Thursday 22/10/20

  1. In FAANG NEWS, Facebook launches its dating site in the UK and we look at why Netflix ain’t dead yet and what’s going on with Google
  2. In ELECTRIC VEHICLE NEWS, Tesla’s profits rises as it talks about mining and we see how EV development costs will fall
  3. In CORONATRENDS NEWS, Ad demand falls, UK home sales rise and more people eat in with Nestlé
  4. In INDIVIDUAL COMPANY NEWS, Ericsson gets Huawei crumbs, PayPal accepts Bitcoin and Quibi shuts down
  5. AND FINALLY, I show you how to make your own cola…

1

FAANG NEWS

So Facebook launches its dating service in the UK and we see how Netflix is still relevant and what’s in store for Google…

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Labour of love: Facebook’s UK dating service is here (Daily Telegraph, Michael Cogley) highlights Facebook’s rollout of its dating service in the UK and rest of Europe yesterday. Facebook Dating is an opt-in service within Facebook’s main app and lets users match up and go on virtual dates using Facebook’s video call service. The company will be competing in the same arena as the likes of Tinder and Bumble. * SO WHAT? * The service launched in the US over a year ago, is available in 19 other countries and was supposed to launch in Europe on February 13th this year but the Irish Data Protection Commissioner raised concerns, hence the delay. Facebook is keen to get a chunk of the £3.8bn global online dating industry and it differentiates itself from the competition by saying that it gives users “a more authentic look at who someone is”. I think this is a genius idea by Facebook and is a really interesting way of using the data that it’s already got on users. I also wonder whether this will have a side benefit of attracting a younger demographic. If you want to know more about the dating industry, have a look at a report I did on it earlier this year HERE.

I mentioned Neflix’s slowing subscriber growth in yesterday’s Watson’s Daily but Don’t write off Netflix just yet, it’s still mainstream (Daily Telegraph, Ben Marlow) is a good article which argues that although 2.2m subscribers

in the July to September quarter was weak compared to the first and second quarters which saw 16m and 10m new subs respectively – and less than the 3.4m expected by analysts – it wasn’t bad in the scheme of things. * SO WHAT? * Investors obsess over the new subscribers metric but the company continues to see meaningful rises in revenues. It is still the biggest streamer out there with almost 200m subscribers versus 150m at Amazon Prime and Disney’s 60m and has good original content (I would also argue that Amazon Prime member numbers may be puffed up as not all of them use the service – they get Prime for other reasons). Given that people continue to abandon terrestrial TV, it would seem that there is more growth potential to be had – but I still think that at some point over the next few years there will be subscription fatigue and the sector will consolidate.

Google antitrust case backed by rare Washington consensus (Financial Times, Kiran Stacey, Kadhim Shubber and Richard Waters) highlights the gathering momentum against Google and draws comparisons with what happened over twenty years ago when the US Department of Justice filed a competition case against Microsoft and the current case it is now filing against Google. Interestingly, the current case will not examine its online advertising dominance and does not deal with allegations that its commentary is liberal-biased and will concentrate on the anti-competitive element. Funnily enough, Google says that the lawsuit is “deeply flawed” and would “do nothing to help consumers” but when you look at what it says in The rivals who have learnt to live shoulder to shoulder (Daily Telegraph, Margi Murphy and James Titcomb), which draws attention to the close relationship between Google and Apple on search (did you know that Google’s payments to Apple to be its default browser are thought to account for up to 20% of Apple’s annual profits??) and The businesses where Google is biggest (and the ones where it isn’t) (Wall Street Journal, Katherine Riley) which highlights its supreme strength in digital ads, smartphone search, maps (did you know that Google bought Waze back in 2013?), browsers and video (via YouTube), you can see where the anti-competitive allegations come from! OK, so it’s still got work to do in smart speakers, cloud computing and smartwatches but it is no slouch. Google/antitrust: unparanoid Android (Financial Times, Lex) shows that the markets are taking this quite calmly at the moment, but given that fines, divestments and impositions on the way Google does things are all possibilities it would seem that these risks are not fully priced in as yet.

2

ELECTRIC VEHICLE NEWS

Tesla does well and considers mining its own lithium while UBS speculates about how soon EV production costs will come down…

In Tesla sticks to target as profit rises (The Times, James Dean) we see that Tesla said yesterday that it will stick with its ambitious target to deliver 500,000 cars this year whilst announcing its fifth quarter of profits in a row. It did say that the delivery goal was made more difficult because of the enforced shutdown of its California factory. * SO WHAT? * Interestingly, Tesla would have lost money in the last four quarters had it not been for the hundreds of millions of dollars that other car manufacturers have paid it for “green” credits! Tesla’s move into mining aimed at energising battery supply chain (Financial Times, Henry Sanderson) highlights another aspect of Tesla’s strategy – mining its own lithium. Sceptics say that it will take years for him to be able to do so and that it is more a kick up the backside for the likes of two big US lithium miners, Livent

and Albemarle in order to give them a sense of urgency (“If you don’t do it, we will”). This is all part of an overall strategy of reducing battery production costs.

Talking of reducing costs, Electric cars ‘as cheap to manufacture’ as regular models by 2024 (The Guardian, Jasper Jolly) sounds like a rather ballsy call from the analysts at UBS who based their research on analysis of batteries from seven of the biggest manufacturers. At the moment, it costs a lot more to make an electric vehicle than it does to make the Internal Combustion Engine (ICE) equivalent – base price for a conventional VW Golf is about £20,280 vs the ID-3 starting at £29,990. * SO WHAT? * Reaching parity will be a huge moment because they will at last become viable alternatives for the masses (assuming the charging infrastructure is up to it). UBS analysts reckon that manufacturers who hang on to making ICE vehicles at the expense of EVs will fall behind the likes of VW and Tesla. It added that parity will eliminate the need for hybrid EVs. This all sounds great, but I have to say I don’t see it happening as quickly as the analysts think it will mainly because there still isn’t massive take-up and because of the poor charging infrastructure.

3

CORONATRENDS NEWS

Ad demand weakens, UK home sales strengthen and Nestlé benefits from lockdown…

Pandemic triggers big cuts in advertising (The Times, Simon Duke) cites the closely-watched IPA Bellwether Report which shows that 41% of companies cut expenditure on adverts and marketing in the third quarter in order to save cash in the downturn. The cuts are the second deepest in the 20 years the survey has been going. * SO WHAT? * When things go badly in the economy, one of the first things to get cut is the advertising budget – it is a pretty reliable economic indicator. Although things have improved since the worst of lockdown, they are still not great. The gloom continues.

In Stamp duty move boosts house sales (The Times, Gurpreet Narwan) we see further evidence, this time from HM Revenue and Customs data, that house buying activity is strong – purchases rose by over 20% last month and are nearing their pre-pandemic levels. Thus far, economic concerns have been superceded by the strong desire for people to move. * SO WHAT? * I am expecting this boost to die down going into Christmas as people hunker down for lockdown celebration but then pick back up again in the New Year as people reassess and try to beat the March stamp duty holiday deadline.

Talking of stuffing our faces under lockdown, Nestle sales top forecasts thanks to pet food boom and ‘trusted’ brands (Financial Times, Judith Evans) shows that the world’s biggest food group announced a positive outlook for the full year due to strong household demand for pet food, convenience foods and purchases of “trusted” brands as we all want to feel warm and fuzzy with the things we know best. Chief exec Mark Schneider observed that “By and large the trend to in-home consumption, I think, is here to stay and that bodes well for next year”.

4

INDIVIDUAL COMPANY NEWS

Ericsson benefits from Huawei’s woes, PayPal accepts Bitcoin and Quibi closes down…

In a quick scoot around other stories today, Ericsson shines against backdrop of Sino-Swedish tension (Financial Times, Nic Fildes) shows that Swedish company reported its best quarterly margins for 14 years as it managed to profit from strong Chinese demand for 5G equipment. * SO WHAT? * This sounds great, but the problem is that there’s a bit of a to-do going on at the moment between the Swedish government and China as it has just become the latest country to ban Huawei from getting involved in its 5G networks. It remains to be seen whether any wavering in demand from China (perhaps in retaliation for its treatment of Huawei) will be mitigated by rising demand elsewhere as more countries shun the Chinese telecoms equipment maker. China is the world’s biggest telecoms market, so retaliation could be quite painful.

Then in Bitcoin gets nod of approval from Paypal (The Times, James Dean) we see that the payment provider is going to allow Bitcoin payments for the first time, sending the price of Bitcoin up by 6% to reach its highest level since July 2019. * SO WHAT? * The euphoria is warranted given that PayPal is one of the world’s biggest online payments groups, meaning that there will be more Bitcoin action via

PayPal but also the increased prospect that others will adopt it as well. Customers will be able to trade and hold Bitcoin, Bitcoin cash, Ether and Litecoin in digital wallets on PayPal. This is a major development as it brings Bitcoin closer to the mainstream.

Quibi is shutting down barely six months after going live (Wall Street Journal, Benjamin Mullin, Joe Flint and Maureen Farrell) highlights a dramatic fall from grace for the much-hyped streaming service. The service, which put out shows in 5-10 minute chapters designed for the commute (!) is now shutting down in order to return as much capital to investors as possible. Employees will be laid of and paid off while the company will try to sell the rights of some of its content to other media and tech companies. * SO WHAT? * This just goes to show that an interesting idea, high profile leaders and the backing of Hollywood just wasn’t enough to overcome the unstoppable force of the coronavirus. Conceived at a time when employment was at all-time highs and people were cash-rich and time-poor, it never had a chance against the coronavirus and the effects it had on jobs and lifestyles. While the Disney+ launch was timed to perfection as families hunkered down, I do not think that Quibi’s launch could have been timed worse as people had much more time to enjoy long-form content. I personally thought that shows like “Most Dangerous Game” and “#FreeRayshawn” were really good, but ultimately it was just too expensive. It’s probably quite good news for other streamers, though, because they might be able to buy content at a time when their own stocks are looking increasingly bare due to production lockdowns.

5

...AND FINALLY...

…in other news…

After yesterday’s dodgy photo, I thought I’d bring things back to an even keel today with something altogether more wholesome in How to make craft cola with all natural ingredients (SoraNews24, Oona McGee). You will be quite surprised at the process!

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