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Fewer than 10% of people in Norway use cash — and a senior official thinks it could disappear completely in a decade

18 hours 17 min ago  |  Clusterstock

  • The deputy governor of the Norwegian central bank believes that the country is effectively cashless.
  • Use of physical money is incredibly rare in the Scandinavian nation, with fewer than 10% of transactions including cash.
  • Cashlessness is on the rise globally, with almost 40% of Brits saying they can see themselves ditching the use of cash altogether in the future.

LONDON — Norway has effectively become the world's first cashless society, according to one of the country's most senior economic policymakers.

Speaking during the City Week conference at London's Guildhall, Jon Nicolaisen, the deputy governor of Norway's central bank, argued that the level of transactions using cash in the Scandinavian country is now so low that it can be considered cashless.

"By approximation, I would argue that the present is cashless," he said, during a discussion of the future of paper currency, chaired by the Bank of England's chief cashier.

Nicolaisen had the figures to back up his argument. 

"According to our latest numbers, we have less than 3% of broad money in cash," he said, adding that "less than 10% of the number of transactions, including buying coffees, are in cash."

Money is now almost entirely transferred electronically, he continued, saying that 90% of transfers in the country are now done via some electronic means.

"In many ways, we are already becoming a cashless society," he continued.

Rising cashlessness, Nicolaisen said, is not anything to do with the central bank's preferences, but simply represents the wishes of those who use money on a daily basis — the country's consumers.

"We have no wish to eliminate cash. It is the public itself that chooses other means of payment," he said.

It is not just in Norway where cashlessness is on the rise, with the whole of Scandinavia effectively moving away from physical money. As early as 2015 people were suggesting that Sweden is virtually cashless, and there is even anecdotal evidence that some beggars and buskers have card terminals, such is the lack of physical money in circulation.

As Business Insider wrote in 2015: "Sweden is the place where, if you use too much cash, banks call the police because they think you might be a terrorist or a criminal."

Scandinavian nations, and neighbouring Finland, are famously forward thinking when it comes to the future of money, with Finland recently launching an experiment with Universal Basic Income — a concept which effectively give citizens free money.

Cashlessness is also on the rise in the UK, with a recent survey conducted for Business Insider showing that almost 40% of Brits can see themselves ditching the use of cash altogether in the future.

Globally, Nicolaisen said, cash could completely disappear within the next decade.

SEE ALSO: EXCLUSIVE: More than one in 3 Brits are ready to stop using cash

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Investors are dying to know if the Cambridge Analytica scandal means people use Facebook less (FB)

20 hours 3 min ago  |  Clusterstock

  • Analysts want to know whether the Cambridge Analytica scandal has affected user engagement on Facebook.
  • CEO Mark Zuckerberg has said the #DeleteFacebook campaign hasn't had much impact, but it's less clear whether users are choosing to spend less time on the social network.
  • Facebook was already suffering from falling user engagement, and it said months ago that it was making changes expected to reduce user time spent on the platform.

As Facebook grapples with the fallout of the Cambridge Analytica scandal, there's one big question on everyone's lips: How are the users reacting?

On Wednesday, we may get some answers. The social-networking giant is due to report its earnings from the first quarter of 2017, which featured weeks of bruising headlines about how as many as 87 million users' data was improperly obtained by a political research firm.

As the scandal erupted, a #DeleteFacebook campaign called on people to leave the service, but its effect appears to have been muted. When testifying to Congress, and in interviews with journalists, CEO Mark Zuckerberg said Facebook had not seen a "meaningful number of people act on that." Plus, early estimates from analysts are predicting that the crisis hasn't damaged the company's advertising business.

Less clear, however, is whether and to what extent the scandal has affected the amount of time users spend on the social network.

In a research note published Sunday, Stifel analysts wrote that they did not expect "a material impact" to Facebook's advertising business, but they expressed concern about frequency of use.

Rating Facebook's stock as "hold" and setting a price target of $168, the analysts wrote: "Should recent negative engagement trends in North America and Europe persist, we believe forward engagement estimates could prove optimistic. Overall, we continue to see heightened risk around regulation, consumer trust, and consumer usage levels of the platform."

In a research note published last week, Pivotal Research Group's Brian Wieser said a decline in use was not an "overly controversial" expectation — but the magnitude was less certain. "Most investors can acknowledge that consumption on core Facebook is weak, and downside from the Cambridge Analytica episode will probably occur, although the scale to which this occurs is debatable," he wrote.

"Our guess is that reduced trust in the platform paired with increasing awareness of toxicity of the platform," as well as other factors, "could mean ongoing erosion of usage throughout 2018. We don't think this point is overly controversial."

'We think Facebook can overcome the most recent data issue'

Some analysts are already trying to quantify the impact of any changes in user behavior. GBH Insights surveyed users and found more than one in 10 said they planned to reduce their amount of time using the app.

"Roughly 15% of Facebook users polled will decrease in some capacity their use of the platform in light of the Cambridge issue and we estimate a negligible number of users have deleted their Facebook accounts despite the backlash," the GBH Insights analysts wrote.

The firm estimates that slower user growth could put up to $2 billion of revenue at risk for the company but says "the fundamental damage to the Facebook platform has been 'contained' in our opinion."

Others are more bullish, predicting that Facebook's portfolio of apps, including Instagram and WhatsApp, will pick up any users who ditch or cut back on Facebook.

"We think Facebook can overcome the most recent data issue, as over time, we expect it to regain user trust around data security and privacy. Thus, we don't see users walking away from Facebook properties or otherwise negating the firm's network effect moat source," Morningstar Equity Research's Ali Mogharabi wrote in a note on April 20.

"Plus, Facebook owns the two largest (and perhaps most valuable) social networking properties, and any migration of users or usage away from Facebook may simply shift toward its Instagram platform."

RBC Capital Markets, meanwhile, expects any drop-off to be short-lived: "We do believe there may be near-term pressure (Q1/Q2) on User and Engagement growth @ Facebook, given all the negative media attention on the data controversy, though do not see a material long-term impact."

Complicating matters is the fact that Facebook engagement was already in decline — and on the company's fourth-quarter 2017 earnings, executives said the company would be making changes expected to reduce it further as the company prioritized "meaningful connections."

"It's always going to be very hard to connect Cambridge Analytica to a specific outcome for Facebook if they're already exhibiting user decline, usage decline, and they already said in January they're going to design a platform to cause more declines," Pivotal's Wieser said on a call.

"How are we going to isolate for it? I think it's probably safe to say relatively few people will completely abandon Facebook, like truly deleting Facebook. But ... people who are already diminishing their use of the platform will continue to do so."

SEE ALSO: The pro-privacy backlash against Facebook might actually make it even stronger

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A top strategist warns that the 'intellectual health of society' is in danger — and explains why investors should be very worried

20 hours 8 min ago  |  Clusterstock

  • Facts and evidence have started taking a backseat to opinion, and that mentality is bleeding into investing, according to Bernstein.
  • The firm scoured millions of books spanning 400 years in an attempt to provide quantifiable evidence of this trend.
  • Bernstein argues that this is a harmful mindset that distorts investor perception and could pose problems as the market enters a late-cycle environment.

If you've spent any time at all on Twitter, you've probably realized that facts and evidence often take a backseat to opinion and conjecture.

Bernstein has noticed too, and it has done extensive legwork to quantify what it describes as the "fall of facts."

The firm's findings are jarring, to say the least.

The chart below shows how the prevalence of the word "fact" has changed over time, using a tool designed to search for it in Google's library of millions of books published from 1600 to 2008. The darker line at the end reflects a similar analysis applied to the comments section of Reddit.

Using the same methodology, Bernstein found that the same situation has unfolded with the word "evidence." As you can see in the chart below, it has seen an even sharper decline — once again highlighting what the firm sees as a disconnect in reason.

"This is the first significant decline in the frequency of their use since the onset of the Enlightenment in the 18th century," Inigo Fraser-Jenkins, a senior analyst at Bernstein who leads the firm's global quantitative and European equity strategy, said in a note to clients.

And while Bernstein is worried about what this all means for the world, the firm argues that investors are particularly at risk — the increased propensity for traders to rely on opinion, it says, is negatively affecting the investment landscape, which will be problematic as we enter the final stage of a market cycle.

"Our ultimate concern is for the intellectual health of society, but there are issues here that are more immediately germane to investors," Fraser-Jenkins said. "This could well matter for economic growth. The increase in the use of the words 'fact' and 'evidence' from the early eighteenth century coincided with the first significant and sustained increase in economic output per capita in human history."

The disconnect between opinion and reality has manifested within the framework of corporate earnings. Bernstein describes the gap between S&P 500 operating and reported earnings as "very wide." That's significant because operating profit usually reflects the opinions of management, while reported numbers represent fact-based findings.

And while the spread has widened in the late stages of economic expansion, Bernstein notes that this is the first time the gap has grown because of an acceleration in operating earnings as opposed to a fall in reported profit (see the third chart).

In other words, conjecture has infiltrated thinking around earnings season to a degree never seen before.

"We see this as a tangible example of the triumph of opinions over facts," Fraser-Jenkins said. "It should be of very tangible concern to the investment community. If we are already late in an economic cycle when the tendency for company managements to employ a rosy spin on their numbers is at its most acute, then we should worry if this gap between opinion and reality is wider than in previous cycles."

That's not to say Fraser-Jenkins is opposed to bucking conventional thought — he readily acknowledges the importance of such behavior throughout history and says research-driven arguments have helped shape the world we live in today.

But with people increasingly keen to cut corners, Fraser-Jenkins isn't holding his breath when it comes to a huge, imminent breakthrough.

"Challenging authority and received wisdom is a good thing, but only if one is doing so with appropriate evidence and facts," Fraser-Jenkins said. "The Scientific Revolution succeeded because it did precisely that."

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Intel may be flying high, but it faces plenty of challenges ahead (INTC)

Tue, 04/24/2018 - 11:42pm  |  Clusterstock

  • Intel's faced a string of bad news over the last six months, from chip delays to major security vulnerabilities.
  • Its stock and financial results have held up despite it all.
  • But it's anyone's guess whether the company can keep it up, as it faces new competitive threats and other challenges.

It hasn't been a great six months for Intel.

Since September, the company has had to contend with product delays, major security vulnerabilities, the potential loss of big-name customers, and resurgent rivals. It's also killed a new product line and faced dozens of lawsuits over its CEO's massive stock sale.

Yet, if you just focused on the company's stock price or its earnings numbers, you might have no clue any of that was going on. So far, despite all the bad news, Intel's stock hits and financial results have not only held up, they've surged.

"There have been lot of different distractions around company," said Mario Morales, an analyst who covers the semiconductor market for research firm IDC. "But they've not impacted their ability to maintain a solid position in the markets they serve."

The big question for Intel, though, is how long its business and stock can hold up — particularly if the hits keep coming.

Intel's core businesses face new threats

Intel's bread and butter are its PC and server chips, which dominate their respective markets. Even though sales of its PC chips have stagnated in recent years, Intel's profits off those chips have actually swelled. Last year, the company posted a whopping $12.9 billion in operating income from its PC chips alone, which was up nearly 22% from 2016.

Meanwhile, its data center chips have grown apace in both sales and earnings. Those processors brought in $8.4 billion in operating income last year, up 16% from 2016.

But there are reasons to worry about Intel's business in both areas. PC sales have shrunk for years. Although there are signs that the market may finally be stabilizing, there's little hope it will rebound to a growth market.

Even as there may be fewer sales to go around, Intel faces renewed competition. AMD, its chief rival in the PC chip space, has stumbled for years. But the company's latest processors are drawing rave reviews for offering comparable performance to Intel's chips — and potentially even better graphics performance — at a significantly lower price. That combination of performance and low cost should help AMD cut into Intel's market share and sales, said Morales.

"AMD is finally executing," he said.

Part of what's helped Intel dominate the chips world is that its manufacturing process has long been far ahead of its rivals. For years, it's been able to cram significantly more transistors into a given space than its competitors, allowing it to produce more powerful and more efficient chips more cost effectively. It's lead has also allowed Intel to charge premium prices for its processors.

Intel may have lost its manufacturing lead

But there are signs that Intel has squandered that advantage. The company has struggled for years to produce chips using its next generation of technology, the so-called 10-nanometer node. Those chips were supposed to be out last year, but now aren't expected in mass quantities until the end of this year.

As Intel has delayed, one of its chief competitors, Taiwan Semiconductor Manufacturing Company (TSMC) has already started to produce chips based on its own 10 nm process. That process isn't directly comparable with Intel's but depending on who you ask, TSMC is close to reaching parity with Intel if it hasn't surpassed it already.

"TSMC is a real competitor to Intel," said C.J. Muse, a financial analyst who covers Intel for Evercore ISI. While Muse still thinks Intel's ahead of TSMC, the Taiwanese company "is probably the closest it's been [to Intel] in the history of the company.

"Intel has some work to do."

If TSMC does catch up, other chipmakers — most notably AMD — could make much more competitive chips, threatening not just Intel's sales, but its profits.

Apple may be ditching Intel

But Intel is facing not just more competition in the PC chip space, but the potential defection of a headline customer — Apple. Reports circulated recently that Apple plans to ditch Intel chips in its Macs for its own homegrown A-series chips that it uses in its iPhones and iPads.

The move would make sense. Apple moved from PowerPC chips to Intel ones a decade ago because advances in PowerPC processors weren't keeping pace with Intel's. But now its Intel that's having trouble keeping pace with the rapid advances in Apple's A-series processors. By some measures, Apple's latest iPhone chips are more powerful than the Intel chips in its MacBook Pro laptops.

What's more, Apple could potentially save money by using its own processors rather than Intel's.

Muse doesn't think the move would be a huge financial hit for Intel, because the company has far bigger customers than Apple. If Intel lost all of Apple's business, it would cost the company about 15 cents a share in annual earnings; by comparison, the company earned $1.99 a share last year.

But the loss of that business could be harder to digest if its having to fight harder to retain its other customers.

Intel's server chip business is under threat too

And it's not just Intel's PC chip business that could come under pressure. Businesses are increasingly shifting their computing processes from their own servers to cloud computing systems such as Amazon Web Services and Microsoft Azure.

Those cloud computing providers use lots of Intel chips. But increasingly, those companies and other big Internet firms such as Facebook are developing their own processors or are relying on different kinds of chips, such as graphics processors, to handle particular tasks. That could eventually make them less reliant on Intel.

The different chips heading to cloud service is "going to bring lot more competition to Intel," said Morales.

Even as it faces potential potholes in its two major business segments, Intel has yet to show it can build a significantly profitable business outside them. Last week it shuttered its wearable devices unit. It previously failed in its effort to build a business around making processors for mobile phones. Meanwhile, Nvidia has carved out an early lead in the race to develop chips for artificial intelligence and self-driving cars.

Intel needs "more cohesive and aggressive AI story to combat the rise and excitement around Nvidia's" chips, said Joe Unsworth, an analyst who covers the semiconductor industry for market research firm Gartner.

Of course, all these potential obstacles will likely be relegated to the background this week, when Intel reports its earnings. Wall Street is expecting yet another quarter of significant earnings and revenue growth. Assuming Intel hits analysts' targets, investors will likely bid up the shares even higher.

And the company is by no means doomed. It still dominates its key markets. Its brand is well known.

But Intel's longer term outlook is probably more uncertain than its been in a long time.

"It's hard to move such a very large company," Morales said.

SEE ALSO: Amid controversy over Intel CEO's stock sale, SEC warns executives about trading shares before disclosing security breaches

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Don't be fooled by retail's market resurgence — one Wall Street firm explains why the worst is yet to come for brick-and-mortar stocks

Tue, 04/24/2018 - 10:59pm  |  Clusterstock

  • Retail stocks in the S&P 500 have beaten the broader index so far in 2018, but Morgan Stanley says that outperformance is misleading.
  • The firm argues conditions for traditional retailers are in much more dire shape than they appear, and it says an index tracking the sector is being carried by two nontraditional components.

2018 has been kind to retail stocks — at least for the most part.

Sure, companies like Sears are still figuring out out how to grapple with increasingly difficult industry conditions. But even then, those restructuring efforts have proved to be positive for the sector's equity prices on the whole.

The year-to-date results are undeniable. Retail companies in the S&P 500 have climbed 13% this year. That has crushed the benchmark, which slipped into negative territory for the year on Monday.

But when you strip out Netflix and Amazon — two of the retail gauge's most influential companies — things start to look more dicey. After all, they are the two best performers in the index year-to-date, with Amazon increasing 29% and Netflix surging more than 66%.

The chart below shows just how much the retail industry has struggled to recover from an early-2018 decline that left it at multimonth lows. The blue line represents the sector with Amazon and Netflix stripped out, and it paints a far less compelling picture — one that has shown few signs of a rebound.

It's troubling that Amazon and Netflix are so responsible for lifting the rest of the industry, especially when you consider that neither company really fits the brick-and-mortar mold. In fact, Amazon's e-commerce efforts are actually blamed regularly for the plight of more traditional retailers, while Netflix's only deliverable content is streaming video.

Putting even more pressure on the retail sector are lofty profit expectations that spiked following the passage of the GOP tax law. The chart below shows a measure of earnings revision breadth for the whole industry, as well as the index with Netflix and Amazon removed. And as you can see, a large number of firms saw profit estimates increase.

By that same token, the chart also shows the degree to which that breadth has declined in recent weeks. While Morgan Stanley sees this as a troublesome sign, the firm says it's nothing compared with the drop that could be coming, especially if the tax boost wears off.

"Prior to tax reform, earnings revisions breadth was negative as analysts took down numbers for the industry group," Mike Wilson, the firm's chief US equity strategist, wrote in a client note. "There is potentially a long way for earnings revisions breadth to fall, which would cause more pain for traditional retail stocks."

If you're still not convinced that many traditional retail stocks are riding the coattails of tax reform, consider the final chart below. It shows the degree to which other profitability measures — EBIT and EBITDA — have failed to keep up with earnings per share.

The reason is simple: Those two gauges don't include the impact of tax cuts and are suppressed by comparison. They're also more accurate representations of core retail businesses, which helps explain why Morgan Stanley is so wary.

"This is a low quality move and most of the growth is coming from tax reform benefits rather than fundamental improvements to the businesses," Wilson said. "We believe traditional retailers are more vulnerable than the average sector to the negative second order effects from tax, namely price competition and rising costs, especially labor."

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MORGAN STANLEY: Here are the 10 tech companies most likely to get acquired in the next 12 months

Tue, 04/24/2018 - 10:57pm  |  Clusterstock

Corporate mergers and acquisitions in the US are rebounding this year. 

Thanks to tax cuts, companies have access to more cash they can spend on deals.  According to Morgan Stanley, M&A offer intensity, the number of offers relative to the number of stocks, increased to 3.2% in the first quarter from 2.5% in the fourth.

Among S&P 500 sectors, tech saw the second-largest increase.

Morgan Stanley identified 10 tech companies that are the most likely to receive tender offers over the next year. On average, 7% of all the companies published in prior lists received offers in the following 12 months. 

"Our model, ALERT (Acquisition Likelihood Estimate Ranking Tool), combines stock characteristics, cohort membership, and data regarding offers to forecast probabilities that stocks receive tender offers in the coming 12 months," said Brian Hayes, the global head of quantitative research, in a note on Tuesday.

"On the one hand, stock-specific information, such as yield, leverage and valuation, impacts stocks' offer likelihoods; on the other hand, recent activity levels in the cohorts to which a stock belongs (e.g., sector and size) tend to continue for some time, and this affects subsequent offer intensities for remaining stocks in those cohorts."

Betting on possible takeover targets has been a successful strategy for investors this year. A Goldman Sachs-curated index of stocks with at least a 15% chance of being acquired in the next 12 months has beaten the benchmark S&P 500 by 4 percentage points since the start of the year.

Here's Morgan Stanley's list of the top takeover targets in tech:

SEE ALSO: Morgan Stanley identified 12 trades to protect you from a stock market meltdown

Arris International

Ticker: ARRS

Year-to-date Trading: $9.21 billion

US Market Cap: $4.9 billion

Closing price as of 4/20: $27.54

Nuance Communications

Ticker: NUAN

Year-to-date Trading: $11.61 billion

US Market Cap: $4.62 billion

Closing price as of 4/20: $15.01


Ticker: HUBS

Year-to-date Trading: $9.63 billion

US Market Cap: $4.06 billion

Closing price as of 4/20: $113.6

See the rest of the story at Business Insider

Fintech could be bigger than ATMs, PayPal, and Bitcoin combined

Tue, 04/24/2018 - 10:01pm  |  Clusterstock

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Fintech broke onto the scene as a disruptive force following the 2008 crisis, but the industry's influence on the broader financial services system is changing. 

The fintech industry no longer stands clearly apart from financial services proper, and is increasingly growing embedded in mainstream finance. We’re now seeing the initial stages of this transformation.

For instance, funding is growing more internationally distributed, and startups are making necessary adjustments to prove sustainability and secure a seat at the table. Most fintech segments in the ascendant a year ago have continued to rise and grow more valuable to the broader financial system. Meanwhile, several fintech categories have had to make adjustments to stay on top. New subsegments are also appearing on the scene — such as digital identity verification fintechs — as new opportunities for innovation are discovered. 

Significantly, incumbents are responding more proactively to the rising influence of fintech by making updates to their consumer-facing channels, back-end systems, and overall business operations. Most are realizing that the best way to adapt is to work alongside the fintechs that are transforming the financial services environment, either by partnering with them or acquiring the startups entirely. As fintech's power grows, incumbents will have no choice but to change in order to stay relevant and competitive. All around, fintech is becoming embedded in mainstream finance.

Business Insider Intelligence, Business Insider's premium research service, has written the definitive Fintech Ecosystem report that looks at the shifts in the broader environment that fintechs operate in, including funding patterns and regulatory trends; examines the adaptations that some of fintech's biggest subsegments have had to make to secure a foothold in the financial services system; and discusses how the continued rise of the fintech industry is pressuring incumbents to make fundamental changes to their business models and roles. It ends by assessing what a global economy increasingly influenced by innovative fintechs will look like.

Here are some key takeaways from the report:

  • The fintech industry is far more than a group of digitally native, consumer-centric startups, although they are, in many ways, becoming the new face of financial services. It's increasingly clear that fintech no longer stands apart from financial services proper, and is morphing into an integral part of the financial system. 
  • To secure their position in the mainstream economy, some of the main fintech subsegments have had to adjust their business models. These include neobanks, robo-advisors, and alt lenders. Other fintech categories, meanwhile, have instead found that current conditions are well suited to their original models, and are seeing largely smooth sailing, like regtechs, insurtechs, and payments fintechs. Innovation and dynamism is still alive in fintech too, with new categories still emerging.
  • The rising influence of fintechs is having a dramatic effect on incumbents, from banks to insurers to wealth managers, pushing them to respond proactively to stay relevant. Incumbents are reacting to changes wrought by fintechs on three key fronts: the front end, the back end, and in their core business operations. As such, incumbents and fintechs are converging on a digital middle ground.
  • As this happens, the fintech industry is on the cusp of becoming an integral component of the broader financial services ecosystem. But it will likely first have to go through a complete credit cycle, and survive an economic downturn like the one that set the stage for its arrival in 2008, for this to happen.

In full, the report:

  • Looks at how the environment in which the fintech industry operates is changing, and what that means for the digitization of financial services.
  • Gives an overview of the main subsegments within the global fintech industry, and discusses which categories have had to adapt to survive, which have reaped benefits from their original game plans, and which new segments have come to the fore in the past twelve months.
  • Outlines the adaptations that incumbent financial institutions have begun making to adjust to an economy that's inevitably shifting to digital, and in which tech-savvy fintechs are increasingly setting the standards.
  • Discusses what the future of financial services will look like as fintech embeds itself into the financial mainstream.
Subscribe to an All-Access membership to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

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Google's stock clobbering shows just how freaked out Wall Street is about the online ad business right now (GOOG, GOOGL)

Tue, 04/24/2018 - 9:10pm  |  Clusterstock

  • Google shares finished down for the second day in a row following mixed earnings. 
  • Even an analyst who trimmed his price target called it an "overreaction."
  • One analyst said those selling Google may anticipate bad news coming from Facebook's quarterly report on Wednesday and wanted to avoid fallout to ad sector

Google continued to feel the backlash on Tuesday of a Q1 financial report that featured some unwelcome surprises.

The share price of Google's parent company Alphabet Inc finished the regular trading session down 4.5%. 

Even analysts who trimmed their price targets struggled to explain the thinking behind investors reaction.

"Unfortunately, I think a lot of people are piling on," said Scott Kessler, director of equity research at CFRA Research, who reduced his 12-month target by $50 to $1,235 a share in the wake of Google's earnings, but still has a strong-buy rating on the stock. "I definitely think it's an overreaction. It feels like a snowball effect."

Tuesday's results came amid a general market selloff that also affected some of Google's top rivals. Facebook and Amazon each fell more than 3 percent while Apple shares dipped more than 2 percent. Still, few of them suffered a decline like Google. Perhaps most significant for the digital-ad business is that Google was the first of the top companies in the sector to report Q1 results, and this isn't an encouraging start.   

Google reported that first-quarter revenue increased 23% from Q1 last year, outperforming analysts expectations, but during the same period the search giant's capital expenditures nearly tripled. In addition, the company's traffic acquisition costs rose 37% and took up a greater percentage of revenue than the same quarter last year.

Clinging to Google is the possibility that new rules in Europe regarding user privacy could hurt the company's ability to collect the kind of information that advertisers want. Then, closer to home, there's the fallout from Facebook's recent troubles with Cambridge Analytica, which is accused of misappropriating user data.

The Wall Street Journal recently wrote that while Facebook faces congressional scrutiny, Google is the advertising company that possesses the most information on members of the public. Why aren't they being called on to testify before lawmakers?

Investing for growth or spending excessively?

Shebly Seyrafi, managing director of internet research at FBN Securities, sees encouraging signs from Google and has an outperform rating on its shares. In his note on Tuesday, he pointed to the company's growth in mobile search and YouTube. He noted that  paid clicks on Google web sites grew 59 percent from Q1 2017. Revenue in the category also grew 26 percent, up from 22 percent during the same period last year.

As for Google's increased costs, Seyrafi sees discrepancies with how Wall Street reacts to the way different tech companies invest. Google said that rising capital expenditures were due in part to the building of a global internet network, a multi-billion dollar endeavor that includes laying its own undersea cables, building data centers and buying tons of computers.

"I think what's happened is that Alphabet is investing for growth,"  Seyrafi told Business Insider on Tuesday. "Unlike Amazon, which is also investing, the street is not ready to accept Google's strategy as much as Amazon's...but what Google is doing is prudent."   

Seyrafi also suspects that Google investors might be anticipating bad news from Facebook when the social network reports first-quarter earnings on Wednesday after the bell. Any softness in Facebook's business outlook would represent more bad news for Google, given that both companies' prospects are tied to the state of the online ad market. 

"I think what’s happening is some investors are stepping back a bit," Seyrafi said. "Some are worried about the digital advertising model, especially post Cambridge. Some are concerned about Facebook's forward outlook and that it may not be positive, and they want to get out of Google ahead of that."   

Business Insider will be covering Facebook earnings live on Wednesday after the bell. 

SEE ALSO: A Facebook bear outlines 2 big risks to watch ahead of earnings (FB)

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THE PAYMENTS INDUSTRY EXPLAINED: The Trends Creating New Winners And Losers In The Card-Processing Ecosystem

Tue, 04/24/2018 - 8:02pm  |  Clusterstock

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Digital disruption is rocking the payments industry. But merchants, consumers, and the companies that help move money between them are all feeling its effects differently.

For banks, card networks, and processors, the digital revolution is bringing new opportunities — and new challenges. With new ways to pay emerging, incumbent firms can take advantage of solid brand recognition and large customer bases to woo new customers and keep those they already have.

And for consumers, the digital revolution is providing more choice and making their lives easier. Digital wallets are simplifying purchases, allowing users to pay online with only a username and password and in-store with just a swipe of their thumb. 

In a new report, Business Insider Intelligence explores the digital payments ecosystem today, its growth drivers, and where the industry is headed. It begins by tracing the path of an in-store card payment from processing to settlement across the key stakeholders. That process is central to understanding payments, and has changed slowly in the face of disruption. The report also forecasts growth and defines drivers for key digital payment types through 2021. Finally, it highlights five trends that are changing payments, looking at how disparate factors, such as surprise elections and fraud surges, are sparking change across the ecosystem.

Here are some key takeaways from the report:

  • Digital growth is accelerating the pace at which payments are becoming faster, cheaper, and more convenient. That benefits both nimble startups and legacy providers that invest in innovation.
  • Mobile payments are continuing to take off. On mobile devices, e-commerce, P2P payments, remittances, and in-store payments are each expected to rise as customer engagement shifts from more established channels.
  • Power is shifting to companies that control the customer experience. As the selling power of physical storefronts shifts to digital devices, the companies that control the apps and platforms that occupy users’ attentions are increasingly encroaching on payment providers’ territory. 
  • Alternative technologies are moving from the idea stage to reality. Widespread investments in blockchain technology last year are beginning to result in services hitting the market, promising to further squeeze margins for payments providers. 

In full, the report:

  • Traces the path of an in-store card payment from processing to settlement across the key stakeholders.  
  • Forecasts growth and defines drivers for key digital payment types through 2021.
  • Highlights five trends that are changing payments, looking at how disparate factors, such as surprise elections and fraud surges, are sparking change across the ecosystem.
Subscribe to an All-Access membership to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

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A popular text therapy app plans to start prescribing drugs to users — and it's part of a major expansion

Tue, 04/24/2018 - 6:06pm  |  Clusterstock

  • Popular text-based therapy platform Talkspace is planning a massive expansion.
  • The company is bringing on psychiatrists to prescribe medications to patients through the app using its video chat tool.
  • The app is also partnering with fraternity Delta Tau Delta to offer its 9,000 members free access.

I began my first therapy session on a crisp spring night in 2015, in the middle of a crowd near Manhattan's Union Square. I was on my way to the subway when my phone buzzed with a new text from an app called Talkspace, a text-message-based therapy platform.

"Hi Erin, it's nice to meet you," the message said. "Can you tell me a little bit more about yourself? I'm glad you are here."

Following that initial message, I used Talkspace for a week.

The app is designed to replace or supplement traditional in-person therapy. And nearly three years and some 1 million additional users after I tried it out, the platform is planning a major expansion.

The biggest change is that Talkspace plans to start prescribing users medications for conditions like anxiety and depression.

Roni Frank, Talkspace's co-founder and head of clinical services, told Business Insider that the decision to expand into prescription drugs comes alongside the company's recent appointment of its first chief medical officer. Neil Leibowitz, Talkspace's pick for the role, was previously senior medical director at UnitedHealth.

In addition, Talkspace is announcing a round of new partnerships in the coming weeks, one of which involves free access for brothers in the 9,000-member college fraternity Delta Tau Delta.

Prescribing drugs through the Talkspace app

The Talkspace platform is built as a way to confront the reality that traditional therapy — which involves pairing a licensed therapist or social worker with an individual or couple — is failing to meet a large and growing need for mental health services.

Of the roughly 20% of Americans who have a mental illness, close to two-thirds are estimated to have gone at least a year without treatment.

Dozens of other startups are also attempting to solve this problem, including AI-powered app Woebot and chatroom platforms like Better Help and 7 Cups of Tea. None of those currently offers patients access to medication, however.

With that in mind, Talkspace is bringing on a team of licensed psychiatrists who will serve as independent contractors and work directly with Talkspace's therapists to determine appropriate prescriptions for medications.

With Leibowitz on board as CMO, Talkspace would be the first mental health app to provide this service, which Frank said they would be piloting in a region of the US beginning in October 2018.

"Many patients can’t access medication and it's very expensive," she said. "This collaboration is key for better clinical outcomes and better results."

Users won't completely forego an in-person consultation, though — Talkspace said that would take place via video chat. 

Talkspace is increasingly moving into offices and universities

In addition to expanding into the prescription drug space, Talkspace is also bringing its platform to offices and universities — first by offering its services through employer assistance programs, and second by teaming up with fraternities on college campuses.

As part of the new arrangement with Delta Tau Delta, the fraternity's members will get free access to Talkspace by using a special code. Talkspace views the initiative as an opportunity to provide young people greater access to mental health services, according to Lynn Hamilton, Talkspace's chief commercial officer.

"I think millennials today are more open about their mental health and their desire to get services but the flipside of that is that the universities are challenged to keep up with the students' demand to access care," Hamilton said.

The company announced a similar partnership with Alpha Tau Omega in 2016, after a member of that fraternity heard about Talkspace in an advertisement and reached out to the company.

The company is also in talks with several sororities and has been mulling the decision to work directly with on-campus mental health services at universities across the US.

"I don't view this as a fraternity-only partnership," Hamilton said.

SEE ALSO: There's a science-backed treatment for drug addiction that works — but it's nearly impossible to get

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How to Build a Robo Advisor: Advice for Starting a Robo Advisory

Tue, 04/24/2018 - 5:03pm  |  Clusterstock

With the tremendous growth in robo advisor assets under management (AUM), financial institutions are scrambling to figure out how to build and become a robo advisor.

Starting a robo advisor service combines financially savvy with big data analytics, as well as a comprehensive understanding to how robo advisors work.

How Do Robo Advisors Work?

Robo advisors are platforms that leverage algorithms to handle users' investment platforms. These services analyze each customer's current financial status, risk aversion, and goals. From here, they recommend the best portfolio of stocks available based on that data.

And these automated financial services are poised to transform the tremendous worldwide wealth management industry. 

MyPrivateBanking's report, Robo Advisor 3.0, takes an in-depth look at the basic challenge of every robo advisor: how to craft a presence that succeeds in convincing website visitors to sign up as investors and then remain on board.

In this data-driven assessment, the report looks at the characteristics, business models, and strengths and weaknesses of the top robo advisors around the world. The research was conducted on a total of 76 active robo advisors worldwide - 29 in the U.S. and Canada, 38 in seven European countries and nine in the Asia-Pacific region. We've compiled a full list of robo advisors analyzed below.

The exhaustive report provides comprehensive answers and data on how to optimize the individual onboarding stages (How it works, Client Assessment, Client Onboarding, Communication and Portfolio Reporting) and details five best practices for each stage. Furthermore, the report provides strategies to appeal to different segments such as Millennials, baby boomer investors approaching retirement, and high net worth individuals (HNWIs), and analyzes the impact of new technologies.

The report provides comprehensive analysis and data-driven insights on how to utilize robo advisors to win and keep clients:

  • What a robo advisor platform should offer to successfully convert prospects into happy clients.
  • Which robo advisor features work and why.
  • What are best practices for the different stages in the digital customer journey.
  • How long clients need to onboard on the surveyed robo advisors and which specialized offers are given.
  • What the client assessment process should include 
  • How client communication should be (inbound for customer service and outbound for news, education and commentary).
  • What good portfolio reporting looks like, so that it meets the information needs of the customer.
  • How B2B providers are positioned in the development of robo advisory services and what they offer.
  • How robo advisors should adopt their strategies to appeal to different segments such as Millennials, baby boomer investors approaching retirement, and high net worth individuals (HNWIs).
  • Which robo advisors provide specialized options such as micro-investing, rewards schemes or hedging strategies, and in what manner.
  • What the impacts of new technologies are, such as the use of artificial intelligence for client interaction and narrative generation on the robo advisor model.
  • How the future of digital success will look for robo advisors.
  • Appendix containing data on the web presences of more than 70 robo advisors alongside the digital customer journey process.
  • And much more.

>> Click here for Report Summary, Table of Contents, Methodology <<

Analyzed robo advisors in this report include:

North America: Acorns, Asset Builder, Betterment, Blooom, Bicycle Financial, BMO SmartFolio, Capital One Investing, Financial Guard, Flexscore, Future Advisor, Guide Financial, Hedgeable, iQuantifi, Jemstep, Learnvest, Liftoff, Nest Wealth, Personal Capital, Rebalance IRA, Schwab Intelligent Portfolios, SheCapital, SigFig, TradeKing Advisors, Universis, Wealthbar, Wealthfront, Wealthsimple, Wela, Wisebanyan 

Europe: AdviseOnly, Advize, comdirect, Easyfolio, EasyVest, ETFmatic,, FeelCapital, Fiver a Day,, GinMon, Investomat, KeyPlan, KeyPrivate, Liqid, Marie Quantier, Money on Toast, MoneyFarm, Nutmeg, Parmenion, Quirion, rplan, Scalable Capital, Simply EQ, Sutor Bank, Swanest, SwissQuote ePrivateBanking, True Potential Investor, True Wealth, Vaamo, VZ Finanz Portal, Wealth Horizon, Wealthify, WeSave, Whitebox, Yellow Advice, Yomoni, Zen Assets.

Asia-Pacific: 8 Now!, Ignition Direct & Ignition Wealth, InvestSMART, Mizuho Bank Smart Folio, Movo, Owners Advisory, QuietGrowth, ScripBox, StockSpot

Here's how you get this exclusive Robo Advisor research:

To provide you with this exclusive report, MyPrivateBanking has partnered with Business Insider Intelligence, Business Insider's premium research service, to create The Complete Robo Advisor Research Collection.

If you’re involved in the financial services industry at any level, you simply must understand the paradigm shift caused by robo advisors.

Investors frustrated by mediocre investment performance, high wealth manager fees and deceptive sales techniques are signing up for automated investment accounts at a record pace.

And the robo advisor field is evolving right before our eyes. Firms are figuring out on the fly how to best attract, service and upsell their customers. What lessons are they learning? Who’s doing it best? What threats are traditional wealth managers facing? Where are the opportunities for exponential growth for firms with robo advisor products or models?

Subscribe to an All-Access pass to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

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Barclays: Salesforce is facing a 'new competitive reality' in M&A and Microsoft has an important edge (CRM, MSFT)

Tue, 04/24/2018 - 4:16pm  |  Clusterstock

  • Wall Street has high expectations for Salesforce's financial performance, but the company has an important weak spot.
  • Salesforce's low margins and free cash flow will become increasingly detrimental as the company competes in the M&A arena with deep-pocketed rivals, Barclays says.
  • Salesforce lost its bid for LinkedIn to Microsoft in 2016 because it couldn't do an all-cash deal.

If Salesforce wants to stay in Wall Street's good graces for the long term, management is going to have to find a way to grow the company's margins and improve its cash flow, according to a Barclays note published Tuesday.

The reason: Less cash means Salesforce is less competitive against large competitors such as Microsoft — especially when it comes to acquisitions.

"Salesforce faces a new competitive reality, especially against the Mega-Tech vendors like Microsoft," Barclays analyst Raimo Lenschow wrote in the note.

"For its $10 billion revenue scale, Salesforce has disappointing profitability," Lenschow said. "Suboptimal margins and cash flows can hurt Salesforce’s competitive position in the long term, especially when it comes to strategic M&A."

Salesforce grew its operating margins by 130 basis points in fiscal year 2018, which ended January 31. The company expects to grow its margins between 125 and 150 basis points in fiscal year 2019.

But Barclays wants to see Salesforce's margins grow by 250 to 350 basis points, which it believes will "allow Salesforce to sustain its healthy growth at scale, while mitigating the risk from its new competitive realities."

More cash means more leverage in acquisition talks

Wall Street sentiment has greatly improved since Salesforce first announced its record-breaking $6.86 billion acquisition of MuleSoft at the end of March. Salesforce paid a 32% premium to buy MuleSoft, which many analysts struggled to make sense of.

They were assuaged, at least partially, when a timeline of the acquisition revealed that the high price tag was the result of a quick turn around time and high-pressure negotiations with MuleSoft CEO Greg Schott — rather than a bidding war, as many analysts assumed.

But Lenschow believes that Salesforce could have paid less if it had more cash on hand, and that the company will continue to pay high premiums for acquisition down the road if it doesn't grow its margins and improve cash-flow before its next purchase.

"We believe that M&A will be a critical pillar for Salesforce to not only defend its leadership position in the CRM market, but also to become more strategic to enterprise customers as it moves further upmarket. As such, we believe subpar margins and cash flows can hurt Salesforce in key M&A situations, where all-cash buyers tend to be better positioned," Lenschow said.

As Lenschow said, Salesforce has already lost out for that exact reason. In 2016, Microsoft won a bidding war against Salesforce to acquire LinkedIn for $26 billion. Salesforce actually outbid Microsoft in price per share, but lost since more than half of its offer was in Salesforce stock, rather than cash.

SEE ALSO: Meet the Salesforce power players helping Marc Benioff take his $87 billion cloud empire to the next level

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Stocks get whacked after the 10-year hits 3%

Tue, 04/24/2018 - 4:10pm  |  Clusterstock

Stocks nosedived Tuesday, with the Dow Jones industrial average sinking 600 points at session lows. The selling came after the 10-year Treasury yield hit 3%, spooking markets. The dollar edged lower after a week of gains.

Here's the scoreboard: 

Dow Jones Industrial Average: 24,023.93 −424.76 (-1.74%)

S&P 500: 2,623.41 −46.88 (-1.76%)

AUD/USD: 0.7609 +0.0002 (+0.03%)

ASX 200 SPI futures: 5,869.0 -5 (-0.09%)

  1. The 10-year Treasury yield climbed above the key 3% level for the first time since 2014Rising US government bond yields can crowd out consumer and corporate spending. 
  2. Earnings season rolls on. Shares of Caterpillar sank as much as 6% after calling its first-quarter results a "high watermark" for the year. Google-parent Alphabet shed more than 5% after reporting an increase in capital spending.
  3. Other FAANG stocks were also hit hard. Shares of Facebook, Netflix and Amazon shed more than 4% each. 
  4. Oil topped $75 a barrel before plunging more than 2.5%. Traders shook off mounting supply concerns after President Donald Trump, alongside French President Emmanuel Macron, told reporters the US may preserve the Iran nuclear deal. 

Here is Wednesday's economic calendar:

  • Australian banks are closed for Anzac Day.
  • Australia reports quarterly import prices.
  • Bank of Canada Governor Stephen Poloz speaks. 
  • US weekly crude inventories are due out. 
  • Facebook, Twitter, AT&T and Boeing report quarterly earnings. 

SEE ALSO: Morgan Stanley identified 12 trades to protect you from a stock market meltdown

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Stocks tumble after the 10-year hits its highest level since 2014

Tue, 04/24/2018 - 4:04pm  |  Clusterstock

  • US stocks tumbled Tuesday after the closely watched 10-year Treasury yield climbed above the 3% level for the first time since 2014.
  • Selling was also pronounced in the tech sector after Google's quarterly earnings report disappointed investors.
  • Follow the Dow Jones industrial average.

US stocks tumbled Tuesday after the closely watched 10-year Treasury yield climbed above 3% for the first time since 2014. Selling in mega-cap tech stocks also put pressure on major indexes.

The Dow Jones industrial average slid more than 2.5%, or 620 points, while the benchmark S&P 500 dropped as much as 2%. The comparatively tech-heavy Nasdaq 100 saw deeper weakness, falling more than 2.8% at its intraday low.

Perhaps the biggest overhang on investor sentiment on Tuesday was the 10-year's breach of 3%, which market experts had pinpointed as a worrisome threshold. The fear is that higher yields will dampen spending as consumers and companies allocate more to repaying debt. The 10-year is a benchmark for mortgage rates.

Stock investors in particular are keenly aware of where the 10-year is trading, as it helps inform the Federal Reserve's monetary-tightening schedule. Any sign the central bank will raise interest rates faster than expected is viewed as negative for equities since hikes will theoretically lessen the appeal of stocks.

Sure enough, the S&P 500 started falling from its daily highs just one minute after the 10-year broke 3%.

At the same time, weakness in many of the large tech stocks that have led the nine-year bull market also weighed on major gauges. At the center of the selling was Google's parent company, Alphabet, whose better-than-expected quarterly sales were overshadowed by rising expenses and a looming regulatory clampdown.

Alphabet declined as much as 5.2%. Other major losers in the tech sector include Micron (-4.6%), Facebook (-4.4%), Adobe Systems (-4.1%), (-3.7%), and Microsoft (2.8%).

Check out Business Insider's recent market coverage:

Elsewhere in global equity markets, the Shanghai Composite climbed 2%, while the Stoxx Europe 600 was little changed. In the bond market, the 10-year US Treasury yield rose four basis points to 2.95%, just below the 3% level it breached earlier in the day.

Here's a rundown of other asset classes:

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Zelle needs to bolster its fraud protection

Tue, 04/24/2018 - 3:35pm  |  Clusterstock

This story was delivered to Business Insider Intelligence "Payments Briefing" subscribers hours before appearing on Business Insider. To be the first to know, please click here.

Zelle, the bank-based peer-to-peer (P2P) payments tool known for its instant interbank transfer features, rose to popularity in the last year, processing 247 million transactions in 2017. But some users have experienced fraudulent transactions through Zelle, according to a series of interviews conducted by The New York Times.

Consumers interviewed have lost hundreds, or even thousands, of dollars in fraudulent transactions through Zelle, with hackers and con artists using the network to steal from them. In some cases, the money transfers never reached the recipient, but instead went to a hacker's account. In another case, a customer was sent a phishing email that appeared to be a legitimate email from Wells Fargo, which tricked her into entering her digital banking credentials into a fake website.

She then received a spoofed phone call, supposedly from the Wells Fargo fraud department, causing her to hand over one-time passcodes that enabled the fraudster to access her Zelle account. That customer lost $2,500 from the scammers. And because P2P platforms don't have the same fraud protections that credit cards do, not all consumers received refunds from their banks.

Zelle's value-added features could actually make the service vulnerable to fraud. Because Zelle transfers take place within seconds — faster than other P2P services, which can take several days to settle — it's harder for banks to stop, detect, or reverse fraudulent transactions.

That's especially true because not all banks that integrated Zelle implemented their own fraud protection. Zelle's P2P rival Venmo, for example, faced criticism for leaving its users vulnerable to fraud, and subsequently upgraded its security policies in 2015 to better detect suspicious transactions. 

Zelle should do the same, as it's the firm's responsibility to bolster the protection of its services, and the banks' duty to communicate the risk of any services to their customers. Bank partnerships give Zelle a security advantage that other P2P platforms don't have, but if fraudulent transactions persist, Zelle could have issues remaining competitive in the crowded P2P space.

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Here are all the Japanese cars made in the USA

Tue, 04/24/2018 - 3:35pm  |  Clusterstock

  • Dozens of Japanese vehicles are built at plants in the US.
  • The factories are in the southern US and have been in operation in some cases for decades.
  • They employ thousands of Americans.

President Donald Trump made some confusing statements about American and Japanese cars.

Last year, Trump argued that more American vehicles should be sold in Japan, where historically almost no American cars have been on the market. But he also seemed to misunderstand that Japanese automakers have been building vehicles in the US for decades, employing thousands of Americans in the process.

In fact, Toyota and Mazda have announced that they'll invest $1.6 billion and construct a new factory in Alabama, with the goal of hiring 4,000 workers.

We started to wonder if folks know just how many Japanese cars are actually made in the US. It's a lot. We added it up:

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Acura NSX: Honda of America Manufacturing, Inc., Marysville Auto Plant, Marysville, Ohio.

Honda Accord: Honda of America Manufacturing, Inc. Marysville Auto Plant. Marysville, Ohio.

Acura ILX: Honda of America Manufacturing, Inc., Marysville Auto Plant, Marysville, Ohio.

See the rest of the story at Business Insider

The idea that most successful startup founders are in their twenties is a myth — the average entrepreneur is much older

Tue, 04/24/2018 - 3:28pm  |  Clusterstock

  • A study by MIT found that the average age of startup founders is around 42, and the average age of entrepreneurs who founded high-growth companies is 45.
  • The study also found that 20-something founders have the lowest likelihood of starting a company with a successful exit.

Mark Zuckerberg was 19 when he started Facebook from his Harvard dorm room. Steve Jobs was 21 when he launched Apple Computer from his family's garage. David Karp was 20 when he started his microblogging site Tumblr. 

The list of successful, youthful Silicon Valley entrepreneurs is long, and it might seem as though celebrated startup founders are getting younger all the time.

However, it turns out that the idea that most successful startup founders are 20-something entrepreneurs is more of a persistent Silicon Valley myth. Yes, they exist, but statistically it's rare. According to a recent study by MIT, the average age of a successful company founder is much older than you might think. The study, which was conducted by MIT Sloan professor Pierre Azoulay and PhD student Daniel Kim, analyzed 2.7 million people who founded companies between 2007 and 2014.

According to the results, the average age of entrepreneurs who started a company that went on to hire just one employee was 41.9, and the average age of founders who started a high-growth company is even older, at 45 years old. 

The study also examined the age of entrepreneurs in sectors like specialized tech employment, venture capital investing, and patent firms, which yielded similar results: The average age of these people, too, was somewhere in their early-to-mid forties.

"Our primary finding is that successful entrepreneurs are middle-aged, not young," the study reads. "Founders in their early 20s have the lowest likelihood of successful exit or creating a 1 in 1,000 top growth firm."

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Amazon's dropping as part of a broader tech sell-off (AMZN)

Tue, 04/24/2018 - 3:02pm  |  Clusterstock

Amazon shares are down more than 4% to an intraday low of $1,448.64 a share Tuesday, as part of a broader tech sell-off. 

Amazon isn't the only FANG stock to drop Tuesday. Facebook is down more than 3.5%, while Alphabet is down 5%, as its better-than-expected earnings results were outweighed by its soaring costs. Netflix is down more than 3.5%, meanwhile. 

All three major US indices are down Tuesday, after the US 10-year treasury yield hit 3%, worrying investors about a noticeable uptick in inflation. 

Amazon is up 22.88% on the year. 

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Paypal has one big hurdle to clear with Venmo (PYPL)

Tue, 04/24/2018 - 3:00pm  |  Clusterstock

  • PayPal is set to report its quarterly results after Wednesday's closing bell.
  • Investors are waiting for PayPal's plan to monetize Venmo.
  • RBC sees 29% growth in Total Payment Volume but also sees a decrease in the take rate due to Venmo.
  • If the company can monetize Venmo, RBC predicts an additional $0.09 of earnings per share in fiscal year 2018.
  • Watch PayPal trade in real time here.

Paypal, the digital-payments giant, is getting ready to report its quarterly results following Wednesday's closing bell and investors will be honing on one key thing: how the company plans to monetize the mobile-payment service Venmo. 

The potential for Venmo is there, but the company has brought in little revenue from transactions on the platform. 

RBC analyst Daniel Perlin anticipates 29% year-over-year growth in Total Payment Volume (TPV), but he also expects the take rate to fall by about 17 basis points. The take rate refers to the cut of a transaction that the company gets to keep as revenue, which means a higher take rate will result in more revenue per transaction.

While the growing adoption of Venmo boosts the number of transactions taking place, it presents a problem for PayPal as the company makes little money off peer-to-peer transactions. With peer-to-peer payments, Venmo takes a 3% cut if a credit card is used, but charges nothing if one pays a friend by connecting a bank account or an existing Venmo balance. 

Monetization of Venmo presents a large opportunity for revenue growth, especially as Perlin expects another solid quarter of volume growth. 

"We expect Venmo to report another solid quarter of volume growth (86% y/y last quarter) and believe investors will look for an update on the potential monetization of this volume, including Pay with Venmo, which was rolled out for all US merchants during Q4/17," Perlin wrote in a note sent to clients on Tuesday.

"We estimate that Venmo monetization could represent a potential $0.09 to EPS in FY18 (some amount possibly already contemplated in guidance) and $0.15 in FY19."

Though competition is increasing, Perlin reiterated his outperform rating and remains impressed by Paypal's strong account growth driven mainly by Paypal and Venmo. At the end of the fourth quarter, the company had 227 million active customer accounts and 18 million active merchant accounts, he writes. He also noted new active accounts jumped 61% versus a year ago during that quarter.

Wall Street is expecting PayPal to report adjusted earnings of $0.54 a share on revenue of $3.59 billion, according to analysts surveyed by Bloomberg.

PayPal shares are up 2.35% this year.

SEE ALSO: Google-parent Alphabet slides after earnings

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Steve Cohen is backing a former Amex exec solving a financial pain point facing 35% of the American workforce

Tue, 04/24/2018 - 2:48pm  |  Clusterstock

  • Steve Cohen's Point72 Ventures has led a $3 million seed fundraising round for Extend, a New York-based fintech company. 
  • The company aims to make life easier for the millions of Americans freelancing.   

A financial technology startup has snagged $3 million to take advantage of a pain point impacting the millions of freelancers in the US. 

Extend, a New York-based firm, told Business Insider Tuesday that it raised the investment in a seed fundraising round led by Steve Cohen's Point72 Ventures, and involving WorldQuant Ventures, Plug and Play, and other investors. 

Extend's platform allows companies to issue a temporary credit card to freelance employees.

It's a win-win for both freelancers and employers. Freelancers can expense items like travel purchases without dealing with a lengthy and complicated reimbursement process. Employers, meanwhile, can extend credit to temporary employees without worrying about spend getting out of control.  

"With Extend, the days of uncomfortably handing over your credit card to an employee or freelancer are over," Extend's chief executive Andrew Jamison said. "We eliminate the need for individuals to use their personal cards to pay for business expenses."

A study by Upwork, a freelance platform, found the freelance economy makes up more than 35% of the workforce, covering 55 million Americans. 

Jamison, a former American Express executive, came up with the idea for Extend when he was a freelance consultant, working for a number of Big Four accounting firms. 

"I was being asked to travel to meet with different financial services institutions," Jamison told Business Insider. "Since I wasn't an employee, they would have to reimburse me and sometimes it would take months."

Point72 Ventures, the venture arm of Steve Cohen's hedge fund Point72, counts Extend as one of its many recent investments. As Business Insider first reported, the firm invested in SAY, another financial technology company. It also invested in DriveWealth, a technology firm powering free stock trading, Business Insider previously reported

Matthew Granade, the chief market intelligence officer at Point72 who oversees Point72 Ventures, told Business Insider the firm tries to identify companies that are alone in solving a big problem and are doing so in a way that works within the existing financial infrastructure. 

"It’s fine for fintech startups to say I'm going to tear down the banks, or whatever else, we think the most promising businesses come from people who understand the ecosystem and figure out how they can fit into that ecosystem to improve it," Granade said of Extend. "And this is a beautiful example."

SEE ALSO: We talked to Steve Cohen's right-hand man about Point72 Ventures' latest investment, tech on Wall Street, and cryptocurrency

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