Tuesday Apr.30, 2019

Spotify's 100M "Unprofitables"

_Googlers need to find a furry wall_

Hey Snackers,

Plants already won the week — Burger King's now cooking its meat-free Impossible Whopper nationwide.

Stocks touched record highs again as (another) US trade delegation heads to China to end the trade war and more earnings reports head to Wall Street.

Google falls 7% because Big Tech stole its ads

Off by a billion... Revenue growth for Google-parent Alphabet decelerated hard in the 1st quarter to its slowest pace since 2015. And the profit made off that $1B-less-than-expected revenue was also (you got it) less than expected. Shares tanked 7% after investors learned Google is ~~human~~ fallible.

"Hey Google: What is competition?"... It's Facebook, Twitter, Snapchat, and Amazon. All of them have surging advertising divisions and they're all bad for Google. Here's the ad growth scoreboard for Q1:

Snap: +39%
Amazon: +34%
Facebook: +26%
Twitter: +18%
Google: +15%
Perspective: In fairness, Google's ad biz is the largest of all these by far — 2x bigger than Facebook's, and 100x bigger than Snap's.

Google's monopoly game is over... For 15 years, its business model was to grow the internet (developed to developing nations, desktop to mobile), then reap more and more $$ off it with online ads. Now it's ad-dependent — Ads are 86% of its revenues. With today's real competition, Google needs to embrace a new skill or embrace less growth.

Stream

Spotify's $158M loss highlights why it needs podcasts

Hitting 100M app downloads deserves Adele's Grammy... Getting 100M humans to pay monthly for something is elite tech status — Netflix and Amazon have it, and now Spotify has joined the band, too. Quarterly earnings showed 217M people logged into Spotify accounts at least once a month. Here's who they/you are:

100M premium users (twice as many as Apple Music): Family and student discounts have cut the average amount users pay to just $5.27/month. But that's okay because streaming customers are "very sticky" — "Premium" revenue makes up 90% of Spotify's total.
117M free users: They can jam out on "Taylor Swift Radio" until Love Story gets buzz-killed by a mortgage ad. Spotify's goal is converting them to Premium via those free trials and discounts.

A scrub is a guy that thinks he's fly... but doesn't make profits. If you're surprised Spotify lost $158M last quarter, remember it pays 70% of revenue back to artists like TLC and their record labels. And it splurged $500M lately to buy podcast companies...

Pods are Spotify's profit puppies... CEO Daniel Ek thinks 20% of listening on his platform won't be music — that's why he calls Spotify an "audio" company. And it's why he bought Gimlet's pod portfolio in February. Spotify doesn't have to share revenue with podcasts because they're financed by their own in-pod ads. Or Spotify already owns them.

Host

Marriott and Airbnb simultaneously unveil knock-offs (of each other)

Same architect?... Marriott International and Airbnb both announced shiny new ventures Monday. But they look a lot alike: Airbnb is entering the hotel biz, while Marriott is jumping into home rentals:

Marriott unveiled "Homes & Villas" — A booking platform for shared apartments and houses (sounds Airbnb-ish). The best part for Marriott's hardcore customers: It's reward-program eligible.
Airbnb unveiled... it's actually not named anything yet. But this "new category of urban lodging" begins with 10-floors of curated, designer-designed high-end hotel-like units in NYC's Rockefeller Center. Airbnb calls it "authentic." New Yorkers doubt that.

That's not where the similarities end... Both will feel more hotel, less Craigslist. They'll be maintained and cleaned by 3rd party management companies so you're not guessing whether the sheets are supposed to be off-white.

Same product, but different target customers... As Airbnb preps to IPO soon, Marriott doesn't want to lose its old school business travelers. And Airbnb wants its Millennials to stop wasting money at old school hotels. They're each dipping into the other's playbook to hospitably keep their same core users.

What else we’re Snackin’

Build: WeWork just "confidentially" filed to IPO (its last valuation was $47B)
Flop: Moviepass competitor Sinemia shuts down US operations
Guilt-free: Mondelez (maker of Oreo's, Toblerone, and Cadbury) pledges to go full-on, 100% sustainable cocoa by 2025
Grounded: Jetblue, American, and other big airlines faced a system-wide computer glitch for ticketing
Spacial: Blue Origin (Jeff Bezos' rocket company) posts a cryptic "5.9.19" Shackleton-ish adventure tweet

Tuesday

Earnings from Apple, GE, McDonald's, Mastercard, Pfizer, and Blue Apron
The Fed's 2-day policy meeting kicks off
US trade delegation hits Beijing to talk tariffs
Japan's emperor abdicates the throne for the 1st time in 200 years

Correction: Yesterday's Snacks referenced that PayPal acquired the parent company of Venmo for $26M. In fact, the parent company of Venmo (Braintree) had acquired Venmo for $26M in 2011, while PayPal acquired Braintree for $800M in 2013.

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Tangential remarks

Nicolai Tangen, the CEO who holds the purse strings of Norway’s $1.6 trillion sovereign wealth fund, thinks that his fellow Europeans don’t quite stack up to US employees when it comes to pure hustle, telling the Financial Times in a recent interview that there is a difference in “the general level of ambition” and that “the Americans just work harder”.

Tangen has clearly been putting his money — or more specifically Norway’s — where his mouth is: the sprawling Norwegian oil fund, now one of the largest investors on the planet, has been pumping more capital into its US holdings in the past decade, while decreasing its investment into European entities.

The troublesome news for our European readers? Tangen might be onto something. According to data from the OECD, American workers are putting in almost 60 hours a year more than the weighted average for OECD nations… a benchmark that workers from countries in the European Union are already ~180 hours shy of.

Europeans ‘less hard-working’ than Americans | FT

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Friday, Apr 26th

What’s happening

Pop Quiz!

Sales of what are up 136% since 2019?

Don't be a sucka

$70B

Alphabet shares are soaring in the after-market session, with a initial jump of more than 10% implying a gain of upwards of about $200B in market value when the stock opens tomorrow morning.

Google’s parent company crushed earnings expectations, initiated a cash dividend for the first time, and authorized a fresh $70B in share repurchases for good measure. The market likes it very much.

What’s up doc?

21h

HOP TO IT

Joshua Topolsky

We get results!

22h

This earnings season is fully operational

Balancing Act

23h

Acrobatic Accounting

So, you want to join the circus?

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Rani Molla

4/25/24

No, Apple hasn’t cut its Vision Pro production estimates in half

Quite a few news outlets are reporting that Apple thinks it’s only going to sell 400,000 to 450,000 Vision Pros in 2024, compared a “market consensus” of 700,000 to 800,000. They’re all citing a note from Apple analyst Ming-Chi Kuo.

Obviously there’s no question that Apple’s $3,500 face computer will have a limited audience and could be a huge flop, but this also doesn’t seem like accurate news.

The issue is that 1) this 400,000 number isn’t new. Back in July of 2023, the Financial Times reported that Apple planned to make fewer than 400,000 units in 2024, reducing its initial projections of 1M units, citing two people close to Apple and, the Chinese contract manufacturer assembling the device. 2) It's unclear who was estimating 700,000-800,000 Vision Pros in the first place, but it appears that it was Ming-Chi Kuo himself?