Thursday’s Themes . . .

SPOTIFY’S IPO IS HERE:  Yesterday Spotify formally announced plans for its long awaited IPO.  As expected the streamer is going with a Direct Listing, which means that won’t raise any new capital by selling shares through institutional investors.  Instead individual equity holders will be able to sell their own shares on the NYSE.  Besides the Direct List shenanigans the other usual aspect of their IPO is the “placeholder valuation” of $1B, as reported in the attached Axios link.  Industry estimates peg Spotify’s market cap at anywhere from $10B-25B, but there’s no real way to tell until the stock starts trading and a price is established.  The other interesting aspect of Spotify’s filing is the first ever disclosure of their audience metrics and financial position.  We now know Spotify has 52M MAUs in North America (they don’t break out the US separately), and about 40% of their audience is subscription.  According to my napkin math that leaves roughly 31M addressable listeners in NA.  The other surprising number is their operating loss, which was a jaw dropping $1.5B in 2017.  So they’re miles away from breaking even and won’t be raising any new capital from a traditional IPO.  Does this sound like a recipe for success to you?

FACEBOOK’S ELECTION TELL ALL:  Over the past few days there’s been a growing controversy over disclosures Facebook has made about the 2016 Presidential Election.  The flash point has been around the different CPMs FB charged the Clinton and Trump campaigns.  The initial headline read as if FB charged Clinton much more than Trump, but this was based on a cost per click metric instead of CPM.  Trump was getting more clicks per ad placed because his creative was much more inflammatory, so the ads performed better on a CPC basis.  This created enough market outcry that FB felt compelled to release the actual purchased CPMs of two campaigns in the image below.  It shows Trump paying higher CPMs – so they probably bought more desirable ad units and/or audience segments which lead to a more efficient click ratio.  Slate does a nice job of unpacking this complex scenario in the attached link.  You rarely get a look under the hood at a major publisher like FB, so spend some time with this one.

THE ONE THAT GOT AWAY:  If you’re a regular reader of the DG you know I’m a big fan of the show Shark Tank and in particular of Mark Cuban.  The knowledge they drop about basic business strategy and marketing is so spot on . . . most of the time.  Every once in a while a great idea is overlooked even by this group of preeminent venture capitalists.  That was the case with a young entrepreneur named Jamie Siminoffs and his IoT connected video doorbell called DoorBot.  As described in the attached QZ link, in 2013 Mr. Siminoffs pitched the DoorBot concept to the Sharks and offered 10% of the company in return for a $700K investment – which valued the company at $7M.  None of the Sharks took the bait (sorry!), so Jamie went home with his DoorBot invention and no deal.  But that’s just where the story begins.  Jamie Siminoffs kept working on his invention and company, which was eventually rebranded as Ring.  This is the same Ring that Amazon just purchased for $1B (with a B, not an M).  Obviously this is a lesson in perseverance after rejection, which we could all use more of.  But it’s also an example of understanding that no matter how much of an expert you are, you can never really be perfect in your decision making.  I think the Sharks found that out the hard way with this one.  (If you’re interested check out the second video link in the article to see why the Sharks dropped out of the DoorBot pitch one by one.)

Have a great Thursday guys!

129 thoughts on “Thursday’s Themes . . .

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