And the winner is: The cloud

Life in the cloud (services) nine

Alphabet and Microsoft announced their earnings yesterday. The big takeaway? Cloud won last quarter.

Both companies have struggled in some business units, blaming economic conditions. Alphabet missed ad revenue expectations, and Microsoft’s PC and video game sales fell. But they still got solid sales from their cloud units.

• Microsoft’s server and cloud revenue rose 26% adjusted for inflation. The biggest driver of growth within that was Azure and other cloud services, which saw sales growth of 46% adjusted for inflation. Wedbush analysts John Katsingris and Dan Ives wrote in their guidance that the cloud is “the core DNA of [Microsoft] growth story.”
• Meanwhile, Google Cloud revenue rose 36%, from $4.6 billion to $6.3 billion, year over year.

However, sustaining the rapid growth is proving difficult. Protocol Enterprise editor Tom Krazit told me that while the results look good on paper, they actually show a gradual slowdown in cloud growth compared to a few years ago.

But cloud tech isn’t as nervous about the downturn as other tech sectors.

• Although the US is potentially staring at a recession, business spending is likely to remain stable. That’s because businesses are in the midst of a “generational shift from old data centers to cloud services,” says Tom.
• As older businesses upgrade to stay afloat, new ones continue to emerge and grow — and many of them are flocking to the cloud.

It’s easier to cut spending on things like marketing than cloud services. Businesses have to keep their data somewhere, after all.

— Nat Rubio-Licht

Then they came for the photo

Kim Kardashian and Kylie Jenner are pleading for Instagram to stop trying to copy TikTok. Instagram is listening, but it’s not agreeing with celebrities on this one.

Video is the future of Instagram, Adam Mosseri said yesterday, addressing users who are “concerned” about some of the changes the platform is implementing. Her response came hours after Kardashian and Jenner posted their stories. Opportunity?

• “[Photo is] part of our heritage,” said Mosseri. “That being said, I have to be honest. I believe Instagram will become more and more video over time.”
• He added that Instagram needs to change “because the world is changing.” You don’t have to read between the lines to understand that this is directed at TikTok.

Instagram is no longer Instagram. It just took some big-name celebrities to say the quiet part out loud.

• Facebook is moving away from Friends by relegating their posts to a separate tab, Feeds, which my colleague Issie Lapowsky calls “a total about-face.”
• Changing the algorithm so much that A-list celebrities will openly denounce it means Instagram has moved past the pivot from Friends and a step toward “Algorithmic Everyone,” said The Information’s Sam Lessin described as providing users with content that is more entertaining than anything celebrities post. Pissing off celebrities is almost expected, then.

So what is Instagram now? If this is shamelessly moving in the direction of TikTok, does this mean that Instagram (and Facebook) wants to be entertainment platforms, rather than social networks?

• TikTok doesn’t consider itself a social media platform, which is why it doesn’t want to be compared to Facebook and Instagram. “We’re an entertainment platform,” TikTok’s Blake Chandlee said last month. “The difference is significant.”
• For Instagram, moving away from a social network means it has to move toward AI personalized content, which Lessin said is coming but still needs time to develop.

Now it remains to be seen what will happen once many of these changes are implemented. Instagram has spent years courting famous people on the platform, but how long will they last when they’re no longer a priority? “We want creators to do what we can, particularly small creators,” Mosseri said. You thought it was show business, son.

— Sarah Roach

Stick to the plan

When Jeremy Toeman launched a video production startup last year, his team created a game called Moviedle that eventually became a hit (probably made money). But instead of throwing his energy behind the game, he stuck to the startup. Protocol’s Janko Roettgers asked Toeman why he decided not to pivot on this week’s “How I Decided.”

• “We’re so close to shipping our core product that not doing so would be a huge mistake. Second, I’m 100% convinced that this micro gaming space is here for the long haul — but I’m not convinced that I know if which games matter in the long run.
• “If [the game] never went viral, I would still look at it as a great decision. Just by spending the week building it, the amount we learned as a team advanced us about 20 business days.”

Read Janko’s interview with Toeman here.

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