July 17, 2018
There's a ton to get to today, so let's get to it.
1 big thing: The high cost of Amazon's Prime Day problems
Amazon's Prime Day got off to a terrible start for the retailer, with customers seeing cute dog pictures instead of deals. The problems persisted into Monday evening for some customers.
Amazon's response: The company, which is playing up the fact the site was never totally down, said it will re-run the deals offered during the times when customers were having problems. It also noted in a statement that the number of orders during the first hour were higher than last year despite the issues.
The bottom line: Analysts are still trying to calculate how much revenue Amazon lost from its Prime Day site problems. But, in reality, there are a couple of different costs to consider.
- The direct economic impact of losing sales on what has become one of Amazon's biggest days. (Remember, not all of this is lost revenue. It was an invented day to begin with and Amazon may be able to recoup with some sort of make-good event.)
- Money lost to rivals. A small group of people probably left Amazon and went elsewhere in search of deals. For instance, Office Depot sent out a marketing e-mail encouraging customers encountering problems at Amazon to browse their site instead.
- The "emperor-has-no-clothes" cost. Since Prime Day was already an invented holiday, people may not get as excited in future years, recalling it as a day of headaches rather than a day of deals.
- The hit to its Amazon Web Services business. Lots of people point out that the company having the web problems is the same one that millions of companies trust to run their websites. Rivals got in some shots, but the real loss would be if this weighs in the mind of corporate customers debating between services from Amazon, Google or Microsoft.
Yes, but: Amazon's site did go down under a crush of demand from customers, which remains a good problem in the scheme of things. It's likely to still break sales records due to expansion into more countries and categories, as well as an increase in Prime members.
"We predict Amazon Prime Day 2018 will be the biggest one yet despite the uncharacteristic speed bump from its site being down."— Guru Hariharan, CEO of Boomerang Commerce
Not bad for a retailer on a weekday in July.
The real victims: I feel most bad for the kids who will wake up two days after Prime Day to find nothing under their Prime Day trees.
Meanwhile: Monday was also the day that Amazon CEO Jeff Bezos became the world's richest man. Whether he keeps that title Tuesday may depend on how the website performs.
2. Pai's challenge to Sinclair deal grows
FCC Chairman Ajit Pai has enough votes to get an administrative law judge to consider his "serious concerns" about Sinclair Broadcast Group's purchase of Tribune Media stations, Axios' David McCabe reports .
Why it matters: This is now the second market-transforming media deal that has recently gone from a regulatory sure thing to a gamble. Like the DOJ's challenge of the AT&T-Time Warner merger, Pai's issues with the Sinclair deal run against the business- and merger-friendly posture that most GOP administrations take.
What we're hearing: The document circulated to Pai's fellow commissioners highlights concerns about several station sales Sinclair set up to get the deal approved, including stations in Chicago, Dallas and Houston, two FCC officials said.
- It also expressed concerns that Sinclair may not have been fully truthful with the agency. One official said that issue was specifically linked to the proposed station divestitures.
What we're reading: Conservative broadcaster Newsmax's petition to deny the deal lays out the opposition to the deal from Pai's side of the aisle and lines up with the chairman's concerns.
Read more of David's story here.
3. What Netflix's big miss means for new tech
In missing expectations for revenue and subscriber growth, Netflix sent its own stock plummeting along with that of its streaming business rivals. Netflix's stock was down nearly 14% in after-hours trading Monday, with Roku, Spotify and others trading lower as well, notes Axios' Sara Fischer.
Why it matters: Netflix's miss is reigniting debate around whether the new tech economy, where companies are highly valued despite being barely or far from profitable, is sustainable long-term.
"The bulls expected continuing upside to their subscriber guidance ... and when those expectations were cracked, the stock cracked."— Michael Pachter, managing director of equity research, Wedbush Securities
The miss wasn't entirely shocking. Most analysts agree that Netflix's momentum wasn't sustainable, especially in the U.S., where analysts say the tech giant was beginning to reach a point of saturation.
- Jill Rosengard, EVP at broadcast research firm Frank N. Magid Associates, tells Axios their research predicted a 2% net decrease in subscribers for Netflix in the U.S. six months ago.
- The streamer is also facing increasing competition from other subscription video on-demand companies gaining market share, like Amazon, HBO and Hulu, as well as legacy media companies looking to break into the on-demand economy, like Disney and AT&T, says eMarketer principal analyst Paul Verna.
Netflix bulls argue that the company will bounce back, and that Netflix is still an attractive investment for the foreseeable future.
"As an investor, we're looking over next five-ten years and Netflix is the number one service that every single person uses in general and probably across the world in the next couple of years. We're not concerned about the business. We love the way the numbers are trending. The only issue anyone has with the stock is the valuation."— Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management on CNBC
Go deeper: Sara has more here.
4. Startups aren't pushing for Big Tech breakup
Today’s tech startups have largely stayed out of the debate over whether antitrust law should be used to humble — and possibly break up — giants like Facebook, Google and Amazon, David writes.
Why it matters: Entrepreneurs face a dilemma: If they go running to regulators, they have to admit they’re in danger and tick off a powerful player in their world. If they do nothing, they risk bleeding out.
The big picture: Tech giants have immense leverage over startups. “The tech hypercaps have never been more powerful relative to startups, including Microsoft in the '90s,” said Sam Altman, the president of startup accelerator Y Combinator. “It’s very, very hard for a startup to compete head on with any of them — the resources are so mismatched it’s an unfair fight.”
How it works: Startups (or larger competitors) can confidentially press their case before staff members at the Department of Justice or the Federal Trade Commission, in the hopes those agencies will investigate the allegations and take action. Or the startups can go public with their concerns.
We've been here before: It’s often been startups that are in a position to lead the antitrust charge against major competitors. Two of the biggest tech wins for antitrust cops over the last 50 years followed aggressive public advocacy by a startup that became the face of the giant’s anticompetitive conduct.
- MCI's advocacy in the 1970s helped trigger the process that led to AT&T's 1982 breakup.
- Twenty years later, Netscape was the poster child for the ill effects of Microsoft’s dominance, inspiring the Justice Department's landmark antitrust lawsuit against the software giant.
But, but, but: With the exception of Yelp, there are no major startups in the U.S. that have turned to regulators to take on today's biggest companies, like Facebook, Amazon, or Google.
Go deeper: David has more here.
5. Stripe gets into book publishing
The company Stripe had already moved beyond its core business of payment processing into areas like helping businesses incorporate. Now the San Francisco-based company is getting into book publishing, my colleague Kia Kokalitcheva reports.
The details: It recently published its first book, “High Growth Handbook,” by entrepreneur and investor Elad Gil.
- The company says this has been something it’s been thinking about doing for years, and currently has a small in-house team working with outside partners who handle the publishing logistics.
- It already has its next three in the pipeline: Tyler Cowen’s “Stubborn Attachments,” Martin Gurri’s “The Revolt of the Public and the Crisis of Authority,” and a re-publication of Mitchell Waldrop’s “The Dream Machine.”
- The company says it doesn’t view Stripe Press as a potentially big direct source of revenue, but rather as a tool to accomplish its main mission of helping entrepreneurs.
“Stripe’s mission is to grow the GDP of the internet,” a company spokesperson tells Axios, adding that the company does this by providing tech tools as well as “by sharing previously hard-to-acquire knowledge and expertise about starting and running companies.”
Read more of Kia's story here.
6. Take Note
- Fortune's Brainstorm Tech continues in Aspen, including a discussion of the techlash as well as appearances from TaskRabbit CEO Stacy Brown-Philpot and Transportation Secretary Elaine Chao.
- Microsoft's Inspire partner conference continues in Las Vegas.
- It's world emoji day. (Apple celebrated by posting Memoji of all its execs.)
- Former Uber self-driving policy head Justin Erlich is now heading policy, legal and strategy for autonomous vehicle startup Voyage, per a tweet from that company's CEO.
- Rep. Mike Coffman is the first House Republican to sign on to the effort to undo the FCC's repeal of net neutrality rules, and also introduced a bill to get the ball rolling on congressional action.
- Walmart signed a big deal to use Microsoft's Azure cloud, along with AI services and a companywide license for Office3 365. For more on how Microsoft has been winning of late, check out this profile of CFO Amy Hood by Bloomberg's Dina Bass.
- The CEO of JD.com says he isn't worried about the growing U.S.-China tariff war hurting his bottom line. "For my company, I can tell you it’ll be OK. Anything we cannot import from the U.S. we can get from Europe, Japan or other countries," Richard Liu said at Brainstorm Tech on Monday.
- IBM is suing Groupon for $167 million over e-commerce patents, saying it has already gotten payments of between $20 million and $50 million from companies including Amazon, Facebook and Google, per Reuters.
- Apple removed the app Qdrops, which pushed a conspiracy theory, but not before it took in considerable revenue, NBC reports.
- The Verge writes that the European Union gave Airbnb until August to address transparency over fees and other issues or risk fines.
- Pinterest is transferring ownership of Instapaper back to the company that last ran it, according to Engadget.
- Uber has been under investigation by the U.S. Equal Employment Opportunity Commission for nearly a year following a complaint over gender discrimination, WSJ reports.
7. After you Login
There was an upside to Amazon's Prime Day problems. It gave us #dogsofamazon.