6 min read

April 26 2023 - Earnings, Enemas & AI

April 26 2023 - Earnings, Enemas & AI

👋Happy Wednesday everyone. No fuss, let's get into it–

Joe's Quick Take

  • Earnings starting to roll in and it's not all doom and gloom
  • Slack and Yelp with some notable new features
  • Netflix to spend some serious money in South Korea
  • AI - Who is going to take the lead on this conversation?
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Top Stories

Spotify has reached a new milestone with over 500 million monthly active users, but the ratio of paid to free users continues to decline. The company's premium subscribers now represent just 40% of its overall user base, a drop from 46% in Q1 2019. The increasing number of free users may be due to consumer cost-cutting, however, this has not translated into ad-supported revenue growth, which fell by 27% in the previous quarter. Despite this, Spotify's MAUs grew by 26 million users, marking its largest Q1 net growth and second largest quarterly growth in its history.

Microsoft has reported a 7% increase in revenue and a 9% jump in profit, with its cloud business powering the results. Azure, Microsoft's cloud computing product, and its Microsoft 365 platform generated $28.5 billion in revenue, a 22% increase from the previous year. The company's foray into artificial intelligence is also expected to benefit from the boom in AI, through its investment in OpenAI. Microsoft has already integrated ChatGPT into its Bing search engine and said it will incorporate AI into other Microsoft products.

McDonald’s, PepsiCo, and Kimberly-Clark reported increased sales and profits despite raising prices by double-digit percentages for their products, such as burgers, soda, diapers, and tissues. Some of these companies have even raised their revenue forecasts for the year. However, executives are still cautious about consumers' ability to withstand price increases as the threat of a recession looms. Companies such as Conagra Brands and Constellation Brands have decided to slow down price increases after aggressive hikes, and Coca-Cola expects to do the same later this year.

Slack has launched a new document editor called Canvas, which is not intended to compete with tools such as Notion and Coda, but rather to improve workplace chats. Canvas aims to enhance group chats by adding a layer of asynchronous communication, allowing users to store and access information in a persistent space. Canvas also allows users to embed Workflows, which can help execute tasks such as procurement or time-off requests. The new tool's focus is on collating important information and creating a space for it. Canvas does not offer extensive formatting options like Notion and Coda but provides rich formatting for links and apps that users would see with a Slack conversation.

Netflix plans to spend $2.5 billion on South Korean series over the next four years, double the amount spent since it launched in the country in 2016, in a move that could help it circumvent the impact of a potential Writers Guild of America strike. The investment will allow the streaming giant to expand its existing content library in the country and commission new productions. Netflix has expressed confidence that it can serve subscribers in the event of a work stoppage, while industry insiders predict that studios will look abroad for content to fill schedules if the strike goes ahead.

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Rundown
  • The gaming advertising world is divided into two camps: intrinsic in-game ads and immersive brand experiences. The friction between the two is increasing as they compete for marketers' gaming budgets. Epic Games CEO Tim Sweeney recently criticized in-game billboards, but Fortnite is full of ads in the form of brand integrations. The argument that Fortnite's brand integrations are more seamless ignores the higher barrier to entry of this format. Intrinsic in-game ad companies are aware that their offerings are not attuned to every game and have been working to make their programmatic ads as seamless and natural as brand integrations. The crux of the tension between the two forms of in-game advertising is that many brand marketers still don't fully grasp the differences between them. Gaming advertising budgets are likely to be split into separate buckets for intrinsic in-game ads and immersive experiences, which could help alleviate some of the conflict.
  • Gap is set to cut hundreds of corporate jobs worldwide as part of a restructuring aimed at making the company more nimble and less bureaucratic. The review led by the company’s brands — Gap, Old Navy, Banana Republic and Athleta — aims to strip out layers of management to speed up decision-making. Gap's goal is to flatten the organization, increase spans of control to create more robust roles and individual empowerment, and decrease layers to remove bottlenecks and make better, faster decisions. Gap previously cut around 500 corporate positions in September, most of which were at its main offices in San Francisco and New York.
  • BBDO Worldwide is warning employees not to use generative AI tools like ChatGPT, Midjourney, and DALL-E 2 for client work due to potential violations of copyright, ownership, and confidentiality. The company has already introduced guidelines for employees to follow when exploring the use of generative AI in their work, including not investing in paid AI tools– although, BBDO is exploring these tools in internal sandbox environments.
  • Meta has hired Jean Boufarhat, corporate vice president of silicon engineering at Microsoft, to lead its Facebook Agile Silicon Team (FAST) that is developing custom chips for hardware devices. FAST has struggled to complete chips for products, and has opted for Qualcomm chips for VR headsets, Ray-Ban smart glasses, and a now-defunct smartwatch line.
  • Kering, the French luxury group that owns brands such as Gucci and Saint Laurent, saw its Q1 revenue grow by just 1% YoY, lagging behind Hermès and LVMH. While Kering's own store sales rose by 4%, sales at its wholesale division dragged the group down. Gucci's sales, which account for half of all group revenues, were broadly flat, while those at Saint Laurent rose 8%.
  • Yelp has introduced a video review feature that allows users to upload 12-second high-resolution clips to its platform alongside their review text and photos. The feature was developed in response to research suggesting users want short-form video content when discovering local businesses. The US online directory and review service has also launched AI-driven Yelp Guaranteed, which offers more detailed reviews and helps users find local businesses, and a "Surprise Me" button on its app to suggest highly rated places to eat.
  • The NFL Draft will feature generative AI art created by Midjourney, showcasing images of an NFL team's home city. The NFL and Formula, its social production company, developed the 3D set for the event, and each team will have a single image selected from 500 variations.
  • Omnicom and Adobe have entered an enterprise partnership to integrate Adobe's content tools into Omnicom's marketing stack. The partnership will enable Omnicom to streamline and automate content using Adobe's creative and experience applications, including Adobe Creative Cloud, Adobe Workfront, and Adobe Experience Manager. Omnicom will also gain access to Adobe Firefly and Adobe Sensei GenAI to produce and deliver creative work.
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Published by:

Joe Nash

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