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Amazon Posts Biggest Profit Ever at Height of Pandemic

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By Reuters | Updated: 31 July 2020

Amazon on Thursday posted the biggest profit in its 26-year history as online sales and its lucrative business supporting third-party merchants surged during the coronavirus pandemic.

Shares of Amazon, the world’s largest online retailer, rose 5 percent in after-hours trade.

While rival brick-and-mortar retailers have had to shut stores during government-imposed lockdowns, Amazon hired 175,000 people in recent months and saw demand for its services soar. The company said revenue jumped 40 percent from a year earlier to $88.9 billion (roughly Rs. 6.64 lakh crores).

Amazon had forecast it might lose money in the just-ended second quarter because it expected to spend some $4 billion (roughly Rs. 29,877 crores) on protective equipment for staff and other expenses related to COVID-19. It did just that – and still earned $5.2 billion (roughly Rs. 38,847 crores) – double its net income from a year prior.

Jeff Bezos, who founded the company in July 1994 and is the world’s richest person, said in a statement, “This was another highly unusual quarter.”

Amazon’s shares have risen by more than 60 percent this year, adding to the wealth of Bezos, its biggest stockholder. The S&P 500 is virtually flat.

Jesse Cohen, senior analyst at Investing.com, said Amazon’s business model sets it up “to expand its e-commerce dominance even more broadly as the global COVID-19 pandemic continues to flare.”

Online store sales jumped 48 percent to $45.9 billion (roughly Rs. 3.42 lakh crores) in the second quarter. Meanwhile, merchants paid Amazon more to fulfill and sponsor their products in order to reach the company’s loyal customers. That resulted in a 52 percent and 41 percent jump in seller services revenue and other revenue such as from ads, respectively.

Amazon’s cloud services also saw higher demand as companies switched to virtual offices in the pandemic. Revenue from Amazon Web Services (AWS), which sells data storage and computing power in the cloud, rose nearly 29 percent to $10.81 billion (roughly Rs. 80,758 crores).

Still, that fell just short of analysts’ estimates of $10.95 billion (roughly Rs. 81,804 crores), according to IBES data from Refinitiv. The cloud business of rival Alphabet’s Google meanwhile was up over 43 percent year over year.

Technology analyst Patrick Moorhead said, “AWS continued to grow, albeit at a slower rate than last quarter.”

‘Everyone was buying groceries’

Brian Olsavsky, Amazon’s chief financial officer, told reporters that the outsised profit surprised the company because at the time it issued its forecast last quarter, shoppers were buying lower-margin products.

“Everyone was looking for masks; everyone was looking for gloves; everyone was buying groceries online. That mix is not super profitable,” he said. “What we saw in Q2 was not only did the mix start to shift back to a more normal mix” but that “we also were able to ship a lot more than we had originally thought.”

Online grocery sales tripled year over year, and worldwide streaming video hours doubled, Olsavsky said on a call with analysts. Delivery and video services bundled with the company’s loyalty club Prime are a key reason why customers subscribe to that program and do more of their shopping on Amazon.

Amazon also posted a rare operating profit in its international business, which Olsavsky attributed to a step up in customer spending in Europe and Japan during the pandemic.

The company forecast net sales of $87 billion (roughly Rs. 6.5 lakh crores) to $93 billion (roughly Rs. 6.94 lakh crores) for the third quarter, ahead of analysts’ expectations of $86.34 billion (roughly Rs. 6.45 lakh crores), according to IBES data.

Olsavsky said that Prime Day, the company’s lucrative summer marketing blitz, would be pushed back to the fourth quarter, excluding its business in India. He also said that per usual the current quarter would see higher costs as the company gears up for the holiday season, even more pronounced now due to higher-than-usual sales.

It would spend more than $2 billion (roughly Rs. 14,943 crores) in COVID-related expenses during the third quarter as well, he said on the analyst call.

Still, Amazon anticipates operating profit between $2 billion (roughly Rs. 14,943 crores) and $5 billion (roughly Rs. 37,360 crores) for the quarter, the midpoint of which is higher than analysts were expecting, according to research firm FactSet.


© Thomson Reuters 2020

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Government’s Plan to Regulate ‘Non-Personal’ Data Faces Pushback From US Tech Giants

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By Reuters | Updated: 10 August 2020

Government’s plan to regulate “non-personal” data has jolted US tech giants Amazon, Facebook, and Google, and a group representing them is preparing to push back against the proposals, according to sources and a letter seen by Reuters. A government-appointed panel in July recommended setting up a regulator for information that is anonymised or devoid of personal details but critical for companies to build their businesses.

The panel proposed a mechanism for firms to share data with other entities – even competitors – saying this would spur the digital ecosystem. The report, if adopted by the government, will form the basis of a new law to regulate such data.

But the US-India Business Council (USIBC), part of the US Chamber of Commerce, calls imposed data sharing “anathema” to promoting competition and says this undermines investments made by companies to process and collect such information, according to a draft letter for the government.

“USIBC and the US Chamber of Commerce are categorically opposed to mandates that require the sharing of proprietary data,” says the USIBC’s previously unreported letter, which is likely to be completed and submitted in coming weeks to India’s information-technology ministry.

“It will also be tantamount to confiscation of investors’ assets and undermine intellectual property protections.”

A USIBC spokeswoman had no comment on the draft letter. The US Chamber of Commerce didn’t respond to Reuters queries.

The head of the panel, Kris Gopalakrishnan, a founder of technology giant Infosys, said the group will work with the government to review input from the industry.

Ministry of Electronics and Information Technology, Amazon, Facebook, and Alphabet’s Google did not respond to requests for comment. The report is open for public comments until September 13.

“Forced data sharing”

Government’s plan to regulate non-personal data is the latest irritant for US tech companies that have been battling tighter e-commerce rules and data storage norms that several countries are also developing.

New Delhi and Washington are already at odds on such issues, as well as over digital taxes and tariffs.

The USIBC draft letter says “forced data sharing” will limit foreign trade and investment in developing countries, and the panel’s proposals run against Prime Minister Narendra Modi’s calls for US companies to invest in the country.

The lobby group expresses concern about the panel’s recommendation to mandate local storage for non-personal data, describing this as a “dramatic tightening” of India’s international data transfer regime.

“These are far-reaching concepts that would have a significant impact on the ability of both Indian and multinational firms to do business in India,” Washington-headquartered law firm Covington & Burling said in a note prepared for the USIBC, which was also seen by Reuters.

The law firm did not respond to a request for comment.

The government panel has listed research, national security and policymaking among purposes for which such data should be shared. Three sources said tech executives participated in several meetings in recent weeks to discuss concerns over the report.


© Thomson Reuters 2020

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UN Reports Sharp Increase in Cybercrime During Pandemic

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By Associated Press | Updated: 7 August 2020

A 350 percent increase in phishing websites was reported in the first quarter of the year, many targeting hospitals and health care systems and hindering their work responding to the COVID-19 pandemic, the UN counterterrorism chief said Thursday.

Vladimir Voronkov told the UN Security Council that the upsurge in phishing sites was part of “a significant rise in cybercrime in recent months” reported by speakers at last month’s first Virtual Counterterrorism Week at the United Nations.

He said the UN and global experts don’t yet fully understand “the impact and consequences of the pandemic on global peace and security, and more specifically on organised crime and terrorism.”

“We know that terrorists are exploiting the significant disruption and economic hardships caused by COVID-19 to spread fear, hate, and division and radicalise and recruit new followers,” Voronkov said. “The increase in Internet usage and cyber-crime during the pandemic further compounds the problem.”

The weeklong meeting was attended by representatives from 134 countries, 88 civil society and private sector organisations, 47 international and regional organisations and 40 United Nations bodies, he said.

Undersecretary-General Voronkov said the discussions showed a shared understanding and concern that “terrorists are generating funds from illicit trafficking in drugs, goods, natural resources, and antiquities, as well as kidnapping for ransom, extorting and committing other heinous crimes.”

He said UN member nations “are rightly focused on tackling the health emergency and human crisis caused by COVID-19,” but he urged them not to forget the threat of terrorism.

In many parts of the world, Voronkov said, “terrorists are exploiting local grievances and poor governance to regroup and assert their control.”

“The pandemic has the potential to act as a catalyst in the spread of terrorism and violent extremism by exacerbating inequalities, undermining social cohesion and fueling local conflicts,” Voronkov said. “We must continue our fight against terrorist groups and criminal networks to deny them the opportunity to exploit the COVID-19 crisis.”

Ghada Waly, executive director of the Vienna-based UN Office on Drugs and Crime, told the council meeting on the linkage between counterterrorism and transnational organised crime that the links are “complex and multifaceted,” and “the COVID-19 crisis poses a host of new challenges to national authorities.”

“Organised criminal groups and terrorists may seek to capitalise on and exploit new vulnerabilities,” she said, “and transit patterns are shifting in view of travel restrictions and lockdown measures, adding further challenges for border security.”

Waly said: “Comprehensive and cooperative responses are needed more than ever.”

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Amazon Starts Preparations to Launch in Sweden

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By Reuters | Updated: 5 August 2020

Amazon has started preparations to launch in Sweden, marking its first step to establish a local presence in a Nordic country.

Swedish customers can already shop on Amazon through its websites in other European countries such as Germany, and get their purchases shipped to the country, but this often meant paying high delivery charges.

“We are optimistic that, by focusing on the things we believe customers will place the greatest emphasis on – low prices, a wide range and fast deliveries – we will eventually be able to win the trust of Swedish customers,” Alex Ootes, vice president for EU Expansion at Amazon, said on Tuesday,

The Swedish website amazon.se was still directing customers to amazon.de with an option to deliver to Sweden. Amazon has not released a date for the launch of the website, a spokesman said.

Amazon did not say if it would create a warehouse or distribution hub in Sweden but Ootes said: “The next step is to introduce a complete retail offering in Sweden and that is what we plan to do now”.

Logistics group Kuehne and Nagel told Reuters it was building a contract logistics facility in Eskilstuna, about 100 km west of Sweden’s capital Stockholm.

The probable entry of Amazon into Sweden has been talked about for years and could represent a challenge to local players.

Daniel Ovin, senior analyst at Nordea, said that based on a report written in October autoparts, sporting goods and general merchandise would be the most exposed sectors after an Amazon entry in the Nordics.

Ovin added that retailers in United States, Britain, Germany, and France that have adopted successful strategies to meet the challenge from Amazon have turned to premium products, sharpened their delivery mechanisms, increased private labels or added brands that were not sold on Amazon.

Shares of budget DIY and homewares retailer Clas Ohlson, fashion specialist Boozt AB, and e-books seller Storytel edged lower.


© Thomson Reuters 2020

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Google Cloud Prepares for Black Friday ‘Peak on Top of Peak’

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By Reuters | Updated: 4 August 2020

Alphabet’s Google Cloud unit is poised for a surge in fourth-quarter sales from US retailers, as they brace for record online shopping during the holidays because of COVID-19 lockdowns.

Cloud technology, used to host websites and store data, is a key part of many retailers’ e-commerce operations. As fees are often pegged to site traffic, a jump in activity will drive up revenue for the unit.

Carrie Tharp, vice president of retail and consumer at Google Cloud, told Reuters that her team had this year tossed out its linear growth model to predict how many servers it will need to process web orders for retailers around Black Friday.

“We’re planning for peak on top of peak,” she said on Monday. That could be a boon for Google Cloud, which has generated about 30 percent of its revenue during the fourth quarter the last two years.

Stores such as Kohls and Wayfair lean on Google months in advance to ensure it has enough servers to withstand increased shopping during holiday discount days such as Black Friday and Cyber Monday in November and December.

This year, Black Friday-style demand has flooded shops since March, when the United States began lockdowns, Tharp said.

Holiday shopping is expected to boost demand further, as retailers including Target and Walmart have said they will reduce in-store hours because of coronavirus concerns.

Tharp said the pandemic has already benefitted Google Cloud, with some retailers adopting its predictive algorithms years ahead of plan to help them work out the most efficient way of fulfilling orders.

Electronics retailer Best Buy, for instance, announced on Tuesday a multi-year deal to centralize customer and product data with Google Cloud to improve its loyalty program and online ad campaigns.

The companies declined to elaborate on the deal, but Tharp said she hopes it leads to Google eventually powering Best Buy’s web ordering system.


© Thomson Reuters 2020

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Australia to Make Facebook, Google Pay for News in Landmark Move

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By Reuters | Updated: 31 July 2020

Australia will force US tech giants Facebook and Alphabet’s Google to pay Australian media outlets for news content in a landmark move to protect independent journalism that will be watched around the world.

Australia will become the first country to require Facebook and Google to pay for news content provided by media companies under a royalty-style system that will become law this year, Treasurer Josh Frydenberg said.

“It’s about a fair go for Australian news media businesses. It’s about ensuring that we have increased competition, increased consumer protection, and a sustainable media landscape,” Frydenberg told reporters in Melbourne.

“Nothing less than the future of the Australian media landscape is at stake.”

The move comes as the tech giants fend off calls around the world for greater regulation, and a day after Google and Facebook took a battering for alleged abuse of market power from US lawmakers in a congressional hearing.

Following an inquiry into the state of the media market and the power of the US platforms, the Australian government late last year told Facebook and Google to negotiate a voluntary deal with media companies to use their content.

Those talks went nowhere and Canberra now says if an agreement cannot reached through arbitration within 45 days the Australian Communications and Media Authority would set legally binding terms on behalf of the government.

Google said the regulation ignores “billions of clicks” that it sends to Australian news publishers each year.

“It sends a concerning message to businesses and investors that the Australian government will intervene instead of letting the market work,” Mel Silva, managing director of Google Australia and New Zealand, said in a statement.

“It does nothing to solve the fundamental challenges of creating a business model fit for the digital age.”

Facebook did not immediately respond to a request for comment.

“Unfair and damaging”

Media companies including News Corp Australia, a unit of Rupert Murdoch’s News Corp, lobbied hard for the government to force the US companies to the negotiating table amid a long decline in advertising revenue.

“While other countries are talking about the tech giants’ unfair and damaging behaviour, the Australian government … (is) taking world-first action,” News Corp Australia Executive Chairman Michael Miller said in a statement.

A 2019 study estimated about 3,000 journalism jobs have been lost in Australia in the past 10 years, as traditional media companies bled advertising revenue to Google and Facebook which paid nothing for news content.

For every AUD 100 (roughly Rs. 5,380) spent on online advertising in Australia, excluding classifieds, nearly a third goes to Google and Facebook, according to Frydenberg.

Other countries have tried and failed to force the hands of the tech giants.

Publishers in Germany, France and Spain have pushed to pass national copyright laws that force Google pay licensing fees when it publishes snippets of their news articles.

In 2019, Google stopped showing news snippets from European publishers on search results for its French users, while Germany’s biggest news publisher, Axel Springer, allowed the search engine to run snippets of its articles after traffic to its sites to plunged.


© Thomson Reuters 2020

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Google Parent Alphabet Sees Dive in Profit as Coronavirus Hits Ad Market

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By Agence France-Presse | Updated: 31 July 2020

Google parent Alphabet reported a rare drop in revenue and profit on Thursday in a quarterly update that nonetheless topped market expectations.

Profit slumped some 30 percent to $6.96 billion (roughly Rs. 52,015 crores) from a year for the online giant that relies on digital advertising for most of its income.

Revenues dipped two percent to $38 billion (roughly Rs. 2.83 lakh crores), as chief financial officer Ruth Porat said; “We continue to navigate through a difficult global economic environment.”

Google shares were little changed in after-market trading following the release.

Revenue regained ground in the second quarter in search and at video-sharing platform YouTube, showing signs of stabilisation by the end, according to Google executives.

“Although we are pleased that ad revenue gradually improved throughout the quarter, we do believe it’s premature to say that we are out of the woods,” Porat said during an earnings call.

She stressed that online ad revenue is related to the overall economic environment, which she saw as “fragile.”

As people hunkered down at home due to the pandemic, Alphabet saw growth in demand for entertainment content at YouTube and its online Play shop as well for cloud services being relied on increasingly for learning, work and online commerce.

While Google ad revenues were down in the second quarter, the business beat expectations, according to eMarketer principal analyst Nicole Perrin.

“We expected April to be the bottom of the digital ad market, with a return to growth in May and June, and these results suggest that acceleration was stronger than expected.”

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