AdBlock’s mysterious buyer revealed: AdBlock Plus (Updated)

A statement from Eyeo GmbH (appended below the report) has confirmed that the company did not purchase AdBlock. We regret the error. 

EXCLUSIVE — AdBlock, one of the two popular ad-blocking extensions for Chrome and Safari, announced that it has been acquired yesterday. Users who have installed the extension previously got a pop-up yesterday announcing the acquisition — without any hint of the buyer or the price it was sold for.

adblock sold

As the pop-up reveals, AdBlock is set to join AdBlock Plus’ Acceptable Ads program post-acquisition. A report from The Next Web states that the buyer specifically requested that they remain anonymous. However, industry sources have pointed The Michael Report in a single direction: Eyeo GmbH, the same company that owns AdBlock Plus and is behind the Acceptable Ads program as the buyer of AdBlock. 

(The fact that the buyer wants anonymity is rather disingenuous: when users install any sort of ad-blocking software, they’re trusting the company behind the software with huge amounts of data, including their browsing history. By not disclosing the buyer, users are left in the dark about the buyer’s motivation and agenda behind the purchase, while still giving the buyer tons of their data.)

be careful eyeoWith the purchase of AdBlock, Eyeo effectively has a monopoly on the entire ad-blocking industry, with its software being used by more than 100 million people. The company also stands to dominate the entire ad-blocking industry’s profits, which is mostly based on its Acceptable Ads program.

In a nutshell, here’s how the Acceptable Ads program work: advertisers can continue to deliver their ads to users — even after they’ve installed its ad-blocking software — at a steep price. By default, when users download AdBlock Plus (and now, presumably, AdBlock), the Acceptable Ads program is enabled by default, although users can turn it off in the settings menu.

Sources said that the acquisition was a long time coming, with each side realizing the benefits: AdBlock’s creator Michael Gundlach could cash out on his creation after maintaining the extension single-handedly for years, while Eyeo could easily double their reach with the acquisition. Internal calculations showed that Eyeo would breakeven from their investment in just a few short months, which made them all the more eager to pursue the deal.

An indication of Eyeo’s hand in the deal could come from a statement from the pop-up where Gundlach indicated his company had “always shared a similar goal to AdBlock Plus, who created the acceptable ads program.”

If users wish to escape the grasps of Eyeo, but still want to download a reliable ad-blocking extension, uBlock Origin is a good option. The extension is currently being maintained by a single, independent developer, with updates being pushed out regularly.

We have reached out to Eyeo for a comment and will update when we receive a response.

Update (Oct. 3 at 4 p.m.) —

We have received the following comment from AdBlock Plus’ spokeswoman, who did not address the question of whether Eyeo has acquired AdBlock.

“We’re very happy to welcome AdBlock users to the Acceptable Ads program. We’ve also made the decision to turn over management of the Acceptable Ads program to a panel of independent experts in the future, which we think is a win for users.”

Update (Oct. 4 at 2 p.m.) —

Eyeo has denied purchasing AdBlock in a statement to TMR.

“We did not purchase AdBlock. As the statement below confirms we are indeed happy that they’ve decided to help encourage better advertising through the Acceptable Ads initiative.”

Continuing to offer the 16GB iPhone for sale is a brilliant move on Apple’s part

Screen Shot 2015-09-27 at 1.16.59 am

The screenshot above came from TechCrunch Editor-in-Chief Matthew Panzarino’s personal blog, Robot Tuxedo (unfortunately, the blog seems dead). In just a single sentence, Panzarino succinctly explained why Apple charges customers the price they do — in part to fatten their bottom line, in part to offset future R&D costs, in part to please investors.

Recently, there has been a huge outcry over Apple’s decision to continue offering the 16GB version of the iPhone. Even the first person in New York to get an iPhone 6s said she’s “sick” of the 16GB model when reporters asked her for a comment.

If Apple’s decision to offer the choice of a 16GB iPhone is so widely hated (and keeping in mind that Apple is probably one of the most consumer-friendly companies), why does the company continue to do so?

In a word: profits.

After the iPhone 5S, Apple ditched the 32GB version entirely as a choice for customers wanting to buy an iPhone, and instead, switched to the 16GB-64GB-128GB model. Now, if you were a customer who previously wanted a 32GB model, you no longer have that choice since Apple took the option away. Instead, you’re faced with the dilemma: 16GB (which is half of what you’ve planned to get) or the 64GB model. Most, out of an abundance of caution, would pick the 64GB so they don’t run out of storage and get the dreaded window that tells them they’re out of storage space midway through their contract.

By forcing the 32GB customers to pick the 64GB option, Apple was — very conveniently — able to increase the iPhone’s ASP (average selling price) and margins (remember: while each step up the storage tier cost customers $100, it costs Apple only ~$10 in parts).

Apple's BOM (bill of materials) for the iPhone 5S, iPhone 6 and iPhone 6 Plus.
Apple’s BOM (bill of materials) for the iPhone 5S, iPhone 6 and iPhone 6 Plus.

Investors loved this. And this is also why, despite all of Apple’s other innovations, investors still consider the iPhone product line not only Apple’s cash cow, but also a magical product (I dare say that there’s no other consumer technology product in the world that can compete with the iPhone’s profit margins at the scale that Apple is selling it).

Perhaps the easiest way to visualize why Apple has zero incentive to change the storage (and pricing) tiers of the iPhones is using the tables below, which comes courtesy of Above Avalon‘s mid-December 2014 report

 iphone 6s 32gb

Translation: once customers (who originally wanted the 32GB model) get used to the 64GB version, they’re going to buy the 64GB version again the next time they buy an iPhone since they’re already used to that storage allotment and price point.

iphone 6 32gb

Based on the iPhone 6/6 Plus models (not 6S), Apple’s ASP (something Wall St. analysts focus on to justify their recommendations/price targets) for the 16GB/64GB/128GB mix is around $690, compared to just $670 for a theoretical 32GB/64GB/128GB mix.

apple profits from 32gb iphone

If Apple decides to make the baseline iPhone 32GB instead of the current 16GB, they stand to lose around $3 billion.

That’s $3 billion in easy money.

Investors are worrying about GoPro for all the wrong reasons

GoPro shares are taking a hit (down 6% to start the week) after Barron’s magazine published a report stating the company’s stock is likely to fall to $25 a share in the very close future (this would equate to a 29% decline from Friday’s closing price of $35.15).

As some publications have noted, this is a 44% year-to-date decline.

So, what’s keeping all these investors up at night? Competition from Apple, apparently.

From the report…

While analysts are bullish, investors are clearly skittish about the company’s ability to ward off competition, notably from Apple (AAPL). At least twice in the past nine months, GoPro shares have tumbled on Apple-related news. In January, the mere issuance of a camera-related patent to Apple sent GoPro shares down 12%.

Even seemingly positive news from Apple has been overlooked. At the company’s keynote address a few weeks ago, it added GoPro support to its Apple Watch, enabling the watch to serve as a viewfinder for GoPro cameras. But Apple also upgraded the camera in its iPhone to a 12-megapixel sensor capable of producing high-resolution 4K video. GoPro shares tumbled 10% on the news.

From someone who knows GoPro’s products inside out, this fear is completely unfounded.

iPhone cameras, no matter how good, is not and will never be a threat to GoPro’s product offerings. People who have the need to buy a GoPro camera will not use an iPhone camera as a substitute for what they’re going to do with the GoPro.

The two products, quite simply, do not overlap.

I’ve long said that the GoPro is a magical product: it’s one of the very few products in the consumer technology world that markets itself. Whenever someone posts a video of them skydiving or snorkeling, people automatically assume that they used a GoPro to film the video. No one is thinking: oh, he/she must’ve used an iPhone with one of those ugly and chunky waterproof cases!

Truth be told, those who fear that GoPro’s sales are going to sink because of the introduction of another camera (even one made by Apple) should be worried that Canon, Nikon, etc. are also producing cameras. What they fail to understand is that in the camera market, while Apple could be cannibalizing Canon/Nikon/etc.’s marketshare, it’ll be difficult for them to reach GoPro’s niche audience: people who intentionally put their camera in harm’s way and/or routinely use it in rough terrains, trusting that their GoPro will hold up. No one uses their iPhones in those same exact situations knowing 100% that the iPhone is going to hold up perfectly.

While nothing about GoPro’s offerings are exclusive or proprietary to the company, it benefits from FMA (first-mover advantage) and a cult-like following, none of which are easily replicable by other companies seeking to build a competing product to GoPro’s offerings.

But of course, no good story is without a kicker, and here’s Barron’s…

“Saying smartphones will replace [GoPro] is like saying the Army will someday replace tanks with sedans,” tech site Gizmodo argued.

It’s actually a revealing metaphor, when you consider that the family sedan has been replaced by do-everything sport utility vehicles. In that sense, smartphones are following an SUV-like evolution. And GoPro runs the risk of being driven off the road.

True, except most roads don’t just have a single lane. They have multiple, with the ability to accommodate all sorts of vehicles.

And I suspect that GoPro’s investors — especially the ones who truly understand the company — know that.

Looks Like Apple Is Putting All Of Its Eggs In One Basket…

If Apple ever to launches an iPhone that fails to live up to customers’ expectation, the company may be done for.

While Apple, to its credit, has been trying to diversify its product offerings (with the car and Watch projects), it is still very much beholden to its iPhone product line, which generated 63.2% of the company’s reported $49 billion revenue in Q3 of 2015.

To put this in perspective, the iPhone line generated $146.6 billion in revenue for Apple in the last fiscal year — putting it above the combined annual revenues of Google, Facebook and Twitter.

About that car market Apple is planning to enter by 2020?

Yeah, the entire premium car market (including Mercedes-Benz, BMW, Porsche, Audi, etc.) generates about $220 billion in annual revenue — just approximately 34% more than Apple’s most profitable product, according to A16Z’s Benedict Evans.

If you’d like to read more about how much the iPhone means to Apple, read this great article by Apple analyst Neil Cybart.

Apple is scheduled to unveil its next generation line of iPhones on September 9th.

If You Think The Market Mayhem Affected Funding In Startup World, You’d Be Dead Wrong…

With growing concerns over the Asian markets and the Feds, the public markets took a harsh beating coming into September. Investors panicked, and many sold their shares, thus plunging the markets into depths not seen since 2011. But there’s one place that seems to be immune from the mayhem affecting the public markets: the private market.

Private company funding announcements have started off strong in September, and there’s no indication of any slowdown. In fact, with 21 days left in September (excluding the Labor Day holiday), it is projected that the overall market will deploy $5.5 billion this month — making this the second largest quarter of capital deployment of the past 5 years for startup funding.

The three biggest deals that led to this surge, according to Mattermark (a startup that analyzes startup and VC data), were $120 million for Tanium from TPG Capital and IVP, $108 million for Apttus led by Iconiq Capital, and $70 million for Intellia Therapeutics led by OrbiMed HealthCare Fund Management.

The private markets can be a nice shelter… just as long as the storm isn’t too strong. Because it will come.


samsung stock bombs

While you’re not looking, Samsung has lost $44 billion in market value since April, marking the company’s worst streak since December 1983.

There are a couple reasons why Samsung’s stock has been absolutely murdered, but none is bigger than this: no one wants Samsung’s products anymore.

As it turns out, as hyped up as the product was in the media, no one really wanted Samsung’s latest line of Galaxy smartphones, bringing the stock down 8.1% this month alone (as a comparison, Apple’s stock fell only 6% during the market mayhem about a week ago — and this alone prompted Tim Cook to send an unprecedented letter to CNBC’s Jim Cramer to assure investors that Apple is fundamentally safe despite the widespread panic over China).

A large part of Samsung’s mistake was misreading consumer demand for the Samsung Galaxy S6/S6 Edge. As it turns out, customers wanted the three-sided S6 Edge more than the conventional looking S6 — and as a result, produced three times more S6 than S6 Edge… most of which are probably sitting in warehouses now.

Samsung also tried to one-up Apple by releasing the sequel to the S6 Edge (S6 Edge+) and Note 4 (Note 5) ahead of Apple’s September 9th event, where the company is expected to unveil the next-generation iPhones. Sure, that’s a great strategy and all, but there’s one big problem: Samsung’s most die-hard fans hated the products. They complained about the lack of a removable back, which means that customers will not be able to swap out additional memory or battery. Many even indicated that they were willing to jump ships across to iOS.

Samsung also priced its latest line of smartphones, by any definition, irrationally. The company is trying to compete with the iPhone – yet it has priced the S6 Edge+ and Note 5 higher than what Apple charges for the iPhone 6 Plus (a 64GB version of the S6 Edge costs $914.99 without contract, while a similar model of the iPhone 6 Plus costs just $849.99).

Here’s the one thing Samsung doesn’t seem to understand (and if they haven’t by now, will they ever?): The iPhone, with it’s tie-in to the iOS ecosystem, is a speciality product. It should be priced (and it is!) like one. On the other hand, Samsung’s Galaxy line of smartphones is a commodity. Every single Galaxy smartphone runs on Android, a software that just about any other smartphone manufacturer (apart from Apple) uses.

Samsung doesn’t have much to differentiate itself from the thousands of Android smartphones out there. Once an Android smartphone is “good enough” in terms of speed and quality, nothing else really matters other than the price. Why would anyone in the right mind buy a $900+ Samsung smartphone over a really well-made OnePlus, for just one-third of the cost?

Samsung thinks it can justify its high prices by copying Apple’s design, but fail to understand that people are often buying the iPhone for both the product and the ecosystem — an ecosystem that neither Samsung nor Android offers.

In fact, Samsung is getting clobbered exactly where all these cheap, yet beautiful Android smartphones are made: China. According to data provided by IDC, in Q1 of 2015, Samsung’s marketshare in China shrank by 53%. Comparatively, Apple’s increased by 62.1%. Behind Apple are the producers of the cheap and well-made Android smartphones, Xiaomi (up 42.3%) and Huawei (up 39.7%).

Here’s Samsung’s stunning free fall, illustrated in chart form:

samsung-loses-50-of-its-china-smartphone-market-sh-1431344174.06-4363879In an interview with Bloomberg, analyst Lee Seung Woo from IBK Securities Co. perhaps sums it up best: “We all know its smartphone business isn’t doing well… I can’t really figure out when the stock will stop declining. The fundamentals look problematic.”