Dozen Worthy Reads 📰 (No. 158)
This week : Salesforce and Slack?, Apple Store commissions, Uber's rumored ATG sale, Data and Ownership, The right to repair, EU v. Amazon, Spotify and monetization, Apple silicon, All new Google Pay
Hi All,
I hope you all are doing well and welcome (if you aren’t new then again) to Dozen Worthy Reads. A newsletter where I talk about the most interesting things about tech that I read the past couple of weeks or write about tech happenings. You can sign up here or just read on …
I hope all of you in the US had a great thanksgiving break and are looking forward to the upcoming festive season. Just a few more weeks to go and 2020 will be behind us. This past week also brought the sad news that Tony Hsieh, the former CEO of Zappos has died in a fire. Here is a pretty good encapsulation of the kind of person he was and his business acumen. Back in 2013 I had the good fortune of visiting the Zappos office and seeing first hand the culture that Tony had created. I also has a chance to visit the Las Vegas Downtown revitalization project (and we ate at a restaurant that was right near Hsieh’s downtown Las Vegas apartment if I recall! RIP Tony for all your contributions to the business world, the most important of them being the reclassification of Customer service as a core part of the business v/s just a “cost center” that had to be managed. I recall during my visit one of the folks who worked there told us about the 8 (yes EIGHT) hour long customer service call! Isn’t that amazing?
Slack and Salesforce?
The past couple of week’s have brought so many interesting tech developments including a rumor that Salesforce might buy Slack. As I noted in “Slack's EU competition complaint, Slack v. Microsoft v. Google v. Zoom” and this might well be financial the boost they need.
Slack should definitely be worried big time. Two of the largest players are going after their market, have the workspace collaboration tools that are needed. Silent in all this is Zoom. Wonder what they’re thinking? Amazon also offers Amazon Chime and JioMeet blatantly copied Zoom in India.
There has been for many years this talk about “Best of Breed” and while Slack might win in their narrow category, it will be hard to keep incumbents back. This move by Salesforce will give them the financial power to fight back but I am still (semi) bearish on Slack since when companies consider productivity suites they need to have all the missing gaps (Think documents, conference calls, emails) all in one place. I think that Salesforce buying Slack is more of a defensive response than an offensive one for Salesforce. If this acquisition does indeed materialize the real question to ask would be what would Slack do differently? Access to a larger sales force? Bundling (aha!! Isn't that what they complained about?) and furthermore how does Salesforce benefit both in the short run and more importantly in the long run. A right acquirer (or partner) would have been Zoom, Notion, Atlassian (remember they killed HipChat) or dare I say it … AWS.
Apple store and cuts?
Apple announced that they will reduce the app store cut to 15% for developers that earn < $1MM in revenue. Again your friendly neighborhood skeptic is back. While I appreciate the step Apple is taking its hard not to see this as something that they will use in either their Epic v. Apple lawsuit or the Spotify’s European Commision complaint saying of course that they are “supporting millions of businesses”. But as estimates from Sensor Tower (app analytics) has estimated this change will affect 98% of companies but only 5% of App Store revenues. That seems like a lot but it is quite likely that this will be way less than if they had to:
Allow for 3rd party payment methods within apps
Provide zero commission sales on products where they compete (especially someone like Spotify that has supply (music licensing) costs as well has the $ they pay to Apple for subscribers who buy via the App Store.
However the skeptic in me also realizes that this will help smaller app creators who do not have the resources to implement a 3rd party payment provider (of course that isn’t allowed today) can save 50% of their marginal costs. Of course Apple will also realize some additional PR with this move (or maybe not since everyone knows why they are doing it). The clear winner here are the truly small developers
Uber and ATG
A couple of weeks ago there was this rumor that Uber is in talks to sell their ATG unit (Self driving unit) to Aurora. I oscillate between if this is a good move or a really bad move. Given that L5 Autonomy is many years away Uber is probably in survival mode at this point and with profitability being a key issue Uber is probably offloading “non performing businesses that are not core to getting back to profitability. So this makes sense to show the market that Uber can put on big boy pants and earn its place as a tech heavy hitter (I mean they are competing with some serious muscle for self driving with companies such as Google/Waymo (and Apple) that have way more cash AND profitable businesses to subsidize this discovery. Uber.. Sadly… does NOT.
Now if you use this lens and think about self driving this kind of technology will (once ready) be widely available to anyone and everyone. Hell if I have enough money to buy a few of those cars I’ll start Dozen Worthy Rides (where every 13th ride is free .. he he) and compete for customers. Uber is probably banking on the fact that they have a large brand presence (as a product they are BRILLIANT and people love the convenience) as their savior. However I think this is a situation of damned if you do and damned if you dont. Remember the way it works for airlines (to use a transport example) way too few of us care about how safe a particular airline is (else safety would be a filter facet). We are perfectly comfortable booking almost any flight at the cheapest price (bar some conveniences for some types of travellers).
The other subtle point to consider is this : Uber is a two sided marketplace, what happens when one side (drivers do not exist?) My guess is that if this happens Uber is doomed in the long run (the rideshare industry will become asset heavy similar to trucking)
Data and Ownership
Tim Berner’s Lee’s startup Inrupt has released a privacy platform for enterprises. The core idea behind the startup is to allow users to control access to their data (similar to how Facebook does when you use Facebook sign on for authentication). Developers can request the POD (Personal Online Data Store) to provide information to the entities that need access to this data. On the surface this is a good idea but this doesn’t prevent such data to be used for targeting (as is done by Facebook and several other companies). I also think this comes with a lot of risk because the data is now owned by one entity. Who pays for data storage? The data owner? The company requesting the API? There are lots of questions to be answered but I really think identity should be owned by a central public entity (Think SSN’s or Driving Licenses or PAN cards/Aadhar cards in India). Again its not fully clear what kind of data will be in these PODS.
The right to repair
You assume that when you buy something you assume you have the right to repair it. Back in the day of a fully mechanical car any mechanic would be able to repair your car. Today it is a bunch of computers that will diagnose and tell you what is wrong. Massachusetts recently voted “Yes” on Question 1 of the Ballot allowing for the right to repair. This allows independent repair shops to assess and repair a vehicle using the diagnostic information. Now if you think about it, how does this help prevent a car from not being hacked? Who becomes responsible if the car no longer works? What if it catches fire? When you consider something like a phone should you be allowed to repair them in a seedy shop in the corner? (Guilty of doing this for an old iPhone that no longer works now). Who is responsible? What if your data is stolen? These are all important questions but directionally one should have the right to repair a product that they pay money for.
European Commission v. Amazon
The EU commission has accused Amazon of breaching antitrust rules. At the heart of the complaint is the fact that Amazon uses non-public data it gathers on sales to boost/create its own label products and services. This is kind of a dumb reason since every retailer has private label products and in fact Costco’s Kirkland label is itself supplied by the same manufacturers. Does Costco not use this data? Luckys? Safeway? Walmart? Fact of the matter is that Amazon owns only single digit percentages of retail (5% per Benedict Evans). What does the EU commission not realize about the fact that customers and merchants willingly want this business? Given Amazon’s brilliant fulfillment services which literally no small merchant can replicate (Shopify is an option but demand gen is still a key issue). Does the EU really think that Merchants don’t know or are OK with this? They do not and of course they are not OK but they can’t live without Amazon and not the other way around
Spotify and Monetization : Buy demand
Spotify will now allow for an Artist or Label to “buy” their way into your playlist.
From : Spotify will now allow artists and labels to promote tracks in your recommendations
Spotify announced today it will begin to test a new service that gives artists more of a say in how their music is discovered on the Spotify platform. At launch, the service will allow artists and labels to identify music that’s a priority to them, and Spotify will then add a signal to help the music get surfaced by its personalization algorithms.
Under US Laws a Radio Station can play a specific song in exchange for money but that must be disclosed (Payola) however Spotify is not “charging” users (Also I don’t think that Spotify is considered a “radio station” under law? I’m not really sure and I can’t find anything that clearly states this). Anyhoo, Spotify is actually doing something crafty (like a reverse Payola) and in order to be part of promoted recommendations Spotify will pay the artist in question a “promotional recording loyalty rate” thereby reducing their cost for that specific single stream (unknown what the exact economics are).
OK so let's break this down : Spotify owns the customer demand and now its charging these labels/artists for access to that attention. From a business perspective this is brilliant since Spotify will reduce their supply cost. What happens when larger labels do this? What happens when the small indie artist can’t compete anymore? Is this an anti-competitive move? (In some odd way this would have a similar-ish impact when Studios were not prevented from owning theaters - Paramount Consent Decree only not exactly). I wonder if customers of Spotify will notice this change whereby making this an issue? I think Spotify will be careful to prevent all of the above scenarios else they’d lose the customer. After all it is a recommendation algorithm that should surface more music a user would enjoy instead of promoted music only. Either way brilliant move by Spotify to reduce their costs (time will tell how this will impact the bottom line)
In other Spotify news:
Spotify starts to capture and make podcasts less open : Spotify to buy podcast ad company Megaphone for $235 million (Read this article from Kay Singh : How Spotify is Killing the Open Podcast Ecosystem)
More Than 18,000 Musicians Are Demanding a Penny Per Stream from Spotify
Apple Silicon and the future
If for any reason you have been living under a rock and didnt see the announcements about the new Apple M1 chip this article is a great read : Steve Jobs's last gambit: Apple's M1 Chip – On my Om
Apple has truly redefined silicon and allowed for cross compatibility across Apple devices. I think this might be a last nail in the coffin for Intel
Revamped Google Pay & Plex
Google’s new Pay App now competes with not only “Payment Apps” but also couponing apps, financial overview apps, as well as Neo Banks (with a lightweight offering. So now Google competes with Apple Pay, Samsung Pay, PayPal, Venmo, Square Cash, Intuit’s Mint, Simplifi, Truebill, Shop, Ally and many more FinTech companies. Think loans, POS’s, payday advances etc.
I’m not quite sure how to process this. On the one hand of course it's interesting for Google to be able to collect data on spend habits and possibly tie them back to ad campaigns (saw ad, purchased product). Back in 2018 Google started purchasing MasterCard data to link online to offline or offsite purchases. I haven’t read much about that specific partnership and how its going but I wonder if this is a way for Google to actually be able to tie all that data up? Google has of course promised that none of this data will be shared for ad targeting. So what's the play here? Is Google truly trying to be a serious fintech player with this offering and stand up a new revenue source? Time will tell …
Reads this week
From The Margins : DoorDash and Societal Arbitrage
A new business school : What's On Deck for Business School - The Flywheel
From Pacy McCormick : Slack’s bull and bear case : Slack: The Bulls are typing...
From Ben Thompson : Playing on Hard Mode (interesting excerpt is below)
In other words, the implication of Airbnb building a platform of trust is not that a homestay is now more trustworthy than a hotel; rather, it’s that the trust advantage of a hotel has been neutralized, allowing homestays to compete on new vectors, including convenience, cost, and environmental factors. It turns out homestays are quite competitive indeed: to return to my personal anecdote, I am living in a beautiful, remodeled one bedroom apartment in one of the best neighborhoods in this city, and paying a fraction of the cost of a mid-tier hotel for the privilege.
From the same article the Doordash flywheel:
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