Friday Jun.26, 2020

🥖 Olive Garden's short breadstick

_When the takeout is Olive Garden, but the drinks are BYO_

Hey Snackers,

Helvetica, Arial, Comic Sans and... Goldman Sans. In case the world's 200K fonts weren't enough, Goldman Sachs just released its very own typeface, free for public use. The 1 rule of Goldman Sans: you can't use it to criticize Goldman Sachs (no joke).

Markets rose on word regulators will loosen some rules put in place after the '09 Great Recession (aka the Volcker Rule) — the move from the FDIC gives banks more freedom with cash deposits, like the ability to more easily invest large sums in venture capital. JP Morgan and Citi jumped on the news.

Dine

Olive Garden's sales plunge on closed stores and limited alcohol: the BYOB problem

Short end of the breadstick... Olive Garden parent Darden Restaurants got it on earnings. In addition to the unlimited breadstick icon, Darden parents eight other restaurant chains, including Capital Grille and LongHorn Steakhouse. All its kids disappointed this quarter.

Sales plunged 43%, and Darden posted an Eggplant Parm-sized $480M loss (compared to a $209M profit last year). All of its 1.5K dining rooms were closed at some point in the March-May quarter.

Blame the booze... During lockdowns, 99% of Olive Gardens were open for curbside pickup. Takeout sales soared 142%, and 3X'd at LongHorn (Darden doesn't deliver). But that wasn't enough to make up for all the lost booze bucks.

Alcohol makes up around 30% of restaurants' sales. And that $40 bottle of Merlot you see on the menu probably cost the OG just $15.
Boozy beverages have around a 70% profit margin, so a restaurant makes 70 cents profit on each buck of price. Your $10 mojito cost $3 to whip up — the restaurant pockets a $7 profit.
During closures, restaurants lost their biggest profit puppy: alcohol. Lockdowns mean takeout, and takeout means BYO(cheaper)B.

Big chains can survive and come back stronger... Darden stock jumped because it survived — 91% of its dining rooms are now open and it expects earnings will be positive again by 1st quarter 2021. Plus, it still has $750M in cash to weather slowdowns. Smaller biz isn't so lucky: 53% of restaurants that closed during the pandemic said they won't reopen. That wipes out a lot of Darden's competition.

Ping

Slack gets closer to killing work email forever with cross-company messaging

Gmail's worst nightmare... Almost exactly a year ago, Slack went public with the goal of killing company email forever. It hasn't been able to do that completely because of one big roadblock: you're still emailing people outside your company. Slack is almost exclusively an internal messaging tool. But with its latest development, Slack might be able to drive the nail into all of work email's coffin:

Slack Connect: Tired of that 40-page long email thread with your marketing partners/clients? Slack Connect allows up to 20 orgs to collab over Slack.
Shared channels: It's a magnification of Slack's "shared channels" idea, first tested in 2017 to allow multiple companies to work in a (you guessed it) shared channel. It is inter-office communication — but 100X more ping'able.

Nothing like a Nando's name drop... to seal the value statement. Slack believes Connect is for more than just project-based communication. Over 1M users have already tested it.

Mention: UK chicken icon Nando's has been using it to communicate with its food delivery partner. Others are using it for customer support, and some doctors are even using it to share COVID-19 experiences.
Flex Mention: Slack humble bragged that it used Connect to coordinate its (super low-interest) $800M convertible bond offering. The law firm, the consulting firm, and the i-bankers... all in one channel.

Consumer messaging could be Slack's next frontier... Slack is 100% focused on business communications. Now, it's expanding its focus from pure intra-company to cross-company. Microsoft just launched a personal version of its Slack rival, which is called Teams, to communicate with friends/family. With the "Connect" platform already built out, Slack might not be far behind.

Pay

Google will pay some news publishers for their views-driving content

Well, that's a change... Google will pay some news publishers to license their content for a new service it's launching this year. News outlets have been wanting this for years. But why is Google finally doing it now?

Adpocalypse: Even before 2020, news outlets have been losing ad sales to Big Tech. In 2019, 52% of American adults got news from Facebook. You scroll your feed to scan the headlines, Facebook gets the ad bucks.
Under Pressure: Google's been getting heat from antitrust regulators in France and Australia. They want it and Facebook to share revenue with news publishers, who drive eyes to Google pages (but don't get Google ad money).

This is a step in that direction... Google's future news service will include content from local and national news publications — and the news agencies will get a piece of the ad money Google brings in when you scroll. It has a few on board already, and is looking to expand. It's not the first to dabble in paying publishers:

Facebook began paying some publishers in its news section back in October.
Apple compensates news publishers for their content on its Apple News+ subscription service.

This aims to solve two existential problems... for news publishers:

#1: Most people have been trained not to pay for news, thanks to years of free news available on tech and social platforms.
#2: Big Tech does ads better than news publishers because it connects ads with the right viewers thanks to better targeting.
Solution: Google's news service will likely be free for consumers. And publishers will get a cut of the ad revenue that Google generates adjacent to their articles.

What else we’re Snackin’

Chucky: Chuck E. Cheese's parent company files for bankruptcy after losing most of its sales cheddar in the corona-conomy.
Interesting: Ford signs a deal with European telecom company Vodafone to build a private 5G network in its factory in the UK.
TicTac: TikTok launches a business platform for advertisers, offering brand marketing solutions for how to not be lame on TikTok.
Groce: Safeway-owner Albertsons just IPO'd, and its shares begin trading today.

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Friday

Consumer spending and personal income report for May.

ID: 1227690

Latest Stories

Rani Molla

29m

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.

34m

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.