This is the briefing for the week of November 28st. Highlights this week are Tech's advancement into Pharma and Fig, a bunch of S1s, tracking eyeballs, why the greatest catch of the year will not go viral, the underrated importance of Credit Card authorizations, and how Hospitals are marketing to their employees.
Start-up Curated will be off next week.
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 "Convenience" and distribution (specifically in the entertainment industry). Next week's essay will be about why McDonalds has beaten Burger King in financial results while BK beats McDonalds in ad creativity. It's a good one you don't want to miss.
Onto the briefing:
News
- Amazon Pharmacy: The Everything Store is finally entering the pharmaceuticals business. Stock prices at Walgreens, CVS and RiteAid stocks slump; GoodRX gets re-valued. Weird that the market did not see this coming. Bezos has been clear he wants a piece of all eCommerce, and Pharma is a HUGE category.
- Google Pay: Google re-launched their payments app with all the features: Peer-to-peer (Venmo), spending insights (Mint), group payments (splitwise), checkings/savings account services (“Plex” - like Ally), and “Google Explore” (mentioned in yesterday’s essay) which allows users to browse products and they purchase with zero friction. You can also opt-in to allow Gmail to scan your inbox for receipts which it will track for you automatically. These big tech companies need to find ways to grow and they will eventually cap out their traditional verticals. Amazon sees a big TAM in health care. Google sees a big TAM in financial services. (Will Apple look to Education, they other big un-tapped chunk of GDP?)
- Apple Tax Cut: The AppStore traditionally takes a 30% cut of all sales. Apple just announced it was dropping that tax to 15% for developers with less than $1MM in sales. That apparently represents 98% of developers who monetize through the app store, but only 5% of Apple’s app store revenue. In some cases (like $1 apps) Apple will be LOSING money on the transaction. Usually you get a discount for being big, but here the power is not with the economics, but with the political power that numbers bring. This is a great PR play - it gets numbers on their side, but lets them keep the vast majority of their revenue. Any additional fights are now by definition between “millionaires and billionaires” (like Spotify and Epic)
- HBO: I mentioned this in yesterday’s essay, but worth calling out on its own. HBO is launching Wonder Woman 1984 direct onto HBO the same day it is in theaters (for no additional fee). Related: Deadline claims Disney is considering direct to Disney+ for their live action re-makes of Pinocchio, Cruella and Peter Pan. Also: The Coming to America sequel is skipping theaters to go direct to streaming. I only included this to tell the story about how, when I was living in Africa my driver once asked me if I liked Eddie Murphy movies. I said, I did. He said he favorite was “Going to America”. I think that is called “localization”.
- S-1s: A bunch of big ones last week. Affirm allows merchants to offer financing at the point of sale (i.e., $1000, or pay $30/month for 40 months). Financial products need customer acquisition channels that avoid adverse selection, and ecommerce companies can use every trick in the book to reduce cart abandons. Affirm increases conversion rate so much that merchants are often willing to subsidize the effective interest rates (“0% APR”). Also in S-1 news: Roblox released their S-1. Gaming is NOT my expertise, but @Growf has a good breakdown of their economics here. Also Airbnb and Wish.
- The Media: This is not a media newsletter, but media is clearly an outlet for advertising and extremely important for marketers. Media has also become more and more intertwined with product (see The Dodo/PetPlan partnership I mentioned a few weeks ago). Media news last week: BuzzFeed is acquiring HuffingtonPost (mostly a scale play. Context-based and display advertising does not work very well, so more scale the better in figuring out a way to monetize these businesses). On November 13th, Matt Yglesias, one of the three co-founders of Vox announced he was leaving Vox to start his own Substack. A week later his co-founder, Ezra Klein announced he was leaving as well, this time to join the New York Times. Ben Thompson has an interesting take on how the two co-founders differ in temperament and why said temperaments have driven them to different landing places.
Marketing
- Facebook: The social network messed up tracking conversions. The result was companies under-estimating their ROI and under-spent on Facebook. Usually these errors tend to HELP the company making the errors, but this was clearly bad for Facebook. It was still a problem though as smart companies left money on the table, so Facebook is going to credit many of the advertisers impacted. Takeaway is that Facebook advertising is MORE effective than we previously though…
- YouTube: The video sharing site traditionally runs ads next to highly viewed content (and shares the revenue with the content creators). Last week it announced “new inventory” - it will be running ads next to low inventory content now as well - but NOT sharing it with the creators. Advertisers can opt-out of the new inventory, but creators cannot. Google is caring more and more about “growth” and less and less about “don’t be evil”.
- Twitter: Remember when the guy being interviewed by BBC was interrupted by his daughter entering his office and everyone thought it was hilarious? It seems like this happens on a regular basis now, but back in 2017 it was unusual enough that it went viral. Twitter is bringing us back to that simpler time with their new ad featuring the interrupted dad.
- Ad Measurement: Clearly every impression is not created equal. It is more valuable when someone pays attention to your ad. TVision has signed up a panel of 5000 homes and outfitted them with eye-trackers. Now they can tell you how many people were in the room when an advertisement ran, and how many of those people were paying attention with their eyes on the screen. Good data I guess, but likely overkill for getting actual ROI on ads.
- Television: The slow death of traditional television in one chart.
- NFL: What does it take to go viral? DeAndre Hopkins made what many are calling the “best play of the year” including an incredible image (See top image below). But it seems it is not going to get the play that Odell Beckham Jr.’s one-handed catch received in 2014 (second image). The difference is that while the Hopkin’s shot prominently shows the Michael Jordan logo, he is NOT a Nike athlete (unlike Beckham). Nike promoted the Beckham catch with extensive marketing, and released Beckham branded sneakers, hats and cleats. Hopkins will not have someone pushing the natural organic reach.
Business
- Netflix: The VOD company has announced a price increase in America. Roughly a 5% increase, but with zero marginal costs, the increased revenue will drop directly to profit. This is a HUGE profitability growth lever that most companies underutilize. The key is to understand the price elasticity, and that is very hard to “test”. Netflix can do it a little by changing prices at different times in different geographies, but since price elasticity can also vary dramatically by geography, that doesn’t help a lot. So it is a little bit of “judgement” and all joining hands to jump off the cliff. I expect there was a LOT of arguments behind the scenes before this decision was made (and likely a consulting firm or two to help rationalize the arguments of the executive leading the initiative)
- Stripe: Stripe released a case study with Twilio that showed +10% increase in credit card authorizations by switching from their legacy credit card processor to Stripe. Credit card processing is about as boring as it comes, but this is effectively a 10%+ improvement in conversion rate. Almost too good to be true. I will cover this more in my next weekly essay (in two weeks).
- Tower Records: The bankrupt retailer is relaunching as a digital brand. Brand names (even bankrupt brand names) have a ton of value, even when used in new context. Related: Retail eCommerce Ventures has been rolling up failing and struggling brands like Pier 1 Imports, Dressbarn and Modell’s. They just announced the purchase of Radio Shack.
- Home Depot: The retailer is building a marketing network based-off Home Depot purchase behavior. More and more companies are realizing the data that matters for advertising targeting is lookalike audiences based on past purchases. Amazon is going to win at this (with the most and most broad purchases happening on their platform), but there will be multiple winners. I expect sooner or later there will be consolidation to create something that competes with the Everything Store (Amazon ad network, Facebook ad network, Google Ad Network, Walmart ad network, Everyone else ad network)
- Mars: The confectioner has announced the purchase of Kind Bars. The rational for these acquisitions is that Mars has more ability to push distribution. Kind has proven product market fit, now Mars can accelerate it more than they could as an independent company.
Marketing For Employees
- Hospitals: 100 Hospital systems have partnered together to run a marketing campaign focused on getting people to wear masks. (1) Unclear if this will have any impact, (2) If it does work it will only marginally help the hospitals in a direct way (irrespective of what Trump says, hospitals make more money from non-COVID patients than COVID cases), (3) To the extent that it helps hospitals it helps overall society - hospitals should be no more running these ads than Walmart, but, (4) This is a signal to hospital employees that their employer cares about them - clear example of marketing to employees even though it looks like someone else is the target.
AI/Machine Learning/GDP-3
- Grading: WSJ has an article on how the bots that are used to evaluate school work often get the grade wrong. When I was a kid “bots” were used to evaluate multiple-choice tests, but now they have been expanded to judge short answers. The problem comes when the bots try to match student answers to a teacher evaluation key. What is often obviously correct from a human grader can be missed by the (simple) algorithms the bots use. Bots also grade essays, but there is it is less obvious when they grade it “incorrectly”, so instead students learn to “write for the bot”. When the bot messes up on an essay grade the student loses, but when it happens with a simple short answer the bot is the one that gets in trouble.
Careers
- Marketing Skills: Marketing Charts surveyed almost 500 senior marketers to ask what the most important digital marketing skills they look for in a marketing hire. Tops three skills were Data Analysis, Marketing Automation, and UX design. These are all BROAD skills. Specific skills like paid search or social media expertise were right at the bottom.
Fun
College, 2073: Wired has a fun piece creating a course catalog for the class of 2073. This is science fiction. Science fiction is fun (I am a fan!), but it is less about trying to predict the future and more about commenting on the present through allegory - or just expressing the desires of the writer. This is clearly the case here where courses include “The Literature of the Great Pacific Garbage Patch” and “Ethics in Punitive Marketing”.
Netflix: The impact of a popular Netflix show on a non-traditional sport.
