The Best One Yet - Spotify hits 217M profitless users, Airbnb & Marriott’s twin announcements, and Chewy.com’s “pet humanization” IPO

Episode Date: April 30, 2019

Spotify now boasts 100M paying subscribers, so we looked into why it’s still losing so much money (hint: It’s betting on podcasts). Airbnb and Marriott both revealed new services that look a lot like each other (awkward). And PetSmart’s digital brand Chewy.com will IPO thanks to “pet humanization” trends.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 is Tuesday, April 30th. And this is the best Snacks Daily ever. Yet, markets are on a record high. Not too shabby. It's a good start.

Jack still got a case of Bachelor Party voice. I'm back from the Bachelor Party. My voices, a.k.a. karaoke throat. Unbelievable time in the Conch Republic. Now, stocks have hit record highs. We went in. We found three fantastic stories. We're kicking it off with Spotify.

It revealed it has 100 million paying customers. That is elite status. And its recent move signify, it had confined harmony with a new business model. Second company is Airbnb. Third company is Marriott, but we're packing into one story. Two for one. Both made big announcements. Now, Airbnb is becoming more like Marriott.

Marriott now is becoming more like Airbnb. It's actually kind of cute. It is. I like that story. Twits. Third and final story. PetSmart. It filed for an IPO.

Seems nice. But not for itself. Go on. Just for its online pet, which is called chewy.com. Now, chewy.com now delivers almost half all the dog food online in the United States. We got to get into this business model. But first, we have to talk about some troubling news from our neighbors up north. Are you talking about the hamburger?

I am. It's a serious situation. It's causing us during the Canadian press. A bunch of Canadians nationwide are waking up after watching the Stanley Cup playoffs and saying, wait a second, I didn't order an egg McMuffin, eh? No. We're talking about the McDonald's app. Some customers are having fraudulent transactions placed, and money is being stolen.

There is a thief who apparently is really hungry and does not have a balanced diet, going through and literally ordering things from a bunch of apps. And people didn't do it. And he really aims for, like, the low-hanging McMuffin because these are like $10 thefts he's taken left and right. Now, Canadians are very politely letting law enforcement know that someone is broken into their apps, and now he is the hamburger or she. There are dozens and dozens of reports.

We don't know who it is. This isn't good news for McDonald's, but you could file this in the any press is good press. category. This is pretty nice for them. CSI, not necessarily on it. We are. The snacks about the hair ain't food. It's air candy. They don't reflect the views of the Robin Hood family. It's all informational just so. You know, we're not recommending any securities. Nope. It's not a research report or investment advice. Not an offer or sale of a security. Right. Snacks is digestible. Business news for you. Robahood Financial, LLC, member FINRA slash SIPC

For our first story, Spotify just announced it has a hundred million users 100 million users With an M, but they're unprofitable by the millions And this shows why they love podcasts. Oh my God, that's their new baby, right? It's our new baby. It's a new toy. It's an incredible thing.

In the first quarter, Spotify announced that it has 217 million total users, 100 million of whom pay 10 bucks a month. Now, that is up significantly. 38% from last year. But can we give some context here? Yeah. A hundred million is twice as many paid subscribers as Apple music. As Apple.

And that's like the dynamone this month. Now, the growth is being driven by family plan and student promotions. You know what we're talking about student promotions. Jack, I'm still using my brown card to get that Jay Crude discount. Middlebury.edu has saved me quite a bit of bucks every month. The real college admission scandals, people using their student IDs for the next three decades after school. So it's offering these poor college students discounts, but the company thinks it'll be worth it because you'll become addicted to Spotify and eventually they'll have a job. Yeah, you graduate. Then you're like, oh, crap, I'm actually paying $10 a month for this, but you'll eventually make money.

So those are the highlights. Let's transition to a low light. Can we talk about the loss? Because that's a big million dollar number two. I don't get it. Spotify lost $158 million last quarter. But they have so many users. It's a natural question. Jack and I are banging our heads against the wall while we listen to this a done. else on track. A hundred million people are paying 10 bucks a month. I'm not good at math, but that's a lot of money. And Spotify is still losing money. So where is the money going? So here's the thing. We jumped into it. Snack style. Most of that money is going to the record companies and musicians, like 70% of that month. So Spotify only gets to keep 30% of the 10 bucks a month you pay. The rest, it's dishing off to the people who are actually, I mean, let's be honest, making the creative music you're listening to me. And the employees of Spotify. And

with the rest of the money, it's actually buying podcast companies. Jack, I like that transition. So what's the takeaway for our buddies over at Spotify? This is why Spotify loves podcasts. Over the last few months, Spotify has acquired Gimlet, Parcast, anchor, all podcast production companies. Yes. And it loves podcast companies because when people podcast, Spotify gets to keep the money. It keeps all the money. No 70-30 split. It's 100% Spotify, baby. Not too shad. Now here's why. Spotify gets to keep all the money from its original podcast, naturally.

Because you subscribed. Yeah. And it's Gimlet and it acquired Gimlet. Not to get kind of met here, but if you're listening to Snacks Daily on Spotify right now, you kind of paid for Snacks Daily in a funny way, even though it's free. Even though we're not getting any money from Spotify. No big deal. No offense.

No worry about it. Great transition though, Nick. The non-Spotify original podcast likes Snacks Daily. It keeps all the money because podcasts are sponsored. by their own ads within their own podcasts. Now, there's a key distinction here between podcasts and music, because people tend to listen to podcasts for a long time,

so less money would be owed to musicians. Yeah. So Spotify kind of hopes that the whole world becomes addicted to podcasts because it is so good for their business model. It's actually profitable, unlike your music streaming. Now it's spending $500 million on new podcast stuff. For our second story, Jack, have you ever gotten two hotel nights

for the price of one? Not yet. You're about to. Airbnb is creating a Marriott competitor. And Marriott is creating an Airbnb competitor. And then in a PR-like leads nightmare, they decided to announce it on the exact same day. This is like, you know,

two neighbors building up Christmas decorations and trying to want up each other. More lights, Susan, more lights. Airbnb is partnering with a real estate developer called RXR Properties. To build up some awesome units in New York City with like hotel-like booking options. Now, you'll notice Jack and I just used a lot of adjectives and nouns.

We didn't actually use a specific proper noun to name this. There is no one word to describe all abys. In fact, in the press release, Airbnb said, quote, unquote, this is a new category of urban launching. They describe it as curated and authentic New York City with the comforts of home. Can I talk for a second on this? Please do. As a native New Yorker, I thought it was a little weird.

They described this as authentic with views of the Empire State Building in Midtown. That is not an authentic New York City experience. Your average New Yorker is not living in the middle of Midtown staring at the Empire. Stateville. What Nick's trying to say is forget about it. That is not New York authenticity. You took the words right out of my mouth. Now, the first unit is developing, yes, it is Rockefeller Center. There's going to be 10 floors that will be redeveloped with kitchen space, living room. It's going to be a big suite with a bunch of bedrooms. It's going to be like a third party that comes in and cleans the thing. We don't know if there's going to be chocolates on the bed,

but sounds to me like the sweet that the cast of the show Real World used to like party in and do things. Except you don't have like 20 people who are all like jacked. Site number two is going to be in Brooklyn Navy Yard, which is kind of a swanky, up and coming neighborhood. Pretty cool. And the reason they're doing this is because over the last few months, we've noticed Airbnb keeps referring to themselves as end-to-end travel platform. Right.

It recently bought Hotel Tonight in March for $400 million. They launched like a magazine. They're having a media channel with like shows on travel. And these new lodgings in New York, they're not going to be, you know, somebody's apartment that you're sharing. These are just straight up bookings, very much more hotel. Okay, so let's take a break. Next up, Marriott.

The 91-year-old hotel company is trying to get into Airbnb's turf. Now, this is kind of like that situation when your parents got on Facebook. Yes. They're like just showing up and just trying to be in with the cool kids. What Marriott understands is physical, huge hotels with giant concierges and ice machines. So what they've launched is something called a U.S. rental platform known as Homes and Villas. Yes, it's getting out of its comfort zone, and it's building a tech platform. form where homeowners can list their unit on Marriott's Airbnb-like thing.

Now, here's the key differentiator here is that the advantage for Marriott is that you can redeem your Marriott rewards points to book one of these homes and villas. You can also build up more and more Marriott reward points if you stay at these properties. And then you can, you know, it's a little bit easier because you don't have to do some like awkward, you know, key handoff with some stranger in the middle of Bryant Park. Instead, it's much more seamless. Yeah. They have a third-party company that's going to handle a.

all that for you. They'll also make sure that it's clean. They'll also make sure the Wi-Fi is up to snuff. So this is targeted to Marriott frequent travelers who don't want a gritty Airbnb experience. Right. They want a little less charm and a little more convenience. They don't want to think, oh my God, is this toilet seat really off white? Or is it off white? So Jack, what's the takeaway for our buddies over at Marriott and Airbnb? Interesting. Marriott has loyalty from old people. Airbnb has trust from young people. What we just described, If you just rewind this thing a few clicks and relisten, it's the exact same product, but it's targeting different customers. You see it in the name.

Look at Airbnb. Its name is so great. Airbnb. Look at what Marriott just rolled out. It's called officially Homes and Villas by Marriott International. It sounds like a nonfiction book. Clearly, they're not targeting the same customers, even though they're doing pretty much the same thing. Now, over the last few years, Marriott's ignored Airbnb as a competitor.

now they're on each other's turf. For our third and final story, PetSmart just announced an IPO, but it's not for PetSmart. It's for Chewy.com. Chewy.com is PetSmart's online-focused, subscription-based food stuff. Throw a couple more trend words in there, please.

IPOs are so in right now. There's so many IPOs. Who isn't IPOing these days? Everybody has IPOing. Everybody's got a friend Ipe. A couple months ago. Lyft. Uber's coming up.

Beyond Meets this week. This week. Slack told us on Friday. It's going to be IPOs. P-Oing very soon? We work said yesterday it's confidentially filed to prepare to IPO. I think my aunt's IPOing. Everyone is IPO. Ploosah. IPO Fest. IPO don't care. But we want it to focus on one in particular because it's not getting enough attention, but it says a lot. So chewy.com listed its S-1 document. Put everything on the table and told investors everything about it. Now, what I love about this S-1 document is Jack and I were going through this thing. The first five pages are puppy photos.

It feels a little too fun. It almost is like an influencer feed on like Instagram. Investing serious and puppies aren't so serious. Page three should not be adorable in your assort. So first, they told us about the co-founders. Met in 2011. Right. Two college dropouts met in the chat room.

Turns out one of them had an apricot teacup poodle. Okay, that breed sounds totally made up. We don't actually believe it exists. But it's incredible sounding at the same time. And the company decided to focus on outstanding customer service so that pet owners get what they want when they need it. and like two-day shipping. Amazon Prime style. Exactly.

Then in 2017, PetSmart came along, a big private company, and decided to buy Chewy.com. For $3 billion to complement its 1,600 brick-and-mortar physical locations. They needed an online help and Chewy.com provided it. Chewy.com, though, it's not just an online place that you can get the same stuff at the stores. No, this is what fascinated Jack and I, and why we wanted to jump into this IPO in particular right now. because it's not just selling online, it's selling online strategically. The first thing you see at chewy.com is auto ship. That is their subscription service.

And it's perfect for pets. They give you a giant discount on your first order if you agree to kind of set it and forget it, showtime rotissory grill style, so that it comes every month on call. Right. Now, we would take wonderful care of our dogs of Jack and I had dogs. But most dogs aren't going to care if they're getting salmon one week or turkey the next week. They're also not going to remind you that you need more salmon because I I ate what was in the ball last night.

No, if they're going to pee on the rug, they're going to pee on the rug. Subscription makes a lot of sense for pet food, and Chewy.com is doing it. All right, so then the second fascinating element of their business model is the loss leader. Yes. The lost leader is when you maybe make a loss on something because you can make profits in other places. We see it with Chewy.com with these giant, heavy, like 50-pound bags of dog food. Exactly. You're going to load up on dog food for the long term, and if you pay $49 or more for a bag of dog food,

shipping is free. And free shipping is expensive for heavy dog food. That stuff's literally, it's like dog-sized. If I recall from Newman in Seinfeld, please. Shipping is dependent on weight for how much it costs. So this is probably causing a loss for chewy.com, but they know you'll stick to the company and come back for other things. Yeah, not every dog is going to need a dog toy, but if you're already getting your food for Fido over there every week through chewy.com, you may as well throw in the bone every now. Seems to be working to 45% of all dog and cat food delivered online is from Chewy in the United States. Too shabby. So, Jack, what's the takeaway for our buddies over at Chewy.com? Chewy has identified a cultural trend and it has run with it. Two wonderful words for you here.

These deserve to be in the dictionary. Pet Humanization. They referenced it like half a dozen times in their IPO filing. Definition? Seeing pets as part of the family. Use it in a sentence, please, Jack? I see my pet Fido as the golden boy in my family. I like them much more than these other tips. Take my firstborn child. We're keeping sparky and putting him up at the kitchen table. So you are seeing some premium products being offered to pets. Right. This is where chewy. Chewy.com sees pet immunization happening. First with consumables. Which I like to call edibles for petables. Talk to me. Free range human grade chicken. You can feed these animals. We're talking like orthopedic dog beds. Another sign of this trend, services. Yes. People are spending a lot

of money on their pets. I'm pretty sure you can like get an Olympian to walk your dog these days. You got grooming, sitting, petwalking. It's all become very high end. Very, Juwey.com. Luxurious. Seas people spending this kind of money and they're going for it.

Now, it knows if you can get your foot in the door with those huge free-delivered dog bags, you'll probably spend on these other things too. Bert's Bees dog shampoo. It's on chewy. Let's make it happen. Jack, can you whip up the takeaways for us? Let's go. Spotify's 100 million users are unprofitable.

That's why it's going hard into podcasts. Full disclosure, Spotify does not sponsor this podcast. It doesn't. We have no involvement with it. Marriott is offering an Airbnb for old people, and Airbnb is offering a Marriott for young people. It's a love-hate relationship between those two, and it's kind of awkward. Chewy.com is the IPOing company with high-end subscription pet stuff. It knows your teacup apricot.

What was it, a golden doodle? It knows that thing is your everything. And by way, if you have one of those, please send us a picture. It's your everything. We don't even believe that exists. It can be a rescue or not a rescue, no judgments from the snacks team. Now, time for our snack fact of the day. Back by popular demand.

So true. Actually, people were tweeting about us. More Key West highlights. First, Harry Truman, the president, had his summer White House on the island. And then this one's kind of perfect. Hemingway met his third wife there. Yes, he did. But we didn't see any of that.

No. We had 13 guys on a boat. We ate a ton of seafood. Listen to a lot of Jimmy Blubbub. It was actually pretty tame. I had like multiple chocolate-covered key lime pies on a side. stick. Those were solid. They were fantastic. Also, one more key Jimmy Buffett line right here. We looked it up. We were curious. Jimmy Buffett's probably made a good amount of money. He's lived

the dream. Turns out he's worth about $600 million. She's Burger in Paradise. He's got a chain. He's got the music and he's even got his own beer. Now, a couple other stories. We have to mention they're in our Snacks Daily Newsletter. Google. It reported earnings. They were really bad. We'll cover that. And then, remember when we told you, A couple weeks ago that Burger King was whipping out a plant-based meat product called the Impossible Berk. That was just in St. Louis, but it's expanding nationwide. Yes, Impossible Burgers from the Impossible Burger Company are going to be in Burger Kings everywhere. Thank you for tuning in today's Snacks Daily podcast.

We're going to rest our voices and can't wait to talk to you tomorrow. 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, Inc., or any of its subsidiaries or affiliates. The podcast is for informational purposes only and 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.