From the heart where Innovation of Money and.
Power Collie in Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I'm Caroline Heinde, a Bloomberg's World headquarters in New York. Ed Ludlow is off today. This is Bloomberg Technology coming up. Full earnings coverage ahead. We wrap Spotify's results and push your head to the all important alphabet Microsoft and Snap Plus what does Twitter's change to x I mean for the company's brand value? Will break down the potential implications and how is AI rewriting the rules for the two hundred billion dollar gaming industry. We'll sit down with Super
League Gaming CEO and a hand for her thoughts. The first big week for earnings. What is one hundred and seventy companies reporting this week? But the two who want to keep an eye on to Microsoft alphabet is also going to be Snap as cool as well. Let's let's dig into some of the key AI plays with Anna Agrana from Roomberg Intelligence, who I'm pleased to say is on the all important week right here in the New
York studio and the rallies have been hard. What forty five percent at least for Microsoft so far this year. The valuations must make a few people question whether they can live up to it.
Yeah.
I think that's why, you know, we'll see tonight when the cloud results come out, is whether there is any kind of a push from the increased use do chat GPD or is that offset by week corporate spending. And I think that remains the biggest question for Microsoft. They have to come out and defend their cloud numbers and showcase that there should be an improvement in that over the next twelve months for you know, this valuation to.
Hold and so maybe looking forward to when AI can start to be revenue generating. But when we look at Alphabet, everyone's been worried about whether it's been a competitive threat to their search business.
Yeah, but I think that's too soon to call that. It's going to take a while before all of these things really, you know, play out. Microsoft is behind on search and I don't think that they can catch up in a quarter or so. You know, it's it's very impressive to see what the chat GPT has been able to do, but you know, habits are not going to change overnight. It's going to take some time for that
to happen. But as I said, cloud business is where it really gets defined for Microsoft because if you look at it, Azure's growth was forty seven percent a year ago, It's going to be around twenty six twenty seven percent today, So it's a massive drop from that high bar. But the question is is this the quarter where this we know we see the bottom and we start to see a U turn next quarter or is it going to take another quarter or two for that to play out.
And I think that will be driven by comments from the CEO and the CFO, is that the new AI workloads are they really coming, you know, with a lot of momentum, or we are still going to be a while before we see that.
Looks at Microsoft, of course we're anticipating hopefully that the bottom is in for advertising when we look at what Alphabet's going to be pulling in great setup for US and Agarana on all things Microsoft and of course some of the other big beasts all love you out there, is that actually maybe these big beasts to run too far, Maybe you need to be cautious on some of the
magnificent seven Cafmoon Navaria is one of those voices. Chief Market stretchgist over at Stonext Group and Catherine, how are you trading? How are you thinking ahead of these big, all important results.
Well, we have earnings this week coming up with some of the major powerhouses and Microsoft and Visa and Verizon across the board. You have some big names reporting earnings, some which are ech between twenty and twenty three percent of their respective ETF and indexes within the communications sector, within technology. So it's going to be very important that these beat for the market to continue to move higher.
They are likely to do so.
But what I would say is that we're at the precipice, or we're at the very.
Peak of where we are.
Anticipating the Fed to stay on hold. Everyone's expecting twenty five basis points tomorrow and then on hold for a good amount of time. My expectation, however, is that if the consumer remains as strong as it has Caroline, we had consumer confidence commit at the highest in two years today, then it's going to be very difficult for the FED to get to that two percent target with service sector inflation as robus as that is and will continue to be.
If that's the case and the FED has to hike again, then this is negative for those highly interest rate sensitive sectors and stocks which are the biggest heavyweights in the indices.
So good that you put it in the macro context. I'm therefore interested in if you have ridden this wave, the Magnificent seven, the big AI trade, do you have to now protect the downside? Do you stop profit taking?
Well, it's a good moment to at least play the laggards, and what we've seen is some of those laggards catch up. This is the catch up trade is the definition of so so it's really been tech and specifically AI that has led the market rally year to date. We have not seen material appreciation in materials or banks or industrials until today, so we are seeing industrials jump quite a bit.
We at stoneacks have a really big commodity section, and the guys are more enthusiastic with regard to possible demand for these materials. If China does in fact come with a material or a significant infrastructure or stimulus package of some sort, so I would say, play the catch up trade, Play the laggards, the cyclical laggards that will benefit from
what could be a very good print on Friday. If we get core PC coming at less than four point six, where it's kind of been for a significant period of time, maybe four point one four point two. Then that's going to be additional boost for the the for the long risk trade, which is in my view, the most overcrowded trade today. So yes, there are potential to still play this rally, but I would advise clients that everything is cyclical.
We are in an economic cycle, and in my view, the next phase of the economic cycle is going to be recession. Timing is the tricky point.
And it's that global recession.
Well, you know, I think it's meaningful to talk about different stages. So perhaps the US enters recession after Europe does, or China enters slow down, So there's different phases, so it doesn't have to all happen at once, and we shouldn't expect it to. But I do believe that these delayed impacts, and everyone talks about the infast, infamous, long and long and prolonged impact of monetary policy in a data dependent FED doesn't really mesh. So what I would
say is, look on Friday's number. Friday's number is probably going to be very good, and I would say Thursday and Friday with second quarter, GDP, Caroline and core PC coming in respectively Thursday and Friday are going to need more important data points than Wednesday's very well expected twenty
five basis point hike. If the United States is or if the Federal Reserve is really serious about its two percent target doesn't change, it isn't complacent with a three handle or a high two handle, then we could get an additional additional hike. And if that's the case, then we're talking five hundred and fifty basis points maybe more in total rate hikes that will start to affect the credit cycle. We're already seeing some difficulty with regard to payments in the real economy.
Causin just how many of your clients are wanting to play the AI tech trade, how many of them feel they've missed it, how many of them feel that there's other names they could look at, other than some of the really big tech heavyweights.
Well at so next, we do cover a wide breath. So it's everything from commodities to tech, to securities to globle payments and clearing. So it's a massive company. We have four thousand people and it's a fortune one hundred and that is deck listed actually, but a lot of clients are keen on following this trend, and you know, they follow the buck. So what I would say is there's a lot of interest with regard to the laggards, looking at the small caps which have lagged, for example,
the triple ques in a very meaningful way. So there's interest in finding ways to play this momentum driven multiple expansion driven rally without getting into the high flyers at exorbitant multiples. And my contention on Caroline is that the growth sector, specifically AI in tech, is trading at exorbitant multiples.
And I sort of asked a little bit about hedging. You sort of gave this very thoughtful response about well, them playing some of the laggards in different industries, But what about volatility gauges? What about looking at ways to protect your downside? Is there a way of doing that for some of these well, very lofty valuations.
And that's another way that our clients are playing this with our options desk against stone cks. What they're doing is they are buying vxx options, or they're buying puts on the S and P five hundred index. These are ways to protect in a cheap way. Of course, because the market is so exuberant and complacent at the current levels, making this kind of a countercyclical portfolio policy. And this is something that I published in my piece last week.
It's important to think counter cyclically when the market is so exuberant and so powerfully positive, to protect yourself, and you can do so in a cheap way. You can hold a nice portion in cash, buy some gold by defensive sectors which are very cheap at current levels because no one's really anticipating and I think that the recession risk is massively underappreciated currently. So that's staples, that's utilities,
that's healthcare. These are sectors that are defensive and value driven in nature, and that's also where clients are focused.
Great to get the perspective diversifications where it's at. Katin Manivera, thank you so much, Chief market strategist at stoneA X Group. Meanwhile, coming up, we've got more on the earning theme. Spotify look at misses on estimates on revenue, but it does give a strong monthly active US account. We're going to dig into the details speaking of earnings as well. Actually,
Katra mentioned the name Verizon. We're watching shares up Percenter's point largest US wildless carrier actually reported earnings that beat estimates of profits for subscribers after a rid of a surprising turnaround in that customer growth from New York. This is Bloombg technology. Let's take a look at Spotify because
the reported earnings before the market open this morning. And look, the shares are getting beaten up off the back of it because second quarter revenue and third quarter revenue well forecast. They missed expectations. So look the forecast for monthly active users was better than expected. We're trying to gauge the analyst reaction to this one city in particular, dean spotifyer by saying that given their revenue miss quote, we would
not be surprised to see the shares trading lower. Shares currently down as you see what fourteen percent almost on this day of trade, Sunday sharmar and pleased to say it's another analyst we can turn to with this moment. Third Bridge joining for more and look, it's the worst days is February twenty twenty two for this particular stock. Were you as concerned by the forecast as the market seems to.
Be again calin' going to have going to be on again. A couple of things over you, I think when you're thinking about this longer term, right, yes, the market is clearly being a life spot of five because of certain misses, and I think this is mostly around their issue with
slightly missing their gross profit margin targets. But if you look at the bigger picture over here, right THEMAU as well as a premium subscriber editions that they were able to achieve in this last quarter really shows that their overarching strategy of gaining more subscribers in developed markets and developing markets is beginning to play our play out. I think the big thing over here to bear in mind for retail and institutional investors is Spotify is executing on
rationalizing its cast space. It's really trying to be a leaner machine across the entire board. But such things do
take some time to materialize in terms of earning. So while we are seeing a yd really substantial shareprise rally versus the slash that we saw in twenty twenty one to twenty twenty two, I think, based on our observations and the expressive interviewed at Third Bridge, the penalization right now might be more of a short term reaction as everybody's getting used as this information and sort of getting prepared for what QT and Q four holds for them.
Okay, so push ahead the premium price height that we found finally catching up with other offerings out there from Amazon and the like. Do you think that will in any way crimp back on that user uptick?
We've seen such a great question, right, So that's something that everybody is waiting to see how it's going to play out based on the observations and the analysis we have done.
Music as well as music.
Streaming is quite a commodity and people tend to not hurn as much as they would expect. If you think about Spotify's timing with this as well, they're doing it after majority of other players have already taken this move, so it's kind of defensive on their path to do this and also imperative of them to do it as well. Again, difficult to say currently at the stage whether it's going to lead it to a huge amount of churn, of substantial slow down.
An uptic of new consumers.
But if the price that they're playing right now versus other players, it's more or less in line or slightly competitive, it shouldn't be as negative and impact as everybody's anticipating. Also, fair enough, Spotify has indicated it's going to be doing this for a while, so it shouldn't necessarily be such a shock to the markets across the board because they pushing for this for a long time as well.
This is a stock, as you say, that's rallied hard on the year up now seventy seven percent. I'm interested to standing on whether it's been the AI exuberance that has been caught up. And we know that they have an AIDJ for example, but how much can artificial intelligence add to the bottom line in any way?
So you know, great thing over here. A couple of things when it comes to AI right. First off, the share price value, if you really think about it, it has been driven because of the huge layoffs that they had they got out of down our staff as well. They've really been trying to clean out their operations and build out that oppec space, which is what investors have been asking for over that time. I don't think that this is that much of an AI play in terms
of what's driving the share price valuy. I think around artificial intelligence a big thing that everybody wants to understand right now, Yes, it's a buzzword, but Spotify has been implementing AI and mL for a substantial period of time, even when they recommend their music to us, right so,
they have already dipped us into this water. There is some contentious issues coming out right now between the music the record labels as well as the digital streaming platforms, but they've always had a contextuous relationship.
When we're thinking about AI and mL.
A big thing over here is just going to be how much more technology do they need to acquire, how much more money do they need to spend on this? And then how does that story play into their cash constraints, on into their profitability constraints. That, of course, is something that hasn't been directly addressed so quickly, And perhaps the next quarter or two will tell us about how Spotify.
Is going to think about investments in this.
So only then will we get to know exactly how the market's going to react to those costs or the investment costs for that.
I mean, meanwhile, go back to the cost cutting. We are anticipating further job cuts, I think they said in the next quarter of the CFO and don Astrov you mentioned, I mean a big talent loss from a podcasting perspective, But is this the right direction to be trimming costs when it comes to talent and people?
So I think the big thing with don Astrov as well, right, so quite creative in terms of the content that was being created podcasting, especially back into twenty twenty two, was the buzz where that Spotify was going for at that time. But it's been pretty evident so far that monetization and
podcasting is pretty hard. Despite an increase in consumption across the board, the technology that they had, or the entire situation of how music streaming or podcast advertising works, it doesn't really lend itself at the current moment to create monetization opportunities. What they're going to be doing over here is going to be getting smarter in terms of the content that they have. They're going to be trying to
monetize that a lot better. And if that requires them to take a certain amount of hits or have a certain degree of losses to curtail and get a bit leaner, they're still providing that story of profitability which the market cares about. Again, right, they've shifted or the market is shifted from that story of podcasting growth towards a story of a bit more of a conservative company with better margins.
Sundy. Great to catch up with you. Thank you, Sandy Shehama working at five pm over there in Europe. Third Bridge Analyst time now for Talking Tech. First up show Me plans to focus on five G smartphones and Alena product portfolio in India. Now that what's dominating, Chinese manufacturer is trying to call back market share lost the rivals, including South KOREIZ Samsung. In India, it's, of course, its
second biggest market. Meanwhile, Adobe's twenty billion dollar takeover of design startup Figma is on calls for an investigation from EU merger regulators. Purchase is also facing global scrutiny as the US Justice Department prepares an antitrust lawsuit seeking to block the merger, and Sequoia while it's kind a third of its talent division, a sign of continued restructuring in
the world of Silicon Valley startups and VC now. The move comes as the firm parts ways with at least five investing partners, two of which the champion Sequi's doomed backing of Crypto exchange FTX. Let's go back to the M and A theme though, if we're just talking Adobe and Figma, what then of Amazon's deal for its acquisition of I Robot. Now I robot is actually now going to come at a lower price point for Amazon, it
would seem for the rumor maker. It's now going to be fifty one dollars seventy five per share, down from sixty one per share when it was originally agreed. Change. We understand off sets some rather expensing debt that I robot is taking on. Let's go to Spencer Solaper, who is oman on the ground when it comes to Amazon and Spencer, I'm interested in this pretty hefty price car. I mean, were you anticipating it because it is a pretty expensive debt deal that they've struck.
Yeah, and it actually it seems like the regulatory scrutiny is slowing the steal down is actually benefiting Amazon because you know, this is I Robot's an example of another one of these kind of pandemic darlings that people were just snatching them up right and left when everyone was locked at home and trying to keep their holms nice. And now they're struggling from people returning to normal habits, which I guess includes keeping a messy house or cleaning
the house yourself. And so yeah, so they're able to cut their price in response to this debt that I Robot had to take on because the market is softer.
We've been naming ours various things back at home. But I'm interested, Like for Amazon, there's another key price point for them and cost base, which is of course as people, and we know that Amazon have been trimming on that people. There's an interesting news point today that well, the deal between UPS and teamsters, so their own delivery force seems to have been struck. Now what does that mean for Amazon, because of course we know that they have tension with labor unions.
Yeah, that it is interesting. So in your term, Amazon wasn't sweating a UPS strike too much, even though Amazon is UPS's largest customer. I think one in ten UPS packages actually come from from Amazon in the US. But still Amazon wasn't sweating it too much because they have
their own delivery network. They have, you know, their branded vans out there run by small businesses, and they also have like this flex army of drivers like kind of like Uber that you can deliver Amazon packages in your own van, so they've definitely diversified that, and also at summertime so things aren't slow if there was like a summertime strike, that's actually a good time for Amazon to see a to see a labor strike for its delivery people because there's just not as much demand to say
the holidays. But longer term, this is an interesting development because the teamsters have said, we're going to focus on UPS and get our contract and then we're coming for you Amazon, because Amazon does have thousands of these delivery service partners that employ hundreds of thousands of drivers, and the teamsters don't like how little those drivers are getting
paid and the conditions that they're working in. And so now they're going to take this contract that they have with UPS and try to dangle it in front of those drivers who are delivering packages for Amazon and say, hey, you guys deserve a lot better, why don't you come on board with us? So I think we're going to see more of a fight between the teamsters and Amazon now that the UPS situation has resolved.
Interesting UPS getting a bit of a boost on well some clarity at least from that deal, But it's a so for a great way across to Amazon. Thanks so much. Welcome back to Bloomberg Technology. I'm Karen Hide in New York. Let's get you up to speed where these markets are trading, because we know that about forty percent of the entire market cap of the likes of the S ANDP are
coming for earnings this week. Tech managing to push on higher the key market capitalizations and Microsoft of Alphabet, they're both giving us numbers after the bell. People optimistic that perhaps they can vindicate in some way the massive run up we've seen in market capitalization and valuations at the first half of the year. We're looking at the Golden Dragon index. That's of course the NAZAG Golden Dragon over there in China, those names that are traded here in
the US. On the upside, that comes more on a macro picture and the fact that China is looking to once again support its own economy, giving wind actually to a lot of some of the mining names out there. That's why Europe managed to trade higher in today's trade as well. I'm looking at a two year yield on the downside, interesting some steepening of that yield curve today, the tenure selling off bonds rising in terms of a
boring cost there and atu overall price falling. That's on the back of consumer confidence when good news is bad news consuming a confidence really strong at the moment. What does the FED therefore do in terms of trying to suppress inflation when the economy still looks pretty good. Let's have a look at what's happening in terms of individual names for you, though, because an XP semi conductor actually numbers doing better than expected, we're particularly seeing growth in
the automotive sector. For this chip maker, we're up four percent. What does that read across mean for the rest of the chip makers today and the rest of the week. I'm looking at Raitheon Technologies because yes, it makes engines. That is deeply a tech story, and we're seeing it on the downside because some of the paint, the powder paint used in some key engines is actually causing issues.
They're going to have to investigate and do more assessments that it's going to cost them, so they're done by some thirteen percent. We're looking at Microsoft, though, up a percentage point ahead of their all important numbers, and we know so much of that's going to be about it's cloud or as it's generative AI, and also what's happening
with the gaming, the focus on activision. We can weave all of that together now because generative AI, we know, is opening up a potential to lower gain production costs, with one analyst telling Bloomberg that the money, the time that people needed to complete one big gain can we come hard. Part of that cost saving could come down to tools like well cub Co, an anime character generator by preferred networks. Just take a listen.
First, we will generate some rundown characters to begin with.
Click on the generated generate. Ah, yeah, not safe for work.
As with many industries across the board, AI is disrupting the business of making video games. We're headed to preferred networks in Tokyo to create our very own anime character in less than five minutes. Generative AI is opening up the potential to lower game production costs, with one analyst telling Bloomberg that the money, time, and people needed to complete one big game can be.
Cut in half.
Part of that cost saving could come down to tools like Crypto, an anime character generator by preferred networks.
Okay, so this girl, I like her. She seems real happy.
And then you can click the fuse.
And emerge something together and it will give you a variety of new characters based on the cater you had to You can also fine tune the character's features, like giving it twenty years and different expressions.
I want minds have glasses and I'm naming her Kinko. After you create the character, you can chat with the character. Love your hair today.
Still, critics argue Generative AI is trained on art without consent from the original creators, who says they began debating copyright concerns three years ago.
Opinion, how you go. Sorry, we didn't have the the translation for that at the very end, but we thank Kareemimuri in Tokyo for that piece. Meanwhile, sticking with gaming, super League Gaming is a leading launch pad for brands and creators and pretty dynamic gaming metaverse. In fact, here to talk more about the metaverse advertising bum or bust,
Super League Gaming CEO and hand. It is great to have some time with you, Anne, And look, we look ahead to meta the actual company that's rebranded itself a couple of years ago, its earnings. We're looking towards whether advertising is still there, whether people are particularly in the gaming sector are seeing a new avenue you are, you're still seeing a commitment from brands to want to reach a new audience through gaming and the metaverse.
Yeah.
Absolutely.
I think the reality is is the definition of gaming has changed a great deal. You know, when in the early days, when you were trying to advertise in a game,
you were interrupting the game experience. And then really with the explosion of these open world gaming platforms that are like open canvases, games like platforms like Rodbox and Minecraft and increasingly Fortnite, it really allows brands to be brought natively into the landscape of the game, and so it changes that experience in the way brands kind of like product placement on steroids, can deeply interact with harder to
reach audiences. So I think the definition of in game advertising and what that means and looks like and why users want it and appreciate it and engage with it more has changed a great deal.
Can you give us any facts, numbers, data that can just put the confidence back into people that brands also wanting to commit real money to this.
Yeah. I mean, look, there's no doubt that while you've got you know, meta's great news with three billion aggregated users. You know, still your that digital ad dollars are down, right, ad spends down, But that's really about traditional digital advertising because that's been underperforming now for the last couple of years, and so when brands are trying to seek much deeper engagement that top of the funnel, including that conversion over
into physical sales. Interacting in these open world gaming platforms again is a way to reach a hard to reach audience and actually achieve those marketing outcomes that right now traditional social media is and delivering on.
I think what is it, fifty six billion by twenty twenty four is where you see in game advertising and projected growth to go. How much does that convert into real sales? What sort of data did you see as to when I'm interacting with it on Twitch and I'm seeing a particular brand that I actually go out and purchase something.
Yeah.
Again, you know when you think about seeing an ad on YouTube or in Twitch and clicking over on that conversion, there's lots of studies there showing that our eyeballs are glazing over those ass We can't head X fast enough, right, we're tuning them out. The difference for what we do.
A good example is what we did for Mattel with Barbie late last year is we actually baked a Barbie Dreamhouse virtual world inside an existing game world that already had tons of players, and during that course of that month, we were able to have sixty million visits to Barbie's Dreamhouse. You could swim in the pool, you could dejayn the roof deck. Again, this is about kind of deep engagement
that enhances the gameplay. Another great example is two promotions we ran for Chipotle where you could in one case, go through a Halloween maze and find a secret phrase for a burrito. The second one was a build a Burrito campaign. During the course of those two campaigns, we gave away one hundred and thirty thousand real life burritos, but also set records for highest digital app download day and one of the highest digital food sales days for Chipotle.
So that digital of physical crossover is a really powerful thing that's much more sticky in a virtual world experience that again is interactive for the user.
Does it have to be massive brands?
You know, it's a great question. Actually, we do a lot of work with like Universal, and you'd expect with a lot of the studios you know, Netflix, Disney, Paramountain is one of our investors. And what Universal did last year is they tested new IP. So yes, we do a lot with minions and some of their more known IP, but equally they dropped some animated characters that kids had never seen before and we were able to test for them. You know how much kids responded to the different characters
ahead of the debut in the movie theaters. And I've often said to some of the larger toy makers in the world and others, like, let's find your next billion dollar toy line in the metaverse. First, let's sample different IP. Frankly, let's engage those young audiences in helping us actually craft that great new toy line and really start to reverse that flow from digital to physical. But also just think about the smarter cogs supply chain savings by just doing your R and D turning it on its head.
It is interesting that, of course, in this economic environment, all companies are focused on the bottom line. They can't
be growth at any cost anymore. And also at the same time, we have this server building around artificient intelligence, and it sort of immediately saw these crypto companies or even dare I say Mark Zuckerberg himself talking way more about AI than he was about the metaverse at his last earnings, how much you've see companies being torn about where they put their R and D or their marketing spend to work.
Yeah, it's a great question because in some ways, you know, super League was talking about the metaverse prior to Matter rebranding, right, And in a way we've all had to kind of suffer through the highs and lows of that hype cycle
a bit. I think what's exciting for the positioning of metaverse AI, as you just saw in your previous segment, can play a really important role in the generation of gamified experiences and worlds, and so all those things will only make that marketing spend or investment by brands more efficient.
But what I would say about just the term metaverse, and I think even when I read some of the comments that the head of metaverse a metaverse recently said at some conferences, I think that they are showing that there is more of a hybrid view. Now you know, there's social media, and then there was the strong point of view of a fully immersive metaverse world with headsets and hardware, right, and our point of view has always been that there is a world we're living in right
now in the middle that doesn't revolve around hardware. There's already hundreds of millions of people who love these two D virtual worlds that have all.
Of that same feeling of immersion.
It may not be as immersive, but it's a way that they enjoy socializing and living. And so super League is a publishing engine for the immersive web, and what we're doing right now is helping brands understand that to change their dot com experience.
Super League Game CEO and hand, thank you so much for your time today digging into just how willing markets I'll spend right now. Meanwhile, coming up Twitter, it's now x you know it, Musk took that social platform well to his favorite letter. We're going to go into the history and just discuss what perhaps is at stake here
from New York as the blue meg technology. So Elon Musk has explained his decision to strip Twitter of its famous bluebird logo, saying it made sense when the platform was just about short messages going back and forth like birds tweeting, but now as a platform expands its character limit and look at moves towards his vision of in everything app says the Twitter name does not make sense in that context, so must be adieu to the bird. Let's talk about the brand destruction. Let's talk about X
as a historical fat point. Philip Schumacher's with a CEO of open source identity verification platform identity dot com, also, of course the former Apple App Store director, along with Bluemerg's own Max Chafkin for more. Max, I want to start with you on the history of this, because it all felt very well wind and overnight. But actually, if you look back at history or indeed what he was just saying as he was looking to buy Twitter, this kind of makes sense.
Yeah, this is very much Elon Musk essentially putting himself in Twitter's brand, the ex brand, and this idea of having kind of a super app goes back to the late nineties when Elon Musk started the company that would become PayPal. You know, the history is very interesting. Elon Musk actually merged this company X dot com with PayPal, became CEO, and then was ousted after a very controversial effort to change the name from PayPal to X dot com.
At the time, a lot of employees felt like that was a really insane decision just because PayPal had a really great brand. It was a verb, you know, very much, the way that Twitter.
Was a verb.
And also when you're talking about finance, right, trust and so on is very important, and I think this issues could be at play here.
You know.
On the other hand, Elon Musk has managed to defy the laws of business gravity many times, so it's possible that this will look brilliant in retrospect.
Let's talk about whether it could look brilliant. Philip, from your perspective, do you think Twitter now X could win back not only advertisers but the consumer to have the trust that this could be a payments player and a big one.
Yes. Absolutely.
I see so many people writing Twitter or X's obituaries right now saying that it's over, and I.
See the opposite right.
I see Elon fulfilling his long term dream of having a universal app, a super app, whatever you want to call it, that's going to do a variety of things. He wants to change the way we pay people, the way that people get monetized for their content. I see this as really the beginning of something huge, and there's no stopping Elon when he really wants something.
Philip, to your point of course, with someone who's very much steeped in the world of Web three right now, how much is this having to adopt Web three or crypto or will it be more of what we were associate PayPal and Memo with.
Yeah, I think Elon really wants to adopt crypto and he wants to embrace the Web three ideals, but I think that will be selling it short.
I think he needs to embrace both.
You can live in a world that's Web three and Web two to be able to handle payments, et cetera. I mean, he's making Twitter. It's essentially a universal name space. People want to know who I am. I'm PBS identity. I don't necessarily get my whole name. I get the handle that I've chosen, and from that point on people can send me money directly to that, and for me, it's something that bridges this gap between Web two and Web three.
Max. The history is so fascinating, and the fact that he ultimately was ousted because people felt that this was a mad move and brand destruction. How much you're reading and feeling that ultimately we are destroying something with Twitter, with tweets with the bird or not the actually people want to be involved in the brand of Elon.
Yeah, I mean I think if you look at Elon Musk's history and you look for weaknesses, you know, obviously has a lot of strengths, as philibers are saying. But but the weakness I think is ego, right, and you've seen it get him, get him into trouble before when he sort of stepped in it on Twitter. And you know, this is a case where you're taking a very well known, very successful media brand and and and taking it apart. And I mean the verb thing does strike me as
a as a challenge. I mean, it's hard to know. Elon yesterday on Twitter said that they're called X's now, which is kind of hard to say. And so I think it's going to be a challenge. And of course there is you know, this kind of very far out vision of payments and so on. But number one question is do you trust Twitter, which is run by a guy who you know spends a lot of his day.
It is not run by a guy, or is it? I mean that point, can Linda stare us Max.
That's a very good question, right, I mean and and and she has come out sort of embracing this and and very much has you on's back. I just think the question is, you know, why buy this company for forty four billion dollars if you were going to take away the brand. The brand seems like it was part of the value here. Of course, Elon Musk has a very valuable brand as well, so I suppose we'll see.
Of course. Lastly, Philip, Apple app Store, you help build the review operations team, you help build in and of itself. I'm looking at the app store and this bluebird still there and it's still called Twitter. How quickly can you sinkly sing up? From an app perspective?
He could have He could have done a sink immediately, right. It's it's not it's it's pretty trivial for them to be able to submit the changes, get the get the logo updated.
And then have the up the app updated in a matter of hours.
So why that's taking a longer time makes me wonder if there's some additional features that that he hasn't announced that are going to go with it as well. Otherwise it should have been through already.
There's a run fast mentality here. We'll see how much they're breaking things. Philip Shoemaker, we thank you so much, CEO of Identity dot Com. Bloomberg's Max Chafkin, brilliant, really shining a light on the history of all of this, and go follow his tweets because it's certainly caught my attention.
Got to talk about snap parent company, of course, the Snapchat set to report earnings after the bell today, and for more on what we can expect, let's bring in Bloomberg's Alex Brinka and Well a couple of years ago, it really set the tone for the rest where the advertising market was going for the Metas for the alphabets, is it a bell weather anymore at the.
Moment, Alex Well, Timing wise, I would say no, because Snap actually is reporting with alphabet on the day. But in terms of what we can potentially expect for meta tomorrow, we'll still be looking at snap That's because they are kind of the pure play digital ad company who relies on online ads on Snapchat for the vast majority of their revenue, which has also Caroline been kind of the
problem with this stock. As economic conditions have continued to be a little bit sluggish, their revenue is so tied to how marketers are feeling because they are kind of brand revenue upper funnel revenue generator, so they have been kind of really hit hard when it comes to this pullback and spending that we've seen from marketers across the board.
They've really tried to put themselves out there as experimental though, and particularly around artificial intelligence. Is that going to reaped any reward in this economic environment?
That is exactly what investors will be looking for. I think the big question here with Snap is, Okay, you've cut costs.
Over the last year.
We've seen them lay off twenty percent of the workforce, rain and a lot of their spending. Things are getting a little bit more stable, as the analyst from UBS and JP Morgan predict they will be when they report today. But where is the growth going to come from? Is it artificial intelligence like they have in their chatbot, their AI chatbot on the app. Is it going to be augmented reality where they've built an entirely new business unit around it earlier this year to sell that to enterprises
and retailers. We don't have a lot of that clarity yet, and that's exactly what we'll be looking for from the executive today. Hey, Snap, you used to be kind of the growthy social media stock on the block. Now you've reported one quarter, your first ever quarter of declining revenue three months ago. We expect revenue will decline this month as well. At what point do you come back to growth?
And to that point, just remind us of growth of actual uses, because I mean, well, is it Threads just eclipsed their entire US user base in about five days. But it's a very niche, bespoke age group.
Right absolutely, And let's expect only a three percent increase from three months ago in terms of users to around three hundred and ninety million and change. So Threads is right there. And obviously you can't forget about the big private company that's been taking Snap users or their time, TikTok, who kind of has has bullied in on this young user group that Snap used to be very much known for. So that kind of three percent expected user growth this
quarter is really endemic of the problem with this company. Hey, if your revenue isn't growing, we need to see you growing on userbase or engagement. You have this new subscription Snapchat Plus, that folks are paying money for and Snap has been able to convert users to pay for new features, which has been kind of ahead of its competitors, but as of three months ago, there were still only three
million people paying for that. We'll be looking for that updated number as well, so that user number could be an inflection point, but again we'll be looking for something a little bit more strong for them as to what to expect in the next six months.
Ax gerenca across that one hundred Mini news is in the US and the Inner Mini worldwide. Let's see how they grow. Thank you so much as we look ahead to Snap. That's it for this edition of Bloom Meg Technology. Don't forget to check out our podcast from New York. This is Blue Meg Technology.