Monday Nov.30, 2020

💬 Slack's surprise acquisition news

"_Yes, we are proficient in Slack — professional Slackers._"

Hey Snackers,

As if 2020 wasn't already enough like a "Black Mirror" episode: a mysterious metal monolith was just found in the middle of a Utah desert. Aliens, or Elon?

Stocks surged last week on promising vaccine news and less political uncertainty. The Dow hit 30K for the 1st time on Tuesday, and the S&P 500 notched a record closing high on Friday.

Slacking

Salesforce cements its B2B strategy with a possible (pricey) Slack-quisition

Set your status back to "Active"... Just before Thanksgiving break, news broke that Salesforce is in advanced talks to buy Slack — according to WSJ's infamous "people familiar with the matter" (#PFWTM). Slack is the office messaging app that rules your life. Salesforce is the cloud software company obsessed with Customer relationship management (CRM). Think: salespeople compulsively logging interactions with leads — "sent 808th cold email to CFO."

Slack stock soared 39% for the week. The deal would likely value it at more than $17B, making it Salesforce's biggest acquisition. Slack hasn't been doing as well as Zoom in the WFH boom.
Salesforce stock dipped 4% on the possibility of another pricey acquisition. Over its 21-year history, Salesforce has leapfrogged by buying 60+ companies.

Joining #baby-yoda-memes channel... Salesforce and Slack have two things in common: they're both business-facing subscription cloud companies and they're both Microsoft rivals. Lately, Microsoft has been aggressively expanding its Teams suite, offering Slack-like collaboration features. It also has a cloud CRM competitor called Dynamics.

Over the years, Salesforce has moved towards becoming an "all-in-one" business software provider, offering services like data analytics.
This Slack-quisition would give it 130K+ paying Slack customers to further that goal — and gain an edge on Microsoft.

Salesforce is cementing its B2B focus... that's business-to-business. Microsoft has B2B and strong consumer-facing businesses (Microsoft Word, Xbox, LinkedIn). Even legacy B2B tech giant Oracle has been showing interest in consumers with its pending TikTok-quisition. Salesforce tried to buy LinkedIn in 2016 (but lost to Microsoft). Four years later, it's cementing its B2B-only strategy with this potential Slack-quisition.

Highs

Who's up...

Can't wait for TwitTok and TikPin... Snap's Stories feature has been copied by nearly every social app. Now Snap's doing some copying of its own with a new "Spotlight" tab for endlessly scrolling viral vertical videos (#ThreeVs). Addictive "Three Vs" content is the secret sauce of TikTok's wild growth. That's why Facebook is aggressively pushing Insta "Reels" — and why Snap is shelling out $1M each day to Spotlight creators. With the scrutiny around viral misinformation, Snap's moving into riskier territory. Still, the stock jumped 4% for the week and has nearly tripled this year.

That's sooo Fitch... Your favorite place to pose with shirtless "models" in 7th grade is having a moment. Abercrombie & Fitch stock soared last week on expectation-beating quarterly earnings. Online sales jumped 43%, and Abercrombie notched a profit thanks to cost-cutting. Interestingly: its Californian sub-brand Hollister brought in 58% of total sales. Hollister got boosted by its sub-sub-brand Gilly Hicks, which makes comfy loungewear and bralettes.

Lows

...and who's down

Vax on, vax off... AstraZeneca stock dropped 5% for the week on two pieces of not-so-hot news. First, it announced that its Covid-19 vaccine was 70% effective on average. That sounds solid — until you compare it to Pfizer and Moderna's 95% effectiveness rates. Then, AstraZeneca acknowledged a key mistake in its trials, which made experts question the reliability of its data. Oxford University, which jointly made the vaccine, says more data is needed to determine its efficacy and safety.

Peace, Love... the Gap? Oversized hoodie legend Gap wasn't feeling it last week. Its stock plunged 11% on worse-than-expected quarterly earnings. Gap's Old Navy brand saw strong growth, and its athleisure brand Athleta (unsurprisingly) performed particularly well — sales soared a record 35% on the leggings life. Despite a 61% jump in online sales, Gap's profit missed estimates because it boosted marketing spend last quarter.

What else we’re Snackin’

Hustle: 50 simple side hustle ideas to earn some extra cash (there's bound to be one).
Live: How to be more thankful for your life by changing just one word.
Focus: Why this pandemic winter is the perfect time to try out "slow work."
Learn: How to make a financial plan — from figuring out your net worth, to saving and investing for your goals.
Succeed: The dreaded cover letter doesn't have to be dreadful. Here's how to write one that'll get you a job.
Read: The life advice that Nobel laureate Rudyard Kipling gave his son (in a poem).

🍪 Thanks for Snacking with us! Want to start getting Snacks daily? Sign up here for our daily market newsletter.

This Week

Monday: Earnings expected from Zoom
Tuesday: Earnings expected from Salesforce
Wednesday: Earnings expected from Snowflake
Thursday: Weekly jobless claims. Earnings expected from Dollar General, DocuSign, Kroger, and Ulta
Friday: November unemployment rate is released. Earnings expected from Big Lots

Disclosure: Authors of this Snacks own shares of Slack and Snap

ID: 1429026

Latest Stories

Rani Molla

55m

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.

59m

Frozen Dead Guys

The audacious and expensive world of cryogenics

Jamie Wilde

US-NORWAY-TRADITION-DEATH-FESTIVAL-OFFBEAT

3.07¢

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.

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.

Meta’s battle with ChatGPT begins now

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

Matt Phillips

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...

Parts distributor Genuine Parts beat, offsetting weak sales with cost control.
Credit card company Discover jumps, as delinquencies stabilize.
Builder D.R. Horton benefitted from the fact that there’s still no houses to buy.
Credit score giant Equifax was hurt by the fact that nobody wants mortgages.
KeyCorp, Comerica latest banks bummed by depositors demanding higher rates .
Insurance Marsh & McLennan did well by investing cash at high short-term rates.
Private equity giant Blackstone’s results were meh, due, in part, to lack of exits.

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.

Rani Molla

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."

Exclusive | Inside Amazon’s Secret Operation to Gather Intel on Rivals

April 18th

11h

What’s happening

13h

Tesla pushes for a massive Musk pay package as the EV maker rides the struggle sedan

Jamie Wilde

Read

13h

Big Banks Earnings Wrap: Investment banking rebounds, but interest rates are a double-edged sword

Nia Warfield

Read

Time’s ticking

4/17/24

Big tech vs. big government

Jack Raines

More taxes, eh?

4/17/24

Capital gains taxes won’t fix Canada’s terrible housing market

Canada's proposed solution to its housing crisis may exacerbate the problem instead.

SWITZERLAND-DIPLOMACY-ECONOMY-SUMMIT-DAVOS

Jack Morse

4/17/24

Worldcoin pivots to the blockchain… with a 'humans only' discount

Worldcoin, the “proof of personhood” crypto project launched by OpenAI’s Sam Altman, said it plans to launch its own ethereum layer-2 (L2) blockchain dubbed World Chain. The pitch: a blockchain where it’s both easier and cheaper for people to transact than bots.

Worldcoin has made waves for its iris-scanning metallic orb that promises a future where people can mathematically prove they’re real humans and not AI bots.

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses.

Which is what may make World Chain attractive. Crypto exchange Coinbase launched its own L2, Base, last year. Base has since seen rapid user growth — activity that’s generated the exchange millions of dollars in weekly fees.

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

Worldcoin, Sam Altman's Crypto Project, Is Building a Layer-2 Chain

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses.

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

Rani Molla

Ad-ing up

4/17/24

Turns out Netflix makes more money if it just acts like regular TV

Streaming companies will let you watch ad-free, but it will cost you.

Earnings

4/17/24

Companies report things

Nia Warfield

4/17/24

Smooth sailing? Not for superyachts

Sales of the luxury boats sank 17% last year. Meanwhile, Super-SUPER yachts (over 650 feet long) took the biggest sales dip, falling around 40%. Part of the problem: a pandemic-era backlog has led to a three- to four-year waitlist for new yacht orders. Meanwhile Russian oligarchs — former MVP customers — are largely out of the boat-buying business due to sanctions.