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Drone Delivery: A Real Thing

Future is closer than most will believe. Drone delivery is yet another example.

Imagined Reality

A few days ago (around April Fools’ Day), a FAKE video (by rendering) populated on Twitter, presenting an Amazon mothership equipped with drones.

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However, this may not be far away from what the future will look like, especially for the drone part.

Amazon’s Plan

The idea could be seen in an Amazon patent US000009305280B120160405 filed in December 2014 and issued by the USPTO in April 2016.

Amazon patent for massive flying warehouses equipped with fleets of drones that deliver goods to key locations | Source: BBC

This is part of Amazon Prime Air program first announced in 2013. It looks more viable on the drone-only side, the first delivery made in December 2016 in Cambridge, UK.

Source: Amazon

And in 2017, an Amazon Prime Air drone dropped off some bottles of sunscreen for attendees at the company’s invite-only MARS conference in California. [The Verge]

US Pilot Programs Granted

In the US, FAA has selected 10 state, local and tribal governments for pilot programs in drone testing in May 2018. [More about the program]

    • Choctaw Nation of Oklahoma, Durant, OK
    • City of San Diego, CA
    • Innovation and Entrepreneurship Investment Authority, Herndon, VA
    • Kansas Department of Transportation, Topeka, KS
    • Memphis-Shelby County Airport Authority, Memphis, TN
    • North Carolina Department of Transportation, Raleigh, NC
    • North Dakota Department of Transportation, Bismarck, ND
    • The City of Reno, NV
    • University of Alaska-Fairbanks, Fairbanks, AK

Alphabet’s Wing in Australia – First to Commercial

Another exciting move is made by Alphabet’s Wing on Tuesday, which was granted approval in Canberra by Australian aviation authority CASA. Wing officially becomes world’s first drone delivery business according to The Guardian.

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The deliveries will start with roughly 100 homes in the Canberra area. The drones are required to operate during daylight hours, banned from crossing over major roads and there’s a minimum distance they have to maintain from people on the ground.

Source: wing.com

Meanwhile, according to Wing’s website, they are going to launch the drone delivery service in Finland in spring of 2019, which will be their first operations in Europe.

Before this approval, in September 2016 at Virginia Tech, Wing (a Google X project then) has tested food delivery (Chipotle burritos) in the US for a tenth of a mile, maintaining the kind of line-of-sight flights that the FAA prefers (before any pilot programs). Virginia Tech is home to a U.S. FAA test site.

Wing made its first test in 2014 in Queensland, Australia, delivering a first aid kit, candy bars, dog treats and water to farmers.

Wing graduated from Google X in July 2018.

JD’s Drone in Asia

Earlier this year, JD.com announced that it has completed the first government approved drone flight in Indonesia, delivering backpacks and books to students in a local elementary school.

In China, JD has been approved for drone delivery services in provinces including Shanxi, Jiangsu, Qinghai, Guangdong, Hainan and Guangxi.

Single-use Plastic Bags Ban And More

Following California’s ban in November 2016, New York State will begin a similar ban of single use plastic bags in March 2020, according to its FY2020 budget agreement.

While California also imposed a minimum & mandatory 10 cents fee if a recycled paper bag is provided to the customers, New York State makes it an optional 5-cent charge.

According to the New York State Department of Environmental Conservation, an estimated 23 billion plastic bags are used by residents across the state annually. New York City alone uses more than 10 billion single-use plastic bags a year. [National Geographic]

If 5 billion recycled paper bags are used in the new program with a 5-cent fee, New York City will generate an additional $250 million. [40 percent will be supporting local programs to buy reusable bags for low and fixed income consumers, and 60 percent will be supporting programs in the State’s Environmental Protection Fund]

In China, nation-wide restrictions on certain plastic bags started in 2008 and a mandatory fee is imposed. More recently, with services including food deliveries growing increasingly popular, the use of single-use plastic bags becomes harder to regulate.

On province level, Jilin Province is the first in China to ban sing-use plastic bags overall in 2015. Shoppers can bring their own reusable grocery bags or they can use biodegradable bags. In Hainan, the province will begin by banning non-biodegradable plastic bags and eating utensils by the end of 2020 and ban the material completely before 2025.

EU member states will have until 2021 to implement a ban on plastic straws, cutlery, cups, drink stirrers, and sticks for balloons. [Quartz]

A worldwide map

On the other hand, more efforts are needed than an executive/legislative order. Less expansive and environmental-friendly alternatives are needed.

A recent study from Denmark’s ministry of environment and food (agreeing with other studies) has found that no all seemingly “good” bags are ultimately good enough. A conventional cotton bag might need to be used more than 7,000 times before making a smaller cumulative environmental impact (water use, energy use, etc.) than a classic plastic bag does.

There is no easy answer. Problems not solved by a few regulatory decisions.

Snap’s Comeback Strategy With Partners

Snap (Before 2019 Q1)

Once characterized as the challenger for Facebook, Snap Inc. has faced fierce competitions from FB’s Instagram, which introduced a similar story feature in August 2016.

Snapchat vs. Instagram users comparison | Source: statista

Snap went IPO in March 2017 onto NYSE, valued at more  than $33 billion on the first day of trading, surpassing the previous $3 billion acquisition offer from Facebook in 2013 and a $30 billion acquisition offer from Google in 2016 (not verified, reported in August 2017, when Snap’s stock price had been declining to around $14).

Its road after IPO was not an easy one.

DAU growth peaked right before Instagram’s story launch. Other problems included the questionable change of Snapchat’s interface, departure of CFO (twice, first CFO departed in May 2018, second CFO departed in Jan 2019), etc.

Snap Partner Summit 2019 And Going Forward

The summit was held on April 4, on which new strategies and partnerships were detailed/projected.

By and large, Snap is learning from Facebook and is pivoting to becoming an “infrastructure”.

Broadly speaking, many firms are pursuing the infrastructure play: AWS wants to be the infrastructure for internet services (servers); Facebook & Google want to be the infrastructure of ads; Twitter & Youtube contents can be embedded in various ways, etc.

Snap now has updated its Snap Kit, to include a new Story Kit enabling other apps/sites to implant Snapchat Stories. Namely, users will be able to show/embed/insert their Snapchat Story in Tinder and Houseparty, two initial partners announced.

Snap Kit April 2019 | Source: kit.snapchat.com

Snapchat Audience Network is also being built to help other apps to monetize – a revenue-sharing practise to expand the audience/utility of Snap Ads, so that people who are not on Snapchat will be broadcasted the ads created by advertisers through Snap. [Read more about Facebook Audience Network]

Additionallly (besides ads), Snap announced the partnership with Fitbit to integrate Bitmoji avatars to Fitbit’s devices (Fitbit Ionic™ and Fitbit Versa™), a clock face that dynamically updates throughout the day based on your personal health and fitness data, activity, time of day, and weather. Also, Bitmoji will be seen on Venmo.

Snap’s Bitmoji on Fitbit | Source: theverge.com

 

Money Flows: Raise By Bonds And Invest In Growth

Corporate bonds are popular, especially those sold by companies that have strong cash flows like Tencent and Saudi Aramco.

For investors, investments in those bonds are not as volatile as equities.

For corporates, there is no dilution in earnings and they could benefit from growth investments with low cost of capital.

Two recent examples (this week): Tencent and Saudi Aramco.

Tencent has been a very active investor in Chinese and global markets. It is one of the two modern “empires” rooted in China (the other being Alibaba). Some of its global investment include:

Tencent just announced that it has raised $6 billion in a bond sale, including $2 billion in fixed and floating rate five-year notes, $500 million in seven-year notes, $3 billion in 10-year notes and $500 million in 30-year notes, carrying coupons of 3.280 percent, 3.575 percent, 3.975 percent and 4.525 percent on the fixed rate five-year notes, seven-year notes, 10-year notes and 30-year notes.

Tencent has now caught up with Alibaba, who sold $7 billion bond in November 2017. (2018 is a year of turmoil that no big bond sales are possible)

Saudi Aramco, the world’s biggest oil producer, was the world’s most profitable company in 2018 (almost three times as much as Apple).

And Aramco has planned bond sale would raise around $10+ billion and is meeting investors this week around the globe.

Aramco has a crucial role to play in Saudi Arabia’s diversification from oil production. And an important part of the strategy is to invest in technology and other high-growth sectors around the world through Saudi Arabia’s Public Investment Fund (PIF), a major backer ($45 billion over 5 years) of Softbank Vision Fund since 2016.

Essentially, Saudi (and PIF) and Tencent are getting low-cost capital from bond sales and invest in tech. And the risks for bond investors are low, given Aramco’s core assets/cash flows and Tencent’s ubiquitous presence in Chinese economy.

It’s gonna be a good time for startup companies that fit Tencent’s or Saudi’s appetite…

Middlemen’s Hard Time… PBMs

It has been more than a month since the 7 major drug manufacturers’ CEOs testified before the congress on February 26.

One of the “problems” that pharma CEOs complained about was pharmacy benefit managers (PBMs) or the middleman problem.

In a healthcare system involving drugmakers, PBMs, pharmacies, insurers, patients, etc., one of the premises behind CVS’s $70 billion acquisition of Aetna and Cigna’s $54 billion acquisition of Express Scripts might actually make them vulnerable in front of regulators: their bargain power.

CVS Health, Cigna, McKesson, Rite Aid, Walgreens… companies with relatively large exposure between pharmaceutical companies and patients/payers are having a very hard time.

Source: Author, Yahoo Finance

What’s ahead – on March 13, the same committee (Senate Finance Committee) said it has called 5 major PBMs to testify on April 3 (tomorrow…)

    • Cigna
    • CVS
    • Humana
    • OptumRx
    • Prime Therapeutics

They must have been prepared.

Stay stunned.

An Excerpt From Bad Blood

I have talked about this as the most exciting part of Bad Blood with friends several times that I would like to read the original wording again and share it here.

“Meanwhile, behind the scenes, Holmes was trying another avenue to quash the story. In March, a month after I had started digging into the company, Theranos had closed another round of funding. Unbeknownst to me, the lead investor was Rupert Murdoch, the Australian-born media mogul who controlled the Journal’s parent company, News Corporation. Of the more than $430 million Theranos had raised in this last round, $125 million had come from Murdoch. That made him the company’s biggest investor.”

“By the time Mike Siconolfi and I had our conversation about the ancient art of Sicilian fishing in late July, Holmes had had three private meetings with Murdoch. The latest had taken place earlier that month, when she’d hosted him in Palo Alto and showed him the miniLab. During the visit, she’d raised my story, telling him the information I had gathered was false and would do great damage to Theranos if it was published. Murdoch had demurred, saying he trusted the paper’s editors to handle the matter fairly.

In late September, as we were getting close to publication, Holmes met with Murdoch a fourth time in his office on the eighth floor of the News Corporation building in Midtown Manhattan. My desk in the Journal’s newsroom was just three floors below, but I had no idea she was on the premises. She brought up my story with renewed urgency, hoping Murdoch would offer to kill it. Once again, despite the substantial investment he had at stake, he declined to intervene.”

– John Carreyrou. “Bad Blood.”

Besides other considerations, the “nonaction” by Mr. Murdoch is simply thrilling and kind of rare these days.