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.
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
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.
“When a customer first switches to online, it typically takes three or four years before that customer’s profitability is the same as when they shop in the store,” says Rodney McMullen, chief executive. “But what we find is we get a significantly higher share of that customer’s total household spend.”
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.
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.
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.
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.
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;
Just 17% of recent Cord Cutter households said they’d re-subscribe to traditional pay TV when live sports return. 31% stated they are likely to subscribe to a new live sports streaming service. Over half (52%) of Traditional and Shaver households say they are likely to reduce their package If televised live sports on traditional pay TV doesn’t return.
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;
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.
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
Google are using their AI capabilities to power personal recommendations in shopping. Sephora have found it highly effective;
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;
Social commerce basically means to me that you are leveraging other people that you know or perhaps even that you don't know, but that you follow, to do product discovery or to shop together in a social engaging experience. And I think what social really solves around commerce specifically is the discovery problem, where I do a ton of shopping on Amazon, an embarrassing amount of shopping on Amazon. But yet Amazon's product recommendations to me—I very, very rarely click on them. And social commerce is a new way to think about bringing products you might like directly to you
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
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