(#52) on Spotify, Google, Starbucks, Epic Games, TikTok and many more.

One year of #onStrategy 🎂

Sorin Anagnoste

Dec 14, 2023

This newsletter turns ONE 🎂

It’s been a fantastic ride so far and I look forward to more years to come.

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Onto the update:

Strategy

Spotify’s new strategy: cutting costs
The company has announced a reduction of its workforce by 17%, essentially reversing its hiring from the past year. This decision comes as Spotify, despite being a prominent aggregator in the music industry, has consistently reported financial losses in recent quarters. A key challenge for Spotify is its inability to commoditize its suppliers, largely due to the oligopolistic nature of the music label industry. Additional insights include:

1/ The value of music often increases over time, similar to how some wines improve with age. This characteristic is less common in the film industry.

2/ Spotify’s cost model is directly tied to usage, as it pays for the amount of music streamed by its users. Therefore, as revenue increases, so do costs.

3/ To address these financial challenges, Spotify has a few options: (a) generating income through advertisements, which it is already doing; (b) encouraging music labels to bid for placement in playlists; and (c) diversifying content, for instance, by developing podcasts.

While enhancing its role as an aggregator presents difficulties, Spotify faces pressure as a publicly listed company to show rapid results. This necessitates either significant growth or cost-cutting measures. In this instance, Spotify has opted for the latter strategy. LINK

Starbucks is in the EV business…sort of.

“Starbucks has opened electric vehicle charging stations at 15 locations along the thousand-mile stretch between Denver and Seattle as part of its partnership with Swedish automaker Volvo” (LINK).

This sounds like a good strategy, except that is only for Volvo (more specifically, for the type of charging Volvo is using: ie. CCS instead of NACS from Tesla and most used in North America)

What’s really the strategy here? There you go:

1/ Enhancing customer experience by offering EV charging stations, Starbucks enhances the customer experience, particularly for EV owners

2/ Brand positioning on sustainability and environmental stewardship, an increasingly important factor for (its) consumers

3/ Partnership synergies because Volvo is an iconic car present on the American market.

4/ Addressing infrastructure gaps - no need to detail 🙂

5/ Targeting a growing market segment

6/ Supporting long-distance EV travel, hence the need for a pause & coffee

On the Golden Goose’ 2024 expected IPO
Quiet luxury is a thing nowadays. What a great read about a company I have been following closely: Golden Goose. LINK

I already explained why Europe's future lies in artisanship and advanced tech. Here are some key takeaways from the FT interview with Silvio Campara - the CEO:

1/ Golden Goose is not fashion. It’s an icon.

2/ China is not a priority.

“Today, the real future is not China but what we used to call the rest of Asia: Thailand, Vietnam, Philippines, Indonesia, Malaysia,” says Campara. “There is a lot to be done there, where the population is 22 years old on average, not 39.”

3/ You need to own the supply chain to make sure you deliver high quality. The company recently acquired two of its factories, including its largest supplier in Puglia, southern Italy.

4/ Finally, about brand positioning:

"The primary Golden Goose customers are women who are looking for a more subtle status symbol, that’s luxury yet comfortable for everyday leisure,"

Golden Goose is going for an IPO in 2024. Fingers crossed, I'm bullish!

Allview is launching its first EV
I wrote in my previous newsletter that Chinese phone makers are launching next year cars (e.g. Xiaomi and Huawei). Since the manufacturing capacity is already there, why not work with other companies…like AllView?

Allview has offices in Brasov, Romania, but I have always thought that is a company from Shenzen. Now, they have launched a small car, CityGo, which can be driven starting from 16 years old and has a price of EUR 6,250 (w/o VAT). Probably, they will succeed in selling a couple of thousands. Announcement, Review

Google lost in court against Epic
Here is the only explanation you need to understand, delivered by Ben Thompson:

“In short, Apple’s best defense is that it has been clear about its lock-in from the very beginning, and can plausibly argue that not only are consumers informed about said lock-in when they make their purchase decisions, but in fact choose Apple products because of said lock-in. Google, on the other hand, has tried to have its cake and eat it too: after initially competing on being open and unencumbered, the company has since changed the rules, as it were, to lock-in its advantages through a combination of revenue-sharing carrots and contractual sticks.”

This is where the third objection — why now? — potentially looms large. Trial, Ben Thompson

The Cybertruck
We have discussed also last time that the Cybertuck was launched and that the first reviews were pretty good. However, I started to see more and more mixed reviews, and here is one from The Wall Street Journal. LINK

Some things are so different that bring only mixed/bad reactions. Let’s remember how many iPhone models were sold by Apple in the first year.

TikTok becomes first non-game app to reach $10B in consumer spending
Some key takeaways from this news:
1/ The main source of TikTok's revenue is from in-app purchases of “coins,” used by users to buy gifts for creators. These gifts make up a significant portion of TikTok's income.

2/ The app's most popular in-app purchase is a bundle of 1,321 coins for $19.99, accounting for a quarter of its revenue.

3/ U.S. consumers and iOS users in China are the primary contributors to TikTok's in-app spending, each driving about 30% of the revenue.

4/ Predictions suggest that TikTok's revenue will reach $15 billion in consumer spending in 2024, potentially becoming the highest-earning mobile app ever.

5/ Users are expected to spend an equivalent of a 40-hour work week each month on TikTok by the end of 2024, a 22% increase from 2023.

The Romanian–Canadian Executive MBA organized by Bucharest Business School is a double degree program that combines the expertise of two prestigious higher education institutions from Europe and North America: the Bucharest University of Economic Studies (ASE) and the Universite du Quebec a Montreal (UQAM).

The value delivered by the program is already recognized globally in the network of 12 Executive MBA Programs of UQAM, located on 5 continents bringing together a global Alumni community of over 12,000 business leaders. More details.

Artificial Intelligence

Google presented Gemini, their largest and latest AI model. Now, the product is not ready yet and will be launched somewhere next year. However, besides Google's misrepresentation in the video of some capabilities, there are other takeaways:

1/ There were three models presented: Ultra, Pro, and Nano

2/ Ultra is positioned in the test better than GPT-4, but Nano is developed to work on the device. Here, Apple is working in the same direction and for sure will surely announce something in this regard next year.

3/ This new model is pretty good for helping you with research. I wish I had this when I was a PhD student.

Overall, Google is doing OK in this LLM field, but still behind OpenAI. Announcement, Misrepresentation

McKinsey launches an open-source ecosystem for digital and AI projects. LINK

Academic LLM papers address three main problems: hallucinations, small (on-device) models, and simplifying how LLMs work. LINK

Dr. Fei-Fei Li, an OG in AI, sees ‘worlds’ of possibilities in a multidisciplinary approach to AI. LINK

As ChatGPT gets “lazy,” people test the “winter break hypothesis” as the cause. LINK

Things happen

A $10,000 members-only sushi restaurant is coming to Miami. LINK

My Life Strategy template from Harvard Business Review. LINK

Inside Stripe’s engineering culture. LINK

Tucker Carlson is launching his streaming network. LINK

Data

“If you think you are too small to make a difference, try sleeping with a mosquito” - Dalai Lama

In a strategic move to counter Shein's competition in the apparel sector, Amazon has announced a significant reduction in the transaction fees it charges sellers. Previously, Amazon, the largest clothing retailer in the U.S., encompassing both online and offline retail, imposed a 17% fee on sellers, in addition to extra charges for fulfillment and advertising. This made selling apparel on Amazon one of the costliest categories. In contrast, Shein, although considerably smaller in scale with a Gross Merchandise Value (GMV) of over $40 billion, which is less than 10% of Amazon’s, has made a substantial impact in the clothing sector. (please see, newsletter #51)

Amazon's response to Shein's growing influence in the clothing market is to lower referral fees from 17% to just 5% for apparel items priced under $15. For items priced between $15 and $20, the fee will be reduced to 10%, while more expensive items will continue to incur the original 17% fee. This fee adjustment aims to enable sellers to reduce their prices while maintaining their profit margins. However, despite these changes, Amazon’s overall costs remain higher than Shein’s due to its more expensive fulfillment processes. Shein, on the other hand, focuses on offering budget-friendly prices and a slower shipping model, in contrast to Amazon's emphasis on fast delivery. This difference in business approaches highlights that while Shein is not a direct competitor to Amazon across all categories, it is a significant rival in the clothing sector. Despite Amazon's fee reduction, it still faces challenges in competing with Shein, which boasts a strong online presence and a unique customer experience, underlined by its massive following on social platforms like Instagram and TikTok.

Let’s see Amazon’s strategy when Temu joins the party hardcore, which is next year. LINK

Apple Watch vs, the Swiss Watch Industry
In 2022 Apple made close to $18 bn in revenue from selling its watch and probably will surpass the entire Swiss watch market (in revenue) in 2023. These are crazy numbers and when you think that the Apple Watch was launched only 10 years ago everything seems even crazier.

Possibly, in ten more years, the Apple Watch will play a key role in a future free-smartphone world.

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Outside Interest

I did not know that there was a contest called the World Excel Championships. Yes, there is super competition in it and this year was kept in Las Vegas, of course. LINK

George R.R. Martin was very busy. I try to understand his energy towards developing sequels and prequels instead of focusing on finishing the “A Song of Ice and Fire” saga. LINK

29,9 degrees Celsius in December in Malaga, Spain. LINK

Peak breakup times throughout the year (as measured through Facebook). LINK

Only 27.5% of people from Hong Kong voted back from 71% in 2019. LINK

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