Fluent Essays

Directions: Read each Wall Street Journal Article and answer the corresponding questions in a well, thought-out and elaborated manner.  Answers must thoroughly answer each question and provide details and support from the articles and knowledge of the current events in order to receive credit. The answers to EACH topic should be ATLEAST one full page (not double spaced).  This means there will be a total of ATLEAST three pages (not double spaced). You may include research/information from other sources for support but they must be cited. The websites for the articles are given. They are also included in this file below the article questions. THE DUE DATE FOR THIS ASSIGNMENT IS NO LATER THAN 12PM NOON FRIDAY, AUGUST 19. PK##########!#+###G#######[Content_Types]. Directions: Read each Wall Street Journal Article and answer the corresponding questions in a well, thought-out and elaborated manner. Answers must thoroughly answer each question and provide details and support from the articles and knowledge of the current events in order to receive credit. The answers to EACH topic should be ATLEAST one full page (not double spaced). This means there will be a total of ATLEAST three pages (not double spaced). You may include research/information from other sources for support but they must be cited. The websites for the articles are given. They are also included in this file below the article questions. Wall Street Journal TOPICS: Advertising SUMMARY: Google parent Alphabet said quarterly profit soared 24\%, the second internet giant in two days to report blockbuster earnings driven by consumers rapid shift to mobile devices. CLASSROOM APPLICATION: Students can evaluate the effect of the rise in smartphones on Googles revenues from click ads. The increase in the use of smartphones has increased the demand for click ads, which in turn has increased Googles revenues from click ads. Instructors can emphasize the point that a new technology, smartphones, has increased the demand for a product, click advertising. QUESTIONS: 1. (Advanced) What is the effect of the rise of smartphones on internet use? What is the effect of the rise in internet use on click advertising?2. (Introductory) Why are companies increasingly willing to advertise on smartphones?3. (Advanced) Why has Google in particular benefited from the rise of smartphones? http://www.wsj.com/articles/google-profits-surge-on-strong-ad-demand-1469736762?mod=djem_jiewr_EC_domainid TOPICS: Microeconomics SUMMARY: American Airlines expects its European routes to suffer from overcapacity, economic weakness and terrorism fears in the coming months. CLASSROOM APPLICATION: The article inspires students to investigate the effect of excess capacity of flights on the prices airlines set. Advanced students can use the Bertrand model to investigate. QUESTIONS: 1. (Introductory) What is the effect of terrorism in Europe in the price of travel to the continent?2. (Advanced) What is the effect of overcapacity in the airline industry in the price of air travel? Advanced students can use Bertrand competition to answer the question.3. (Advanced) What is the effect of Brexit on the demand for business travel to Britain? http://www.wsj.com/articles/american-airlines-profit-and-revenue-decline-1469190634?mod=djem_jiewr_EC_domainid TOPICS: Price Discrimination SUMMARY: Behind a pair of recent multibillion-dollar deals in the mobile videogame industry is an expertly crafted weapon: virtual goods sold inside apps for as little as 99 cents a pop. In-app purchases let players spend real money to bypass ads, acquire skills or grow powerful quickly. CLASSROOM APPLICATION: Students can evaluate the evolution of mechanisms within mobile videogames to increase the likelihood that players purchase in-game tools to improve the playing experience. One interesting class of mechanisms involves behavior-based price discrimination: Data on players behavior also are used to strategically tweak prices for virtual goods in real time. QUESTIONS: 1. (Introductory) Is the use of a countdown clock within a game a tool used by game developers to price discriminate?2. (Advanced) What is behavior-based price discrimination? What are examples of behavior-based price discrimination noted in the article?3. (Advanced) Evaluate the statement, Developers have gotten savvier about giving players more free things to do to keep them hooked until they start spending. Does getting hooked on a game imply that the players demand for continued and faster play is more price inelastic? Does the higher price inelasticity imply that the player is more willing to pay to play a game without imposed delays? http://www.wsj.com/articles/how-mobile-games-rake-in-billions-1469720088?mod=djem_jiewr_EC_domainid Article 1 Google Profits Surge on Strong Ad Demand Internet giant continues to capture users and advertisers as they shift to mobile By Jack Nicas Updated July 28, 2016 7:19 p.m. ET Google parent Alphabet Inc. said quarterly profit soared 24\%, the second internet giant in two days to report blockbuster earnings driven by consumers’ rapid shift to mobile devices. Alphabet said growth continued as companies bought more ads on its search engine and other products, while users increasingly clicked on those ads. Revenue, fueled by Google’s advertising business, rose 21\% to $21.5 billion in the second quarter from a year ago, beating analysts’ average estimate of $20.76 billion. The rise of smartphones has put internet-connected computers in the pockets of more than a billion people world-wide, leading to a surge in internet use—and a major boost to the bottom lines of tech giants such as Google and Facebook Inc. As consumers use the companies’ wildly popular free services more, Google and Facebook can sell more ads to companies trying to reach those users. “The strength of the quarter is about mobile,” Google Chief Executive Sundar Pichai said Thursday. “Our investment in mobile now underlines everything that we do today, from search and YouTube to Android and advertising.” Alphabet stock, which had slid 1.6\% in 2016 through Thursday’s close, jumped 4\% in after-hours trading. The company had recently struggled to meet investor expectations, with earnings missing analysts’ estimates in eight of the past 12 quarters. “The big overhang of concern on Wall Street was that Google’s best days are behind it and that search is a dramatically maturing business. I think they just proved that’s not the case,” said Mark Mahaney, an analyst with RBC Capital Markets. The shift to mobile phones has revitalized Google’s business, he said. “More smartphones means more use of Google, and YouTube, too.” Facebook, Google’s chief rival, also is gaining strength from mobile. Facebook said Wednesday that its second-quarter profit nearly tripled from a year earlier to $2.1 billion, easily beating Wall Street estimates. Mobile accounted for 84\% of its $6.2 billion in second-quarter advertising sales. While Google still controls about 31\% of the roughly $187 billion world-wide digital-ad market, Facebook’s market share has risen to 12\% from 8.6\% in 2014, according to research firm eMarketer. Google’s success capturing advertisers and users as they shift to mobile devices from traditional personal computers is helped by its Android smartphone software, which gives its search engine and other services top billing on more than a billion devices. Google also pays Apple Inc. to make Google the default search engine on iPhones. Google said last year that more than half of its searches now come on mobile devices, and some analysts estimate more than half of its revenue comes from mobile. Advertisers’ spending on mobile search ads increased 63\% in the second quarter over a year prior, while overall search-ad spending rose just 10\% over the period, according to marketing-technology firm Kenshoo Ltd. Alphabet on Thursday said net profit in the quarter that ended June 30 rose to $4.88 billion, or $7 a share, from $3.93 billion, or $4.93 a share, a year earlier. Excluding certain items, Alphabet earned $8.42 a share, beating analysts’ estimates of $8.04 a share. Clicks on ads that Google shows users increased 29\% in the second quarter over a year prior, the fourth consecutive quarter with growth above 22\% after a year of slower growth. Google said it is now reaping the rewards from the shift to mobile because companies are increasingly willing to advertise on smartphones. That is in part because Google is adding new mobile ad formats and better measuring the efficacy of such ads, including tracking users’ locations to see if they visit a physical store after seeing an ad for the store on their phones, Google said. One downside to mobile’s rise for Google has been a simultaneous decline in the average amount that advertisers pay Google per ad click. Mobile ads are generally less expensive than desktop ads, so as the number of mobile ads has increased, advertisers’ overall cost per click has declined. But analysts say there are some signs ad buyers are bidding more for mobile ads, and on Thursday Google said advertisers’ cost per click decreased 7\% in the second quarter over a year prior, compared with a 9\% decline in the first quarter and steeper declines before that. Google’s 19\% growth in advertising revenues was outpaced by nonadvertising sales, which grew 33\% to $2.17 billion over a year prior. That jump was an acceleration for Google’s nonadvertising business, which executives said was primarily driven by its cloud business of hosting other companies’ data and processing on its servers. Google is betting the cloud can become a major revenue driver over the next several years and is investing hundreds of millions of dollars in building new data centers. Other nonadvertising businesses include hardware sales and Google’s share of app sales in its Play Store. Thursday’s results are the third time the firm reported as Alphabet, a parent company created in October to house Google and a series of “other bets,” from home-automation firm Nest to the research lab X, which is working on long-term projects such as self-driving cars, internet-beaming balloons and delivery drones. While the Google unit accounts for virtually all of Alphabet’s revenue, analysts and investors have closely watched financial results of the other initiatives for a sense of how much money they are losing. Revenue for those other bets increased to $185 million from $74 million a year ago, and the operating loss widened to $859 million from $660 million. Cost controls have also been a recent focus since the arrival of former Morgan Stanley executive Ruth Porat as finance chief last year. Investors cheered Ms. Porat’s hire, hoping she would step up scrutiny of Alphabet’s costs. Second-quarter total expenses increased 20\% to $15.53 billion, a slightly slower pace than revenue grew. Article 2 American Airlines Expects European Routes to Suffer From Overcapacity Met Wall Street estimates on its second-quarter results By Susan Carey Updated July 22, 2016 2:07 p.m. ET 3 COMMENTS American Airlines Group Inc., which has a large trans-Atlantic business, said on Friday it expects its European routes to suffer from overcapacity, economic weakness and terrorism fears in the coming months. But it was more sanguine than its big U.S. rivals on the potential impact from the U.K.’s eventual departure from the European Union. Scott Kirby, American’s president, told analysts Friday that he doesn’t expect a big change in business confidence that would lead to tightening of corporate travel budgets in the short term. Until the U.K. actually exits, he said, “there will be a lot more lawyers and bankers flying back and forth, figuring out what to do.” American generates only 4\% of its revenue in now-weakened sterling. His comments came as the airline, the nation’s largest airline by traffic, met Wall Street estimates on its second-quarter results and gave better-than-expected unit-revenue guidance for next quarter. The carrier is a close partner of British Airways, a unit of International Consolidated Airlines Group SA, and the two talk frequently about the amount of capacity they jointly offer across the Atlantic, said Mr. Kirby, who declined to say if American plans to trim its capacity to the U.K. as some of its rival have done. American’s stock rose 4\%, while shares of its major rivals also rebounded from a rout on Thursday caused by negative guidance on unit revenue from Southwest Airlines Co. American’s U.S. bookings and revenues have improved since the Brexit referendum occurred on June 23, Mr. Kirby added. But Europe in general is a weak spot, compared with Latin America, where American is the leading U.S. carrier and revenue is rebounding on its deep capacity cuts. The Olympic Games in Rio de Janeiro next month promise to lift unit-revenue on routes to Brazil into positive territory in the September quarter and possibly into the end of the year. Such big sporting events often are negative because business travel dries up. “But in this case, [Brazil’s economy] is so bad, there’s no business traffic,” Mr. Kirby said. American said Friday it is changing its key measure for unit revenue. It said it would measure total revenue for each seat flown, rather than its previous metric of passenger revenue taken in for each seat flown a mile, which essentially is ticket revenue. The new methodology includes a big slug of revenue from things like frequent-flier credit cards, change fees, bag fees, extra legroom, airport club revenue and in-flight service revenue. For the third quarter, American estimates that extra revenue will total $1.27 billion. Under the new metric, American sees its total revenue for each seat flown down 3.5\% to 5.5\% in the September quarter, an improvement of down 6.1\% in the June quarter and down 6.4\% in the second quarter of 2015. “We think we’re on a trajectory to get back to positive” unit-revenue trends, Mr. Kirby said, without saying when. U.S. airlines have been suffering from negative unit-revenue trends for more than a year, and investors have been focusing relentlessly on that weakness even as carriers have been posting record or near-record profits and buying back billions of dollars of stock. The Fort Worth, Texas-based American said it earned $950 million, or $1.68 a share, in the June quarter, compared with $1.7 billion, or $2.41 a share a year ago, its earnings peak. Revenue declined 4.3\% to $10.4 billion. Much of the earnings decline was due to the noncash provision for $541 million in taxes in the latest quarter, compared with no taxes a year ago. American’s fuel tab fell 26\% in the June quarter, but its labor costs rose 13\% on higher wages and a new employee profit-sharing plan. The company also said it reached an agreement with plane-maker Airbus Group SE to defer the start of delivery of 22 A350 XWB widebody planes to late 2018 from the spring of 2017, as previously planned. Now American expects to take delivery of the planes through 2022, an average deferral of 26 months. The change will reduce capital expenditures in 2017 and 2018 and American paid no penalties to Airbus, it said. Article 3 How Mobile Games Rake In Billions Revenue, mostly from in-app purchases, is expected to hit an estimated $36.87 billion for year Behind a pair of recent multibillion-dollar deals in the mobile videogame industry is an expertly crafted weapon: virtual goods sold inside apps for as little as 99 cents a pop. WSJs Sarah Needleman discusses with Tanya Rivero. By Sarah E. Needleman July 28, 2016 11:34 a.m. ET 8 COMMENTS Behind a pair of recent multibillion-dollar deals in the mobile videogame industry is an expertly crafted weapon: virtual goods sold inside apps for as little as 99 cents a pop. In-app purchases let players spend real money to bypass advertisements, acquire skills or grow powerful quickly, among other benefits. The terms “in-app” and “in-game” refer to purchases that take place while a person is playing, as opposed to paying outright to buy a game. Once considered an unrefined nag, the in-app pitch has been honed so well it coaxes tens of billions of dollars a year from people who have gravitated to free mobile games. Mobile-game revenue, made mostly from in-app purchases, is expected to grow 21\% to $36.87 billion this year, according to research firm Newzoo BV. By 2019, it is expected to reach $52.5 billion. Traditional game publishers like Pokémon Co. and Nintendo Co. have noticed. Their new game made with augmented reality firm Niantic Inc., “Pokémon Go,” soared to the top of app charts just a day after its July 6 release. It has grossed about $120.3 million from in-game transactions to date, estimates industry tracker SuperData Research Inc. In-app purchases are “dramatically changing the mobile-entertainment landscape,” said Andrew Phelps, director of digital media at Rochester Institute of Technology. They “engage people in a longer financial discourse than you would have in an upfront sale.” A handful of developers have mastered the art, including Finland’s Supercell Oy, which last year pulled in revenue of $2 billion from its war-strategy game “Clash of Clans” and two other mobile games. Tencent Holdings Ltd. is betting revenue will keep growing as it seeks partners for its deal to buy 84\% of Supercell for $8.6 billion—mobile gaming’s biggest-ever acquisition. The secret sauce behind many in-app purchases is the countdown clock—a frustration tax that forces gamers to idle before they can perform duties such as farming crops or replenishing fuel, unless they pay for more turns or items to speed up the action. In “Clash of Clans,” players slowly generate elixir and gold needed to train troops, or they can spend real money to stock up quickly. Players can wait out a timer without spending, though the countdown often takes longer to resolve the further along players get in a game. King Digital Entertainment PLC’s hit puzzle game “Candy Crush” makes players wait after running out of lives before retrying a level, or they can pay to play sooner. Earlier this year, Activision Blizzard Inc. spent $5.9 billion to buy King. It credited the company with contributing about 23\% of adjusted revenue in the first quarter. Rather than hound people to repeatedly spend in small amounts, game makers sell caches of virtual currency, such as gems to be used inside games. The idea: Gamers will have an easier time parting with virtual coins than actual coins. Converting players into spenders without turning them off is key; gamers have derided free-to-play games as “free to play, pay to win” for years. Developers, though, have gotten savvier about giving players more free things to do to keep them hooked until they start spending. In “Pokémon Go,” players can go weeks capturing dozens of “pocket monsters” without needing to spend money. After investing so much time, players might be more inclined to dole out cash to upgrade their gear so they can carry more items and creatures, for example. In Electronic Arts Inc. ’s “Star Wars: Galaxy of Heroes,” players unlock characters by grinding their way through the role-playing combat game or using crystals available in increments ranging from $1.99 to $99.99. The game gives out crystals free, too, to keep people coming back. EA in May said it generated $173 million in revenue from mobile games in its fiscal fourth quarter, up 15\% from a year earlier. Algorithms are playing an increasing part in nudging players to spend. Based on dozens of data points—how often gamers play, what model mobile device they use, location and gender—developers might raise a game’s difficulty level, making no two players’ experiences exactly alike. Data on players’ behavior also are used to strategically tweak prices for virtual goods in real time. “You get people to spend more money if you understand their behavior,” said Niklas Herriger, founder and chief executive of Gondola, a New York analytics firm that develops algorithms for game developers. “You can trace their finger every step of the way.” Other tactics: tapping into players’ “fear of missing out” through limited-time events, and cultivating relationships between players. Machine Zone Inc. of Palo Alto, Calif., for instance, uses language-translation software so players from around the globe can chat in its two hit games, “Game of War: Fire Age” and “Mobile Strike.” Joe Akaki of Rockville, Md., has developed friendships with people in Brazil, France and Kosovo through “Game of War.” He used to buy packs of virtual gold in $4.99 increments; now he buys $99.99 packs about three times a week. “The personal relationships are probably the main reason I keep coming back,” the 32-year-old said.