Making a big ruckus in this morning's news is the European Court of Justice's ruling that deemed a 15-year-old data-sharing pact between the EU and U.S. invalid. The decision cannot be appealed.
"Legislation permitting...access on a generalized basis to the content of electronic communications must be regarded as compromising the essence of the fundamental right to respect for private life," Europe's highest court said in a statement.
The ruling has significant implications on how internet groups can operate in the 28-member bloc, and will likely force thousands of companies to overhaul their businesses to avoid breaking the law.
Internet stocks have posted substantial losses after a morning market rally proved short-lived. The Nasdaq is down 1.2%.
In addition to Google, which has made new 52-week lows, Facebook (FB -3%), Twitter (TWTR -4.7%), Amazon (AMZN -3.5%), and Netflix (NFLX -3.2%) are among the underperforming names. Other decliners: Z -5.5%. TRLA -5.4%. MELI -5.4%. ZNGA -4.9%. ZU -3.2%. ANGI -3.4%.
The selloff comes even though Goldman upgraded its rating for the sector to Attractive from Neutral today. The firm noted Internet stocks are collectively down 16% over the last 12 months (maybe 18%-19% after today), and that forward EV/EBITDA multiples have contracted significantly.
The Emerging Markets Internet & Ecommerce ETF (NYSEARCA:EMQQ) is the first ETF to offer investors exposure to the growing investment opportunities in internet and e-commerce firms focusing on both the emerging and frontier markets.
Rather than tracking firms located in emerging and frontier markets, EMQQ will follow a portfolio of firms that derive a majority of their assets or revenues from Internet and e-commerce activities in emerging market nations, as stated in the prospectus.
Internet stocks are selling off in AH trading as Netflix craters in response to its light Q3 subscriber adds and disappointing Q4 guidance, and eBay slumps after providing weak Q4 guidance and reporting only 6% Y/Y Q3 Marketplaces growth.
The number of U.S. tech startups receiving $1B+ valuations in their first financing round rose 133% Y/Y in 1H14, says CB Insights. Meanwhile, PriceWaterhouseCoopers estimates the amount of VC funding directed towards "software" companies (includes a lot of Internet-related funding) totaled $10.1B in 1H14, up from just $4.6B a year earlier. Uber's $1.2B funding round (at a $17B valuation) helped boost PwC's figure.
The breakneck investment pace has led a slew of high-profile VCs to warn valuations have gotten stretched, if not suggest a fresh bubble is afoot. Kleiner Perkins' Randy Komisar: "There's too much capital and there's very few places to invest it ... risk is not being priced properly and so venture capitalists are taking high-risk, high-reward bets."
"No one's fearful, everyone's greedy, and it will eventually end," declared Benchmark's Bill Gurley in a recent WSJ interview. "I think that Silicon Valley as a whole or that the venture-capital community or startup community is taking on an excessive amount of risk right now. Unprecedented since '99."
For their parts, Marc Andreessen and Fred Wilson have warned startups to curb their spendthrift ways. Andreessen: "When the market turns, and it will turn, we will find out who has been swimming without trunks on: many high burn rate co's will VAPORIZE."
Nonetheless, contrasting views remain easy to find. Menlo Ventures' Venky Ganesan: "While we are in an up cycle, we are nowhere close to the top ... There are pockets of irrational exuberance, but for the most part, I think it's actually fine."
The ARK Industrial Innovation ETF (NYSEARCA:ARKQ) and the ARK Web x.0 ETF (NYSEARCA:ARKW) are the first launches in line of actively managed thematic ETFs filed with the SEC by ARK.
ARKQ seeks to invest in companies that are revolutionizing the industrial world and how people travel, while ARKW seeks to invest in companies that are transforming every sector of the economy thanks to Internet-enabled innovation.
The U.S. has warned China that treaties and other global negotiations could be in danger if negotiations fail regarding their high-tech product international trade agreement. The agreement includes an annual $2T in trade, and eliminates tariffs and other trade barriers on IT products.
China has recently excluded approximately 60 new product categories, including medical devices and next-generation silicon chips, from the trade agreement. American authorities are looking to use this week’s annual U.S.-China Strategic and Economic Dialogue to update the 1996 Information Technology Agreement.
U.S. officials warn that if an agreement is not reached, increased opposition will be taken in Congress toward other trade deals with China.
Whereas smartphone penetration in the 15 biggest developed markets was at 65% at the end of 2013, it was only 23% for the 15 biggest emerging markets, notes Mary Meeker in a mobile-centric 2014 Internet Trends Report.
Global smartphone penetration has reached 22%, well above 11% penetration for laptops and 10% penetration for desktops. Tablets are still only at 6%, and mobile phones in general at 73%. There were 2.61B global Web users at the end of 2013, and 1.79B smartphone subs.
Mobile made up 25% of Internet traffic as of May 2014, up from 15% a year ago and 10% two years ago. Asia and Africa are respectively at 37% and 38%. Mobile accounts for over 1/5 of online video time (favorable for YouTube).
Internet ad sales grew 16% last year to $116B. Google (GOOG) had a Q1 annualized ad ARPU of $45 (up $3 Y/Y), dwarfing Facebook's (FB) $7.24 (up $2.84), and Twitter's (TWTR) $3.55 (up $1.58). Mobile is estimated to account for 20% of media time spent, and just 4% of ad sales. For Internet, the figures are 25% and 22%.
Other details: 1) Tech firms account for 19% of the S&P 500's market cap - up from 11% 20 years ago, but well below a Dot.com bubble peak of 35%. 2) Web-connected TVs made up nearly 40% of 2013 shipments, up from <10% in 2010. 3) Facebook made up 21% of social media referral traffic in March (per Shareholic), and Twitter just 1%.
Has irrational exuberance given way to panic selling? Internet stocks are off again today, as the Street registers disappointment with earnings reports from AOL, Groupon, Zulily, SouFun, 500.com, and King.