August 7, 2020

Facebook Takes On Twitter With Video

That’s the maximum length of the videos on Vine, a mobile application owned by Twitter that has grown like one of those creeping plants, to close to 20 million users since it sprouted five months ago.

On Thursday, Facebook introduced its own short-video service, built into Instagram, the popular photo-sharing app that Facebook bought last year. The new feature allows users to record as much as 15 seconds of video, enhance it with image filters and post it immediately.

The move underscores how video has increasingly become critical to companies like Facebook, which is seeking ways to keep its 1.1 billion users entertained and engaged — particularly on their mobile devices. Video also represents a lucrative and fast-growing area of online advertising and is expected to top $4 billion this year across the industry, according to the research firm eMarketer.

“Sharing video is inherently mobile,” said Gene Munster, an analyst with Piper Jaffray. And Facebook needed to get into the game, he said, adding that it had to “check that box to remain relevant to their users.”

The simplicity of both apps — press your finger to the screen to record, lift it to stop and click to publish — makes it nearly as easy to share a video as it is to post a photograph.

And the form seems aptly suited to modern vanities and attention spans — people peek at their smartphones in line at the grocery store but may also feel moved to document the visit.

Vine has caught the fancy of everyone from the White House, which recently filmed President Obama pedaling a stationary water filtration bicycle, to marketers like Burberry, which this week compressed its entire runway show of men’s fashions into a six-second blur.

Kevin Systrom, a co-founder of Instagram, said his team had been considering adding video to the service for two years, but waited until it could be made “fast, simple and beautiful.”

“What we did to photos we just did for video,” Mr. Systrom said at a news conference at Facebook’s Silicon Valley headquarters on Thursday. Instagram has about 130 million users, according to the company.

Although neither Vine nor Facebook’s service is currently offering advertising, it would be easy to sprinkle a sponsor’s video ad into the legions of user-generated videos, much as Twitter and Facebook do now with text ads in their users’ feeds.

Jan Rezab, chief executive of the research firm Socialbakers, said that online viewers had a high tendency to engage with video ads, especially if they were deftly inserted into a stream of other content.

“You could actually monetize Vines and the Vine channel by introducing sponsored Vines. Every 10th Vine could be a sponsored Vine,” he said. Facebook could do something similar.

Currently, about one in 10 iPhone users in the United States has the Vine app, and more than a third of iPhone users have Instagram, according to the research firm Onavo Insights. If the short-video format proves to be more than a passing fad, a great deal of advertising revenue could be at stake. YouTube, Google’s longer-format video service, brings in billions of dollars a year in advertising.

Facebook already gets about 30 percent of its advertising revenue from mobile, according to its last quarterly earnings report.

Video holds a promise that goes beyond what static images and nuggets of text can offer. It tends to engage even the most distracted users, particularly when the snippets are easily digestible.

Vine-length videos are ideal when scrolling through a Twitter feed on a smartphone, Mr. Rezab said. Videos tend to be funny, and “you don’t have to hit the play button. The sound kicks in as you’re scrolling over it.”

“The six seconds is just magical,” Mr. Rezab said.

That sense of ease and simplicity was what the Vine team was striving for when it built the app, said Michael Sippey, Twitter’s vice president of product, in an interview.

“We wanted to make mobile video without a start or stop button,” he said. “If you give people simple tools to tell stories, they’ll tell really great stories.”

Some will be funny or trivial, but others will record momentous events, he said, like this week’s videos on Vine of the protests in Brazil.

The Instagram team sought much the same thing, although it added other features, like the ability to delete portions of a 15-second video and rerecord them. It also included an image stabilization feature to reduce the choppiness that often comes with hand-held recording.

Vindu Goel reported from Menlo Park and Jenna Wortham from New York.

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Internet Sales Tax Coming Too Late for Some Stores

Now that Congress seems ready to do that, she is no longer sure it matters. Even in losing, the e-commerce powerhouse is triumphant. It no longer needs the tax break to vanquish its foes — and could even make money by collecting the new taxes for other retailers.

“I’m surprised and glad this is happening,” said Ms. Demetropoulos, who owns three toy stores with her husband. “But Amazon won’t rest until it gobbles up everyone and everything.”

The Senate is poised to pass a bill to require all but the smallest online sellers to collect the tax. The House appears likely to follow suit. Although Amazon’s desire to avoid the tax played a fundamental role in its founding and growth, it is a supporter of the legislation.

As it builds new warehouses and extends its already considerable reach, Amazon is relying less on price than speedy delivery, free shipping and a selection that encompasses just about everything. Small retailers say Amazon was always a significant opponent, and is now a fearsome one.

“It’s beyond frustrating that Congress waited until Amazon became so dominant that having a massive tax advantage is no longer essential to its strategy,” said Stacy Mitchell, a senior researcher with the Institute for Local Self-Reliance. “The right time to fix this was a decade ago, when it could have saved many local businesses.”

Analysts who closely follow the fortunes of Amazon say collecting taxes is unlikely to drive away its customers. They say it may even help the Seattle company while simultaneously defusing a potent political issue.

In the few states where the company has already begun collecting, said Gene Munster, an analyst with Piper Jaffray, sales dip for about a year. “Then the customers come back for the convenience and selection,” he said.

Figuring out the tax in thousands of jurisdictions could be a logistical nightmare for merchants just above the legislation’s threshold of $1 million in annual revenue. That is another place where Amazon is expected to benefit; it could sell tax collection services to tens of thousands of third parties.

For some store owners, the digital world’s momentum can seem overpowering.

Ms. Demetropoulos tried to sell specialty toys online, but business dwindled as Amazon sought out her competitors and signed them up to sell through its Web site. The company courted her as well. “I’m like, ‘Are you kidding?’ ” she said.

Customers come into one of the branches of Island Treasure Toys, she said, scan a toy on their smartphone, and inform the sales clerk that Amazon sells it cheaper. Would the store be willing to make a deal?

The tax will not help this situation much, which is regularly played out in all kinds of stores across the country.

If retailers say no, Amazon often gets the business.

Amazon reported this week that its first-quarter revenue rose 22 percent, to $16.07 billion, an amazing increase for a retailer of its size. Wal-Mart, by contrast, is expecting no sales growth at all this quarter.

“This is the moment when Internet commerce was finally forced to stand on its own two feet,” said Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities who wrote the definitive report on Amazon’s long-held intransigence on the issue. “But it’s coming very late in the game.”

Under the current system, an Internet company has to collect taxes only in states where it has a physical location. For most companies, that means the state in which it has its headquarters.

When Jeff Bezos had the idea for Amazon in the mid-1990s, he explored setting up shop on a tax-free Indian reservation. Foiled in that goal, Mr. Bezos chose the State of Washington, which had an abundance of software programmers but a relatively small population. “It made no sense for us to be in California or New York,” he explained in an unguarded 1996 interview.

For years, Amazon rejected the notion that it should collect money in states where it had no employees. “It’s not fair,” Mr. Bezos told stockholders in 2008.

Consumers are supposed to add up their Internet purchases and pay the appropriate tax directly to their state revenue collectors. In practice, however, few do, and enforcement is minimal.

Nick Wingfield contributed reporting.

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Samsung Plays on Apple’s Turf to Introduce Galaxy S 4 Smartphone

At a packed event at Radio City Music Hall in New York on Thursday, Samsung showed off the Galaxy S 4, which has a screen slightly larger than the latest iPhone.

The device has quirky software features, including Smart Scroll, in which the front camera detects when someone is looking at the phone, and scrolls the screen according to the angle the phone is tilted. The phone can also be controlled with hand gestures. Waving a hand down in front of the phone will scroll up on a Web page, for example.

“Once you spend time with the Galaxy S 4, I’m very confident you’ll find how its innovations make your life simple and fuller,” said JK Shin, president of Samsung Mobile Communications, at the company’s first promotional event for its flagship smartphone.

With the prominent introduction of the phone, Samsung is trying to end its role as understudy to its more celebrated competitor, especially in the crucial American market, where Apple still rules. Even as Samsung has surpassed Apple in global market share, it is often criticized in the United States as an effective copycat, taking most of its product cues from Apple. But Samsung has begun flexing its marketing muscle more aggressively here to try to change that perception.

“This is Samsung’s time right now,” said Gene Munster, an analyst at Piper Jaffray. “They are clearly gaining more attention this time around than they ever have.”

Apple itself is showing signs of concern. In an unusual move on the eve of the Samsung event, Philip W. Schiller, Apple’s senior vice president for worldwide marketing, gave several interviews in which he discussed flaws in mobile devices based on Android, the Google operating system used by most of Samsung’s smartphones.

But Apple still has many big advantages that allow it to defend its position in the mobile business. Its iPhone 5 was the best-selling smartphone in the world in the holiday quarter, even though Samsung’s vast portfolio of phones is bigger than Apple’s. By charging a premium for its products, Apple raked in 69 percent of the profits in the smartphone business last year, compared with 34 percent for Samsung, according to a report by T. Michael Walkley, an analyst with Canaccord Genuity.

While analysts like Mr. Munster expect Samsung to gain market share in the United States in the coming two quarters, they predict Apple is likely to still dominate the crucial holiday shopping season, when gift shoppers buy mobile devices in droves. That is when sales of the iPhone typically outperform all other devices. By unveiling its flagship phone just before spring, Samsung is striking at Apple months before a new iPhone is expected to be released.

“Everyone stays out of the zone of iPhone launch periods,” said Horace Dediu, a blogger and analyst with Asymco.

Apple’s iPhones fly off the shelves in the United States, but Samsung is still the top seller of smartphones worldwide. And in the United States, Samsung is gaining.

In the fourth quarter of 2012, sales of Samsung devices accounted for 30 percent of the American smartphone market, up from 21 percent the previous year, according to NPD Group, the research firm. For the same time period, Apple’s iPhone accounted for 39 percent of the market, down from 41 percent the previous year.

Samsung is far exceeding Apple in its rate of growth worldwide. In the holiday quarter last year, Samsung shipped 63.7 million smartphones, up 76 percent from the previous year, according to IDC, the research firm. Apple sold 47.8 million, up 29.2 percent from the previous year.

Samsung has won the global volume race by releasing multiple models of smartphones at different prices and sizes, while Apple has released one new model every year. Along with the Galaxy S III, the Note II, a Samsung phone with an even bigger screen, has been a popular seller.

“Samsung’s momentum has been tremendous if you look at where they were three years ago to where it is today in the smartphone market,” said Chris Jones, an analyst at Canalys.

Apple of Cupertino, Calif., is famous for products that create markets, as was the case with the iPhone and iPad. Apple has accused Samsung of stealing many of its best ideas in the mobile market. Last year, it convinced a jury that Samsung had infringed Apple patents, winning a $1 billion award that a federal judge in the case recently reduced to $600 million, a figure that could change as the case develops. Some recent moves by Apple have appeared to be in response at least in part to competition from Samsung. It released a smaller iPad and a bigger iPhone after Samsung had been selling smaller tablets and smartphones with bigger screens for a while.

“Right now Apple is the challenger, and basically the power dynamics have changed already,” said Tero Kuittinen, an analyst at Alekstra, which helps companies reduce their phone bills. “Suddenly, Apple looks a little defensive.”

Before Thursday’s introduction, Samsung’s new smartphone generated nearly as much discussion and excitement in technology blogs as a new iPhone. “This is like the hype around the iPhone was two years ago,” Mr. Kuittinen said. “A year ago nobody cared about Samsung Galaxy S III. It’s not like the tech blogs wrote five posts a day about it.“

The Galaxy S 4 has several notable features. One, Dual Camera, allows the user to take a photograph with the front and rear-facing cameras simultaneously. At a basketball game, for example, a user can shoot a photograph of the game with the rear camera and the user’s reaction to it with the front camera; the two shots appear in one photograph.

Before Thursday’s event, a Samsung employee said the Smart Scroll feature would rely on tracking eye movements to determine where to scroll. When asked about the lack of eye-controlled scrolling in the new phone, David Park, a manager of Samsung’s mobile division, said the company had experimented with several approaches and decided to use the tilting method.

Samsung also added Group Play, which will allow multiple Galaxy phones to link together to play a game together. It uses Wi-Fi to bridge a connection.The phone will be available next quarter on Verizon Wireless, ATT, T-Mobile USA and Sprint. The older model, the Galaxy S III, was extremely popular because of its large screen and software capabilities; for a while it even outsold the iPhone. The company did not reveal a price for the Galaxy S 4, but said it should be the same as other premium Samsung phones, which have cost $200 with a contract.

To defend its lead in the market, Samsung will have to introduce capabilities in devices and set trends, said Chetan Sharma, a mobile communications consultant. But Mr. Kuittinen of Alekstra said Samsung has been setting the trends for a while. This year, Apple should introduce an iPhone with an even bigger screen, he said.

“They knew that if you do a phone with a huge 5-inch display, it will have big demand because it turns out people really want to have a phone with an enormous screen,” he said. “Apple didn’t know that.”

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Investors Shrug Off a Weak Earnings Report From Amazon

Investors decimated Apple last week when it appeared that the world’s mightiest profit machine might be slowing down just a tad. But they cheered on Tuesday when Amazon said its fourth-quarter sales and earnings fell short of expectations. Oh, and expect a miserable first quarter, too.

Shares in Amazon immediately jumped nearly 10 percent in after-hours trading, about the same amount that Apple fell after releasing its news.

What caught the eye of investors was that operating margins as a percent of consolidated sales rose to 3.2 percent, from 2.7 percent a year ago.

“The carrot for Amazon investors is improvements to margin over time,” said Gene Munster, an analyst with Piper Jaffray. Apple, on the other hand, would need to build a cheaper iPhone to keep growing as fast as it has been, which would slice into its margins.

For more than a decade, Amazon has teetered between minimal profits and no profits. In 2012, it said Tuesday, it lost money. But Wall Street has always been more about promises than results, and Amazon is always on the verge of converting its overwhelming online presence into buckets of cash.

“As long as the dream is there, the stock is going to go up,” Mr. Munster said.

The short-term news Tuesday was not good. Earnings per share fell to 21 cents from 38 cents in the fourth quarter of 2011. Although fourth-quarter revenue went up 22 percent to $21.27 billion, both revenue and earnings did not meet expectations. Analysts had predicted revenue of $22.2 billion and earnings of 27 cents a share.

Forget about all that. What mattered was the improvement in margin.

Amazon has had plenty of opportunities to raise its margins in the past, but has instead routinely chosen to reward customers with subsidized shipping and higher discounts. In a conference call with analysts on Tuesday, Tom Szkutak, Amazon’s chief financial officer, repeated this mantra.

“Putting customers first is the only reliable way to create lasting value for shareholders,” he said.

Investors took some time to buy into this idea. “Wall Street gets in a kerfuffle when we lower product prices and invest heavily in the future,” Jeff Bezos, Amazon’s chief executive, acknowledged in 2005, at a point when the stock had tumbled 40 percent in less than a year. “So don’t buy our stock — instead buy our products and enjoy our investments.”

That was bad advice. The stock is up almost 700 percent since then, hitting a record this month.

Shares in Amazon fell nearly $16 in regular trading Tuesday, to $260.35. After-hours, shares went up more than $22.

Jason Moser, an analyst with the Motley Fool, who owns shares in the retailer, said that “many investors, myself included, will more than likely watch this story play out for as long as it takes.”

Mr. Moser added in an e-mail message that the market was “betting a lot on what Amazon hasn’t done yet and betting on the fact that it will do it based on what it’s doing now.” He added, “Kind of a ‘build it and they will come’ sort of thing.”

Some analysts are still skeptical.

“It’s much easier to sell goods at cost the way Amazon does than sell goods at a 40 percent margin like Apple,” said Colin Gillis of BGC Partners. “Once you’ve trained your customers to buy at cost, it’s difficult to train them away from it.”

Still, Mr. Gillis said: “Who’s going to undercut Amazon? They’re only making half a cent on every dollar. Who can run a business at less profit?”

Amazon continues to expand. Last year, the retailer announced it was building a million-square-foot warehouse in Patterson, Calif., about 85 miles southeast of San Francisco. Last week, it announced another million-square-foot warehouse barely 30 miles north of Patterson, in Tracy. It obviously has designs on fast (if not quite same-day) shipping to the seven million generally affluent, Internet-using residents of the Bay Area.

“We’ll continue to expand our footprint over time and become even closer and closer to customers,” Mr. Szkutak said on the conference call.

Many of those shoppers will be buying material that originated not with Amazon but with more than two million third-party sellers. The volume of items sold by these firms during the 2012 holidays was up 40 percent from 2011. Some of these sellers merely used Amazon to digitally display their goods, while others also used the retailer to ship it.

Amazon said earlier this month that third-party sellers sold enough Santa hats during the holiday for Santa to wear a new hat every day for the next 127 years, and enough guitar picks to give one to every attendee of Woodstock — about a half-million. Analysts expect third-party sales to outpace Amazon deals over the next few years.

Recently several states, including California, successfully made deals with Amazon to collect sales tax. That had the effect of raising prices on many Amazon items by more than 5 percent. Land-based retailers, which had agitated for years for such a move, thought the tax might finally level the playing field.

Their hopes might be misplaced. Any drop in online sales from the collecting of sales tax tends to be temporary, said Scot Wingo, chief executive of ChannelAdvisor, which helps retailers sell online, including on Amazon.

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IPhone 4S Gets More Power, a Better Camera and Siri

Instead, the company unveiled something that looks an awful lot like an iPhone 4 on the outside, with an innovative feature that turns the device into a voice-activated mobile assistant for scheduling appointments and performing other tasks.

It’s a measure of how Apple has habituated its legions of fans to regular, eye-catching design changes that the news about the latest version of the iPhone qualified as a disappointment for some. Grumbling about the announcement of the new phone, the iPhone 4S, spread on Twitter throughout the day and the company’s shares fell as much as 5 percent, though they regained most of those losses by the end of trading.

“At the end of the day, there are still going to be long lines for this,” said Gene Munster, an analyst at Piper Jaffray. “They could have been even longer if they’d changed the hardware more.”

The new model of the iPhone, which will go on sale Oct. 14, with preorders starting Friday, is virtually indistinguishable from its predecessor on the outside. But beneath its skin Apple made big changes, packing it with a better camera that shoots crisper pictures and video. The device also includes a more powerful chip, the A5, the same microprocessor that is the brains of the iPad, for producing better graphics and other improvements.

Timothy D. Cook, Apple’s chief executive, presided over the event just as Steven P. Jobs had on similar occasions before he left the top job in August. Mr. Cook said that although the iPhone 4 is the best-selling smartphone in the world, Apple believes that the company still has plenty of people it wants to convert.

“We believe over time all handsets become smartphones,” he said. “This market is 1.5 billion units annually. It’s an enormous opportunity for Apple.”

Mr. Cook and other Apple executives also highlighted an array of supporting products for the new phone, but the centerpiece of the presentation, and of the new device, is the “virtual assistant” feature, Siri, named after a company Apple acquired last year that originally developed the technology. While the iPhone 4 already responds to some basic voice commands — to make phone calls, for example — Siri is designed to comprehend a much broader range of instructions in natural language.

For example, Apple executives demonstrated the technology by asking an iPhone, “Do I need a raincoat today?” to which the device responded, “It sure looks like rain today.”

While Apple’s decision not to call its new phone the iPhone 5, as many expected, raised some eyebrows, it has some precedent. A couple of years ago the company introduced the iPhone 3GS, which made modest improvements over the iPhone 3G. Michael Mace, the chief executive of a mobile application start-up and a former Apple and Palm executive, said Apple most likely wanted to telegraph that the iPhone 4S was an incremental change to the product, rather than a big redesign denoted by a change in the model number.

“You don’t want to oversell what you’re doing so you hurt your credibility,” Mr. Mace said.

Even incremental changes to the iPhone can help sales. Mr. Munster of Piper Jaffray said the annual growth rate in the number of iPhones that Apple sold during the fiscal year the iPhone 3GS was introduced was 93 percent, compared with 78 percent when the iPhone 3G came out.

With the new phone, Apple is taking on a growing challenge in the mobile market from the Android operating system made by Google. Smartphones powered by Android now outsell iPhones by more than two to one. While Android phones also let people use basic voice commands to do simple tasks, Apple is betting that the more sophisticated capabilities of Siri will make it stand out.

Many of the best minds in technology in the last several decades have been stymied by how to decipher speech, given variations in how people talk. Mr. Mace called what Apple is doing the “holy grail” for mobile devices; voice recognition could make it much easier for people to use them on the go without having to peck words into a keyboard. But he said the technology needed to be accurate or users would ignore it.

“When you start talking to a computer you expect it to really understand you, and if it doesn’t, you get really frustrated,” he said. “If Siri is like that, forget about it.”

This article has been revised to reflect the following correction:

Correction: October 4, 2011

An earlier version of this article misstated the previous price of the iPhone 3GS. It had been $49 (from ATT), not $99. Because of an editing error, the article also misstated the day of the Apple announcement. It was Tuesday, not Wednesday.

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