💰Getting fiscal: $2T to the rescue

Thursday, March 26, 2020 by Robinhood Snacks | Disclosures

FB to Twitter: "What are we going to do with all this usage?"

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Hey Snackers,

The National Cowboy Museum in Oklahoma put its head of security in charge of its Twitter account during the museum's closure — Tim's debut into the world of social media is excellent (Hashtag John Wayne). Thanks, Tim.

US stocks continued to rebound sharply on word the relief-inducing $2T stimulus bill is inches away from passing (a big hurdle was cleared super late Tuesday night). As markets closed yesterday, the bill was being held up in the Senate on last-minute disagreements over unemployment benefits.

1. The US gov finalizes a deal for historic $2T economic rescue package

Let's get fiscal, fiscal... The White House and Senate struck a deal for a huge $2T economic stimulus package — it's 2.5X bigger than the stimulus given after the 2008 financial crisis. 90% of Americans will be eligible to receive full or partial payments, according to estimates. Since it's being paid to you (courtesy of your tax dollars), we'll itemize the receipt:

  • Around $900B in payments to Americans: $1.2K checks sent to each taxpayer with individual incomes of up to $75K/year (little less for $75K-$99K) and no check if you're making over $100K. Families also get $500/child. Plus, the gov is looking to dramatically increase unemployment assistance by an extra $600/week for up to 4 months.

I'm just a bill, yes I'm only a... mammoth $2T economic rescue bill. We didn't forget there's still a key $1.1T left to account for:

  • $350B for Small Biz: Loans for small businesses. Important: Loans are forgiven for businesses that don't lay off workers and keep sending them paychecks for the duration of the crisis.
  • $500B for Big Biz: $425B in loans for struggling corporations and $75B for specific industries like airlines (which will be banned from stock buybacks — the $$$ should go to employees and investments, not shareholders).
  • $150B to State/Local Gov: To deal with virus-related costs and losses.
  • $100B for Healthcare: To help hospitals manage the front lines of the crisis (and buy crucial medical supplies like beds, masks, and ventilators).

This (partly) fills the giant spending hole... Consumer spending + government spending makes up a huge part of America's Gross Domestic Product. $2T is around 10% of the total spending/production in the US each year (aka, 10% of GDP). In 2019, the US gov spent $4.45T — this stimulus alone is nearly half that, and is meant to offset spending and income that doesn't happen because of the virus. And it still might not be enough.


Well, this is awkward... We're familiar with the concept that if a product is free, our attention likely is the product. With everyone cooped inside because of coronavirus, virtual communication is more important than ever. So is not going outside. That means way less shopping/spending, and puts ad-reliant social media giants in an awkward situation:

  • Facebook: Messaging across FB's apps in the hardest hit countries has surged 50%, while video chatting has more than 2X'd. In Italy alone, group video calling is up 1,000% from a month ago, and FB app usage is up 70% across the board.
  • Twitter: Daily usage has jumped a whopping 23% this year thanks to desperately inactive Twitter fingers.

But social media relies on ad sales... While people need social media more than ever, advertisers have never needed it less. Marketers won't waste big marketing bucks on ads if you won't buy their products anyway (no one cares about the new spring eyeshadow palette when all you need is a robe to stay home). So Facebook and Twitter haven't translated the usage surge into ad $$$.


We could face ad-pocalypse 2020... When spending drops during economic downturns, so do ad sales. Twitter revealed its ad sales may have dunked as much as 20% in March. Facebook expects something similar. The bright spot for ad-reliant media companies is that they might retain this larger/more engaged user base when the economy rebounds. But think about the 2 types of companies and their demand for ads:

  • Companies that sell essentials (like food/TP) don't need ads right now (you're buying TP no matter what).
  • Companies that sell non-essentials don't want ads because their stores are closed.
What else we’re Snackin’
  • Swoosh: Nike enjoyed a 36% pop in online sales — that offsets its 1st China sales drop in almost 6 years.
  • CleanX: Elon Musk's SpaceX is making and donating hand sanitizer and face shields to contribute to the COVID-19 fighting effort.
  • Hoard: Target's March sales got a 20% boost from virus buyers, but profits have squeezed since sales of high-margin items (like clothes/accessories) plunged over 20%.
  • Edgy: Payments processor Square rallied on hopes the stimulus bill will prop up small businesses that use its credit card swipe dongles.
  • Stop: State attorneys general call on Amazon, Walmart, Facebook and others to crack down on price gouging of coronavirus-related products.
Snacks Daily Podcast

ClassPass is like the DoorDash of boutique fitness, helping hungry yogis and spinners discover classes at 30K participating studios. It's gained $1B unicorn-status with its sweat-connecting ways.

Problem? 90% of its studios are shut right now (because, germs). So ClassPass is pulling out the rare "resurrected failed product" — it's launching virtual workouts (again).

TBD if the resurrected "Class Pass Live" will be able to build (and maintain) the keystone of app goals: The Daily Habit. Tune into our 15-minute pod to learn more.


Disclosure: Authors of this Snacks own shares of Lululemon, Twitter, Walmart, Square, and fractional shares of Amazon

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