Welcome to this week’s edition of “Five on Friday,” from groundbreaking legal decisions affecting industry giants to major shifts in business strategies, we bring you a curated selection of stories that highlight key trends and brands. We explore a landmark antitrust case against Google, a significant revenue shift for Elon Musk’s X, YouTube’s latest move affecting revenue transparency, Broadcom’s strategic overhaul of VMware’s pricing, and some creative last-minute subscription-based gift ideas for your co-workers. Dive in below!
Federal Jury Finds Google’s App Store an Illegal Monopoly in Landmark Antitrust Case
A federal jury ruled that Google’s Android app store is an illegal monopoly, marking a major victory for Epic Games, the creator of “Fortnite,” in its long-standing legal battle against Google, CNN and others have reported. The jury found that Google’s practices in distributing Android apps and charging for them violate US antitrust law. This decision could lead to significant changes in Google’s app store operations.
The trial, closely watched over several weeks, focused on various aspects such as Google’s in-app purchase fees and restrictions on competing app stores on Android devices. This decision is seen as a potential turning point against the dominant app store operators, who have previously defended themselves successfully against monopoly accusations.
Following the verdict, Google announced its intention to challenge the decision, emphasizing the choice and openness provided by Android and Google Play. They also highlighted their competition with other app stores, including Apple’s. The case will now move to a separate phase to determine potential remedies, which might include changes to how Google collects fees from developers or facilitating third-party app stores on Android devices. Epic Games has a similar ongoing legal battle against Apple regarding its app store, which is now appealed to the US Supreme Court after a defeat in the lower courts.
The background to this lawsuit involves criticism from app developers about restrictive terms and high fees imposed by app store operators like Apple and Google. Epic Games initiated these legal battles as part of a deliberate strategy, known as Project Liberty, by encouraging Fortnite players to purchase in-game currency directly from Epic, leading to Fortnite being removed from both app stores. Read the full article here.
Elon Musk’s X Experiences 50% Drop in Ad Revenue, Anticipates $2.5B Earnings in 2023
Elon Musk’s social network, X (formerly Twitter), is expected to generate approximately $2.5 billion in advertising revenue in 2023, marking a significant decrease from previous years, per reporting from Fortune. Musk himself has confirmed that ad revenue was down “roughly 50%” from previous levels. This decline in ad sales is a key aspect of the financial challenges the company is facing under Musk’s leadership. The platform has seen around $600 million in ad revenue in each of the first three quarters and anticipates a similar outcome in the final quarter, which is notably less than the over $1 billion per quarter in 2022. Ad sales currently represent about 70-75% of X’s total revenue, indicating total sales of around $3.4 billion, including subscription and data licensing income. These figures highlight advertisers’ concerns over X’s content moderation under Musk, particularly his posts that have been accused of amplifying antisemitic and extremist views.
X’s executives initially aimed for $3 billion in 2023 from ads and subscriptions, but are likely to fall short. Joe Benarroch, head of business operations for X, contends that the financial overview is incomplete and lacks accuracy. Musk has acknowledged a considerable drop in ad sales, citing a 50% decrease and attributing it partly to activists urging marketers to reduce spending on the platform.
X also earns from its subscription service, X Premium, and data licensing, but these revenues are relatively small compared to ad sales. The company has been unprofitable under Musk’s ownership, despite having over $5 billion in revenue before the acquisition. Musk’s controversial posts and policy reversals, such as reinstating banned users like Alex Jones, have further strained relations with brand-conscious advertisers. Several major advertisers paused spending after Musk endorsed an antisemitic post, though he later apologized.
Musk has expressed a desire to balance subscription and ad revenues, aiming for subscriptions to constitute half of the company’s income. However, subscription numbers are lower than expected. X is now focusing on attracting small- and medium-sized businesses as advertisers. Musk has admitted concern over the decline in ad revenue, fearing it could lead to the company’s failure. Read the full article here.
YouTube Obscures Ad and Subscription Revenue Details for Channels, Affecting Creators and Analysis
YouTube’s recent removal of a code snippet from its website, which indicated channels’ participation in its YouTube Partner Program (YPP), has significant implications for both ad and subscription revenue transparency, Wired is reporting. This change, not previously reported, is impactful for creators, researchers, and journalists who used this feature to monitor competition, track channel status, and hold YouTube accountable for its monetization policies.
The absence of this code creates uncertainty among creators, making it difficult to determine if channels are receiving a share of both advertising and subscription revenues under YPP. This change particularly affects those who previously relied on this transparency to scrutinize channels monetizing harmful or controversial content. Creators have varying reactions to this change. Per Wired, Tony Woodall, who aspires to join YPP, found the transparency useful to learn from monetized channels, while Lindz Amer, a current YPP member, was indifferent to the public knowledge of their monetization status.
YouTube views ad and subscription revenue sharing as private matters between YouTube and the channel owners. The lack of transparency also affects advocacy groups and researchers who used the code to analyze financial support for problematic content on YouTube. The change complicates efforts to study and report on the monetization of controversial content, encompassing both ad and subscription revenues. Researchers and advocacy groups are now seeking new methods to continue their work, as the removal of this code limits their ability to scrutinize YouTube’s monetization decisions comprehensively. Read the full article here.
Broadcom’s Major Shift: Halves VMware’s Cloud Subscription Costs, Ends Perpetual Licenses
Broadcom’s VMware Cloud Foundation Division has announced significant changes to its product strategy, including the abrupt end to the sale of perpetual licenses and a shift to subscription models, with some prices slashed by half, The Register is reporting. This division, dedicated to VMware’s server virtualization and cloud products, represents the core of the original VMware.
Key changes announced include:
- Immediate halt to perpetual license sales and additional support for these licenses.
- Reduction of the product portfolio to two main products:
- The Cloud Foundation hybrid cloud suite, now offered at half its previous subscription price, with enhanced support services.
- vSphere Foundation, an iteration of VMware’s core virtualization stack with added operations management tools. Standard and Essentials Plus versions of vSphere will still be available for limited requirement deployments.
- Optional add-ons for these products, cover areas like storage, ransomware, disaster recovery, and application platform services, with more advanced services like Private AI expected soon.
- A new subscription model allows customers to use their subscriptions in a VMware-approved cloud of their choice.
- A trade-in program for perpetual license holders to move to subscription products with upgrade pricing incentives.
While Broadcom’s cessation of perpetual license sales and accompanying support is sudden and disruptive, VMware had previously signaled a move towards subscription licenses. This move aligns with their strategy to focus on new feature development for subscribers, especially in cloud and SaaS configurations. However, challenges remain for VMware users, including negotiating the end of perpetual licenses and forced migrations for those with older software licenses and support contracts. Read the full article here.
Last-Minute Lifesavers: 7 Subscription-Based Gift Ideas for Your Co-Worker!
Struggling to find the perfect last-minute gift for one of your co-workers? Why not brighten their day (and support another subscription business) with these fun and thoughtful ideas!
- For the Bookworms: Gift an Audible or Kindle Unlimited subscription. It’s perfect for those who love diving into new stories, whether they’re reading or listening on their daily commute.
- Caffeine Fix in a Box: Delight your coffee or tea-loving colleague with a monthly subscription to a Coffee or Tea Box. It’s like a cozy coffee shop experience, delivered right to their door!
- Snack Attack: For the snack aficionado, try a SnackNation or Graze box subscription. It’s a delicious way to explore new treats every month.
- Magazine Maven: Tailor a gift to their interests with a magazine subscription. Whether they’re into gardening, tech, or fashion, there’s a magazine for every hobby and passion.
- Music Maestro: A Spotify or Apple Music subscription can be music to the ears of your co-worker. It’s a ticket to endless tunes and discovering new artists.
- Chef-in-the-Making: Busy colleague? A Meal Kit Service like Blue Apron offers the joy of cooking without the hassle of meal planning and grocery shopping.
- Creative Corner: Inspire their artistic side with an Adults & Craft Crate subscription, delivering new and exciting art or craft supplies each month.
With these subscription-based gifts, you’re not just giving a present; you’re delivering an experience that keeps on giving! ✨