Weekly TLDR - Youtube’s Reaction Video to TikTok Stealing Its Lunch

TikTok going after Youtube, Tesla’s Germany Expansion, and Web3’s continued march into mainstream business and everyday finance

The TLDR

Some of you may have noticed that we now have a premium subscription option for $7 per month. There’s not much here at the moment but we promise good things are coming soon! In the meanwhile, if you wanted to throw us a coffee or two to fuel our growing caffeine addiction, we wouldn’t say no. We would actually be very grateful. Back to business, in this week's TLDR we talk about TikTok going after Youtube, Tesla’s Germany Expansion, and Web3’s continued march into mainstream business and everyday finance.

Chart of the Week:

Source: Axios

Higher income individuals are feeling much more secure in their income stability. It could be that we are reaching a new normal almost 2 years into the Covid pandemic. Typically, increased confidence in income leads to increased consumer spending and, in particular, bigger ticket items like travel, appliances, cars, etc. 

Stock Market TLDR

TikTok goes after Youtube 

TikTok is extending its video uploads to up to 10 minutes in length from up to 3 minutes. If you follow the history, TikTok videos have consistently been increasing in length (originally 15 seconds -> 60 seconds -> 3 minutes -> 10 minutes). After eating Facebook’s and Instagram’s lunch, TikTok is going after Youtube. 10 minute long content is much more fitting for advertising but it’s going to be a multi-year battle to attract advertisers to a new format and then cause a shift in content creator behavior to impact a platform like Youtube. In the near-term, expect little revenue impact with more risk around users and videos, two metrics that Google/Youtube doesn’t report on in earnings anyways…

Tesla’s German Gigafactory is Gearing Up 

Final approval to start production at Gigafactory Berlin is reportedly a done deal after months of delays. This factory expands Tesla’s production reach into Europe. The German gigafactory has primarily been producing Model Y’s. We published a Tesla model last week and after this news, it may be time to up our Model Y shipment and production and delivery assumptions. 

Amazon enticing advertisers with Omni-Channel capabilities

Amazon is planning on selling digital advertising in its physical stores. We view this move as a plan to enhance Amazon’s already large digital advertising business ($31 billion in 2021 revenue) with omni-channel capabilities. There are some advertisers that have budgets that require both digital and physical presences and this move may help Amazon capture some of this budget. Longer-term, physical retargeting is likely the play with Amazon stores recognizing your user identity as you walk in with the Amazon shopping app. Then, advertisers are able to target you with ads based on what you’ve bought in the past or what you still have in your cart. It's like the minority report of advertising, which is a scary thought.

How does the Russo-Ukrainian War affect inflation? 

One way to tell how the war affects global inflation is to see what commodities each country exports. Russian exports could be affected by sanctions, while Ukrainian exports could be affected by destroyed infrastructure. If exports are disrupted, global supply for a commodity will contract and could cause prices to significantly increase. The chart below shows that global grain prices are at the highest risk of inflation from this war, since Russia is responsible for about 7% of global seaborne export of grain while Ukraine is responsible for about 9%. For example, if Russia takes the Black Sea coast or damages crucial Ukrainian grain infrastructure, Ukrainian grain exports could stop and the world will have lost 9% of its grain supply.

So diversiFied (SoFi) 

SoFi announced it is acquiring banking software company Technisys for $1.1 billion. This marks yet another acquisition as SoFi looks to diversify from student loan debt origination to becoming a diversified FinTech provider. SoFi has acquired Galileo, a popular debit card issuing company, an actual bank, and now Technisys. With FinTech valuations taking a huge dip as the market de-risks, SoFi is going all in to diversify its offering. Expect SoFi to start offering more full suite banking services from savings, checking, debit cards, credit cards, and loans. My best guess for SoFi’s next move is something in the blockchain space to web3.0-ify it’s offering. Which is the perfect segue to the Crypto TLDR.

Crypto TLDR

Crypto is attracting traditional finance execs 

Roger Bartlett, Goldman Sachs exec with a 15-year tenure, recently announced his departure from the firm to join Coinbase as vice president and global head of financial operations. Prior to this move, Bartlett was managing director and global co-head of operations for global markets at Goldman Sachs. Bartlett is one of many traditional financial execs that have recently switched to Web3 in search of greener pastures. Other recent traditional finance departures include Alex Taff, a former equity derivatives VP at Citi in New York who joined crypto market maker GSR and Moritz Seibert, former CIO of insurer giant Munich Re, who left to pursue an unannounced new role in Web3. The increasing migration of financial talent to Web3 lends credence to the idea that Web3 as a burgeoning technology could become a non-trivial facet of global finance. Emphasis on “could”.

Japanese e-commerce giant Rakuten launches NFT marketplace 

Continuing from last week’s theme of large companies embracing crypto, Japan’s leading e-commerce company Rakuten has launched their own NFT marketplace, and they’re getting deeeep into it. Rakuten will not only be dropping their own NFT by partnering with firms owning pop culture (e.g. anime) IP, but will also allow IP owners to independently release NFTs on the marketplace. Rakuten’s first NFT drop will occur on February 25th and will include digital assets from classic anime Ultraman among others.

$1.96B in Bitcoin sales via CashApp in Q4

CashApp is taking a page out of Coinbase’s book by building a gigantic business bringing crypto to the masses. Parent company Block reported Q4 earnings last week Thursday and shared that CashApp generated $1.96 billion in Bitcoin sales in the fourth quarter of 2021 alone. This resulted in $46 million in gross profits for the company. In total, for 2021, Cash App generated just over $10 billion in Bitcoin sales. Companies like Coinbase, Block, and Robinhood are introducing millions of young investors into crypto, accelerating the rapid adoption of crypto into everyday finance that originally emerged in the midst of the pandemic.

The end of “Spray and Pray” Web3 private equity investing? 

If one followed crypto’s private equity market in the past year, you’ll know how desperately crypto VCs have been trying to give their money away. Existing Crypto VC funds were raising billions of dollars while new funds were popping up everywhere, all with a mandate to invest as fast and hard as possible into anything resembling a Web3 company. In fact, according to crypto news firm The Block, $28.65 billion in funding poured into crypto firms in 2021. This has led some people to call this investment behavior “spray and pray”. 2022, however, is a different beast, with global capital markets pulling back risk with spillover effects on the fervent crypto private equity market. According to crypto VC investor Darren Lau, crypto VCs are also feeling the pain and are starting to be more selective in their investments. Let’s see how fast VC investors come to their senses in 2022, or will the spray and pray funding race continue this year?

Bonus Chart of the Week

More companies are guiding below expectations this quarter when compared to the last few quarters. This could be an early sign of slipping fundamentals or a sign of low visibility into future business from both companies as well as the investment community. 

FinanceTLDR Research

Goldman Sachs’ model says TSLA is worth $1200, Citibank’s model says TLSA is worth $262; what does your model say? Don’t have one? We got you covered, our Model Says TSLA is worth $982 and it's your model now too! 

Additional Reading

Intel CEO’s interview with Stratechery

A must read if you are an investor in TSM, AMD, INTC, GFS, NVDA, or any other fabless semiconductor company. It details out the economics between leading and lagging edge at foundries, how Intel views its strategic positioning, and the most recent acquisition of Tower Semiconductor.