Welcome to my blog. I am Minh. This is where I escape mentally and practice thinking by putting thoughts to words
A Vietnamese native in my latter part of 20s. Trying to figure out how to give it back what I have received since I did receive a lot from people. This blog is one of the things I want to do. Learning is sharing. I'd like to share what I learned that, in my opinion, is worth reading.
Hobbies are quite limited: reading, writing, soccer, basketball & F1. Unless you are a nerd too, I will be the worst person to have at a party. I don't know much about music
Many folks criticize Apple for taking commissions on the sale of digital content on iOS devices, saying that the company doesn’t do anything in the sale process to deserve the commission. I disagree. I outlined my thoughts on the criticisms of the App Store. In the latest filing as part of its legal battle against Epic Games, Apple provided some data points on what they spent on the App Store and the impact. Because these excerpts come from a legal document submitted to a court, it’s unlikely that Apple made them up. Have a read and decide for yourself if it’s reasonable to ask a company not to benefit from the servers it renders and investments it makes. Also, would you do the same if you were Tim Cook running the company?
Investment in data centers and staff maintaining the App Store
Apple has spent billions of dollars to develop and maintain the App Store. The data centers alone that Apple has established to facilitate the App Store have cost Apple many billions of dollars, and Apple spends hundreds of millions of dollars per year to employ the engineers who contribute to the App Store’s success.
Services that Apple provides under the License Agreement include handling more than 25 million customer support cases a year with a dedicated team of over 5,000 full-time AppleCare advisors; verification of customer accounts to maintain the integrity of the marketplace, including removal of hundreds of millions of fraudulent customer accounts each year; and implementing other measures to combat fraud and refund abuse.
Apple contracts with third-party payment settlement providers to facilitate Apple’s own ability to accept customer payments. During this process, transactions are verified and payments authorized, but this function is just one part of the process and is outsourced to third parties to whom Apple itself pays a fee.
The App Store removes administrative hurdles for developers such as cross-country taxes
While expanding developers’ ability to monetize their apps, IAP also removes administrative burdens and allows developers to effortlessly sell their services to, and receive payments from, customers in the 175 countries where the App Store operates. This support includes collecting and managing payment information from around one billion potential customers around the globe; handling conversions to 45 currencies; and ensuring compliance with local tax laws, and handling tax withholding in scores of countries. Moreover, the records maintained through IAP help Apple provide both routine and customized business analytics to app developers. For many developers, it would be prohibitively complex and costly to carry out these tasks on a similar scale. Yet Apple’s infrastructure makes it effortless for them.
The App Store shields consumers from potentially harmful apps
Since January 1, 2020, Apple has processed more than four million app submissions, approving approximately two thirds of them and rejecting approximately one third for noncompliance with the Guidelines and/or the agreements. For example, more than 100,000 app submissions are rejected each year for data collection and storage practices that run afoul of Apple’s strict requirements for consumer privacy protection. Most of these developers whose apps are rejected make changes to their apps to address Apple’s concerns, and ultimately have their apps published to the App Store.
more than 75,000 accounts of developers for introducing new features to their apps without going through App Review, i.e., bait-and-switch conduct, in which a developer makes changes post-review to circumvent the app review process, also referred to as Illicit Concept Changes (ICC);
more than 2,000 developer accounts for introduction of a non-IAP payment method for in-app sales of digital content;
more than 60,000 developer accounts for inclusion of hidden features or obfuscated code or for facilitating the download or installation of executable code; and
more than 175,000 developer accounts for other fraudulent conduct.
Our estimates show that adding about 2,000 characters (approximately two paragraphs) of text and one photo to a city’s Wikipedia page increased the number of nights spent in this city by about 9% during the tourist season compared to cities in the control group.6 The effect comes mostly from pages that were initially relatively incomplete. In particular, the treatment increases hotel stays by about 33% in cities which initially had very short pages in a particular language, while there was no effect on city-language combinations where the pages were well developed.
Yesterday, Apple held an event to announce updates on their hardware, software and services. Everything related to Apple should be widely covered. You can read about the event on the news. I just want to share my thoughts on the two notable services: Apple One and Apple Fitness+
It’s a fitness subscription that resides inside the Fitness app and is built for Apple Watch. Essentially, if you’re wearing an Apple Watch and have a screen that can show various workouts developed by Apple, you can see health and exercise data while sweating and hustling through the physical torture :D. According to Apple, there are workouts for everyone, including Cycling, Treadmill, Rowing, HIIT, Strength, Yoga, Dance, Core, and Mindful Cooldown. Each workout is accompanied by curated music, but you can also add your own tunes from Apple Music. Apple claimed that machine learning on device would use your previous workouts as well as health data to personalize suggestions for you. All the data would not leave your devices.
Apple Fitness+ will be available at the end of the year in the US, Australia, Ireland, the U, Canada and New Zealand. A subscription will cost $9.99/month or $79.99/year with one month trial and can be shared with up to five people. To gain access to Apple Fitness+, customers need Apple Watch Series 3 or later.
Now, I have seen a lot of comparison with Peloton since the service was announced. Let’s take a look at whom each should be for
Whom it is for
1/ Those who own an Apple Watch Series 3 or later 2/ Those who don’t want to spend at least $1,400 for a piece of equipment and a subscription on top of that just for workout 3/ Those who don’t have a lot of interior space for a bike or a tread 4/ Those who travel quite a lot and can’t carry equipment 5/ Those who prefer working out without equipment 6/ Those who want to incorporate health data always on Apple devices with workouts
1/ Those who don’t own an Apple Watch Series 3 or later (Obviously!) 2/ Those who are serious enough about fitness to make a sizable investment in a Peloton bike/tread 3/ Families whose multiple members want to share the same account and bike/tread 4/ Those who have enough space for a bike/tread 5/ Those who stay home often enough
For those who already owned a Peloton machine and subscription, I don’t imagine they will sign up for Apple Fitness+. The sunk cost of a Peloton bike/tread is so high that consumers will try to milk as much out of it as possible. Hence, Peloton shouldn’t have to worry about that. While Apple has many fans, it also has as many, if not more, critics. As Apple Fitness requires an Apple Watch, Peloton shouldn’t worry much about this segment of the market, either. It’s inconceivable to think a non-Apple person would invest in a Watch and iPhone (who has the former without the latter?) just for this fitness subscription.
What should worry Peloton is potential customers who own Apple devices and don’t have a Peloton subscription. To those who are interested in fitness enough to spend $10/month, but not as much to spend $1,400+ for a bike, Apple Fitness+ should be much more appealing as the barriers to entry are much lower. Sure enough, a $350 Apple Watch is still a significant investment, but if historical product rollouts by Apple are nothing but an indication, they will add more health-related functions to their Watches to make them more attractive. Case in point. The new Apple Watch will be able to monitor oxygen level in blood. Hence, compared to a big and expensive bike from Peloton, a combination of a Watch and Fitness+ should be an enticing alternative.
With that being said, I do think the market is big enough for these two players. The hardware requirement limits Apple in the same way as it does Peloton. But if a non-Apple phone or smart watch manufacturer jumps into the fitness market and offers the same service, it can spell trouble for Peloton because in that case, the manufacturer wouldn’t be limited by the hardware requirement any more.
This is one of the badly kept secrets. On Tuesday, Apple announced its long anticipated umbrella subscription bundle called Apple One. Basically, an Apple One subscription offers consumers access to multiple Apple services such as iCloud, Apple Arcade, Apple Music, Apple TV+, Apple Fitness+ and Apple News+. Below are the tiers and prices
A bundle is to encourage consumers to use more individual services, usually at a discount. Apple One is no exception. If you buy services individually and add them all up together, Apple One offers a great value for money. Morgan Stanley had a great summary below
Premier offers an astounding 45% discount and if your family is already using most, if not all, of the included services, Premier tier is a no-brainer. Additionally, it’s worth pointing out that customers with Apple Card will get 3% cash back from Apple One, on top of the already incredible discount.
What gets me excited about a bundle like this is what lays ahead. If you think about it, I believe that Apple must have had this vision for a while. First they rolled out iCloud. Then Apple Music. Then Apple News+, Apple Arcade, Apple TV+ and Apple Fitness+. There is no way that Apple will stop here. I am confident that they already have something in the pipeline already. It won’t surprise me if they add more and more services to their flagship bundle and make it the Amazon Prime of Apple Services. A few options I can think of:
A service related to books as they already have iBooks
Something related to cars as iPhone can replace car keys for the new BMW already
Apple is known for incremental yet effective progress over time, proven by its approach to hardware and software. So don’t be surprised that it is taking the same path here with Apple One
We are so accustomed to having quick card-based transactions that if a transaction takes more than a couple of seconds, it will be a terrible customer experience. What many folks don’t know is that there are a lot of things that happen behind every transaction. It involves several parties, including but not limited to a cardholder, an issuing bank, an issuer processor, a network, a merchant processor, a merchant bank and a merchant. During the brief couple of seconds when a cardholder waits at a cashier, information goes from a card reader all the way back to at least an issuer processor through a card network (Visa, Mastercard) and a merchant processor, and back to the card reader. But it’s not finished yet. The process continues at least a couple of days after the transaction when the involved parties go through the clearing and settlement steps.
The payment world is so complex that there are startups that decouple individual steps of the whole process and carve out a niche market for themselves by specializing in such steps and improved efficiency. Take neobanks for example. They offer checking accounts with virtually no fees because they aren’t regulated and can operate without fixed costs such as branches.
I tried in the past to learn about payment systems, but not until this book did I find a reliable source that can break down abstract concepts in a digestible manner. If you are interested in payments or fintech, do yourself a favor and read this book
The reason why you can take money out of just about any ATM is because of the Durbin Amendment and its requirement that every debit card must have a secondary unaffiliated network. This law was put in to give consumers more choice in finding an ATM network. For example, if you have a debit card from Visa and the ATM doesn’t support Visa’s ATM networks, then it can run on Mastercard’s ATM network, Cirrus.
The term “Clearing” is used primarily by Issuers, but can also be referred to as “Capture” by Merchant Acquirers. Clearing happens toward the end of the day for most Merchants and will factor in tips, transaction reversals, and returns. This is basically the Merchant confirming these transactions are valid and that these funds are ready to be moved or “settled.”
Settlement is the actual movement of money from the cardholder’s bank account, the Issuing Bank, to the Merchant’s bank account, the Acquiring Bank. This movement of money typically happens via Fedwire as instructed by the payment networks.
Key term: 3D Secure
This is a standard for offering cardholders one more layer of security for online transactions. When card numbers are entered into a website to pay for something, 3D Secure will require the cardholder to enter one more form of authentication, such as a one-time-use PIN or passcode, similar to how two-factor authentication works for websites. More recently, the card networks are requiring Merchants and card Issuers to roll out a service called 3D Secure. The technology is standard in Europe but not yet in the US.
More recently, the card networks are requiring Merchants and card Issuers to roll out a service called 3D Secure. The technology is standard in Europe but not yet in the US.
The main reason is that these new “neo-banks” aren’t actually banks but rather tech companies that partner with regional banks such as Sutton Bank, Bancorp, or Meta Bank. These regional banks have less than $10 billion in assets and are able to charge a higher Interchange rate because they are considered exempt from the Interchange rules set forth in the Durbin Amendment and are considered “unregulated.”
This book was written by Frank Slootman, former CEO of Data Domain. Frank took the company public and was the CEO when it was sold to EMC. He then went on to take the rein at ServiceNow and is currently assuming the top job at Snowflake. This book is his account of his time as CEO at Data Domain. It is a pretty short book, but it includes an honest and crisp account of how he scaled the company and dealt with startup issues. I like this book because it isn’t lengthy. I think it’s because of his direct nature as a Dutchman. Frank wrote about the lessons he learned along the way with little “fat” or lengthy unrelated anecdotes. He was straight to the point. His lessons outlined in the book should be helpful to aspirational entrepreneurs and CEOs.
Snowflake is expected to go public next week. If you are interested in that company and its CEO, you should give it a read.
The author interviewed a plethora of celebrities and successful folks to learn about their productivity hacks in the morning. Humans are creatures of habits. We all have our habits and routines and these successful men and women aren’t any exception. I don’t think what this book offers is unique in a sense that you can find these hacks on Google at any time. What it does is perhaps to catalogue all these hacks in one place so that you can choose to look at the routines of the folks you like. Plus, if you already studied about productivity tips before, it’s very likely you’d know what to do in general. What is missing is just our determination and discipline.
With that being said, if you are new to the productivity improvement game, this book may be of value. However, it’s pretty pricey compared to the two books I listed above, given the value and satisfaction in return. I’d try to Google the topic before I book this book
This is a classic book about business strategy. It covers 7 aspects of a successful strategy framework developed by Hamilton Helmer. The aspects include Economies of Scale, Network Effect, Counter Positioning, Switching Costs, Branding, Cornered Resource and Process Power. I think it’s a valuable read to anyone who is interested in analyzing businesses and companies. Of course, the book would be more valuable to newcomers than those who already studied strategy before. For instance, if you are familiar with the concept of Network Effect, Porter’s Five Forces and Switching Costs, this book will serve more as a reminder than a revelation. Nonetheless, it costs only $9 for a Kindle version from which you can take great notes on business strategy.
Even though this book costs $15 for a Kindle version, I actually think if you are new to investing and you want to grow your net worth, you should start reading this book. This book covers very important topics of investing. It talks about why you should invest in or avoid mutual funds. It also discusses the appeal of blue chips and small-cap stocks. If you haven’t learned much about the main financial statements (income statement, cash flow or balance sheet), the book provides an overview of these statements and what they mean in general. In my personal experience, although news outlets have coverage of companies’ financials, as an investor, you should do your own homework and practice reading reports as well as financial statements. Additionally, this book touches upon options such as shorting and longing a stock. They aren’t my preferences, but it doesn’t hurt to know what they are and what they do. Of course, the book has to talk about the power of compound interest, which is why we need to invest early and be patient.
I really recommend this book if you want to venture into investment.
Though it has made significant strides in automated driving, owners should not rely on Tesla’s driver assistance features to necessarily add safety or to make driving easier, based on Consumer Reports’ extensive testing and experience.
Most features within Tesla’s Full Self-Driving Capability suite worked inconsistently, including the Autopark self-parking system that has been around for several years.
I have watched a few interesting documentaries during this long weekend and I want to share with you what I think of them.
This documentary is called “The Cradle of the Gods” on Disney Plus. It’s about an ancient site in Turkey called Gobekli Tepe. The discovery of Gobekli Tepe, according to the documentary, turned what we thought we understood about human history and civilizations on its head. Before this discovery, we thought agriculture was the catalyst for religion and arts. Once people settled down and had more food produced and stored, they could finally have time and security to think about and develop religion.
Not in the case of Gobekli Tepe. The site consists of many structures on top of a steep hill that are made of stones weighing dozens or hundreds of tons. What makes Gobekli Tepe interesting is that scientists estimate the structures were made around the end of the last Ice Age, when humans were still hunters and gatherers, and there was no language, metal tools or even wheels to help move supremely heavy stones up the hill. Yet, the structures were still miraculously built. Scientists’ theory for why people, thousands of years ago, went through all that trouble to build the structure is that they want to have a place to celebrate their belief: humans are superior to savage animals. Such a belief banded hunters and gatherers together to achieve a monumental feat. Later, they settled on the lands at the bottom of the hill and started their journey towards agriculture and an early stage of civilization.
The theory proposed by scientists who discovered Gobekli Tepe meant that religion came before agriculture, not the other way around, at least in this case. I think it’s a fascinating documentary. Fortunately, it seems you can watch it on YouTube in full here:
The Lost City of Machu Picchu
Another documentary on Disney Plus is called “The Lost City of Machu Picchu”, featuring arguably the most intact archaeological site of the Inca. The Inca rule in South America in the 1400s and 1500s lasted only 100 years and was full of mysteries before it was brutally ended by the Spanish conquerors. The Spaniards destroyed every Inca city that they invaded, yet somehow Machu Picchu wasn’t discovered and fortunately survived. More than 100 years ago, an explorer named Hiram Bingham came across Machu Picchu and wrote a piece published on National Geographic about what he thought was the purpose of Machu Picchu.
What the scientists in this documentary found out; however, largely debunked Bingham’s theory. Moreover, they went in details on what builders did several hundred years ago to construct this monumental site. Machu Picchu was built on a treacherous ground. First of all, it’s on top of a mountain ridge; which poses a tremendous challenge in bringing heavy stones up from quarry sites nearby. Secondly and more importantly, Machu Picchu site has a lot of rain during the year. Without a sophisticated drainage system, the soil would have been eroded and the stones would have been washed away. By digging into the ground at Machu Picchu, the scientists learned about a magnificent construction feat by the Inca builders that not only effectively carries rain water away from the site and keep the soil from being eroded, but also directs drinkable water throughout the small city for allegedly a thousand inhabitants.
It blows my mind to watch the documentary and see how the Inca people made such an engineering and architecture achievement without sophisticated tools that we have nowadays. If you are interested in the Inca and Macu Picchu, you should check it out
All or Nothing on Tottenham
If you are a football/soccer fan, you’ll likely enjoy this one. The documentary chronicled the last season at Tottenham Hotspur, one of the biggest clubs in London and England in general. The Amazon Prime crew was given exclusive access to the players, the coaches, the manager, the Head of Recruitment, the staff, the Chairman and so on. They even secured permission to be present in some of the most sensitive conversations at a football club. For instance, viewers could see the conversation between Chairman Daniel Levy and Manager Jose Mourinho on Christian Eriksen, who had had only a few months on his contract and been on his way out of the club. Audience could also listen to a candid exchange between the manager and Dany Rose, who had been at the club for 12 years and demanded to play or he would prefer to leave; which he did.
There are a few things that fascinate me. First, the filming crew had to be very aware of the situations they were in. Imagine that as a manager, you were about to have a tough conversation with your players during half time and your team was down. I can imagine having someone else film the whole thing could be very irritating. Hence, the ability to blend in situations without being a disruption or annoyance is pretty admirable.
Second, as I mentioned above, the crew recorded some highly confidential and sensitive conversations at the club. There must have been a great deal of trust and professionalism between the club and the production crew. Otherwise, the whole thing would have been a catastrophe. Imagine what would have happened if the names of starting players for an important match had been leaked or transfer issues had been improperly disclosed to the press.
Third, the documentary, which has new episodes every week, pulls the curtain on what goes on behind the scenes at a football club: how they are treated physically, the training, the process before a match, the team hurdle, the psychological change, the struggle with injuries and so on. For me as a football fan, I am highly fascinated what I have seen so far. It’s available on Amazon Prime, you really should check it out.
On Tuesday, Walmart unveiled its a long anticipated membership program called Walmart+. For $99/year, members can have unlimited free qualified deliveries from stores, fuel discounts at Walmart & Murphy stations as well as shopping tools such as scan & go to avoid long lines. To qualify for free shipping, deliveries must be $35 or more. Walmart said that there were more than 160,000 items available for this program, ranging from groceries, toys, household essentials to technology. Additionally, members can get 5 cents per gallon off at Walmart and Murphy gas stations. The company said that customers would be able to subscribe for this program starting 15th September 2020 with a 15-day trial.
How competitive is it?
Compared to Amazon Prime, Walmart Plus is years behind. First of all, at $119 a year, Amazon Prime includes many more additional benefits such as exclusive discounts, unlimited deliveries of qualified items without minimum purchase requirement, media & entertainment perks, just to name a few. Among the biggest benefits that Prime offers is the ability to get unlimited two-day delivery for low value items. I can’t count how many times I order stuff less than $15 individually. Second, Amazon carries a lot more items for Amazon Prime than Walmart. Third, when it comes to online shopping, it is a much more established name than its Arkansas-based rival. Shoppers trust Amazon and that’s a true competitive advantage.
What works for Walmart Plus in comparison to Amazon Prime, I believe, is that it offers less expensive groceries. My experience with shopping groceries on Prime is frustrating. I was confused about groceries on Amazon itself and then Whole Foods. Plus, they are not as cheap as groceries sold by Walmart. Hence, if customers are geared more towards grocery shopping, I think Walmart Plus can make a play there.
Other grocers or retailers follow almost the same playbook. Deliveries have to meet a certain threshold to be free and if retailers don’t handle delivery themselves, they’ll partner with Instacart. In that case, customers either pay a small fee for each delivery or enroll in a membership with Instacart (in either case, you are expected to tip drivers). Each retailer will appeal to shoppers in a different way. Take Aldi for example. Its unique selling point is inexpensive fresh groceries. Look for cheap grapes and great Greek yogurt? Head to Aldi. The downside is that Aldi carries few SKUs and less flexibility for shoppers. Target offers much more flexibility and choice as it carries more items, but its groceries are significantly more expensive than those at Aldi or Walmart, in my experience. Costco seems to match Walmart on the grocery front. A Costco member (at least $60/year) can have free grocery delivery for orders of $35+. Groceries at Costco are competitive in prices, compared to those sold at Walmart. Other items can have free delivery too, and with no minimum order requirement, but it will take at least two days.
There are other important players in this space such as Instacart and Shipt. Instacart Express or Ship membership is almost identical to Walmart Plus. Both cap membership fees at $99/year and a qualified basket has to be $35 or more. Unlike Walmart, Instacart is more focused, almost exclusively, on grocery delivery. Shipt is similar to Instacart and owned by Target, but also delivers for other brands as well. An advantage that Shipt or Instacart has is their network of partners. Walmart Plus works only for items sold by Walmart. With Shipt or Instacart; however, shoppers can order from different stores that sell different private brands. It offers shoppers more choices and flexibility. This is the list of retailers partnering with Instacart at where I live. I am sure in bigger cities, the list will be much longer
It’s worth pointing out that even though you can order from multiple stores within Instacart, each store has its own check-out and minimum purchase requirement. The value for customers here is that they won’t have to create an account or download multiple apps on their phone. Within Instacart, they can place orders from different apps. What works for Walmart against the likes of Instacart is that Walmart offers non-grocery items for deliveries as well. Walmart Plus also offers fuel discounts, something that isn’t possible with Instacart.
This is how I think about the positioning of a few retailers who either have their own delivery programs such as Walmart or Amazon, or have their delivery powered by Instacart/Shipt
Among the ones I picked to analyze, Costco is the most similar to Walmart in terms of positioning. Their assortments and offering of inexpensive groceries are pretty similar. While Costco membership, the lowest level at $60/year, is cheaper than Walmart Plus, the fuel discounts and in-store shopping tools from Walmart make the comparison interesting. As far as I am concerned, Murphy and Costco stations are pretty similar in gas prices. Throwing in another 5 cent discount can be attractive to shoppers who drive a lot. Plus, in-store shopping perks like Scan & Go and pay with Walmart Pay can offer extra flexibility. Sometimes, we just need one or two quick items that wouldn’t qualify for a free shipping and we don’t mind stopping at a store for a few minutes. These shopping perks can make life a little bit easier for shoppers to get in and out of a store quickly.
It’s both interesting and challenging to look at this space as there are so many ways to slice and dice. For instance, Walmart Plus enables Walmart to keep their faithful customers from joining the likes of Instacart. If somebody tends to shop more at Walmart for groceries, they now have more reasons to stick to the brand. If some people usually shop at Costco, both Costco and Walmart have its appeal and the decision will rest with each shopper. For those who like to shop non-grocery items a lot and prefer the convenience, I don’t think Walmart Plus stands a chance against Prime yet. If some shoppers prefer the flexibility of ordering from multiple stores within one app, Instacart is the way to go.
Walmart Plus has tailwinds behind it. First, various stores across the country will power their delivery and be a huge competitive advantage. Few retailers can rival Walmart in this sense. Second, the ongoing pandemic and the explosion of grocery eCommerce are significant positive trends for Walmart. Moving forward, Walmart will likely continue to add more benefits to its membership program. The most obvious play is to expand the selection, pushing Walmart’s position in Figure 3 to the right. The more items are available for delivery, the more attractive Walmart Plus will be. Another idea is to mirror what Amazon did with Prime by throwing in other perks such as books, music, movies, etc…I suspect Walmart won’t increase Walmart Plus membership fees in the next two years at least. It took Amazon almost ten years to increase Prime’s fees from $79 to $99/year and another four years to $119.
The future isn’t without challenges for Walmart Plus. There is really subscription fatigue among consumers. How many consumers are willing to spend money on entertainment subscriptions (Netflix, Spotify, Disney Plus…), Amazon Prime or Instacart or Costco membership and then Walmart Plus. The economic uncertainty may be a factor as well. Folks may try to tighten their budget more and not have enough disposable income for another subscription. Plus, as Walmart moves to make its membership program more attractive, others don’t stand still. Instacart will continuously expand its partnership network. Amazon will definitely work to move more into grocery delivery.
Today, I ran into a very awesome website called InPractise. InPractise is a treasure trove for nerds or curious minds like myself. It interviews folks, mostly former & current executives at major firms with tribal and insider knowledge as well as domain expertise, to shed light on great business insights, practices and strategies. The content is delivered in audio and text format, which I appreciate greatly as while I sometimes like to listen to interviews, taking my eyes away from the screen, I mostly consume content better by reading. For $20/month on a monthly basis or $200/year, subscribers gain access to 10+ interviews per month. If you do the maths, it comes down to $2 per interview, which is quite cheap for valuable insights. Another cool thing about InPractise is that they let you try it out for two weeks first for free without asking your credit card details.
I gave it a try today and have been spending hours reading the previous posts. I am talking about it here as a token of my appreciation to the website for letting me read their stuff for free for two weeks, even though I have every intention of becoming a subscriber already. Below are a few insights that I found very helpful
Aldi: Hard Discounter Business Model – With Former CEO of Aldi UK
Finally, as a hope, I would say, a discounter like Aldi when entering a market would prefer that its competition is stock market listed. Stock market listed companies have programs, management incentive schemes, which means that the management is not likely to react to a new threat until the last minute. They’re whole compensation package, what is expected of them as a management team, their contracts, their job descriptions are all based on maximizing shareholder value, maximizing profits.
Basically, we did everything out of those first 15 years to get ourselves what our goal was. Which is to match the quality level of the best-selling brands on the market. Now, some of that was easy. We could do it within four or five years. Some of it was dreadfully hard. You try making a KitKat even in a normal chocolate factory, which rivals a KitKat. It is really difficult to do. Either the chocolate mushes into the biscuit, or the biscuit is too hard and breaks your teeth. So on. It was really a journey to end up with a thousand products, which truly were rivals for the best-selling brands on the market under the private labels which the company was doing. Enormous fun. I never had a corporate lunch in 25 years because every midday, I was involved in testing product to see whether or not you could tell the difference between the Aldi version of Cornflakes and Kellogg’s. Or the Aldi version of Ketchup up and Heinz. Eventually, we got there. It was truly very difficult to tell the difference. That’s when you’ve got a business concept, which the majority of consumers will not turn their noses up at.
Scale means purchasing power with an individual supplier. You can’t have hundreds of suppliers all making one product and just selling it in different places. You actually have very few to start with one, maybe two or three in the future who are producing enormous scale. If you lost one of those, it’s an absolute catastrophe. First of all, it won’t be possible for the other suppliers, even if you have a dual supply, to make up another 50 percent overnight. Secondly, you run the risk that the quality is not the same.
Thirdly, you have the situation where your reputation is put at risk with companies that would have to make serious investment decisions to be able to make your private label to the same quality as brands. We were always incredibly protective over the suppliers. Quite actually forgiving when mistakes were made, so long as they weren’t made on a constant basis. Tried to be more than fair with that supply base. What does more than fair mean? To be people who agreed things on handshakes and don’t need 50-page contracts to endorse it. Secondly, to pay on time. The biggest single question every supplier will have about its retail partner is: Am I going to get the money for the product that I’ve put all the investment into and delivered to their warehouse 15/20/25/30 days, whatever the contract actually says, later. I will tell you, you’d have got fired in Aldi if you paid one day late. A CEO would get fired if he deliberately paid one day late a supplier.
After only a few years, most Aldi management can tell you exactly how long it will take to clean a store in minutes. How long it will take to merchandise a pallet. How long it will take to unload a truck. How long it will take to process a hundred customers through the cash registers. There are prizes given for people who can invent a small change to the business process that can quicken something up even if it’s only a few seconds because that few seconds is multiplied by thousands of stores and hundreds of days per year.
The final bill for this super, little idea is often worth an astronomic amount of money in terms of cost reduction. That’s the philosophy for which the business is built on. A nice little example. If you pick up a product, I don’t have one in front of me, but if you pick up a product and you show it to a normal food retailer, he will look at the colors. He will look at the messages that the product has on it. He will look at how beautiful this item is. He’s thinking how many of those I can sell. I’ll tell you, you put this product in front of any Aldi operating manager and the first thing he’ll look at is, how big is the barcode? If that doesn’t scan with one sweep of the arm across the cash register, that’s going to cost me money. That’s just one of a thousand examples I could give you of how this cost mentality is built in from day one.
Netflix Business Model & Economics – With Former Director of Financial Planning and Analysis at Netflix
I’ll take the other side of it. I don’t think they want to move into it, nor do they need to for growth. I think to further saturate the US, they would probably move into news and sports more aggressively. They are growing just fine in the US and are growing even better internationally, so I don’t think they have to. I think they would do that as a distraction tax for a few reasons. If they were to move into news and sports, live is largely supported by advertising. Advertisers pay a premium and people don’t skip the commercials as much. Do they want to go out and build an ads sales force of hundreds and thousands of employees, insertion of dynamic ads, data which Facebook and Google have been collecting for years to do this at scale? It is beyond their focus right now, especially when they have this massive opportunity to take what they’ve already done and port that over to new countries with different content. They’re dabbling with news and sports and reality and other categories and they’ll push those. But you’ll see non-scripted, the reality competition shows they’re doing, before news and sports. Sports is extremely challenged and maybe that will shake out over the next three years, but I don’t see it as a near term focus.
On the question of whether Netflix should move into sports. Source: InPractise
The real question, if you look at more of a five-year view, is do they have pricing power domestically? I absolutely believe they do. They’re going to continue to accelerate their spend, the number of shows and categories such as unscripted theatrical movies they are investing in. I think that will, eventually, result in what Disney is now doing. Disney is experimenting with bringing a $30 super premium movie, like Mulan, which was supposed to go to theaters, and bringing it onto Disney Plus and expecting consumers to pay a regular subscription fee, plus $30 on top. Netflix would take that same movie, that is maybe on a par with Mulan or The Irishman, and give it to users for free.
Eventually, they are going to say, you are getting these movies at Disney – who are charging you $20 to $30 – so we are going to increase our price from $13 to $15. They are still not the price leader, as they are behind HBO Max which is $15. Netflix has a $15 price but its average user is not there, as they are on a lower tier. They have a chance to move people up those price tiers, but I don’t foresee that happening in the near term. They have that option when they choose to exercise it and I expect them to exercise it very diligently and thoughtfully.
Lidl in Ireland: from 0 to 12% market share in 20 years – With Former Head of Sales Organisation, Lidl Ireland
It is very difficult to give a percentage on that because it is a changing product group. Some items are discontinued and some are coming in, so every day or every week that changes, but probably around 10% to 15% as a rough guide. When you look at the shelf. you have your top shelf, middle shelf and bottom shelf. Sometimes there are four or five shelves, but the own brand will always be at eye level, first in flow. The brand will be on a shelf but always hidden. It might even be on the floor. I remember Nescafe coffee never ever made it off ankle height, but there’s a reason for that, that was always to promote the own brand and give it the best possible chance.
If you invest in a restaurant, you are entitled to its benefits and profits. If you write a software from scratch, you’re entitled to the economic benefits from it. That’s how business works. A party puts time and money at risk for a shot at success. It is the case for many and should be the case here for Apple. Apple introduced the App Store in 2008 and over the years, it has invested a lot in growing and maintaining the App Store. On principle, it should be treated equally as other businesses. Some argue that Apple should not charge commission fees on its platform. Well, Apple is responsible for the store and it should be able to benefit from it the way it sees fit. If you run a restaurant and somebody comes in and asks you to not charge for food or drinks, what will you think? Insane, right?
Is 30% too high a commission?
Apple levies a 30% commission on digital goods bought through its in-app purchase. For subscriptions, the commission is 30% in the first year and drops to 15% in the second year onwards. Many have lamented that the fee is too high and it puts an enormous financial strain on developers, especially those that are already operating on a low margin. Well, there is no free lunch in the business world. Developers have access to a lucrative user base with more than 500 million paid subscribers and a billion active devices. By being on the App Store, apps can be found through the search function, as well as accessible in every corner of the world. Users can download the app in a matter of seconds with the level of trust that can be hardly found anywhere. Is it right to argue that developers should get all of those for free without having to pay? I don’t agree with that.
Some said that Apple should NOT get any compensation on a regular basis because it doesn’t contribute to the development of apps. But developers don’t pay Apple to receive development input. They pay Apple for the app distribution. No matter how good your product is, if you can’t figure out distribution and get it to the hands of customers, what worth will it be? People pay Facebook or Google for access to a select group of users. Folks pay to attend high-end conferences to mingle with executives and potential clients. Donors pay to participate in fundraising dinners to talk to lawmakers so that they can have more influence. I don’t see the problem with Apple charging developers for this limited yet important commodity: access to customers who trust Apple and are willing to pay for apps on Apple devices.
When I was researching on Wix, I came across this from its annual report:
The App Market consists of web applications that are developed by us or by third-party developers. All third-party applications undergo a limited evaluation which is focused mainly on technical functionality, and partner agreements are signed prior to publication in the App Market. We are customarily entitled to a share in 30% of net revenues from the sale of every third-party application purchased through our App Market. We are responsible for the development, operation and maintenance of applications that we create, and the third-party developers are responsible for the applications that they create. However, we may remove a third-party application at any time if it does not meet our standards or for other reasons.
A short while ago, Apple commissioned an independent study on marketplaces’ take rate. When you look at what other platforms charge, the rate at which Apple sets its commission doesn’t look as outrageous as others make it out to be
Apparently, what Apple is doing is similar to the industry standards. I don’t see there is anything inherently wrong with the commission approach. As to the question of how high the commission should be, I’ll argue that it will never be low enough for developers unless it goes down to zero. Some long-time industry observers noted that developers used to pay for a much higher share of their revenue to have apps distributed in the past, before the App Store was debuted. They cheered when the App Store was introduced and the commission was 30%. Now, they are complaining that 30% is too high. I suspect that 15% will please developers more in the next two years and they will complain again after that.
Should Apple stop requiring the use of in-app purchase?
If your apps don’t generate revenue on Apple devices, you don’t have to pay Apple for anything. In fact, a study commissioned by Apple estimated that 85% of billings on the App Store in 2019 belonged solely to developers. If an app sells digital content and goods that are consumed on Apple iOS, Apple charges a commission. There are a few cases in which apps can avoid in-app purchase
3.1.3(a) “Reader” Apps: Apps may allow a user to access previously purchased content or content subscriptions (specifically: magazines, newspapers, books, audio, music, video, access to professional databases, VoIP, cloud storage, and approved services such as classroom management apps), provided that you agree not to directly or indirectly target iOS users to use a purchasing method other than in-app purchase, and your general communications about other purchasing methods are not designed to discourage use of in-app purchase.
3.1.3(b) Multiplatform Services: Apps that operate across multiple platforms may allow users to access content, subscriptions, or features they have acquired in your app on other platforms or your web site, including consumable items in multiplatform games, provided those items are also available as in-app purchases within the app. You must not directly or indirectly target iOS users to use a purchasing method other than in-app purchase, and your general communications about other purchasing methods must not discourage use of in-app purchase.
3.1.5(a) Goods and Services Outside of the App: If your app enables people to purchase goods or services that will be consumed outside of the app, you must use purchase methods other than in-app purchase to collect those payments, such as Apple Pay or traditional credit card entry.
If a customer already has a subscription purchased before, the customer can continue to use that subscription and the app doesn’t have to pay Apple. For instance, if you install Netflix or Bloomberg app AFTER purchasing a subscription on a browser, neither Netflix or Bloomberg has to pay Apple
If an app acquires new users on an Apple device with its payment mechanism, it is obligated to offer in-app purchase as well and it must not use language that blatantly discourages the use of in-app purchase
If you book an Uber, but the transaction takes place in a car, not on an Apple device, Uber can avoid using in-app purchase. The same case applies for AirBnb rentals. If you book a room on AirBnb iOS app, but stay in a physical room, AirBnb doesn’t have to pay Apple. However, if AirBnb offers AirBnb Experiences on iOS, asks users to pay and then offers content on iOS, then it will have to pay Apple
I do think these exceptions make sense. If the consumption of goods or services takes place outside an iOS device, Apple shouldn’t benefit from that. In return for giving such apps access to users, Apple benefits from the presence of the apps that make the ecosystem and their devices more useful. Imagine how much you would like your iPhone less if it didn’t have Uber, AirBnb, Booking.com apps, just to name a few.
If Apple didn’t mandate the use of in-app purchase, how many apps would voluntarily use it? My guess is: not many. Hence, every time a user opens an app on their iPhone, they would have to go to a browser to pay for services. That wouldn’t be a nice user experience.
If Apple didn’t forbid the discouragement of in-app purchase, I imagine apps would play every trick in the book to favor their own payment mechanism. Take Turbo Tax below as an example of tricks that apps could use. In that case, Apple would be affected financially. Therefore, I can see the reasoning behind its requirement of not discouraging the use of in-app purchase. If you don’t look out for yourself, who will?
A curated store or an open system?
Many argue that Apple should open up its walled garden like Android. The problem is that while Apple is known for security and privacy, the same can’t be said about Android, which is prone to malware. A study estimated that Android devices are 50 times more malware-affected than iOS ones. Plus, Apple is known for protecting user privacy. It went to court against the US government for that. Many users, including yours truly, appreciate it greatly.
It’s worth pointing out that Apple wasn’t the first to introduce a locked-down system that didn’t degrade. Nintendo, Sony, and Microsoft consoles restricted the software that could be modified on their host operating systems and ran with limited capabilities. This resulted in fewer support calls, reduced frustration, and limited piracy.
One of Apple’s most touted virtues is that the company creates secure devices that respect user’s privacy. In fact, they have even gone to court against the US government over security. Yet iOS remains the most secure consumer operating system. This has been made possible through multiple layers of security that address different threats.
For now, let me just say that, as a parent, there are few things that would make me happier than more stringent App Store rules governing what applications can do. In the end, I value my iOS devices because I know that I can trust them with my information because security is paramount to Apple.
In the battle over the security and privacy of my phone, I am happy to pay a premium knowing that my information is safe and sound, and that it is not going to be sold to the highest bidder.
Opening up a platform to allow total freedom for developers may not be as good as many think. Take Facebook as an example. It strives to give everyone’s freedom to say whatever they want. The consequences are that folks use First Amendment Right to spew out misinformation and hate speech. With regard to apps on Facebook, you don’t need to look further than what happened with Cambridge Analytica.
The problem with an open platform is that giving everyone unrestricted freedom is a preclude to getting the worst behavior from them. Precisely because of that, I much prefer a curated and controlled platform. Of course, that means Apple is very powerful as it can dictate which app is distributed and how. We should definitely strive to continuously hold Apple accountable, but requiring Apple to open its marketplace isn’t the solution.
Apple stifles innovation?
Since its debut, the App Store has facilitated the introduction of many apps. Without the App Store, we likely wouldn’t have Uber, Lyft or Robinhood, just to name a few. So far, it has been a boon to innovation in my opinion.
Some argue that Apple’s iron grip on the App Store limits future innovation. Well, that may sound logical on the surface, but I really doubt the sentiment. The reason is that it’s difficult to pinpoint exactly what sort of innovation is being stifled by Apple’s rules. There are only a handful of app marketplaces for phones. Even though they differ from one another to some extent, they should work essentailly the same way. If an app can appear on Google Play, which works similarly as the App Store, it shouldn’t have to alter its core too much to be featured on the App Store. If an app cannot work on any of the app marketplace, then it’s hardly Apple’s fault that such an “innovation” can’t be brought to life.
Innovation is very abstract and can be misused as a blanket reason like “national security”. The argument that Apple stifles innovation CAN be a valid one, but as of now, I see it more like a hypothetical scenario with no evidence to back it up.
Apple’s inconsistent enforcement of its rules
In my opinion, most of Apple’s fights with developers resulted from execution failure. The rules are there, but they applied the rules differently from one case to another. To Hey as an example, the app was rejected in the beginning because it didn’t offer in-app purchase. However, the issue was that Hey’s competitors did the exact same thing, but were approved by Apple to appear on iOS. As you can imagine, laws don’t mean much if they aren’t applied fairly and consistently. It’s the same for the App Store Guidelines. To make the Guidelines more respected and mean anything, Apple must be better in its application.
Some may argue that Apple has to handle thousands of updates and apps on a daily basis, so it’s understandable that some slipped through the cracks. I’d say that as a $2 trillion company that holds so much power over us, it should be better.
Solutions to the App Store issue
The App Store Guidelines haven’t changed much since they were written. While I tend to agree that they may need updating, I struggle to see exactly how they should be. One reason is that this is a very nuanced and complicated issue. Apple has to strike a sweet balance between its own interest and the interest of users as well as developers. Only Apple has enough information to make informed decisions.
Some, including Ben Thompson, argued that Apple should update its guidelines based on the marginal cost of apps. Specifically, apps that have marginal costs should be granted a lower commission (10%) than the standard 30% now. While it may sound logical, I doubt its practicality for the following reasons:
What would be the thresholds for an app’s marginal cost to be qualified for a lower commission? 5%, 10% or 30%? I suspect if this approach was implemented, we would see more apps claiming to have increased marginal costs
How would Apple validate the marginal cost? Surely, relying purely on an app’s words wouldn’t be the case. If an app has to submit financial records, who is to say those records are correct?
Plus, do you really want a $2 trillion company to have financial records of thousands of private entities? I don’t.
Right now, the practical and feasible things I think Apple can do include:
Be more consistent in its application of the App Store Guidelines
Be more transparent and communicative when it comes to high profile disputes to explain its side of the story
Think about how to change the App Store moving forward. I am sure they would prefer not having PR onslaughts. Hence, I truly hope that somewhere inside the company, some folks are trying to figure out a solution to this problem.
One grey area that is highly complex lies in the case of Spotify vs Apple Music. Spotify refuses to adopt in-app purchases because its low gross margin doesn’t allow it to. Apple Music, which competes with Spotify, may not be subject to the 30% requirement as Spotify. Some argue that Apple, as the owner of the App Store, shouldn’t launch competing products. However, as a company, Apple should be able to launch any product or service that is in accordance with the laws. I don’t see any legal problem with the existence of Apple Music. It is, to a high degree, similar to retailers launching private labels to compete with brands. I understand that a lot of critics are vocal about this behavior, but it has been around for a long time legally and until somebody makes it illegal to do so, I don’t see why Apple should be an exception.
It comes down to essentially this: when developers benefit from the App Store, they operate on the terms of Apple. Apple gains its enormous bargaining power by expertly managing both software and hardware. The $2 trillion+ valuation, customer satisfaction and half a trillion in app sales in 2019 are both proof that whatever the company is doing works and a condemnation of the lack of alternatives.
Of course, lawmakers can intervene and force Apple to change. I believe if that is the case, the company will appeal to even the highest court in the land and actually may have a chance to win. There are appeals from tech observers that the existing anti-trust regulations aren’t modern enough for the tech giants and should be updated. I believe it will be a time-consuming and complex process and I, for one, am glad that it’s not my job.