TOUGH DAY FOR SNAPCHAT: On the anniversary of arch-rival Instagram’s Stories launch, Snapchat received a 1-2 punch of bad headlines. First, Snapchat is officially getting trounced by Instagram in the usage department. As noted in the attached TechCrunch link, Instagram now has 250M average daily users compared to Snapchat’s 166M. If that wasn’t enough Standard & Poors also gave Snapchat some unwelcome news yesterday, by rejecting its application to be included in the S&P 500. Apparently the way Snapchat’s stock is organized by classes doesn’t comply with S&P’s standards. This news sent Snapchat’s stock to an all-time low yesterday, because the S&P denial will lock Snapchat out of index-based stock buying from institutional investors. Industry experts are calling for even more bad news later in the month as Snapchat ends it lockup period for employees – so they can sell vested equity for the first time since the IPO. All of these issues paint an ever-darkening picture for the once-promising tech darling.
WHEN QUALITY KILLS: So answer me this . . . the big three economic indicators which predicate auto purchases (gas prices/unemployment rate/interest rate) look pretty good right now, and the US is adding 2M new licensed drivers every year, why are automobile sales declining? The answer can be summed up in one word – Quality. According to Bloomberg the average car on the roads is 12 years old right now, with some lasting even 20 years or more. That’s because they’re made better than ever, so the cost of repairs/upkeep is lower relative to purchasing a new car. The graph below explains it well. The bigger the delta between the black bars (new cars purchased) and red bars (old cars scrapped), the more total cars are on the road. And if that old car is still in your driveway you’re less likely to go buy a new one.
WHAT PIZZA CAN TEACH US ABOUT aaS: Over the past decade you’ve probably heard the term SaaS (Software as a Service) numerous times – it’s how Oracle built its business services empire. More recently we’re starting to see many other aaS applications – like TaaS (Transportation), DaaS (Data), etc.. But what does this all mean, and how can the aaS trend by actualized for specific industries? The simplest and best example I’ve come across is the image below. It compares an industry we all know very well (pizza), breaks down the components of manufacturing and serving/delivering a piping hot pie to the hungry consumer, and shows how each element can be farmed out to 3rd parties in a hypothetical PaaS (Pizza) industry. If you take this example to the extreme imagine Pizza Hut as just a brand you order from, while some anonymous pizza making factory creates the pie and then Uber Eats delivers it to you. So much for two slices and a Coke from your favorite corner pizza joint.
Have a great Thursday guys!