It is not necessarily something new/surprising – traditional media are PAYING tech companies to be promoted.
Source: my Twitter on 11/8
I found this really ironic in the sense that originally most media should BE PAID to promote something. The reach to readers is built in the gene of media and defines one of the two pillars of media business model.
Tech companies like Twitter/Toutiao, are not just selling promotions/ads. To me, they are more like real estate developers. They are building towns/offices for people to live/work and renting out the places such as tops of buildings… What’s more, they are doing this everyday and creating places everyday with little physical limits and marginal efforts.
When the town is getting crowded, it becomes Manhattan, where real estates are pricey. Those who were invited as “Official Accounts” now needs to pay more money to be seen. The tech companies can run those auctions which no one questions their eligibility (and why Manhattan is in New York).
Crystal City near Washington was reported a few days ago by Bezos’ Washington Post as the choice for Amazon’s HQ2; only after 2 days, medias reported that it’s going to be split into two cities.
While the result will be announced soon, I think it is worth to review tech firms’ real estate moves by looking at Facebook, Google, etc. This post will focus on Facebook.
Facebook’s original office (since 2004) was in downtown Palo Alto on Emerson Street. It had 5 or 6 offices, one conference room, and a large common area.
Source: Daily Mail, NY Times, Redux, eyevineSource: Business Insider
The following expansion in Palo Alto including leases on S. California Avenue and 1050 Page Mill Road.
Facebook moved to Menlo Park in 2011, the old campus of Sun (acquired by Oracle) – an 11 building, 57 acre, 1 million square foot property on the Bayfront Expressway. The purchase was a sale-leaseback with a 15 year long-term lease, with an option to purchase the campus after five years. There were no tax breaks included in the deal with Menlo Park. Facebook has also bought a 22 acre building connected to the campus by a tunnel. It was rumored that Facebook had been considering a leaseback of the property, with the purchase being assigned to a state pension fund. A 15 year leaseback was confirmed today, with the option to buy after 5 years. [TechCrunch]
Source: e-Discovery Team
Besides the move in Silicon Valley, in December 2010, it leased two floors with up to 150,000 square feet at 335 Madison Avenue in New York City, accommodating up to 600 people. It began construction on a $450 million data center in Forest City, North Carolina in 2010 after the first one announced earlier that year in Prineville, Oregon. Facebook also announced a 500-person office in Hyderabad, India, as the first office in mainland Asia, investing up to $150 million to the 50,000 square foot facility.
The number of employees start to explode since 2010.
In a 2013 report, FB has the project, called Anton Menlo, cost an estimated $120 million. It will sprawl over 10 acres of land off Highway 101 in Menlo Park, California. The 630,000 square-foot Facebook town will be walking and biking distance to Facebook’s headquarters. There will be 35 studios, 208 one-bedroom apartments, 139 two-bedroom apartments, and for top Facebook employees, there will be 12 three-bedroom apartments. [Business Insider]
Source: Business InsiderSource: Business Insider
In 2015, FB acquired a 56-acre industrial park immediately south of its current Menlo Park headquarters. The purchase of Prologis Inc.’s 21-building Menlo Science & Technology Park — which industry sources pegged at roughly $400 million. [Silicon Valley Business Journal]
In 2016, Facebook goes from rent to own in Menlo Park in $202 million deal.
Source: Silicon Valley Business Journal
During 2017-2018, FB has opened offices and hired at a blistering pace, with enormous new leases in Sunnyvale, Mountain View and Fremont. This month, Facebook leased all the office space in San Francisco’s new 43-story Park Tower, vaulting it into the ranks of the largest tech tenants in San Francisco. Instagram, a major Facebook subsidiary, recently moved 200 employees into another San Francisco office tower. [San Francisco Chronicle]
In June 2018 reports, Facebook has leased an additional 754,000 square feet for offices in Fremont.
In 2017, FB said it will two more Prineville data centers, followed up by a report of $750 million in Sep. 2018, bringing total investments to $2 billion and total footprint to 3.2 million sqft. The expansion will take nearly two years and employ 1,500 construction workers at peak.
Facebook Data Center in Prineville, August 14, 2015 | Source: Thomas Boyd, oregonlive.com
CIIE 2018 is actually the first of its kind so itself doesn’t have a rich “history” to tell. But there are two other exhibits in China worth noting – 1. Canton Fair (广交会) in Guangdong & 2. Expo 2010 (2010 世博会) in Shanghai
Canton Fair was first held in 1957 Spring and has two sessions (spring session & autumn session) a year (62 years and 124 sessions so far) . Its official name was Chinese Export Commodities Fair, which highlights its origin and main function – exports. Its name was changed after the 100th session and has been China Import and Export Fair since then.
World Expo (or World’s fair, International Exposition, etc.), held every 5 years, is more of a showcase than an purposeful event. China won the bid to host Expo 2010 in 2002, one year after it won the 2008 Summer Olympic Games in 2001. CIIE is held in Shanghai.
What did Xi Say
I watched live keynote and took the following notes –
Part I – welcome & intro
President Xi welcomed the guests, briefly introduced the CIIE and highlighted that CIIE is the “first expo with import theme on a nation’s level”
Part II – importance of a global economy
President Xi used “irresistible trends” according to history to describe the inevitable future of openness, collaborations and global trades/economy. President Xi mentioned “the better world” several times
President Xi suggested three points using “every country” as subject
be open and open more room for collaboration
push for technology & science advancements, as the driver for human’s growth, also highlighting the word “together”
be more inclusive and let every country make progress; reduce inequalities globally
Part III – what China did and will do
China has made significant progress due to reform and opening, and will continue to do so on a greater scale
China will do the following
Increase import proactively: support the consumption upgrade; lower the tariffs; host CIIE annually
Lift limits on foreign investments in certain industries: finance & services (opening accordingly), agricultural & mining & manufacturing (deeper openness), telecom & education & healthcare & culture (accelerate); especially in education and healthcare, foreign ownership percentage will increase. In the future 15 years, good imported might exceed $30 trillion, services imported might exceed $10 trillion
Make business environment better: a combination of “pre-establishment national treatment” and “negative list” will be used; protection on IP is highlighted; an interesting “torchlight” metaphor also mentioned here – President Xi said every country should improve their business environment.
Pilot area on the next level: Hainan is highlighted here
Push for multilateral and bilateral collaborations: WTO reform is mentioned here; several regional collaboration framework is mentioned here
Part IV – be confident in China’s growth potential
President Xi mentioned a few numbers to support the argument that China is making solid progress this year
President Xi also talked about the difficulties/dilemma which should naturally occur as things always have two sides; but be confident about China’s economy, its resilience, strength and growth
Part V – Shanghai is great and has its unique positions
President Xi announced three decisions about Shanghai
expand free trade pilot zone
establish a market for tech/innovation in Shanghai Stock Exchange (科创板), supporting Shanghai’s financial role and tech/innovation center
make integrated Yangtze River Delta region a national level strategy
Part VI – closing
Takwaways
Shanghai’s role reinforced.
The center of import will shift from Guangdong to Shanghai. Export center might still remain in Canton Fair.
Domestic financial center strengthened; global financial firms (mostly have already had presence in HK and Beijing) should expand and locate in Shanghai (especially for the new board on SSE).
SSE will be part of the overall push to let tech companies IPO in domestic market (aimed to compete with SZSE, HKEX, Nasdaq); but this kind of effort has been made several times – ChiNext on SZSE, NEEQ (new three board), etc.. really need a series of efforts/reforms to vitalize the market
Currently major startups/tech companies are in Beijing or Shenzhen; Shanghai will play a more important role.
Lobster industry was a nautical gold rush. Two generations ago, the entire New England coast had a thriving lobster industry.
Today, lobster catches have collapsed in southern New England, and the only state with a significant harvest is north in Maine, where the seafood practically synonymous with the state has exploded.
Now lobsters keep running to the north and going deeper in the water. Maine might be in trouble after another 5-15 years.
Rising temperatures along the bottom of the Atlantic Ocean will force American lobsters (H. americanus) farther offshore and into more northern waters, a new study finds. Credit: Natalie Renier, Woods Hole Oceanographic Institution
That’s happening not only to lobster, but literally to all marine species.
In the U.S. North Atlantic, fisheries data show that at least 85 percent of the nearly 70 federally tracked species have shifted north or deeper, or both, in recent years when compared to the norm over the past half-century. And the most dramatic of species shifts have occurred in the last 10 or 15 years.
Summer flounder’s center of species | Source: NOOA/Oceanadapt, Rugster U., Reuters
Similar findings in a map of predicted migration – marine species are moving northward to colder waters.
Starbucks posted a stellar earnings result today, with net revenue at record level of $6.3bn, beating expectations in many aspects.
Starbucks up after hours with earnings beats | Source: CNBC
While a single beat doesn’t indicate a new stage of growth, in the long run there are three issues I think matter the most and should be watched closely.
1 | Problem: Frappuccino’s decline
It was an problem Starbucks facing over the years. People are leaning towards healthier products (at least a very obvious trend in Cali), which usually means less sugar and less calories. That’s a problem for Starbucks’ Frappuccino, as explicitly mentioned in CEO’s presentation in June.
How did/will Starbucks address this? Product Mix & Innovation
Strategy a) Big push for healthier product lines – Nitro Cold Brew & Refresher series etc.
Starbucks Nitro Cold Brew | Source: Starbucks
– Nitro Cold Brew “is expected to be available in nearly 1,500 stores in 26 markets by the end of 2017″ (SBUX Jul. 2017 Press Release) -> “[Starbucks is] accelerating this platform to more than 2,800 stores by the close of fiscal year 2018, up to more than 6,000 stores by year-end fiscal year 2019″ (SBUX Q3 Earnings Call Transcript). A 4x availability expansion for cold brew in 3 years.
– Several new products in the Refresher category were introduced, e.g. “Dragonfruit” introduced Jun. 2018, “Pink Drink” introduced last year, etc.
Dragon Fruit | Source: StarbucksPink Drink | Source: Starbucks
Strategy b) Instagramable & limited edition within the Frappuccino category
– Unicorn Frappuccino (Apr. 19-23, 2017), Zombie Frappuccino (Oct. 26-31, 2017), Christmas Tree Frappuccino (Dec. 7 – 11, 2017), Crystal Ball Frappuccino (Mar. 22-26, 2018), Witch’s Brew Frappuccino (starting Oct. 25 for a limited time while supplies last)… among many others.
– Plus, Starbucks’ new Frappucino recipe has fewer calories and less sugar, part of its efforts to reduce sugar by 25% by 2020.
Starbucks Rewards could serve a similar role as Amazon Prime. In past last 3 month, loyalty program accounts for 14% of all transactions and US loyalty members contributed 40% of US sales. That’s what happened in the Amazon case, where its Prime members out-spend non-members significantly.
Digital relationship makes it easier to incentivize purchases, market new products/initiatives, bring in more collaborations (e.g. Spotify, Pokémon GO), expand membership offerings and more.
Starbuck’s push for afternoon consumptions is also facilitated by the digitalized promotions.
The room to grow digital relationships is still large – currently 15.3 million global active members, only representing ~22% of its 70 million global customers base. “Additionally, drive-thru, out-the-window and Mobile Order and Pay combined grew to more than 50% of the way customers are ordering, up more than 10 percentage points in just two years” according to COO.
3 | Opportunity – China Growth
It’s more debatable on Starbucks’ China future. Just want to highlight a few sure things.
Starbucks took full ownership in China East & opened flagship Roastery in Shanghai in 2017 – definitely the right moves here.
China’s coffee consumption will explode, even considering major cities alone. Younger generations will consume more coffee and they will represent an increasing proportion of the overall urban population.
China coffee consumption potential | Source: Starbucks 6/19 Presentation
Coffee even has a role to play in China’s GDP growth by boosting workers’ average productivity and the “culture” of working overtime.
Herding effect is stronger in China and “Instagramable & Limited” strategy may provide better outcomes if properly implemented.
Other things worth noticing – Starbucks’ food, packaged goods with Nestlé, next-generation store design, coffee supplies, SKU outside the Starbucks’ core products, etc…
Social network platforms such as Twitter and Weibo, are where we post our words/expressions, and is taking an essential role in todays’ Modern Communication.
Interestingly, but not surprisingly, they are also providing a feedback loop to change our ways of communication (and our thinking – but that’s another different story). After all, we are one of those animals with natural herding inclinations.
Taking a very simple example – as Twitter was becoming more popular, people started to lean heavily towards the use of new abbreviations, partially due to its 140-word limit. (Similarly, when Blackberries were popular, certain abbreviations were created, used and spread among professionals in texts & emails)
In 2017, Twitter officially made its “140-word limit” a history [Weibo ended the limit in 2016] and doubled the character limit to 280. One resulting impact is that people are spelling out abbreviations and acronyms more often, according to Twitter’s report.
Source: TwitterData
TwitterData also touted that “people are saying ‘please’ (+54%) and ‘thank you’ (+22%) more.” in the first year of doubling limit.
[Something worth noting on the data – 1) need to consider the difference in total number of tweets 2) need to consider other ways of saying ‘please’ and ‘thank you’…]
It is really nice that people could be more friendly and polite (not excessively tho). It would be even nicer if people could inherit their concise and efficient use of language in the 140-word era & all the other positive impacts Modern Communication made on us.
Today Apple announced new products of three lines of business – MacBook Air, iPad Pro and Mac mini.
MacBook Air 2018 Gold | Source: AppleiPad Pro 2018 11-inch and 12.9-inch | Source: AppleMac mini 2018 | Source: Apple
Besides the new features and superior performance, Apple seems to be more addicted to aggressive price tags. Today’s event is the latest episode of a series, starting from the 10-year anniversary model iPhone X last year.
[discussion below is based on the most basic consumer version of each product]
9/12/2017 – iPhone X introduced @ $999, a 30% increase from the high-end phone (iPhone 7 Plus @ $769) one year before
5/27/2018 – updated iPad introduced @ $329, flat with the new iPad debut price in Apr. 2017.
7/12/2018 – updated MacBook Pro @ $1,799; the price seems to be the same as Oct. 2016’s debut price with Touch Bar, but is a 20% increase in terms of available low-end option (MacBook Pro with no Touch Bar @ $1,499).
9/12/2018 – iPhone XR @ $749, increased by 7% ($50) compared to the low-end phone last year (iPhone 8 @$699) ; Apple Watch Series 4 @ $399, increased by 21% ($70) from a year ago @ $329.
10/30/2018 – new MacBook Air @ $1,199, a 20% increase from the old model years ago @ $999; updated iPad Pro @ $799, a 23% ($150) increase from previous Jun. 2017 version @ $649; new Mac mini @ $799, a 60% increase from the old model years ago @ $499; redesigned Apple Pencil 2 @ $129, increased by 30% from $99 when it was introduced 3 years ago
The 2-way strategy looks clear: 1. use entry-level new products (e.g. iPad & iPhone XR) to attract new users and compete with other firm’s often lower-priced products. Educational market and some international markets are important here, especially for new-user growth, ensuring an increasing number of total active users in Apple’s ecosystem and getting more market shares in terms of shipment. So there is barely any increase in price. 2. raise prices by 20-30% in other product lines to keep margin (for example Apple Watch price increase might be more associated with costs) or to compensate lower margins in entry-level products.
Apple’s overall average gross margin from 2016 to present is actually lower than the average from 2014 to 2015 (38.44% vs. 39.63%, down ~120bp), even with higher gross margins from service revenues weighing in more recently.
