Monday Nov.29, 2021

🕸️ Web3, untangled

Counting the “Web3” mentions [dowell/Moment via Getty Images]

Hey Snackers,

Bad news for your neighbor who started putting up holiday lights as soon as the pumpkin pie was digested: Christmas trees are expected to cost 30% more this season.

Stocks rebounded today from Friday’s sharp sell-off, as fears about the new “Omicron” Covid variant partially cooled. Investors were reassured by initial reports that symptoms have been mild and Biden’s announcement that lockdowns aren’t necessary (at least for now). But there’s still much we don’t know about Omicron’s potential impact.

Buzzy

Inside Web3: Why crypto fans are going wild over a blockchain-based internet idea

Charlotte's Web3… is tangly. By now, the term "Web3" has been thrown out by techies more times than “Gucci” at Fashion Week. The Silicon Valley buzzword refers to a conceptual internet of the future that runs on public blockchains. Refresher: Web1 was the disjointed era of AOL and static GeoCities pages. Web2 is the now, dominated by Big Tech. Web3 is still a vision, but can be loosely defined as:

Decentralized: Instead of accessing the web through services controlled by titans like Google and Facebook, Web3 would feature new services owned by their users.
Unified: By recording your activity in “crypto Sharpie” on a blockchain, Web3 could let us carry our data around and bounce between sites with one "account" (scrap the 50 logins).
Direct: Blockchain tech could allow for more direct online transactions and interactions, without Big Tech intermediaries.

Googling "how to Web3"... sooo not Web3. In theory, decentralized payments and publicly owned social sites could eliminate some revenue for companies like Google, PayPal, and Meta (fka Facebook). In October, VC heavyweight Andreessen Horowitz launched a Web3 lobbying campaign in DC, promoting it as a solution to tech monopolies. Cryptos, NFTs, and DeFi apps will be crucial parts of any Web3 future:

DeFi: Decentralized finance apps replace financial mediators like banks, powering direct transactions via blockchain.
NFTs: Web3 could form the basis for a marketplace to exchange everything from digital art to Nikes through non-fungible tokens.
Voting: Web3 features could empower communal platform decisions. Reddit is exploring letting users share ownership of communities with tokens accrued by posting.

Web3 is a threat to Big Tech… But Big Tech companies will likely be very involved, from shaping regulation to integrating Web3 elements on their platforms (think: community tokens, NFTs). Twitter is already exploring ways to add Web3 features to its app. Yet scaling the infrastructure needed for the fully fledged version could take decades. Even the largest blockchains are currently too small to handle all transactions that happen on Web2. Web3’s best-case scenario could be existing alongside Big Tech platforms — not replacing them.

Zoom Out

Stories we’re watching...

The opioid saga continues... And now pharmacies are center stage. Last week, two Ohio counties ruled that CVS, Walgreens, and Walmart enabled the opioid epidemic — which has killed 500K+ Americans — by allowing opioid over-prescription. The verdict will likely lead to more fines for pharmacy giants. Leading drugmakers are already being held accountable: OxyContin maker Purdue Pharma was slapped with $8.3B in penalties for fraudulent marketing, while Johnson & Johnson and opioid distributors McKesson, Cardinal Health, and AmerisourceBergen also face a $26B settlement.

The inflation situation... Consumer prices jumped the most in 31 years last month. Three-quarters of Americans say they’re feeling the pinch, and more than half blame President Biden, knocking his approval rating to an all-time low of 41%. But high prices haven’t stopped US consumers from splurging, and holiday spending’s expected to hit a record $860B. Analysts expect inflation to stay high for years, so Biden’s stepping in. Last week, he tapped into national oil reserves to lower gas prices and renominated Fed Chair Jerome Powell, hoping he’ll fight surging prices.

Events

Coming up this week...

Task board is stacked… with nothing checked off. Software company Asana is a one-stop shop for online project management with 100K+ paying customers worldwide. Asana's revenue tripled to $90M last quarter as corporate customers more than doubled, which helped it notch a $20B market cap. Now Asana is focused on expanding its business overseas and growing partnerships with companies like Zoom and Vimeo. We’ll see whether that boosted Asana’s sales when it reports on Wednesday.

Help (still) wanted... even as people flock back to work. After the pandemic triggered millions of layoffs, the job market is heating up again. Last week, the number of Americans claiming jobless benefits hit its lowest level in more than 50 years. October hiring surged as bars, restaurants, and hotels rushed to staff up despite an ongoing labor shortage — which hasn’t been cheap. Retailers are hiking wages and offering free tuition to snag employees. We'll see how the labor rebound is faring when the November jobs report drops on Friday.

ICYMI

Last week's highlights....

Bitcity: El Salvador plans to build a volcano-powered "Bitcoin City," funded by the first government-issued “Bitcoin bonds” — but its crypto moves could be economically implosive.
DPF: Zoom shares plunged last week after it reported slowing sales growth. It’s not the only WFH winner suffering from the “demand pulled forward” effect.
Swipe: Tinder and Hinge owner Match Group launched a human-matchmaking subscription as swipe-fatigued singles look for love beyond algorithms.

What else we’re Snackin’

Shop: What inflation means for the busy holiday season. Americans are salty over rising prices, but they’re still ready to splurge $1K on gifts and decorations.
Learn: More women than men are going to college (three women for every two men), and the decades-long trend could reshape the economy.
Scrape: Desperate parents are turning to shopping bots to scour retail sites for hard-to-find gifts, from PS5s to CoComelon plushies.

This Week

Monday: Cyber Monday
Tuesday: Giving Tuesday. Earnings expected from Salesforce, Zscaler, GlobalFoundries, NetApp, Box, and Allbirds
Wednesday: Earnings expected from Snowflake, CrowdStrike, Okta, Build-A-Bear Workshop, and Royal Bank of Canada
Thursday: Weekly jobless claims. Earnings expected from TD Bank, Dollar General, DocuSign, Kroger, Asana, Smith & Wesson Brands
Friday: Earnings expected from Big Lots and Dole. November jobs report.

Authors of this Snacks own: Bitcoin, and shares of Google, Apple, Match, Twitter, Amazon, Walmart, Vimeo, and CVS

ID: 1936948

Latest Stories

William Coulman & David Crowther

14m

Not so Gucci

French luxury fashion conglomerate Kering has seen its shares fall ~10% in the last 24 hours after reporting that sales at its flagship brand Gucci had dropped 21% in its latest quarter.

Kering’s other brands, which include Yves Saint Laurent, Bottega Veneta, and Balenciaga, fared slightly better — but the only real bright spot was the company’s eyewear division, where sales rose 24% (9% on a comparable basis).

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.

Kering Warns Profit to Tumble Following Gucci Woes in China

Good morning

What’s happening

Starbucks is challenging a labor watchdog’s power in a far-reaching Supreme Court case

Max Knoblauch

Read

What a US TikTok ban could mean for the rest of the market

Rebecca Moretti

Read

Goldman ditches its robo-advisory biz as it breaks up with consumer banking

Jamie Wilde

Read

Worse than expected

17h

Ugly numbers, but Tesla shares bounce

Rebecca Moretti, Rani Molla

18h

Just the start

Banning
TikTok

What it means for the rest of the market

Jack Raines

20h

The FTC vs. Big Handbag

The Federal Trade Commission has sued to block big tech, big grocery, big vacuum, and now, big… “affordable luxury handbag.”

Yesterday, the FTC sued to block Tapestry Inc’s $8.5B acquisition of Capri holdings. The agency is worried that a merger between Tapestry, which owns the Coach and Kate Spade brands, and Capri, which owns Michael Kors, would eliminate competition in the market.

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.
The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

FTC Moves to Block Tapestry’s Acquisition of Capri

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.
The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

Matt Phillips

22h

Tesla had a good ride, but the stock’s price destruction is historic

Few people have created as much value as Elon Musk. The iconoclastic entrepreneur took Tesla from a market capitalization of roughly $2 billion at the time of its IPO in 2010 to $1.2 trillion in early 2023. That’s a return of about 55,000%. Musk made a lot of people a lot of money.

On the other hand, Tesla shares are down nearly 60% since their all-time peak. The company has ceded ground in EVs, prompting a series of profit crushing price cuts to preserve market share. The cumulative loss in market value over that period is pushing $800 billion. Few corporate executives have presided over such a degree of value destruction.

And it could get worse, as people are bracing for an ugly update when Tesla reports after the close Tuesday.

Jack Raines

Opinion

4/23/24

Starbucks could use a CIO

Customers give Starbucks billions of dollars in prepaid credits each year. Should the coffee chain be investing it?

Starbucks American Coffee Chain Cafe In Amsterdam

Rani Molla

4/23/24

Smaller AI models are in

Tech companies that have long touted the enormity of their AI models are now saying size doesn’t always matter.

Microsoft is the latest tech company to introduce smaller AI models, as part of its Phi-3 tech family. Last week Meta released two smaller models of its AI Llama 3 and earlier this year Alphabet did the same. All are open sourcing these models to encourage wider adoption.

Microsoft says its smallest model, which can fit on a smartphone and wouldn’t need to be connected to the internet to work, is nearly as good as OpenAI’s GPT-3.5. A Microsoft exec suggested this less expensive model could be a good fit for online advertisers, if not doctors.

Microsoft Makes a New Push Into Smaller A.I. Systems

wake up!

4/23/24

Morning earnings report

$127

The average bitcoin-transaction fee hit an all-time high of $127 on Friday.

The temporary spike came as the halving cut miner rewards and traders forked over huge sums of BTC (skewing the average) to be included in the first post-halving block.

Adding fuel to the fee fire was the launch of Runes, a new protocol that lets developers create memecoins on top of the bitcoin blockchain. The debut was so popular that fees popped as traders fought for limited block space.

4/23/24