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Fix / Friday July 24

Publishers

As premium publishers struggle to get their fair share of ad revenue in a programmatic world we see two reactions - more cost cutting and more innovation. One paradox is that the cost cutting rightly prioritises journalists but the demise of commercial people hampers innovation. One firm getting it mainly right is the New York Times, but their CEO Mark Thompson is leaving, to be replaced by the current COO Meredith Levien.

It is worth watching this recent Finders Forum interview with Mark Thompson and Mathias Döpfner (CEO of Axel Springer) to understand the key themes and how these publishers are reacting.

More evidence of the NYT vision is their investment in TV content - with 10 scripted shows in development along with a number of documentaries - and their new deal to acquire Podcast pioneers Serial. The price could be as high as $50m

Merchant

This good FT article on grocery builds on the Bain report we shared in the last Fix/Merchant and looks at some of the differing models for online grocery. Ocado are very bullish - predicting that online grocery penetration could reach 70% - and this quote from their customer Kroger shows the importance of lifetime value.

The main differences are about local stores versus a more centralized approach, with lots of people trying different options. One really interesting Chinese model is Alibaba Freshippo, which has local stores but reverses the usual set up - they are optimised for the pickers - letting instore customers adapt instead.. Rethinking the role of stores is also happening in the US - closed supermarkets are reopening as ecommerce fulfilment centres.

With so much experimentation in the UKs advanced market, it's an interesting time for Walmart to again consider how to sell their stake in Asda. Their original plan to merge with Sainsbury faltered because of the Regulators. The natural buyer is Amazon who I think need a chain to make significant inroads into grocery, but I cannot see Walmart selling to them. Maybe one of the emerging Chinese firms could bring their fresh thinking into this market?

Walmart are very focused in investing in their grocery business - with $3.5bn for Canadian stores - but don’t see the (very competitive) UK market as a priority when compared to fast growth markets like China and India.

Instacart are suing Uber over allegations that their recent acquisition Cornershop is stealing Instacart IP.

But sometimes just exporting a business model doesn't work - Japanese firm Muji has suffered and has filed for bankruptcy in the US.

More and more people are recognising that the VC model is not right for many DTC brands. As I argued before many are Bonsai Brands - and don't grow beyond a certain size. We are seeing a similar effect with PE backed Fast Casual Dining.

Amazon have announced how they plan to handle oversea sales post Brexit - and it looks a nightmare. Our friends at FordBaker look at the implications. With more and more DTC brands in the UK using Facebook ads to grow their international business, this is going to be a difficult time for many.

Snap

The latest Snap results were quite impressive - an extra 9 million users in the quarter and revenue up 17%. The full investor slides are here. European revenue grew by 30% - but is only around a quarter of the North American total (Facebook European revenue tends to be around half of North America, so plenty of room for growth here). The share price fell as future performance is hard to call - just like we saw with Netflix and will see when GAFA report in the coming days.

Good support for their new initiatives with Headspace launching a Mini for mindfulness and meditation.

TikTok

Our TikTok webinar went well this week with an interview with the RB exec behind their stellar Handwash Challenge and a Q&A with a top TikTok exec. I will share the webinar video next week.

Much of the news around TIkTok is geo political as it is banned from US Government issued devices and plans for a UK Global HQ are parked. Some US investors are looking to buy TikTok but this seems quite insular thinking; a US ban would be problematic but this is a global business and the ban in India is probably just as big an issue.

One of the themes of our webinar was how brands are using TikTok - including Dettol, Apple and a great Coke example of UGC ads. This Hollister campaign is another great example.

And TikTok now has Prince’s entire song catalogue - so anyone can use a 15 second clip in their video. It’s unclear whether a brand could do that?

No surprise that Facebook are planning to launch their TikTok rival Reels in the US shortly. They launched in India as the ban kicked on.

newTV

A new Roku study shows the early effects of the Pandemic, with a rise in cord cutting. Many in the industry believe that when live sports return so will viewers, but their study suggests otherwise;

And this research confirms that many share a Netflix account - they see 17% of US adults are streaming service moochers.

As the economic impact of the virus mounts we think the economics of streaming TV change too. And this will help the latest entrant Peacock, who amongst their complicated offer have a free tier - with ads. As cNet break down here this is a pretty good option if you are not too bothered about the original shows Peacock are offering. This NYT article is good background;

And this is why Roku and Amazon are holding out and Peacock is not on their devices. There is going to be a lot of ad revenue and they want their (fair?) share. And Hulu are launching a self service tool to build their revenue from small businesses

Talking of originals, Hamilton has been a big success - Samba say 2.7m households streamed it in the first 10 days - but of the top 10 Netflix original movies how many are essential viewing? Their customer experience can drive big audiences to watch, but I could live without most - apart from the Irishman.

Our friends at Tubular Labs have a new report looking at how SVOD services are using social video to build audiences. For example Amazon Prime promote classic movies by posting famous music and dance scenes on Facebook.

Fix friend Dave Morgan on the pace of change in Video - it will change more in next 6 months than in past 6 years

AI / Machine Learning

Some of the most interesting opportunities with AI are around how it replaces / helps creative development. There is lots happening and we know a number of smart people are focused on this area. This AI logo designer is a good example.

And GTP3 takes this to a new level. Read this blog post by a developer - and learn at the end it was actually ‘written’ by the language prediction model, fed by the developers bio. It is early days but the examples he shares on his Twitter feed highlight the possibilities. The Resemble team see it as a way to drive synthetic speech

Perhaps the most fully formed play in the AI creative space are the guys at Pencil. Well worth checking out and happy to make an intro if helpful.

Google are using their AI capabilities to power personal recommendations in shopping. Sephora have found it highly effective;

Social Commerce

So much happening with Social Commerce. This podcast with Connie Chan of A16Z is a must listen (or you can read the transcript) for context. Her definition is a good place to start;

The latest project from Google Area 120 is Shoploop; a video shopping platform for discovering, evaluating and buying products, all in one place. You can play with the service here.

Instagram Shop is now live in the US and rolling out globally over the next few weeks. It's a destination in Explore but a Shop button will roll out later this year. It ties in with the roll out of Facebook Pay

Twitter thread on Twitch as a Service - Anyone can start a live streaming service

Adtech

From a post by @eric_seufert we found this interesting post by Facebook documenting the value of personalisation. We have seen this again and again but this adds to our understanding.

On the hot topic of IDFA a Guild member shared their company point of view - worth a read. And add your thoughts to the debate in our Guild community.

Plus

Top YouTube Searches (as of 2020) - increasing focus on Music

Good thinking on Adjacent Users - people who are aware of a product and possibly tried using it, but are not able to successfully become an engaged user.

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