Tuesday Nov.29, 2022

📦 Black Friday goes cyber

The store might be empty, but the e-cart is full (Leonardo Munoz/Getty Images)
The store might be empty, but the e-cart is full (Leonardo Munoz/Getty Images)

Hey Snackers,

Even Florida isn’t immune to crypto winter’s chill: Miami nightclubs are mourning the absence of big-spending cryptopreneurs. No more bitcoin-sponsored bottle service?

Stocks sank yesterday after Fed officials hinted that high rates might stick for a while. Crypto had its own rough day as bitcoin and ether slid following news of crypto lender BlockFi's bankruptcy.

Click

Black Friday sales break online records as Americans keep click-shopping while margins get slimmer

’Tis the season to splurge… and inflation-stressed US shoppers still have the urge: shoppers spent a record $9B online on Black Friday, and yesterday’s Cyber Monday sales were expected to hit a record $11B. Thanks partly to deep discounts, sales of Apple MacBooks, Dyson gadgets, drones, and gaming consoles soared, while toy sales quadrupled.

  • Mobile mania: Consumers did nearly half their Black Friday shopping from their phones — a new record.
  • Buy now, pay later payments rose 78% from the previous week as consumers continued to grapple with high prices.

Holiday hype may not last… Strong post-Thanksgiving sales were a bright spot for retailers, which had given cloudy forecasts for this holiday season: Target, Macy’s, Nordstrom, and others reported slow sales in October and early November as consumer sentiment dipped. Now retailers are trying to unload their inventory — and stay rid of it:

  • Deeper discounts: This year the average Black Friday discount ticked up to 30%+, Salesforce data showed. Translation: retailers want to ditch piles of summer goods.
  • Stricter returns: About 60% of retailers surveyed are adopting stricter policies to cut costs (think: fewer free returns).

More sales ≠ more profits… because discounts mean slimmer margins. Despite this past week’s strong (cough, inflated) sales, analysts actually expect holiday sales to fall this season when adjusted for inflation — which would be the first holiday drop since 2009. That could spell tough times ahead for mega-retailers like Target and Walmart, which may end up with punier profits if they’re forced to keep slashing prices to move merch.

Fallout

China's “zero-Covid” protests send jitters through global markets as the second-largest economy falters

Eruptions in the east… From Beijing to Shanghai, thousands of Chinese residents took to the streets (and social media) over the weekend to protest the country’s strict zero-Covid policies. Some called for President Xi to step down. China has extended lockdowns and tightened restrictions in certain areas after reporting 253K+ Covid cases over the past three weeks. Now things may be reaching a breaking point:

  • On Thursday a fire in China's western city of Urumqi killed 10 people trapped in a high-rise building, which was under partial lockdown and reportedly inaccessible to first responders.
  • It’s a big deal: The deadly fire sparked mass protests to Xi’s authoritarian government on a scale not seen in decades.
  • In markets, stocks sank yesterday while oil fell to its lowest level since January, as investors feared that China’s domestic conflict could jolt the global economy.

The Covid fallout… Earlier this month China said it would ease some quarantine rules to curb the economic damage. But its plans have been thwarted by outbreaks in 80 of its cities, which generate half of China’s GDP. It’s hurting the economy:

  • Last month, China’s retail spending shrank by 0.5% from a year ago, the first decline since May. Meanwhile, China's exports dropped for the first time since 2020.
  • China's economy is expected to grow about 3% this year — nearly half of the 5.5% expected in March.

China could be at a tipping point… While its strict Covid policy has crippled global supply chains and companies including Apple, it’s affecting Chinese citizens the most. Though some analysts say the unrest could cause Xi to crack down even further, others are optimistic that the protests could spur the government to unwind some of its policies.

DEFI(NE)

Heard on the Block: "contagion"

🤧 Like when your coworker shows up to the office with the flu…

Because crypto's so interconnected, one big incident (like a bankruptcy or hack) can act as a "contagion" spreading across the industry and getting others sick. Case in point: crypto lender BlockFi filed for bankruptcy yesterday, citing "significant exposure" to the contagion of bankrupt exchange FTX.

What else we’re Snackin’

  • Shpd: Tech companies are rerouting chip shipments from train to trucks ahead of a possible rail strike, which could bring freight transport to a halt next week unless a deal is reached.
  • Win: Casino stocks including Wynn and Las Vegas Sands rose after the Macau government renewed their licenses. Part of the deal: operators agreed to invest in non-gambling draws (think: theme parks).
  • Oof: Balenciaga pulled ads featuring children holding stuffed animals with leather straps after public criticism. Kim Kardashian said she's reevaluating her brand-ambassador role.
  • Slick: The White House gave Chevron the go-ahead to pump in Venezuela again. But new oil won't hit the US market soon: busted equipment and staffing problems mean any market effects may take a while to be felt.
  • Stealle: Banks like Wells Fargo and Bank of America are devising a blueprint to refund customers scammed into sending fraudsters $$ via Zelle. The Venmo rival did $490B in transactions last year.

Tuesday

  • Earnings expected from Intuit, Workday, CrowdStrike, and NetApp

Authors of this Snacks own: bitcoin and ether and shares of Apple, and Walmart

ID: 2613241

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Latest Stories

Tech

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.

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.

Business

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.

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.

Markets

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.

Cocoa prices

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.

Cocoa prices
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Power

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¢
Business

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.

Tech

Meta’s not telling where it got its AI training data

Today Meta unleashed its ChatGPT competitor, Meta AI, across its apps and as a standalone. The company boasts that it is running on its latest, greatest AI model, Llama 3, which was trained on “data of the highest quality”! A dataset seven times larger than Llama2! And includes 4 times more code!

What is that training data? There the company is less loquacious.

Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

It did mention that it includes AI-generated data, or synthetic data: “we used Llama 2 to generate the training data for the text-quality classifiers that are powering Llama 3.” There are plenty of known issues with synthetic or AI-created data, foremost of which is that it can exacerbate existing issues with AI, because it’s liable to spit out a more concentrated version of any garbage it is ingesting.

AI companies are turning to such data because there’s not enough good, public data on the entire internet to train their increasingly greedy AI models. (Meta had reportedly floated buying a publisher like Simon & Schuster to satisfy its insatiable data needs.)

Meta, of course, isn’t the only company that’s tight-lipped about where its AI data is coming from. In a now infamous interview with WSJ’s Johanna Stern, OpenAI’s chief technology officer Mira Murati was unable to answer questions about what Sora, OpenAI’s video generating app, was trained on. YouTube? Facebook? Instagram — she said she wasn’t sure.

What is that training data? There the company is less loquacious.

Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

It did mention that it includes AI-generated data, or synthetic data: “we used Llama 2 to generate the training data for the text-quality classifiers that are powering Llama 3.” There are plenty of known issues with synthetic or AI-created data, foremost of which is that it can exacerbate existing issues with AI, because it’s liable to spit out a more concentrated version of any garbage it is ingesting.

AI companies are turning to such data because there’s not enough good, public data on the entire internet to train their increasingly greedy AI models. (Meta had reportedly floated buying a publisher like Simon & Schuster to satisfy its insatiable data needs.)

Meta, of course, isn’t the only company that’s tight-lipped about where its AI data is coming from. In a now infamous interview with WSJ’s Johanna Stern, OpenAI’s chief technology officer Mira Murati was unable to answer questions about what Sora, OpenAI’s video generating app, was trained on. YouTube? Facebook? Instagram — she said she wasn’t sure.

Today’s earnings: Who’s making money edition

Here are some some notable numbers out this morning, as earnings season gathers steam. Thursday’s main event will be Netflix after the close of trading. (Keep an eye on its advertising business.) But until then...

7.13%

The 30-year fixed rate mortgage is back above 7%, according to weekly numbers from the Mortgage Bankers Association, the highest level in four months. High borrowing costs are creating havoc for would-be buyers, as affordability lingers at the low levels not seen consistently since the late 1980s.

Business
Rani Molla
4/18/24

Amazon’s spy ops on rivals: shell companies, printed docs, and a fake Japanese streetwear brand

Some companies check out rivals’ websites, stores and public filings to stay abreast of the competition. Amazon made its own fake shell company and brands, transacted hundreds of thousands of dollars per year undercover on competitors’ platforms, and kept its intel operation a secret for nearly a decade even from others at Amazon, according to a fascinating investigation by the Wall Street Journal.

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."