Hey Snackers,
A woman was fined $440 for breaking Italy's strict lockdown rules by going outside without a valid reason. Her excuse? She was walking her turtle... It was "as big as a pizza," according to Italian police at the scene. That dog-less quarantine life.
Over 5M more Americans filed for unemployment last week — The total of newly unemployed is now an astonishing 22M (nearly 14% of the workforce) in just a month. Despite those abysmal numbers, markets inched up Thursday.
Then stock futures surged after hours on reports that a Gilead drug is proving effective in treating COVID-19.
Amazon wants you to stop filling your shopping cart — the rare anti-upsell strategy
Clear eyes, full carts, can't lose... Amazon begs to differ. Its stock just hit a record high as it enjoys record online shopping demand, but it's not all rainbows and smiles in Bezosland. Amazon is struggling to manage the insane lockdown order surge, which has led to late shipments, unavailable items, and frustrated Prime members.
- Unlike a predictable holiday surge, the COVID-19 surge came out of the blue and escalated quickly — Amazon had no time to prep its forces for the flood.
- Even with the 175K new employees it's hiring and the $500M it spent on extra pay for warehouse workers, Amazon can't handle the heat. It could take over 2 months for Amazon to regain its pre-pandemic reliability. So...
Don't even think about adding the jade roller... Amazon is doing something unheard of: it's re-working its website to make you buy less. It doesn't want your business so badly, that it even limited advertising on Google.
- Goodbye Recommendations: You went to Amazon to buy one yoga mat, but the "you might also like" algorithm was so powerful that you ended up with a full gym in your cart. Amazon is removing these "others also bought" recommendations.
- Goodbye Promotions: Prime Day is postponed indefinitely, and you can say bye to Mother's and Father's Day deals too. Promotions get you to throw stuff you don't need into your cart — Amazon's new worst nightmare.
The recommended upsell is Amazon's greatest trick... Recommendations have the same effect as the new episode that auto-plays after you promised it was "the last one" — they're key to boosting sales/consumption. 35% of Amazon sales and 75% of Netflix views come from personalized recommendations. Personal preference data is marketing gold, and it's the secret to Amazon's retail profits. Removing these recs only highlights their effectiveness.
BlackRock's adorably small fees lead to ridiculously big money (even in a downturn)
Check your 401(k) or brokerage account... There's a high likelihood you've got some money in a BlackRock fund, since it's the world's largest money manager.
- But the investment giant's profits fell 23% as its individual and institutional customers panic-sold stocks for liquid cash. Less money to manage = less profit for BlackRock.
- Assets under management shrank from $7.4T at the end of 2019 to $6.5T at the end of March. Still not too shabby, considering America's GDP was $21T in 2018.
Not Apple's social media arm... iShares is BlackRock's exchange-traded funds unit, and also one of its profit puppies. In addition to the $$$ BlackRock makes from investment advising and lending, it also charges tiny management fees for its ETFs.
- ETFs are like investment smoothies which track multiple stocks, a sector, or an index. For example, with just one share of an S&P ETF, you can own a part of all 500 S&P companies. You get to track the index without individually purchasing each stock.
- BlackRock customers poured only $14B into iShares ETFs this quarter (their worst performance since 2018). Vanguard, the world's 2nd largest money manager, took in 3X the amount of ETF investments.
Tiny fees (on a large scale) = billions in profit... Big investment firms like Blackrock and Vanguard sell their own ETFs across various brokerages in high volumes. If they charge a 0.03% fee on an ETF, they make only 3 cents off every $100 you invest. But because they operate at such a large scale, those tiny fees can add up to big profits. Blackrock made $800M in profit last quarter on the $6.4T it managed (annualize that, and it's only 0.05% of $6.4T).
Verizon snags Zoom's (smaller) video rival BlueJeans — goodbye "One & Only"
Should've called it "Khakis"... BlueJeans is a videoconference service like Zoom, except it only services businesses, it has no free version, and it's way less popular than Zoom. But Verizon noticed BlueJeans from across the room — now it's acquiring it for less than $500M.
- ICYMI, videoconferencing has been having a moment. Zoom jumped from 10M customers in December to 200M customers in March — an unbelievable boost driven by virus lockdowns and office closures.
- BlueJeans is only used by businesses, unlike Zoom. It has 15K companies signed up for its service. Forget about the Middle School Reunion happy hour — BlueJeans is strictly 'bout that office life. And Verizon's into it.
Blue Jeans, White Collar... Verizon is obsessed with rolling out its faster 5G network. The biggest adopters of this 5G tech will be Verizon's corporate customers — aka, the ones who pay for Verizon WiFi for their offices and Verizon data for employee cell phones.
- Verizon can offer its corporate customers BlueJeans' video conference tech to build telemedicine, virtual learning, and remote training services.
- Verizon also digs BlueJeans' encryption, which could shield it from Zoom-style privacy issues (never heard of BlueJeans-bombing).
BlueJeans will no longer be a "One & Only" company... once it's part of Verizon. "One & Only" companies only do one thing — but they do it really well, and are successful because of that. Zoom and Netflix are successful O&O companies. Skype used to be an O&O company, until it got acquired by Microsoft in 2011. It went from being super popular to being barely used. "One of Many" companies can get neglected post-acquisition — TBD if BlueJeans is next.
What else we’re Snackin’
- Billions: Digital payments pioneer Stripe raises $600M of fresh funding, and is now valued at $36B — it's the biggest unicorn in the US
- Gone: GoPro cuts over 200 employees (or 20% of its workforce) and is shifting to a direct-to-consumer biz model — no more GoPros not sold on GoPro.com
- Cashed: The small business loan Paycheck Protection Program has already hit the $349B loan limit, and is no longer accepting applications.
- Signed: GE and Ford sign a $336M federal contract to produce 50K ventilators by July 13 under the Defense Production Act.
- Drafted: Sports-betting site DraftKings still plans to go public in April via reverse merger, despite the current lack of live sports (no fantasy teams to bet on).
Friday
- Earnings expected from State Street
Disclosure: Authors of this Snacks own shares of Amazon, Netflix, and Walmart
ID: 1155596