Given the early mission of the internet to democratize information, it’s somewhat surprising that we don’t see more nonprofits operating in the tech space. Wikipedia is the strongest example of what that model might look like. In New York, The Driver Cooperative (TDC), is trying to launch a ridesharing app that would get closer to a nonprofit model:

When it rolls out to the pub­lic ear­ly next year, TDC will become New York City’s first work­er-owned rideshar­ing plat­form — owned by the dri­vers them­selves, rather than by big investors and exec­u­tives. Its founders’ brazen idea is that TDC can actu­al­ly gain a com­pet­i­tive advan­tage over Uber and Lyft — sav­ing mon­ey and fun­nel­ing those sav­ings back to dri­vers — by doing away with the most exploita­tive prac­tices of that dom­i­nant duop­oly. ​The way the [Uber] mod­el is orga­nized is extrac­tive. It takes out the mon­ey and doesn’t give back much. Imag­ine a com­pa­ny that doesn’t have any prof­its, but has cre­at­ed bil­lion­aires,” Lewis says. ​That mon­ey comes from drivers.”

TDC hopes it can also change the cost structure which could make them the low-cost provider:

By com­bin­ing the pur­chas­ing pow­er of all the mem­bers, they hope to low­er expens­es on costs like gas and insur­ance — expens­es that Uber and Lyft dri­vers must han­dle on their own. They project that this should all add up to 8 – 10% high­er earn­ings for dri­vers on every ride, even while being able to beat their com­peti­tors on fare prices. And if the coop has any prof­its left at the end of the year, they will be paid out to dri­vers as dividends.

It is very difficult to compete against an entrenched company in winner-take most markets. Being able to offer a comparable product at a lower price helps. Taking on nonprofit status could help companies achieve that. So as more markets mature, we might see competitors arise more frequently as nonprofits.

Here’s the full article on TDC.

We’ve seen how Ghost Kitchens have started to change the face of restaurants. Ghost Kitchens are essentially restaurants with no physical space for customers which means they are delivery-only restaurants. And in fact, some Ghost Kitchens will actually support multiple online-only restaurants from the same location. The economics of Ghost Kitchens are very different than traditional restaurants. Obviously their cost structure is lower because they can use less expensive space, but also their orders tend to be more tightly distributed around mealtimes (think 12PM for lunch, 6PM for dinner). In the immediate aftermath of the pandemic, as restaurants were forced to close their dining rooms, every restaurant became a sort of Ghost Kitchen, at least temporary.

We’re starting to see the model of no storefront move into other areas. Take, for example, Gorilla, a grocery start-up in Germany.

Founded by Kağan Sümer and Jörg Kattner in May this year and operating in Berlin and Cologne, Gorillas delivers groceries within an average of ten minutes. Unlike gig economy models, it employs riders directly and is emphasising its ability to get fresh groceries, along with other household items, to shoppers at very short notice and at “retail prices”. The idea is that the startup can address a large part of the groceries market that falls outside of a weekly bulk shop.

As TechCrunch reports, there are others (Diji and Weezy) who are building out similar services elsewhere in Europe. In the U.S. we have goPuff. These services are focused on the type of things you might buy at a convenience store. Or that you might run to the grocery to buy when you only need that singular thing.

Gorillas CEO Kağan Sümer says that mass supermarkets, including their delivery models, are designed so that the consumer organises their grocery shopping around the needs of the supermarket and supply chain, rather than the supermarket being designed around the needs of the consumer…bulk purchases are super served…all of the supermarket infrastructure is shaped around bulk purchases…our hypothesis was that people would appreciate it and shift their interaction with groceries to more on demand purchases

The internet is conditioning us to expect very quick, nearly instant, delivery. We’re already there with video on-demand and this will only become more pronounced in 2021 as studios close the windowing between theatric release and streaming release. Amazon has conditioned us to expect quick delivery of many things. We expect our Uber or Yelp to arrive quickly (and we want to track it while en route). We expect our meals to be delivered quickly. Those expectations will likely carry into other categories. Basic groceries and convenience store items make a lot of sense. But thinking outside of this, there are likely numerous sectors that will be pushed towards near-instant delivery models by competitive forces and consumer expectations.

Reid Hoffman posted some reflections on Greylock’s investment in Airbnb. Reid is a wonderful writer and his post is provides a wonderful narrative on how the investment came about. The part that caught me was this:

Part of the reason that Blitzscaling opens with the Airbnb story is that it demonstrates how when you win a winner-take-most market with strong network effects, it can be not just industry-transforming, but world-transforming. I believe Airbnb is going to be a different kind of company, with a different kind of product and service, that will become a different kind of platform for launching businesses that go well beyond replacing hotel rooms. The reason I got into tech investing is to back companies that could have that kind of massive impact.

If you poke around the internet you’ll see a myriad of articles written about Airbnb’s IPO that suggest a bet on Airbnb is a bet on the future of travel. But here Reid suggests that Airbnb will eventually be a much bigger platform with more offerings than just short-term rentals. Of course, Airbnb already offers experiences. When I was in Cuba a few years ago, I enjoyed a wonderful cooking class that I booked through Airbnb. And in 2020 Airbnb has found success in offering online experiences. An interesting one next week will be a virtual cooking class featuring techniques from the 19th century. Oh, and its being held at the Alamo. If you catch Reid’s vision, these are probably just the start for Airbnb just like books were just the start for Amazon.




Tim Wu is out with a few things press keeps getting wrong about the Facebook antitrust case. Tim’s second point is most insights. The government doesn’t have a duty to prove that Instagram or WhatsApp, absent the merger, would have become significant competitors.

Too many journalists have been falling for this assertion — and reporting it as the established legal standard — when it actually is a controversial theory and misreading of precedent that comes out of a paper funded by Facebook and published in a corporate-funded journal. (The New York Times is guilty of repeating this today.)
The theory is, roughly, that the Government needs to prove the hypothetical case that Instagram (say) would have prospered and become a significant competitor without Facebook’s acquisition, so that Facebook effectively eliminated a real competitor.

But Microsoft, the authoritative case in this area, says nearly the opposite — it says that the Government does not need to prove a hypothetical:

To require that § 2 liability turn on a plaintiff’s ability or inability to reconstruct the hypothetical marketplace absent a defendant’s anticompetitive conduct would only encourage monopolists to take more and earlier anticompetitive action. . . .

[T]he underlying proof problem is . . . [that] neither plaintiffs nor the court can confidently reconstruct a product’s hypothetical technological development in a world absent the defendant’s exclusionary conduct. To some degree, “the defendant is made to suffer the uncertain consequences of its own undesirable conduct.” 3 Areeda & Hovenkamp, Antitrust Law p 651c, at 78.

The court went out of its way to reject a “would have prospered” test, because it set too high a bar. The actual inquiry into what would have happened, the court said, was “edentulous” — toothless. Here is what the case says is the standard:

 and  provide a good overview of the lawsuits here

From Ross Young:

In 2020, Wuhan is expected to account for 6% of worldwide mobile OLED capacity, 3% of mobile LCD capacity and 2% of LCD TV capacity. In 2021, these figures should rise to 9% of mobile OLED capacity and 4% of LCD TV capacity…Since the display industry is still in a period of over-supply, this supply disruption could help further stabilize and increase prices.

Several years ago my oldest son bought himself an iPad mini. Recently he received his first iPhone and as a result has been using his iPad infrequently. At the same time, my seven-year-old wants to buy an iPad and so his brother offered to sell him his iPad for $250. Over the last two or three weeks my seven year old has been debating if this is a reasonable price and we’ve discussed checking secondary markets like eBay to determine if it is in fact a good price or not.

Several days ago my seven-year-old asked my 11-year-old if he would discount his iPad for Black Friday. After several minutes of questions and a little bit of implicit prodding, my 11-year-old acquiesced by reluctantly agreeing to discount his iPad mini $50 on Black Friday.

As you might guess we spent a lot of time talking about technology trends and around this time year Black Friday is a frequent topic. Well, it has officially entered our every day vernacular.

This week Square introduced preorder and pick-up services. On the surface this service should help expand the business opportunities for small businesses. It might also help level the playing field for small businesses that compete against multi-channel retailers who currently offer similar services.

The offering is borne out of the increasingly blurring lines between digital and analog commerce. Once well separated and siloed retail channels, online and brick-and-mortar are continuing to come together such that consumers can toggle seamlessly between the two.

The service also introduces some interesting questions – namely which sectors are most likely to take advantage of the service. I haven’t seen any data that provides a distribution of square users, but personal observation is that a fair amount of taxis utilize square. Coincidentally, a digital preorder-like service fits their business model quite well.

There is a confluence of conflicting forces underpinning mobile today and the outcome will define the mobile experience of tomorrow.

Here are two of this morning’s announcements:

  1. Snapchat announced they were adding video chat and instant messaging
  2. Foursquare’s move to split their app services into two separate apps

On the surface, these may seem like inconsequential developments but they speak forcefully to how the mobile user experience is evolving.

In a recent interview with Mark Zuckerberg, he was asked about the work Facebook’s Creative Labs is focused on.  Creative Labs is an internal Facebook team assigned with “crafting new apps to support the diverse ways people want to connect and share.” In other words, Creative Labs is tasked with leveraging (and one might even say cannibalizing) the popularity of Facebook to ensure the company remains relevant on mobile. Here is an excerpt from the interview with Zuckerberg:

“So Facebook is not one thing. On desktop where we grew up, the mode that made the most sense was to have a website, and to have different ways of sharing built as features within a website. So when we ported to mobile, that’s where we started — this one big blue app that approximated the desktop presence.

But I think on mobile, people want different things. Ease of access is so important. So is having the ability to control which things you get notifications for. And the real estate is so small. In mobile there’s a big premium on creating single-purpose first-class experiences.

So what we’re doing with Creative Labs is basically unbundling the big blue app.”

Jon Steinback, Foursquare’s VP of product experience, describes their decision to break existing Foursquare services into separate pieces as follows:

“I think mobile forced this fundamental switch. We were born in mobile but we were born in this idea that each mobile app was kind of like a web property bundled up for mobile. And as mobile usage has broadened and evolved you get individual experiences instead. You open an app to do a specific task and not as a gateway to a large complicated experience.”

Foursquare – one of the original mobile-first companies – is breaking services into separate stand-alone apps. Facebook, who in addition to beginning to build a suite of stand-alone, single-purpose apps (starting with Paper), is also acquire siloed apps. Last month it was Whatsapp and late last week the Finnish fitness tracking app Moves announced they had been acquired by Facebook. At the same time, you have companies like Snapchat – also a mobile-first company – expanding into adjacent service categories within their existing app structure.

Among other things, these moves speak to user engagement. In the early web environment – when our web experience resided exclusively on the desktop – user-engagement was primarily focused on length and depth of engagement. How long did a user stay on your web property and how deep (ie number of pages) did they go. But this traditional measure of engagement might be changing. Foursquare found that breaking well-defined services into separate apps led to shorter, but more frequent sessions. Frequency is become a key metric for mobile engagement.

Historically, when a large company like Facebook would acquire a smaller company it would integrate the intellectual property (most importantly the team).In some instances, the larger acquiring company might move users over before closing down what had been a competitive service to one of the larger firm’s offerings. Google has a long history of both shutdown companies they acquire but also integrating them into core Google offerings. The Blogger team was bought and brought over. Grand Central ultimately became Google Voice. And earlier this year, Google shutdown Bump – an app it had acquired last Fall. There are thousands of similar examples from Google, Apple, and a long host of companies both inside and outside of the tech industry.

But this model is changing – especially when it comes to mobile. This year Google acquired Waze and Nest. Both are continuing to operate on a stand-alone basis and likely will for the foreseeable future. And despite the generally held fear that Facebook will amalgamate all future acquisitions into the “big blue app,” Facebook continues to operate Instagram as a  stand-alone app.

In mobile we are are seeing conflicting evolutionary paths. The question remains why consumers appear to gravitate towards single-purpose mobile app experiences? Is it driven by time constraints and therefore developing mobile apps that are used for shorter (though more frequent) sessions is the key to success in mobile? Is it being able to launch a specific app “solution” quickly, perform a small finite number of operations, and exit the app as quickly as you entered? Or is it driven by the general inability to multi-task on a mobile device like we can on a PC?

While both of these drivers are likely in play, I think the answer is found more broadly in how mobile has evolved. This also begs the question if single-purpose apps are the steady-state for the mobile experience. If not, should we expect consolidation of apps over time and should we expect to see app service offerings expand? It is worth noting that consolidation is a strong element of industry structure. Most industries consolidate as they mature. This has been true in nearly every sector – from automotive to defense to aviation to consumer tech. More, this consolidation happens at every level of the supply chain. There are not only fewer automotive manufacturers today, there are also fewer tire manufacturers and  fewer gasoline system providers.

Many mobile apps – and certainly a majority of the successful ones – were built with a single purpose in mind. But this is because many of these mobile-first solutions were designed to provide newly discovered “needs” that developed as a result of having an always-on connected device in your pocket. The need created the service rather than the service being ported to the platform. Companies like Instagram, Flipboard, Pulse, Square, Rovio, ZeptoLabs, and yes Foursquare and Snapchat, were born “mobile first” and typically started with one core solution in mind. One of the big reasons we see so many mobile apps with just a single well-defined solution is because consumers are interested first and foremost in a first-class experience and these companies originally set-out to provide a single offering to resolve one well-defined problem.

But as mobile matures we are seeing a number of these mobile-first companies explore changing business models. Many of the early mobile-first companies, such as Shazam, are in the process of exploring how they can expand their growth opportunities. Companies typically expand either (1) geographically, (2) within their segment (vertically), or (3) by entering adjacent segments (horizontally). While many mobile-first companies started with a well-defined solution in mind, they will eventually expand offerings in order to produce growth opportunities. While it might be true today, it doesn’t have to always be true that mobile applications can only do one thing and one thing well. For example,  if Spotify had a strongly integrated Shazam-like feature then I would probably abandon the stand-alone Shazam app.

I’m not suggesting an unbundled mobile experience isn’t what consumers want. But we are very early in the evolution of mobile. The mature mobile platform will look very different than our current nascent mobile platform and right now conflicting forces are pulling in rather opposite directions.  

Yesterday I posted a few thoughts and my predictions for Apple’s fiscal Q2 results.  Here’s my follow-up with some additional thoughts on the market implications and where we go from here.

I had predicted Apple would sell around 37M iPhones in the quarter. Consensus was calling for 38.2M. Apple blew away not only the consensus estimate but every estimate in the panel. 43.7M is a huge number given expectations. I’ll discuss the implications as I see them below.

The consensus estimate for iPad sales for the quarter was 19.3M. I predicted 17M and there was only one estimate from the panel of forecasters below mine. The actual figure was 16.3M – about 15% below the consensus estimate and about 4% below my forecast.

Total Device Growth
One of the most telling charts from my slide deck (see below), is the year-over-year growth in total device volume. It was 0.6% last quarter and 0.7% this quarter. Despite incredibly strong iPhone numbers, total device growth is near zero for a second consecutive quarter. In other words, revenue growth has come because of compositional shifts and not because of aggregate unit volume growth. While I haven’t heard others tout this figure, this is at the heart of Apple’s needed growth strategy. They are a hardware company (at least for now) that needs to growth unit volume.

Apple grew revenue by roughly $2B in the quarter from the year-ago period. This was nearly all driven by iPhone sales which represented $3.1B in revenue growth. The decline in iPad sales during the quarter resulted in a revenue loss of $1.1B. iPod revenue declined by about $500M while revenue from iTunes increased almost that amount. iPhones now represent 57% of total revenue while the iPad share declined to 17%. The share of revenue derived from iTunes increased from 8% to 10%.

But Apple’s quarterly results are more than just an iPhone story – they are a China and Japan iPhone story. Total revenue from China increased $1B from the year-ago quarter – representing about half of the total revenue gains. Revenue from Japan increased $800M. Revenue gains from China and Japan represent 93% of the total revenue increase from the year-ago quarter. Japan’s share of overall revenue grew by 21% from the year-ago quarter while China’s share of revenue grew 8% for the same period. The total share of revenue derived in the Americas declined by 3%.

I wrote yesterday:

To beat consensus, I think Apple will need to have shipped more lower-end models (4S and 5C) during the quarter. This will show-up in the average price of iPhones sold during the quarter. But it will also point to traction in emerging markets – places like China and India – so I think Apple will tout this fact if it materializes. Geographic expansion is how most large companies grow (think Coke and Pepsi) and Apple will need that within their arsenal in addition to any new product classes (read: wearables) or service sectors (read: streaming services, mobile payments) they might enter over the next two years.

And the results tend to suggest this. The average price of iPhones sold during the quarter is down 6% from the prior quarter. The geographic revenue figures combined with the strong iPhone unit volume results suggest the quarter was defined by iPhone sales internationally – though not all were emerging markets.

My prediction for iPad sales were not only directionally correct but also the most accurate of any forecaster in the panel of forecasters. Yes, Apple attributes much of the decline in iPad sales to channel inventory shifts, but those channel inventory shifts are driven by changing demand. I wrote this yesterday about the tablet market:

Lower tier and lower priced tablets have continued to gain momentum as the market has matured. These tablets are getting better and in an expanding set of use cases are “good enough.” Moreover, tablet ownership in the US is approaching 50 percent. Households are holding onto tablets longer or buying secondary and tertiary units for the household.

I still believe this is an accurate portray of the current tablet market. Moreover, Apple faces tremendous competition in the Chinese tablet market from white box Chinese manufacturers. Given that much of Apple’s revenue growth in the quarter came from China, I imagine Apple struggled to grow tablet sales there while at the same time tablet sales were likely declining in other markets (especially the US) for the reasons mentioned above. At the same time, the average price of iPads sold during the quarter increased about 6% from the previous quarter suggesting to me that Apple is potentially gaining a stronger grasp of the high-end tablet market while at the same time conceding share of the overall tablet market (the classic Innovator’s Delimma at work).

Ben Thompson argues to not “give up on the iPad” and while I think his arguments are generally valid, I think they are potentially misplaced. I believe more innovation will “appear” in the tablet market as the device segment continues to mature and new use-case scenarios are born.  Academic research suggests it takes something like 7 years before the productivity gains of a new device are realized. We are still squarely in the experimentation stage of devices. But I would question Ben’s assumption of the iPad singularly as opposed to the broader tablet market. As I mentioned, secondary and tertiary use-case scenarios might not call for a high-end (read: high price point) tablet.














Here are some historical slides that I’ll update once the results are in later today. 

Apple reports Fiscal second-quarter financial results after the close of the markets today and so brings the week-long exercise where pundits spend the first half of the week talking about what Apple will say followed by the second half of the week where the selfsame pundits talk about what Apple said. Here’s some food for thought:

Apple has enjoyed a tremendous run and each subsequent quarterly result is more heavily scrutinized than the last. It has been 11 years since Apple reported a year-over-year decline in revenue. That simple statistic sums Apple’s “big” problem. It is a problem all large companies face – how to produce the growth rates once enjoyed now that you are grown. Eleven years ago, Apple reported quarterly revenue of $1.48B. That figure has grown 30-fold over the subsequent years. Analysts today are looking for $43.54B – slightly lower than a year-ago.

Last quarter iPhone sales represented about 56% of total revenue. By far, the largest share of company revenue. Analysts are expecting 38.2M in the quarter – with a range of 34M to 43M. To beat consensus, I think Apple will need to have shipped more lower-end models (4S and 5C) during the quarter. This will show-up in the average price of iPhones sold during the quarter. But it will also point to traction in emerging markets – places like China and India – so I think Apple will tout this fact if it materializes. Geographic expansion is how most large companies grow (think Coke and Pepsi) and Apple will need that within their arsenal in addition to any new product classes (read: wearables) or service sectors (read: streaming services, mobile payments) they might enter over the next two years.

In the year-ago quarter, Apple sold 37.4M iPhones so the average expectation of 38.2M represents a roughly 2% year-over-year increase. Everything I’m tracking suggests the first calendar quarter of 2014 has been dismal for tech. I take the under on iPhone sales and think the figure will be close to 37M for the quarter.

Last quarter, iPad sales were the second largest share of total revenue – representing about 20% of total revenue. The current consensus quarterly estimate for the iPad is 19.3M – with a wide range between 15-22M. Again, everything I’m watching suggests a pretty strong headwind in 1Q14 for spending on consumer tech. There are also a number of items specific to the tablet market. Lower tier and lower priced tablets have continued to gain momentum as the market has matured. These tablets are getting better and in an expanding set of use cases are “good enough.” Moreover, tablet ownership in the US is approaching 50 percent. Households are holding onto tablets longer or buying secondary and tertiary units for the household. I take the under on iPad sales and expect a figure closer to 17M – a year-over-year decline of about 13 percent.

Here are some historical slides that I’ll update once the results are in later today.