Thursday Oct.31, 2019

Too political for Twitter

_Sorry, your political ad is no longer accepted on Twitter_
_Sorry, your political ad is no longer accepted on Twitter_

Hey Snackers,

Aggressive Halloween move — Molson Coors went full-makeover, changing its name (now "Molson Coors Beverage") and moving its HQ to Chicago.

On Wednesday, Apple's earnings (slower iPhone sales couldn't stop record revenues) and Facebook's earnings ($6B in profits despite fresh scandals) didn't surprise. And the Fed cut interest rates again. So your Snacks team found 2 other stories worth digesting.

Takedown

Twitter bans political ads — a short-term revenue hit for long-term trust

Twitter just banned one of its revenue streams (via tweet)... Bold move. Misinformation (aka lies, false info, and deceptive non-truths) has hit such a level that Twitter's CEO banned political ads on Twitter — his tweet-based announcement also casually trolled Facebook:

  • For instance, it‘s not credible for us to say: “We’re working hard to stop people from gaming our systems to spread misleading info, buuut if someone pays us to target and force people to see their political ad…well...they can say whatever they want! 😉” -- @Jack

Kill misinformation... (except when it comes to politicians). They're Facebook and Twitter's big exception. Both platforms let political leaders post without fact-checking. Plus, they won't remove/flag tweets/posts from politicians even if they're false.

  • Zuck's approach: He doesn't want to referee free speech — a politician lying is in-and-of-itself, news, that shouldn't be censored by Facebook.
  • Jack's approach: But getting paid to expand the reach of misinformation is where Twitter's drawing the line (Facebook isn't into line drawing).

This is straight-up #ShortTermCost cost for #LongTermGain... Jack's leadership on a divisive topic will probably hurt profits before it helps them:

  • Short-term = lost revenues: Twitter won't snag any of the advertising bonanza of 2020 election campaigns.
  • Long-term = gained trust/cred: Twitter can now say it's doing more than Facebook to limit the spread of misinformation, whether it's from a politician or not — and that may earn new users.
Mergin'

Fiat Chrysler and Peugeot are merging — an Italian-French-American car giant is born

Long distance relationship... Europe's Peugeot and Fiat Chrysler are living it. The pair is reportedly merging for $48.8B to create the 4th biggest car company on Earth. Peugeot is French, Fiat is Italian, and Chrysler is American. The 3 surprises from studying this thing abroad:

  1. Peugeot (founded 1810) was the 1st to put solid rubber tires on a gas-powered car.
  2. Fiat (1899) owns a dozen brands, from Maserati to Dodge — but the profit puppies driving its $$$ are Jeep SUVs and Ram trucks, not adorable Italian mini-machines.
  3. Chrysler (1925) is one of Detroit's "Big 3" carmakers, but is now owned by Fiat, which snagged it post-Chrysler bailout/bankruptcy in 2009.

This fulfills a dream... Former CEO Sergio Marchionne’s dream. The godfather of modern automobile strategy passed away last year, but he called shotgun on merging whenever he could:

  • 2004: When Fiat's small cars were losing $1.1M a day, Sergio took over the company as CEO.
  • 2009: He got Fiat on its feet and then took over Chrysler.
  • 2015: He tried (but failed) to merge with GM.

If you ain’t merging, you’re dying... For years, Sergio called on the car industry to consolidate. He predicted and watched car companies go bankrupt in the '08-'09 Recession. He recognized that people stop buying cars mid-recession, so a merged "team" of car companies can better survive. Now Peugeot and Fiat Chrysler can own 1/4 of the European car market. Together.

What else we’re Snackin’

  • Frothed: Starbucks revenues rose 7%, powered by the nitro brews it whipped up over the summer
  • PG: Spotify launches a dedicated "Kids" app with parent-approved playlists
  • Played: Mattel stock rose 14% thanks to love for Barbie and a Korean pop toy
  • ETA: Lyft revenues jumped 63% and it (still) hopes to become profitable (early) in 2021
  • Work: Ford signs 4-year deal with the United Auto Workers union, avoiding GM-esque labor strike
  • Macro: GDP slowed to 1.9% growth the 3rd quarter (down from 2.0% in the 2nd quarter), but that beat analysts' low expectations

Thursday

Disclosure: Authors of this Snacks own call options in Spotify.

ID: 999084

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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

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

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.