(#71) Netflix has a new strategy; Shein's business model has its limits; TikTok is preparing an Instagram-clone; Tesla's teasing a ride-hailing app
Samsung shifts executives to six-day workweeks to “inject a sense of crisis”
Knowledge Partner: EY
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Strategy
Netflix won the streaming wars
In its first-quarter 2024 earnings release on Thursday, Netflix significantly surpassed expectations by adding 9.33 million subscribers, bringing its global total to nearly 270 million. The company also exceeded Wall Street forecasts for both revenue and profits, while announcing that will no longer report subscriber numbers.
Well, there are some conclusions from this earnings call:
1/ When a company starts to hide its user's numbers it means it reached somehow a plateau (ie. Apple did the same at some point)
2/ Their ad-free prices will increase, and the ad-tier will remain the same (that means, will decrease due to inflation)
3/ Studios will come after Netflix to sell their films, but now Netflix has the leverage in the discussions. We already see movies from Sky Showtime or HBO on Netflix.
The last point is the most important because looking at it makes you realize that Netflix is becoming the new cable bundle. LINK
Shein is the 2nd success story
1/ Shein's meteoric rise in the fast fashion industry is underscored by its astonishing array of offerings (SKUs) and cutthroat pricing strategies (ie. including government subsidies). On any given day, shoppers can find thousands of new items listed at drastically reduced prices, exemplified by a daily rotation of flash sales featuring everything from workout leggings to wedding dresses at eye-wateringly low costs. This relentless cycle of consumption is powered by Shein's ability to outpace traditional fast fashion giants, listing up to 10,000 new products daily, creating an ever-refreshing catalog that entices consumers to keep coming back.
2/ Beyond the staggering variety and volume, Shein's business model is heavily reliant on social media influence and digital marketing to drive its sales. The brand has adeptly harnessed the power of trending aesthetics, labeling products with current internet-culture terms like "Mermaidcore" or "Y2K," to attract a younger demographic. They also deploy aggressive social media strategies, involving influencers and targeted ads that help perpetuate a cycle of high-volume, low-cost shopping. This has established Shein not just as a retailer, but as a major cultural player in shaping how fashion is consumed by the digital generation.
3/ However, the dark underbelly of Shein's success story lies in its sustainability and ethical production practices. The fast-paced environment in which it operates, producing a mind-boggling array of garments at breakneck speeds, raises (ignored) concerns about labor conditions and environmental impact. Shein's model, built on the backbone of fleeting trends and disposable fashion, perpetuates a cycle of overconsumption and waste, reflecting broader issues within the fast fashion industry at large. The brand's practices highlight the urgent need for a shift towards more sustainable and ethically conscious consumer behaviors in the fashion sector, which, given their business model, it can’t be achieved. LINK
TikTok is reportedly working to launch a competition for Instagram
Why? Well, at least 6 reasons:
1/ By introducing a dedicated photo and text-sharing platform, TikTok can diversify its offerings and not just be seen as a video-centric platform. This could attract a broader audience who might prefer other forms of content over video.
2/ TikTok has a massive global user base that primarily interacts with video content. By offering a new way to engage - through photos -it can leverage its existing audience to boost the new app's usage, similar to how Instagram benefited when it introduced Stories, a feature originally popularized by Snapchat.
3/ As social media platforms increasingly borrow features from each other to retain users and increase time spent on the app, TikTok entering the photo-sharing space is a direct challenge to Instagram’s dominance in this area. It reflects the ongoing competition where platforms seek to become all-encompassing media hubs.
4/ The move comes at a time when TikTok faces significant regulatory challenges, especially in the U.S., where there is political pressure due to its Chinese ownership. By diversifying its app offerings, TikTok might be trying to mitigate risks associated with potential bans or restrictions on its main app.
5/ A new platform could also provide TikTok with more data on user preferences, enhancing its algorithmic targeting for both content and advertisements, thus driving revenue.
6/ Despite the social media consultant's skepticism about the demand for another photo-sharing app, TikTok might see an opportunity to innovate in this space, offering features that distinguish it from existing apps and draw in users looking for new experiences.
One thing is for sure: it will gate the further increase of Instagram. LINK
Testa released a preview of their upcoming ride-hailing app
I wonder if this is not a distraction to the company...or a competitor for Waze LINK
on Apple
The company has many challenges:
1/iPhone sales have decreased, especially in China. LINK
2/ The 2024 & 2025 Vision Pro shipment forecastshas been adjusted to 400-500k units, down from 700-800k. LINK
3/ The car project is dead
…and others.
No wonder the company is looking for the new thing. LINK
Mark Gurman, an Apple analyst at Bloomberg, makes the case for selling cheaper iPhones. Well, just a reminder that Apple sold fewer phones in 2023 (vs 2022) and made more money. Scarcity sales. Abundance, just comodites your products (and brand). Probably, the future growth will come from emerging markets: India, Indonesia, Brazil, Nigeria, etc. LINK
In the meantime, the company announced an (iPad?) event for the 7th of May. Bring the MacOS to iPad and you will solve some of these problems. LINK
Samsung shifts executives to six-day workweeks to “inject a sense of crisis”
Unless it’s a measure of life and death for the company, then there is no need to do it. Here are some ideas:
1/ Increasing work hours does not necessarily lead to higher productivity. In fact, it often results in burnout, which can decrease overall effectiveness and stifle creativity, both crucial for leadership roles in innovative sectors like technology.
2/ Such a move can significantly impact morale, making executives feel undervalued and overworked. This can lead to higher turnover rates, as employees may seek better work-life balance elsewhere, leading to a loss of experienced and skilled leaders.
3/ Instituting longer workweeks under the guise of creating urgency can cultivate a toxic work environment, characterized by stress and short-term thinking. This approach can undermine collaboration and long-term strategic planning, essential for sustainable growth and success.
No wonder the birth rates are astronomical low in South Korea. Just don’t do it. LINK
Tucker Carlson interview with the social media app Telegram boss
Some key insights:
1/ Telegram has 900 million users
2/ No marketing budget for ads…for anything
3/ The company has 30 full-time employees \
4/ No HR. LINK
Artificial Intelligence
Consulting firms are cashing in on AI services
Financial Times:
“BCG says AI consulting will supply 20% of revenues this year”. The traditional consulting firms will change becoming tech-driven and with different data science positions. Additionally, they will need fewer people to deliver while building their digital assets.
Just a reminder, Accenture is on track to make $2.4B from generative AI.
So, what’s your AI strategy? BCG, Accenture
Meta announces Llama 3. LINK
Some key insights:
1/ Llama 3-8B can be ran locally on many computers (hint! That’s what Apple is trying to do and probably will announce in June at the WWDC)
2/ Llama is available on many Meta apps
The direct competition: Open AI. LINK
Source: META
AI working side-by-side with doctors
The increasing need for doctors will be partially solved by deploying AI.
OpenAI's GPT-4 model has demonstrated remarkable capabilities in assessing eye conditions, almost matching the expertise of specialized doctors and surpassing junior medical practitioners, as shown in a recent study. This research underscores the significant potential of generative artificial intelligence in medical applications, particularly in ophthalmology.
The study's comparison of AI's performance with that of practicing doctors rather than just test results and its use of a broad range of generative capabilities highlights an advanced level of AI's application in diagnosing and suggesting treatments for ocular issues. This progress in AI technology not only promises to enhance diagnostic accuracy but also opens the door to potential uses in patient triage and areas with limited access to specialist care, although it necessitates careful consideration of the risks, especially regarding the accuracy of AI-generated information. LINK
“The Simple Macroeconomics of AI”, by Daron Acemoglu
For those of you who don’t know it yet Acemoglu is probably the next expected Nobel winner in economics. Until then he has a paper on AI which I think is wrong:
“Using existing estimates on exposure to AI and productivity improvements at the task level, these macroeconomic effects appear nontrivial but modest—no more than a 0.71% increase in total factor productivity over 10 years. The paper then argues that even these estimates could be exaggerated, because early evidence is from easy-to-learn tasks, whereas some of the future effects will come from hard-to-learn tasks, where there are many context-dependent factors affecting decision-making and no objective outcome measures from which to learn successful performance. Consequently, predicted TFP gains over the next 10 years are even more modest and are predicted to be less than 0.55%.”. LINK
Just thinking about it, there will be huge gains in efficiency across various sectors such as software engineering, legal fields, consultancy (which I might not even need), customer support, fraud identification, and the entertainment industries like gaming, music, video, and art. Additionally, there will be numerous new products that have never been seen before. We're likely to witness a surge in solo entrepreneur ventures. The speed at which AI enables the creation of businesses and software will lead to fiercely competitive markets, eroding the market share of established players with large workforces. Time will tell.
Things Happen
Chinese spies target Dutch industries (hint! ASLM). LINK
How Amazon tried to gather data about competition. LINK
We have a map with the lack of strategic minerals within the EU. Romania will be a good solution for sourcing some of them. Map, Romania
Why China Can’t Innovate, 2014 article from Harvard Business Review. (needless to say, that this is all wrong). LINK
US Senate passes TikTok divestment-or-ban bill. LINK
CEO Andy Jassy’s 2023 letter to shareholders. LINK
Data
The growth in manufacturing investment in the US (+65% since 2019). LINK
GDP per capita doubled in Romania and Poland over the last two decades. LINK
Government debt at the end of the fourth quarter 2023 by member states. LINK
Cement manufacturing is currently responsible for 6% of global emissions. LINK
Outside interest
The story about the people who make sure you have internet access. LINK
Mercedes has officially unveiled the all-electric G-Class. LINK
Last week, Rome turned 2,777 years old. LINK
Costco is selling up to $200m in gold bars per month. LINK
Chinese exodus leaves Cambodia boomtown with 500 'ghost buildings'. LINK
I will be a speaker at Techsylvania, held between 26-27 June in Cluj. Use the code SORIN24 to get a 24% discount on your tickets. LINK
