🍋 Food Goes Netflix

Together With

Good morning and Happy Friday! This week has flown by but a snowstorm reportedly awaits us this weekend. The snow is expected to wreak havoc in NYC today but let's hope the weather predictors got this one wrong. 2022 markets are showing no mercy and Cathie Wood's tech-heavy ARK Innovation ETF is down bad – more than 48% from its Feb '21 all-time intraday high. In M&A news, the New York Times has agreed to acquire subscription-based sports media company, Athletic for $550 million. 

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1. Story of the Day: Food Goes Netflix

It’s taken a while but subscriptions are overtaking the food industry.

Netflix was one of the first companies to popularize the business model. These days every company is trying to pivot its model to a subscription-based service. The subscription economy has grown 6x from 2012 to 2021. Our Book of the Day (below) is also a lesson in making any company a subscription-based business.

We reported in September that Taco Bell was running subscription trials in Arizona. The trials have gone well with Taco Bell growing its rewards program by 20% (Doritos Locos Tacos Supreme was the most redeemed taco). Now Taco Bell is offering everyone the $10 Taco Lover’s Pass: 1 taco per day.

The idea is also to lure people with a free taco and hope they add more to their order and increase the amount they spend at the restaurant. It also gives restaurant owners information about ordering habits that help target diners with customized deals.

Sweetgreen also got in on the action earlier this week and announced a special: $10/month Sweetpass for $3 per order discounts. (if you are like me and eat Sweetgreen 30x a month, this deal seems like a no-brainer)

Short Squeez Takeaway: These companies are betting that many subscribers won’t take advantage of these subscriptions. It’s like gyms benefiting when you don't work out but you keep that membership to feel good about that workout you’re going to do “tomorrow.”

Brands need to be careful though. Eating food is not the same as working out. Eating is fun and working out is not (well for most people). MoviePass is a great case study in subscriptions gone wrong when you bet on customers not showing up. Turns out when you start offering unlimited movies for $10/month even people who don’t go to the cinema, show up 2-3 times a week. (RIP MoviePass) 

Source: Axios, CNN

2. Markets Rundown

Stocks closed lower yesterday, as Treasury yields climbed and expectations for a more aggressive pace of normalization of monetary policy from the Fed weighed on Wall Street.

Movers & Shakers

• (+) Allbirds ($BIRD) +12% after Morgan Stanley upgraded the stock to overweight from equal weight.

• (+) Lamb Weston ($LW)+7% after beating estimates on the top and bottom lines for its fiscal second quarter.

• (–) Humana ($HUM) -20% after releasing updated guidance.

3. Top Reads

• With Elizabeth Holmes’s conviction, venture capitalists distance themselves from Theranos (WSJ)

• Novak Djokovic in limbo as he fights deportation from Australia (CNBC)

• What is going on with "Web3" (Axios)

• Warner Media and ViacomCBS, co-owners of the CW Network, are exploring a sale of part or all of it (WSJ)

• At-home COVID-19 tests are selling on digital marketplaces for three times the retail price, with two-packs listed for as much as $75 (Bloomberg)

• Here’s how much money Apple CEO Tim Cook made in 2021 (CNBC)

• The companies offering delivery to the Moon (BBC)

• SpaceX’s Starlink internet service has more than 145,000 users (CNBC)

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4. Book of the Day: The Automatic Customer: Creating a Subscription Business in Any Industry

These days virtually anything you need can be purchased through a subscription, with more convenience than ever before. Far beyond Spotify, Netflix, and New York Times subscriptions, you can sign up for weekly or monthly supplies of everything from groceries (AmazonFresh) to cosmetics (Birchbox) to razor blades (Dollar Shave Club).

This emerging subscription economy offers huge opportunities to companies that know how to turn customers into subscribers. Automatic customers are the key to increasing cash flow, igniting growth, and boosting the value of your company.

Consider Whatsapp, the internet-based messaging service that was purchased by Facebook for $19 billion. While other services bombarded users with invasive ads in order to fund a free messaging platform, Whatsapp offered a refreshingly private tool on a subscription platform, charging just $1 per year. Their business model enabled the kind of service that customers wanted and ensured automatic customers for years to come.

“At the time it was acquired, WhatsApp did not employ a single marketing executive.”

5. Short Squeez Picks

• Another Banner Year for Bill Ackman 

• Jimmy Carr: The easiest way to live a happier life podcast

• Don't make this billion dollar mistake

6. Daily Visual: Yield on 10-Year Treasury Note

Source: Axios

7. Daily Acumen:  Network Effects

Network Effect is the idea that a service or product becomes more valuable as more people use it.

Amazon, for example, has built multiple types of effects into its business model over the years. In the beginning, Amazon’s review systems generated same-side effects: As the number of product reviews on the site increased, users became more likely to visit Amazon to read the reviews as well as write them. 

Later, Amazon’s marketplace, which allows third parties to sell products to Amazon users, generated cross-side network effects, in which buyers and third-party sellers attracted each other. Meanwhile, Amazon’s recommendation system, which suggests products on the basis of past purchase behavior, amplified the impact of the company’s scale by continually learning about consumers’ preferences. The more consumers used the site, the more accurate the recommendations Amazon could provide them.

Source: HBR

8. Crypto Corner

• Vitalik proposes new ‘multidimensional’ Ethereum fee structure

• Here’s why Bitcoin traders say a drop to $38K is the worst case scenario

• NYC mayor getting paid in Bitcoin suggests buying the dip

• Crypto bank Sygnum raises $90 million, now valued at $800 million

• Ethereum dominates among developers, but competitors are growing faster

• Daughter of former Blockbuster CEO joins BlockbusterDAO’s core team

9. Memes of the Day

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