Real Estate, The Economy, and News

Friday, January 19, 2018

Amazon Expects Advertising Revenue to Improve Profit Margin

Jeff Bezos, the CEO of Amazon Inc., recently took over the spot of "richest man in the world" from Bill Gates, the creator of Microsoft. To many, Bezos' wealth doesn't make much sense, because, for the past 20 years, Amazon has not brought in a profit. That may seem pretty cut and dry: profit means financial success. However, for Bezos, that's not exactly how it works. For many years, Bezos' financial strategy has been to choose business growth over profit, reinvesting any revenue into expanding Amazon. In that manner, Amazon's stock value has steadily gone up, even without paying any dividends to shareholders. According to an L.A. Times article by Spencer Soper and Mark Bergen, Amazon's latest shift, to focus on sources of advertising revenue, could help to push the company into profit territory.

Over the past few years, Amazon has been losing money in its e-commerce business but has been able to recoup those losses due to its profitable business of providing cloud services. However, the differences between gains and losses are tight: Amazon's average profit is only around 1%. Up until now, Amazon's advertising business has been pretty small, at $1.7 billion in revenue compared with Google's $35 or Facebook's $17.4 billion. Amazon has nowhere to go but up when it comes to advertising. It is likely that the growth will be among companies trying to get priority placement for their products on Amazon's website. That kind of business plan pivot is unlikely to have high costs and has huge potential for billions more in revenue.

Amazon is in a good place for advertisements. Often, on Google or Facebook, an advertisement appears that tries to push a user toward another site, where the user might purchase the product being advertised. The problem with that system is that users get annoyed by incessant advertisements when they aren't looking to buy anything. The difference for Amazon is that its users are already looking to buy something. Advertisements would be both helpful to the shopper, would benefit the advertiser, and would give Amazon more revenue. Everyone wins!

Food companies spend millions each year to put advertisements on television and in magazines to try to generate more interest in their products among potential customers. The same effect can be achieved on Amazon's website for far lower cost, with less work, simply by adding in suggested searches or sponsored search results. Of course, putting actual images and videos as advertisements can also help, but if someone is looking to buy a product, they're going to choose the one that seems to be at the best price. Through Amazon advertisements, companies can make their products more interesting to the average user. Perhaps one day, Amazon's advertisements could replace those on television entirely. Amazon does have its own video streaming capabilities, after all.

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Friday, January 12, 2018

Verizon and AT&T Both Plan to Introduce 5G Internet This Year

It's only been about 20 years since cell phones started to become popular among the common person. At around the same time, the internet became a commodity many people had in their homes. Yet, even though the history of both technologies is so recent, you would be hard-pressed to walk down any street in this day and age and not see someone surfing the internet from their cell phone. Smartphones have pervaded our society, providing entertainment, convenience, and connectivity to pretty much everyone around the country. According to David Lazarus's L.A. Times article, the newest update, 5G wireless, is coming soon.

In Las Vegas this week, there was a huge tech show called CES (which used to stand for Consumer Electronics Show). Many new electronic devices were debuted to the public for the first time. From fitness wearables to computers, tablets, and smartphones, the latest in tech was there for visitors to check out. One of the main innovations that is drawing major interest is that of the newest level of high-speed wireless internet: 5G. Both AT&T and Verizon Wireless, two of the top mobile phone providers in the world, have announced that they will be making 5G mobile internet available in several major cities, including Sacramento, before the end of the year.

For people who download or stream a lot of material on their phone, 5G seems like it will be exactly what they need. The 5G connections are expected to be much faster than the current standard 4G ones, and the connections will be far more reliable and less prone to lag. On the other hand, there are also some downsides to the faster connection. It is probable that the 5G connectivity will require that the user purchase a new phone, one that is designed specifically to use 5G. Additionally, the monthly cell phone bill will probably be significantly higher, and analysts believe that most average users won't need so much speed anyway.

Currently, mainly users who play a lot of high-bandwidth games or those who download large, high-definition movie would benefit the most from a 5G connection, but technologists expect that developers will rise to the occasion. Once 5G becomes commonplace, 4K video streaming, driverless vehicles, and immersive virtual reality are likely to follow quickly. 5G could unlock untold innovations of the future. Unfortunately, that path is likely to be expensive. Economic analysts expect the development of 5G to cost hundreds of billions of dollars, and those costs will be pushed onto the consumer with higher cell phone plan costs, but to many, the better internet connection is well worth a higher bill each month.

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Friday, January 5, 2018

Sheltered Harbor Program Uses "Buddy System" to Protect Financial Institutions from Cyber-Criminals

Increased prevalence of new technologies in pretty much every industry over the past few decades has led to improved quality and efficiency of service across the board. While technological improvements have, as a whole, provided more benefits than drawbacks in the modern day, one major concern has made its way to the forefront in recent years. With the technological advances has come cyber attacks, which put personal data and financial information at risk. Yalman Onaran's article in the L.A. Times discusses a method that financial institutions have been developing to protect trillions of dollars in funds from hackers.

From checking and savings accounts to retirement and pension funds, there are trillions of dollars being stored through various banks and brokers. Those assets tend to be insured, such as in the case of a bank robbery, the clients of the bank will get their money back. The difference between a physical robbery and theft via cyber attack is that hackers will often delete data from the targeted system, which can lead to great turmoil for a banking institution without sufficient backup data.

Many of the larger companies keep their data backed up on private secure servers, but that doesn't help much if the cyber attack shuts down their entire system. In a situation where the entire system is targeted and taken down, it can take days or even weeks for the company to get everything running properly again. The main issue with that, especially among banks, is that their customers need to access their accounts on a daily basis. The average person can't just wait uncertainly for days on end without access to the money in their checking account.

Financial institutions began to worry that such a hack at any banking entity, no matter how small, could cause significant ripples throughout the entire financial system. For example, if people hear that a bank was hacked (even if the bank is not theirs), and if they see that the customers of that bank can't access their money, they would be less likely to trust their own bank and could possibly go to withdraw their money, to prevent their funds from getting tied up if their bank was hacked. If enough people followed suit, it would become a wave that could crash the entire infrastructure, as banks don't actually have enough money in-house to cover most of their customers, since they lend out the majority of it to other customers.

A project called Sheltered Harbor is aiming to avoid such potential issues by teaming up financial institutions. By pairing them up, if one bank was hacked and had their system shut down for any length of time, the other bank would have a backup of their data and could assist their customers. The same would work in reverse. So, unless a sophisticated cybercriminal could predict and target the exact banking institutions that had been paired, Sheltered Harbor's system should be able to prevent an all-out meltdown of the financial system. That means that trillions of dollars in savings and retirement accounts will remain protected.

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Friday, December 29, 2017

JetBlue Airlines Ranked Highest for Domestic In-Flight WiFi Capabilities

Technological improvements over time allow the general public to take advantage of certain amenities that were once only available to the wealthy elite. Personal automobiles were once few and far between, due to the exorbitant price tags and cost of upkeep. Over the years, via various production improvements and the development of cheaper and longer-lasting parts, automobiles have become commonplace. Another example is that of airplane travel. More and more people these days choose to travel by air rather than by ground because of its efficiency, reasonable price, and various amenities. One such amenity that's drawing in more customers, according to Hugo Martin's L.A. Times article, is free or low-priced in-flight WiFi.

Whether flying for business or for pleasure, customers want to have access to everything that they could have while traveling by another mode of transportation. For quite a while, people traveling via car, bus, and even train have been able to make calls, send text messages, and access mobile internet data at no extra charge. Until recently, the convenience and speed of an airplane had the drawback that travelers couldn't remain in contact with the outside world. For some travelers, especially those traveling for business, hours without their mobile devices could make a huge difference in their personal lives and careers.

Access to in-flight internet is a wanted amenity for most passengers, but that draws the question: how much are people willing to pay for the amenity? Research has found that customers feel cheated if an airline charges them a rate that is significantly higher than their home internet or mobile data, on a per megabyte basis. Of course, this expectation doesn't make much sense, given that there's a huge difference between the infrastructure that provides mobile internet on a cell phone and WiFi on a flying plane thousands of feet in the sky, but people want what they want.

Highspeedinternet.com made a ranking of the best airlines with respect to in-flight WiFi service. They ranked speed of connection, reliability, availability, and price, to come up with the sliding scale. In the end, they found that the airline with the best overall WiFi was found on JetBlue flights. JetBlue provides free 15 mbps internet to all passengers on 100% of its domestic flights. Southwest Airlines was ranked second, and has WiFi connectivity for $8 on 90% of its planes. Virgin America also provides 15 mbps connections, but for $25 per flight, so they are ranked even lower. Some industry leaders, like Hawaiian Airlines, Frontier, and Spirit Airways don't provide WiFi at all, putting them toward the bottom of the ranking.

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Friday, December 22, 2017

Big Box Retailers Looking to Compete by Combining with Same-Day Delivery Services

Over the past few years, especially during the holiday shopping season, e-commerce businesses have found themselves pulling ahead of their brick-and-mortar competitors. In this modern age, more and more shoppers value the efficiency of online purchasing over the more personalized feeling of a physical store. The economy has become based on instant gratification, and many feel that online retailers can fill that need more easily. Ronald White's L.A. Times article begs to differ: White claims that retailers are aiming to recapture the market by offering same-day delivery.

While people were once satisfied to wait up to 6 weeks for a product to arrive from a mail-order catalog, technological and business advances by companies like Amazon have led consumers to expect fast delivery, often at no extra cost. For a shipping giant like Amazon, same-day delivery isn't such a big deal, because they already built up their infrastructure over the years. For businesses like Target or Wal-Mart, things can get a little tricky. Those companies are used to delivering in bulk but tend to take several days to a week to make a delivery.

The big box chains don't have the time or the capital to build a same-day shipping platform from the ground up. So, they've turned to alternative delivery modules, most notably third-parties like Shipt, Grand Junction, and Deliv. Those services use mobile apps to connect the network of delivery drivers to the big box retailers. While some companies are on a part-time basis with those services, using them for deliveries when necessary, others are looking to make acquisitions for their future success. In fact, Target put in a $550 million acquisition offer to Shipt just last week. If the offer is accepted, Target will have their own network of same-day delivery drivers, giving the chain a competitive advantage against places like Best Buy or Wal-Mart.

These same-day delivery platforms operate under the same principle as services like Uber or Lyft. Drivers sign up to deliver packages during certain hours, deliver those packages, and get paid their set rate. If a driver gets too many negative reviews (damaged package, delayed delivery, etc) then they aren't allowed to deliver anymore. The better a deliverer's ratings, the better the perks. While services like Shipt are only economically feasible in big cities like L.A. or New York, Target s willing to make that big acquisition move because they know that the independent contractors connected through the app are faster and more reliable than mainstream delivery services like USPS or Fed-Ex.

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Friday, December 15, 2017

Disney's Acquisition of Fox Expected to Drastically Change the Entertainment Industry

Most companies in this day and age are subsidiaries of other companies and there is a relatively small number of parent corporations that own the majority of the other corporations. Disney Inc. is one of those parent companies, and their business decisions over the past couple of decades have made them one of the largest and most powerful corporations in the world. According to an article by the staff of the L.A. Times, Disney's most recent move is to acquire 21st Century Fox, a deal that could completely reshape the entertainment industry.

Most of Disney's sprawling growth has happened since Robert Iger was named CEO in 2005. However, even before Iger, Disney Inc. had begun to acquire competitors and build an entertainment empire. In 1996, Disney made a move that first brought Iger to the company: they purchased Capital Cities/ABC and thereby gained ESPN as well (which was a subsidiary of Capital Cities) for $19 billion. Iger was president of Capital Cities at the time, and the acquisition introduced him to the executive arena of the Disney entertainment powerhouse.

Then, in 2006, after Iger was made CEO, Disney made its second main power move, this time to address a decline in its animation department. After several animated films that flopped in the box office, Disney spent $7.4 billion to acquire Pixar Animation Studios in a stock deal, which allowed them to retain John Lasseter and Ed Catmull, the geniuses behind Pixar hits like "Finding Nemo" and "Toy Story." The acquisition has since paid off many times, as the Disney-Pixar animation team has arguably become the best in the world.

The action film franchises were next on Disney's road to supremacy. In 2009, Disney purchased Marvel Films for $4 billion, and in 2012, they acquired Lucasfilm (and the Star Wars franchise) for another $4 billion. Since then, Disney has made dozens of movies set in the Marvel cinematic universe and has just released another movie set in the Star Wars universe, and will soon be opening a Star Wars Land at Disneyland. Additionally, by owning those two companies, Disney has put itself in a position to rival streaming sites like Hulu or Netflix by limiting the spread of their movies on competing streaming platforms. Then, by acquiring a controlling stake in BamTech (a streaming video company) in 2017, Disney has assured itself a competitive advantage in the online streaming market, both for sports (ESPN) and TV shows/movies.

Disney's latest move to purchase 21st Century Fox could be its most important decision in making sure it remains the most powerful entertainment company in the world. It's possible that government regulators will stop the $52.4 billion deal on anti-trust arguments, but if the purchase goes through, Disney will be able to add several existing shows (The Simpsons, Family Guy, etc) to its video streaming service, will gain a majority stake in streaming competitor Hulu, and will gain control of another studio, as well as Fox's television channels, including FX and National Geographic. Disney will be more powerful than any other company could hope to be, and that is likely to affect Hollywood in unpredictable ways,

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Friday, December 8, 2017

Over 51 Million People Flying Domestically this Holiday Season

Each year, especially leading up to the month of December, people across the country frantically scour the internet for the best airplane tickets to make it home in time for the holidays. Many people want to visit with family and the 21-day Christmas travel season is when millions of Americans choose to do so. Some people choose to drive or take a bus or train, but each year, the number of fliers continues to rise. According to Hugo Martin's L.A. Times article, this season's number of fliers increased by 3.5% from the same measurement last year.

Analysts expect that there will be over 51 million people traveling via plane throughout the upcoming holiday season. Over the last four years, airplane travel has been growing, especially in the month of December, and especially during the few days leading up to and following Christmas. Research shows that the increasing prevalence of the mode of transportation is likely due to improvements in the economy and competition between airlines, which make flights more affordable for the common consumer.

The law of supply and demand states that supply and demand tend to be inversely proportional, which means that as the supply of a good or service increases, the demand for it decreases. The same concept applies to the proportionality of demand/price or the inverse proportionality of supply/price. In other words, the more consumers demand a product, the more a company can charge for it. Because there are so many companies that offer the service of airplane transportation, the competition drives the price down. As more and more consumers choose to fly because of the lower prices, however, those same prices will likely be driven back up until the price reaches an equilibrium.

Economic analysts predict that this trend will lead to a total of more than $16 billion in profit split among the various domestic carriers, 5% more than last year. Additionally, over the past three years, airlines throughout North America have earned over half of the profit in the industry as a whole. Analysts expect that things might change quickly if the airlines aren't careful. Between rising costs, taxes, and governmental security laws, the various airlines may have to quickly adapt to successfully meet growing demands and keep their competitive edge.

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