Here’s a selection of what I found most interesting recently. I’m experimenting with some design changes…not sure how it looks via email. May be better to read directly in the browser.
Of course, the real item of interest is what happens with the elections, whether there will be a constitutional / election crisis, and whether the global state of affairs change in anyway for all citizens of the world.
And tech is increasingly coming under fire from all sides. How tech behaves and reacts over the next month could dramatically change how tech is regulated in the coming months and years.
📺 Media
Snap is still relevant if you haven’t heard.
#1 Snapchat Earnings Blowout
The company posted an adjusted $0.01 per-share profit, beating expectations of a $0.04 loss, but the real headline was that the company delivered $679 million in reported revenue, smashing past Wall Street expectations that pinned their performance for the quarter around $555 million.
The revenue numbers represented 52% year-over-year growth, showcasing a huge comeback for the company which has faced some difficult quarters as a public company since making their debut.
User growth was up 4% to 249 million daily active users from the 238 million they reported at the end of last quarter, marking an 18% year-over-year increase. The company still posted a net loss of $200 million, but that’s a 12% improvement from last year’s numbers.
Source: TechCrunch
Not that long ago, Snap was left for dead. But Snap continues to innovate and grow the user base. The user base isn’t growing at an eye-popping level, but expectations aren’t particularly high. Snap likely also gained some users in the US and India as both countries interfered with Tiktok’s operations over the last few months.
I continue to question how much more potential Snap has, but there is no questioning that Snap remains relevant and continues to do interesting things.
Snap is doing a lot of interesting things when it comes to AR. And they seem to be able to do it in a way that is fun and culturally relevant.
For example:
#2 Snapchat’s Anime Lens was a Huge Hit
Snapchat’s anime filter was used more than 3 billion times in the first week after it was released, Snap said today, confirming what we already knew: it was a huge hit.
The filter, which morphs its subject into an anime character, is just the latest in a line of fun AR lenses from Snapchat that have gone viral and helped drive usage on the platform.
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Snap called out the success of its AR features, in particular, when highlighting where it saw growth in the longer term. “The adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us,” Snap CEO Evan Spiegel said in remarks alongside the company’s earnings release for the third quarter of 2020.
Source: The Verge
Makes you look like this:
Source: The Sun
But beyond fun filters, Snap is building out some interesting technology that will be highly relevant when AR glasses are prevalent.
One of the most important shifts in the next 5 years in Capital Flywheels’ opinion is the direct mapping of the digital world onto the physical world. Right now there is a digital version of the physical world, but it is not directly mapped. You have to have use search to connect the dots. But AR glasses and filters can allow direct, passive mapping of the digital world onto the physical world.
And one way of doing that is through barcodes, which Snap is experimenting with. Also helps with commerce, which obviously would grow the long-term monetization potential of the business.
#3 Snapchat Adds New Barcode Scanning Capacity for Selected Products
Back in June, at its annual partner summit, Snapchat announced some coming additions for its Snap Camera, including the ability to identify plants, dog breeds and get additional product information, like nutrition data, by simply ‘scanning’ a dog/plant/product within its camera function.
Now, we’re seeing the next steps for this, with users now able to scan food and wine labels to get more information on certain products.
Source: Social Media Today
What do I mean by the merging of the digital and offline world?
I mean something like this demo:
While Snapchat is experimenting with the future, Facebook continues to do very, very pragmatic things as they shift towards e-commerce.
I definitely sound like a broken record by now, but the faster Facebook shifts away from politics and towards something else (like commerce), the better.
#4 Instagram Fan Badges for Live Video
Instagram is today introducing a new way for creators to make money. The company is now rolling out badges in Instagram Live to an initial group of over 50,000 creators, who will be able to offer their fans the ability to purchase badges during their live videos to stand out in the comments and show their support.
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Instagram users will see three options to purchase a badge during live videos: badges that cost $0.99, $1.99, or $4.99.
On Instagram Live, badges will not only call attention to the fans’ comments, they also unlock special features, Instagram says. This includes a placement on a creator’s list of badge holders and access to a special heart badge.
Source: TechCrunch
This isn’t exactly commerce, but it does continue to seed the ecosystem with monetization potential for creators beyond advertising in a way that feels more organic. Unlike advertising, which links monetization to content that may or may not be related, these badges are directly linked to the user side of the equation Users will only pay if they enjoy the content. It also diversifies Facebook’s revenue streams. This will likely also become an important method for incentivizing user-generated content and services since services, unlike products, are not easily monetized through e-commerce platforms.
💸 Payments
#5 Ant Group Valued at up to $450 Billion?
Chinese billionaire Jack Ma’s Ant Group is on the cusp of pulling off the world’s largest initial public offering (IPO), and investors are pouring over its books, trying to calculate its worth.
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The core group of bankers orchestrating the share sale are sending research to investors this week pegging Ant’s near-term valuation roughly between US$350 billion and US$450 billion, including the money it is raising in the IPO, according to people familiar with the matter.
At the high end of that range, the fintech giant will eclipse JPMorgan Chase’s market capitalisation of US$391 billion, or, on a different scale, it will top the size of the economy of either Nigeria or Austria.
Source: SCMP
The world’s most famous fintech company is about to go public with one of the highest market capitalizations of any new IPO in history (exceeded only by Saudi Aramco). This deal has been anticipated for years.
Once upon a time, Capital Flywheels would have been very excited for Ant Group to go public, but now the context has changed. The market cap of the company has risen dramatically. The operating environment of the company has also changed with regulations significantly clamping down on the long-term potential of the company. The Chinese government has increasingly regulated away the company’s ability to truly disrupt the stodgy banking system, forcing Ant to become more of a technology provider to the banking system. Nonetheless, the Chinese financial system is so massive that Ant can still be an attractive investment. However, the timing is a little awkward…being jammed through right before US elections. Could be interesting depending on how the deal performs and what happens post-election.
The key risk is that Ant is now a financial utility. If China’s financial system comes under stress because of external politics, there is a non-zero chance Ant will become a government policy tool.
#6 Paypal and Venmo to Offer and Accept Cryptocurrencies
PayPal on Wednesday announced it would begin supporting cryptocurrencies for the first time, allowing any PayPal account holder to store, buy, and sell popular virtual currencies starting later this year. The announcement makes PayPal arguably the most significant company in the financial tech sector to adopt support for virtual currencies.
Source: The Verge
Square’s Cash App has offered similar functionality since 2018. And just a few weeks ago, Square announced that they have invested in $50 million of Bitcoin as well. However, PayPal seems to be making a broader commitment to support a wider number of cryptocurrencies.
While Capital Flywheels continues to think cryptocurrencies are an interesting technology but a questionable investment, Capital Flywheels would love to be able to invest in crypto infrastructure…of which Cash App and PayPal are now potentially becoming. Both Square and PayPal are in the Paper Portfolio.
🛍 Commerce
#7 Amazon Revamps Search Bar to Improve Discovery
Internal documents reviewed by Business Insider show the company’s plans to use machine-learning technology to make its search bar smarter, with better personalization and contextualization features. Search improvements across Amazon’s website is expected to contribute up to $8.8 billion in indirect sales this year, as they help shoppers buy more on the site, one of the documents said.
As part of the push, Amazon has tested a number of new search features in recent months, including product images and Prime links that show up directly within its autocomplete search predictions, based on screenshots seen by Business Insider. Amazon also considered showing ads as an autocomplete suggestion, though it’s unclear whether it started testing it, one person familiar with the plans said.
The moves show how Amazon is working to address one of its biggest weak spots — its reputation of being a great place to order things when you know what you want to buy, but just a mediocre site to browse and discover things you didn’t know you needed. Better search box features will be a key component for Amazon to go beyond its core strength in choice and convenience.
Source: Business Insider via USA News Site
This feels extremely overdue. For all the data that Amazon has, the experience is neither tailored nor fun. As Capital Flywheels wrote a few years ago, Amazon historically seems dogmatically focused on only being highly convenient. This gives Amazon a very important moat, but Amazon likely needs to do more in order to continue to win. The Achille’s heel for Amazon has always been discovery. No one goes on Amazon to simply browse for fun. People only go on there to find something they need. But the vast majority of commerce has always been about getting people to buy things that they want rather than need. And the retailers that can create that desire and want are the ones that control commerce.
This seems like a step forward, but they are still very far away from diffusing the potential threat from the social commerce paradigms that are developing within Instagram / Facebook, Pinterest, Snapchat, and others.
I suspect the data they have is not useful for discovery. The data they have is good for showing you more of what you have already bought or are interested in. But part of the magic of discovery is that you don’t know what you want. The social data that Instagram / Facebook, Pinterest, and Snapchat are much better at doing that. The influencers and tastemakers in those ecosystems are also highly valuable. Amazon doesn’t have much of that at the moment.
Although the US looks increasingly competitive to me, it’s good to keep in mind that Amazon has a very large opportunity abroad, especially in India. The next 20 years could do for India what the 2000s did for China. Amazon missed out on China, but Amazon is definitely investing to make sure they don’t lose India.
#8 Flipkart and Amazon Vie for Leadership During India’s Diwali Shopping Season
Amazon and Walmart are big rivals in the US but they are also big rivals in India where Walmart owns Flipkart and Myntra. Prime Day took place around the globe last week except for in India where major shopping happens around the holiday of Diwali. People don’t just buy things specifically for the holiday though (clothes/home decor), but for everything such as computers, mobile phones, cars, bikes and more.
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New installs, or downloads, grew more this year than any year previously. This is likely due to more people staying home out of precaution for the pandemic. Most of India’s commerce is still done in person but the pandemic has accelerated the country’s transition to online. While Amazon grew downloads more year-over-year, Flipkart still came out on top in terms of absolute numbers.
Sessions is a metric that helps understand engagement and account for people who already have the app installed on their mobile device. While the story is similar when looking at user sessions, Flipkart dominated both absolute numbers and year-over-year growth.
Source: Apptopia
It’s incredible how much scale Amazon has achieved in India. Amazon India does not seem to be getting as much attention as it deserves. Although India is still a very poor country, the size and scale of the country already makes it the 5th largest economy in the world just behind US, China, Japan, and Germany. Don’t underestimate the value of a very, very large population that is on track to exceed China’s by the end of this century.
Also interesting to see that Walmart’s Flipkart is doing very well. Walmart also seems to be experiencing a little bit of a renaissance are in the US. Some of that tech and e-commerce magic from abroad might be rubbing off on Walmart in the US.
#9 Whatsapp to Offer In-App Purchases and Cloud Services
SAN FRANCISCO (Reuters) – Facebook Inc FB.O on Thursday said its WhatsApp messaging app would start to offer in-app purchases and hosting services, as it moves to boost revenue from the app while knitting together e-commerce infrastructure across the company.
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With the changes, WhatsApp will enable businesses sell products inside WhatsApp via Facebook Shops, an online store launched in May to offer a unified shopping experience across Facebook’s apps.
The company will also enter the cloud computing sector, offering firms who use its customer service messaging tools the ability to store those messages on Facebook servers.
Source: Reuters
Yes, please. I will say it again: The faster Facebook moves away from politics to something else, the better.
👨💻 Technology
#10 Facebook Poised to Face Antitrust Suit
U.S. antitrust officials are nearing a final decision on bringing a lawsuit against Facebook Inc. that accuses the social-media giant of using its dominance to harm competition, according to a person familiar with the matter.
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The FTC has been investigating whether Facebook violated antitrust laws for more than year, including whether its acquisitions of Instagram and WhatsApp were designed to eliminate emerging competitive threats. Facebook Chief Executive Officer Mark Zuckerberg was questioned by FTC officials in August as part of the investigation. A nationwide group of state attorneys general led by New York are also investigating the company.
Source: Bloomberg
The US government already sued Google recently. However, the Google case seems to be quite narrowly focused on browser search default options. The government is focusing on Google’s payments to companies like Apple in order to become the default search engine.
The potential case against Facebook, however, would break new ground. Historically, antitrust / competition analysis when it comes to mergers and acquisitions has been focused on market share at time of acquisition. This antitrust case (if it succeeds) could materially change the merger and acquisition landscape because it argues that large companies should not be able to acquire smaller companies based on future market share potential. This raises a lot of questions. How and who should project whether a very small competitor could be a meaningful competitor in the future and hence should not be acquired? And if this case succeeds, what will it ultimately do to the tech landscape if selling to a larger company is not an option for a start-up and the only option is to compete to the death? Instagram had only 50 million users when Facebook acquired it. Today it has 1 billion. Who is to say that Instagram would have survived on its own if it had to compete against Facebook to the death? And if this case succeeds, what remedies would be required? Keep in mind, these acquisitions were already reviewed at the time of announcement and approved. This case is about rewriting and undoing history.
Speaking of government actions, the US isn’t the only one trying to restore “order”…
#11 Huawei + China Firms Seek to Seek Curbs on Nvidia’s ARM Deal
Chinese technology companies including Huawei Technologies Co. have expressed strong concerns to local regulators about Nvidia Corp.’s proposed acquisition of Arm Ltd., people familiar with the matter said, potentially jeopardizing the $40 billion semiconductor deal.
Several of the country’s most influential tech firms have been lobbying the State Administration for Market Regulation to either reject the transaction or impose conditions to ensure their access to Arm technology, the people said. Chief among their concerns is that Nvidia may force the British firm to cut off Chinese clients, they said, asking not to be identified discussing private deliberations.
China’s fear is that Arm — whose semiconductor designs and architecture are central to most of the world’s electronics from smartphones to supercomputers — will become yet another pawn in a U.S.-Chinese struggle for tech supremacy. Nvidia is buying the British firm from Japan’s SoftBank Group Corp., bringing it under American jurisdiction and theoretically threatening its cherished status as a neutral party in the chip industry. SoftBank’s shares erased gains Wednesday to close slightly lower in Tokyo.
Source: Bloomberg
The current trade (and tech) war has already exposed uncomfortable weaknesses within China’s economy and technology landscape. So much of what China has achieved technologically still rests on American science and innovations. And this acquisition would, unfortunately for the Chinese, bring more global technology under US control.
And if Jensen (Nvidia’s CEO) gets his way, Nvidia + ARM will control the future of the datacenter and edge computing. There is too much at stake for China to take a gamble on.
BUT, Capital Flywheels thinks there is almost nothing China can do about this. Huawei and Chinese firms can make noise, but the primary “stick” that any country can employ when it comes to M&A is to block market access. For an unwanted deal, this is often a large enough threat to scuttle a deal (or get favorable concessions / deal adjustments) because the acquirer will likely not get their money’s worth if the acquisition target is shut out of major market(s).
However, for this particular deal, China has no ability to realistically threaten to block market access because China’s own development depends on ARM as well as Nvidia. The ARM deal is important to China precisely because China *needs* ARM. China would very much prefer that ARM remain out of the hands of a US company, but there is no way China can realistically threaten to block ARM (or Nvidia) from Chinese markets in order to prevent this deal. China is very much a paper tiger with no leverage for this specific transaction. I think the fears of Chinese interference are overplayed.
#12 Google Duplex Has Updated 3 Million+ Business Listings Since Pandemic [Began]
Google today offered an update on the status of Duplex, its AI technology that uses natural conversations to get things done — like making restaurant reservations, booking appointments or updating a Google Business listing, for example. When the pandemic began, Google expanded its use of Duplex for business updates to eight countries, and has since made more than 3 million updates to business listings — including pharmacies, restaurants and grocery stores.
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Since launching, Duplex in Google Assistant has completed over a million bookings, Google announced today.
Source: TechCrunch
I’ve kind of forgotten about Duplex since the 2018 announcement. I’m not even sure where to find this feature at the moment, but seems like it is still around and improving. Much as it was in 2018, the technology is incredibly mind-blowing 🤯, but the route to market still seems very questionable. This type of technology seems much more useful as a back-end or B2B (business-to-business) service rather than a consumer service. The fact that it has only been used to make 1 million bookings since 2018 essentially proves the point given that Google has 1 billion+ users.
Maybe one day I will write a more in-depth piece on Google…I continue to think Google has some of the most interesting technology (including quantum computing), but it’s being hampered by its business model and desire to be a consumer company, when in reality it is and should be a business-to-business company. All of Google’s customers are businesses (advertisers and enterprises and smartphone makers) but all it wants to focus on is consumer technology.
🇮🇳 India
In the last edition of Tidbits, I mentioned I would be writing more about India. I think India’s tech and economic landscape could become much more interesting and vibrant in the coming years.
What’s interesting is that historically India tech is very much the plaything of US and China tech…
China’s app and tech models have found decent success in India given that both countries are emerging markets.
However, the US has also dominated largely because many tech-using Indians also speak English and therefore can and do rely on US tech offerings from the likes of Google, Facebook, Netflix, and Amazon.
But both of those things are now changing. China and India’s geopolitical environment has changed. China and India are currently engaged in a border standoff, and India is increasingly viewing China as an adversary. This means the door for Chinese tech companies operating in India is closing fast.
On the other hand, while the market remains open for US tech companies. Indian tech has been reenergized by Reliance Jio’s aggressive investments to expand the Indian internet user base. With a much larger opportunity at hand, Indian domestic tech is experiencing a renaissance. And the pushback against dependence on China is morphing into somewhat of a push for tech self-sufficiency overall. I am very interested to see how India’s tech landscape evolves in the coming years.
With that said, I found this tweet and chart to be interesting as it says so much about the state of Indian tech over the last 5 years.
#13 India Tech Dominated by China and US
Packy McCormick’s work on Reliance Jio is also worth reading to understand the history and vision of the company that is currently driving Indian tech.
#14 Reliance: Gateway of India
The 2020s will be India’s decade. And unlike China, which features a fierce competition at the top between Tencent and Alibaba, in India, Reliance is the main game in town.
Reliance Industries Ltd (“Reliance” or “RIL”) is like an India-focused Exxon, Dow Chemical, Walmart, AT&T, and Comcast all rolled into one. If it fulfills its Jio vision, it will add Shopify, DoorDash, Zoom, WeChat, Square, AWS, and more to that roll. Its $200 billion market cap is the largest in India, where its backstory, leaders, products, and dramas are well-known. But when I asked a bunch of smart non-Indian friends what they knew about Reliance, they replied, “Who?”
Source: Not Boring by Packy McCormick
#15 Reliance’s Next Act
To date, Reliance has only built or acquired, while a thriving startup ecosystem has grown up around, and on top of, Jio. This is Reliance’s opportunity: to become the largest investor in India’s booming tech ecosystem. Investing in Indian startups represents a massive opportunity, but Reliance will need to evolve how it operates to take advantage of it.
Source: Not Boring by Packy McCormick
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