Tech Brew Ride Home - Mon. 12/16 - Give Us A Name For $100MM AAR Startups!

Episode Date: December 16, 2019

Chrome 79 is wiping data from some apps, Amazon is about to deliver more than FedEx or UPS all by its lonesome, Argo plans to charge by the mile, smart TV’s make margin by watching you, does music lack pricing power and help me find a name for $100 million-dollar annual recurring revenue startups. Sponsors: TinyCapital.com DollarShaveClub.com/ride Links: Google pauses Chrome 79 rollout on Android after bug wipes data in some apps (Android Police) Watch out, UPS. Morgan Stanley estimates Amazon is already delivering half of its packages (CNBC) Self-Driving Mercedes Will Be Programmed To Sacrifice Pedestrians To Save The Driver (Fast Company) Argo takes different road to skirt self-driving challenges (Reuters) The falling price of a TV set is the story of the American economy (The Outline) The newest members of the $100M ARR club (TechCrunch) Zero-to-100 Million in 3 Years (Lemonade Blog) Why Do We Still Pay Only $10 a Month for Music? (Rolling Stone) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Monday, December 16th, 2019. I'm Brian McCullough today. Chrome 79 is wiping data from some apps. Amazon is about to deliver more than FedEx or UPS all by its lonesome. Argo plans to charge by the mile. Does music lack pricing power? And help me find a name for $100 million annual recurring revenue startups. Here's what you miss today in the world of tech. Google has halted the Chrome 79 rollout on Android. Android, which was already 50% complete, by the way, after reports came that a misconfiguration in the update was wiping data from many apps using Android's native WebView, quoting Android police.

You might be wondering, how the heck can a Chrome bug erase data in other apps? Well, on most recent versions of Android, Chrome acts as the system's web view, the component that renders web pages inside of apps. When you log in with a web page inside an app or use browsers like DuckDuck Go that lack their own internal rendering engine, Chrome is responsible for loading the content. Some Android apps actually run entirely inside WebView, such as applications built with Apache Cordova, phone gap, or packaged web apps like Twitter Lite. One of the changes in Chrome 79 is that the location where web data is stored was updated. However, as one comment on a chromium bug page pointed out, data from local storage and webSQL, two types of storage commonly used by web apps and packaged apps, wasn't migrated properly, end quote.

Quick check in on something we've been keeping an eye on for a while now, something that was probably inevitable. Morgan Stanley estimates that Amazon is now delivering half of its own packages all by itself, and will soon pass both UPS and FedEx in total package volume at a current rate of 2.5 billion packages a year, reaching 6.5 billion packages a year by 2020, quoting CNBC. Amazon Logistics is the e-commerce giant's in-house logistics operation. Morgan Stanley said Amazon Logistics, quote, more than doubled its share of U.S. package volumes from about 20% a year ago and is now shipping at a rate of $2.5 billion per year. For comparison, Morgan Stanley estimates UPS and FedEx have U.S. shipping volumes of 4.7 billion and 3 billion packages per year respectively. We see more of this going forward as our new bottom-up U.S. package model assumes Amazon Logistics, U.S. packages grow at a 68 percent compound annual growth rate from 2018 to 2022, Morgan Stanley said. That would put Amazon logistics at six and a half billion packages per year by 2022, according to the firm, far exceeding.

exceeding its estimate for UPS at 5 billion packages per year and FedEx at 3.4 billion packages per year, end quote. This is an example that has been rolled out so many times as self-driving technology evolves that it's almost become cliche. It's that old ethical question, the trolley problem. A runaway trolley car is about to kill five people on one track, but if you flip the switch, the trolley will jump to a different track and only kill one person. What do you do?

Well, the old trolley car dilemma is apparently already upon us because car and driver is reporting that forthcoming self-driving Mercedes vehicles will be programmed to sacrifice pedestrians, or at least anyone outside of the vehicle, in order to save the occupants of the vehicle. This is from a fast company write-up of the story. If you know you can save at least one person, at least save that one. Save the one in the car, Mercedes manager of driverless car safety. Christoph von Hugo told car and driver in an interview. Quote, if all you know for sure is that one death can be prevented, then that's your first priority. There are situations that today's driver can't handle, that we can't prevent today, and

automated vehicles can't prevent either. The self-driving car will just be far better than the average human driver, Von Hugo said. He also points out that even if the car were to sacrifice its occupants, the car may end up hitting the crowd of school kids regardless. Quote, you could sacrifice the car, you could, but then the people you've saved initially, you don't know what happens to them after that in situations that are often very complex. So you save the ones you know you can save, end quote. One of the things that I find fascinating about, especially the automotive industries,

dive into self-driving tech, is that billions and billions of dollars are being spent on research. And yet no one really knows what the business model is on the other. end of this. Like, do the car company still sell cars to individuals who just never have to drive them, or do they operate a fleet of robotaxies, or do someone else? In which case, do the individual car companies and their brands matter, or do the taxi brands matter? Uber obviously hopes for the latter. And then what about delivery? Do wheeled vehicles merely become autonomous versions of the UPS truck or even my automated burrito delivery vehicle? In other words, what is the way? In other words, What is the ultimate way folks think they're going to make money when and if self-driving technology finally arrives?

Well, Argo is the startup backed jointly by Ford and Volkswagen, and according to Reuters, Argo's AI chief says, they really don't care. They're going to just go the cell carrier route, they think. You know how cell carriers charge per minute or per megabyte? Yeah, Argo's imagining just charging per mile. End of story. I hate the word robotaxi, Argos Brian Seleski, said in a rare interview at Argos Pittsburgh headquarters. There are so many applications and businesses to be built and try to understand which ones are more profitable than others, end quote.

The Argo business plan hinges on a unique revenue sharing deal that will pay Argo fees based on miles traveled in self-driving Ford and VW vehicles equipped with Argos technology. details of that arrangement have not previously been reported. Argo's financial structure is also different from rival autonomous vehicle ventures, Ford and VW, each own just under 40%, with Argo's management team holding just over 20%, according to sources familiar with the business. Details of the ownership structure also have not previously been reported. Among the prospective commercial applications of Argos technology,

long-haul trucking, e-commerce deliveries, the transport of people along fixed routes and cities, and off-highway applications such as mining, end quote. So they don't care. Do whatever you're going to do with the software and technology stack they eventually come out with. Just pay them their license fee per mile. It's all sort of back to basics in a way. I'm gearing up to head to CES next month for the first time in almost a decade.

So folks, if you're going to be at CES, hit me up and let's hang out. and brands, if you have decent interviews to pitch me, please do. But interesting interviews, please. CES is maybe most famous for the new TV lineups that are always announced every year, the actual TV hardware. The last time I was there was the year that all manufacturers were trying to make 3D TVs a thing, if you remember that. The outline notes that as they tend to do,

prices for even the high end of the TV market continue to fall. The price of a 50-inch 4K HD television has declined by 80% from 2012 to 2017, but that also points to an interesting notion that the business model of producing television hardware has changed. The reason why you can now get a 50-inch flat screen for $300 might surprise you. manufacturers can actually make more money by taking a cut of the ad revenue via pre-installed channels and also by selling user data. So it's just like the old cheap PC business model where you fill a PC with crapware that you get fees for, mixed with the modern surveillance device into your home business model.

Quote, because only 37% of U.S. homes currently have a smart TV, according to the market researchers at Forrester. That means there's a lot of revenue these companies have yet to squeeze. TV makers, understandably, are doubling down. This week, Vizio announced that it was launching its own in-house advertising unit looking to capture a bigger slice of the estimated $4.4 billion video streaming ad market in 2020. For many big companies that make physical products, the business of making stuff isn't sufficiently lucrative anymore. Automakers, for example, can now expect to see bigger profits from the loans they make on selling cars than from selling the actual cars. And like the TV manufacturers and car companies, even ad-friendly tech

giants like Apple know that their real margins won't come from hardware anymore. It's why Cooperino is spending massively on content to shore up its growing services revenue, end quote. The multi-headed hydro revenue stream is coming for every market, just getting people to pay for something, and making margin on that is so passe, except new buzzword trend alert now that the shine around being a unicorn has been buffed off a bit i.e. where people used to hear billion dollar valuation and thought oh the next facebook now they think ah money burning company with an uncertain road to profitability now that this is the reality how exactly do you signal in shorthand that you're a startup head and shoulders above your peers

well what is the new hotness right now as we just discussed Subscription revenue, right? ARR, annual recurring revenue. Seemingly safe, guaranteed like clockwork revenue. I've been seeing a lot of companies beginning to tout lately that they've cracked the $100 million in ARR Club. That's a new badge of honor. Bill.com went public last week in a fairly successful IPO, on top of reaching the vaunted $100 million dollar ARRR.

mark earlier this year. Sprout Social also went public after achieving the same mark just this past summer. Insurance startup lemonade posted a blog post that got a lot of chatter this weekend, touting how it's gone from zero to 100 million in ARR in just two and a half years. And recently, TechCrunch has been tallying newly minted members of the $100 million ARR club like Asana, Druva, Walk Me, GitLab, told TechCrunch, they expect to meet the mark next month, January, and Ignite told TechCrunch they reached the milestone last month. Brazes, CEO, told TechCrunch in an interview, quote, we're actually in a position where we have no plans to fundraise further, and we've now reached the $100 million

AAR point with less than $200 million raised. We also expect to hit $200 million in AARR with less than $200 million raised. So when we look at the milestones in our business, the traditional ones that get covered are the fundraising. But you know what's better than raising money from outside people is getting paid for your product, end quote. Which in a way, I can see why you would want to virtue signal that your strategy is not to just simply burn hundreds of millions of dollars in VC money in service of that elusive scale, burn a bunch of money, question mark, then profit, right? No, not us. We actually are bringing in money today. not someday down the road. Today, our product not only has traction, we can already show tangible results on that traction.

Of course, it is somewhat funny that companies are trying to differentiate themselves by claiming they made a product that people are actually willing to pay for, right? Squint your eyes just a bit, and that was always kind of the point. And actually, it was the lemonade post that made me want to talk about this because lemonade is in the insurance business, right? So it's interesting that they want to call what they do ARR. Isn't that $100 million a year just, you know, insurance premiums? Isn't that the business you're in anyway? But okay, see, when companies contort themselves into knots to fit into a buzzword category, then you know that you've found the new hotness.

So the $100 million ARR club. But then again, in some industries, the fact that people are finally even willing to pay for products is long overdue and quite a welcome change in market behavior. So it is probably worth celebrating. And hey, subscription revenue means you probably don't have to do surveillance capitalism to monetize, which again is a welcome change in the startup ecosystem from just a few years ago. But, and this is why we're talking about it, one big problem. What do we call these sorts of companies, members of the $100 million AAR Club? We need some sexy form of branding that is at least as cool and ubiquitous as the term unicorn.

So I'm putting this out to all of you. What should we call these startups in the rarefied $100 million ARR club? Leave your suggestions in the subreddit R-slash write home if I can remember to start a thread there. Or tweet them at me. Doesn't have to be another mythical creature or even an animal at all, but the only thing that I thought of over the weekend was Narwhal, or maybe pirate startups, because A-R-R, you know, what's a pirate's favorite radio station? NPR. And finally today, one more thing about subscription revenue. We know everyone is chasing it in the media space. Recurring revenue is one

thing, but it does kind of lock you in to a certain pricing level, right, so that the only way you can grow is to achieve that vaunted scale. However, while Netflix seems to have pricing power because of their head start in the streaming space, and other folks like Disney Plus own their own library of content to one degree or another, so they theoretically have control over their costs and thus have flexibility on pricing as well. What about the streaming music space, the space that taught us all to love and stop worrying about paying a monthly subscription? Like, no one who streams music owns their content. In fact, for all the ways, streaming has revitalized the music industry, it's worth pointing out that the streaming services themselves have yet to make

meaningful money because the cost of getting the content they need is so steep. So when Rolling Stone wonders why a decade into music streaming, we are still only paying $10 a month for our music. The answer is kind of depressing, especially if you're Spotify. Spotify, of course, would love to charge you more and maybe eke out a profit. And the music companies would love if they raise their prices as well, because they'd make more money if that happened too. But could Spotify raise its prices? Maybe not yet. And if not yet, why? Quote, it's a billion-dollar question, says Russ Kruppnik, managing director of music research firm Music Watch. It's been at least 15 years, if you include Rhapsody, that music subscriptions have been sold for the same price.

Yet, if you think about it, they work on more devices than ever, and have bigger catalogs and more features and functionality than ever. It's a measure of the competitiveness of the environment that the prices haven't changed, end quote. With a dozen streaming services all offering the same songs and albums, it's risky for any one. company to take the first step into users' wallets. Quote, the one big difference between music and video is that Netflix has House of Cards and Oranges of the New Black and all that, Kripnik says. If you are really a fan of someone's original content, they can get away with sneaking

in increases because they know you're willing to wait for the next season to binge. In music, if your favorite streaming service said they are going to raise prices, you could easily switch to a different one. There's no House of Cards exclusive for them to offer. music streaming did once make a foray into album exclusives, but it was ill-received and short-lived. And while Spotify may suffer financially from its low pricing right now, juggernauts like Amazon and Apple don't mind operating their music arms at a loss because the rest of their businesses are profitable enough to compensate, end quote.

Yeah, that's maybe the biggest hidden lesson here. Much has been made about how the entry of Apple Music into the streaming game has done nothing to slow Spotify's user growth, growth in users overall, but also in paying customers. And yet, does Apple simply being in the business mean that Spotify has lost any hope of pricing power, of reaching profitability? Maybe that's why they make noises about things like antitrust. Maybe that's why the push into podcasting, perhaps. Rolling Stone thinks if Spotify and others do attempt a price raise, this might be the year they do it. Spotify just passed the 100 million paying user mark and 250,000,000, million users, period. But if Spotify does take the plunge, it might not just be through a straight

increase in the monthly bill. Quote, one route that music services could take is toward tiering, offering high-resolution streaming at a higher price, as title on Amazon do. Another is raising fees in regions that will tolerate it, as Spotify has been doing with experiments in its home region of Scandinavia. Going more niche could be another tactic in a study by UGov and Dutch American classical streaming service Prime Phonic this month, 52% of American music fans said they would be willing to pay more than $10 a month for, quote, a streaming service that truly meets their needs, with some willing to go as high as $20 a month, end quote.

See, I always thought that Spotify was going to differentiate its revenue stream by dialing up its own record label and eventually owning its own artist and less its own content, like we always thought it could and sort of mimic the streaming video services that way. But maybe that's what the move into podcasts really is. Doing something similar in podcasts with actual production studios. That might be easier, cheaper. And actually, it comes full circle back to radio, right? Because playing songs got people to listen to your radio channel,

but it was your morning zoo and your nightly sim. indicated call-in content that made the real money. I really like how each story just sort of led into the next story on the show today. Sort of like the B-side of Abbey Road. I swear I didn't plan that, by the way. And by the way, one thing to mention from late last week, you can now listen to any podcast that is in Apple Podcasts directory or Spotify's directory on your Alexa-enabled device.

any Alexa enabled device simply by saying, hey, you know who, play the tech meme right home on Apple Podcasts or Spotify or whatever. Before, to enable you to listen on Echo devices, I had to do all sorts of weird workarounds to make that happen. Plus, now if you link your Apple ID to your Alexa app, you can pick up listening where you left off. So good for the transition between your home and on the go. whatever. I don't care where you listen to this show. I'm just glad that it's now drop dead simple to do so on Alexa as well. Talk to you tomorrow.