Thursday Jul.08, 2021

☁️ Cloud Wars, demystified

_"This is definitely going on Nextdoor" [Caspar Benson via GettyImages]_

Hey Snackers,

Spotted: bad reviews. The "Gossip Girl" reboot launches on HBO Max today, but critics are already XOXO'ing — not in a nice way.

Yesterday, the Fed indicated it's not ready to end its economy-boosting, cash-infusing policy yet – but it could be close. The S&P 500 index ticked up to a record regardless.

JEDI

Cloud Wars: the Pentagon calls off its $10B JEDI contract, two years after Microsoft won

Put down your lightsabers... The JEDI war is over. In 2019, Microsoft scored a huge win by snagging the Pentagon's $10B cloud-computing contract (aka: "JEDI"). Over 10 years, Microsoft would modernize the Department of Defense's IT systems, storing and crunching government data in its cloud. After losing the bid, cloud competitor Amazon appealed the decision. In response to the 'Zon's lawsuit, a federal judge temporarily blocked the deal earlier this year.

The tea: Amazon claimed that then-President Donald Trump sabotaged its JEDI bid because of beef with The Washington Post, which Jeff Bezos owns.
Now, JEDI is canceled. The Biden admin scrapped the contract, in favor of a new contract that will be awarded to multiple cloud companies.

Cloud moves fast... Two years after outlining its cloud-computing needs, the DoD wants to reassess its options. Now, Amazon and Microsoft will both be solicited for proposals for the new contract, called "Joint Warfighter Cloud Capability" (less catchy). Other qualified bidders could include Google, Oracle, and IBM. The DoD is America's largest employer, which means big cloud cash.

In context: Companies and governments are moving in droves from on-premise data storage (think: OG Word doc on your PC) to cloud storage (think: Google Doc in the cloud).
The cloud-computing market is worth $214B, and the competition for market share is intense. Amazon's AWS is the leader, while Microsoft's Azure is #2.

The Cloud Wars are far from fluffy... They're brutal for a reason. Cloud is the oil of the modern economy, powering everything from Netflix to your credit card payments. Cloud infrastructure service revenue was $39B in the first quarter, up 37% from last year. Once a company transitions to a cloud service, it's hard to move off because of high switching costs. High-profile contracts like this Pentagon deal are crucial to gaining market share in a cloud-eat-cloud world.

Tabitha

Neighborhood social network Nextdoor is going public: it’s capitalizing on “local media”

Has anyone seen my tabby cat?... When Tabitha's missing, a Facebook post won't help — so you turn to Nextdoor. The hyper-local social networking app allows you to chat with neighbors, exchange recs, and get the scoop on local news. Like: your fave mailman just retired, and that "earthquake" you felt was actually just you. People seek advice on everything from babysitters, to laundromats, to borrowing BBQ grills.

Nextdoor is going public through a SPAC merger that values it at $4.3B, nearly double its 2019 valuation. The 10-year-old company will raise nearly $700M.
KIND: Nextdoor's future ticker combats perceptions about its chatrooms, like "Trina, can you take out your stupid trash before 2 am.”
$$$: Nextdoor makes most of its money from ads for local businesses and real estate brokers. Two big trends in its favor: business reopenings and the housing boom.

Giving away my extra TP rolls... Too kind. Nextdoor thrived during the pandemic, as people flocked to the app for info about Covid, testing/vax sites, and local biz closures. Now:

Nearly one in three households in the US use the Nextdoor app.
275K+ neighborhoods across 11 countries are on Nextdoor.
Facebook is trying to Zuck Nextdoor with a copycat called “Neighborhoods.”

OG social has become too antisocial... Most of the time: You're scrolling photos of random influencers and meme accounts, and barely interacting with your 1K followers. On FB, you're flooded with notifications about people you haven't seen since 5th grade. People are seeking real community post-pandemic, but big social networks have become too big. Tight-knit communities and real-life connections help Nextdoor users feel closer — call it "local media."

What else we’re Snackin’

Served: 36 states sued Google, alleging that the tech giant illegally abused its power over developers on the Google Play store.
Chipper: Samsung's quarterly profit soared 53% because semiconductors are a hot commodity, and it's serving up memory chips.
Trumped: Donald Trump filed proposed lawsuits against Facebook, Twitter, Google, and their CEOs, after they removed him from their platforms.
Crypto: Visa will allow cardholders to pay with crypto at 70M merchants worldwide, but the merchants will get paid in fiat (aka: regular) currency.
Blimey: British fintech giant Wise notched an $11B market cap after going public in London through a direct listing.
Floral: Authentic Brands, which owns struggling mall staples Forever 21 and JCPenney, is filing to go public.

Thursday

Weekly jobless claims
Earnings expected from Walgreens

Authors of this Snacks own: Microsoft, Google, and Amazon

ID: 1

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Do you want to run the State Department of McDonald’s?

A couple of days ago, a tweet making fun at McDonald’s hiring a “Manager for Diplomatic Relations” went viral.

At first glance, the idea that McDonald’s, a burger franchise known for its double quarter pounders and perfectly salted fries, is expanding its diplomatic influence with policy makers in Foggy Bottom and the world at large sounds comical. But it’s actually crucial.

There are more than 40,000 McDonald’s locations spread across 115 countries around the world, and 90% of these stores are independently owned and operated franchises that pay royalties to the parent organization to operate. Tens of thousands of franchises operated by different owners with different beliefs, priorities, and values can get complicated, fast.

As we noted in Snacks in February, McDonald’s received heavy backlash from franchisees in countries including Saudi Arabia, Oman, Jordan, Kuwait, and Pakistan after McDonald’s Israel donated thousands of free meals to IDF personnel. But it wasn’t McDonald’s, as an entity, that made the donations. It was the owner of the company’s Israel franchises, who was acting under his own volition.

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The data doesn’t lie: Taylor Swift is the biggest pop star on the planet

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Nuke stocks up on AI excitement

For most of humanity, the thought of “nuclear-powered AI” sends a shiver down the spine. But the stock market is all for it! Just check out the list of top performing S&P 500 stocks this year. Just behind established AI plays — Super Micro Computer and Nvidia, you’ll find Constellation Energy, the largest operator of nuclear plants in the U.S. NRG Energy, which also operates nuclear plants, isn’t far behind. Bloomberg reports that CEO of power distributor Exelon — which spun off Constellation in 2022 — says in the Chicago area alone, AI could drive a 900% jump in demand for energy from data centers.

Rani Molla

China makes Apple remove WhatsApp, Threads, Signal and Telegram from app store

In its latest move to restrict foreign tech, Beijing has ordered Apple to remove a number of popular messaging apps from its app store there, including WhatsApp, Threads, Signal and Telegram.

These apps had only been available through VPNs but were popular nonetheless, according to the Wall Street Journal.

Apple said the Chinese government asked them to remove the apps in the iPhone maker’s second biggest market over “national security concerns.” Last week, China told its state-owned telecoms to phase out the use of US chips by 2027.

Exclusive | China Orders Apple to Remove Popular Messaging Apps

Rani Molla

Tesla's recall reveals just how bad Cybertruck delivery numbers have been

Thanks to a recall of Tesla’s Cybertrucks, we now know how many of them have actually been delivered: 3,878 since the EV company began releasing them to customers in November.

In its third and fourth quarter earnings report, Tesla said that its current Cybertruck production capacity was greater than 125,000 a year. Musk had previously said he expected to produce 250,000 Cybertrucks a year by 2025.

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

Tesla recalls the Cybertruck for faulty accelerator pedals that can get stuck | TechCrunch

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

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Cocoa hits $11,000

Cocoa prices are breaking records on an almost daily basis — with cocoa futures closing at (another) all-time high of $11,020 per metric ton yesterday.

That’s up 158% since the start of the year, and over 4x on the typical prices seen in 2022 — as crop production continues to fall short of demand.

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

Why the World of Chocolate Is in Crisis

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World out of balance: It costs the US 3¢ to make 1 penny

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

3.07¢

Pop Quiz!

What’s the world’s busiest airport?

Don't be a sucka

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23h

Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

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