Dozen Worthy Reads 📰 (No. 160)

This week : Substack/Content policies, App Store and Trends, Apple and Vertical Integration, Facebook v. Apple, Uber v. co-ops, TikTok on TV, Self driving's moat, scraper dominance and effects

Jan 02, 2021

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 you all managed to take some time off and recharge, spend some time with friends and family and come back recharged for 2021!

I thought I’d start the 2021 edition with a quick look back:

I published 62 times and of that 16 were original pieces (with a goal of 20 original pieces)
I had a goal of 1200 miles for 2020. I ended up doing 1248 miles.
I planned to start trading on Robinhood (or Public) to see all the hype and I did and while my minuscule portfolio is up by 13-14% it was nothing compared to how tech stocks set fire to the market.
I planned to build a Twitter following and failed miserably; it just requires so much effort that I haven’t had the time to put in :(

I don’t make new year resolutions but I do set goals and my goals for this year

Write 26 editions of Dozen Worthy Reads and 20 pieces of original content
Run 1000 miles

Jan is going to be an exciting month filled with learning since I am enrolled in a People Analytics class at Berkeley (for my batchmates reading this you're probably shaking your head I know, I know)

Predictions for 2021:

Amazon and Apple face one or multiple antitrust lawsuits in EU and US
At least 50-70% of the US will be vaccinated by the end of the year
- Travel/airlines/hotels will face a good amount of unprecedented demand (similar to what the Doordashes and Amazons saw with “adoption - remains to be seen how much of this is actually temporary). In the short run this will lead to a run of the stock prices
Silicon Valley continues to still be dominant. Long term advantages built over years are not going to dissipate however what will likely happen is that key hires (and what key is will change depending on the company) will still be made here. The larger companies moving out will give room to (hopefully) cheaper labor and cost of living in the bay resulting in more young people moving here. The cycle I kinda envision is :

Start Company in the Bay Area → Hire Key talent here → Build Company → Build offices in other cheaper locations/and more move company outside the Bay Area completely → Rinse/Wash/Repeat

Bitcoin prices go up to $35k by the end of the year (I do not own bitcoin today to be clear)

Let’s see how many of these actually hold true!

A fair warning that some of this week’s analysis is based on happenings the last couple of weeks of Dec mostly (News has been kinda slow this past week. Even Zuck has stopped crying about Apple as you’ll read later on :))

Let’s get into it ...

Substack and Content policies : I wanna have my cake and eat it too

So for those of you who are not familiar with Substack they provide infrastructure for any writer to create a newsletter/blog and publish with ease. Substack only makes $ when the newsletter (for example me) charges you (the reader). They then get a cut of that $. In the true sense they are publishing infrastructure similar to how AWS offers infrastructure or Stripe offers payments.

Substack recent wrote about their views on content moderation and while I love Substack I think they are missing the mark with these policies. On the one hand they are saying “no censorship” on the other hand they are saying “here are our policies” I mean if the author/writer is ultimately responsible then why censor at all? What if I write a blog about assembling guns or something worse? I’m not asking you to do anything illegal right?

While I appreciate the fine stance this is exactly what platforms are - In this way no different than Facebook and the problem is small now only because Substack is small (and of course will never be as large as FB)

Content policies (even a single one) is a slippery slope. This is a preemptive approach at somewhat sidelining them but also making a claim that something might be “censored”. Let’s take an example : Let's say I start writing about the Chinese Government (and that's just my opinion right) and the Chinese government doesn't like it (assume Substack operates in China, what are the options?). In the end YouTube, Facebook, Insta etc have learned the hard way that content policies can’t catch everything and that's why you invest in AI or a moderation team. If Substack gets large enough as they probably will it’s probably a lot easier to turn on/off the spigot by disabling the author and also investing in AI to detect such text

App Stores and Trends

Eric Feng has this interesting read on charting COVID trends using App Store data. In and off itself its an interesting read not because of the trends per se (most we know/kinda understand) but because it kinda points to two things

How our phones/apps we use reflect everything in our lives (and how much of that data is out there!)
Food delivery and normal state. Remember the post from Jake Singer on DoorDash’s flywheels?. The second to last paragraph clearly articulates why I am bearish in the long run. Smart move going for an IPO when everyone white collar rich professionals are cooped at home, saving more $ and have serious investment FOMO with products such as Robinhood.

We’ve gone through the flywheel and why I am highly skeptical that DoorDash has built or could build unique advantages. But what about COVID? Maybe the shift I described above is here to stay?
After all, we’ve seen a similar story with Peloton and Zoom, where the world shifted to ‘at-home’ fitness and meetings and realized that it’s actually a pretty good stand-in for the real thing. In those cases, I believe the COVID bump is sustainable, and clearly the stock market agrees.
So why not DoorDash? The answer is simple: unlike with exercise or work, people haven’t suddenly shifted to delivery and realized, ‘you know what, this is just as good as eating at a restaurant”. In fact, it’s just the opposite. The moment it’s safe to do so, we’re going to see an unprecedented restaurant bonanza.
When that happens, we’re likely to see the following: DoorDash, UberEats, and the others will resume their cutthroat price wars. Consumers will return to their deal surfing practices. DoorDash will be forced to once again spend 50%+ of its revenue on sales and marketing, and will therefore return to negative contribution margin territory.

Apple and Vertical Integration

Apple has announced that they’re gonna start making their own cellular modems. Now making cellular modems as we all probably know is not easy both in terms of actually hiring and building the product out. Remember Apple had some kind of partnership with Intel to build modem chips which was probably miserable given Intel’s subpar delivery on their main chip business. So at the time Apple settled with Qualcomm by signing a 6 year agreement (This was in April 2019). Now of course this is pretty much a blow to Intel and Apple acquired Intel’s modem chipset division subsequently (a couple of months later). With the recent announcement that they plan to make their own modem chipset (duh, why else would they pay Intel $1B?). Essentially this means two things

With the recent M1 announcements and this chipset they are going all in on vertical integration
This means (obviously) that they have scale for their existing line up of Phones/Laptops/Computers/Wearables etc
They probably have several other products planned. It's no secret that they are working on the Apple Car but this is not the end of Apple’s hardware offering (Smart Glasses/AR & VR/Wearable computing?)

Meet the SMB’s friendliest advocate : Facebook

There is a lot of history/content here so bear with me …

For those of you who are not following this saga. Last year Apple announced that in iOS 14 they plan to introduce a new App Tracking Transparency feature that will let users know when companies want to track them across apps and websites. It looks like the below screenshot (below the text). They also introduced something called SKAdNetwork which allows for attribution while preserving privacy (read this article for a complete rundown, it’s great!). Now I’m no expert on this but there are two separate-ish issues:

Preserving privacy - Which is not allowing apps to track you if you don’t want to be tracked.

Marketing Attribution - Which is super important to marketers to be able to identify what converted you (for example an ad made you download an app).

Apple introduced, many moons ago, what was known as Identify for Advertisers (IDFA) which was turned on by default allowing for the use of a (resettable) IDFA. This identity, which is resettable is used primarily to uhh as you might have guessed “identify” YOU irrespective of which app you are using (effectively a mac/hardware id). Now in iOS14 Apple has decoupled privacy and attribution. There is a lot of brouhaha about this and I don’t fully grok all the details but at the root of it Apple provided a way for marketers to understand how a specific campaign is doing (using SKAdNetwork) but this breaks some of the capabilities for retargeting ad’s. You know the ad’s that follow you around the web?

Ok now finally that brings us to Facebook which as we know uses data from apps to track you “across apps and websites”. Needless to say they use these identifiers to understand who you are, target you better and as such keep a certain part of their ad engine running. A couple of weeks ago Facebook took out a full page ad targeting this change and proclaiming themselves as the protector of Small businesses. Ok I’ll stop for a second. You can laugh out loud. Then Apple responded back and the nitpicking continued. But the end result of all this is that there is something extremely ironic about a company that wants/needs data saying that they are protecting "small businesses" .. the best part? This was done on "full-page newspaper ads" (Isn't that the industry they helped push off the ledge, just the last gentle nudge?)

My thoughts around this : Sure while I don't disagree that smaller businesses might have less targeting information is that accurate? I mean Facebook doesn’t need to get rid of all the data they’ve collected already right so it's only “new” data that they can't collect.

Collecting less (interest and behavior) data means poorer targeting but this recent article sheds a pretty bad picture that Facebook’s ad targeting was abysmal

From the article:

A “February 2016 internal memorandum” sent from an unnamed Facebook manager to Andrew Bosworth, a Zuckerberg confidant and powerful company executive who oversaw ad efforts at the time, reads, “[I]nterest precision in the US is only 41%—that means that more than half the time we’re showing ads to someone other than the advertisers’ intended audience. And it is even worse internationally. … We don’t feel we’re meeting advertisers’ interest accuracy expectations today.”

I suspect, if this is true, then how much has this improved since then. Either way that note aside the way it should work is

If targeting sucks, advertisers will have a lower CPM
If there is a lower CPM advertisers will pay less in the interim period
Given ad loads (how many ad’s you can show in the feed or other places) more advertisers will advertise thereby taking the prices back to Supply/Demand equilibrium (market clearing price will go up because there are now more advertisers and ad loads cant increase much)
Why would Facebook be opposed to that? I mean more $ for FB? So really then, is this about protecting small businesses or just smart business?

I think there are a couple of interesting dynamics that might be at play here in the long run:

Facebook’s superpower is crisp target advertising and now this is being chipped away slowly. In the long run this could mean that Facebook loses its advertising advantage (and thereby their, almost entire, business model)
This would mean that a competitor could step in and offer an alternative since an ad on a competitor platform = ad on Facebook without specific targeting (i’m simplifying this a lot)
Facebook knows that in the US (and probably elsewhere) the WTP for an iPhone owner is higher than it is for Android (generally more affluent people but an iPhone)
Apple is not an innocent “protector of rights”. Given the rumors that they might want to get into search advertising they are potentially preemptively blocking Facebook

Also why take a newspaper ad? I mean you have the biggest voice amplifier in the world. Why not use that? Ugh, fishy!

Reads on this topic:

Opinion | Facebook's Tone-Deaf Attack on Apple

Facebook’s Laughable Campaign Against Apple Is Really Against Users and Small Businesses

Facebook Employees Say Apple Fight Is “Self Serving”

On that note …Apple and Privacy ….

I read this article about schools buying tech to hack iPhones. The key thing to note here is that physical access to the phone should be separated from hacking into a phone. Apple definitely cares about privacy to the extent that the privacy narrative can be used in their favor. For example Privacy Labels

Uber v/s Co-ops

Co-ops have been around for long especially in NY for housing. From Wiki:

A cooperative (also known as co-operative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise".Cooperatives are democratically owned by their members, with each member having one vote in electing the board of directors. Cooperatives may include:
businesses owned and managed by the people who use their services (a consumer cooperative)
organizations managed by the people who work there (worker cooperatives)
multi-stakeholder or hybrid cooperatives that share ownership between different stakeholder groups. For example, care cooperatives where ownership is shared between both care-givers and receivers. Stakeholders might also include non-profits or investors.
second- and third-tier cooperatives whose members are other cooperatives
platform cooperatives that use a cooperatively owned and governed website, mobile app or a protocol to facilitate the sale of goods and services.

This news about the city’s drivers creating a co-operative to take on Uber - The Drivers Cooperative (TDC) is interesting. This is exactly the thing about hyperlocal. Uber’s disadvantage is that each market they start doing business in requires that they start from zero. This is the exact same dynamic that will play out when/if drivers band together. I mean at the end of it I don’t think rides will become cheaper but hopefully the money goes to the small guy. The real question here is how effectively can they serve the customers, get brand recognition and more so what incentive will a New Yorker have to use this product if the prices are the same?

Post Prop 22? What's Uber's deal?

So then Uber and Lyft are giving drivers benefits in California. But guess who is paying? Uh uh not them - you and me :

From Uber and Lyft roll out new benefits for California drivers under Prop 22:

To cover the costs of the new benefits, Uber said it would apply a fee of up to $1.50 to the cost of rides and up to $2 on meal deliveries, the Financial Times reported. Lyft did not provide details on any additional customer fees.

I am trying to find a company I dislike more than Uber. I’m hard pressed. Please help me!

TikTok on TV : TikTok app launches on Samsung smart TVs

People confuse Social, Media, and Social Media companies however a lot of these fall on a scale of how “social” or how “media” they are. TikTok is definitely an example that tends more toward media and having an app on the TV’s is definitely the right step to continue to build engagement! This, I think is one of the key things Quibi got wrong.

Brand and Self Driving :

So what matters? Does the Self driving tech matter? Does the brand matter? What will be the key differentiator for a “ride-hailing” company? What moat should they build and how?

From the article: : Amazon’s Zoox Unveils Robotaxi for Future Ride-Hailing Service

The vehicle, which Zoox describes as a driverless carriage or robotaxi, can carry as many as four passengers. With a motor at each end, it travels in either direction and maxes out at 75 miles per hour. Two battery packs, one under each row of seats, generate enough juice for 16 hours of run time before recharging, the company said. To commercialize the technology, Zoox plans to launch an app-based ride-hailing service in cities like San Francisco and Las Vegas.

BigTech Regulation

From : Apple, Amazon, Google Could Face EU Fines as High as 10% Annual Revenue

Tech giants deemed to be gatekeepers could face fines as high as 10% of annual revenue if they don’t comply with new European Union rules on data usage to be unveiled Tuesday, according to a draft of the regulation seen by Bloomberg News.
Companies that could include Google, Amazon.com Inc., and Apple Inc. will be banned from using any data from business users to compete with them or from treating their own services more favorably in rankings, among other obligations. Nasdaq futures pared gains.
A company that “systemically infringes” the obligations could face orders by the European Commission to make behavioral and structural changes, such as divesting businesses. Companies will be considered to be in systematic non-compliance if the EU has issued at least three fines within a period of five years.
The rules are still in draft form and could be subject to revisions. A spokesperson from the European Union declined to comment. Representatives for Google, Apple and Amazon didn’t immediately respond for comment.

Um. OK. Great. How the hell does one prove that something is more “favorable”? This is the kind of regulation that unless absolutely specific will lead to confusion and lack teeth. Let's take an example. Are we saying that Amazon can't compete with a 3P seller or are we saying that Amazon can kick all 3P sellers for a particular category and sell that product? I mean it is Amazon’s platform and they can make the rules right?

Scraper Dominance and Antitrust : Where antitrust should focus their efforts

If the way to make other search engines be able to crawl and index (and not be blocked) as many pages as Google then should there not be regulation preventing a company from blocking a search engine from crawling them? I mean can you blame the companies who probably get upward of 99% of their traffic from Google and MSFT? What is their incentive?

Tech investors are well aware that the most profitable companies are the ones whose economics improve as they scale. This is usually described as some form of network effect, but there are sometimes multiple compounding scale effects at work. Google's dominant search index is getting some attention, and the economics there are fascinating.
To rank and display webpages, a search engine needs to have a bot parse the contents of every page. Site owners can choose to allow or reject bots, or to give some of them more generous permissions than others. From the site owner perspective, small search engines aren't worth the time—if they don't take up any bandwidth, they can be ignored, but if they do anything attention-grabbing, they'll probably get blocked. Meanwhile, Google has found that faster crawling leads to better results, especially for more specific long-tail queries. And since long-tail results are the way an excellent search engine differentiates itself from a merely good one, that's what they have to focus on. As a result, the total cost of crawling, both for search engines and the sites they crawl, rises with the number of search engines. A search engine that copied Google's algorithms and hardware, but not their distribution, would be imposing a pure cost on the sites it indexed, with no attendant benefit.
This leads to an economic setup that's wonderful for Google, and troubling for anyone worried about industry concentration: the better search gets, the more economic sense it makes for there to be just one big search engine.
The Times piece linked above cites research from a group called Knuckleheads' Club, and on their site they propose an interesting solution: a public cache of the web. It's not strictly necessary for this to be publicly-owned, though; the same benefits would accrue if it were run by a private company and offered open access to anyone. Ordering Google to spin off its crawling business and let Bing and DuckDuckGo buy access to the data on the same terms is not the sort of antitrust remedy that gets hearts racing, but it would peel one part of search with monopolistic economies of scale from the core business, which has a completely different set of the same.

Great Reads from the past few weeks

A16z’s Social Series. Every read was great! Social Strikes Back - a16z
Sharing and owning standards by Bryne Hobart : Sharing and Owning Standards
NFX on Fiverr and marketplace creation tactics
Influencer IPO’s
Why Content is King by Nathan Baschez
Alex Danco on friction : Shopify, SPACs and Status: My Interview with Jim O'Shaughnessy (Part One)

Thank you for reading. Stay safe, be well! If you enjoyed reading this please consider sharing with a friend or two (or sign up here if you came across this or were forwarded this)

Dozen Worthy Reads