From Marhart where Innovation of Money and Power Collie in Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I'm Caroline Heinder Blomberg's World headquarters in New York, and I'm Ed Ludlow here in San Francisco.
This is Bloomberg Technology.
Coming up metas push into generative AI. Mark Zuckerberg announces artificial intelligence tools that are coming to Instagram, Messenger, WhatsApp. We're going to run through the entirety and get the reaction to Meta connect.
And Apple asked the US Supreme Court to reverse its app store ruling won by Epic two years ago. We're going to bring you the latest details.
Plus TikTok airs and ads during the Republican debates moments after candidate's spa of the security concerns with the app have more on that than the companies e commerce ambitions too. But first let's checking on these markets, because actually we've got the NASA managing to push up more than a percentage point even in the face of growing yields on the thirty year Actually we're basically flat about one basis point. We had been at decade highs. In fact, the higher
since twenty ten on the thirty year. Maybe a bit of a correction going on with yields pulling down on the front end.
We've had some weaker macro data today.
Ed we're still trying to work out the direction of travel from Federal Reserve and global central banks as they still have to tackle pretty strong economies, particularly here in the United States. The dollar manages are pulled down after days of rallying, so maybe that's a sigh of relief for some of the riskier assets out there. At the moment, we're seeing dollar indux off by five ten percent, move on to bitcoin therefore, and bitcoin manages to push higher
versus the US dollar. That risk appetite building a little bit in the og world of crypto. So if we can just shine a light on what's happening in bitcoin. We are higher on the day, so currently up almost three point three percent.
And to you on the micros, yeah, we got news and we've got earnings. On the news side, Peloton has a content deal with Lulu Lemmon. The stock up seven percent now had been much higher. Later in the show, we're going to bring you the analyst reaction because this is all around Lulu's mirror, but it has a finite life, and it's really interesting to see the stock bounce all
over the place. On the earning side, Micron, the biggest US maker of memory chips, we're talking d ram, we're talking nand projecting a wide and expected loss for the current quarter, the fiscal first ending in November. But there are signs that the memory market, maybe in the trough, coming out of a trough, will go deeper.
On that later in the program.
There's an interesting day to to Meta Connect Meta's developers conference. Look at the stock on a two day basis. The training's kind of all over the place, like while Meta connect was going on, kind of disinterested. The stock falls closes basically flat on Wednesday, but we're significantly higher today. We had the hardware announcements around Quest three and the smart glasses.
But as you talked.
About, Carol, it's about the integration of what it's been working on the research side, large language models now generative AI tools in it's suite of apps and offerings.
Yeah, and let's just listen and add as to what Mark Zeckerberg really articulated about AI at the event.
Take listen what I argue is that people are going to want to interact with a bunch of different ais for the different things that you want to do.
And I actually think that.
Over time a lot of you are going to want to make your own AIS to advance individual goals that you have, whether you're a small business and you want to interact with customers, or if you're a creator and you want to engage your community, or.
Whatever it is that you do.
He needs to say.
Mark German, who is our hands on product guy, can also will delve into how much these sort of chatbots, celebrity endorse some of them, or notably just the way in which you think Generator ai is going to ut the ante on some of their devices and indeed the offering they have for across the board social media.
I certainly think the new devices are impressive, right, but this is really maybe the last stand for Meta right. Meta for the last few years has been pushing the idea of their quest headset to being the very core of the metaverse. Right, This idea of using headsets and virtual reality for the future of working online, for communicating
with people, as the future of the social network. But if you watched Meta connect You'll notice that Mark Zuckerberg didn't really mention the metaverse, right, This latest Quest three, these new smart glasses with ray ban to pivot away from the metaverse and to move towards two things, productivity and AI. Right, they're pushing towards what Apple is doing with mixed reality, and I think the quest headset. The goal there is to focus on performance, gaming and productivity.
Whereas the smart classes they have a lot of AI features. Now let's take a look at the AI. There's these generative AI chatbots, There's these celebrity chat heads. There are a few other things related to stickers. There's AI based collaboration, and these are things Meta really needed to do, right, But nothing they announced this week is novel. At this point, we've seen a lot of similar technology from Microsoft, from Google already, from Amazon a couple of weeks ago, certainly
from open ai and others. So metas a bit of a laggard here, but they did what they needed to do to be there in twenty twenty four, which of course is going to be the year of AI for Apple as well.
So what does AI look like at Meta in its suite of apps? You know, I don't know if you're still using Facebook, Theapple dot Com, but you're on Instagram, did they demonstrate what that actually looks like as a consumer user of social media?
Yeah, I mean AI is now going to be completely integrated across the suite of Facebook apps, whether that's the main Facebook Blue app, whether that's Messenger, Instagram, WhatsApp, and what you're going to get there is a chat GPT like system integrated as a chatbot into those different messaging services, right, So have it write messages for you, have it do collaboration on your behalf with other people in your contact list. So it's a fully integrated expression of this generative AI,
which is really what chat GBT has been missing. Chat GBT is this core technology. It's a novel, it can do some cool things, but it's not in integrated into a platform. And you're seeing Meta being one of the first companies to show integration of AI across their platform, not to do similar not too unsimilar from when Amazon showed a couple of weeks ago general of AI being
built into Alexa. So really the next step of these generative AI tools is moving from this sort of raw data, these raw functions into something integrated into existing platforms, and I think you're going to see that from Apple happen as well next year. And I think Meta really showed some of the most cool stuff so far that we've seen in the I world because of how integrated is into the existing workflows that consumers use on a daily basis.
Okay, you heard from Mark number one. That was Zuckerberg's thanks to Bloomberg's Mark German, he's Mark number two.
Let's get to Mark number three.
Joining us now is analyst Mark Mahaney over at Evercresi, Senior managing Director and outperform rating on Meta with a four hundred and thirty five dollars price target.
Mark.
I start by asking you, do you understand how Meta will make money from integrating its generative AI programs into the existing suite of apps.
Yes, explain it to us.
Okay, so sorry about that, but yes, Look, they've been they've been using AI. I mean, if you used it.
There are three billion people who use Facebook and Instagram, and those people who have used it have noticed something in the last two years that's been driven by AI, which is the news feed has changed. It's gone from just content about from your friends and family to content from across the Internet. It's come from being a social site, social media site with the accent on social, to a
social media site with an accent on media. That's artificial intelligence that's helped them that they've deployed it to make the user experience more, more broader, more all encompassing, and it's paid off. You've seen rising engagement. Then flip it over to the advertisers side. You've seen return on ad spend, remprove recover at meta over the last year. That's showing up in this dramatically accelerating ad revenin growth. It shows up in our in our in our advertiser channel checks.
So look, we've already seen successful deployment of AI. I don't think the market realizes this. And now what they're doing is taking it a step further with generative AI and the use of chatbots. In the use of these of these I would you call them these little widgets, you know, emojis, et cetera. On the site, they're going to make the site even more engaging using generative AI. And on the chatbox side, here's it, they're going to better monetize youse. It's going to increase your engagement on
the site. But then with the chatbots, there's a real pitch here for businesses. This can reduce materially customer service costs. This gives businesses a chance. Businesses that rely on WhatsApp and Facebook Messenger to interact with customers, This allows them to better more efficiently handle customer complaints, customer service requests, et cetera.
So I think there's a lot of wins here.
Everybody focuses us in then video and AWS and Microsoft is the big plays off of infrastructure and platforms. But here's the killer app, and it's a Facebook meta that's deploying generative AI right in front of our faces, and they're using it to improve user engage and advertisers spend.
Okay, So that, with a bit of a mic drop mark, was a great analysis of how we're going to see money spinning out of generative AI. How does it fit into well, the rebranded meta, the metaverse, the actual hardware. How much do you think that is a decent future competitor to what Apple will eventually bring us in the first quarter of twenty twenty four.
Yeah, So I don't know the answer to that, Caroline. That's tougher and what I find interesting about the.
Way the stock traded, and I don't want to over ascribe intelligence to the markets. Market's usually right, But as we had conversations yesterday during Metaconnect about the metaverse, about the devices and the glasses, the stock kind of tricked down, and then we started getting into generative AI, the stock.
Moved up, and that's the focus today.
So I think that what it tells you is the market would like to hear a little less from Suckerberg in company about the metaverse and more about how they're going to deploy generative AI.
And I think Suckerberg kind of got the memo.
I think this was event that was kind of pitched as kind of part metaverse, part AI, but when it actually came to giving us details, we got a lot less metaverse, a lot less Oculus Quest, and we got a.
Lot more AI. And that's why the stock's reacting the way it is.
So you know, the market's telling Zuckerberg, you know, kind of, let's limit down the amount that you're investing in the metaverse, and we really appreciate what you're doing.
In generative AI. That's one of the reasons we think the stock goes hired.
But I still want to ask you, Monk, does spending fifteen minutes with a mixed reality headset on either watching something or playing something at the weekend?
Does that appeal to you?
I got I've tried both. I've got both versions of the Quest, you know, the Gen one and Gen two.
The truth of the fact is I gave it to my children then they loved it for a day. So it's if I've seen something that's enduringly appealing to people, to adults and to all sorts of people. Know not yet, but is the potential there?
I mean, why not. If there wasn't potential, you wouldn't have Apple entering this space.
So there is a there there, Whether whether it you know, I don't know what if it's if it's Quest seven that really breaks through and then you really at a lower price point and you really get people kind of massive option of these devices. I think there's a potential for that, And then you have to figure out what
are the other apps? Is there other educational apps? Absolutely, are there, enterprise apps probably, Whether whether Meta can really succeed with those or not, that's a different question.
But yeah, I'm kind of believe that there is a there there Virtual reality, mixed reality, augmented reality.
I think there's enough thoughtful people investing in this space and people looking for a different experience. I mean it is a wow experience. It just there's a lot of things that need to improve. But yeah, I think there's a there there.
Timing is everything.
I mean, in many ways, we saw chatbots and we saw AI with M and that was what twenty fifteen to twenty eighteen and they decided to put that on ICE because it wasn't as useful now a generator of AI, these chatbots are. Is there a winner takes all scenario?
Hair mark? Because it's interesting that.
Of course in this respect we've got meta teaming with Being and with Microsoft here, No, I.
Don't think so.
I think there's going to be a lot of plays and if we just step back, Yeah, it's a wonderful development that we're all going to benefit from as you know, as consumers, as businesses, as individuals, you know, well what have you?
We're seeing just a dramatic step up in compute power and that's just a lot. I mean that all builds on you.
You wouldn't have Jenai if you didn't have the Internet, if you didn't have mobile internet and if you didn't have cloud, but they all build on each other.
It just means that these digital experiences are going to.
Become more relevant amthing, more personalized, more useful, more entertaining. So I think it's just super exciting, and I think you're going to see a lot.
You know, we've got these.
Waves now if infrastructure and platform investments, and people are kind of waiting to see what apps come out of this, And I think I'm sure there are going to be some apps that you know, I can't think of, but that'll be out in the next three to five years that we'll look back on and say wow, or look at it and say wow.
But there's also the ability to apply.
Jenai today to improve existing processes, existing experiences.
But I think there's one wonderful example on the right in front of us now.
It's Meta Mamahiney who doesn't want Snoop Dogg as a dungeon master? Hey ever, Core I sign we thank you so much. Epic Games. It's the maker of, of course, the popular online game Fortnite. Becau's laying off about nine hundred employees. That's about sixteen percent of its workforce. That's all according to source, who says the job carts were announced in a memo to staff. Epic is one of the biggest privately held video game companies in the world.
And of course, speaking of Epic, well, we know that it's had a long running battle with Apple. We've got an update on it for you and hard of it all. Epic claims that Apple's online marketplace policies violate federal law, claims that a federal judge rejected two years ago. But yesterday Epic asked the US Supreme Court to review that ruling, and just this morning, Apple found its own petition with a Supreme Court to review a different part of that
ruling from two years ago. Let's spreak it all down. Blue Mos has been keeping up to speed with what is a very long saga, and just from your perspective, what Epic is trying to bring to the Supreme Court's attention is one particular nuance in the two years ago ruling, a California part of the law.
Yes, that's right, so Apple one a majority of the ruling that basically said that it's app store policies don't violate federal antitrust laws. And that's the part that Epic is now appealing at this Supreme Court. And Epic one a ruling on a California state law claim related to competition law, where a judge found that the fact that Apple doesn't allow developers to point to alternative payment methods that perhaps through a link or a button or an email saying hey, you can go on the web and
go directly to my website and make a payment. So the jets thought there was unlawful. And that's the part that Apple is appealing, and Apple wants to make sure that that part of the decision is reversed.
And so that's the part that Apple is appealing. In parallel, Epic is also asking the courts to review a separate part of the original decision.
What does Epic want.
So Epic one part which I talked about, But Apple won on the larger sort of aspect about federal antitrust laws, and the court held that it's APSTRO policies were absolutely fine and didn't violate any anti competition laws. So it upheld ABSTRO policies at large. And that's the part that Apple won, and Epic wants that reversed.
All right, Bloomberg's Malti Nayak at the face of it and all the court battles, Thank you so much. Coming up here on BlueBag technology, Google has become a favorite for law enforcement seeking location and search data even for nonviolent cases. That's today's big take. We're going to bring you one of the reporters behind it. Coming up next, I will also take a quick look at AMD. There is no newsflow catalysts behind this stock, but on track
for its biggest jump since May. AMD on a two day basis also on track for its biggest jump since May. A bit of momentum rising for two straight sessions in today's session up five point eight percent.
This has been big.
Technology time now for Talking Tech. First up, Elonmusk SpaceX Well. It's received its first contract from the US Space Force. It will provide customer satellite communications for the military under the company's new Starshill program. The decision extends Musk's role as a defense contract.
Also teaming up with US agency.
This is Palenteer signing a two hundred and fifty million dollar contract from the Defense Department. Under the new three year contract, Palenteer will research, develop and machine learning technology and affirm it's relationship with the US government, plus Apple's new iPhone fifteen, maybe too hot of a commodity, at
least that's what some users are complaining about. How some mcgrites has spread online and on social media, saying that the back or the side of the phone comes too hot to touch while gaming, during phone calls, or indeed when charging it. So Apple so far has not responded to request for common.
Ed that's a lot to do with titanium. As reported by Mark German now Bloomberg's shining a light on a growing trend regarding privacy concerns. Some police are using warrants to dig up location and search data from Google, even for nonviolent cases or on those that have nothing to do with the crime. It's the big, big take out in the Bloomberg magazine on October third for more scud of Julia Love, who covers all things Alphabet, the parent of Google, and author this story.
Let's go through the mechanics.
So the police try and get a warrant from a judge, and they go to Google and they ask for this data.
Why Google has become one of the favorite destinations for law enforcement when they're trying to solve crimes. It has a big repository of location information. So if say, a burglary takes place at a jewelry store and the police, if they don't have other sources of evidence, they might go to Doodle to see if Goodle happens to have registered any devices that were present at the location near
the time of the crime. And that can often be a first step in an investigation, but it raises big privacy concerns.
Let's talk about the privacy concerns then. I think what's interesting is you write that this is often an avenue when a detective is at a loss. They can't go any further, so they turn to Google. But they are getting hold of people's data.
Yes.
The problem is that because Goodle has such big databases, that means that in order to find the potential.
Suspects, they have to also.
Go through data of people who had nothing to do with the crime, and police sometimes will have to go through those innocent users data in order to home in on the users who truly might be involved.
Extraordinary the numbers.
Google says it received a record sixty four hundred and seventy two search warrants in the US alone last year, and we know that's a lot. We know that in many ways, Apple has a different way of allowing or disallowing the sharing of such information. But you look, they also if you using Google Maps on your Apple iPhone, then your data will be exposed as well. Ultimately, what are people taking issue with and how are people starting to fight back on this?
What's Google's response?
So there's different schools of thought on this. Some people feel that we need to give law enforcement every tool that they can to solve crimes, but other people feel
that the privacy implications are just too great. They are concerned about the possibility of using search data a search for the address where a crime took place could have been committed by the culprit, but it also just could have been conducted by someone who was on their way to the place, and so some people just feel like that's too big a risk to take, And legislation has been proposed in New York and California to ban the police from turning to doodle in this way.
Your story really focuses on one particular well National Associated Criminal Defense Lawyer's Fourth Amendment Center, a guy called Michael Price, and just sort of highlighting that this is almost the opposite of how a warrant used to be where you'd ask for specific details on a specific person, and this is.
Sort of far more catch all.
I go again and ask has alphabet has Google responded to all of this?
How are they dealing with it? Internally?
These warrants put.
Doodle in a difficult spot.
They're court orders, so they're not optional that the company is obligated to comply. However, they really go over them with a fine tooth comb. They try to identify warrants that are overbroad and that potentially violate the Fourth Amendment, and they do push back on those. They've got a big team staff by lawyers, but also often young people just starting their careers who are tasked worth fighting back.
But they do find that if a judge has signed off on it, there's only so much the company can do.
It's an amazing piece to go and read yourself, and Davy Albo, we really appreciate you running us through it. Go get the Business Week article and delve into it. Thank you, Julia. Welcome back to bluemag Technology.
I'm Caroline Hyde in New York and Imed Lovelow in San Francisco. Let's get that private market news. It's time for the VC roundup and an alumnus of Google's AI research unit, DeepMind has a new venture fund, Mythos Ventures, that will bankroll young AI startups.
The firm is founded.
Earlier this year and has raised fourteen million dollars from more than four dozen different investors that all according to a filing, and also open Ai is in talks to raise more than one billion dollars from SoftBank to develop
a consumer AI device. That's the Financial Times reporting, citing sources and open Ai chief Sam Altman has tapped former Apple design chief Johnny Ive to design quote the iPhone of artificial intelligence plus Alpha Sense says it raised one hundred and fifty million dollars in a Series E financing round led by Bond, bringing its valuation to two point
five billion dollars. It will use the funds to expand the Enterprise solution, grow its collection of searchable business content, and make strategic acquisitions that expand its platform capabilities.
Cara I mean, well, let's stick with the private markets for a moment, because black Lane it's an ouproviding.
Premium global chauffeur services.
Let's closed a Series F funding with the company seeing evaluation that's roughly fifty percent higher than its previous one from twenty twenty. Backers of the series f including Mercedes, Ben's Mobility, AGESH Enterprises, and six, who is partnered with the company as it continues to expand, so gains Wiltov.
I'm pleased to say Blacklin CEO is joining us and remind us YenS back in what was it twenty eleven when you first found in this company, many felt okay, the European version of Uber, but you've managed to carve a different path, offering longer kind of rides.
How are you distinct.
Yeah, exactly as you said, it's about the use case that we serve. It's a different one than if you would just hop into a car that transports you around the block.
It's a bit like food.
If you want right, there's this fast food chain, there is a mid tier restaurant, and there are top restaurants out there where quality counts, where you really want to enjoy the experience, and it's comparable to us. We are one of those top restaurants. If you want the top transportation service and you can enjoy it, especially when you spend long times in the car. So naturally the long distance is our sweet spot.
And we're looking at a lot of Mercedes Benz there. It feels as I you've got a few strategic investors on board, Mercedes Men's Mobility being one of them. In sixth Just how are you teaming with ultimately a company that will will rent me a car for a short term basis?
Yeah, same explanation. Actually it's about use cases, right, and sometimes you have the use case for a rental car, but also a Sixth customers. Sometimes one's a different option. And therefore, when you are already playing in a premium mobility space, than the premium show for service backly and fits very well into the portfolio. And so we are actually partnering up. We will be introduced into the Sixth
booking channels. That's helping us for distribution. It's helping Sixth to capture a new service that they can offer to their customers. So it's a win win. We are starting in North America and then continue to expand globally.
Yeah.
And the two big stories of the last year in this space were the rental car companies not having inventory because of their knee reaction to the pandemic, and then on the the ride sharing side, the driver deficit and driver supply. How did chauffeur manage and navigate those two scenarios.
Yeah, that's a great question. It was in detail challenge for the whole industry, not only the kind industry, the rental kin industry, but also the whole hospitality industry. And we are operating in both segments, right, So it was about car shortage, chip crisis.
It was about.
Chauffeurs and supply of premium show feurs, which is difficult, right, It's not a commodity. A professional chauffeur is something very special that needs training and week last year we quad drippled our revenue, right, so imagine such a demand surge into our systems. Luckily, we have a very solid and
loyal base of shawfee services. We helped them also to pull through the difficult times of the pandemic, so we were able to keep up to our high standards of actually almost one hundred percent fulfillment rate for every booking that has been placed in our system also during those times.
So I also find the cap table interesting. Caroline's absolutely right. You know, you look at sex and Mercedes, but what is it that you guys have black lain. Technologically speaking, what is it that is unique that justifies this round justifies what is a fifty percent jump invaluation?
Yeah, it's the whole package, right, It's the digital product that is driving a lot of value.
Right.
We are a technology company, right. We have a huge engineering a team that is building the dispatching technologies behind that are building the apps for both sides of the marketplace that are building also the products for the city to city for instance, or prediction algorithms to to understand how the next day might evolve. Because we have like a lot of inflow into our system. We have pre book rights, we have on demand rights, we have a
very special fleet. We want to utilize those exclusive fleets in many markets in the most optimal manner. So it's a very different spin to technology than if you compare to pure on demand play for.
Instance, and when using the new funds yen. Is it about talent? Is it about those engineers? Is it about expansion and marketing? Where do you deploy the cash?
Yeah, it is about all of that. It's like we grow, especially on the technological side. We will invest heavily into continue to push the limits technologically. We will launch more products the city to city is one of those. Philadelphia to New York, Miami, Fort Lauderdale a center, Barbara, those kind of routes are really growing as significantly. Well, we will push them and we will launch more markets. We have an electric only fleet now in cities like Dubai
for instance, on the road. We want to continue being also the sustainability leader in the transportation industry. Right in twenty seventeen, we were the first to offset every single right and we have led the industry to follow. Now we want to also lead the electrification site and this is it's also something that requires investment.
Of course.
Jen's I said earlier that this was a fifty percent jump in valuation. It's just Caroline and I and the global Bloomberg technology audience just between us, what's the valuation?
Are you a unicorn? Based on this? Give us some scale.
We are on a great way to reach it.
Not there yet, but if we continue to grow in with those numbers quadrupling last year, this year also looks very very promising. I think we will meet again the three of us and discussed us in more detail.
All right, Yeah, and taught of black Laine. See great to have you here. On the program. Thank you, Caroline Group.
Next time, I'll tease it out of him.
Meanwhile, get a quick market check for me as we assess the private markets. There, let's look at the public We're up by one point three percent, and as that one hundred, we're actually managing to see a relatively risk on kind of a day, even though.
We see some macro weakness.
Maybe it is as we anticipate in the Federal Reserve not having to go so far so far ast we're looking at the two year yield actually coming down some basis poice, it's still above five percent. Nevertheless, we are pulling back a little bit. That's spurring bitcoin to the height.
So I go into the.
Individual names though for a moment, ed because we have had some lackluster numbers coming out work day down eight percent worse performer.
On than as that one hundred.
Is it perhaps re engauges new team, new CFO and just recalibrating growth seventeen to nineteen percent, revenue increases where they're expecting it. We're seeing Micron up some three percent, down some three percent as well, that too, as they curtail some of their outlooks on the back of what is still a very difficult market for some chip makers if they're not being really spurred by artificial intelligence. And I'm looking at Serious ExM, this one continues to be volatile.
Liberty Media of course trying to be combining its own eighty five percent stake in these traded stock.
Of Serious XM.
And at the moment we're up some seventeen percent, but yesterday it was down hard from New York for San Francisco.
This is Bloomberg Technology.
Let's take a quick look at Peloton shares because they're doing pretty well well. The biggest moves is July thirty first of this year, at one point moving the highest
since February. That's after agreeing a deal with Lululemon to tap its online workouts and team up on apparel intelseampiece of say founder Telsea Advisory Group is with us now writing a note on what ultimately seems to be Peloton once again finding new partnerships way to bring their product to more people, while Lululemon seems to be stepping back from its mirror product.
Yes, Lululemon is stepping back from its mirror product, but keep in mind it's less than one percent of sales. I think the partnership with Peloton adds something to each. For Lulu Lemon, they get digital content that they don't have to provide themselves that now becomes a lower cost. It's a revenue share for Peloton given the app memberships,
and they'll get a percentage of that fee. So with both communities having in age fitness members, it's a win win for each and the co branded apparel only is a benefit to Lulu given they wholesale the product to Peloton and they sell it in their stores and online.
Dolge was about that for what the apparel part.
Of it means for Peloton, because they were trying to make their own kid and basically was out just wasn't working out for them.
It didn't work, the apparel didn't work. It definitely requires inventory management, it requires design and talent, It requires an infrastructure and sourcing and manufacturing. Take that away with the awareness that Lulu has with their apparel brand it with Peloton and Lulu Lemon, you have a win win for each and at the same time for Peloton it helps
to increase their presence. Keep in mind, Lulu has around thirteen million members compared to Peloton which doesn't have that sort of ilk, and as a result, you can basically grow the reach. I do not think that Lulu Lemon is buying Peloton. I think this is an opportunity for Lulu Lemon to continue to track new members and they don't have to bother with the digital content, of which Peloton has a ton that consumers seem to value.
And like Dana, I still find the shares reaction weird because at the end of this year, Lula Lemon discontinues the Mirror. So basically what Peloton gets is access to an audience that exists now but won't grow in the future.
Why is the stock up so much?
I think the reason why Peloton is up is because to be able to partner with Lulu Lemon, a powerhouse in terms of fitness, a real differentiator in terms of their apparel assortment and the technicality and functionality.
And keep in mind, with a peril what Lulu is doing.
You look at accessories, which grew forty four percent on top of fifty one percent in the prior quarter. You're entering a wider universe with a quality partner that is a real solid balance sheet.
Does this signal anything to you about the value of Peloton's content, but how good it is.
I think it does signal what the value is.
They have greater instructors, and some of those instructors are going to become Lulu brand ambassadors, and they have a constantly changing product suite and basically content suite that is going to continue the appeal to.
Lulu members of their app.
So I think it's a win win for each and I think the transition to the Peloton app for Lulu members will only expand the platform for each of them.
How far can Barry McCarthy take this?
How many more deals, how many inter linking and interwoven partnerships can he bring to the table to really inspire this pop in the shares a lot?
And I think he needs a lot.
I mean, yes, obviously the stock is up today, but it's still a long way off from where it had been and you're really transitioning into a new normal in this post pandemic world. So the way for their content to prove value added to a wider audience, I think is what he's looking to do and looking for these partnerships to increase the value of what Peloton is today and what it could be in the future.
I mean, five hundred million is what I think Lunar Lemon spent on Mirror and.
They basically like wiped it out, They wrote it off.
It's better to try and fail fast rather than keep it going and not continue investing.
We know where their growth is coming.
It's coming from international, it's coming from enhanced product and now an increased member base too.
That is organic growth. What about inorganic growth?
You know you said that you don't think Lulu Lemon's going to buy Peloton, but it's always part of the conversation someone buying Peloton. Do you see that happening anywhere?
It'll depend on these partnerships. Who do they partner with. What does it add to the value of the company that.
They're partnering with. That'll be the key.
And what can Barry McCarthy do in order to create a data company and a content company rather than a product company. The data has more value than the product, and they still have product that they need to move.
I'm glad you went there.
I think it's time we asked you, Dana, give us your Barry McCarthy scorecard. What do you think of the job that he's done.
I mean he's improving the business by being able to partner with a Lulu Lemon. I don't think any of us would have seen a Lulu Lemon partnership a year ago. So showcasing the value of what the content is and what.
The member base is.
Given the similarity and demographic to a Lulu, it's a win win. It wouldn't have been here a year ago, and that's a proof point.
That's positive. You still need.
More on the board because free cash flow break even free cash flow is definitely the quantitative scorecard that you have to measure in the future.
It's interesting we all sort of reassessed Peloton and decided, look, this isn't a mass market product.
This is a high end product. It's got more of a niche.
There's a Tonal, there's a Pelaton, there's you know, these more unique ways in which we sell. But now it feels us as a content company, you're thinking it could be more of a mass product.
Again, it can be because you look at some of these floor exercises that you have that you don't need product for. We know we're barrier McCarthy comes from. We know what he's been doing. Look he's on the board. Of instacart also, so he knows what's needed to create value. Can he get from here to there in a fast enough timeframe is what needs to be seen.
Is there a future for at home workouts? And the reason I asked that is I'm an Equinox member.
Right.
They have an agreement with soul Cycle on the content side, so you can either go to a human led class or you go to the gym and you use a library of classes. Peloton's not quite gone there yet. Do you think they will?
It's something certainly they'll examine over time. I don't think there's anything that they're not looking at in order to extract value. So it's a matter of time, just like what we've been seeing with some of these partnerships that Barry McCarthy is putting in place.
All right, Dana Telsey of Telsey Advisory Group, Great to have you on the program.
And what's been a big story.
We need to win elections, and part of how we win elections is reaching the next generation of young Americans where they are.
This is infuriating because TikTok is one of the most dangerous social media actions that we could have.
That was Republican candidate Nikki Haley there criticizing her rival Vivit Ramaswami for joining the app TikTok and echoing other politicians' concerns around the app's growing role in the US, and moments after candidates debated on how best to limit China's influence in the US, a commercial break featured an ad from TikTok. Ads from the social media platform appeared several times throughout the broadcast, with one of them featuring a US Navy veteran who goes by the nickname Patriotic Kenny.
Let's bring in Bloomberg Sarah Friar, our technology editor who pretty much leads coverage of social media. Okay, so what would the arguments for and against in this debate?
Well, I think that there's a real problem that politicians have here, which is what they want to show that they are strong on China, that they have this this ability to maintain our national security as a foremost priority. But at the same time, they want to make sure that they get elected. And if you want to reach young voters, you have to be on.
TikTok, much like halftime at the Super Bowl. You know, ads that run in these political debates get seen by lots of people. Has anyone actually had anything to say about the irony of that since it happened, Well, I think that it's.
It's just it goes to show how critical TikTok is right now as part of our cultural infrastructure. I mean, this is an app that is that really gains seen during the pandemic, but isn't going anywhere. They're only expanding their ambitions. They're moving to shopping, going head to head with Amazon. We've written about that a bit, and they have You've had this pressure from the US government on you know, should we blan this app? Should we figure out how to put restrictions on them? They had that
partnership with Oracle, but that criticism has slowed down. The government has bigger problems. They have a potential shutdown coming this weekend. So I think that that TikTok is now like, hey, we need to use this opportunity to advertise to US consumers. We are gonna be part of the twenty twenty four election. And that's what that's what we're going to try to take advantage of.
Caroline when we cover the news with TikTok, it's regulation, it's the relationship with China, but out in the real world across America, tens of millions of people use TikTok and they love it.
Yeah, one point seven billion people use it across the world. And so to that point, has the growth at any point showed any deterioration, Has it at any point seen that us have pushed away against the app?
Well, I think that we continue to see growth here. One struggle that TikTok recently faced is actually in Indonesia, which is a place where it is extremely popular, but the government is starting to take a concern. They said that now TikTok cannot as they expand their shop tool there, they actually can't directly connect collect payments through the app,
so that really hampers their ability to expand there. So I think when resistance to TikTok's growth does come, it comes in the form of government resistance, and I think there's going to be more of that for this particular app, just because of its Chinese based ownership. It's a little it gets a little bit more of a microscope, a little bit more scrutiny than the other apps. And those Republican candidates would tell you that's for good reason.
And talk to us a little bit more about the e commerce play here, And we had Matt Mahiney on a little bit earlier in the show, and he's been putting out a note on Amazon, the opportunity to buy into that stuck after its dip, but also some of the competition wheel of false coming from the Timus and the Tiktoks of this world. How much of a pressure do you think it will be from an e commerce perspective, Well, we.
Had the scoop here at Bloomberg on the Black Friday campaign that TikTok is planning.
They're going to give really steep.
Discounts on TikTok for for their for their goods, and they're going to make it really easy for merchants. They're essentially paying for merchants to to have visibility on the app and not have the same kind of fees that
they have when they list on Amazon. Whether that's going to work to migrate consumers to do their Black Friday shopping or holiday shopping on TikTok, I don't know, but it certainly is the most significant run up against Amazon that we've seen in the US in a while, and they do have the budget to make it happen.
Because now I won.
Like, just as the FTC is really pounding the anti competitive table.
These competitive edges seem to keep coming in.
Sarah fra, We thank you so much just really drilling down on the world of TikTok me.
While that doesn't to this edition of New Technology.
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