Hey everyone. Thank you for welcoming me into you inbox yet again.
I got some awesome responses to the #DeleteLinkedIn newsletter last week, a few dozen emails (some of them angry) and plenty of tweets. Looking forward to chatting with some of you soon. On that note, I’m currently in China for a TechCrunch event that we’re having in Shenzhen and will be taking some time offline to travel a bit so I won’t be arriving in your inboxes the next two weeks. Week in Review will be back in your inboxes the weekend after Thanksgiving so you’ll have to savor this newsletter until then.
The big story
If there’s been a collective theme to some of the tech backlash of the past couple years, it’s been an evolving vision towards platform responsibility.
Social media platforms have earned the lion’s share of this discussion to date. This has largely been due to the political landscape and gripes with both liberals and conservatives for how the site handles content policing. The prevailing libertarian view that tech platforms weren’t responsible for what was enabled by their platforms has fallen out of vogue.
What continues to surprise me is how little accountability or expectations there still seems to be for marketplace platforms. Speech is a crucial part of the internet, but so is buying and selling and it shocks me how big some startups have been able to get without delivering some basic buyer protections.
Through some great investigations from the Wall Street Journal, we’ve seen how fast and loose Amazon has been playing with third-party sellers getting free reign on the site. There have been countless stories of scammers infiltrating sites like Airbnb and eBay and operating in grey areas that allow them to rip off buyers. Last week, a reporter at Vice delivered a scathing deep dive into a scam she fell victim to on Airbnb’s platform.
This week, Airbnb announced that by next year they are pledging to verify all of their listings, something that seems more than a little overdue. Standing behind the properties being booked on their platform was seemingly the last box to check before driving to the IPO hoop.
More from our story:
Airbnb properties will soon be verified for accuracy of photos, addresses, listing details, cleanliness, safety and basic home amenities, according to a company-wide email sent by Airbnb co-founder and chief executive officer Brian Chesky on Wednesday.
Airbnb is just another highly valued startup that has been trying to take the past of least resistance to outsized future value. Verifying properties is a difficult issue to brace. Sellers are certainly not the only scammers on Airbnb, and buyers abusing this new system is a guarantee. But keeping both sides in some sort of satisfaction equilibrium is Airbnb’s messy, god-given task.
Airbnb has garnered more grumblings than most due to bad customer experiences, but it’s just a harbinger of what comes next. 2020 being a presidential election year in the U.S. means that the public might still be too busy with lambasting Zuckerberg to give marketplaces their due watchful eye in the near term, but the bell is tolling for these marketplaces and it’d be wise for them to pay attention to the writing on the wall.
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On to the rest of the week’s news.
Trends of the week
Here are a few big news items from big companies, with green links to all the sweet, sweet added context:
- Twitter’s Saudi Arabian infiltration
One of the wilder stories this week was how Saudi Arabia reportedly lifted sensitive contact info from Twitter via employees at the company that they paid off. There’s a lot in this saga and while Twitter seems to have done most things right, it is a pretty nightmarish scenario.
- T-Mobile and Sprint get hitched
The telecom marriage of two of the United States top four carriers cleared its last major hurdle as the FCC gave the deal its blessing. There’s still some residual legal hurdles for the two to wrap up in good faith, but this deal is done.
- Adobe makes good on a promise
The promises of tablet computing have always been a little ambitious in terms of timing, but Photoshop is finally arriving on the iPad and with that, one decade-long wish list item has been realized.
How did the top tech companies screw up this week? This clearly needs its own section, in order of badness:
- California isn’t happy with Zuckerberg:
[California accuses Facebook of ignoring subpoenas in state’s Cambridge Analytica investigation]
- Google’s board is investigating some executive impropriety:
[Alphabet’s board is investigating execs over claims of sexual harassment and other misconduct]
It’s hard to believe it’s already that time of the year again, but we just announced the agenda for Disrupt Berlin and we’ve got some all-stars making their way to the stage. I’ll be there this year, get some tickets and come say hey!
- Learn how to win customers and influence consumers
- Three of the best tackle the thorny issue of Brexit for startups
- Learn how to raise your first Euros
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These ten enterprise M&A deals totaled over $40B in 2019
It would be hard to top the 2018 enterprise M&A total of a whopping $87 billion, and predictably this year didn’t come close. In fact, the top 10 enterprise M&A deals in 2019 were less than half last year’s, totaling $40.6 billion. This year’s biggest purchase was Salesforce buying Tableau for $15.7 billion, which would…
It would be hard to top the 2018 enterprise M&A total of a whopping $87 billion, and predictably this year didn’t come close. In fact, the top 10 enterprise M&A deals in 2019 were less than half last year’s, totaling $40.6 billion.
This year’s biggest purchase was Salesforce buying Tableau for $15.7 billion, which would have been good for third place last year behind IBM’s mega deal plucking Red Hat for $34 billion and Broadcom grabbing CA Technologies for $18.8 billion.
Contributing to this year’s quieter activity was the fact that several typically acquisitive companies — Adobe, Oracle and IBM — stayed mostly on the sidelines after big investments last year. It’s not unusual for companies to take a go-slow approach after a big expenditure year. Adobe and Oracle bought just two companies each with neither revealing the prices. IBM didn’t buy any.
Microsoft didn’t show up on this year’s list either, but still managed to pick up eight new companies. It was just that none was large enough to make the list (or even for them to publicly reveal the prices). When a publicly traded company doesn’t reveal the price, it usually means that it didn’t reach the threshold of being material to the company’s results.
As always, just because you buy it doesn’t mean it’s always going to integrate smoothly or well, and we won’t know about the success or failure of these transactions for some years to come. For now, we can only look at the deals themselves.
Jumia, DHL, and Alibaba will face off in African ecommerce 2.0
The business of selling consumer goods and services online is a relatively young endeavor across Africa, but ecommerce is set to boom. Over the last eight years, the sector has seen its first phase of big VC fundings, startup duels and attrition. To date, scaling e-commerce in Africa has straddled the line of challenge and…
The business of selling consumer goods and services online is a relatively young endeavor across Africa, but ecommerce is set to boom.
Over the last eight years, the sector has seen its first phase of big VC fundings, startup duels and attrition.
To date, scaling e-commerce in Africa has straddled the line of challenge and opportunity, perhaps more than any other market in the world. Across major African economies, many of the requisites for online retail — internet access, digital payment adoption, and 3PL delivery options — have been severely lacking.
Still, startups jumped into this market for the chance to digitize a share of Africa’s fast growing consumer spending, expected to top $2 billion by 2025.
African e-commerce 2.0 will include some old and new players, play out across more countries, place more priority on internet services, and see the entry of China.
But before highlighting several things to look out for in the future of digital-retail on the continent, a look back is beneficial.
Jumia vs. Konga
The early years for development of African online shopping largely played out in Nigeria (and to some extent South Africa). Anyone who visited Nigeria from 2012 to 2016 likely saw evidence of one of the continent’s early e-commerce showdowns. Nigeria had its own Coke vs. Pepsi-like duel — a race between ventures Konga and Jumia to out-advertise and out-discount each other in a quest to scale online shopping in Africa’s largest economy and most populous nation.
Traveling in Lagos traffic, large billboards for each startup faced off across the skyline, as their delivery motorcycles buzzed between stopped cars.
Covering each company early on, it appeared a battle of VC attrition. The challenge: who could continue to raise enough capital to absorb the losses of simultaneously capturing and creating an e-commerce market in notoriously difficult conditions.
In addition to the aforementioned challenges, Nigeria also had (and continues to have) shoddy electricity.
Both Konga — founded by Nigerian Sim Shagaya — and Jumia — originally founded by two Nigerians and two Frenchman — were forced to burn capital building fulfillment operations most e-commerce startups source to third parties.
That included their own delivery and payment services (KongaPay and JumiaPay). In addition to sales of goods from mobile-phones to diapers, both startups also began experimenting with verticals for internet based services, such as food-delivery and classifieds.
While Jumia and Konga were competing in Nigeria, there was another VC driven race for e-commerce playing out in South Africa — the continent’s second largest and most advanced economy.
E-tailers Takealot and Kalahari had been jockeying for market share since 2011 after raising capital in the hundreds of millions of dollars from investors Naspers and U.S. fund Tiger Global Management.
So how did things turn out in West and Southern Africa? In 2014, the lead investor of a flailing Kalahari — Naspers — facilitated a merger with Takealot (that was more of an acquisition). They nixed the Kalahari brand in 2016 and bought out Takelot’s largest investor, Tiger Global, in 2018. Takealot is now South Africa’s leading e-commerce site by market share, but only operates in one country.
In Nigeria, by 2016 Jumia had outpaced its rival Konga in Alexa ratings (6 vs 14), while out-raising Konga (with backing of Goldman Sachs) to become Africa’s first VC backed, startup unicorn. By early 2018, Konga was purchased in a distressed acquisition and faded away as a competitor to Jumia.
Jumia went on to expand online goods and services verticals into 14 Africa countries (though it recently exited a few) and in April 2019 raised over $200 million in an NYSE IPO — the first on a major exchange for a VC-backed startup operating in Africa.
Jumia’s had bumpy road since going public — losing significant share-value after a short-sell attack earlier in 2019 — but the continent’s leading e-commerce company still has heap of capital and generates $100 million in revenues (even with losses).
Airbnb’s New Year’s Eve guest volume shows its falling growth rate
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between. It’s finally 2020, the year that should bring us a direct listing from home-sharing giant Airbnb, a technology company valued at tens of billions of dollars. The company’s flotation will be a key event in…
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
It’s finally 2020, the year that should bring us a direct listing from home-sharing giant Airbnb, a technology company valued at tens of billions of dollars. The company’s flotation will be a key event in this coming year’s technology exit market. Expect the NYSE and Nasdaq to compete for the listing, bankers to queue to take part, and endless media coverage.
Given that that’s ahead, we’re going to take periodic looks at Airbnb as we tick closer to its eventual public market debut. And that means that this morning we’re looking back through time to see how fast the company has grown by using a quirky data point.
Airbnb releases a regular tally of its expected “guest stays” for New Year’s Eve each year, including 2019. We can therefore look back in time, tracking how quickly (or not) Airbnb’s New Year Eve guest tally has risen. This exercise will provide a loose, but fun proxy for the company’s growth as a whole.
Before we look into the figures themselves, keep in mind that we are looking at a guest figure which is at best a proxy for revenue. We don’t know the revenue mix of the guest stays, for example, meaning that Airbnb could have seen a 10% drop in per-guest revenue this New Year’s Eve — even with more guest stays — and we’d have no idea.
So, the cliche about grains of salt and taking, please.
But as more guests tends to mean more rentals which points towards more revenue, the New Year’s Eve figures are useful as we work to understand how quickly Airbnb is growing now compared to how fast it grew in the past. The faster the company is expanding today, the more it’s worth. And given recent news that the company has ditched profitability in favor of boosting its sales and marketing spend (leading to sharp, regular deficits in its quarterly results), how fast Airbnb can grow through higher spend is a key question for the highly-backed, San Francisco-based private company.
- 2009: 1,400
- 2010: 6,000 (+329%)
- 2011: 3,1000 (+417%)
- 2012: 108,000 (248%)
- 2013: 250,000 (+131%)
- 2014: 540,000 (+116%)
- 2015: 1,100,000 (+104%)
- 2016: 2,000,000 (+82%)
- 2017: 3,000,000 (+50%)
- 2018: 3,700,000 (+23%)
- 2019: 4,500,000 (+22%)
In chart form, that looks like this:
Let’s talk about a few things that stand out. First is that the company’s growth rate managed to stay over 100% for as long as it did. In case you’re a SaaS fan, what Airbnb pulled off in its early years (again, using this fun proxy for revenue growth) was far better than a triple-triple-double-double-double.
Next, the company’s growth rate in percentage terms has slowed dramatically, including in 2019. At the same time the firm managed to re-accelerate its gross guest growth in 2019. In numerical terms, Airbnb added 1,000,000 New Year’s Eve guest stays in 2017, 700,000 in 2018, and 800,000 in 2019. So 2019’s gross adds was not a record, but it was a better result than its year-ago tally.
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