Sunday, July 26, 2015

Driverless cars as a service: $16B+ for Google?

This past Friday four UCLA Anderson EDGE student teams competed in a case competition involving the future of autonomous vehicles (AVs). Teams were assigned to Google, Mercedes-Benz, Tesla, or Uber and were tasked with how each company should innovate in order to enhance its position in the battleground for the future of the automobile.

The Google team won, recommending that Google should enter the AVaaS (autonomous vehicles as a service) market. The team estimated that this initiative (which they code named GOOSE) could yield $16 billion in direct, transportation-related annual revenue for Google starting in the year 2020. The team assumed pricing for on-demand car services would fall by 50%, given that the "driver dude" would no longer be needed. (Of course, this analysis assumed that regulatory and other issues can be resolved.) In addition, the team estimated that Google could earn up to $7 billion in additional advertising related to this service.

The team argued that Google should "go to war" against Uber and become the leader in next-generation on-demand vehicle services. This possibility of  this battle has been widely reported on in the press. For example, in February, Business Week reported that Google was developing its own Uber competitor. Google was coy about its future plans, tweeting "we think you will find that Uber and Lyft work quite well. We use them all the time."

In 2013, Google Ventures (GV) invested $258 million in Uber at a reported post-money valuation of $3.8 billion. Since GV operates largely independently of Google with a prime directive of generating capital gains, it's not unheard of for GV to invest in potential competitors of its parent.

Uber, given the possibility of having to go head-to-head with Google, has not stood still. In March, Uber acquired DeCarta, a map-tech company. Then in May, Uber lured 40+ robotics researchers away from Carnegie Mellon University to significantly enhance the capabilities of its own robotics research center in Pittsburgh.

If the EDGE team is correct in estimating this market opportunity for Google, fasten your driverless seat belts.

Tuesday, July 7, 2015

Will Twitter's acquisitions in 2015 turn the company?

Twitter may be changing its CEO, but the company's M&A machine has certainly not been stuck in neutral. Our infographic depicts six acquisitions the company has made during the first half of 2015.

Overall, Twitter's acquisitions are continuing to move away from acquiring companies that build the core social network to companies that support monetization efforts. Consider some examples.
  • In January, Twitter acquired Periscope, which allows users to upload live video wherever they are and broadcast it for followers to watch. The consideration was estimated at less than $100 million in cash and stock, but skewed towards cash. The acquisition reflects Twitter’s move to bolster its video capabilities. Adding the ability to stream live video on Twitter capitalizes on the company’s strengths as a real-time broadcast service. This fall, Twitter plans to launch Project Lightning, which will provide special live event coverage for both Twitter users and non-users.
  • In April, Twitter acquired TellApart, which helps retailers leverage data by personalizing the customer experience and drive omni-channel commerce. According to an SEC filing the consideration was $533 million in stock. TellApart's integrated suite of marketing solutions has allowed marketers to deliver personalized messages in real-time across platforms such as display ads, Facebook, and email.
  • In June, Twitter acquired Whetlab, which develops technologies for machine learning, a branch of artificial intelligence that utilizes algorithms to detect patterns in big data and to make recommendations and predictions. Possible uses of Whetlab technology by Twitter include: 1) improving a user's tweet timeline; 2) enhancing the company's ability to target ads; 3) licensing data. While Google has information about user's search and Facebook has information about what people are doing, Twitter's cache of data is distinctive in capturing what "influencers" are thinking. Whetlab could help Twitter pattern such data into trends that are of high value to both consumers and businesses.
M&A success is about sound strategy, valid valuation, and intelligent integration. Twitter appears to have delivered on the first two elements. Let's see if it can pull off the third.