Tech Brew Ride Home - Wed. 10/19 – What Even IS Apple’s iPad Strategy?

Episode Date: October 19, 2022

Netflix actually beat on earnings and customer additions. Why their pivot to ads might actually be in line with their long-term strategy. Yesterday’s iPad releases were even more complicated, and stranger, frankly, than I told you. Bluesky is still plugging away on decentralized social media. And another monster interesting raise in the AI space. Links: Netflix adds more than 2.4 million subscribers, reveals details about password-sharing crackdown (CNBC) The New Netflix Age Has Arrived (Puck/Julia Alexander) The iPad’s erratic odyssey continues (Jason Snell/Six Colors) Jack Dorsey-Founded Bluesky Unveils Roadmap for Decentralized Social Networks (Decrypt) AI content platform Jasper raises $125M at a $1.5B valuation (TechCrunch) 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 TechMeme right home for Wednesday, October 19th, 2020. I'm Brian McCullough today. Netflix actually beat on earnings and customer additions, why their pivot to ads might actually be in line with their long-term strategy. Yesterday's iPad releases were even more complicated and stranger, frankly, than I told you.

Blue Sky is still plugging away on decentralized social media and another monster interesting raise in the AI space. Here's what you miss today in the world of tech. Tech earnings season is back, and surprise, surprise, Netflix. Always first out the door, beat with Q3 revenue up 5.9% year-over-year to $7.93 billion, $1.4 billion in net income, though that was down from $1.45 billion year-over year. But most importantly, 2.4 million net global subscribers added versus $1.09 million, which was the estimate. Netflix's stock open up 10% this morning. So bouncing back from that subscriber loss in a stronger way than we perhaps expected, quoting CNBC. The majority of Netflix's net subscriber growth during the quarter came from

the Asia Pacific region, which accounted for 1.43 million subscribers. The U.S. Canada region had the smallest growth of Netflix's regions contributing just 100,000 net subscribers. We're still not growing as fast as we'd like. Spencer Newman, Netflix's chief financial officer said during the company's earnings call. We are building momentum. We are pleased with our progress, but we know we still have a lot more work to do, end quote. Netflix forecast it would add four and a half million subscribers during its fiscal first quarter and said it expects revenue of $7.8 billion, largely due to currency pressures overseas, end quote. On that analyst call, Netflix said it plans to stop sharing projected subscriber numbers in its earnings going forward, starting in Q4,

2022. Instead, they want to stress new revenue streams like ads and page sharing. And Netflix VP of Gaming, Mike Verdu, said the company is, quote, seriously exploring a cloud gaming offering and plans to open a new gaming studio in Southern California, quoting TechCrunch. It's a value ad. We're not asking you to subscribe as a console replacement, Verdu said on stage. It's a completely different business model. The hope is, over time, that it just becomes this very natural way to play games wherever you are, end quote. Since it announced its foray into gaming, Netflix has 14 games in development in its own studios and has 35 games on the service now. In total, Verdeu said it has 55 games in flight at present. These games include experiences based on original IP like Stranger

Things, as well as licensed IP like SpongeBob SquarePants. Netflix is also developing original games, end quote. So remember when I use the break glass in case of emergency analogy with Netflix recently. Let's think about this. Coming online next month, Netflix has ads. And even though we broke down how much ads they would need to show to make up for the lower price point, it's worth remembering that Netflix is thinking of ads as only accretive. The hope is that some folks that were never Netflix subscribers or maybe went away will become subscribers. And Netflix will get that high margin ad revenue on top of everything else. On the call, Netflix execs touted how excited advertisers are to reach the Netflix audience, which I completely believe they are. The question really is

just how many eyeballs Netflix can actually rustle up. But so we have ads and we have games, and we have their crackdown on membership sharing. Netflix has broken all of the glass available to them, at least the ones within easy reach. In her Puck newsletter this morning, the great Julia Alexander reminded us of the Netflix long game. Remember, they just want to become TV. They want to replace TV. And in a way, the pivot, especially to ads, might only play into that long-term strategy after all. Like, what if this move continues Netflix's focus on its own owned and operated sitcoms and procedurals that advertisers lust over, but Netflix largely hasn't served them to date? What if Netflix can make its own Law and Order franchise, in short? Quote,

Today's earnings report notes that shareholders shouldn't expect to see material effects in Q4 from ads, but the core innovation here and the key signal to the street is Netflix's change in mindset from pursuing exponential growth to a more sustainable P&L. While Netflix likely hasn't hit its final subscriber ceiling in the U.S. and Canada, future growth will most likely remain incremental at best. A large percentage of those homes, about 80% that want Netflix, already have it, or engage with its content via piracy, according to Pivotal Research Group. But that still leaves some six and a half to eight million

potential news subscribers that Netflix could attract in the UKAN, which is the United States and Canada region in 2023, with its hybrid advertising product, according to some analysts. The annual revenue per user from an ad-supported tier could eventually be higher than the ad-free tier depending on adoption, usage, and advertising CPM. Former Disney streaming head Kevin Mayer, for example, previously noted that annual revenue per user from Hulu's ad-supported tier was higher than the ad-free tier when he was overseeing that division. And presumably it's potentially easier for Netflix to build an ad business atop a stable subscriber business than it has been for traditional ad-supported media companies to enter streaming. I would argue that

it's because of advertising that certain types of shows still flourish. Procedurals and sitcoms, for example, are broadcast staples. CBS airs, a plethora of cop shows with built-in act breaks for ads. The same goes for ABC and sitcoms like Modern Family and Blackish, which could sustain their runs because of the mix of audience demand and advertisers wanting to reach those audiences. Right now, a lot of those network hits are thriving on streaming. One of the most watched shows on Netflix week after week in the U.S. is Criminal Minds, according to Nielsen. Netflix's head of drama, Ginny Howe, told Dateline back in August that Netflix is, quote, really, really interested in an NCIS or a Law and Order SVU, noting that these are a series

that we as fans have loved over the years and would be excited to explore at Netflix. It helps that those are shows that advertisers love too, to truly replace the long-running series that subscribers value. After all, Netflix needs to build out its own slate. Advertising can help keep the company alive during that period, end quote. As I was recording yesterday's show, it turned out that Apple was continuing to dribble out press releases about the products it launched yesterday. So I miss telling you about some stuff, like the $249 Magic Keyboard Folio designed for that entry-level 10th-gen iPad with a detachable keyboard, 14 function keys, and an adjustable stand. Also, I miss noting that on that iPad, the camera is now in

landscape mode. I miss noting that the same iPad got Apple Pencil support, but since that same iPad also switched to USBC, to actually use the pencil with the entry-level iPad, you need to buy a $9 pencil to USB accessory, though it will be included in the box with future Apple pencils. But also, well, I'm just going to let Jason Snell fill you in, since he ends his summary of yesterday's announces with a valid critique, I think. quote, the new 10th generation iPad is a nice update, adding touch ID on the wake sleep button, and an A14 processor kicking the home button to the curb at last. Apple has moved the iPad's front-facing camera to its long edge,

and as someone who uses my iPad almost exclusively in landscape orientation, this is a great step. Apple has also built a new keyboard and trackpad case for the iPad with the same key mechanism as the magic keyboard for iPad Pro and iPad Air. It's a very different product, though, rather than creating a laptop-style flat surface via a clever cantilever method, Apple's new $249 Magic Keyboard Folio resembles a lot of third-party cases in having an adjustable kickstand and the ability to detach the keyboard magnetically when you're not using it. I'm not a fan of kickstands. They're good on tables, but lousy on laps. But the Magic Keyboard is really an accessory that's only good for typing,

while the Magic Keyboard Folio could reasonably be your only iPad case, since you can pull the keyboard off if you aren't using it. The Magic Keyboard Folio also has a row of function keys that the Magic keyboard sorely lacks. The Magic Keyboard Fulio lacks the key backlighting of the Magic keyboard, however. While the iPad is basically a complete hardware redesign, the new M2 iPad Pro models are very subtly upgraded versions of last year's hardware. This makes complete sense, but it also means that they haven't been updated to support some of the advances in the 10th generation iPad.

It's a very weird situation to be in when the low-end iPad is showing the way to a new front-facing camera position and an embracing of function keys, but the high-end iPad Pro is stuck in the past. And the poor 11-inch iPad Pro couldn't even get an upgrade to the XDR display in the 12.9-inch model. Just as with the MacBook Air and MacBook Pro, the move from M1 to M2 will offer some nice but modest speed boosts for the iPad Pro, and Apple is smart to show off video apps like DaVinci Resolve, and Octane X, that really take advantage of the full power of the M2. But when I see Apple boasting about how the M2 can be put to work for serious video work with these apps, it's bittersweet because I'm reminded that Apple's own Pro Video App, Final Cut, still hasn't made it to the iPad. There's no getting around it. The absence of Apple's Pro Media apps on the iPad Pro is an embarrassment. All these other apps are great, yes, but Apple had an opportunity to take the lead

in defining what the pro app experience should be on one of its platforms and has never seized it. Overall, Tuesday's announcements left me with mixed emotions. The individual products look fine, and I look forward to trying them out, but zoom out to the iPad lineup as a whole, and it's kind of a mess. From the old 9th generation iPad all the way up to the 12.9-inch iPad Pro, there's an iPad for everyone if you can figure out which ones have which features and whether those features are worth the extra price. If the growth of the iPad is a journey, today shows that it's still an erratic one. At least it's moving forward, but there are an awful lot of weird

sidesteps along the way, end quote. By the way, did you remember that this was happening? Quoting DeCrypt. In late 2019, Twitter co-founder Jack Dorsey announced that his company had formed a small, independent group of developers and tasked it with a single objective to create a decentralized social media protocol that could serve as the bedrock of a new standard for online connectivity

free from corporate and governmental influence. Three years later, and after Dorsey's own departure from Twitter, that team has emerged from relative silence to announce that it believes it has achieved its assigned goal. On Tuesday, the Blue Sky Initiative launched a website for its decentralized social media protocol, which it's calling the AT protocol. I think I'm going to say AT going forward. It also opened a wait list for the Blue Sky app,

which the team is framing as the ideal browser with which, to access the AT protocol network, the waitlist quickly filled up, requiring third-party intervention. The AT protocol as a decentralized network functions independently of the will of any single company. That independence, Blue Sky believes, will allow users of social networks built atop the protocol to both protect their private data and avoid corporate algorithms that often promote controversy to keep users hooked. Algorithms dictate what we see and who we can reach, the Blue Sky team wrote today. We must have control over our algorithms if we're going to going to trust in our online spaces, end quote. Fostering interoperation or the mutual compatibility

of different platforms across the same protocol is key to Blue Sky's mission. Imagine TikTok working on Instagram, for example, and vice versa. The team has developed an interoperational framework called Lexicon that will facilitate connectivity between different apps and networks built on AT protocol. When Dorsey, who congratulated the Blue Sky team today on their foundational achievement, despite no longer being affiliated with the project, first envisioned the group's potential. He stated that, quote, the goal is for Twitter to ultimately be a client of the standard, end quote. Finally today, it was in our last Twitter space, the one that we recorded on September 29th, which we released on October 1st, were at the end of the show, as an aside, I suggested to Chris that VCI's at least were turning to the AI space.

Now, I'd like to think I'm good at prognosticating, and in theory, reading the tea leaves and trend-spotting the technology space is my literal job with this podcast. It's why you listen, I would hope. But I'm not exactly egotistical enough to feel certain that my musings every day can reliably become fact. But look, we had that billion-dollar stability AI seed round raise yesterday, and now we've got a billion and a half series A raise from AI company Jasper. Jasper is a service that leverages AI to generate marketing art and copy and raised a $125 million series A led by inside partners and a whole murderers row of big name VCs at a one and a half billion dollar valuation. So in just two days this week, we've seen a unicorn seed and a half

series A. Those are huge monster raises. They would have been huge monster. raises a year ago when markets were at their heights, it would be huge monster raises in any market and any time in history. So something, something AI is hot. But some more details here. This new one, this Jasper, is a company that is literally plugging into the generative AI APIs that are out there now. So whereas yesterday's raise was for a maker of those AI platforms, this is about a business being built on top of those AI platforms, which if the valuation suggests the sort of traction they're seeing is nothing but bullish for building businesses in the space. Quoting TechCrunch. CEO Dave Rogan Moser launched Jasper early last year with JPMorgan

and Chris Hall, who together largely bootstrapped the company. Rogan Moser is a Y Combinator alum, having co-founded proof, a startup that used algorithms to customize businesses' websites. Morgan and Hall, who have backgrounds in business-to-business marketing and process automation, also helped to co-launch proof whose technology laid the groundwork for Jasper. I'm a marketer by trade and have long been interested in AI and saw how it was becoming more tangible and accessible, moving from theory and academia into a transformative applied technology that could help people. Rogan Moser said, with the advent of OpenAI's GPT3, we saw an opportunity to launch an AI content platform that could help businesses and professional

creators brainstorm and do their work more quickly and efficiently, end quote. Jasper leverages AI to generate content for blog articles, social media posts, website, copy, and more. Using the platform, customers can describe in natural language what they want Jasper to write, whether a keyword-rich piece designed to rank well in search engines, or existing content repurposed with additional context. Plenty of startups also do this. Copy AI, write Sonic, pepper type, word tune, and simplified to name a few. In fact, TechCrunch recently wrote a survey of the market for AI-powered copy-generating ad tech vendors, which is robust. Copysmith last April secured $10 million in financing for its AI-powered content generation platform, while Copy AI closed a $10 million round in October.

Rogan Moser claims that Jasper's language models trained on 10% of the web and fine-tuned for customer specificity set it apart. Among other apps and services, they power Jasper's browser extension for Chrome that delivers contextual content recommendations across platforms including Google Docs, Gmail, Notion, and HubSpot. The folks that, will win at Generative AI will be ones that have the best feedback loops, he said. We're committed to building the best feedback to AI loop, end quote. Jasper's other differentiator, Rogan Moser says, is Jasper Art, a recently launched AI generating system. As with systems such as Dolly 2, Jasper Art turns prompts into images,

letting users adjust aspects like the medium, e.g. Canvas or pastel art style, say Van Gogh, and mood. While a number of free and paid alternatives to Jasper, art exist, see stable diffusion, pixels AI, and Mid Journey, to name a few. Rogan Moser pitches it as an art generating system specifically designed for marketing applications like creating copyright-free stock photos. He says that one early adopter, Mungoose Media, is using Jasper Art to generate flat lays and backgrounds at scale around product images for its designers. According to Rogan Moser, Jasper has more than 70,000 customers and generated $40 million in revenue last year. The company expects to

and 2022 with over double that revenue, $90 million, buoyed by the buzz around AI for AdTech and Martec. We are a hypergrowth company that is also focused on profitability, Rogan Moser said. The pandemic has accelerated this business. As organizations look for ways to find efficiencies within teams, AI generation is the natural choice to augment creators and teams, end quote. Nothing for you today. Talk to you tomorrow.