As a new month dawns, we hereby present a month-end compilation of #RandomThoughts courtesy the Team at the Information & the Bulwark. We will continue to assess all of these over the ensuing weeks and months as we look forward to the privilege to serve:
There was a time when employees at Apple—long one of Silicon Valley’s most secretive companies—wouldn’t dare to speak openly about their employer in public without permission. Often they were too spooked to talk to colleagues in other parts of the company, if they could even figure out who they were.
But in the past few weeks the doors to the Apple kingdom have been partially cracked open with the help of an unlikely tool: Slack.
The popular messaging tool became a hit at the 160,000-person company during the pandemic, when many employees were forced to work from home. And in recent months, Slack has become a virtual town square. They have rallied there to protest the company’s plan to return to its offices, object to its method of granting exemptions for continued remote work and declare their outrage over Apple’s hiring of a controversial tech industry figure.
Tuesday was a good day for Tim Cook. On the 10-year anniversary of his appointment as Apple CEO, tributes to his leadership of the company began flowing—drowning out, for a moment, the gripes from some of his critics.
The most common of the Cook complaints is that Apple has lost its creative razzle-dazzle. His successor, Steve Jobs, hit a nearly unbroken series of home runs with the iPod, iPhone, iPad and the App Store. Cook, in contrast, can claim credit for the Apple Watch, AirPods and some of the growth in Apple’s highly profitable services business—all solid doubles and triples.
The more upbeat assessment is that Cook’s performance has been outstanding for shareholders. The Economist ran a chart showing that Apple has added $2.1 trillion in market capitalization during Cook’s decade-long run at the top of the company, more than any other current tech CEO. When you adjust for tenure, Cook ranked third after Microsoft’s Satya Nadella and Alphabet’s Sundar Pichai, each of whom has presided over bigger increases in market cap on a per-year basis.
It’s especially interesting to compare Cook’s performance to that of Jeff Bezos, Amazon’s CEO until last month. Bezos is probably the closest living analog in tech to Steve Jobs: a founder CEO who is widely seen as a creative business genius, someone who has conjured up enormous new businesses like Amazon Web Services out of thin air. Still, Bezos oversaw a significantly smaller increase in market cap at Amazon ($1.7 trillion) than Cook did at Apple.
Cook’s legacy could still be undone by developments yet to come. Its planned mixed-reality headsets and electric vehicle could bomb. IPhone sales could fall into a serious slump. For the moment, though, give the guy a break. —Nick Wingfield
Warby Faces an Eye Test
There are a few notable takeaways from paperwork filed by Warby Parker, the eyeglass retailer with digital roots, as part of a plan to go public. The first is that Warby is the latest internet company to shun a traditional IPO in favor of a direct listing, in which a company’s shares start trading without raising any additional capital that dilutes existing shareholders. Warby raised a couple rounds of capital last year—it had $261 million in cash on hand at the end of June—so it appears to feel confident it doesn’t need to replenish its coffers.
Still, the pandemic was simply brutal for Warby’s business. Revenue grew only 6% last year to $394 million from 2019, a fraction of the 36% revenue growth in 2019 compared to the prior year. You’d think that Warby would have been in a good position during the Covid-19 lockdown since it has such a strong online presence. And after all, the company was founded in order to turn glasses into digital purchases. But it became heavily dependent on its retail stores, which accounted for 65% of sales in 2019.
Covid forced Warby to close its physical stores—which now total 145—between March and May of last year. The loss of physical sales during those months resulted in Warby getting 60% of its revenue last year from the web and 40% from stores.
This year has been brighter for Warby, which saw 53% revenue growth in the first six months of 2021 compared to the same period last year. Sales during that period were evenly divided between offline and online. Still, investors thinking about buying Warby shares should be clear: They’re buying into a digitally-fluent retailer that is heavily dependent on foot traffic. —Nick Wingfield
The move by Chinese authorities to take an equity stake and board seat in ByteDance’s China subsidiary isn’t a one-off. It’s part of Beijing’s effort to increase oversight of all social media and news, which means other major owners of online content platforms, such as Tencent, Alibaba and Kuaishou, will likely be on the receiving end of similar government actions, according to tech investors and corporate lawyers in China.
China’s government, which has long owned and controlled traditional newspapers and TV broadcasters, for years has been taking steps to exert more influence over the management of online media platforms as well—long before the recent regulatory crackdown that has ensnared some of the same companies. The ruling Communist Party uses the media to shape public opinion and maintain its hold on power, so it needed to play catch-up after news websites and apps began driving politically sensitive or sensational topics.
I interrupt this regular Briefing—which will once again be brought to you by Martin Peers next week when he returns from vacation—with a dispatch from the land of the news media, which seemed to be on fire Thursday.
German media company Axel Springer agreed to buy Politico in a deal worth more than $1 billion. Forbes is preparing to go public via a SPAC. Vice, which may or may not ever go public via a SPAC, had layoffs.
The first development is the one that interests me most. I’ve long admired Politico. It’s a fabulous example of journalistic excellence and business savvy. I hope and believe its continued legacy will be strong.
And yet, I’m uneasy. Because, any way you slice this, Axel Springer’s continued shopping spree—it owns Business Insider and Morning Brew in the U.S., along with stakes in a slew of other publishers—certainly signals we’re entering the era of digital media consolidation. (If you want to get up to speed on Axel Springer’s overall business, Mark had a great primer in this interview with its very busy U.S. mergers scout Lars Kahl.)
Consolidation, of course, has pros and cons. On the con side, I’m worried about jobs. We need more jobs in journalism and most consolidations lead to overlap and eventually cutbacks. I’m also worried about variation and competition and ensuring there is a path for the “next new thing.” Behemoths have a way of crowding out competition, as New York Times media columnist Ben Smith wrote in a piece last year presciently posing the question of whether the New York Times’s own growth was bad for journalism.
At the time, I remember thinking he was being a bit silly. Surely the digital playing field is wide open. But days like today give us pause. They remind us that neither readers nor revenue are as easy to come by as they once seemed, and that great outlets will have to continue to work even harder to earn both.—Jessica E. Lessin
PELOTON LOSES GAS
One of my favorite Peloton cycling instructors, Jess Sims, has a quote she often uses to get people in her classes spinning a little faster: “We can do hard things.” Peloton executives should be repeating that phrase to themselves right now.
The digital fitness company, which became a shining example of the “work from home” stocks whose businesses soared during the lockdown, swung to a net loss of $313 million for its fiscal fourth quarter ended June 30 from a profit of $89 million a year earlier. Big increases in sales and marketing and other operating expenses led to the backslide.
An equally serious concern for Peloton is that its revenue grew only 54% to $937 million, dramatically less than the 141% revenue growth it posted in the quarter ended March 31. And the company projected revenue for the current quarter that also was far below expectations. The slowing growth could be a troubling sign—for Peloton and its investors, at least—that people are starting to return to gyms and other more traditional forms of exercise. The company also announced it iss slashing the price of its cheapest internet-connected bicycle by 20%, which could juice growth.
Peloton’s shares fell 6% after its results came out and are down 22% for the year. More hard things likely await the company.—Nick Wingfield
(Photo by Leon Neal/Getty Images)
1. Full Stack Economics
It’s a promising new operation from Timothy Lee and Alan Cole. So far, I’ve loved every issue. Starting with this one about Amazon’s push into grocery:
A new Amazon Fresh store opened in the upscale Logan Circle neighborhood—one of dozens of stores Amazon is expected to open in the coming months across the United States. . . .
The DC store is notable because it’s one of the first Amazon Fresh stores to feature Amazon’s Just Walk Out technology. Cameras, weight sensors, and sophisticated software enable customers to grab the items they want and leave, skipping the checkout process entirely. Amazon debuted the technology for smaller Amazon Go convenience stores a few years ago, and is now starting to use it for larger stores.
For this story I visited two Amazon fresh stores—the DC store with Just Walk Out technology and a second store in the Virginia suburbs. The Virginia store uses a different checkout technology called a Dash Cart. . . .
I visited the Washington DC Amazon Fresh store on Monday, August 2 with a shopping list of about a dozen items. You use the Amazon app to bring up a QR code and scan this code at the entrance. Then you put away your phone and start shopping. When you’re done, you “just walk out” and Amazon emails you a receipt.
At 7,300 square feet, the DC store is larger than most convenience stores (including Amazon’s own Go convenience stores that use the same technology) but much smaller than a full-sized grocery store. Amazon’s store was missing buttermilk and Wheaties, and it didn’t have non-food items like dental floss. But it had all the other items I wanted, including a good selection of fruit and meat. . . .
Amazon’s no-checkout technology helps in several ways here. Obviously, buying groceries is more convenient if you don’t have to wait in a checkout line. Equally obvious, Amazon can pass along the money it saves by not having checkout clerks.
More subtly, removing checkout counters allows the stores to be smaller—not only because you don’t need the physical space for the checkout lanes, but also because you don’t need a large volume of business to recoup the fixed cost of running the checkout lanes. So instead of having a single big store, Amazon could profitably build several small stores to serve the same area. That would mean more customers living within easy walking distance of an Amazon Fresh store—customers who might get in the habit of stopping by Amazon Fresh stores every day or two for fruit, milk, and other perishables. . . .
The DC region’s other Amazon Fresh location is in Franconia, Virginia, about 30 minutes southwest of the nation’s capital. I visited it on Monday, August 9. In contrast to the DC location, this one is a full-sized suburban grocery store. And this store doesn’t have Just Walk Out technology. It uses a totally different checkout technology called the Dash Cart, a high-tech grocery cart with a digital screen and several inward-facing cameras. . . .
While I wasn’t a fan of the Dash Cart, I was impressed by the suburban store’s prices. As I did in DC, I compared the Franconia store’s prices to that of a nearby store—in this case a Giant supermarket. Amazon’s prices were dramatically lower. . . .
Another remarkable thing about the Virginia store: it was swarming with Amazon employees. During my visit on a Monday afternoon, I saw more Amazon workers than I did regular customers. Most of them were carrying around hand-held scanners and filling shopping carts full of groceries—in other words, they appeared to be pickers for Amazon’s grocery delivery service.
In short, the Franconia store is effectively a delivery warehouse that lets customers visit.
