The Best One Yet - Amazon’s “Era of Less Profitability,” Twitter’s midlife ad crisis, and Barclays’ ATM drama

Episode Date: October 25, 2019

Shares of Amazon dropped 7% on word 1-day shipping is really, really costly. Twitter plummeted 21% on its midlife ad crisis. And Barclays pulled the switcheroo on its ATM-in-post-offices plan, ultimately caving to pressure.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is Snacks Daily. It's Friday, October 25th. How are we feeling, yeah? Happy Friday, Snackers. Nick, what do you got planned this weekend? I know we do got, I'm going to, you know, I would say force fire permitting.

I'm doing Wine Country in Napa. I am doing a Stanford University football homecoming game. For the record, I didn't go to Stanford. When it comes to the snacks, how are you feeling about this snacks? Really good. This is the best one yet. First story, post offices in the United Kingdom, they double as ATMs. But then Barclays Bank tried to try to.

change that. Then the Brits started borderline ride. Now it's flip-flopping. Barclays has a situation we're going to talk about business deserts. Second story today is Twitter stock. It dropped 21% yesterday after a bad earnings report. It's going through a midlife ad crisis. Jack Dorsey, we're here for you. We always are. Third and final story, you know how you wanted one day shipping from Amazon Prime? Full disclosure, actually two days was fine for me. Never asked for this. Never asked for it, Jeff. Anyway, Amazon delivered one day free shipping, and Jeff Bezos kind of had to mortgage his house to afford to do it. Yeah, this thing's going to get expensive. Now, Snackers, before we jump into all that, we got to talk about a breakthrough over at Google that is highly

complicated to get prepared. This is the techiest most mathematical story we'll ever cover on this pod. Jack and I had to like read six different books just to get through this. We felt like we're in some like long lost library trying to figure this thing out. Google claimed yesterday in an article in Nature Magazine that it has achieved a technological breakthrough, which is called quantum supremacy. You only go to Nature magazine with that kind of thing. It's big news you go to nature. They have a computer that can perform a mathematical equation that was thought impossible. It's going to make supercomputers basically look like abacuses, this thing. Now, the machine that Google has built is like the size of a house, and it took just a few minutes to perform a task

that would take, you know, just a regular supercomputer 10,000 years. That's Google's claim. They're dropping two words on this thing, quantum and supremacy. Quantum was already a really big word, Google. Yeah, quantum's a pretty dramatic word. Did you really need to add supremacy after that? Feels like an aggressive humble brag, like when your buddy posts that he just got a raise, and he's humbled and appreciative that this happened to happen. Exactly. For the record, IBM disputes this whole thing. They're in the supercomputer business as well. And they're like, Google. Yeah, hey, we're here.

This is quantum deceness at best. IBM, write something to Nature magazine. I bet they're looking for another point of view. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. It's snacks about to hear ain't food. It's air candy. They don't reflect the views of the robberhood family.

It's all informational just so. We're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible, business news for you. Robberhood Financial, LLC, member Fenra slash SIPC. For our first story, Amazon's stock just dropped 7% basically because your impatience is really costly for Jeff Bezos. It just issued its third quarter earnings report.

And as a reminder, this is a gigantic e-commerce company that also owns a movie studio. If you're going to jump into Amazon's earnings, be prepared for like 12 pages of bullet points describing every possible. business it's in. Tons of business segments. We're talking even like the marvelous Mrs. Maisel. They're talking about how the show got eight Emmys. They touch everything. So we actually read this thing. The tone right away was kind of defensive. It didn't seem Amazon style. The first thing Jeff Bezos is talking about is basically, hey, trust us. This whole one-day shipping thing we promised earlier this year, it's going to be awesome. That's Nick's paraphrase, but here are Jeff's words himself. Customers love the transition of prime from two-day shipping to one-day shipping.

But yeah, obviously. Yeah, who wouldn't love one day shipping? It's basically like a little bit of insecurity we're seeing where he's like, all right, trust us, you're going to love it. Counterintuitively, though, Jeff says that one day shipping improved carbon emissions. Because remember, Jeff just signed the climate pledge, which is to beat the Paris Accord Climate Pledge by 10 years. So you're wondering why they're so defensive?

The reason it's incredibly costly. Shipping costs increased by 46% last quarter from the year before. That is a ton of money. We're talking billions of dollars of like UPS, FedEx, and Amazon ships a lot of its own price. Amazon's had to actually redo some of its own logistics just to accommodate your need because he had to get that paper towel ASAP tomorrow. You didn't just order a day earlier. They also had to hire a bazillion workers.

They're up to 750,000 full-time workers. And because of all these costs, the profit outlook for Amazon in the next quarter, the fourth quarter, the critical fourth quarter, it's not looking sharp. Last year, it made $3.5 billion of price. profits in the holiday quarter when we're like going obsessed with online shopping. This year expects to make about half that. Not a good sign. It's all because you had to get that toothpaste ASAP tomorrow. So Jack, what's the takeaway for our buddies over at Amazon?

Amazon might be reentering its era of unprofitability. Build yourself a time machine. If you're going to go back to any time, go back 20 years ago when Amazon was on a 20-year stretch to basically not have any profits. Jeff Bezos's master plan was to dominate every. Everything. Everything you're spending money on, and that required insane spending, and it didn't leave any room for profit. So then everything changed. It went from having like no profit in the first half of 2017 to $7 billion of profit in the second half of 2018. Investors were pumped. The stock price rose, but now Walmart and Target are challenging Amazon with their own one-day shipping, and it's kind of back to the old days of neglecting profits.

And when it comes to the shipping war, it's because they're back, Amazon has to spend big. It's on one-day shipping. shipping. For our second story, Barclays, the British Bank, just flip-flopped on its decision to end post office ATMs. After an epic public outcry in the UK. Very significant outcry. A lot of non-Politanos out of there. We have a lot of Yanks listening to this pod in the United States. Barkley's is the sponsor of the top British Football League, right? That's what it is, classic. Classic, classic lion logo on this thing. Very majestic, very monarchical. It's a very royal logo, but it's also one of the UK's biggest banks. It's basically the Bank of America of the United Kingdom. And Barclays came out on October 8 and said it was going to end a very particular

arrangement that's happening between post offices and banks. Yeah, basically post offices in the UK, you don't just ship packages and buy like collectible stamps. Nope. You can also withdraw money from an ATM for free from like any AT, from any bank. So post offices in the UK, They are ATMs, essentially. And if you've got a parent who loves going to the post office, like I'm sure Jack's parents do and I'm sure mine do, they probably would love the fact that they could probably get cash out of there. It was a lovely arrangement. It's not a law or anything.

It's just kind of a pact that all the banks of the UK made. They said, we're going to let people withdraw money for free at post offices, no ATM fees. Turns out their 11,500 post offices in the UK, and they've got something, and this is classic British, extremely literal in the name, post office banking framework. That's what the thing's called. That's the deal. This reminds me of Mount Snow, my hometown ski resort, which used to give local youngsters who got straight A's in school free ski passes. Nick, I got one three years in a row.

You got to make sure you're making the people happy. But Barclays announced a few weeks ago it's exiting this deal. And the Guardian News in the UK said that would save Barclays 11 million pounds per year. But when you look at what money Barclays actually makes, that's only 0.3% of its annual. a profit. It's like a teeny sliver. All right, so Barclays is doing this to save 11 million pounds a year, but the cost of this is going to be huge

on rural Britons. People were not happy about this. The rural areas, the shires, the shurs, we're talking Yorkshire, Buckinghamshire. They're not feeling it. No, rural communities, not just in the UK, also in America, they tend to get neglected by businesses that can't turn a profit. Broadband

internet doesn't tend to expand to rural areas. A lot of grocery stores will leave a place because there aren't enough buyers. That happens in cities too. Even banks tend to close up in rural areas in particular because they're just not enough people there. Barclays closed like 481 of them since 2015.

Now, post offices, on the other hand, their government run, they're not going to betray rural communities. They're in every zip code and people could get cash from there. It was a huge, important thing in the UK. It's kind of like if an ATM morphed itself into like a mall. It's a lot of other things. Yeah, now rural people were at risk of losing cash if other banks follow. But instead, Barclays caved.

They recognized the hate they were getting. They were persuaded to change. And they promised to keep doing this ATM thing at post offices for at least three more years. So, Jack, what's the takeaway for our buddies over at Barclays? If you're going to do something controversial, make sure you go all in and you're committed to the idea. Barkley's, even though you canceled, you're still looking like the villain in this situation. It got all the hate and didn't even get those savings that it was trying to make. reminds Jack and I of the old NBA.

Remember a couple weeks ago we were talking about this? At first it was pro-China, then it was pro-free speech. And it got villainized by both sides because it couldn't like outright pick a side. Barclay should have realized that when they take away a public good like this, they're going to get a backlash. And they should have either decided not to do it from the start or committed and did it anyway and at least saved the money. It didn't get the money. It just got the hate. It's gotten either.

For our third and final story, Twitter, it's going through a midlife ad crisis. It's got the flu and the stock plummeted 21% yesterday. For context, Twitter's value is now two lifts. Yeah, that's it. It's about $30 billion. That's pretty much it. But the revenues for the company rose 9% last quarter. It's hit 145 million daily users.

That's 6 million more than last year. Also for context, Snapchat has 210 million daily users. So Twitter's behind. And Instagram's doing like 500 million stories on a given day. so that's a totally different number. And then Facebook has 1.6 billion daily people logging in. So Twitter is about one-tenth of Facebook. And there are 7 billion people on Earth, so it's got like a long way to go.

I can't do that math. I don't have one of those Google computers. In the meantime, Twitter's pretty much going through a mid-life crisis. Typically, when you have a mid-life crisis, you buy a motorcycle, you convince yourself you're the man. We're going and eat, pray, love trip to Italy. Yeah, whatever you do on Julie Roberts, we're in for. it. Twitter, on the other hand, in their midlife crisis, they're sending people more ads. Yeah, that's

pretty much it. If you think you're seeing more ads on Twitter, you're actually right. You're seeing a lot more ads on Twitter. Just in the last couple weeks, Twitter has increased the number of ads at showing you because it knew this quarter was about to show bad results. Yeah, like, Jesse has a political comment. Julie's got to say something about her yoga class. Boom, Applecard ad, boom, Salesforce ad with like enterprise software you want to buy. I just went through my Twitter just Now, actually, two out of the first five tweets were sponsored ads, which are ads. It's brutal. Like half of them are like B2B software providers that you're never really going to use.

So Twitter blamed a bug for its poor revenue growth of just 9% last quarter. Jack Dorsey specifically said we had some missteps. Right. Apparently Twitter had a software issue, and the result was that it couldn't perfectly target you with the ads you should have been getting. Targeting is super important in digital ads. You want to make sure that the ad someone is seen. being in Twitter, like the Apple card, Nick mentioned, is relevant and might actually be bought by

that person. All right, so let's say, you know, it's a weekend, you just went for your run, you pop over to Project Juice in the Marina, you order the assayee bowl, you get the protein topping, and you ask for extra chia seeds, because, you know, you like the texture. I'm not talking about Jack and I. And let's say you tweet a picture of the ball, so now Twitter knows that you're a Project Juice fan. Suddenly, 10 minutes later, you start getting hit with ads at 8 a.m. from Wendy, saying you

should buy the Baconator at their local spot for lunch outside of Dallas. People, if an Asai fan is seeing ads of a Wendy's Baconator, that is the worst targeted ad imaginable. And if that's shown up at breakfast, there may be something wrong here. Twitter saying, yeah, there was something wrong there. That's what happened to Twitter last quarter. Facebook would never show a Baconator ad to somebody eating Project Juice. Zuck's freaking out in his suit right now.

By the way, the result of all that, it affected who was actually spending money on Twitter ads. Yeah, Wendy's was like, these ads aren't. working. I'm not going to send as much money to Twitter. Please. So, Jack, what's the takeaway for our buddy Jack Dorsey, great snacks listener, and our buddies over at Twitter? Don't forget the media in the word social media. Twitter has the same business model as the New York Times used to have. Ads. New York Times, by the way, has kind of switched to a subscription business model where you pay for the news. But 85% of Twitter's revenues, those come from regular old school

style ads. Right. The other 15% is like licensing the data because Twitter knows so much about what's going on. So if you're investing in Twitter, you're investing in a media company most of all, not just a digital company. And if the ads aren't working, the company's not working. And the answer probably isn't more ads. That's why the stock dropped 20% because more ads isn't the only solution. Jack, and you'll whip up the takeaways for us over there. Because Amazon customers are so impatient, Amazon investors have to get more patient for profits. The shipping wars might bring Amazon back to its old, old, less profit habits. Barclays is reversing plans to end its free ATM policy at UK post offices.

But it still kind of looks like the bad guy, like the guy from like a guy Ritchie movie we're thinking. And then Twitter's ad system wasn't working right, so investors crashed the stock by 20% because it's kind of an ad company. Stop showing Baconator ads to the yoga instructor. It's killing our Zen Twitter. Snackers, time for a snack fact. A great one sent into us by Sarah Forney in lovely San Francisco right near us. Jack, the $100 billion venture fund run by SoftBank. It's kind of a big deal. Yeah, she pointed out in our coverage of SoftBank and we worked the other day.

We didn't mention Masayoshi Son, who is the godfather of SoftBank and the guy who enabled Adam Newman and WeWork to rise. Turns out Masayoshi Son has a 300 year plan for his venture fund, 300 years from now. Yeah, what's your five-year plan? I'll up you. your 300 year plan? Yeah, what's included it? Apparently, he's really into cloning telepathy and like

really old human beings. Masayoshi son is kind of a genius. He's made billions and billions of dollars, but this is a little too much for me. Yeah, we're talking like 200 old humans. That's what he's thinking, 200 years old. That was a great one. Snackers, have a great weekend, but let me ask you for one thing. We would love if you could make a

review on our iTunes page. Drop down, drop five stars. It helps us grow. It helps us get discovered. got 3,000 reviews approximately right now? Great number. We love this. There's a lot more than 3,000 of you out there. You all are wonderful. We know there are plenty more. Drop us five stars. We'll see you on Monday. We'll see you that. Can't wait. This is Jack. I own stock of Amazon. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets,

or any of its subsidiaries or affiliates. The podcast is for informational purposes only, is not intended to serve as a recommendation to buy or sell any security, and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA SIPC.