handwringing, there is no shortage of public sector contractors who will happily take over the many public sector construction and support service contracts that Carillion’s collapse will require the government to put up for tender.

This will follow an established protocol that is designed to ensure that essential services are not interrupted. The larger, more troubled Carillion projects will take longer to renegotiate but will ultimately find replacement companies to deliver them. Work interruptions are likely to be limited, and people who have been laid off as a result of the collapse will quickly find new work, particularly given the current healthy state of the labour market. The takeaway from all of this is simply that bad businesses, whatever their line of work, go to the wall and better ones replace them.

Keep reading |  5 min read


Whatsapp Launches New Venture Aimed at Businesses

 1 min read / 

whatsapp business

Whatsapp has launched a new app targeted at businesses, called the Whatsapp Business App, which they claim will enable companies to “communicate more efficiently” with present and potential customers.

This forms part of Whatsapp’s wider strategy to branch out into the corporate world. It plans to use the app to generate new revenue by charging businesses for using the extra communication tools that will enable them to better connect with their customers.

Although the app is set for worldwide release, at present it will only be available in Indonesia, Italy, Mexico, the UK and US. It includes a feature which indicates a business is authentic with a green tick badge next to their name.

Keep reading |  1 min read


Amex: Troubled Credit Card Company Reports $1.2bn Net Loss

 2 min read / 

Amex annual report

On Thursday, American Express, or Amex, reported a net loss of $1,197m in the fourth quarter, the first net loss the company has experienced for 26 years.

Although the company stated that revenue from interest expenses was up 10% to $8.8bn, Amex said recent reforms to the US tax code meant the company incurred extra costs, including a repatriation cost on its foreign assets as well as a devaluation of its deferred tax assets. It estimates total costs amounted to $2.6m.

For the full year, net income was $2.7bn compared with $5.4bn the company earned in 2017. However, even with the estimated $2.6m the company claims it incurred from the recent tax charge, net earnings were still $5.3bn, $100m lower compared to last year.

In New York, American Express shares (AXP) took a near 1% tumble at the beginning of trade with shares finishing the day on $99.90.  JPMorgan Chase and Goldman Sachs anticipate greater earnings for 2018.

“Overall, we believe the Tax Act will be a positive development for both the U.S. economy and American Express” said CEO and chairman Kenneth Chenault. Chenault also said he will be leaving Amex in “very strong hands” when his successor, Steve Squeri takes over next month.

American Express has suffered from an ever-reducing share in the credit card market and ended its 14-year relationship with American warehouse chain Costco who in 2016 made an agreement with the market leader, Visa.

Keep reading |  2 min read


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