11/05/2017 World Business Report


11/05/2017

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Now it is time for World Business Report.

:00:00.:00:18.

Snap judgement - investors punish the firm behind Snapchat.

:00:19.:00:20.

As the messaging app's results disappoint, its shares plunge 23%.

:00:21.:00:23.

Businesses in Northern Ireland fear for the future

:00:24.:00:33.

Also coming up: A strong year for Japanese tech giant Softbank.

:00:34.:00:43.

We start with Snap, the company behind the messaging app Snapchat.

:00:44.:00:58.

In case you aren't familiar with it, it lets you send photo messages

:00:59.:01:02.

which disappear after a few seconds, and it seems the confidence

:01:03.:01:05.

of investors has gone missing almost as fast.

:01:06.:01:07.

Snap's shares have plunged in after-hours trading,

:01:08.:01:09.

on its first set of financial results since that huge flotation

:01:10.:01:12.

This is how much they lost in the first three months

:01:13.:01:19.

That is a massive jump on the losses this time last year.

:01:20.:01:24.

It is mostly because of huge stock option payouts to staff in the IPO.

:01:25.:01:28.

But here is the number investors are really looking at.

:01:29.:01:31.

By the end of March, 166 million people were using

:01:32.:01:33.

That is up over 36% on the same time last year, but it was a few million

:01:34.:01:39.

less than investors had been hoping, and a big slowdown from growth seen

:01:40.:01:42.

It also pales in comparison when you look at this.

:01:43.:01:46.

Facebook has around 1.3 billion daily users,

:01:47.:01:48.

and almost 2 billion who use it at least once a month.

:01:49.:01:51.

Even its version of Snapchat, Instagram Stories, has 200

:01:52.:01:53.

Investors were quick to pile into shares when Snap went public

:01:54.:02:04.

The share price rose by as much as 50% in the first couple

:02:05.:02:08.

But look how that enthusiasm has waned on concerns about competition

:02:09.:02:12.

from Facebook, and its shares are likely to plunge

:02:13.:02:15.

They were down 23% in after-market trading, towards $17.

:02:16.:02:18.

That would take the shares pretty much back to their flotation price.

:02:19.:02:22.

From San Francisco, here is Dave Lee.

:02:23.:02:36.

When Snap went public in March it had to answer two big questions. The

:02:37.:02:43.

first was, could attract enough new users to keep investors happy, and

:02:44.:02:47.

the second question, probably a bigger question, was caught it

:02:48.:02:50.

survive an onslaught from Facebook which has been copying Snapchat's

:02:51.:02:54.

best ideas and giving them to its users instead. Well, so far the

:02:55.:02:58.

answer to both of those questions seems to be no. User growth has been

:02:59.:03:02.

too small, revenue has been too small, and while Snapchat is still

:03:03.:03:06.

very popular with teenagers, there hasn't been an increasing engagement

:03:07.:03:10.

that perhaps investors would have wanted. Indeed, on an earnings call

:03:11.:03:13.

after results were published, one investor asked the chief executive

:03:14.:03:17.

whether there were new products coming which could give investors

:03:18.:03:21.

cause for hope. He didn't have too many bright ideas. He also said he

:03:22.:03:26.

wasn't worried by Facebook, but on the evidence of these results, he

:03:27.:03:28.

probably should be. Colin Jacobs is managing director

:03:29.:03:30.

of Immediate Future, an independent social

:03:31.:03:32.

media consultancy. Let's start with the immediate

:03:33.:03:44.

concern that people seem to have about Snapchat, and this is this

:03:45.:03:47.

competition from Facebook, whether it really is a sustainable model as

:03:48.:03:52.

it is, and can sustain interest. Facebook are not going to go

:03:53.:03:56.

anywhere, they are thriving at the moment, the numbers you have just

:03:57.:04:00.

read out underlined that. It is quite an interesting position he

:04:01.:04:05.

takes, when Facebook lies a company as it tried to do with Snapchat, --

:04:06.:04:12.

by the company. If he fails, he worked overtime, and that is what we

:04:13.:04:16.

are seeing with the new features coming online. Facebook's position

:04:17.:04:20.

is stronger because of their user growth, there is no doubt about

:04:21.:04:25.

that, and revenues they are currently generating a reportedly ?8

:04:26.:04:29.

billion, which is significant. And Snapchat are moving on. Yes, and

:04:30.:04:33.

they are moving in the right direction and have some nice product

:04:34.:04:36.

coming online. So just for the viewers, what we understand Snapchat

:04:37.:04:42.

to do is to take a photograph, apply a filter and it lends itself to

:04:43.:04:45.

advertising various products, however they need to do more. They

:04:46.:04:49.

need to do more but they have had some products in test, and the

:04:50.:04:54.

signals are encouraging. There was a reporter couple of weeks ago when

:04:55.:04:58.

they analyse their user growth and within the report showing that 80%

:04:59.:05:01.

of us are snapping in restaurants and 66% are snapping in balls, they

:05:02.:05:05.

released early signals on the product which looked for a long

:05:06.:05:09.

time... Social has played around with a term called click to break.

:05:10.:05:13.

Can we show that there is engagement in social that drives revenue at a

:05:14.:05:18.

location. Snapchat claim they have a product which does this. They had a

:05:19.:05:23.

trial with Wendy's restaurants, 42,000 people visited within seven

:05:24.:05:27.

days of acting on a filter. If they bring that product to market there

:05:28.:05:30.

is no doubt retailers and consumers will have great interest in it. In

:05:31.:05:34.

fact we are exploring it without consumer clients already. So the

:05:35.:05:39.

battle for these social media Company is his first business of

:05:40.:05:42.

user growth, because the more users you have the better it is in terms

:05:43.:05:46.

of potential conversion but the other thing is absolutely monetising

:05:47.:05:49.

it. Many social media companies have struggled in this department and

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Snapchat is no exception. And if you go back far enough, this is exactly

:05:53.:05:56.

the fight that Facebook had. Not long ago it was quite a revelation

:05:57.:06:00.

when parents suddenly joined Facebook. The younger demographic

:06:01.:06:04.

was quite shocked, my father now on Facebook. That is where Snapchat a

:06:05.:06:08.

rat today. The challenges, are they going to be able to grow their user

:06:09.:06:12.

base to truly monetise? Because the big revenues will only come if they

:06:13.:06:17.

have a far more inclusive user base, there is no doubt about that.

:06:18.:06:19.

Also, as the EU's chief Brexit negotiator, Michel Barnier,

:06:20.:06:22.

prepares to address the Irish Parliament,

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we are on the border between the Republic of Ireland

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and Northern Ireland, where Brexit talks will be closely followed.

:06:27.:06:29.

That is because, of course, it will represent Britain's land

:06:30.:06:32.

frontier with the EU once it leaves, and businesses there are worried

:06:33.:06:35.

about what that border will be like, as the BBC's

:06:36.:06:37.

This is what we will be once Britain leaves the European Union. The main

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land border between the two. They might not look like it, but the

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tranquil waters here are actually an international frontier. Over here

:06:57.:06:59.

the Republic of Ireland and hear the United Kingdom. It wasn't always

:07:00.:07:03.

this peaceful, of course. It used to be a militarised border with

:07:04.:07:07.

checkpoints. Now businesses here are worried about Britain's bow to the

:07:08.:07:10.

European Union, and what happens next. Another busy lambing season

:07:11.:07:15.

just finished... Some of the most worried farmers and food processors

:07:16.:07:18.

in the north who have forged deep relationships in the Republic. The

:07:19.:07:22.

chief executive of the farmers cooperative says his organisation

:07:23.:07:26.

makes constant use of the open border. We process livestock in

:07:27.:07:31.

Northern Ireland and the Republic of Ireland. We employ 1200 people in

:07:32.:07:36.

the Republic, we employ 1400 in Northern Ireland. From our

:07:37.:07:39.

perspective, we are hugely concerned about the potential impact of a hard

:07:40.:07:43.

order. We hope that they will not the one. But we cannot rule that

:07:44.:07:47.

out. Therefore, for business planning purposes, we have to

:07:48.:07:51.

consider the worst-case scenario. And for our company that would be

:07:52.:07:55.

very significant disruption. Not all businesses in the North think Rex it

:07:56.:08:03.

is bad news. Some think it is the best thing that has ever happened.

:08:04.:08:07.

The ministers in Northern Ireland have less influence over fisheries

:08:08.:08:10.

policy in the Irish Sea than a government minister from Slovakia or

:08:11.:08:14.

any other part of the European Union. The thing about the Irish

:08:15.:08:20.

Sea, 75% of the Irish Sea is within UK territorial waters but UK

:08:21.:08:25.

fishermen really only have the opportunity to carry catch about

:08:26.:08:32.

40%. Future here is linked to the outcome of the Brexit negotiations,

:08:33.:08:36.

which are themselves uncertain. But businesses in the north and south

:08:37.:08:40.

will be hoping that the politics of peace which dismantled the hard

:08:41.:08:43.

border in the first place will triumph over the politics of Brexit.

:08:44.:08:51.

To Asia now, where Japanese telecoms and internet giant Softbank has

:08:52.:08:54.

revealed some of its best profits ever.

:08:55.:08:56.

Softbank is a complicated company to follow.

:08:57.:08:58.

It runs a mobile phone network in Japan, but also invests heavily

:08:59.:09:01.

It owns US mobile company Sprint, and has recently bought UK chip firm

:09:02.:09:06.

ARM, which designs chips for the iPhone.

:09:07.:09:08.

It also has a huge stake in Chinese ecommerce giant Alibaba.

:09:09.:09:11.

Rico Hizon is following this in Singapore for us.

:09:12.:09:18.

It is indeed a confusing company. And Softbank doesn't help that be

:09:19.:09:29.

understood any more, the name. That's right, it is very diversify.

:09:30.:09:34.

They are into e-commerce, taxi hailing applications, but looking at

:09:35.:09:38.

the overall numbers, the second best ever for Softbank, operating profit

:09:39.:09:42.

for the year, until the end of March, rising 30% to $9 billion. And

:09:43.:09:48.

again it was due basically to cost-cutting and a rise in the

:09:49.:09:52.

number of subscribers in its US mobile business, Sprint, which it

:09:53.:09:59.

hopes to merge with rival the third largest wireless carrier, seen as a

:10:00.:10:07.

potential kingmaker in the sector, as companies like Sprint have

:10:08.:10:10.

ambitions of being the largest in the field. The diversify

:10:11.:10:15.

conglomerate also has the investments in China. It recently

:10:16.:10:21.

confirmed $5 billion investment in the so-called Uber of China, which

:10:22.:10:29.

has some 400 million users across 400 cities in the mainland. It

:10:30.:10:33.

acquired Uber China in August last year. Lots of businesses which are

:10:34.:10:40.

profitable. That is what we like to hear. Let's look at what has been

:10:41.:10:43.

happening on the markets. A couple of driving in fact is. There is an

:10:44.:10:48.

impression in the markets for reasons I won't go into that we will

:10:49.:10:52.

see further rate hikes in the US. That has strengthened the dollar,

:10:53.:10:55.

but also oil inventory is moving down fast and that has been helpful

:10:56.:10:59.

for commodity prices generally. These are the Asian markets, as you

:11:00.:11:04.

can see, picking up on a strong performance we saw on Wall Street.

:11:05.:11:10.

Here we go. You can see the NASDAQ moving up and the Dow. We take a

:11:11.:11:17.

look at what has been happening on the European markets? I don't think

:11:18.:11:21.

it is going to play with me, but we are seeing a stronger dollar this

:11:22.:11:23.

morning. Don't forget you can get

:11:24.:11:24.

in touch with me and some

:11:25.:11:28.

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