2PM - Monday Letter: "A" is for Ads

Performance and Advertising / Excerpt: Apple’s advertising business strategy is becoming clearer after a string of announcements, confirming what’s been suspected by many analysts over the past year. The company is tipping the scales in favor of its own ad products, looking to cut competitors Meta and Google off at the knees. At the same time, Apple’s advertising products are expanding beyond the app store.

Apple is planning on aggressively expanding its ad business, with the goal of increasing annual ad revenue from $4 billion today into the double-digit billions, according to Bloomberg. That means iOS users can expect to find more Apple ad products across Apple’s native platforms. As of now: News, Stocks and the App Store have potential ad positions. Those will become areas that are increasingly monetized. (Read More...)

Apple finds its next big business

Source No. 1 / Bloomberg: The effort to add search ads to Apple Maps has already been explored internally. Such a feature would probably work similarly to search ads in the App Store. For instance, a Japanese restaurant could pay money to rank at the top of local listings when users searched for “sushi.” If you’ve used Yelp, you already get the idea.

Apple wants to triple its revenue from ads business

Source No. 2 / 9-to-5 Mac: There are more signs that Apple is aggressively expanding its ad business. In today's edition of Mark Gurman's Power On newsletter, Gurman says that Apple VP Advertising Platforms Todd Teresi aims to bring annual revenue into the 'double digits', up from about $4 billion-per-year today.

How have brands performed over the previous three months? The new DTC Power List was updated for August 15 with new data for 700 companies and notable changes to the rankings based on recent performance. By this measure, Yeti is the fastest growing brand and Liquid IV established the most impressive leap up the chart. Join here to gain access to this growing list. 

DTC's very bad, no good earnings week

eCommerce / Retail Dive: Earnings across the board in retail have been depressed, with major companies slashing their guidance as consumers avoid spending on discretionary categories. Last week was an especially big reporting week in the DTC space and some fared better than others. Below we break down the results from major players including Purple, Bark, Warby Parker, Allbirds, Canada Goose and more.

Ultra-rich fueling sales of luxury brands despite inflation

Retail Economics / CNBC: From 2019, we explained - "While history doesn’t repeat itself, it does rhyme. The economically-disadvantaged deliver food, novelties, alcohol, and commodities to urban sprawls and gated suburbs – within the hour. Across the country, the net worths of the top 1% have become noticeable as conspicuous consumption of products and services have risen; the rise of platforms like StockX, Hodinkee, and Uncrate demonstrate this. For the top .01%, there are more 40,000+ square foot homes than there were in the Roaring 20’s. Retail is responding to economic realities of today. Wealth is galvanizing; retail strategies should adjust to meet the shifts head on." More Here: Prices for food, gas and travel have soared over the past year - but the rich appear to be shrugging it off and are still fueling sales at luxury companies, where sneakers can go for $1,200 and sports cars easily top $300,000.

Online retail YoY decline slows in July 2022

Data / CW: Online retail sales in the UK saw another year-on-year (YoY) drop in July 2022 by 2.3% when compared to the same month last year, according to the Capgemini/IMRG online retail index. While this is the seventh month in a row there has been a YoY drop in online sales, July matched June's smaller drop after the first half of the year saw significant YoY declines.

You may soon have to assemble your own Peloton

DTC Health / Verge: The move is part of Peloton’s ongoing restructuring plan, which aims to reduce the company’s costs and improve cash flow. On Friday, Peloton announced it was cutting more than 500 jobs related to last-mile deliveries and product distribution. The company also noted it was raising the cost of its Bike Plus and Tread while shuttering retail locations in 2023. 

Inventory management, frictionless checkout, computer vision

Grocery / TechCrunch+: Grocery store technology hasn't changed much in decades, so when the pandemic hit, it served as a wake-up call to the industry, highlighting its shortcomings, especially concerning e-commerce. Grocery stores that don't adapt will most likely lose out on market share.

A big reorganization of Amazon's physical stores

Retail Real Estate / Insider (Paywall): Other changes appear to be aimed at building a closer alliance between Amazon and Whole Foods, whose relationship hasn't always been great since the 2017 acquisition, as Insider previously reported. For example, Hoggett announced that Whole Foods' chief marketing and communications officer, Sonya Gafsi Oblisk, would take on a bigger role to lead all branding, customer insights, and private-label efforts "across Amazon Fresh and Whole Foods Market.

How Snapchat is sneaking its way into the streaming wars

New Media / Quartz: Snap's bet on subscriptions is already paying off. The company announced that just six weeks from the launch of Snapchat+, the service has already garnered over 1 million users paying $3.99 a month for the service. The subscriber update was slipped into an announcement of new Snapchat+ features, which include higher visibility to influencers and early access to experimental features.

2PM Executive Member Brief: Revisited is a continuation of the 13 month old report Formula One and America and the changing dynamics as the Formula One takeover of American sports and business enthusiasts continues.

There are a number of global sports: boxing, soccer, cricket, tennis, and racing. The last category is dominated by a form called Formula One. Though founded in 1950, it’s just now beginning to reach its zenith in perhaps the most important global media market – The United States. And though the sport’s American influence is scant compared to that of Europe, Mexico, Brazil, Japan, China – the potential of the sport is uniquely American.

The “sport” in Formula One lasts for a couple of hours on a Sunday Afternoon. Everything else is business, pure and simple. […] We set out to provide the best platform with the best image and the best environment for companies to maximize the benefits of their investment.

This was a quote by the former head of McLaren, one of several fabled teams, that I found in the 22 year old book by Russell Hotten, Formula 1 – The Business of Winning. Here’s another anecdote on the mainstreaming of Formula One racing. In the long history of Harvard Business case studies, there are only four cases written on the Formula One business or its many components. (Read More...)