This is the briefing for the week of October 27th. Most important links this week are 230 tech briefing takeaways, Doordash’s private label, Long Lived Institutions.
Startup Curated subscribers can get access to these briefings on four days early (on Tuesdays), as well as a long form essay on an important marketing topic, and exclusive interviews with successful CMOs for free by subscribing here.
This week's essay was on the importance of Inputs vs Outputs when building a business. Next week's essay covers what matters in manage product and company reviews.
Onto the briefing:
- Apple Search:There have been rumors that Apple is working on its own search engine for a long time. Last week the FT published more details. 9to5Mac re-wrote the content outside of a paywallfor those who do not subscribe. Recall that Apple makes roughly $12B from Google for making it the default search engine on iOS (~14% of Apple’s profit). So mostly this is about leverage. But if US anti-trust regulation prevents Google from being able to pay to be the default, Apple needs an alternative. Note that not only does Apple need to make a good search engine (Apple Maps anyone?), they also need to build up advertiser density to monetize it. Not easy.
- 230 Tech Hearing:Before “Section 230” online platforms had two choices: (1) No moderation at all of user content, or (2) Full liability for any user generated content. Section 230 allow online businesses to do SOME moderation but still have no liability for what they leave alone. Now both Democrats and Republicans claim they want to change the law. Last week the CEOs of the three companies most likely to be impacted by changes were seated before Congress(Google, Twitter and Facebook). The Republicans focused on the recent suppression of the New York Post “Hunter Biden Laptop” story (Focus: regardless of the legitimacy of the story, why should Jack and Mark be the ones to decide what constitutes “truth”). Zuckerberg suggested that 230 SHOULD be amended, which might sound like he is giving up, but in practice any regulation hurts the smaller companies far more than bigger companies (like Facebook), and more clear rules make it easier for Facebook to do whatever it is society claims it actually wants them to do without everyone being mad at them all the time for contradictory reasons. ALSO NOTE: Zuckerberg shared that the both FB and Twitter were told by the FBI to “be ready” for some sort of mis-information campaign shortly before the NY Post story, which helps explain why both acted so quickly.
- Tech Earnings: Lots of earnings calls last week. Facebook recorded record revenue +22%. Amazon revenue was up 37% and profit tripled, while Google “only” saw a 10% YoY growth. Amazon hired 400K people bringing their staff levels to 1.1MM. Apple revenue was only up 1%, but services are now 22% of their total(and new phone comes out next quarter). It turns out that these are good businesses, and even better when people shift dramatically to shopping more online…. Meanwhile non-digital advertising was still hurting last quarter with advertising giant WPP down 7.6% YOY in Q3.
- TikTok/Shopify:The two companies announced a partnership. This will help TikTok monetize, provide more distribution for companies on the Shopify platform, and reduce consumer friction. This is good business all around. Expect more of these integrations. It turns out the infomercial works in many different formats.
- Kazakhstan: Borat is a satire where Sacha Baron Cohen plays a racist, sexist autocrat caricature from Kazakhstan who puts unsuspecting bystanders in uncomfortable positions. When the first movie came out in 2006 Kazakhstan banned the film. When Borat 2 was released last week, the country decided to “lean in” and released tourist videos that borrow liberally from the film. You can watch their “Very Nice” advertisement here. No PR is bad PR. (But I feel like execution could have been MUCH better. Its weird to say that an ad based on the Borat character is... bland?)
- Television Advertising: The average price of a 30-second spot on Sunday night football is up 14% YoYon a 23% decline in viewership. It’s hard to replace TV as a broad, brand-building channel.
- Proactive negative SEO:Now that Google is hiding many of the KWs that come up in paid search, you need to be proactive in making sure you have the right negatives - you can't count on a feedback mechanism. SearchEngineLand has some good suggestions.
- Not Subject to Earth Law: Starlink is Elon Musk’s satellite internet service. Last week they launched beta testing. In theory this could mean lightning fast internet service anywhere on the planet. As part of their launch they issued their “Governance rules”. For services provided on Earth and the Moon they will subject themselves to “California Law”, but for (hypothetical) services provided on Mars, “the parties recognize Mars as a free planet and that no Earth-based government has authority or sovereignty over Martian Activities”. Some may argue this is “advanced planning”, but more likely it is a great PR stunt.
Burger King: The Quick Service Restaurant has been winning advertising awards left and right and doing some really innovative stuff. But last quarter their same-store sales were down 7% (while McDonalds was up 4.6% in the US). Creative /= effective
Lookalike Audiences: Regular readers know that I believe lookalike audiences based on purchases are the only real effective way to do early funnel targeting. The NYTs ran a contest to see if people could identify Trump supporters vs Biden supporters based on the contents of their refrigerators. Even political opinions can be predicted sometimes based on purchase behavior…
FICO Scores: High FICO credit scores lead to lower interest payments on loans. Low scores can stop your ability to get a loan entirely. In theory the scores tell lenders an individual’s credit risk, but in practice they are both imperfect and “game-able”. Many people, regardless of their credit risk, want to do what they can to increase their scores, so that is what we see happening. While credit-worthiness has not changed significantly in the last decade, FICO scores HAVE. Average scores are up 3.4% since 2010. When the metric becomes the goal is becomes less effective at measuring what you care about.
- DoorDash: The delivery company used its internal search data to figure out which cuisines were in demand in which geographies, and compared that to supply. Where it is seeing gaps it is launching its own “private label” restaurants, including a Burmese restaurant in San Fransisco. Amazon takes a lot of heat for this, but no one seems to be concerned about DoorDash - at least not yet.
- Franchises: Matthew Ball shared a great chart on the growing share of box office coming from the largest franchises. Even more impressive the Disney is shifting away from the theatrical release model. Christianson would bet against them.
- Window(less) Incentives: For almost 150 years in the 1600s and 1700s Great Britain changed property taxes based on the number of windows in a building. The result was millions of homes built with “very few” windows and existing windows being boarded up, “to the detriment of both health and aesthetics”.
- Quote: Rory Sutherland, “The job of science it to try and be right, the job of a business is to be less wrong than your competitors”
- The Lincoln Project:The never-Trump ex-Republican organization has created some very impressive advertisements this cycle. After the election they will not really have a home - neither the Republicans nor the Democrats will want them in their club. So what to do instead? Create their own media company. The hardest part of any business is getting enough attention to exist. They have that. Now they just need to find something to do with it.
- Privacy: French publishers are arguing that Apple’s increased privacy controls are unfair. Apple is doing this unilaterally, but these are the same rules that GDPR forces ALL companies to comply with on the open web. Privacy concerns are not about privacy.
COVID and The New World Order
- Commuting Time:Many more people are working from home. Historically the average person commuted 40+ minutes per day. So what are we doing with all our additional time?The WSJ estimates about a third is going towards more work, 15% to home improvement, 10% to child care, 8% to a second job, and the remainder ~30% to leisure.
- Reddit:"To support employees to live where they want to and do their best work, we are eliminating geographic compensation zones in the US. It means that our US compensation will be tied to pay ranges of high-cost areas such as SF and NY, regardless of where employees live."
AI, Machine Learning and GPT-3
- GPT-3 Pushback: Facebook’s Chief AI Scientist explains why he things GPT-3 is overrated. “It’s entertaining, and perhaps mildly useful as a creative help. But trying to build intelligent machines by scaling up language models is like building a high-altitude airplanes (sic) to go to the moon. You might beat altitude records, but going to the moon requires a completely different approach”. I think he may come to regret making the public statement sometime around GPT-4, but maybe he is right and this is a dead end. For anyone who has played with it, it sure doesn’t FEEL like a dead end…
- Interviews:“Do you have any questions for me?” is an awkward time in many interviews. Once you have the job offer in hand you should have LOTS of probing questions, but until then, you want to ask questions less to figure out if you want the job, and more to increase your chance of getting the job. FirstRound has some suggestions on what questions you can ask (beyond the obvious) to get achieve that goal, while still getting a little deeper into what the company culture is ACTUALLY like.
- Course Selection: Entrepreneurs were asked which courses they wished they had taken in college. Answers included “deal making”, managerial psychology, consumer psychology, coding, creative writing (“It would have helped me with marketing” - maybe he should have taken copywriting?), communications and finance. No one suggested they were missing courses in history, physics, or theater so I guess I made the wrong choices.
- Selection, Selection Effect:Family businesses that pass to the first born do not perform as well. Obvious explanation if the default is to pass to the first born, so when it passes to another child, there is a good reason.
- Long Lived Institutions: The Long Now Foundation has done some research into the characteristics of over 5000 institutions that have been around for more than 200 years. Some findings:
- Over half (56%) are Japanese; Germany comes in second with 15%
- Most are small. 90% have fewer than 300 employees
- There are MANY breweries. 23% are in alcohol, 12% hotels and 9% restaurants
- Western companies on the list are mostly service companies, “It’s a lot easier to reinvent yourself as a service-oriented company than it is as a commodity company when that particular commodity goes out of use.”
- I liked this quote: “The most dangerous time for anything that’s lasting is really just one generation after it was built. It’s no longer a new, cool thing; it’s the thing that your parents did, and it’s not cool anymore. And it’s not until another couple generations later where everyone values it, largely because it is old and venerable and has become a kind of cultural icon.”
- Much more at the link
Keep it simple,