A downtick is coming for online advertising
wsj.com
wsj.com
Ad revenue will drop due to a weak economy.
Higher interest rates will expose many business models(Uber, Doordash, etc) as unsustainable.
Netflix crashing likely popped the bubble in streaming services and Hulu. People are realizing Netflix is the next TiVo and streaming services with monthly subscriptions are a 'race to the bottom' and content(which is currently not cheap to produce) is king. Even with content, users can sign up, binge, and quit after a single month.
All of these services crashing will slow sales of enterprise HW and AI accelerators.
Now is probably a good time to shift your investments to things people need, not things they want. If you're in tech, I hope you've diversified your assets.
This is gonna be a wild few years ahead of us one way or another.
F, N are cratering, Amzn is sideways, Aapl is still way up yoy (seems vulnerable this earnings season though), MSFT has been good historically but worse this year and seems vulnerable. Google has had a good run recently but is weak this year, however P/E is already in a better place than its competitors so it has room to run I'd say.
I know of a non-zero amount of people though in the US hit by the low withholding on RSU's and then having a big tax bill, based on their value at vest before a stock drop.
Unfortunately this is usually insufficient in most companies and one will likely still owe a big chunk of change to the IRS each year as a result.
One can ask for extra withholding, but it's a bit tricky to figure out until one has worked for a given company / comp level for a given year.
Why do people always mention this? You pay income taxes at vesting as if the entire stock was income. cap gains is only for the difference between vest price and selling if you hold it for a year.
A good chunk of Apple's profit is the annual payment from Google.
I've long said tech wages need to come back to reality, so that the rest of the world can get back to building software for the rest of the world, not just the tech bubble compatible ventures. I think adtech and online advertising propping itself up is part of the problem.
That aside, all that money could go on non-tech things, or on debt servicing, or be left in the bank, etc.
Also question: Why would high interest rates expose Uber etc?
As far as I understandincrease in interest rates could make them running at a profit hard/ very unlikely in the future because covering high-interest loans will become hard. Further, it potentially could limit their cashflow, which impacts growth etc.
Many other factors, such as new investemnts or a decrease in individual travel, could influence this too of course. Though for a growth-centric company a limit on credit seems to be one of the harshest limitations.
Unbundling TV/Movie content from Cable providers was the disruption.
You wouldn't need to pay for Cable TV just to get internet.
You wouldn't need to pay for Broadband, just to watch the show you wanted - assuming you had internet access some other way.
It also offered the promise of relaxing control of where/when/how you watched content.
Content on Demand used to be a premium feature, you largely had content delivered to you in channels, and only a limited range. You could record content to watch it later, but that required another device (or a Cable box capable of doing it)
Location was also tightly controlled - you could only watch certain content in one room, in one house.
Wanted to watch a movie in your Hotel Room? Buy it from the Hotel. At your friends' place while you're staying with them? Only if they had the right Cable subscription.
Yes, Cable companies offered streaming, and on demand, and all that other stuff - but largely only after Netflix had proven it out.
In other words, they waited for Netflix to do the expensive and risky work of building out the market and refining the streaming infrastructure. Then they used the money they got from licensing their IP to Netflix and built out their own offerings. Sounds like good business.
... Or maybe it wasn't, and Netflix shouldn't have been either. They're fundamentally solving the same problem and delivering essentially the same value, and Blockbusters had the advantage that first-sale doctrine meant they didn't have to strike expensive licensing agreements with studios in order to serve their content.
If Netflix can combine their streaming service with their DVD catalogue, and side-step licensing restrictions by streaming data from a physical DVD in their collection to paying customers, maybe they can win back that attention. But I assume that such an application has already been challenged in court.
Someone tried that a few years ago, using the position that they were renting out a DVD player and a very long cable. Courts didn't accept that argument and they got shut down.
[1] Anyone today with cable service might notice how you get your Tivo functionality from set-top boxes supplied by the cable company. That's the same thing they're trying to do with streaming. They're not so much against it as trying to buy time to build out their own services to compete.
YouTube’s business model is so simple it’s phenomenal. Only reason Google will continue doing well for investors as they are no viable alternatives to YouTube in the near future
I still think that's true. The fact that there is a maximum saturation level is unsurprising. Because internet speeds and availability equates to netflix availability, I was surprised Netflix saturation took this long.
This is particularly painful for hiring managers, b/c companies give offers with higher RSUs than they are currently personally vesting for roles below them.
This just made me realize the next big step is likely paying for monthly access to the service, then paying to unlock the content. Similar to games that hide features behind DLC.
I wouldn’t be surprised if resetting your unlocked content if you let your monthly payments expire was another step forward.
I'm done pretending the studios and content creators are good faith operators. I've paid over 6 figures in the last 20 years for movies, shows, books. I'm not paying any more, and I don't feel bad about it at all.
Netflix had a great library, but the industry caught up and licensing and copyright induced fragmentation made streaming platforms more or less equally shitty.
There's no more value add if the apps, content, and curation don't work, or if they start sneaking in advertisements or if the companies are engaging in regulatory capture or other malicious corporate fuckery.
Avast, mateys, time to keelhaul the bastards in charge (or their pocketbooks.)
Disney gets the new landscape. They give early access to tons of youtubers and you can't move on yourtube without bumping into the latest breakdowns, rections etc about an episode of moon knight or a teaser trailer, shows are released globally within hours, and they have a massive back catalogue.
Amazon bought MGM, bringing in things like Stargate and Bond, but it's dabbling, if their video service stops, it doesn't really cause the company to fail. Apple doesn't seem to know where it wants to go, it's not really in the game, but it's not their core competency either.
Netflix had an opportunity to secure their catalogues a couple of years ago, but just threw money at trying to create original content but not really knowing how (and certainly not knowing how to do it efficently)
Paramount etc can make stuff, but they don't get the global media landscape in a way netflix and disney do, and I think similar can be said about other well established media companies.
Some shows worked better with entire season released at once, some didn’t. Streaming services will probably dabble with both.
Content isn't the problem, they just ran out of people willing to sub, they were always going to reach that limit at some point and when they did their tech unicorn valuations would reset back to something more realistic.
They are selling attention addiction like Facebook without caring about quality recently. Ex: Korean copycat shows and "documentaries", just because both categories tend to rate higher on imdb. Seems like a decision a PM will make, based on metrics to improve profit, not quality - i.e. give users what they want, even if it is bad for them (or the business) in the long term.
PS: Disney is doing the same, but with brands instead.
I'm sure it's an important channel to reach certain demographics (gen z? I'm not sure who exactly) but most people aren't choosing a streaming service based on youtube reaction videos.
People should be investing in total stock market index funds like VTI anyway, individual companies crashing should not affect one's investing philosophy.
On the slowdown front, some companies work in industries with inelastic demand. They advertise to stay in forefront and these ads won't go away.
Then there are companies in the want-based sector and they rely heavily on ads. I don't see this changing even with a reducing consumer appetite. They can't afford to be out-marketed as long as there is demand of any kind.
The only place where I see some reduction would be in the VC-funded consumer space in developing markets that rely heavily on cash backs and incentives as a way to get customers onboarded. I feel there will be a major push back on them.
My general sense is that paid ads is still valuable for niche markets as the ad will be cheaper and ad platforms allow quite specific targeting (they do gather huge amounts of data after all). It's probs too expensive for big competitive markets.
As an aside, it's quite risky to rely too much of paid ads as your business becomes subordinate to the whims of Google, Facebook etc.
However, that is also the exact type of adtech that is extremely dodgy in terms of privacy, because it thirsts for data. I'd love the whole thing to end in favor of some genuine user recommendation system. But as always, any ranking system that drives revenue will be gamed to no end.
There's some [literal] marketing 101 stuff most people aren't aware of. For large companies the value in marketing isn't really about directly selling you products, but about instilling a positive subconscious perception of a product in your mind.
Coke is the classic example. Dominant marketshare, defacto monopoly in many regions, and a loyal customer base. Yet they advertise endlessly and at great cost. The reason is so when you look at a bottle of Coke you don't think 'sugar, heart disease, obese people drink this' but instead 'crisp, cool, refreshing, athletic people drink this'. And it's all subconscious because of course we all consciously know its the former rather than the latter, but advertising can effectively make people do and think things that they might not otherwise. And there is significant research and practice to confirm all of this. Companies aren't just spending out of inertia.
This [1] is considered one of the most effective and powerful ads of all-time. It's Apple's 1984 Ad about the first Mac. A 60 second clip with zero information on the product/capabilities, zero information on pricing, etc. And Apple spent big on the ad (which was, for instance, directed by Ridley Scott) and tried to get it out everywhere, including in theaters. It seems like a completely absurd ad, until you understand how advertising works.
That's partly why since we've got better measurement tech in the digital ads space we've seen a massive shift to performance marketing and solid, measurable results.
I recently read "Subprime Attention Crisis" by Tim Hwang and he believes that even the performance marketing space could suffer a decline too - but he could be overly pessimistic in that regard.
Turns out with barely any knowledge in the area the ads more or less brought in the money they needed to break even.
These three platforms make up a majority of the ad industry without a doubt so I'm not sure where your statement comes from? If you've got info or sources though I'd be very keen.
A lot of people get confused about targeting a cost per conversion which is extremely common now, and actually paying per conversion.
Targeting cost/conv is not the same thing and is purely when the ad platform will adjust who and when it shows your ads too based on an amount you give it, normally the most you'd be willing to pay for a sale or lead.
Unbelievable that google can grow their advertisment revenue 23% YOY though.
If the US passes either or both of their laws with strong bipartisan support, or the EU gets the DMA into effect, a lot of Google's core businesses will be open for real competition for the first time in a decade.
Which specific laws are you referring to?