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Showing posts from November, 2020

The copied becomes the copier

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After years of being the victim of "borrowed features" now it's Snapchat that's doing the borrowing. Snapchat's new product Spotlight is aimed squarely at competing in the short-form video space where TikTok is having so much success.To encourage creators to join Spotlight, Snapchat is using a not-so-subtle carrot. For the rest of the year they will share out $1m every day to creators who make the most viral videos. That sounds like an enormous amount to give away — but because Snapchat has become increasingly efficient at monetizing its user base, it's actually a reasonable bet. Assuming they run the campaign until the end of 2020 (roughly 35 days worth), that's only $35m on revenue that will very likely exceed $2bn this year. If Snapchat is able to draw some top creators to Spotlight it may be able to launch the most credible competitor to TikTok so far. Facebook's attempt, Reels, reportedly isn't doing well . Maybe Snapchat can succeed where Fa
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Airbnb is not Uber and that's great news for Airbnb

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Airbnb, the house-sharing tech company, wants to go public in December under the ticker symbol ABNB. In this article, I look into the company's business model and why I'm psyched that it's finally coming to Robinhood. Airbnb can be compared to Uber. Both make more efficient use of assets that otherwise might sit idle (spare rooms, cars on driveways) but their financial performance is staggeringly different. In its most recent financial year Airbnb had an operating loss of $500M on revenues of $4.8B, roughly a -10% margin. Uber's most recent annual results? A -60% operating margin. Both Uber and Airbnb have built something that's truly unique in logistics and lodging respectively. Both created an entirely new sort of supply that didn't exist before. Both took trust - a core differentiator of the incumbents (hotels and taxis) in their verticals and digitized it. And, most importantly, the resulting commoditization happened only on their platforms and were captured
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Microsoft vs. Sony: The console battle and the gaming war

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Last week, Sony launched PlayStation 5 (PS5) on the same day that Microsoft dropped its Xbox Series X and S. So much for not stealing each others' thunder ;) As far as the actual hardware specs go, they are pretty on-par with each other. However, the two warring companies are approaching the growing gaming industry very differently, and competition between them will be one of the most interesting stories to watch over the coming few years. Here's a run down of where the two companies are and the very different directions that they are taking: Sony Sony is following the traditional razor and blades model that has long characterized consoles: try and not lose too much money on the consoles, and make up the difference in game licenses, its online service, and in-game purchases. It’s a model that gamers are familiar with, even if it ends up being a pricey one. In short, Sony is treating the PS5 like a console, and gamers like gamers, just as they did last generation. So, when it la
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The tie between health insurance and employment: It's the IRS stupid!

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It's the most wonderful (?) time of the year It's that time of the year. Change is in the air. There is that flurry of excitement that comes from new beginnings. You guessed it - open enrollment is here. People are shopping for insurance plans,  which these days can mean looking at the health care marketplaces, assessing medicare plans, or looking at the options an employer provides during this open enrollment season. About half of us get our health insurance through an employer - but why? The story that you most often hear is that it all started during World War II. Amidst stiff competition for employees, benefits were even more important due to the federally-imposed wage cap. That story is almost right, but not quite. Really, the most important factor of why we receive our health insurance through our employers is the tax write off. Also, offering health insurance has been a strategy to hopefully keep employees - a way for employers to garner loyalty, especially in union-heav
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The business of calm

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Last week was a long one. The stress of the election coupled with the pandemic has a lot of us looking for ways to relieve anxiety and invest in wellness from the comfort of home. Increasingly, many are resorting to mental health and meditation apps. Calm, a meditation app, topped Apple's health and fitness category on Election Day — and other mindfulness apps like Headspace weren't far behind.  Why are these apps popular? The anxiety-inducing times, along with poor access to mental healthcare and high smart phone penetration are big contributing factors. However, these are not the only ones. For me, the biggest factor is that the companies making these apps have finally figured out that they are content creators and not just app makers. The features that were available through these apps 5 years ago were a lot more rudimentary compared to what we have today, and so was the content. These apps have heavily invested in improving their content. It's telling that the biggest a
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Dunkin' is going fancy (and private)

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Dunkin' is officially going private. Arby's owner, Inspire Brands, is snatching up Dunkin' for $11.3B (including debt). This is the opposite of a regular private equity (PE) deal which typically involves finding a struggling company, revamping it, and flipping it for more. Dunkin' has not been struggling. It managed the pandemic well & its stock is at an all-time high. So why is Dunkin' going private, and are there synergies with Inspire Brands? Dunkin' has been freshening up its image and brand for years. It wants to be in the same league as Starbucks. It dropped "Donuts" from its name - not surprising considering drinks make up more than half of Dunkin's revenue- invested in new brewing systems, and got its employees "espresso certified". It also added drive-thrus and flashy items to its menu - green tea refreshers, non dairy milks, and vegan options (Beyond Meat sandwiches). It also put in a lot of money into its digital business (
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Bitcoin and the 99 other coins

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So far Bitcoin is having a decent 2021. It hit a record high of more than $41.5K last week, continuing the upward trajectory it has been on since April of last year, when a single Bitcoin cost less than $5K. That rise now means that the sum of all Bitcoins in existence is worth more than $700B.  Because Bitcoin dominates much of the media's attention, it can be easy to forget just how many other cryptocurrencies there are. A quick look through the full list from coinmarketcap reveals over 100 alternative cryptocurrencies with a "market cap" of more than $100M. Each hoping that their unique take on the core blockchain technology will be enough to propel them out of obscurity, to where Bitcoin is today. With some of the names on the list you can't help but think someone is having a joke, or planning something nefarious - there is a "dogecoin", "YEP COIN", "OMG" and even "SushiSwap" (???). This time it's... different? Some of
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Why the stock market is beating expectations

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  In the early stages of the pandemic, the S&P 500 index dropped a third of its value. Since then it has roared back, soaring more than 50 percent from its low in late March and setting an all-time high last week. This seems very implausible when set against the current state of the economy and the ongoing devastation caused by the pandemic. So why is the stock market rallying in the face of a pandemic and bad economic news? Several explanations are plausible. The stock market is not the economy: The stock market represents publicly traded companies only; it’s not the whole market. Most importantly, it’s always forward looking; i.e. it’s an indicator of the future earnings of those companies and how they would fare in the future. A rising stock market indicates that investors think these companies will do better in the future. On the other hand, a falling stock indicates that investors are pessimistic about the future earnings of companies. Continued income support for the econom
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Netflix: No more burn?

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In the last article on Netflix , I discussed why Netflix's promise to premiere a movie every week is not an overly ambitious strategy for the streaming giant. It's a brilliant move that isn't risky because Netflix can keep spending at this high rate for a long time. Yesterday's earnings call confirmed this. During the call, Netflix announced that it does not intend to raise any more capital, through debt or equity, as it plans to be cash-neutral this year and cash-flow positive beyond 2021. Looks like all those price increases are flowing through to the bottom line. Of course, saying you don't need any more capital is a really great way of getting people to offer you more capital at even more attractive rates (if you ever did want it).
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