July 7, 2023
I thought I’d do things a little differently this week and start with the Postscript…
Sadly, this will be my last post as Editor of Streetlight Confidential. We’ve made some changes here at the Streetlight Group and for now my energies will need to be focused on some other projects. I’ll be handing the editorial reins over to my partner Tim Collins starting with your July issue that’ll be out next week. I know you’ll enjoy hearing from him just as much.
It’s been a pleasure sharing my thoughts and insights with you these past two years. So for now remember… Make the trend your friend! Now on to this week’s post…
[Ding ding ding…]
Ladiiiieeeeeeeeesssss and Gentlemennnn…
Welcome the heavyweight championship of the tech world.
In the blue corner, weighing in at an approximate 154 pounds and standing roughly 5 feet 7 inches with an approximate IQ of 152…
The 39 year old comeback kid who’s rallied his company back from a 75% market cap collapse… Maaaaaaaaark Zuckerberrrrrrrrg
And in the red corner, tipping the scales at somewhere around 187 pounds and standing about 6 feet 1 inch with an IQ of (it’s been estimated) 155…
The 52 year old master of disaster Elooooooooooon Muuuuuuuuusk…
If you haven’t been living at the top of Mt. Everest, you’ve no doubt heard about the highly hyped billionaire battle royal between Elon Musk and Mark Zuckerberg.
It started with a business related jab from Musk mocking Zuck’s then-planned Twitter competitor. And ended with the tweet heard round the world…
Zuck replied on Instagram “Send me Location.”
To which Elon replied…
And the rest is history. Well, except for any actual details thus far.
But this cage match has been brewing for a while.
Bad Blood from the Past
This is far from the beginning of the tension between the two moguls.
Back in 2016, Elon Musk’s SpaceX was set to launch a Facebook satellite into orbit. The launch didn’t go as planned…
Zuckerberg jabbed at Musk’s company saying, “I’m deeply disappointed to hear that SpaceX’s launch failure destroyed our satellite.”
Things heated up in 2018 when news of the Cambridge Analytica scandal broke. (Cambridge Analytica was a British consulting firm that had been collecting data from tens of millions of Facebook users without their knowledge or consent.) In the wake of the news, Musk publicly deleted his companies’ Facebook pages. He said Facebook gave him the “willies.”
Then just last April, after Musk bought Twitter and stepped into the social media ring with Zuckerberg, the Meta CEO announced the development of a new app hosted on its Instagram platform that would compete directly with the blue bird.
And just yesterday, Zuckerberg launched Threads — their head-to-head Twitter competitor.
According to its CEO, Threads had signed up 10 million accounts in the first seven hours. (On the flip side, many of the Threads-curious went on Twitter to complain that once they opened their account, they couldn’t delete it without deleting their entire Instagram account. A bug or feature?)
In a lot of ways, the battle between these two might be as much ideological as it is technological. But beyond even that, winning is going to come down to two things… money and users.
Social media is essentially an ad-driven profit model. In the quarter ending December 31, 2021, Meta reported $33.7 billion in total revenue. Of that, 97% came from advertising. And to attract that kind of ad money, you need users.
It’s far too early to tell what the outcome of this battle will be. Twitter has been delisted from the Nasdaq and is now a privately held company so it’s hard to get a handle on the market’s thoughts on it.
Zuckerberg, on the other hand, can be called a legitimate comeback kid this year. After a disastrous 2022, where the former trillion dollar market cap social media giant lost some 76% of its value, the company has been on a roll.
Back in October, I noted that Zuck had been slashing and burning to get costs under control and right the ship. I said that given management’s new attitude and improved valuation, Meta could be worth a look for investors. Year-to-date the stock is up 136%.
But this battle to recapture his user/ad base may be just a tune up for what’s coming next. His battle for the future of technology…
Zuck Vs. Godzilla
The race to a gazillion is on…
At the end of the month of June, six months into the new bull market year and up 53% on year-to-date… Apple has become the world’s first $3 trillion company.
Apple (AAPL) Year-to-Date
Not only are they the richest company in the world — they’re the sixth richest country by GDP. (They’re currently roughly tied with the UK, but I expect they’ll leave them in the dust sooner rather than later.)
After that it’s India, Germany and Japan.
Of course they’re nowhere near China and the US. But once they figure out how to inflate their own currency — look out!
It’s rumored that Tim Cook is thinking about skipping the step of becoming their own sovereign nation and just jumping straight to their own planetary presence. The company’s considering making an offer for the earth…
But to say it’s been a meteoric rise is an understatement…
In January 2010, the company was trading for a little over $7. By August 2, 2018 Apple hit $1 trillion. Two years later, on August 19, 2020, they doubled that market cap.
Then on June 30, 2023 they made history again.
If you think it’s easy for a company to grow by these kinds of multiples when your market cap is already so huge, think again.
And the way they did it was especially impressive — largely without the boost the current AI boom has been giving to most big tech companies.
Their focus has been in an entirely different direction, namely their obscenely priced VR/AR headset called Apple Vision Pro.
This offering is taking direct aim at Meta’s headsets called the Quest 2 and Quest Pro (not to mention Zuck’s obsession with dominating the metaverse). And Zuck has a serious stake in this game too.
Apple and Meta’s Bad Blood
There’s no shortage of bad blood between Apple and Meta either.
In September 2021 — ironically just days after Meta reached its all-time high — Apple launched iOS 15. Included in the upgrade was a privacy feature called “Ask to Track.” It required all third party apps to ask permission to track a user across apps.
It turned out users value their privacy. Roughly 84% of Apple users said “no” to the tracking permission.
That basically killed Meta’s ability to collect user data which in turn crippled their ability to serve targeted ads which literally destroyed their value in the eyes of advertisers. When Meta reported their earnings miss the following February, the stock collapsed 26% in a single day.
Now an earnings miss in a growth company (and yes, despite their previous trillion dollar market cap, Meta was still considered a growth company) is the kiss of death. But Meta had another problem.
In their quest to dominate the metaverse, the company spent over $10 billion in 2021 alone. That’s more than ten times what they spent to buy Instagram in 2012.
It wasn’t just the spending that was the mistake. It was that they really had no idea what they were spending it all on. The challenge with disruptive technologies (like the metaverse) is that no one can say with any confidence what the end result will look like. And if you can’t do that, you can’t build the tools and software that will take advantage of the new tech environment.
Without their massive ad revenue to fund their blind pursuit of metaverse dominance, Meta and Zuck were basically screwed — as evidenced by their stock during the rest of 2022.
Apple’s Adaptive Advantage
Apple is now stepping into the ring with Meta in a battle for the Next Big Thing.
And if you want my opinion, Apple has the track record to come out the winner. Let me tell you why…
Apple has a knack for stepping into a disruptive niche, producing a better product for it, and expanding the whole market in the process. They did it in the digital music revolution.
There were a number of digital music players in the market before the iPod was introduced. But they were clunky as hell to use, had short battery lives, and couldn’t hold that much music. No one really wanted one. Enter the iPod.
It was sleek, easy to operate and held thousands of songs. The digital music market exploded. But the iPod was just a really better version of what was already out there.
What about something that’s metaverse disruptive? Something for which there’s no real precedent market? And no conscious need? Well Apple has a strategy for that too.
And it was on display when they launched the Apple Watch.
There have been “digital” watches since the early 1970s. I give you the Hamilton Pulsar P1 Limited Edition…
(BTW, that watch cost $2,100 in 1972 — that’s over $15,000 in today’s money!)
This was followed by calculator watches, game watches, camara watches, even TV watches.
By the time Apple brought their Apple Watch to the market in 2015, watches had largely become passé. Everyone was doing everything on their personal devices (phones) including checking the time. Who on earth would need an Apple Watch?
I don’t think Tim Cook and the team had an idea themselves. Still, they put out the slickest product they could, with an all new interface, that had all kinds of apps for all kinds of (silly) purposes (like showing you where you are on the earth or where all the planets in the solar system were at any given moment)…
…And in a few years, and as the health and fitness market began to grow, the Apple Watch became its perfect fit.
The Apple Watch might have been the gamble of all gambles — until the Vision Pro.
Apple has always seemed to be able to step in with exactly what fits the current market, and then evolve to meet the market’s ultimate needs.
This would appear to be the same playbook they’re working from with their headset. Rather than build something for the “disruptive end result,” Apple is starting where we are, and bringing the digital world in. The Wall Street Journal described it…
Apple is differentiating itself with an experience that is fully grounded in reality. This is not virtual reality where you escape your surroundings. Instead, it’s all about bringing the digital world to your real world. What Apple calls “spatial computing.”
Spatial computing. There you go.
Anyway, I didn’t mean for this to turn into an Apple commercial. It just seems to me that they have a track record for stepping into the disruptive space and somehow end up dominating. (You don’t get to be a $3 trillion company by sheer luck!)
Zuck wants to create a new world with the Quest line. Apple, on the other hand, is building a new device to interact with the technology we already know — and leaving the door open to see what evolves.
I think Zuck’s gonna have a tough battle on his hands here.
Unless he wants to call Tim Cook out for a cage match.
Make the trend your friend,
Editor, Streetlight Confidential