Weekly Digest
Weekly Digest Issue No. 526
29-07-2010
by Deirdre McArdle
Mobile makers post underwhelming results | Google buddies up to games developers
Online ad spend on the rise
Figures released this week by the IAB and PricewaterhouseCoopers highlighted the growing value of the online advertising market in Ireland. In 2009, the total spend on online advertising came to EUR97.2 million, representing over 10 percent of the total estimated advertising market, according to the report. The tight budgets of recession-conscious firms may well have had a positive impact on the sector, with marketing departments turning to the internet in a bid to stretch budgets further.
Breaking it down, search advertising dominates the sector with a 46.2 percent share, in line with the European average (46 percent). Classified ads make up 27.2 percent and display ads account for 26.6 percent. The recruitment and property sectors combined were the biggest spenders on online ads at 25 percent, followed by the automobile industry at 20 percent. Interestingly, all three of these sectors were arguably among the hardest hit by the economic woes of last year.
The Irish figures reflect a broader global push towards internet advertising. A report by eMarketer this week revealed that while total media advertising spending worldwide fell 10.5 percent to USD465.1 billion in 2009, online ad spending grew 2 percent to USD55.2 billion. The report also predicted that worldwide spending on online advertising will jump 12 percent to USD61.8 billion this year. Though figures weren't specified by the Irish study, 75 percent of participants in the report predicted growth or strong growth for online ad spending in 2010.
Mobile makers post underwhelming results
Technology results continued to trickle in this week, with two of the world's largest mobile phone makers putting in disappointing performances. First up, market leader Nokia said profit fell 40 percent to EUR227 million, or EUR0.06 per share, for the second quarter, down from EUR380 million, or EUR0.10 per share, a year ago. Sales did increase, but only marginally, from EUR9.91 billion to EUR10 billion.
Still, the Finnish mobile maker was upbeat, with CEO Olli-Pekka Kallasvuo praising the mobile phone unit's performance, which he said was strengthened by the introduction of a number of new affordable handsets. Total mobile device volumes for the second quarter were 111.1 million units, up 8 percent year-on-year. Nokia said it expects its mobile device market share by volume to remain flat in 2010, despite its predictions that the market itself will grow by 10 percent. Kallasvuo also urged an end to speculation surrounding his future at Nokia, in response to reports suggesting that the firm had begun a search for a new CEO. Speaking with CNBC he said the uncertainty was not good for the company.
Meanwhile, the world's third largest maker of mobile phones, LG, saw operating profit for the quarter plunge 90 percent year-on-year to KRW126.2 billion. Net profit dropped by 33 percent to KRW856.4 billion (USD724.5 million) from KRW1.28 trillion a year earlier. Losses at LG's handset division had a negative effect on the company's balance sheet; the unit posted an operating loss of KRW120 billion, down from a KRW620 billion profit in the year-ago quarter. LG has lagged behind the likes of Apple and Samsung in the race to dominate the smartphone market, and has struggled to come up with a flagship device. It only holds a 1 percent share of the lucrative smartphone market. For the current quarter LG said it expects losses in its handset division to stay around the KRW120 billion mark.
Microsoft eyeing new revenue stream?
As the global economic rebound filters through the various sectors, technology firms have by and large reported a positive impact. Not least software giant Microsoft, which saw revenues jump to USD16.04 billion in the second quarter, up 22 percent on the year-ago period, and higher than the USD15.27 billion analysts had been expecting. Profits were up too, coming in at USD4.5 billion, or USD0.51 per share, 48 percent higher than last year, and again, above analysts' forecast of USD0.46 per share. As well as the recovery of the PC market, Microsoft benefited from the launch of its Windows 7 operating system.
Despite the positive top-level figures, Wall Street didn't appear too impressed with Microsoft shares remaining static. Industry observers have expressed concerns that Microsoft won't be able to make up lost ground in crucial markets like smartphones and internet search. Indeed, their concerns about Microsoft's position in the search market appeared vindicated this week with the news that Yahoo Japan has chosen Google to power its web searches, a snub to Microsoft's Bing. The deal extends Google's dominance of the global search market and cuts off another avenue for Microsoft to make substantial gains. Last summer, Yahoo signed a 10-year agreement to use Microsoft's Bing search technology elsewhere in the world. The partnership is expected to come into effect this autumn. Microsoft on Tuesday threatened to raise the deal with regulators. "It means there will be no search competition in Japan," the company said.
Perhaps Microsoft is looking to generate new revenue streams elsewhere? The software firm this week announced that it had reached a licensing deal with ARM Holdings that allows it to design chips based on ARM's technology. Microsoft declined to elaborate on its plans, saying only: "With closer access to the ARM technology we will be able to enhance our research and development activities for ARM-based products." However, Microsoft did acknowledge its relationship with ARM, in that its mobile phone software runs on ARM chips. Financial details of the deal were not revealed.
Jailbreak ruling knocks Apple
It's been another mixed week for Apple. On Monday, the iPhone maker was rocked by a US federal ruling that effectively legalises 'jailbreaking', the practice of altering devices to install unapproved software. The Library of Congress, which helps oversee copyright law, removed a legal cloud over the altering of iPhones, iPads and iPods to install and run software not purchased from Apple. Jennifer Granick, civil liberties director at Electronic Freedom Foundation, the digital-rights organisation that pushed for the change, said the ruling could open the door for third-party app stores. Such a move could undercut Apple's control over the iPhone and its other devices via the iTunes store.
Apple, which likes having a tight rein on all things iPhone, responded negatively to the ruling. In a statement to Apple news website Cult of Mac, it said its goal "has always been to ensure that our customers have a great experience with their iPhone and we know that jailbreaking can severely degrade the experience. As we've said before, the vast majority of customers do not jailbreak their iPhones as this can violate the warranty and can cause the iPhone to become unstable and not work reliably." The firm has also outlined what it calls the "various dangers" of jailbreaking on a support page.
Meanwhile, with the iPhone 4 antennae issue settling down, Apple has announced the launch of the handset in 17 more countries this coming Friday. Hot on the heels of the iPad launch in Ireland last Friday, the iPhone 4 will be available across the country with Vodafone, O2 and Three Ireland all offering the device. Prices vary based on price plans and the two different models – 16GB and 32GB. Compare the different options available on Vodafone, O2 and Three.
Google buddies up to games developers
Rumours of Google developing one social network to rule them all reignited this week following a report in the Wall Street Journal that Google was in talks with a number of online game developers for a new social networking service. Among the developers Google is said to be talking with are Playdom, Electronic Arts' Playfish and Zynga Game Network.
Each of these companies develops social games that have become hugely popular on social networks like Facebook. Zynga, for example, develops Farmville which, incredibly, has 60 million active monthly users. (As an interesting aside, TechCrunch reported this week that Google has taken a substantial stake in Zynga.) And it's not just Zynga that's hitting the jackpot. On Tuesday, Walt Disney acquired Playdom for USD563.2 million, while late last year, Electronic Arts paid USD400 million for Playfish. Social games like these provide the likes of Facebook with a 'stickiness' factor that appeals to advertisers as it encourages users to spend more time on the sites.
As yet, it's still not clear exactly what Google is planning, although the Wall Street Journal quoted people familiar with its plans who said gaming would be part of a broader push into social networking. The internet giant itself has refused to confirm that it is eyeing the social network market. However, earlier this month speculation on Google's plans mounted, with a number of sources suggesting the firm was working on a project called 'Google Me'. The firm's rumoured plans should perhaps be tempered by the fact that it has already tried and failed at social networking -- remember Google Buzz? In saying that, this time round it looks like Google's taking a different, and some might say cleverer, path in striking up strategic allegiances with games developers.
Caped Koala Studios has built a virtual world for kids, combining education and social networking 