Tuesday,
December 8, 2020

Market recap

Dow Jones

30069.79

-148.47 (-0.49%)

S&P 500

3691.96

-7.16 (-0.19%)

Nasdaq

12519.95

55.71 (0.45%)

Google

$1,815.22

-$8.54 (-0.47%)

Amazon

$3,158.00

-$4.58 (-0.14%)

Kodak

$12.05

$4.52 (59.96%)

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Top Story

Google, IAC Battle Over Marketing Practices

Google Weighs Penalizing IAC

Google (GOOGL) Chrome’s trust and safety team has accused IAC/InterActive Corp. (IAC), a leading media and internet company, of misleading customers about its browser extensions on Google Chrome. While Google has not yet taken action on the report, investigators have recommended that Google immediately remove and deactivate IAC’s browser extensions from the Google web store.

Google’s investigation found that IAC did not give users clear information about its browser extensions. For context, these browser extensions provide manuals, government forms, and other external applications that run inside the Chrome browser. Investigators discovered that downloading IAC extensions can change a user’s default search engine from Google to IAC-owned MyWay.com.

What This Mean for IAC

Google’s report claims that IAC engaged in what is called “browser hijacking,” a practice antivirus companies have said is unethical. It involves changing a user’s browser settings without their expressed consent and understanding. For example, the Google report described an ad campaign using search terms like “how to vote” and “vote by mail,” but when users clicked on the links, instead of providing information about voting, the ad changed users’ default search engines to MyWay and installed an IAC-owned toolbar on users’ browsers. According to the audit, which IAC disputes, “IAC’s business model appears to rely almost exclusively on unintentional installs.”

IAC owns online products like Investopedia and Angie’s List, but advertising with Google made up over a quarter of the company’s overall revenue last year. Google Chrome users downloaded IAC browser extensions over 150 million times in 2019, earning the company $291 million in revenue. If Google does decide to deactivate IAC extensions and remove those extensions from the web store, IAC executives say that will severely harm the company.

Antitrust Concerns for Google

Google may be hesitant to take action against IAC because a clamp down could highlight the tech giant’s power over internet advertising right when it is in the spotlight for alleged antitrust violations. Though IAC’s MyWay search engine has a much smaller market share than Google’s own search engine, the two are competitors in some categories.

In October, federal prosecutors filed a lawsuit against Google for antitrust violations related to its search product. The company is also up against antitrust investigations at the state level and abroad. It will likely proceed with caution as it decides how to handle its relationship with IAC in an effort to avoid more antitrust probes.

Flipkart IPO Could Double Valuation of Indian Company

Walmart Aims to Launch IPO in United States

After a surge in ecommerce sales during the pandemic, Walmart (WMT) is now considering turning its investment in Flipkart, India’s largest online retailer, into an initial public offering in the United States. The IPO, which Goldman Sachs (GS) is exploring, could raise $10 billion and boost Flipkart’s valuation to $40 billion. Walmart is thinking about selling roughly 25% in the company.

Flipkart is headquartered in Bengaluru. In India, it competes with companies like Amazon (AMZN) and JioMart, run by Reliance Industries Ltd. Proceeds from the IPO, which would be the largest by an Indian-based company on an international exchange, will likely be used to expand Flipkart’s market share in order to capture accelerating ecommerce adoption brought on by the pandemic.

How Flipkart Has Grown

Flipkart, which is now the largest online retailer in India, began in 2007 with online book sales. Much like Amazon (AMZN) in the United States, the company has since expanded to sell tech products, clothing, household items, and groceries. Walmart bought a 77% stake in Flipkart for $16 billion in 2018. At that time Walmart promised it would take Flipkart public within four years.

Today Walmart has an 82.3% stake in Flipkart. Walmart led a funding round over the summer that raised $1.2 billion for Flipkart and grew the company’s valuation to $24.9 billion. Since then, the coronavirus pandemic has continued to push transactions online through platforms like Flipkart as customers in India try to stay away from crowded public areas.

Flipkart’s Payment Unit Could IPO in 2023

After Flipkart goes public, its digital payments company PhonePe could soon follow. PhonePe competes with Google Pay (GOOGL) and Amazon Pay. In July Flipkart said PhonePe processes over $180 billion in payments per year. Every month, the app processes around 500 million transactions.

Walmart may list PhonePe on a US stock exchange also at a $10 billion valuation. The payment company could then leverage its relationship with Walmart to launch its product internationally. Investors both at home and abroad will have their eyes on this Indian ecommerce giant over the next 12 to 36 months.

Drone Development Spurs Architectural Innovation

Takeout and Packages, Delivered by Drone

The Federal Aviation Administration has granted permission to Amazon (AMZN), the United Parcel Service (UPS), and Google’s parent company Alphabet (GOOGL) to start experimenting with drones commercial deliveries. In Christianburg, Virginia, where Alphabet has started testing drones, customers can receive deliveries from FedEx (FDX), Walgreens (WBA), and local restaurants via aerial vehicles. In Florida, UPS subsidiary Flight Forward and CVS Health (CVS) have teamed up to deliver prescriptions to residents of the largest retirement community in the US via drone.

Amazon Prime Air is working on a technology that could make it possible to deliver packages weighing 5 lbs or less in under 30 minutes. While this is all exciting, figuring out how to help drones land safely on homes and office buildings has been an obstacle for Amazon and other companies.

An Opportunity for Tech Startups

For tech startups, drone deliveries present an opportunity for innovation surrounding mailbox design. Valqari, a Chicago-based company, is working on a landing-pad-style mailbox specifically designed to receive drone deliveries. When a drone carrying a takeout meal or delivery box lands on top, the mailbox will open to receive the package.

Walmart (WMT) has also filed a patent application for another type of delivery receptacle. The concept uses a delivery chute mounted to the roof of an apartment building. With it, apartments could one day receive package deliveries by drone. Packages would drop from drone to chute and then move from the chute to a mailroom conveyor belt.

Other ideas include parachutes that would guide packages to a safe landing area, curbside mailboxes for both packages and traditional mail, and windowsill or rooftop pads.

Costs and Benefits of Drone Delivery

While parachuting packages may sound far-fetched, Valqari’s CEO Ryan Walsh says a drone landing pad could one day be “as common as a garage.” But before that can become a reality, urban planners and air-traffic controllers will need to design “smart cities” to safely accommodate drones. The FAA is developing a system to register drones and track them during delivery to avoid attacks or collisions. Companies that hope to use drones for delivery will also need to create systems for storing, powering, and recharging the devices.

Though there are many hurdles to overcome, advocates of drones say that drone deliveries could cut down on both street traffic and gas emissions. Mailboxes for drones could rely on solar power, and could even produce a surplus of energy that could be sold back for other uses. Mapping and meteorological sensors on mailboxes and drones could also help cities evolve their weather forecasting, mapping, and traffic systems. If experimental drone deliveries go well, researchers say these “smart cities” could be on the horizon.

Not-So-Breaking News

  • Airbnb is now aiming to list its shares between $56 and $60 per share in its upcoming IPO. Originally the home-rental giant said shares would list between $44 and $50 each. The new pricing highlights the demand for US tech stocks and gives Airbnb up to a $42 billion valuation, fully diluted.
  • A federal agency found no evidence of wrongdoing by Kodak (KODK) or government agents surrounding a now-paused $765 million loan from the government to the company to help it manufacture COVID-19-related pharmaceutical ingredients. Kodak shares surged 60% on Monday.
  • Chinese online retailer JD.com (JD) will become the first company to accept China’s digital yuan. China will distribute 20 million digital yuan, the equivalent of $3 million, in a lottery for residents of the city of Suzhou to spend on JD.com.
  • Celebrated songwriter Bob Dylan has sold his complete song catalog to Universal Media Group (UMGP) in a blockbuster deal. Details weren't disclosed but the price tag was reportedly estimated at more than $300 million. The sale includes over 600 songs written over the course of nearly 60 years.
  • The Trump administration extended student loan relief for an extra month. Now over 40 million Americans who have benefited from the pause on monthly payments and interest will have until January 31 until the freeze ends.
  • This extended student loan relief pushes student loan forgiveness into the spotlight again. Here are details about Biden’s plans for student loan relief, proposals for future tuition, and what legislation is in place that may affect student loans now or in the near future.

Financial Planner Tip of the Day

"The government currently offers four income-driven repayment plans for federal student loans that can forgive borrowers’ balances after 20 or 25 years. There are eligibility requirements, like making required monthly payments for a designated period of time, which are tied to a person’s income. The plans a borrower qualifies for will depend on the types of loans they have and when they took them out."

Brian Walsh, CFP® at SoFi

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