PowerTrend Brief: Never a Dull Moment in the Increasingly Always On, Always Connected Society

Chris Versace

Chris Versace is a financial columnist and equity analyst with more than 20 years of experience in the investment industry.

Perhaps the most dynamic PowerTrend of my Great 8 PowerTrends is Always On, Always Connected. I’m sure you’ve heard me mention this PowerTrend in PowerTrend Brief at least a few times. The reason is because it is something we all see, if not use, increasingly in our daily lives. Today, smartphones and tablets are hot. But a new report out from ABI Research suggests that by 2020, more than 30 billion devices will be connected wirelessly to the Internet of Everything (IoE), compared to only 10 billion devices today. Now, that’s what I call a growth market and it’s one that subscribers to PowerTrend Profits are already benefitting from.

More and more connected devices. But that’s just the hardware angle. When you use your connected device, odds are you’re emailing or messaging someone. If not, you may be checking the latest news or scores on the web and chatting with a friend or family member by way of Facebook (FB) or another social media platform. In our house, other than sports or special events like the Olympics, it’s rare that we follow what has been called “appointment TV.” Instead, we stream our programming either to our TV or sometimes to an iPad.

Google to monetize You Tube. As more devices get connected to the Internet of Everything, content will be a key battleground. Never one to sit on its laurels, Google (GOOG) finally has announced the long-suspected subscription business model for YouTube. Now, I suspect you’ve heard of You Tube, but did you know that more than 1 billion unique users visit the site each month? Did you know that more than 4 billion hours of video are watched each month on You Tube? With that kind of traffic, it makes sense that Google would look to monetize it. Subscription fees will start at $0.99 per month. Once you’ve signed up, you can watch your pay channel on your smartphone, tablet, PC or connected television.

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Advertising continues to shift to Internet properties. The subscription business model aside, Internet programming sites also happen to be where the advertising dollars are flowing. According to Nielsen (NLSN), Internet advertising rose 9.9% in 2012 and far greater than overall global advertising growth of 3.2% last year. According to Google, there are more than 1 million channels generating revenue on YouTube. Google is looking to help content creators get paid. Similar to Apple (AAPL) and its iTunes and App revenue-sharing program, Google stands to make at least some revenue and profits from charging a subscription fee to YouTube viewers. Whether that change moves the needle for Google’s overall revenue stream and profits, we’ll see as more channels are deployed.

New services and new combinations. The combination of shifting advertising dollars and the new YouTube business model underscores the growing emphasis of video services and help explain why Yahoo! (YHOO) is rumored to be exploring a bid for video streaming service Hulu. It also helps explain why AOL (AOL) recently announced its Be On, a video platform that connects branded video content with consumers across all screens.

“Old” media is no place for us. From an investor perspective, the overall shift in advertising dollars will continue to pressure newspaper and publishing business models, such as those found at The New York Times Company (NYT), Gannett (GCI) and others. While it may be tempting to invest in newspapers like Warren Buffett, I will be fishing in far more fertile waters for subscribers to my investment newsletter PowerTrend Profits.

Facebook targets maps and traffic. Another development that came across my bow this week was rumblings that Facebook (FB) may acquire Waze, a mapping-and-traffic-meets-social app. Now, I have to tell you that I have used Waze many times and I really like it. Should Facebook acquire the company, it will push Facebook further into mobile, which is a good thing. Waze also will bring Facebook into the world of maps and put Facebook on track to spar even more with Google and potentially Apple, Microsoft (MSFT) and Nokia’s (NOK) HERE mapping service.

As to whom this would affect negatively, subscribers to PowerTrend Profits know I’ve had a hard time getting behind Garmin (GRMN) shares, given the declining personal navigation device market. The reason is because of the adoption of smartphones and, to a lesser extent, tablets. The combination of Facebook-Waze would only accelerate the falloff in that device category. Again, I’d rather look for stronger companies with better growth prospects than try to justify buying a company like Garmin. I just can’t do that to my subscribers.

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To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

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