Sander Saar, founder of AgentCDN, making videos work inside AI

Transcript

1. 0:00

   Hi, I'm Sander, and today I want to explore with you the idea that we're moving from lockdown to consolidation. We now live in a world where the unemployment is higher since the Second World War and higher than any recession in recent history. There's layoffs happening across the board, and they haven't slowed down across many industries and startups, especially in technology companies, around transportation, travel, finance, retail, and almost no industry has been left untouched.

2. 0:26

   Even some of the largest companies that we thought are completely immune to this, like Uber, Airbnb, Booking.com, Yelp, Salesforce, LinkedIn, TripAdvisor, GoDaddy, many, many other companies are actually going through significant restructuring. So if you want to see more of that, there's a great domain called layoffs.fyi who's tracking all of that information if you want to dig into any of the industries or companies more in detail.

3. 0:52

   But that is as much caused by the fact that also a lot of those companies are funded by venture capitalists who've also reduced their investments significantly, specifically in the seed stage. So there's less new companies coming to the market, but also follow-on investments, which have seen less of an impact on Series A and Series B side, but nowhere as close to last year's level, most of it half less than last year. Some of those later-stage investments are not seeing such significant impact.

4. 1:19

   For example, Series G raised by Impossible Foods or Robinhood investment app, or Instacart delivery service are seeing several hundred million dollar investment at significant valuations, even though oftentimes lower than the valuations they were before. And VC investment is similarly across the industry less focused on travel now and more focused on data and AI and other services. Exit strategy, how do those companies get out of their businesses, has similarly slowed down significantly.

5. 1:48

   In the US, that slowed down by 83% of merger acquisitions. And worldwide, it's more than 40%, going down from $2.1 trillion deals to $1.2 trillion in the, in the first year of 2020 compared to last year. While the deals, their number of deals hasn't declined as much, the deal sizes themselves are significantly smaller. So we now are in this position where there's financial difficulties, whether caused by the market changes or their financing difficulties and business models for startups, paired with limited investments coming from the venture capital world or the mergers acquisitions in the financial industry.

6. 2:24

   So this has really put a lot of strain in a lot of companies, and that's why we're seeing so many layoffs as well. But it's not all doom because there's companies out there, specifically the Big Five, who've got more than half a trillion dollars sitting on their bank account, whether in cash or liquid assets. Specifically Apple with $200 billion, Microsoft with $130 billion, Alphabet $120 billion, followed by Facebook and Amazon in $50 to $60 billion themselves.

7. 2:51

   And that's a lot of money. And that's because some of those businesses within this year have gained a lot of value. Their market cap has increased by more than 60% in aggregate. If you remove them from the S&P 500 index and look at the index otherwise, the index themselves has declined more than 16%. So it's deeply reliant on those Big 5 companies delivering most of the growth and bringing most of the cash to the market.

8. 3:17

   They now make 25% of the S&P 500 market cap and 50% of the Nasdaq 100 market cap. So significant impact from those companies with a lot of cash in their bank account. So what is that a good time for? If they have a lot of cash on their bank accounts, market believes in them in growth, while at the same time, a lot of their competitors and smaller companies are losing out because they can't sustain their businesses in a way, in their business models or their financial structures, then it's a great time for consolidation because the prices are lower.

9. 3:50

   And those companies have been doing just that. For example, Apple has done for the middle of this year more deals than last year or the year before. Facebook has been doing similar amount of deals than they did 2 years ago, while Google is on track to do similar amount of deals this year. Microsoft similarly, and Amazon has done only 1 deal. So they're definitely more active in the mergers and acquisitions space. And Amazon is most, most active in investing inside of their own business, but also doing some significant big investment tickets, which we're going to talk about in dig into each one of those companies.

10. 4:24

    So let's talk about Apple first. There's 3 key categories which are just categorized by me by where I see those investments going. One is artificial intelligence, specifically focusing on the Xnor AI, which is focusing on edge computing, meaning the computing and the intelligence that's, that is driven from the devices, the iPhones and iPads that we have in our hands rather than in cloud, which is a key element for Apple's growth because they're focusing so much on privacy. They're also enhancing their Siri capabilities by an investment to Voices, which is again a voice recognition company and voice assistant business.

11. 4:58

    They're investing heavily in AR and VR technologies. NextVR Camera AI, which is a real-time AR engine or real-time AR camera. They're investing in Spaces, which helps you to create your own avatars in virtual worlds and previously was also running physical spaces for VR experiences. They're doing ecosystem investments as well. They acquired Dark Sky, one of the more popular weather apps on iPhone, MobiWave, a mobile payment solution without actually having any additional terminals, and FleetSmith, which is a device management software for Apple's own devices.

12. 5:34

    They're, they're definitely doing investments strongly bolstering their own ecosystem and owning more of that ecosystem. Facebook, similarly, is doing significant investments in AR and VR, specifically bolstering their Oculus, or now Facebook Reality Labs, offering They invested in Scape and Mapillary, which are there to bolster their offering of mapping the real-world environment, whether that's going to be on street level with Mapillary or Scape with focusing on mapping the world around us.

13. 6:02

    They, in AR and VR space, bought up a whole supply of AR displays from Plessey. That was the company that Apple and Google were both in discussions of acquiring as their technology provider, while Facebook went in and bought all of their supplies. So it's not a direct acquisition, but it's full control of that business. They're also investing in gaming. That's again related to the AR and VR space where they acquired last year several studios, and this year they've been going hard as well by acquiring Sanzaru and Ready at Dawn gaming studios.

14. 6:34

    And on their ecosystem side, they've acquired one of the most popular apps on their Facebook Messenger app and WhatsApp called Giphy to bolster and own more of their ecosystem and tap into many other apps where users are using Giphy. Google is solely focused on their cloud offering as well as consumer devices. So their cloud offering, they completed their acquisition of Looker for more than $2 billion this year. They acquired AppSheet, which is a no-code app development platform, again a key area for Microsoft as well as Google and Amazon, and StratoZone, which is an easy way, makes it easier to port cloud services to Google.

15. 7:12

    Or other cloud platforms. In the AR and wearable space on the consumer side, they acquired North, which is the AR glasses company that is in the market with their second generation that you can use today. Clearly focused on that area as well that we saw similar to Apple and Facebook. And they also completed their acquisition of Fitbit for again more than $2 billion to be in the health and wearable space. On an ecosystem side, they've invested in Pointy, which is an easy way to bring your physical goods to online.

16. 7:41

    Direct link to Google Search and Google Shopping. Microsoft is solely focused on bolstering their enterprise and cloud offering by focusing on communications companies like Affirmed and MetaSwift, which make the wireless communication in the cloud easier and more secure for enterprise customers. They also invested in many cloud tools and services, for example Softomotive, which is an automation platform, a data platform, as well as a cybersecurity platform.

17. 8:07

    So solely focused on their enterprise clients and bolstering their cloud offering. Amazon, as we said, hasn't done that many deals as of yet. They've invested heavily, heavily in their own value chain, bolstering their warehouses and their Amazon Fulfillment Network. But they've also done one significant investment for $1.2 billion to Zoox, which is a self-driving car company where Amazon clearly sees a strong future as well for their own self-driving delivery trucks, etc.

18. 8:36

    But more than just focusing on their own capabilities and the deep technologies investment, they're also looking at geographical expansion beyond Europe and America, where they're already pretty big. Amazon is in talks with Reliance Retail, which is part of the Reliance Group, to invest in one of their largest competitors for $20 billion. That's one of the biggest ticket sizes you've seen. And Airtel itself, which is a mobile carrier in India, They're looking at a $2 billion investment.

19. 9:05

    None of them are closed and there's still discussions. Jio, which is one of the largest leading carriers and the new age carrier, again, part of the Reliance Group, Jio Platforms raised more than $15 billion just in 3 months. Facebook and Google got some of the biggest tickets with $5.7 and $4.5 billion for Jio in India. Walmart themselves bolstered their own Flipkart position where they already had made an $11 billion investment before, now adding another $1.2 billion.

20. 9:34

    So it's not just focusing on deep tech, but also focusing on geographical expansion at the moment. So how to win in that space against all of those big businesses with a lot of cash on their hand? How you can sustain and grow your own business? Number one way is to reinvent yourself quickly and rapidly reiterate and innovate for the new market conditions. Then number 2 is to partner and bolster your own offering by coming together with potential competitors or up and down in the value chain.

21. 10:03

    And the third option is to consolidate yourself within your niche categories. So let's dig into each one of those examples. Reinvent for Airbnb. They lost 80% of their business within 2 weeks of the pandemic starting. They had to think deep around what are the services that they need to focus on, what they have to cut. And as we saw, they let go more, more than 25% of their workforce, which was significant for Airbnb.

22. 10:28

    And within 14 days, we pivoted the entire product line to offer online experiences. So now you can do, we have 800 experiences, 200 Olympians.

23. 10:39

    Within 14 days, they had to reinvent their old business and focus on building new products. So they brought out Airbnb Online Experiences. Experiences was a big business for them before, and now they pivoted it to online. They brought all of the Hollywood actors and the Olympians on the platform to do new trainings behind the scenes, and that's been a very successful product for Airbnb now. They've also had to reinvent their existing products. So for example, Airbnb Stays, they now focus on rather than going far and flying somewhere, they focused on going near because they knew that there's customers out there who are not going to fly, but they're going to drive 2 or 3 hours, several hundred miles.

24. 11:15

    And instead of staying short-term, they're now going to want to rent in terms of weeks and months. And they envisioned that to be the future for the younger generation who necessarily is not going to be stuck in one place, who wants to work and explore different parts of the country or the world by staying longer term. So they focused on going near and staying long term and pivoting their experiences online. And that's paved a really good way and a V-shaped recovery for Airbnb.

25. 11:40

    Looking at their web traffic, it's actually recovered to a higher level than they were before the pandemic started, and they've sustained that growth over time. Now, if you look at someone like Expedia, which was one of the largest booking engines before, Expedia has actually dropped to the bottom where they were before, and that's more of an L-shaped recovery. So they've stayed at the bottom. They haven't really recovered in any meaningful meaningful way. However, the short-term bookings overall in the industry have recovered 85% compared to 2019 levels.

26. 12:09

    So that shows you if you quickly reinvent yourself, innovate, that can really sustain your growth and the business in the new world. Number 2 is partnering, and that's a great example from Netflix. When Netflix's US subscriber growth had slowed down in the US, not quite plateaued but slowed down, they were looking for new ways to grow their subscribership, and they did this partnership with T-Mobile which helped them grow their pie much larger.

27. 12:36

    Now you can binge all the Netflix you want, and it's all included. America's best unlimited network just got a hell of a lot better. Our Uncarrier moves are always about ending customer pain points, and this one is a BFD. You see, the carriers have blown billions buying up media businesses, trying to create carrier-content cable mashups.

28. 12:59

    We talked about those carrier content mashup bundles in our bundle video and our subscription video, which you can check out here. But that's a separate video more focusing on how T-Mobile helped really Netflix to boost another level of growth in the US. And based on the Barclays analysis, they envision that about 22%, every 5th subscriber for Netflix in the US is coming from those integrations with legacy TV providers, internet and wireless mobile providers, and 10% internationally.

29. 13:27

    And Netflix product officer says they're increasingly now with bundles, they've removed yet another point of friction for users to sign up to Netflix. So they announced a deal with Comcast Xfinity in the US, but now also with Sky Q in the UK and the rest of Europe, where Netflix is coming pre-installed to those devices and oftentimes part of the bundle. So it's a no-brainer for users to sign up, and that drives Netflix growth globally. And that's an important part of their business.

30. 13:53

    So again, integrating up and down their value chain, that helps them sustain their growth. Now looking at consolidation in different parts of the industry, Uber is known for having several different products in the market. One of them was Jump that they recently sold off through an investment into Lime in an all-stock deal, so they became a shareholder in Lime by offering away Jump and consolidating that by becoming a much stronger and important player in the marketplace.

31. 14:19

    Uber Eats, they were looking at an acquisition of Grubhub to consolidate that Uber food market. While Uber doesn't want to say it was consolidation, it clearly was. And we're going to hear what the, what the reason behind it was. But they acquired Postmates for $2.65 billion. And Uber also is doing up and down consolidation by acquiring Careem, which is the car rental service or car service provider for their drivers. So they're not just focusing on consumers, but they're also going up the value chain and focusing on the car rental, which is a key part of their business and driving a lot of the growth.

32. 14:52

    But let's see why they acquired Postmates.

33. 14:56

    When you look at COVID, COVID's accelerated, you know, 2 to 3 years of essentially consumer adoption into a few months. So this is a category that we, that we love. We want to get bigger in the category, and really scale is how you bring the category to profitability.

34. 15:14

    So this for them is a way to bring the category into profitability, and that's why they acquired Postmates. That's a great way for them to say, no, no, we're not consolidating market, we actually want to make better for everybody. We want to make it better for restaurants, we want to make it for drivers, which is, I'm sure, half of the story, but at the same time growing the pie themselves. Interestingly, in other niche categories, Lululemon is a great example of consolidation where they realized there was lockdown and the growth of Peloton. They found a great way to enter into home fitness market themselves and again move up in the value chain where they're becoming a larger part of people's everyday lives rather than just offering the clothes and the experience in the studios.

35. 15:50

    They can now bring the studio in-house by acquiring Mirror for $500 million. Hopefully that's going to work out well for Lululemon, but you can see that those consolidations can happen in niche categories as well. Another huge, huge consolidation has been happening for Nvidia. Nvidia is one of the largest GPU graphics processing unit manufacturers, and they're a key part for powering the cloud infrastructure, powering all of the powerful applications like gaming and AR and VR.

36. 16:19

    But they're very power-hungry chips. So those necessarily have not been used in mobile devices as much. And a lot of that is powered by Arm. Arm themselves has got a different business model where Nvidia is selling it to, to original equipment manufacturers like Apple, for example, or IBM, etc. Then Arm is focused on designing the chips and just licensing those structures to the chipmakers who then sell it to the OEMs.

37. 16:46

    So it's a different business model for Nvidia, but clearly they're focusing on this super high-end, you know, those, uh, GPUs that they've been doing so far, and going the other way and also focusing on the mobile side, which Apple is now known now to launch their own chips and their own developed chips which are in partnership with Arm and using Arm designs as well. And that's happening across many, many other industries. VW invested in self-driving startup Arm.

38. 17:12

    Zynga acquired another gaming studio. General Motors invested in Nikola. Trucking companies. So there's so much happening in the industry in specific niche categories rather than just the Big 5, but that's another way to grow your business. So just to conclude, here's what I really love to, loved what Brian Chesky from Airbnb said.

39. 17:34

    Andy Grove, one of the founders of Intel, and he said, bad companies are destroyed by a crisis, good companies survive a crisis, but great companies are defined by a crisis.

40. 17:47

    And I love that saying: great companies are improved by the crisis, bad companies are destroyed, and good companies survive them. I hope you enjoyed this video. I hope you learned how you can look at the crisis as an opportunity to grow by either reinventing yourself, partnering with others, or trying to consolidate across your relevant industries. If you enjoyed this video, please give it a thumbs up, subscribe to the channel. That truly helps me to grow and bring you more of those videos.

41. 18:14

    Please also let me know in the comments section what do you think are the biggest opportunities in the markets, or what do you think have been the smartest deals? Thanks again for watching, and I hope to see you next time.