Weekly reading – 1st January 2022

Happy New Year! No matter where you are in the world, if you come across this little blog of mine, I wish you and yours a great year ahead with lots of health, luck and happiness. Also, with Covid finally behind us! Welcome to my first post in 2022!

What I wrote last week

Review of my 2021

Super Apps

Business

Thanks to podcasts, Spotify is the fastest-growing music service in the US, according to Morgan Stanley survey. “From 2019 to 2021, the streaming giant’s share of the average American’s listening hours increased from 7 per cent to 10 per cent, well behind AM/FM radio and YouTube, but strong among younger consumers who will make up the bulk of listeners over the next decade.”

American Airlines, Saddled With Debt and Growing Pains, Turns to New CEO. “Among airline executives, Mr. Isom is known for drilling down into details. A metric known as d-zero—when flights push back from the gate exactly on time or early—became a rallying cry under Mr. Isom, though it is something American has struggled with at times. Kerry Philipovitch, who worked for Mr. Isom at American until 2019, recalled Mr. Parker and CFO Derek Kerr marveling at how early Mr. Isom arrived at a company event, pointing out his prime parking spot. Ms. Philipovitch said: “That’s Robert. He works really hard. He’s going to get there early.”

Here’s What Happened to Biotech This Year. “Below is the harsh reality laid out in a chart. While the total return of the S&P 500 Index is up 29.4% year-to-date through December 27 (as represented by the SPY ETF that tracks it), the S&P Biotechnology Select Industry Index is down -18.2% over the same period (as represented by the XBI ETF that tracks it). In fact, biotech is the worst performing of any of the 11 S&P 500 sectors this year (note: XBI is equal weighted. Within the biotech community, it is generally believed to represent the performance of typical mid-to-small cap biotech stocks)”

The Super League Debacle Forced Manchester United’s American Owners to Listen to Fans. Football or soccer as it is called in the U.S is a business in which a drought of titles and a period of mediocrity can have major implications. When a club goes without a trophy for a while, great players don’t want to spend precious years at the club. Worse, they go to the competitors to help them win more titles and inflict more pain. The vicious cycle is very hard to break. Manchester United has been in that cycle since 2013, when Sir Alex Ferguson retired. The club hasn’t won a major trophy and it has lost its mojo. Prominent players don’t consider the club in the same breadth as the elite any more. It’s all down to the American club owners who don’t have the right management skill or the football culture in them. Everything is commercial. I am extremely sad to see how the club falls from grace

Apple ditched Intel, and it paid off. Taking control of an important technology stack such as the chips is a strategic masterpiece from Apple. They no longer have to rely on a dinosaur such as Intel while deepening their moat. Who else can compete with Apple in combining one of the most iconic brands in history, hardware expertise, the total control of operating systems, the network of retail stores, the world-class capability in supply chain and now an amazingly efficient chip?

Google and Tech Rivals Tap Cash Reserves to Realize Cloud Ambitions. While Amazon relies on AWS for margin, Google and Microsoft have no shortage of profitable segments to help their cloud departments catch up with a formidable rival. If you are not a first market mover, you gotta use the tools available to you.

Facebook’s Pushback: Stem the Leaks, Spin the Politics, Don’t Say Sorry. Facebook deploying the “divide and conquer” strategy with our lawmakers successfully is just surreal.

A Look Back at Q3 ’21 Public Cloud Software Earnings. A very informative post on public cloud software companies. Have a read if it’s your cup of tea

Other stuff I find interesting

Oscars: ‘Spider-Man: No Way Home’ Team Plans Best Picture Push, Tom Holland Open to Hosting. I am glad that Tom Holland, Kevin Feige and co fought for their work and the work of their colleagues in making these Marvel movies because I find it weird that some don’t consider them “art”. Spider-Man: No Way Home is a great movie. The box office and the online reviews say the same thing. Now that it’s likely a potential for Oscar nominations, would anybody come out and say it’s still not art?

New York City bans natural gas in new buildings. It all sounds well and good on paper for environmentalists as new buildings are banned from using natural gas. However, there are second-order effects as “New York’s move to all-electric buildings could mean a higher price tag for consumers using electricity for heat than those relying on gas. This winter, the average household in the U.S. Northeast is expected to pay $1,538 to heat their home with electricity, compared with gas at about $865. Almost half of the power generated in New York State so far this year came from burning fossil fuels (45% from gas and 4% from oil), with another 24% from nuclear and 22% from hydropower, according to federal energy data.”

In Hamburg, Surviving Climate Change Means Living With Water

Japan’s Paper Culture. “Old, traditional ways of using paper are still prevalent, from the gohei (a paper offering made to gods) in shrines, to the shūgi-bukuro (money envelopes) given at celebrations, and New Year’s cards. In more modern uses, purchases are typically made with cash; important documents are faxed rather than emailed; and nearly everyone uses hanko, a personalized stamp used in lieu of a signature.”

Stats

No new homes in November 2021 were under $200,000

37% of the world’s population have never used the Internet

Holiday spending in the U.S in 2021 increased by 8.5% compared to the same period last year. eCommerce retail spending rose by 11%

54% of adults in the United States have prose literacy below the 6th-grade level“. Prose literacy level refers to the ability to read and comprehend materials such as news stories or manuals.

Walmart drew one in four dollars spent on click and collect — with room to grow in 2022

Super Apps

In this post, I’ll touch upon briefly the definition of a Super App, give a few examples and talk about the business implications of these apps.

The term Super Apps is generally credited to Mike Lazaridi, the founder of Blackberry, who defined it as “a closed ecosystem of many apps that people would use every day because they offer such a seamless, integrated, contextualized and efficient experience”. In laymen’s terms, a Super App is an application that offers various services on one interface. While the mix of services offered by Super Apps varies from one to another, the common denominators of these apps are 1/ they are all two-sided networks popular with both merchants and consumers and 2/ they all began their journey by being excellent in one function before branching out to others. Merchants need to have access to a lot of consumers to join a network while consumers only find the network useful when there is a lot of utility, namely plenty of merchants. The chicken and egg problem of a two-sided network is hard. Therefore, the singular focus on a vertical in the beginning makes sense as start-ups can’t afford to solve this issue in multiple verticals. No-one can build a Super App right from the get-go. Once an app excels and makes a name for itself in a vertical, why not leveraging existing traffic and offering users more reasons to stick around longer?

Examples of Super Apps

WeChat

WeChat started out as a messenger app. An engineer named Allen Zhang alerted his employer Tencent on a threat of other competitors taking away its market share and app engagement. To stay competitive, WeChat transformed itself into an app on which users could do everyday things on a single interface including payments, social media, e-commerce, doctor appointments, hotel reservation or ride-hailing. The pivot was a hit as the new services surpassed even the apps that inspired WeChat in the first place. 

Facebook

Facebook and its founding story need little introduction. Over the years, Facebook has added several services to make itself stickier as a platform. Nowadays, users can shop on a marketplace or Facebook-native stores; create new connections with Facebook’s own Tinder version; make payments with Facebook Pay or consume exclusive content from creators. With its ambition and virtually limitless resources, it won’t be a surprise that Facebook or Meta will expand its offerings in the future.  

Grab

The title of grab.com reads “Grab: The Everyday Everything App”. Its status as one of the biggest Super Apps in Southeast Asia is so different from its humble beginning. Grab was founded as a taxi-hailing business in Malaysia in 2012 by two Harvard graduates. The company gradually expanded into other areas, such as other modes of ride-hailing, food delivery & nonfood delivery, travel bookings, bill payment and financial services. In Vietnam, almost everyone in big cities uses Grab for daily tasks from food delivery, ride-sharing or bill payments.

What Grab mobile app looks like in Vietnam
Figure 1 – What Grab mobile app looks like in Vietnam

Uber

Uber was founded in 2009 by Travis Kalanick and Garrett Camp as a ride-hailing alternative to taxies. The company’s meteoric rise saw it become a global phenomenon, but the company today is more than just a ride-hailing app. In 2014, Uber launched a food delivery service called Uber Eats, which was later rebranded under Delivery. While Covid-19 decimated the Mobility segment (ride-sharing) as riders were restricted by stay-at-home orders, the pandemic was a catalyst for the transformation of Uber as a whole. Delivery has been growing substantially due to consumers ordering food and grocery deliveries. Its gross bookings have repeatedly surpassed Mobility’s and now reaches Mobility’s pre-pandemic level. Second, the company has made strategic acquisitions to expand beyond food delivery. In June 2020, Uber acquired Cornership, a popular grocery delivery service in Latin America. A few months after, it added Postmates, which is very competitive in coastal cities and offers delivery-as-a-service for non-food items. In October 2021, Uber took over an alcohol delivery startup called Drizly. The company has been tinkering with marijuana delivery in Canada and waiting for the green light from the federal government before launching it in the U.S. Powered by the new capabilities, nonfood categories make up around 5-6% of Uber’s overall gross bookings and are expected to grow more in the future. Uber’s ambition is very simple: be the go-to app when consumers have a transportation need. 

PayPal

PayPal first made a name for itself by being a secure digital wallet and online payment system, especially as the primary checkout option on eBay. Since its spin-off from eBay in 2014, the company has added plenty of services to its mobile app and become a formidable two-sided network, due to relentless acquisitions and product development. End users can access various services on the current PayPal app, including paycheck deposit, high-interest savings, bill payment, remittance, credit cards, debit cards, in-store & online payment, BNPL, PayPal Credit, P2P payment, shopping deals and investing. PayPal’s end goal is to be the go-to Financial app for its users.

PayPal's offerings to consumers and merchants
Figure 2 – PayPal’s offerings to consumers and merchants. Source: PayPal

Cash App

Cash App started out as a P2P payment app in which users could transfer funds to anybody in the U.S. Nowadays, users can pay for purchases in stores and online with Cash App debit card and Cash App Pay; invest in stocks and cryptocurrency; or make deposits into checking accounts. In November 2020, Square bought the tax filing division of Credit Karma and subsequently added to its flagship app the ability to file taxes and receive tax refunds. In August 2021, Square paid $29 billion for Afterpay, one of the major BNPL players in Australia and in the U.S. It’s just a matter of time before Cash App turns on BNPL for its users and merchants. Cash App’s ambition is similar to PayPal’s; which makes it interesting to see how the two compete in the future.

Pros and Cons of partnering with Super Apps

Merchants stand to gain an additional payment option as well as more sales from Super Apps, but the story isn’t all rosy. Too much reliance on Super Apps means that merchants’d risk ceding the control of direct customer relationships. In business, few things are more valuable than that. Take Apple and Amazon for instance. Apple’s customer base is so loyal and attached to their brand that almost all developers or other brands take the back seat in negotiations . Amazon’s scale and iron grip on the valuable Prime base allows them to dictate terms over merchants. When you buy from a merchant on Amazon, do you feel more related to the former or the latter?

For banks, Super Apps can have adverse impact in a couple of ways. First, services such as PayPal in 4, Afterpay, PayPal Credit or PayPal/Venmo credit cards can reduce issuers’ credit card spend and subsequently balance as well as revenue. Secondly, it’s in their interest to have users maintain an in-app balance and keep funds away from banks’ checking accounts. Think about it this way: would you feel more poised to use PayPal when your PayPal balance was $20 or $0? That’s why Venmo credits dormant users $10 for downloading and logging into the app again or why Square wants users to keep tax refunds in Cash App balance. The reduction in deposits can raise banks’ cost of funds as well as threaten to cut off the most fundamental relationship with customers. 

On the other hand, Super Apps present a battleground for financial institutions vying for wallet share. Once the connection between checking accounts or debit/credit cards and these Super Apps is established, users often don’t want to go through the inconvenience of updating their default payment method. Hence, every financial institution wants to be the primary source of funds for consumers on these Super Apps to have a leg up over the competition. In this sense, Super Apps offer a business opportunity.

In summary, as you can see above, there are multiple paths towards the Super App status, whether an app’s starting point is to be in messaging, digital wallets or ride-sharing. I think all successful consumer-facing apps have ambition to gain the Super App status. If not, they’d do something wrong. It’ll be interesting to see how these Super Apps compete for mindshare as feature parity is established (meaning they all offer similar features). For merchants, working with Super Apps can be a double-edged sword. While the benefits these apps bring are very tempting, merchants need to keep in mind the risk of losing customer relationships. Like people usually say: don’t miss the forest for the trees.

Weekly reading 13th November 2021

What I wrote last week

PayPal’s Q3 FY2021 results

Good reads on Business

A very good Business Breakdown episode on MongoDB. Database can be very abstract and tricky to grab your head around. Hence. I appreciate folks taking the time to share knowledge and translate a tricky subject into laymen’s terms. Check it out!

2021 Retailer of the Year: Dollar General. “Food and consumables accounted for 77% of Dollar General’s annual sales last year of $33.7 billion. The expansion of cooler and freezer capacity at new and remodeled stores has for several years been described as the Goodlettsville, Tenn.-based company’s most impactful merchandising initiative. Dollar General began selling fresh produce at select stores last year, expanded the program to 2,000 locations this year, and its current plan is to add produce in up to 10,000 stores.” The refusal to call itself a grocer, in my opinion, is spot on. The name of the store is Dollar General, not Dollar Grocery. To change it to grocery would be a mistake as consumers would wonder: what kind of grocery am I getting for $1? Plus, the brand is about getting daily items for at a low price (may not necessarily be cheaper than at Costco, if you talk about unit economics). Hence, it doesn’t make sense to limit themselves to just being a grocer.

Why charging phones is a complex business. An interview with Anker CEO. A really interesting one in my opinion. They plan to avoid going into the phone business and stick to what they do best: accessories. Smart. Strategic.

Experts From A World That No Longer Exists. “Expertise is great, but it has a bad side effect. It tends to create an inability to accept new ideas.”

Facebook launches Shops in Groups and Live Shopping for Creators. The investments and focus on eCommerce, in my opinion, are strategically helpful to Facebook. Its giant cash cow has always been advertising powered by surveillance tracking which falls out of favor of many stakeholders. Politicians, lawmakers, more privacy-conscious consumers, powerful companies like Apple. Facebook has literally millions of people and thousands of brands using its platforms every day. It’s in a prime spot to be an eCommerce powerhouse.

Meta CTO thinks bad metaverse moderation could pose an ‘existential threat’. Boz wasn’t wrong there. What is interesting is that Facebook’s biggest challenge right now, before metaverse, is….moderation. In spite of billions of dollars and an army of technology plus human beings, Facebook still can’t crack the moderation code at scale, without pissing off a whole lot of people. Moreover, because its cash cow is advertising, Facebook has an inherent incentive to encourage engagement, whether it’s toxic engagement or not. I am not saying that moderation is easy. It’s super difficult and, like Boz said, almost impossible. But if your existential threat is impossible to solve, then it should give investors some pause.

Debit cards are hidden financial infrastructure. If you are interested in the U.S financial system, subscribe to this newsletter. I think the write-ups are helpful.

Stuff I found interesting

Hundreds of Ancient Maya Sites Hidden Under Mexico Reveal a Mysterious Blueprint. “In a new study, an international team of researchers led by anthropologist Takeshi Inomata from the University of Arizona reports the identification of almost 500 ceremonial complexes tracing back not just to the Maya, but also to another Mesoamerican civilization who made their mark on the land even earlier, the Olmecs.”

Brazilian Farmers Who Protect the Amazon Rainforest Would Like to Be Paid. “Governments, corporations and business executives are calling for a world-wide market to trade carbon credits so Brazilian farmers like Mr. Weis can be paid to help protect forests on their lands rather than cut them down to make way for more crops and cattle. Existing regional markets for carbon credits, from Europe to California to South Korea, show that the interest—and capital—is there for a global market. The value of carbon markets in Europe and elsewhere grew 23% last year to $274 billion, according to data provider Refinitiv Holdings Ltd. In a global market, carbon credits generated anywhere would be easily tradable anywhere else, just as a security issued by a Brazilian company can be bought and sold on the Nasdaq. Landholding farmers, indigenous groups, state governments and environmentalists could all sell credits.”

Spiders are much smarter than you think. ““There is this general idea that probably spiders are too small, that you need some kind of a critical mass of brain tissue to be able to perform complex behaviors,” says arachnologist and evolutionary biologist Dimitar Dimitrov of the University Museum of Bergen in Norway. “But I think spiders are one case where this general idea is challenged. Some small things are actually capable of doing very complex stuff.””

The nation’s last uranium mill plans to import Estonia’s radioactive waste. The tribes that live close to the U.S’ last uranium mill protest unambiguously and loudly the mill’s owner’s plant o import radioactive waste from Estonia since the water that feeds the tribes is ALREADY contaminated enough. Yet it seems that their concerns fall on deaf ears.

Perfecting the New York Street. “An achievable, replicable plan for a city that’s embracing public space as never before.” Yes, please. Fewer cars, less space for parking and more space for pedestrians

Stats

Cloud Computing Spend is expected to reach $848bn in 2025, according to Battery Venture

Vietnam is forecast to have 53 million online consumers by the end of 2021. The country has a population of 96 million people

“65% of U.S. consumers say they watch free, ad-supported video services”

Weekly reading 6th November 2021

What I wrote last week

I gave two examples from Financial Times on why you should be vigilant about what’s on the Net

Uber’s Q3 FY2021 results

Good reads on Business

Why acquisitions lead DTC exits. “An acquisition, especially from a larger firm in the space, can provide brands with the resources needed for sustained growth, like marketing expertise, a stronger supply chain, access to new customers or a wider distribution network. At the same time, an acquisition — as opposed to alternative exit methods like a public listing — keeps many aspects of the business, namely its financial reports, private. Acquiring a brand gives larger companies access to the brand’s data, e-commerce expertise and its customers. Through an acquisition, a larger company may also be looking for expertise, resources and sometimes real estate it doesn’t have yet, in addition to talent and customers”

The Facebook name was such a drag that employees referred to it as a ‘brand tax’. What it’s interesting yet has been so obvious to me for a while is that while Facebook is supposed to be an entity making decisions based on mountains of data, the call to add “from Facebook” to Instagram and Whatsapp was made unilaterally by Mark Zuckerberg based solely on his preference and against studies with concrete data from his staff. I am sure this isn’t the only instance that this sort of things happen in Facebook or quite frankly any organization

The economics of pumpkin patches. If you haven’t subscribed to The Hustle, you may consider doing so as their weekend write-ups are usually a joy to read.

A New Market Emerges for Online Delivery: 10-Minute Groceries. The idea of 10-minute deliveries is straightforward, but requires gigantic investments and great execution. In other words, it’s exceedingly difficult. On top of the operational challenges, consumers can switch to another provider at any time, making the cost of acquisition and retention expensive. My guess is that these providers use initial investments to generate demand and popularize the concept of 10-minute deliveries. Once consumers are used to the concept and demand it from retailers, these retailers have no choice but to offer it, either by building the capacity themselves or working with the delivery services. The likelihood of retailers building the capacity themselves is low, especially for small and medium-sized retailers. Hence, these delivery services can improve economies of scale by signing up more and more retailers. Oh and don’t forget the ads dollars that will definitely grow once the delivery apps become popular enough.

Is Facebook Bad for You? 360 Million Users Say Yes, Company Documents Show. “Facebook researchers have found that 1 in 8 of its users report engaging in compulsive use of social media that impacts their sleep, work, parenting or relationships, according to documents reviewed by The Wall Street Journal. A Facebook team focused on user well-being suggested a range of fixes, and the company implemented some, building in optional features to encourage breaks from social media and to dial back the notifications that can serve as a lure to bring people back to the platform. Facebook shut down the team in late 2019.

Rene Ritchie talked to two Apple executives about Apple’s switch to their own chip M1. Two things stood out to me from this interview: 1/ the minimalistic style that Apple follows is reflected on the principle that no transistor is wasted on the chip. If a transistor is on the chip, then it has a job to do and it really needs to be there; 2/ the construction of the M1 chip is a collaborative effort between multiple different teams that starts from the vision for better customer experiences. Other chips are designed to maximize benchmarks and meaningless stats and then hardware and software follow to accommodate the chips.

Stuff I found interesting

The untold story of the world’s biggest nuclear bomb. The deaths that stem directly from these nuclear bombs are tragic. What’s even worse is the long-lasting radioactive effect that can linger for hundreds of years. The next generations didn’t do anything to deserve that

‘Father of tiramisu’ Ado Campeol dies aged 93. “Campeol was the owner of Le Beccherie, a restaurant in Treviso in northern Italy where the famous dessert was invented by his wife and a chef. The dish, featuring coffee-soaked biscuits and mascarpone, was added to their menu in 1972 but never patented by the family. According to the dessert’s co-inventor, Chef Roberto Linguanotto, the dish was the result of an accident while making vanilla ice cream. The pair then perfected the dessert by adding ladyfinger sponges soaked in coffee, and sprinkling it with cocoa – calling it “Tiramisù”, which translates into English as “pick me up”.

A very good M1 Max Macbook Pro by MKBHD

Stats

Chile, Australia and Argentina have 75% of the world’s Lithium reserve with Chile making up 45%, according to World Economic Forum

Source: World Economic Forum

Companies on Apple’s App Tracking Transparency

Apple introduced App Tracking Transparency (ATT) in iOS14.6 several months ago. The idea is that any app that wants to track users even after users stop using the app has to ask for permission. If permission isn’t granted, the app or developers can’t follow users around off premise. Such a lack of signal could result in weakened…tracking, targeting, measure and of course, advertisers’ income. Since the introduction of ATT, some advertisers and developers have voiced fierce criticisms towards Apple for abusing its power. The criticisms grew harsher after Apple debuted its own advertising network. Even though Apple doesn’t rely on 3rd party data for tracking, the move and the awkward timing make it look like Apple doesn’t do it for user privacy, but merely for its own pocket. Privacy proponents, on the other hand, praise this move by Apple as it gives the end users a choice to allow tracking or not. Both sides have strong opinions. But what do the stakeholders have to say? How have companies been affected by the change from Apple?

In this post, I’ll cite as many opinions from relevant parties in this debate as I can, so readers can form their own opinion. I’ll add my own thoughts on this debate in the end

Again, look, I think from our perspective, we haven’t really seen a negative impact of the Apple changes. As we said before, it’s beginning to become a more complex world from a data and privacy perspective.I think that makes the advice to give our clients more important. It will have an impact on individual media owners, depending on their business model. And I think those that have been impacted have been those companies that tend to have sort of a big app download business, which is linked very carefully to the ability to track what’s happening. That’s not part of the business in which we really operate, so I think accounts for the — perhaps the surprises that you saw there.

WPP CEO Mark Read – Q3 Earnings Call

Yes. So for us, it didn’t really have much of an impact. We did — like a lot of people, we’re very aware of it. We have a very big brand business which wasn’t significantly impacted at all. And the fact that we are — have a ton of first-party data with all of our users being logged into the service really helped us grow. So we didn’t really see much of an impact at all. We don’t see much going forward, although we’ll continue to monitor it. And Q4, for us, the biggest impact on Q4 will just be continued growth in podcast and in inventory. We know the demand is there. We know the advertisers are there.So for us, it’s just continuing to expand the inventory available for advertisers.

Spotify CFO Paul Vogel – Q3 2021 Earnings Call

Let me also spend a moment on ATT. We continue to see opportunities around personalization on Twitter as we better leverage our unique signal to improve people’s experience and show their more effective ads across both brand and direct response. The revenue impact we experienced from ATT in Q3 increased on a sequential basis but remains modest. The impact of ATT is likely to vary across ad platforms given the unique mix of ad formats, signal and remediations on each as well as other factors, the mitigations we put in place and the speed with which we’ve adopted new standards like the SKAdNetwork and resulting changes across our technical stack have contributed to minimizing the impact to us.

Since the launch of ATT in April, we’ve invested in supporting SKAdNetwork, opening up 30%-plus more inventory and scale on iOS and launch support for view-through attribution and SK Campaign ID management features in the Twitter ads manager. It’s still too early for Twitter to assess the long-term impact of Apple’s privacy-related IOS changes, but the Q3 revenue impact was lower than expected, and we’ve incorporated an ongoing modest impact into our Q4 guidance. We’ve seen our revenue product development, both related to and distinct from ATT, improved the performance of our products, and we expect that to continue.

Twitter CFO Ned Segal – Q3 2021 Earnings Call

In terms of the iOS 14 changes specifically, they had a modest impact on YouTube revenues. That was primarily in direct response. I think as you all know well, focusing on privacy has been core to what we’ve been doing consistently

Alphabet/Google CEO Ruth Porat – Q3 2021 Earnings Call

Rich, thanks so much for the question and share your disappointment. This has definitely been a frustrating setback for us. But I think over the long term, these privacy changes and protecting privacy for users of iOS and, of course, the Snapchat community is really important to the long-term health of the ecosystem and something that we fully support.

I think when we saw these changes coming, our primary focus was the performance of our advertising platform in the face of this signal loss. So could we still really drive advertising performance, optimize campaigns, make sure our ads were in front of the right people. And we spent the vast majority of our engineering time and effort and energy making sure our ads were still really effective. And we did all sorts of revenue back testing to make sure that we could be revenue neutral. And we were really confident in our ability to drive results with our advertising platform despite the signal loss.

But what I think we really underestimated were the tooling changes. And so what I mean by that specifically is that advertisers have essentially for a long time now, used a set of really sophisticated tools to measure and optimize their campaigns. So that allows them to test out a bunch of different creative and see what’s performing more effectively and so on and so forth. And the big change there was that with these new Apple changes, those tools were essentially rendered blind. And in their place, Apple released a new product called SKAdNetwork that allows advertisers to measure across different advertising platforms but without a lot of the flexibility that they’re used to. So for example, you can only really measure your advertising results using the success parameters that Apple is already defined. The reporting is delayed for a significant period of time and often unavailable, if you don’t hit a certain threshold of conversion. It’s very hard to see performance on a creative level.

Snapchat CEO Evan Spiegel – Q3 2021 Earnings Call

A dozen e-commerce companies interviewed by The Wall Street Journal said they now have to spend a lot more money on these ads to get the same number of sales from them that they could expect before the new feature was rolled out. They also can’t get enough data to know how effective these ads are at driving purchases. Many have reduced their ad spending on targeted-ad platforms. In a July poll of 118 e-commerce store owners by eCommerceFuel, 62% said they had decreased their Facebook ad spending since the iOS upgrade.

Source: WSJ

We’ve been open about the fact that there were headwinds coming, and we’ve experienced that in Q3. The biggest is the impact of Apple iOS 14 changes, which has created headwinds for others in the industry as well, major challenges for small businesses and advantaged Apple’s own advertising business. We started to see that impact in Q2, but adoption on the consumer side ramped up by late June, so it hit critical mass in Q3.

Overall, if it wasn’t for Apple’s iOS 14 changes, we would have seen positive quarter-over-quarter revenue growth. And while we and our advertisers will continue to feel the effect of these changes in future quarters, we will continue working hard to mitigate them.

On targeting, we focused on improving campaign performance even with the increased limitations facing our industry. We’re building commerce tools to help businesses reach more new customers and get more incremental sales. And over the longer term, we’re developing privacy-enhancing technologies in collaboration with others across the industry to help minimize the amount of personal information we process while still allowing us to show relevant ads. Progress in these areas will take time and will be a focus for us throughout 2022 and beyond.On measurement, as we wrote in a recent blog post, we believe we are underreporting iOS web conversions. This means real-world conversions like sales and app installs are higher than what’s being reported from many advertisers, especially small advertisers. We’re making good progress fixing this. We think we’ll be able to address more than half of the underreporting by the end of this year, and we’ll continue to work on this into 2022.

Facebook COO Shreyl Sandberg – Q3 2021 Earnings Call

Kathy Huberty: And Tim, as a follow-up. We recently surveyed 4,000 consumers in the U.S. and China, and the feedback is most of them don’t want to pay for apps or services direct with the developer. They value the security, privacy, ease of transactions with the App Store. So how do you think about balancing the regulators push for more choice with a customer base that’s happy with the existing experience?

Tim Cook: The main thing that we’re focused on, on the App Store is to keep our focus on privacy and security. And so these are the 2 major tenets that have produced over the years a very trusted environment where consumers and developers come together and consumers can trust the developers on the developers and the apps or what they say they are and the developers get a huge audience to sell their software to. And so that’s sort of #1 on our list. Everything else is a distant second.

Apple Q4 2021 Earnings Call

My take

This issue features different stakeholders with varied interests. Even from the advertiser side, companies receive the change from Apple in various ways, depending on whether they are affected by it more or less than their rivals. Hence, when it comes to the question of whether ATT is a net benefit change, then we have to ask: for whom? For consumers, I do think it’s a great development. The surveillance tracking has been the standard practice in digital advertising for years. However, it doesn’t have to continue this way in the future. Consumers used to not have a say in the matter. Now they do. The choice is totally up to them and I think it’s great.

For businesses that rely on digital marketing, it’s undeniable that there is a short-term pain. As you can see above, some have to invest more money in digital ads for the same result. While I feel for them, the fact and the matter is that changes in external environments are part of doing business. Something that business owners have to encounter and overcome.

Regarding advertisers, I’ll say the same thing. The big change has finally arrived. Advertisers can either adapt to a society that is more conscious of privacy or keep complaining. Based on the commentary above, some advertisers have had little adverse impact so far from ATT. They invested in new tools, first-party data, distribution and products to overcome the obstacle. Even Facebook, the biggest whiner, also talked about how they tried to minimize the impact on their business. I don’t blame Facebook or any advertiser for vocal opposition. They do what they have to for their interest. But if millions of dollars is created in spite of violation of consumer privacy, then perhaps it’s time to change.

For Apple, even though apps and developers are important stakeholders in their ecosystems, the number one priority is still consumers. Whether you like Apple or not, the company is trusted by consumers, especially on the privacy front. For years, they have implemented services, software and hardware features that promote privacy. Because of this track record, for the time being, I believe in Apple. Of course, the company also wants to grow their highly profitable advertising network. Where Apple earns credit is that they manage to find a sweet spot that overlaps the two interests. With that being said, the introduction of Apple Search Ads after ATT plants the seed of doubt over their motive. Does it mean that what Apple did is inherently wrong? Not really. Companies exist to make money and look out for their and their shareholders’ interest. Apple is doing what it believes to be the best for their business. Is Apple a bit too much when it speaks from an ivory tower while launching its own ads network? Yeah, but that’s what every corporate Marketing department does.

Based on what I have seen so far, and I will continue to follow this issue, the advent of ATT is a significant change with big consequences in eCommerce, mobile ads and digital ads. I think a year from now, we will not decry ATT as something that wrecks peoples’ livelihood. Instead, it will bring about positive changes and innovation. Perhaps a similar move from Android within the next 2,3 quarters?

Disclaimer: I have a position on Apple, Facebook, Snapchat, Spotify

Weekly reading – 9th October 2021

What I wrote last week

The Mundanity of Excellence

Good Business reads

Measuring the Moat. An absolute belter. If you want to understand the bases of competitive moats without paying thousands of dollars for a degree, read this one article instead. Oh and it’s marvelously free.

Google’s pivot away from bank accounts shows why finance is a tough industry for tech giants. The article cited the fear of damaging the cloud business and the regulatory scrutiny as the reasons why Google is abandoning its plan to get into the financial world. But there is perhaps one more reason. Google may have concluded that their organization isn’t set up to do well in the financial world and the likes of Apple or PayPal are far better positioned to compete. Why risking billions of dollars when the upside doesn’t look that likely?

Inside the Rise of the Game-Changing ‘Chipotlane’. “Digital represented a $916 million business for Chipotle in the second quarter of 2021. When Chipotle collected $262 million in digital sales in Q2 2019, it marked a 99 percent year-over-year rise and was more than it produced in all of 2016. The Chipotlane doesn’t have a menuboard. It’s a digital order drive-thru pickup lane where guests who pay in advance arrive and get their food from a quick handoff. Restricting Chipotlanes to digital orders stripped friction out of the process. And it avoided past concerns that kept Chipotle from ever seriously considering the channel, fast casual perception or not. New Chipotlanes continue to open with sales 20 percent higher than traditional formats. They operate with 200 basis-points higher restaurant-level margin. This incremental profit comfortably offsets the $75,000–$100,000 cost of a Chipotlane and yield cash-on-cash return of at least 500 basis points above standard locations, BTIG analyst Peter Saleh said.

LRT Capital Q3 Investor Letter. It includes a nice write-up on Tractor Supply and was written by an intern

Other stuff that I found interesting

Facebook to act on illegal sale of Amazon rainforest. Significant changes only happen when those in power put it to good use. As in this case. It’s a waste and pity that in some cases, powerful entities like Facebook take no action because they fear backlash or hit to their bottom line.

The great Koh Kong land rush: Areas stripped of protection by Cambodian gov’t being bought up. The amount of forest loss has increased markedly in Cambodia in recent years. The same phenomenon has happened in Vietnam for years. What good is technology when we can’t preserve the Earth and natural landscapes for future generations?

iPhone Macro: A Big Day for Small Things

Writing In Public, Inside Your Company. This makes me think a lot about what I can do at work to make writing more popular

Stats

Almost 78% of all new cars in Norway in September were battery electric vehicles

Only 1 out of 4 households in Europe invest in equities and funds since 2008, compared to 50% in the U.S

90% of American shoppers still consider prices as the most important driver in fresh food consumption

40% of US shoppers will start their holiday shopping earlier this year than they did last year. 22% have already begun, with another 22% planning to get started before Black Friday, per Klarna

87% of teens own an iPhone and 88% expect an iPhone to be their next phone; Apple is No. 1 watch brand for first time

The productivity app Notion announced that they currently have 20 million users, 80% of which are outside of the U.S

Weekly reading – 18th September 2021

What I wrote last week

The importance of reading footnotes

Interesting articles on Business

Facebook Says Its Rules Apply to All. Company Documents Reveal a Secret Elite That’s Exempt. The sentence “we’re not going what we say publicly we are” can be applied to any company to some extent. The problem for Facebook is that the trust-eroding incidents happen way too often for a company with grandiose ambitions. Facebook wants us to trust them and use some of the new services for Facebook Pay, but how can trust be formed when stuff like this happens? I am sure this won’t be the last time that Facebook got a PR black eye.

Intuit Agrees to Buy Mailchimp for About $12 Billion. “Mailchimp, established in 2001, is based in Atlanta and is still owned by founders Ben Chestnut and Dan Kurzius, according to its website. The company, which hasn’t taken any outside funding, began as a web-design agency and ran an email-marketing service on the side that later became its focus. Today it also offers other digital-ad services and customer-relationship- management tools. Already popular among small businesses, Mailchimp became something of a household name in 2014, when it advertised on the first season of the hit podcast “Serial.” The company now serves 2.4 million monthly active users, including 800,000 paying customers. Half of its customers are outside the U.S. It had about $800 million in annual revenue last year, a 20% rise from the year earlier.”

Square Offers Sellers and Consumers a New Checkout Experience with Cash App Pay. It’s a natural progression in my opinion. Square is competing with PayPal to be the Super App for consumer financial needs as well as the go-to partner for commerce. PayPal has enabled payments by QR Code and mobile wallet for a while. Now, Square and Cash App have it too.

Facebook Knows Instagram Is Toxic for Teen Girls, Company Documents Show. “For the past three years, Facebook has been conducting studies into how its photo-sharing app affects its millions of young users. Repeatedly, the company’s researchers found that Instagram is harmful for a sizable percentage of them, most notably teenage girls. Expanding its base of young users is vital to the company’s more than $100 billion in annual revenue, and it doesn’t want to jeopardize their engagement with the platform. The features that Instagram identifies as most harmful to teens appear to be at the platform’s core. The research has been reviewed by top Facebook executives, and was cited in a 2020 presentation given to Mr. Zuckerberg, according to the documents.” Guess what Facebook chose to do? Nothing. Absolutely nothing.

Adobe jumps into e-commerce payments business in challenge to Shopify. The race to be the force that powers eCommerce features some of the biggest firms in the world: Amazon, Walmart, Shopify, PayPal, Adobe and Square. If you notice, the first three have fulfillment capabilities. PayPal bought Happy Returns. So it’s only a matter of time the latter three build out their own fulfillment muscle.

Amazon Is Doing It. So Is Walmart. Why Retail Loves ‘Buy Now, Pay Later.’ “Shoppers spend more at Macy’s when they use installment plans offered through Klarna Bank AB, Macy’s CEO Jeff Gennette said on a recent earnings call. Klarna also is helping the retailer attract younger customers, he said. A desire to boost loan approvals was among the reasons Walmart in 2018 decided to end its decadeslong credit-card partnership with Synchrony Financial. Citigroup Inc. saw a sevenfold increase in the dollar amount of credit-card purchases converted to installment loans in July, compared with the same month a year prior, said Gonzalo Luchetti, head of Citigroup’s U.S. consumer bank.”

Other stuff I find interesting

One Woman’s Mission to Rewrite Nazi History on Wikipedia. I hope down the line, years from now, there will be folks who come across what Ksenia Coffman did and be thankful that she did. Same way as I do today.

What Makes Work Meaningful — Or Meaningless

Stats

“Close to half of all new U.S. gun buyers since the beginning of 2019 have been women”

55% of shoppers start their 2021 holiday season shopping before Thanksgiving

Source: JungleScout

Weekly reading – 28th August 2021

What I wrote last week

My review of three books: 1/ Stray reflections; 2/ An ugly truth and 3/ Obviously awesome

Business

Facebook says post that cast doubt on covid-19 vaccine was most popular on the platform from January through March. The fact that this article was published on a Saturday means that Facebook doesn’t want too many people to see it. I honestly can see the bull case for Facebook. However, it will be remiss to not mention the monumental challenge of content moderation that the company has to face. Because when false information runs rampage on its platforms, it may affect the engagement of users; which in turn can adversely affect advertising that is Facebook’s bread and butter.

Why You Can’t Find Everything You Want at Grocery Stores. Retailers are suffering from supply shortages; which is exacerbated by higher-than-expected demand. But if these hiccups are overcome, it means that there will be a growing retail segment in the coming months and by extension, likely, a healthy economy.

Diem: A Dream Deferred? Facebook has a lot going to their advantage: almost limitless resources, four of the most popular social networks in the world, 1/3 of the global population are its users, a money printing machine that is growing at a scary clip. But there are a couple of challenges that Facebook will have a hard time to overcome. First, it’s content moderation. Should I say: content moderation without pissing off anybody. As you can see, the task sounds almost impossible. When you moderate content by people with vastly different ideologies, you are almost certain to upset somebody. Facebook doesn’t have the luxury of having upset users or lawmakers. Hence, it’s not a problem that Facebook will easily solve. Second, public trust. The company has been around for almost 20 years and it has not garnered a lot of trust. As long as it continues to rely on advertising, capturing data and more importantly be embroiled in misinformation, the public trust will likely continue to evade them. As the article from Coindesk pointed out, trust is paramount in the payments/finance world. How on Earth would Facebook succeed in it?

The Digital Payment Giant That Adds Up. Merchants are going down the omni-channel route that allows shoppers to shop in multiple ways. This will be the key to Adyen’s growth. I like the fact that they prefer building in-house and maintaining the one-ness of their platform to acquiring capabilities from other companies through M&A and bundling different tech stacks into one. Working at a company that suffers from systems not talking to each other, I know first-hand how that could become a significant problem in no time. In addition, I really look forward to Adyen coming to the U.S with a banking license. I am not sure the folks at Marqeta share my enthusiasm.

Buying a bank turned LendingClub around. Now the fintech industry is watching. It requires a lot of work and preparation to get a banking license. The benefits of owning a charter; however, include less dependency and more control over your own fate, margin and operations.

What I found interesting

Inside Afghanistan’s cryptocurrency underground as the country plunges into turmoil. One can argue that cryptocurrency can be a savior in crises like what is going on in Afghanistan. The thing is that if something requires there to be a crisis to drive adoption, I am not sure that something is as good or revolutionary as some may think.

An immense mystery older than Stonehenge. It’s profoundly impressive to me that prehistoric people could transport stones that weighed tons to the top of a hill 6000 years ago. Think about that for a second. They must not have had all the tools that we came up with up hundreds of years later. It’s just extraordinary. If I ever have enough money and time, Gobekli Tepe, Machu Picchu, Egypt and Greece are where I wish to go.

Bigger vehicles are directly resulting in more deaths of people walking. Take a trip to Europe and you’ll see how absurdly big vehicles in the U.S are compared to those in Europe. And the implications aren’t necessarily positive. I’d argue that it’s considerably better to have smaller vehicles or fewer vehicles on the roads.

European Sleeper Trains Make a Comeback. I really wish that Americans would share the same enthusiasm about travelling by train as Europeans do. Personally, I enjoyed the train ride from Chicago to Omaha. If there were a reliable Wifi, I’d take trains every single time over flights and especially driving.

Apparently, there is a 2021 Global Crypto Adoption Index and Vietnam is ranked as #1. Below are the two reasons that experts say are why Vietnam’s adoption is so high. I am not sure how I should feel about it. On one hand, this index is not negative in nature. Hence, the #1 ranking certainly feels good. On the other hand, the alleged reason that young people don’t know what to do with ETF is alarming. That implies a lack of understanding in investing and a tendency to gamble in cryptocurrencies.

“We heard from experts that people in Vietnam have a history of gambling, and the young, tech-savvy people don’t have much to do with their funds in terms of investing in a traditional ETF, both of which drive crypto adoption,”

Source: CNBC

Stats that may interest you

In 2019, 70% of music in Japan was consumed via CDs

eCommerce made up 13.3% of total retail sales in the U.S in the 2nd quarter of 2021, indicating that the Covid effect has tapered off

46% of retail BNPL shoppers didn’t use their credit cards because they wanted to avoid high interest rates

The U.S online lottery ticket market will reach $2.3 billion by the end of 2021, a 25% YoY growth

Book Review – Obviously Awesome – An Ugly Truth: Inside Facebook’s Battle for Domination – Stray Reflections

In this post, I’ll briefly review the three books I finished recently. Let me know in the comment if you read any of them and what you think about it.

An Ugly Truth: Inside Facebook’s Battle for Domination

Written by two award-winning New York Times journalists Sheera Frenkel and Cecilia Kang, An Ugly Truth covers Facebook’s battle with misinformation and how the company, in my opinion, has failed so far in preventing bad actors from abusing Facebook’s platforms for their agendas. The book draws from hundreds of interviews with sources, including former & current employees who courageously put their career in danger to speak the truth, and takes readers inside the company and throughout the past few years when the conflicting interests came to their heads. Facebook has perfect recipes for a disaster.

The company’s purpose is to connect everybody on Earth. It means that you’ll connect not only the good guys, but also the bad guys. To Facebook, the engagement level is always one of the high priorities. The more engaged users are, the more money the company can make from advertising. As a consequence, any idea or initiative, no matter how constructive or beneficial to the company, would be shelved if it was considered hurting the user engagement. Additionally, the company is Mark Zuckerberg’s, plain and simple. He can fire the Board of Directors if he wants to and there is nothing anybody can do about it. At first, Mark didn’t seem to believe that his creation could be leveraged for harmful purposes. He seemed to actually believe that Facebook was a positive contributor to the world in a sense that since everyone should have the freedom of expression, his platforms were there to facilitate it. It is this belief that led to some of his controversial decisions when it came to content moderation. Last but not least, the bureaucracy and office politics at Facebook also played a role in this mess. Take Stamos and his threat intel team as an example. Alex Stamos was hired by Facebook to be its Chief Security Officer. Along with his team, Stamos unearthed how Russia misused Facebook to interfere in the U.S election. They tried to sound the alarm for months, but their efforts were thwarted and ignored by the upper management team. When they finally got a meeting with Mark and Sheryl, Stamos suddenly became the culprit and scapegoat.

Combine all of those factors together and you can see why Facebook was always poised for a disaster. There are other stories in the book that could highlight how efforts to rein in misinformation always took a back seat at Facebook for various reasons. While the theme of the book may not be anything new, the behind-the-scenes stories are riveting and interesting. If you want an easy read and like to learn about the inner workings at Facebook, this should be a good one to pick up.

Obviously Awesome: How to Nail Product Positioning so Customers Get It, Buy It, Love It

Product positioning is hard. It’s virtually impossible to create a completely new product or service without any direct or indirect alternatives. The challenge then becomes: how can you position your product so that your customers know what it stands for, among all the noises and distractions? In this book, positioning expert April Dunford offers 10 concrete steps to address your positioning problems, along with specific case studies to make her points. As a business student at bachelor and Master’s degree level, I learned about marketing and positioning. So, some of the points April made are not novel to me. Yet, it’s still interesting to look at positioning from her point of view and it’s great to brush upon what I learned in the past. Personally speaking, I think this book is more suitable for B2B products/services than B2C.

Her writing is easy to understand and doesn’t involve a lot of jargon. It’s quite witty in some parts; which makes the experience more enjoyable. I kinda like the book. You can learn quite a lot from a $7 book (the Kindle version), a cost-effective option compared to hundreds of dollars spent on a few credits in college.

Stray Reflections

Jawad Mian hails from Pakistan and is the founder of Stray Reflections, a macro research firm. Two of his obsessions are writing and finding truth in life; which are the inspiration for this book. In it, Jawad shares with readers some of his intimate personal experiences, from growing up in Pakistan to adulthood and fatherhood, as well as important lessons about life that he picked up along the way. In addition to his stories, the author puts to great use some excerpts from classic literature by historical figures. In a busy society full of angst and distractions, this small book helps readers pause, catch their breath and reflect on what matters in life. Reading it was invigorating and refreshing for my soul.

“No distance of place or lapse of time can lessen the friendship of those who are thoroughly persuaded of each other’s worth.”

I’ve grown up to believe there are no coincidences in life. We are always in the right place, and everything happens at exactly the right time. Instead of obsessing about our goals or destination, maybe we should remain in the present moment and just let the universe move about. Like the river, life has its own flow; we cannot impose our own structure on it. We can’t control it—all we can do is listen to its current. Sometimes, when the outside noise dulls down, the quietness within reveals a lot, but only if you listen intently.

I beg you, to have patience with everything unresolved in your heart. Try to love the questions themselves as if they were locked rooms or books written in a foreign language. Don’t search for the answers, which could not be given to you now, because you would not be able to live them. And the point is to live everything. Live the questions now. Perhaps then, someday far in the future, you will gradually, without even noticing it, live your way into the answer.

Life is a journey, and we are all just travelers. It’s okay to fall down or not know where you’re going. Nature has marked out a path for each of us, and it won’t let us stray too far from our course. There is no shame in falling, only in failing to rise and get back up on our feet. As Paulo Coelho said, the secret of life is to fall seven times and to get up eight times. Even success, it has been well said, is nothing more than moving from one failure to the next with undiminished enthusiasm.

Weekly reading – 7/17/2021

What I wrote last week

A strong debut weekend of Black Widow highlights Disney’s competitiveness

Business

The Verge did a great comparison of smart trackers from Apple, Samsung and Tile. Tile is really in a bind here. Its products are not substantially better than the others, to the extent that can justify the inferior network of trackers that Apple and Samsung can boast. Unfortunately, that’s the one thing that makes these trackers valuable in the first place

Facebook Users Said No to Tracking. Now Advertisers are Panicking. There seems to be a genuine angst from developers and advertisers over Apps Transparency Tracking (ATT). The thing is that when it comes to tracking, the interests of developers and consumers aren’t necessarily aligned. In that case, Apple has to pick a side and it decided to side with consumers; which is an understandable decision for two reasons: 1/ it’s what Apple has always been about and 2/ Consumers are ultimately their source of income and profit. Sure enough, it’s in Apple’s interest to have a great relationship with developers. But when it comes to the list of top reasons why Apple exists, I don’t think assisting all developers for free is anywhere near the top. The whole situation seems like when oil companies complain about governments’ policies that curb oil extraction in order to protect everyone else.

Inside Facebook’s Data Wars. When you allow misinformation to spread frictionlessly, it’s kinda hard to convince others that you are not an echo chamber of misinformation

Dara Khosrowshahi, Dad of Silicon Valley

Profile of Melanie Perkins, Co-founder and CEO of Canva

What I found interesting

Lewis Hamilton: ‘Everything I’d suppressed came up – I had to speak out’

Is a Graduate Degree Worth the Debt? Check It Here. The debate over whether a university degree is worth the financial investment is very nuanced and it’s not just about the money. However, it’s undeniable that what one can learn from the Internet for much less money increasingly puts in the spotlight the high tuition fees and all the nonsensical charges that schools levy on students

Alcohol Use Linked To Over 740,000 Cancer Cases Last Year, New Study Says

Stats that may interest you

Since 1928, every S&P500’s bull market cycle lasted more than 1,100 days on average while that of a bear market cycle averaged 207 days

Engineers in Japan reached the new record for Internet speed at 319 Terabits per second, two times faster than the previous record

Edge_Retail_Insight-top_global_food_retailers-channels.png
Source: Supermarketnews