37: Feds Target Google Chrome, Etsy Deep-Dive, Amazon Logistics vs UPS & Fedex, Twilio & Crowdstrike Acquisitions, and Cool Spaceships

"Aoccdrnig to a rscheearch at Cmabrigde Uinervtisy"

The best way to escape competition is to be authentic to yourself. If you’re building something which is an extension of who you are, no one can compete with you on that. —Naval Ravikant

That quote above is basically my super-secret plan for this newsletter hobby.

Instead of trying to do what is already being done on various SeekingAlpha blogs or whatever, I’m allowing myself to make it very me, without any pretenses of professionalism, or pressure to color-within-the-lines of the conventions in the financial space.

That’ll turn off a bunch of people, of course, but if you have enough overlap with my interests and style and enjoy it, hopefully what you find here is unique.

Differentiation, for better or worse… ¯\_(ツ)_/¯

→ If you’re a US citizen, please vote. ←

✰ Something new this week, I have a sponsor. If you’ve been reading me a while, you know I’m a big fan of many of the financial research & data platforms that have been rapidly innovating and iterating lately.

It’s a much healthier ecosystem than when I first started investing, with multiple offerings for every kind of investor/analyst. I was glad when one of these platforms reached out for a spot. Which one? You’ll have to read the next edition to find out…


Investing & Business

Etsy Deep-Dive

Another deep-dive by Mostly Borrowed Ideas (you can subscribe to his site for more every month):

Founded in 2005 in a Brooklyn apartment, Etsy is a two-sided online marketplace connecting buyers and sellers of primarily handmade goods, vintage items (>20 years old), and craft supplies. [...]

E-commerce has been enjoying secular tailwind even before Covid-19 and the pandemic has just accelerated the trend even faster. Etsy estimated ~22% of total retail sales will be online in 2023, and the TAM for “special” or Etsy segments will be $170 Bn in 2023. Of course, Covid-19 has exceeded even the most bullish penetration expectation for e-commerce in 2020 and it reached 27% in April 2020. Even though we expect the penetration to come down a little after physical stores open, I think we all mostly agree at this point that e-commerce penetration will be 22% or higher in 2023. As an online marketplace, Etsy will be one of the biggest beneficiaries of this secular tailwind. [...]

I like this Nick Sleep quote from 2011 about Amazon that MBI includes (I’m not including the full thing, you’ll have to go read the piece):

When investors think about the future of a business, they often have in mind the assumption that growth rates slow with time, as competition ekes away advantages and marketplaces become saturated. Predicted revenue growth rates (used in valuation models) therefore start high and end low. This is especially true for firms that are quite large already.

However, if the rate of growth in internet retailing is a product of attitude, rather than assets, then, the fact that a firm is quite large already does not necessarily tell you that its growth rate is set to slow. The widely held presumption that regression to the mean begins the moment the analyst picks up their pen, risks being wrong footed as a result. Two years of forty percent revenue growth, for example, will result in revenues doubling in twenty-four months and regression to the mean-based estimates would be out by almost a factor of two! That did not take long. In other words, although some online retailing firms may be quite large, they may also be quite young. In our opinion, it is this realization that has partially driven the revaluation of internet retailers these last few years.”

For more, go check the write-up. The name is correct, it is a deep dive, so set aside some time to read it all.

Analyzing the Boiler Room Speech

h/t Ragunath Jayabalakrishnan

Feds May Target Chrome for Breakup from Google

Justice Department and state prosecutors investigating Google for alleged antitrust violations are considering whether to force the company to sell its dominant Chrome browser and parts of its lucrative advertising business, three people with knowledge of the discussions said Friday. (Source)

This is making me wonder what a dominant browser like Chrome may be worth as a standalone.

Most of the revenue would no doubt come from selling the default search setting and the default homepage view to the highest bidder, as well as some usage/clickstream data. Maybe they’d even go old school and pull a Yahoo and create a default homepage with all kinds of stuff on it including some display ads and services spots that they sell to third parties…

Looking at how much it’s reported that Google pays Apple to be the default search in Safari on mobile (˜$12 billion in 2019), Chrome could pull in pretty impressive revenues, and they’d almost all fall to the bottom line, since development costs are relatively fixed.

Chrome is based on an open source rendering engine: the OSS browser project is Chromium, the rendering engine is Blink, which is based on Webkit, which is the OSS version of Safari, which itself was originally based on KHTML, which was the rendering engine of Konqueror, the OSS browser of the KDE desktop environment for Linux and BSD… Yeah, the lineage is downright medieval.

So there’s obvious value that could be generated by selling a valuable piece of real estate in a popular piece of software, but there’s also strategic value to owning Chrome that Google would lose. It’s a defensive asset, to be able to control one of the main gateway to the web and make sure that your products run well (or better than the competition) in it and that someone else won’t lock you out the way Microsoft did with IE6 and all its non-standard quirks.

If Mozilla Firefox had somehow won and became dominant, Google would not only have to pay them billions to be the default search, but they’d have to pressure and cajole them into supporting their desired feature roadmap and optimize their web apps.

Because Chrome is based on an open source rendering engine, others have forked it. Microsoft Edge (the replacement to Explorer) is based on the same rendering engine as Chrome… If, for some reason, Microsoft was able to over time develop a dominant market share in browsers and overtake Chrome, it could try to monetize the browser by selling the search spot, or it could try to leverage it into improving its Bing search business. I’m not saying that’s likely, but this is an example of the strategic value of controlling a browser.

By the way, the launch of Chrome in 2008 was one of the coolest tech launches I’ve seen. I remember, I was on a trip, and saw the announcement on my laptop. They commissioned Scott McCloud to make a comic book about the browser and its architecture and features. Great stuff, check it out.

Twilio May Buy Segment for $3.2 Billion

By the time you read this, it may be official:

Cloud communications business Twilio has agreed to acquire customer data infrastructure company Segment for $3.2 billion, two sources tells Forbes. The deal which was not yet finalized as of Friday afternoon, is expected to be at least partially based on Twilio stock. [...]

The acquisition comes almost two years to the date after Twilio announced it would acquire API provider SendGrid for $2 billion in stock. By the time the deal closed in January 2019, with the help of a fateful breakfast burrito, that value was about $3 billion. (Source)

I’ve been following Twilio a bit, but it’s not a company I know very well, and I know almost nothing about segment. @LongWayCapital helped me with some context on what they do:

Segment makes integrating and managing data easier. Data from stuff like website cookies, advertising pixels, sales + marketing tools, app data, etc.. It's a dev friendly way of orchestrating all of it.

Segment was a big beneficiary of GDPR for example.

Here's a pretty standard use case. All companies set a myriad of pixels on visitors. Maintaining all of it can be a pain for devs, and it's easy to fuck up. Marketing people are always needing new pixels or updates to existing ones. Segment makes this much easier.

Another one that's a little less mundane.
You can use Segment to send your data to your data warehouse, maybe even bypass the ETL process.

Interesting to see Twilio keep expanding horizontally, rather than stick only to its original vertical of communication APIs. Will they try to evolved into a kind of Salesforce-model?

I also hadn’t realized until now that Twilio had bought Authy in 2015. It’s one of the two-factor authentication apps that I use. If you don’t use two-factor authentication (2FA) yet, I highly recommend it to massively increase the security of your various accounts.

Context for Crowdstrike’s Acquisition of Preempt

Crowdstrike recently acquired a zero-trust security company called Preempt forabout $96 million. I thought this forum post by ethan1234 gave good context on what this may add to the Crowdstrike stack:

The old model of security was basically a locked front door. If you had a key to the front door you had access to everything in the house. The zero trust model means you need a new key (credential) for each and every single thing you access or do in the house. You have to prove you can open the fridge, show your credentials turn on the tv, change the channel, etc etc.

Preempt is really interesting because they go into an organization and get the identities and credentials information from the IaaS (identity as a service) provider (OKTA, PING MSFT and many others) . Preempt then uses that information to build security profiles so they can see if an entity is accessing something unexpected or if the entity somehow has permissions it shouldn't. They can look at security hygiene in a very robust way and spot insider attacks in real time. With the information Preempt can tell if an account is too high risk because it has access to too many things. All in all it is a very cool product that appears to make managing identity and permissions much more holistic as well as real time threat analysis.

The combination of Preempt and CRWD is going to be really powerful because CRWD is looking for patterns whereas Preempt has knowledge of exactly what the rules/permissions are, if those permissions are appropriate, and if credentials are being used in an appropriate way. Preempt will allow CRWD to have a much greater understanding of what should be happening as well as allow CRWD to give companies much greater insight into their security hygiene. This will make the security products that CRWD already has much more powerful. IT hygiene will be much more useful to companies , the firewall product will have a much greater understanding of what should be happening and the activity monitor now doesn’t just have to look at historical norms but has an understanding of what is actually allowed.

h/t VanCity Investor

That’s a Lot of Cardboard Boxes

Source: Jefferies

Interview: Packy McCormick

I enjoyed this podcast interview of Packy McCormick, of the Not Boring newsletter, by Andrew Walker. The main topic (most of the latter part of the podcast) is companies that are trying to innovate and bring real estate into the 21st century, OpenDoor & Zillow. There’s also SPAC talk, angel investing, and a bunch more stuff.

Check it out: Packy McCormick from Not Boring on Opendoor $IPOB

Local/Micro-Influencers

Blake Robbins: The algorithm for TikTok is so good that it has surfaced a ton of interesting restaurants and coffee shops near me — that I didn’t even know existed. Related: I’m intrigued by micro-influencers at a local level. e.g. the popular kid in HS promoting a new coffee shop.

Hillman Ball: My burger restaurant that opened mid/peak COVID had a TikTok from a local micro influencer “go viral” (500k views) and it 3.5Xd our business. 😮


Science & Technology

There Are Two Kinds of Developers…

Comment on Reddit:

I used to know a dev who would message the ceo saying there was a problem, when he knew the ceo wouldn't look at his email, and then 10 minutes later sending an email saying, no worries, already sorted it.

Then the ceo a few hours later would see it and publicly praise him.

There never was an issue in the first place.

Ugh. Source.

8 Parking Spaces for Every Car in America

“There are an estimated 8 parking spaces for every car in America, with parking spots taking up about 30% of cities’ areas. When combined, all U.S. parking spots take up about the same area as the state of West Virginia.”

Source.

Native American Tribe in Washington State Gets Early Access to SpaceX Starlink

The [Hoh] tribe is based on [Washington] state’s coast, about a three to four hour drive west of Seattle. Residents typically only get internet speeds at an astonishing slow 0.3 to 0.7Mbps [...]

“The last eight years I feel like we have been paddling up river with a spoon, and almost getting nowhere with getting internet to the reservation,” Melvinjohn Ashue, vice chairman of the Hoh Tribe, said in the video. [...]

“It seemed like out of nowhere SpaceX just came up and catapulted us into the 21st century," Ashue said of the speed increase. [...]

SpaceX says the satellite network is currently capable of delivering 100Mbps download speeds at a latency below 30 milliseconds, which is on par with ground-based internet. [...]

Starlink currently operates over 700 satellites in low orbit around the planet, largely across the higher latitudes. But the company’s goal is to launch thousands of satellites, enabling Starlink to offer 1Gbps internet speeds to most places across the planet. (Source)

🚀 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 🛰 📡


The Arts & History

‘All children are authentic artists with LEGO’

[Italian artist Marco Sodano's] pixelation of famous paintings caught Lego's attention, and they are now appearing as official Lego's advertisements. [...]

The concept behind his work is that "All children are authentic artists with LEGO," according to his website

Marco’s website is here, with some of his other works.

The way that our brains can recognize paintings based on a fairly low-detail model of the original reminds me of this phenomenon with written word:

Aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it deosn’t mttaer in waht oredr the ltteers in a wrod are, the olny iprmoetnt tihng is taht the frist and lsat ltteer be at the rghit pclae. The rset can be a toatl mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe.

In orbit over Earth. (Photo of Earth taken by ESA astronaut Alexander Gerst)

Who Doesn’t Like Cool Spaceships?

Seth Pritchard is an “Independant Space Artist” (cool title). Above and below are renderings of a spaceship called “Vagabond Saint” that he designed, with this context:

By the 2300s, the Solar System was held together by fusion-driven spacecraft like this passenger ferry, the Vagabond Saint. Ships of its class use a specialized fusion method known as sheared-flow stabilized Z-pinch fusion, in which a bolt of electricity is dumped into the plasma, squeezing it until it fuses. Rather than attempting to confine it, the plasma is allowed to flow axially to mute the various instabilities that arise in other Z-pinch devices. This also makes it a very convenient rocket engine.

When the planets are at their closest, trips between Earth and Mars can take only a few weeks, and the outer planets can be reached in only a few months. Passengers will be in freefall for the majority of the flight, except during departure and arrival burns which can generate a small amount of thrust gravity, typically between only 0.1 - 0.2 gees.

Some of his other projects that I like (I wish I could just put a bunch of images below, but too many images in one email and some filters don’t let emails through…):

  • Hyperion (“fusion-powered mission to Saturn”)

  • Tianlong-class Nuclear Ferry (“workhorse for the Sino-African Alliance's territory in the Jovian system”)

  • NASA Reusable Nuclear Shuttle (“In the heady days of the late 1960's - Early 1970's, NASA was already envisioning a robust, reusable space transportation infrastructure for transferring crew and cargo to and from the Moon”)

  • TSC Electric Magnolia (“The automated freighter "Electric Magnolia" lights its fusion drive near the main belt asteroid 16 Psyche, the largest metallic asteroid in the Belt and a major source of metals for the Jovian and Saturnian settlements”