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Data Sheet—Not All ‘FANG’ Stocks Are Created Equal

Amazon CEO Jeff Bezos tours the Amazon Spheres in SeattleAmazon CEO Jeff Bezos tours the Amazon Spheres in Seattle
Amazon CEO Jeff Bezos can afford to laugh. His company posted record profits in the second quarter of 2018.Jason Redmond — AFP/Getty Images

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It’s a well-known fact that restaurants make their money on marked-up cocktails and other libations, not the food they serve, no matter how tasty. It’s a similar story for auto dealers, whose margins are slim on hunks of steel even as their vigs are fat on warranties, financing fees, and car mats. (I fell for that one in 1997, and I’m still annoyed.)

Now we see Amazon has pulled off a similar feat. Its barely-break-even retail business was all it had for years, and for eons Amazon didn’t make money. Just wait, the company’s fans would say. Eventually Amazon’s hugeness will pay dividends.

And it has, but not because the business of traditional retailing suddenly got better. Amazon, instead, is now oozing profits because of the services it has built on top of its something-for-everyone merchandising. It takes a cut from other merchants who sell on its platform. It charges brands and others to advertise on its sites. And its best services business of all is AWS, the online business that rents computing power and software programs to the commercial masses.

We’re now seeing that not all tech mega-caps are created equal. (“No FANG contagion,” Stifel analyst Scott Devitt told clients.) Facebook, Netflix: bad. Google, Amazon: good. In other words, there are no easy conclusions to make in these confusing times. Perhaps Apple, which reports earnings next week, will be the tie breaker.

***

As someone who works for a purveyor of a quality product whose owners have changed now and again, I’m keenly watching how phone company AT&T is handling HBO, the highfalutin TV-show producer that was incubated by the company that started Fortune, Time Inc. HBO employees are rightly terrified AT&T is going to order up well-made cat videos, the better to boost AT&T’s “inventory.” A top HBO executive, speaking on a press tour, tried to calm the waters. “We’re not going to do anything that doesn’t feel like something we wouldn’t have done before,” the executive said, according to The Wall Street Journal. “No one is asking us to sacrifice quality for volume,” he said.

Amen to that. And good luck, HBO.

Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com

NEWSWORTHY

Cloudy forecast. With Microsoft bearing down on the corporate messaging market, smaller players are scattering. It was too much for software developer Atlassian, which announced it was flipping its HipChat users to Slack in exchange for a small stake in its rival (and less than two weeks after Microsoft announced a free version of its competing Teams app). “Over the past year, however, the market in real-time communications has changed pretty dramatically,” Atlassian vp Jeff Redfern wrote in a blog post. “And throughout that change, one product has continued to stand out from the others: Slack.”

Hailstorms and rain. Thursday was another super busy day on Wall Street. In addition to Amazon pleasing the market with the highest quarterly profit in its history, as Adam mentioned, Intel was less fortunate. Its sales rose 15% to $17 billion, ostensibly beating analysts expectations. But within the figure, sales to the all important data center market fell below expectations while volatile PC chip sales surged. And the company said its very, very, very delayed 10nm chips wouldn’t arrive until the end of next year. Intel shares were down 7% in premarket trading. But Twitter had it worst of all. Its shares were down 16% premarket after the company reported its monthly active users decreased by 1 million during the second quarter to 335 million and would likely fall again this quarter.

In need of an umbrella. Mark Zuckerberg’s net worth reportedly dived $16 billion as Facebook’s stock price ended Thursday with a 19% loss. The $119 billion drop in a single day in the company’s market value was a record for the stock market (sorry, previous record holder Intel, which had lost $91 billion on a particularly bad September day in 2000). If that wasn’t enough to give the Harvard dropout indigestion, a money management firm that holds Facebook shares filed a proposal to have Zuck removed as chairman due to the company “mishandling” several crises.

Coming up roses. Okay, so forget the battle of the titans among big tech companies. A couple of fresh faces also hit the stock market on Thursday. Security firm Tenable went public at $23 and closed its first of trading at $30.25, up 32%. And Chinese discount e-commerce site Pinduoduo priced its ADR shares at $19 only to see them soar 41% to $26.70. Keep your IPO hats on. Opera goes public on Friday and Sonos and Arlo Technology on Monday.

Flat-faced. Maybe this will cheer Zuck up. The Winklevoss twins failed in their second attempt to get regulatory approval for a digital currency exchange-traded fund (which is kind of like a mutual fund that trades like a stock). The Securities and Exchange Commission voted 3-1 to reject the the Winklevoss Bitcoin Trust.

I’ll pull this car over right now. Seeking to avoid some of the creepier app categories now spreading, Google tightened the rules for its Android app store. No more cryptocurrency mining apps, app that facilitate the sale of explosives, firearms, ammunition, or certain firearms accessories, and no more apps that require users to click on an ad before full usage.

Storage is too cheap. Was anyone asking for more voicemails? I didn’t think so, but LinkedIn didn’t, wait for it, get the message. The Microsoft unit is adding the ability to leave voicemails for users to its mobile app. Or as Fast Company put it: “You’ll soon have voicemails from LinkedIn that you’ll never listen to.”

FOR YOUR WEEKEND READING PLEASURE

A few longer reads that I came across this week that may be appealing for your weekend reading pleasure:

Welcome to the New Space Age (Bloomberg Businessweek)
They say there are only two plots: Species goes on a journey, and aliens arrive in town. UFO sightings aside, humans have been living the first story for decades. The first stage of the trip began in 1957, when Sputnik 1 arced its way around the world, and ended in 1972, when Apollo 17 Commander Gene Cernan traced his daughter’s initials in moondust and stepped off the lunar surface. The second big stage is upon us now.

The Streaming Problem: How Spammers, Superstars, and Tech Giants Gamed the Music Industry (New York Magazine’s Vulture blog)
A few weeks after the release of Kendrick Lamar’s “Humble,” the hard-charging lead single on his fourth album Damn., the song landed at No. 1 on Billboard’s streaming chart. It’s been on the chart ever since, never falling below No. 3 as users have played it more than 291 million times on Spotify alone. And that’s just the streaming total for Lamar’s version. His hit song has also been a boon for Spotify’s parasitic underbelly — the coverbots and ripoff artists who vomit out inferior versions of popular songs every week, flooding the website with dreck that only succeeds when users are misled.

Literary Ambition. Fabulous Parties. A Hidden Past. Who Is Anna March? (Los Angeles Times)
She threw a welcome party for herself at the Ace Hotel in downtown Los Angeles, a beautiful old building with black and white marble, Alice-in-Wonderland floors. The guests, more than 400 of L.A.’s literati: authors, editors, publishers, book reviewers, literary agents, the local independent presses. Anna March whisked in and out, a flash of pink hair in a polka-dot dress. The 2015 party at the Ace’s mezzanine bar, serving free drinks, was packed to overflowing.

The Big Business of Being Gwyneth Paltrow (New York Times Magazine)
On a Monday morning in November, students at Harvard Business School convened in their classroom to find Gwyneth Paltrow. She was sitting at one of their desks, fitting in not at all, using her phone, as they took their seats along with guests they brought to class that day—wives, mothers, boyfriends. Each seat filled, and some guests had to stand along the back wall and sit on the steps. The class was called the Business of Entertainment, Media and Sports. The students were there to interrogate Paltrow about Goop, her lifestyle-and-wellness e-commerce business, and to learn how to create a “sustainable competitive advantage,” according to the class catalog.

FOOD FOR THOUGHT

Transportation in major American cities is a mess. Aging public transport systems and excessive spending on highways seems to have put some metropolises on the edge of total gridlock. Now enter ride hailing services like Uber and Lyft into the equation. Helpful or hurtful? Faiz Siddiqui at the Washington Post looks into the latest study and the news is not good. The services are drawing more from customers who would otherwise take public transportation, while car ownership and personal driving are still rising. But there was plenty of room for debate, Siddiqui found:

Adie Tomer, a fellow at the Brookings Institution’s Metropolitan Policy Institute, was skeptical that such broad conclusions could be drawn from data that was not derived directly from the ride-hail companies, and was instead parsed from research including the National Household Travel Survey, a range of studies conducted by research groups and, in some cases, collected from sources within the ride-hail industry.

“My overall sense from reading the entire report is this is the exact reason why we need more data transparency on this,” Tomer said. “My hunch is . . . the immediate reactions from both Uber and Lyft . . . They’re gonna suggest, well, ‘This isn’t what our data says.’ And the reality is we don’t know.”

In rebutting Schaller’s conclusions, Lyft pointed to studies from outside sources such as the traffic data firm INRIX and the University of California, Los Angeles, showing that overall congestion had decreased in the San Francisco Bay area in 2017, and most ride-hail users “report no change in their travel by other modes,” respectively. Asked if it had internal data that run counter to Schaller’s findings, however, the company declined to provide specifics. Uber said the report was limited because it relied on data from 2017, though it did not provide related data to support its rebuttal.

IN CASE YOU MISSED IT

A Former Google Employee Just Became One of China’s Richest People By Alice Tozer

Facebook Buys Workplace Software Company Redkix By Jonathan Vanian

Why AMD’s Stock Jumped 14% By Aaron Pressman

Cylance Tech Chief Leaves to Helm Cyber Startup By Robert Hackett

Amazon’s Facial Recognition Linked the Faces of 28 Members of Congress to Mugshots By Don Reisinger

Commentary: Blockchain Could Be the Savior of Free Speech By Mick Hagen

Commentary: Facebook’s Biggest Problem? A Crisis of Words By Jeff John Roberts

BEFORE YOU GO

Headed to the movies this weekend? My wife and I took in Tom Cruise’s globe-trotting, big budget action thriller Mission Impossible: Fallout on Thursday. There was certainly a lot of action and some truly amazing stunt work Cruise pulled off himself. But not a lot of plot coherence or compelling emotional exchanges. As a popcorn consumer: A+. As a film aficionado: C+.

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.