Fast Five from the Valley: Edition 31
Facebook’s private mistakes become public.
Facebook’s privacy mistakes are becoming increasingly public with the discovery this week that Facebook captures texts and call logs for some Android users. As people have been sensitized to this issue, there will be an increasing number of juicy articles about this subject in the future. Both Apple and Tesla have been quite public in their condemnation of Facebook’s actions. Facebook is in damage-control mode, indicating that they are prepared to testify in the US. The impact of this has been significant and immediate, with declines in Facebook’s stock price and the beginnings of a federal investigation.
However, interestingly, the impact of this scandal has been felt beyond just the ticker of Facebook, with shares of Apple, Amazon, and Netflix all declining. The likely increase in regulation is rattling investors, who are concerned that additional regulation is likely to impact the companies’ bottom line, both in terms of the cost to comply with the legislation, but also in limiting the future revenue potential from the sale of user data (explicitly direct access or implicitly through leveraging it for products such as targeted user advertising). It seems like the regulatory risk is now beginning to be priced into these stocks, making it likely that Tesla’s next capital raise could be more challenging.
UBER is stepping back from its Southeast Asian operations – withdrawing from yet another market.
Just one week after a woman was killed on the streets of Arizona by an autonomous Uber vehicle, the company is in the headlines again: The world’s biggest ride-hailing company has given up on its Southeast Asian business.
Uber’s local competitor Grab will acquire all of Uber’s SE Asian operations – including the food delivery service UberEats. Back in 2016, Uber gave in to Didi Chuxing – another major competitor – selling its Chinese business. More recently Uber gave in to Russian Yandex, a multinational corporation specializing in Internet-related services and ride-hailing – deciding on a merger.
The deal with Grab is yet the latest addition to a history of consolidation in the ride-hailing market. Grab is focusing on providing car, shuttle, bus and bike ride-hailing in many Asian countries such as Malaysia, Indonesia, Thailand, Vietnam and the Philippines.
As part of the deal, Uber gets a 27.5% stake in Grab and Uber’s CEO will get to join the board of the Singapore-based company. The deal was finalized over the course of the last weekend. The real winner of the deal is SoftBank Group, a major shareholder, which has invested in both companies and has an interest in reducing competition to stabilize prices and maximize overall profits.
SoftBank does not only hold shares of Uber and Grab, but is also invested in two other ride-hailing market leaders: India’s Ola and China’s Didi Chuxing. The SoftBank Group now provides an accumulated 45m rides a day.
In order to enter many of its markets, Uber has burned billions with its aggressive market entry strategy, undercutting the prices of local transport providers and taxi companies. The Grab deal is indicative of Uber turning towards a profitability as the company is targetting the goal of being out of the red by 2022.
For Uber, killing the Southeast Asian market also means that the company can brush up on its own numbers as it can cut back on its losses, just in time before its planned IPO in 2019.
Big dogs make moves to keep up with video conferencing technologies and sales software
Remote working is increasingly common with 43% of workers now occasionally working remotely, boosting the video conferencing market to a predicted $41bn by 2022.
Headset maker, Plantronics, is clearly aware of this as the company announced it is buying San Jose-based conferencing hardware company, Polycom, for $2bn in a bid to become the “one-stop-shop for business communication gear”.
With almost 4,000 employees apiece for both companies (P.S. Plantronic headset was used by Neil Armstrong when he first stepped onto the moon), these are not small players. However, newer conferencing startups such as Zoom, Highfive and G2 Crowd, are dead set on stealing market share, with Zoom crossing the line with a $1bn valuation last year.
Meanwhile, sales software startup, Intercom, has announced a $125m Series D round with participation from Google Ventures and veteran investor, Mary Meeker. CEO Eoghan McCabe believes that the key difference is that, “Salesforce is not built for internet businesses”, while Intercom is the “next generation customer database that’s specifically built for internet businesses” with customer sales increasing by an average of 82% when using the platform. The startup emphasizes its “messaging-first approach”, helping power 500m conversations per month across its 25,000 customers.
With ever-increasing competition and opportunities in video conferencing and sales software, we expect to see big players considering buying up their competition to build scale.
Lululemon’s new hires poised to steady the ship
Lululemon, the Canadian “athleisure” retailer, has experienced some instability in the executive ranks in recent years. In 2017, the company lost executives including Chief Digital Officer, Miguel Almledia, and Executive Vice President and Creative Director, Lee Holman.
Even so, the retailer was still able to add new recruits, with Julie Averill joining as Executive Vice President and Chief Technology Officer, and now, Justin Richmond as Lululemon’s Chief Strategy and Digital Officer.
Richmond, a former executive at the e-commerce firm Zulily, is likely to pave the way forward for the retailer’s adoption of emerging digital technologies and physical-and-digital integration efforts. Richmond will have a lot of pressure to deliver Lululemon’s 2020 sales goals of $1bn in online sales, $1bn in international sales, and $4bnin total sales by 2020. This is likely to being challenging considering the rumors that Lulelemon has developed a toxic work environment as a result of prior CEO and Chairman, Laurent Potdevin.
Even amongst the high executive turnover and toxic work culture allegations, Lululemon still posted a 14% increase in sales for the 3rd quarter in 2017. It will be interesting to see if this can be maintained under Richmond’s leadership and Lululemon’s recent turbulent experiences.
Why do fonts matter – Netflix develops its own font
In the book by Sarah Hyndman, she argues that fonts matter as they have the potential to influence the way we think, feel and behave. However, with the announcement this week that Netflix has invented its own font, the need for creation of fonts is not just limited to emotional logic. Corporates are increasingly inventing their own fonts to save money as using a pre-designed font for all your creative and corporate material can rack up millions in license costs. Sounds like we should get cracking on developing a Fast 5 font!