News: Week 49
Salesforce confirms Slack deal, Zoom & Snowflake earnings, Stripe Treasury and Shopify beats out Amazon for Black Friday sales.
|Dec 5, 2020||1|
This weeks news summary is a little longer than usual, but in fairness there was a lot of interesting news, headlined by the Salesforce & Slack deal being formally announced. The Black Friday sales data from Shopify and Amazon was also super interesting, as it feels like we’ll be comparing these two for years to come.
So with that, what happened in Week 49;
Salesforce: earnings & Slack acquisition
CEO Marc Benioff used Tuesday’s quarterly earnings call to confirm that Salesforce had agreed to acquire Slack for $27.7 billion. It’s a $10 billion premium on Slack’s market cap at the time the Wall Street Journal broke the news last week. It’s reasonable to suggest the world class enterprise sales team at Salesforce will accelerate growth for Slack, which Benioff hopes will become the “front-end” application for customers who use Salesforce CRM. On earnings, Salesforce grew quarterly revenue 20% YOY to $5.4 billion, however soft guidance on next quarter caused a sell off, with a 9% drop in its share price this week. (earnings) (Slack acquisition press release)
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There might not be another company influenced by the pandemic as much as Zoom. So much so that reporting YOY numbers doesn’t really make sense anymore, it’s more meaningful to review quarter on quarter data. Back in Q2, the video conferencing app blew the market away with over 100% revenue growth in the space of three months, adding $340m in revenue and more than 100,000 new customers with 10 or more more employees, all in the space of 13 weeks. This week Zoom released Q3 earnings, and while still incredibly impressive, the growth is understandably slowing down. Zoom added $114m in revenue and 63,000 new customers with 10 or more employees during the period. Also of note is gross profit dropped, as the cost of serving non-paying users such as families and schools took its toll. In a world where Microsoft Teams and Google Meet are bundled into productivity software, Zoom is an incredible story. (press release)
Remember Snowflake? In September they recorded the biggest IPO for money raised by a software company, securing $31 billion of new capital. Snowflake is a cloud data platform that helps companies understand and use their online data more productively. We learned that revenue grew 119% YOY to $160 million for the quarter and enterprise sales is the focus. Snowflake counts Fortune 500 customers as a KPI (they have 165 currently) as well as customers with a $1 million+ revenue contribution (65). Equally interesting is that 86% of Snowflakes business is in North America. Snowflake’s share price has jumped 32% since Wednesday’s earnings. (presentation)
Reddit chasing ad growth
In an effort to attract more advertisers, Reddit disclosed its active daily users for the first time. Reddit is known for being the forum for almost any topic imaginable, and has attracted a wealth of notable people running AMAs (ask me anything) on the platform. Reddit has 52 million daily active users now, which is 44% more than last year. For context Twitter has 187 million while Facebook has 1.8 billion. Companies have limited ad budgets, and spreading that across the breadth of social media apps means active users and conversion becomes super important metrics. Reddit generated $100 million in ad revenue in 2019, and expects that to grow by 70% this year, however it is still miles short of its closest comparable app (user experience and data wise) in Twitter, which generates $3-4 billion in annual revenues from its users. (story)
Shopify “out sells” Amazon over Black Friday weekend
In a battle of the ecommerce platform giants, Shopify sellers marginally outsold independent sellers on the Amazon platform for the four day shopping event of the year. Following Thanksgiving in the US, from Friday through Monday retailers run huge sales, prompting the retail kick-off of the holiday season. In 2020, sellers on the Shopify platform generated $5.1 billion in sales, up from $2.9 billion in 2019. Meanwhile independent sellers on Amazon generated $4.8 billion, up from $3 billion last year. Amazon’s figure does not include its own branded products. (Shopify press release) (Amazon blog post)
Stripe launches Treasury & Capital for Platforms
In a super busy week for Stripe’s marketing and press team, the global payments technology firm launched two compelling new products. The first is an extension of its current Capital product, which allows businesses who collect payments on Stripe to access working capital finance, using their Stripe transaction history to determine how much they can borrow. Stripe has now extended this product to its platform partners to offer their customers. Meaning platforms like Shopify or Lightspeed POS can offer their sellers finance, with Stirpe handling all of the credit infrastructure and risk.
The second major product update is what Stripe is calling Treasury. This product is banking as a service, which will also enable its platform partners to offer banking products to its users. Stripe is partnering with global banks Citi, Goldman Sachs, Barclays as well as Evolve Bank & Trust. Shopify is an early user of Treasury, which allows sellers to open a Shopify bank balance and store funds.
If you’re interested in learning more about Stripe’s strategy, I highly recommend two updates from Ben Thompson this past week, the first is his weekly free article titled “Stripe: Platform of Platforms” and the second, a special, is an interview with Stripe President and Co-Founder John Collison.
Facebook purchases Kustomer
The corporate development and M&A team at Facebook keeps itself busy. This time it is a customer service and chatbot startup called Kustomer that Facebook has acquired. This is about bringing business conversations and transactions to Facebook, as well as its ancillary platforms such as Instagram and Whatsapp. In a nice reminder of what a deal the Instagram acquisition was for Facebook, Kustomer and Instagram each cost Facebook $1 billion to purchase. (story $)
Huawei ban brought forward
The British government has brought forward the deadline for telecom providers to stop installing Huawei kit into British 5G infrastructure. Huawei is Chinese owned, and many Western governments are banning Huawei products from communications infrastructure for fears the Chinese government will access citizen data. There is a lot of Huawei technology in the current mobile infrastructure in the UK, but it will need to be completely removed by 2027. (story)
GM backs away from Nikola deal
In another tough blow for the electric truck company, General Motors has backed away from its original commitment to invest $2 billion in Nikola, and manufacture its “Badger” pick up truck. Nikola will be returning nearly $7 million to customers who had paid a deposit for the truck. This follows a tough couple of months, with Nikola’s executive chairman stepping down following accusations of fraud from short sellers, implying Nikola was dishonest about the progress of its electric truck technology. Nikola’s share price fell 25% on Monday. (link)
Monzo raises more capital
In an extension of its previous raise in June, UK neobank Monzo added £60 million to its runway as it works its way towards profitability. Earlier this year Monzo caught the attention of the media, following a “going concern” warning in its financial report as well as making some redundancies. Since then, Monzo has accelerated its business accounts growth, who are generally more profitable customers with higher balances, to 60,000. While Monzo has also done an admirable job converting 100,000 of its retail customers to its new subscription accounts Monzo Plus and Premium. All eyes are on Monzo’s lending plans, a traditional banking strategy which has seen competitor Starling Bank post its first profit in October. (link)
Discovery launches streaming service
OMG Shark Week on demand! That’s right, from January 4th Discovery will be launching Discovery+, a direct to consumer streaming service for its content assets. Discovery’s flagship products include the Food Network, HGTV and the Discovery Channel, home to the cult classic Shark Week program. Discovery+ will be initially available in 25 countries and will have two pricing tiers - $4.99 with ads and $6.99 without. Don’t dare add up all of your monthly streaming subscriptions. (link)
Techonomist holiday schedule
I plan to keep writing up until December 19, which will be my last edition for the year before enjoying a couple weeks of reading the news without thinking too much about deadlines. There is still plenty to cover over the next couple of weeks, so hope you stick with me until then.
In the meantime, have a fun & safe weekend, and for those in the UK enjoy a little more freedom with some restrictions lifted!