Weekly reading – 19th February 2022

I didn’t write anything last week and this weekly post is late because I was traveling back to Vietnam and locked out of my account. My blog’s two-step authentication requires a verification by SMS, but my carrier doesn’t enable calls or messages outside the US.


Sequoia’s invisible hand: How Roelof Botha became one of the most powerful people in venture capital. VCs usually cut overly confident figures but this profile shows that even one of the best in the business expects himself to have unsuccessful deals and do have unsuccessful deals. Even one of the best needs support in times of uncertainty.

The Hidden Ways Companies Raise Prices. I have no beef with businesses that raise prices to cover high costs. I do have a beef with companies that do so sneakily. Be upfront and tell me that you have to raise prices due to inflation. Be straight and transparent with me.

DoorDash to Bump Up Its Fees on Slow McDonald’s Restaurants. An interesting look at the negotiation between a delivery service like DoorDash and a merchant like McDonald’s. DoorDash has considerable bargaining power, in my opinion, because it can drag an icon like McDonald’s to the negotiation table and get a deal.

Doing Business in Myanmar Is Tough, but Norway’s Telenor Finds That Leaving Isn’t Much Easier. While I feel bad for Telenor as the company has to find a way to leave Myanmar even though it only tries to do good by the people, I feel even worse for the people of Myanmar.

Discover Is Bringing a Payment Option Popular in Asia to the U.S. Discover is expected to announce a new partnership later this week that will enable merchants to accept payments through checking accounts. I am eager to learn how Discover is going to change consumer behavior and how this kind of initiative would affect the arguably duopoly of Visa and Mastercard

Inside Facebook’s $10 Billion Breakup With Advertisers. The article struck a positive and compassionate tone for Facebook as it didn’t mention once that the business model is built on users’ data and can violate their privacy or that Facebook usually leads the news headlines for all the wrong reasons related to that business model.

Other stuff I found interesting

How Pfizer made an effective anti-covid pill. “Right away, researchers got a lucky break. When Pfizer checked, it found that none of the thousands of proteins in the human body shared the same bit of molecular structure they planned to interfere with in SARS-CoV-2. That meant they could hit the virus hard and not expect any major side effects. Nature had provided the scientists with a big bull’s-eye”

The Logistics Behind Deicing Airplanes. I think after watching this clip by WSJ, I become more understanding any time flights are delayed.


According to a presentation to investors by Shopify, Amazon has 41% of the U.S eCommerce while Apple has 4%

The discontinuation of Monthly Child Tax Credits is allegedly pushing 3 million kids back into poverty

Get to know Wix

What is Wix and what does it do?

Wix was founded in Israel in 2006 by Avishai Abrahami, Nadav Abrahami and Giora Kaplan. The trio were brainstorming ideas for a startup and they realized that building a website was complicated and expensive. They pivoted to building a tool that would enable an easy and painless process to quickly construct a website, even for those without coding experience. Hence, Wix was born. The company reached 1 million users in 2009, debuted on Nasdaq in 2013, reported 50 million users in 2014 and, as of June 2020, had 182 million registered users. The latest reports showed that Wix was available in 190 countries and 20 languages.

The company mostly operates on a freemium basis. In addition to a free tier, Wix also offers paid subscriptions such as Ascend by Wix and Premium, the latter of which comes into two sub-tiers: Website and Business & eCommerce. Moreover, there are also standalone services such as: Domains, Mailbox in a partnership with G-Suite, Wix Payments, Wix Answers and Wix Logo Maker.

Wix’s two main revenue segments are Creative Subscriptions and Business Solutions. The former consists of mostly Premium Subscription while the latter is made of Ascend by Wix, other services and the 30% commission that comes from the use of 3rd party apps. For instance, if a user pais $10/month to use a 3rd party app on Wix, Wix is entitled to $3/month and that revenue will go to Business Solutions segment. As of December 31, 2019, 84% of Wix’s premium subscriptions were yearly or multi-year subscriptions while the other 16% was made of monthly subscriptions.

Figure 1 – Wix’s services and reported segments

To cater to industries, Wix offers tailored packages that include various tools specific to each industry such as Wix Stores, Wix Hotels, Wix Bookings, Wix Music, Wix Video, Wix Restaurants and others.

How has Wix been doing?

Wix’s quarterly revenue has been steadily increasing. In Q2 2020 ending June 30, 2020, the company recorded around $236 million, up 27% from the same period a year ago. Over the years, there has been a shift in revenue mix as Business Solutions has been gaining share from Creative Subscriptions. Since Creative Subscriptions segment has a higher gross margin, the shift negatively impacts the company’s overall margin. In Q2 2020, the gross margin stood at 70%, compared to 75% a year ago.

Figure 2 – Wix’s quarterly revenue. Data source: Wix

Figure 3 – Revenue Mix. Data source: Wix

With regard to user acquisition, Wix has been steadily adding both registered and paid users; however, out of 100 registered users, there have been consistently only 3 paid users. What does work for Wix is its monetization from these paid users. According to the Investor Presentation, Wix, the company made more money and recouped marketing cost faster from more recent cohorts.

Figure 4 – Increasing Monetization of Cohorts. Data source: Wix
Figure 5 – Faster Recoup Time of Marketing Expenses. Data source: Wix

A concern for the company is operating margin. In Q2 2020, operating margin stood at -23%, the highest since Q1 2016. The increase in operating loss resulted from the decrease in gross margin and increase mostly in Sales & Marketing, which was 50% of total revenue in Q2 2020, the highest in the last 3 years. In my opinion, this is particularly worrying because the company lost more money from acquiring users during a pandemic that should accelerate the adoption of their offerings.

Figure 6 – Operating Margin. Data source: Wix

Unsurprisingly, North America is Wix’s biggest market with 57% of total revenue, followed by Europe, Asia and Latin America. Europe and Asia’s share has been consistent in the past 3 years while half of Latin America’s share in 2017 (9%) was transferred to North America. Since the company doesn’t break down margin by geography, it’s hard to say which one is more profitable, but I suspect that the fierce competition in the largest market contributed to the decrease in operating margin.


Wix is undeniably a success story. The company has been around for 14 years as 90% of startups fail. It is used by 180 million users around the world and many businesses are powered by its platform. However, I am very concerned about the company’s competitive advantages. Its competitors in the eCommerce space include Shopify, Square, WordPress, Adobe, BigCommerce, Etsy and to some extent Amazon, all formidable entities. A business doesn’t only need a tool to build a website. It needs other operational tools to run, and equally importantly traffic to its website to generate sales. That’s why you see Shopify partner with Facebook, Walmart and Pinterest. That’s why you see Shopify has shipped new features relentlessly and launched a fulfillment service of its own. That’s why it’s important that Amazon’s marketplace attracts 150 million unique visitors a month. I don’t see yet how Wix help small and medium sized businesses do that.

It can be argued that some of the standalone services are quite new and they take time to gain economies of scale. That is a valid argument. I hope it’s the case and that as they entice more customers to use such services, the marketing leverage will improve and so will the margin. As of now, that is not the case yet.

Get to know Square, the owner of Cash App

How Square was founded and what it is today

Shortly before 2009, Jim McKelvey and Jack Dorsey were looking for a business idea to work on together. Jim was operating a glassblowing studio at the time. He had a customer come in ready to pay for an order. The customer had an American Express card, which the studio couldn’t accept. Jim lost the sale. He started to dig into the payment world and soon realized that there was a problem. The payment world is highly complicated with different credit card vendors and a myriad of rules and fees. To make its store accessible, a merchant had to work different credit card networks. Worse, in 2004, credit card vendors were making 45 times the amount of revenue on Small & Medium Sized merchants (SMB) as much as the revenue on large corporations.

Book Review: The Innovation Stack :: UXmatters
Figure 1 – Small and Medium Sized Merchants made up the majority of credit card vendors’ revenue in 2004. Source: uxmatters

The two co-founders of Square came up with an idea of a simple-to-use dongle that could read different credit cards, along with unprecedented transparency over fees to eliminate confusion for vendors. Their value proposition to customers was to simplify the process of working with different card vendors and to avoid the situation that some cards like Amex couldn’t be accepted. To lessen the fees for merchants, Square waived the per transaction fee and relied on the sale of their dongle, a small cut of interchange from transactions and likely a one-time fee to be able to use the dongle. That’s how the company started.

Fast forward to 2020, you can hardly recognize that Square company. It has grown leaps and bounds so that their offerings expanded to include a set of solutions for business and consumers. On the seller ecosystem side, Square offers software, hardware and financial services, namely:

  • Software: Online store, Square for different industries, Gift Card, Marketing, Dashboard
  • Hardware: different POS types
  • Financial services: managed payments, instant transfer, Square Card and Square Capital

On the Cash App side, the app can enable users to store & transfer funds to another person, spend via a debit card called Cash Card and invest in stocks, ETFs or Bitcoin.

Figure 2 – A simple way to look at Square business
Figure 3 – A more granular look at Square’s offerings. Source: Square

How does Square make money?

  • Transaction-based revenue: Square takes a small cut from every transaction from some services that they help facilitate through products and services
  • Subscriptions and fees: For some Square services, customers have to either subscribe or pay fees to be able to use them, including Square Capital, Instant Transfer, Cash Card, website & domain hosting and other
  • Hardware: Square also makes money from selling their hardware, including Stand, Register and Terminal, card swiping devices and chip readers
  • Bitcoine: allowing users to buy, sell and deposit Bitcoin, Square makes money in this segment by charging a fee for every transaction as well as raking in the difference in Bitcoin’s prices. For instance, the company might buy a Bitcoin at $9,950 and sell it at $10,000, netting $50 in revenue, on top of 1.7% in transaction fees
Figure 4 – Revenue breakdown from the Seller ecosystem. Source: Square
Figure 5 – Revenue breakdown from the Cash App ecosystem. Source: Square

Square has been growing very nicely in the last five years. The top line increased from $1.3 billion in 2015 to $4.7 billion in 2019, a CAGR of almost 38%. Meanwhile, the company went from losing money to the tune of $175 million in 2015 to making a modest operational income of $27 million in 2019.

In terms of segment revenue, transaction-based was the dominant source of revenue, making up 66% of Square’s revenue in 2019. On the other, Bitcoin was the fastest growing segment, growing at 211% YoY, followed by Subscription & Services.

Figure 6 – Square’s revenue by segment. Source: Square

Among Square’s segments, hardware is consistently the one that loses money. It’s the case of razor and blades. Square is willing to lose dozens of millions on hardware if that means they can make hundreds of millions of dollars in return from services. Meanwhile, Bitcoin’s gross margin is routinely at 2% while Square has made great improvements on the margin of Transaction-based and Subscriptions & Services.

Figure 7: Square’s Gross Margin. Source: Square

The growth of Cash App

Cash App has grown more important to Square over the years. The application was responsible for around 22-23% of the company’s revenue in Q2 2019, but the figure grew to 62% in Q2 2020, leaving the seller ecosystem only responsible for 38% of the total revenue. While the numbers for Cash App look impressive, most of the growth was attributed to the increase in Bitcoin revenue, even though Transaction-based and Subscription & Services also recorded nice growth. Additionally, Square increased the pile with a lower gross margin between Cash App and Seller ecosystems. If Cash App had 23% gross margin in Q2 2020, Seller notched 44%.

Figure 8 – Square’s Q2 2020 result. Source: Square

Over the years, Square has increased their marketing leverage. Sales & Marketing as % of revenue for Cash App decreased from 27% in Q2 2019 to 12% a year later. As a result, even though Cash App offers a lower gross margin than Seller, I suspect the increased marketing leverage enabled Square to turn a profit in Q2 2020. Whether this will persist as a routine in the future or whether it is mainly driven by Covid-19 remains to be seen.

Square defines “active transacting customers ” as those who have at least one cash inflow or outflow during a month. The base that had 1 million active transacting customers in Dec 2015 grew to 30 million in June 2020. Covid-19 helped accelerate the use of Cash App as these customers transacted 15 times per month or more on average every other day, up 50% from a year ago.

Figure 9 – Square’s Active Transacting Cash App Customers

At the end of FY 2019, over 50% of Cash App customers brought revenue to the company, a figure that was exceeded in Q2 2020 as the company reported an uplift. Revenue per customer, excluding bitcoin, was $45 on an annualized basis, compared to $30 in Q4 FY2019 and $15 in 2017.

Cause for concern

While Cash App seems to be going on the right track, Square does seem to have a problem at hand with the Seller ecosystem. In Q2 2020, Seller revenue decreased to $723 million from $870 million a year ago. In the meantime, Shopify’s revenue almost doubled in Q2 2020, compared to a year ago while offering essentially the same solutions and going after the same market as Square. Another competitor that had an impressive growth in the same quarter is Amazon. Their 3rd party segment’s revenue grew by 52% YoY. As I expect us to continue struggling with the pandemic in the months to come, what I have seen so far shows that Square may have a tough time competing to facilitate eCommerce with the likes of Amazon or Shopify. Other players include eBay, Google, Etsy, BigCommerce or Facebook.

It’s valuable indeed to help businesses manage their operations, but it’s not enough. The biggest worry of businesses is to generate revenue. As the pandemic fast-tracks eCommerce, revenue usually means website traffic. Amazon is the king of eCommerce in the US. Shopify partnered with Walmart, Facebook and Pinterest to bring traffic to their vendors. Meanwhile, I am not aware that Square has a similar capability to bring traffic to their customers. That’s a huge missing piece in their puzzle.

Another challenge that Square has to face for its Seller ecosystem is fulfillment. Walmart, Shopify and Amazon all have their fulfillment network. Even though Square already partnered with UPS, it’s not the same as owning that capability themselves, especially when the fulfillment demand scales up.

Cash App is also having to deal with a growing and fierce competition. Apple is pushing very hard to market Apple Pay, Apple Cash and Apple Card, whose basic utility is the same as that of Cash App and Cash Card. There is also Paypal/Venmo, Facebook with their own payment system and neobanks such as Point App. Although Cash App is in a pretty good shape, there is still a lot of work to do to stay competitive and fend off rivals. Having the ability to invest and trade Bitcoin is nice, but 1/ I don’t believe both features offer a high margin and 2/ they aren’t likely to keep consumers exclusive on Cash App. One can easily use Robinhood for trading and Apple services for other purposes.

Compared to their rival Shopify, Square has an advantage of having their feet in the consumer world as well. If they can manage to connect the consumer and seller side by offering consumer trend insights in real time to their sellers, that will be a great selling point to sellers. For Cash App customers, they need to find a way to keep customers active and use their services more. Recently, a new feature was added to let users access short-term loans of less than $200. However, the feature is a horizontal expansion and not everyone will be happy with a high interest loan. Cash App needs to get customers locked in by giving them more utility than the likes of Apple, Paypal and a host of other competitors.

In sum, Square is spinning a lot of disks at the same time. One can argue that catering to both the Seller and Cash App ecosystems spreads thin Square’s focus and resources, but to fend off fierce rivals on both sides, that is likely what Square has to do. As a fan of eCommerce and fintech, I am very interested in seeing what awaits Square in the future.

Disclaimer: I own Shopify and Amazon stocks in my personal portfolio.

Weekly readings – 18th July 2020

What I wrote

Uber’s latest chess moves

An interview with AirBnb CEO Brian Chesky on the future of his company and travel

What I think of a potential Twitter subscription feature

A groundbreaking and disheartening study on violence against women in Vietnam

Chris Evans started a project to facilitate communication between voters and elected officials. It’s called A Starting Point


Kroger conducted a test in which they moved plant-based meat into the meat section at some select stores. The test proved that the move lifted sales of plant-based meat. This is great news for suppliers such as Beyond Meat and environmentalists.

In the past, I was somewhat bearish on Netflix’s prospect, but I have grown more bullish over the past year. The high retention figure below bolsters the new position

Source: Second Measure

Lidl’s entering the Long Island market caused competitors to reduce item prices by 8% to 15%. It’s worth noting that Lidl commissioned the study, but it was independently conducted.

Amazon is formidable in online grocery. The company leads many aspects in the latest study on consumer satisfaction with online grocery services.


US Netflix Subscribers Watch 3.2 Hours and Use 9.6 GB of Data Per Day

This company presents an interesting concept when it comes to encryption. Slack-rival Element wins largest ever collaborative software deal

A government’s role in stimulating demand and widespread adoption of next generation products is at play here. Europeans get substantial subsidies for electric cars from their government

How SHA-2 Works Step-By-Step (SHA-256)

What I think is interesting

According to JP Morgan, 19% of eCommerce transaction value in Vietnam in 2019 was through digital wallets while 34% was through debit and credit cards

How Parmesan cheese is made and how you can identify the real Parmesan cheese. Fascinating stuff

I didn’t know there is a company that has an exclusive deal with airlines to buy lost luggage

‘Absolutely No Mercy’: Leaked Files Expose How China Organized Mass Detentions of Muslims

Scale and Loyalty are more important online than offline

The competition for immigrants will heat up soon as women are giving birth less, especially in developed countries

Graph of number of children women have
Source: BBC

Weekly readings – 18th April 2020

We need to talk about AirPods Pro

Companies Don’t Need to Lay People Off to Survive

Source: Nikkei Asian Review

A very good thread from one of USPS employees

A great primer on the existential challenge that USPS is facing

A great read on TAM from Credit Suisse

A good read on the FED and why it shouldn’t shoulder more blame for the economic crisis threat than the government

Social Distancing Is Bringing Drive-In Theaters Back to Life

How small business owners survived the Great Recession

The New Yorker’s profile of Mitch McConnell

A chilling report on how Bloomberg News bullied a reporter and his wife

The Postal Service Deserves a Permanent Bailout

Apple’s mobility report

Your Coronavirus Check Is Coming. Your Bank Can Grab It

A heart-breaking story on a brilliant young programmer who co-founded Cloudfare

It bid high and lost. Should Amazon be allowed a do-over on JEDI?

Ecommerce in Vietnam

Ecommerce in Vietnam is a booming industry that is estimated to be worth $24 billion in 2025. The competition is cut-throat and features heavily-invested companies such as Shopee, Sendo, Lazada and Tiki.

CompanyFunding SizeSource of FundingNext Round
Tiki$44 millionJD in 2018Announced plans to raise $100 million in Jun 2019
Shopee$51 million Parent company (SEA) in 2018
Lazada$2 billionAlibaba in Mar 2018
Sendo$51 millionSBI Holding in 2018Announced plans to raise $61 million in Nov 2019
Source: cafebiz

One of the biggest corporations in Vietnam, Vingroup, announced this month its intention to suspend all operations of adayroi, its e-commerce branch. For a good reason. In 2018, the four biggest e-commerce firms listed above lost a total of approximately $220 million.

Toàn cảnh bức tranh TMĐT năm 2019: Tứ hùng tranh bá Shopee - Tiki - Lazada - Sendo; Viettel gia nhập cuộc đua, Vingroup từ bỏ sàn đấu - Ảnh 6.
Source: cafebiz

The financial losses are understandable given the customer acquisition cost, investments in warehouses or assortment centers and the delivery cost. If Amazon Now is a standout service with its 2-hour delivery, within-day delivery can be considered a subpar service in the E-commerce world in Vietnam. Most of the main players are committed to delivery within hours inside Hanoi and Ho Chi Minh. The following is what E-commerce players plus Grab, a major ride-sharing app and a pivotal delivery partner in Vietnam, commit with consumers. Note that these commitments come with restrictions.

E-commerce BrandDelivery Time
Tiki 2 hours
Shopee Express4 hours
GrabExpress6 hours
GrabExpress Sieu Toc30 minutes
Sendo & Grab3 hours
LazadaWithin 1-2 working days

It is no easy feat to make such a commitment given how terrible traffic is in Hanoi and Ho Chi Minh. Look below for just a taste of what the traffic is like in the two biggest cities in Vietnam

Kinh khủng cảnh tượng kẹt xe sáng sớm ở Sài Gòn khiến cả ngàn người trễ giờ làm - ảnh 8
Source: Baomoi

It will be interesting to see how these companies can be profitable, how they can branch out to other provinces outside Hanoi and Ho Chi Minh, how they can delivery returns to investors and whether they could come up with something similar to Prime and AWS that obviously contributed so much to the health and profitability of Amazon.