Curated Insights 2018.06.10

Laying the pipes of a post-advertising world

Brands have always fought for a place in consumers’ hearts, and then relied on their loyalty for repeat business. Pipes are structural relationships that don’t rely on such fickle factors. They are built on more vertically integrated distribution channels and behave more like utilities — a way into people’s homes and lives attached to an account.

Amazon is the ultimate pipe. Their entire value is that they bring things to you — the things can change as necessary: movies, pickles, sneakers. They own the interface, the invisible moving parts, and the household. They understand your preferences intimately and have become arbiters of choice in many homes. Alexa, buy batteries. You get a big pack of generic batteries, rated 4.5 stars for a good price delivered to your home. Do we really need brands with brand managers and media agencies competing for our attention or do we just need batteries for the remote? If pipes offer simplified decision making, better value and validation — then brands as we know them lose their value.

Advertising was unsustainable from the beginning, for two key reasons. Firstly, when a market fills up, everyone needs to shout louder to get heard, until the noise drowns everything out and a vicious cycle sets in to the detriment of all. Secondly, advertisers pay to reach people, but the audience also pays, with perhaps the most precious resource of all, their attention. You pay attention, and our attentions are more burdened than ever. This is the perfect recipe for people to opt out, should we give them a way to, and we have. In a very short span of time, ads have gone from having captive audiences to being avoidable. Social feeds are designed to skip over anything that doesn’t interest you. Fast forwarding over TV ads is great, but watching ad free content (Netflix) is even better.

Not adapting carries the risk of becoming a price taker in the long run. Adapting can be either through building your own pipe infrastructure, not an easy task and especially difficult for companies not born out of technology, or renting someone else’s pipe and ceding power to them and again facing the potential of long term decline. Disney has chosen the former. Soon they will launch their subscription video competitor to Netflix. With a lot on the line, a transformation of epic proportions lies ahead. Whether it’s successful or not, it speaks volumes that the owner of the most magical brands in the world is entering the pipe race.

The list of advantages pipes and subscriptions have over brands and ads is overwhelming: more consistent income and cash flow, lower marketing costs, better access to customers, more flexibility and control of customer experience, better valuations and access to capital, better quality data and potential for AI. As these factors compound, the shift in the balance of power will accelerate.

Spotify uproar points to the power of the playlist

The furor reflects a reality of today’s music business: Playlists are the new radio, helping major artists rack up millions of streams and connecting lesser-known acts with new fans.

But the findings highlight how influential Spotify can be in determining which songs, albums and artists succeed in the streaming era, he adds. Justin Barker, group director of streaming strategy for PIAS, a U.K.-based group of record labels that works with musicians such as Father John Misty, says that for the majority of its new artists, roughly 60% to 80% of streams are on playlists owned and operated by Spotify.

Spotify has become “a very powerful intermediary,” Mr. Waldfogel says. “The music industry used to get bent out of shape about how much market share Walmart would have. This makes that seem quaint.”


Here’s what Fiat Chrysler’s five-year road map looks like

Adjusted Ebitda will rise to between 13 billion and 16 billion euros by 2022, up from about 6.6 billion in 2017. The 2017 figure excludes the Magneti Marelli parts unit that Fiat Chrysler plans to spin off at the beginning of 2019. Fiat Chrysler also said it will spend about 45 billion euros on capital investments as it tries to harness an evolving automotive market place driven by electrification, connected services and self-driving cars.

Fiat Chrysler plans to form a captive financial unit in the U.S. The company has an option to buy out its existing partner, Santander Consumer USA Holdings Inc., and has initiated discussions, Palmer said. Such a move could add $500 million to $800 million in incremental pretax earnings within four years, he said. Fiat could also start its own business, in which case the company envisions about $100 million in incremental profit. A captive finance unit will allow Fiat Chrysler to “participate more fully in capturing value from emerging platforms,” Palmer said, for example by securitizing vehicle fleets and offering access to service providers on a per-mile basis.

Jeep is targeting 1/12 of all sport utility vehicle sales worldwide by 2022, implying a will more than doubling of deliveries to as many as 3.3 million units, based on Bloomberg calculations from the presentation. Maserati will target Tesla Inc. with a full-electric sports car that reaches more than 186 miles per hour. All Maserati powertrains, including the electric ones, will be supplied by Ferrari NV, the supercar maker spun off from Fiat Chrysler in 2016.

Google emerges as early winner from Europe’s new data privacy law

The reason: the Alphabet ad giant is gathering individuals’ consent for targeted advertising at far higher rates than many competing online-ad services, early data show. That means the new law, the General Data Protection Regulation, is reinforcing—at least initially—the strength of the biggest online-ad players, led by Google and Facebook Inc.

Havas SA, one of the world’s largest buyers of ads, says it observed a low double-digit percentage increase in advertisers’ spending through DBM on Google’s own ad exchange on the first day the law went into effect. On the selling side, companies that help publishers sell ad inventory have seen declines in bids coming through their platforms from Google. Paris-based Smart says it has seen a roughly 50% drop. Amsterdam-based Improve Digital says it has experienced a similar fall-off for ads that rely on third-party vendors.

It took a $1 billion IPO for people to see why Adyen matters

By 2017, Adyen was processing in excess of $122 billion in payments for the year, an increase of 61 percent from the year before, and generated $1.2 billion in revenue, according to financial filings. Uber Technologies Inc., Netflix Inc., Spotify Technology SA, and Facebook Inc., are all customers.

Despite its success so far, Adyen still has some ways to go to catch up with the largest payments firms — Vantiv, Chase Paymentech and First Data each handle about $1 trillion annually — but Adyen differs from many of its rivals in a number of ways: Its transaction processing fees are typically lower than those of other young e-commerce oriented payments firms such as Stripe or Square, and it can handle transfers in more currencies and payment types than Chase Paymentech or Vantiv.

Olivier Bisserier, the chief financial officer at Booking.com, an Adyen customer, told Bloomberg in 2016 that he liked that Adyen was willing to “think like a tech company” rather than a bank. When Booking.com expanded into Argentina, Adyen helped build its payments processing gateway for that market at a time when larger payments processors were refusing to do so until the travel site could show significant sales volumes from the new geography.

Janitors are becoming millionaires thanks to this stock’s 9,500% rally

Sunny Optical’s affluent employees have benefited from the largesse of Wang Wenjian, who started the company in Yuyao, a small city on China’s eastern coast, in 1984. When Sunny Optical restructured from a so-called village and township enterprise into a joint-stock company in the 1990s, Wang took the rare step of distributing stakes beyond top management and later organizing the holdings into a trust that now has about 400 holders and owns 35 percent of the Hong Kong-listed company. Leaving a 6.8 percent stake for himself in 1994, Wang allowed quality inspectors, company cooks and cleaners to subscribe for shares at a negligible cost based on their position and years of service.

“When money gathers, people will be apart; when money is scattered, people will gather.”

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