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Everyone has an opinion on the $27.7B Slack acquisition

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When the Salesforce-Slack deal was officially announced on Tuesday afternoon, and the number appeared, it was kind of hard to believe. Salesforce had shelled out more than $27 billion to buy Slack and bring it into the Salesforce family of products. The company sees a key missing piece in Slack, and that could explain why it was willing to spend such an astonishing amount of money to get it.

With Slack, Salesforce now has what CEO Marc Benioff called the interface to everything, something he says that the company has thought about for years. In 2010, they tried building it themselves with Chatter, a social tool that never really caught on in a big way. With Slack they finally have it.

“We’ve always had the vision of the social enterprise at Salesforce for more than a decade. Oh, we’ve had Dreamforces entirely dedicated to the vision of what a collaborative interface, a high production interface with applications and an ecosystem would look like wrapped on top of our Customer 360,” Benioff said.

He added that ironically in a building right next door to Salesforce Park you’ll find Slack headquarters. They won’t have to go far to collaborate (or you know, they can just use Slack).

From Chatter to Slack

Neeraj Agrawal, general partner at Battery Ventures says that Benioff has had an interest in enterprise social going back years and this is his way of finally delivering.”Remember Chatter? Benioff was dead on with this trend. He lost Yammer to Microsoft (when Microsoft acquired it for $1.2 billion) about 7-8 years ago, and then launched Chatter. It was a huge bet, but didn’t work. Slack is really Chatter 2.0,” he said.

Chuck Ganapathi, CEO and co-founder at Tact.ai was product lead on the Chatter product at Salesforce in the 2009 timeframe. He wrote in a soon-to-be-published blog post he shared with TechCrunch, that it failed for a lot of reasons, but mostly because at its core, Salesforce was still a bunch of database guys and enterprise social was a very different animal.

“Salesforce is a database-centric company, founded by Oracle ex-pats on a relational DB foundation. Messaging apps must be architected to handle unstructured data, with a big focus on UX, which weren’t core competencies at Salesforce. Sometime after I left, the company seemed to lose interest in improving Chatter, except maybe as a component of other products,” he wrote.

But Benioff never lost interest in the concept of incorporating social into the Salesforce platform. It just took another 10 years or so and bushel of money to make it happen.

A good match or not?

Leyla Seka, a partner at Operator Capital, who formerly ran the AppExchange at Salesforce, sees good things ahead with a combined Slack and Salesforce. “Salesforce and Slack together will offer a powerful duo of applications that will help companies work more effectively together. I think that COVID-19 has shown us how critical it is to get employees the data they need to do their job, but also the community they need to thrive at their job. The marriage of Salesforce and Slack promises to do just that,” Seka told me.

Brent Leary, principal analyst at CRM Essentials was knocked out by the price tag, but says it shows that Salesforce is not afraid to go after what it wants, even if it has to pay a hefty price to get it. “This goes to show Salesforce has absolutely no fear in them when it comes to this deal. They are willing to throw down the big bucks on this acquisition because they see a huge payoff by adding this piece into their platform,” he said.

As for Slack, he sees it as a way for them to take the fast track to the enterprise big leagues. “And for Slack they go from competing with AMOSS (Adobe, Microsoft, Oracle, SAP, Salesforce) to joining the one of them, and the company that really made the most sense for them to team up with,” he said.

Laurie McCabe, an analyst and founder at SMB Group agrees with Leary’s take, saying Salesforce doesn’t hesitate when it thinks the value is there. “In this case, Slack gives them a strong collaboration offering that will help them compete more effectively against Microsoft’s growing cloud portfolio, which of course includes CRM and Teams,” she said.

Show me the money

Battery’s Agrawal believes this deal is all about generating revenue, and it was willing to pay a premium to move the needle in billion dollar chunks. The end game he believes is about catching Microsoft, or at the very least getting to $1 trillion (with a T, folks) in market cap.

It’s worth noting that investors are not showing signs, initially at least, of liking this deal with the stock down over 8% today and 16.5% since the rumor of Salesforce’s interest in Slack surfaced last week before the Thanksgiving holiday. That translates into over $18 billion in lost market cap, probably not the reaction that they were hoping for. But Salesforce is big enough that it can afford to play a long game, and reach its financial goals with the help of Slack.

“To get to a market cap of $1 trillion, Salesforce now has to take MSFT head on. Until now, the company has mostly been able to stay in its own swim lane in terms of products. […] To get to a trillion dollars in market cap, Salesforce needs to try to grow in two massive markets,” Agrawal said. Those would be either knowledge worker/desktop (see the 2016 Quip acquisition) or cloud (see the Hyperforce announcement). Agrawal says chances are the company’s best bet is the former, and it was willing to pay top dollar to get it.

“The deal will help Salesforce maintain a 20%+ growth rate over next few years,” he said. Ultimately, he sees it moving the revenue needle, which should eventually drive market cap higher and help achieve those goals.

It’s worth noting that Salesforce president and CEO Bret Taylor said while they intend to integrate Slack deeply into the Salesforce product family, they recognize the power and utility of Slack as a stand-alone product and they don’t intend to do anything that would mess with that.

“Fundamentally, we want to make sure that Slack remains as a kind of technology agnostic platform. We know that Slack is used by millions and millions of people every day to connect every tool under the sun. The most remarkable thing is just how many customers have also just integrated their own custom internal tools as well into this is really kind of the central nervous system for the teams that use it, and we would never want to change that,” he said.

It’s hard to judge a deal this large until we have some hindsight and see how well the two companies have meshed, how well they can incorporate Slack into the Salesforce ecosystem, while allowing that independence Taylor alluded to. If they can find a way to walk that line and Slack becomes that wrapper, that operating system, that glue that holds the Salesforce ecosystem together it will be a good deal, but if Slack stops innovating and withers under the weight of its corporate overlords, then it might not be money well spent.

Time will tell which is the case.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Facebook predicts ‘significant’ obstacles to ad targeting and revenue in 2021

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While Facebook’s fourth quarter earnings report included solid user and revenue numbers, the company sounded a note of caution for 2021.

In the “CFO outlook” section of the earnings release, Facebook said it anticipates facing “more significant advertising headwinds” this year.

“This includes the impact of platform changes, notably iOS 14, as well as the evolving regulatory landscape,” the company wrote. “While the timing of the iOS 14 changes remains uncertain, we would expect to see an impact beginning late in the first quarter.”

Facebook has already been waging a bit of a campaign against Apple’s upcoming privacy changes, which will require app developers to ask users for permission in order to use their IDFA identifiers for ad targeting — although the PR focus has been the impact on small businesses, not Facebook.

Facebook also highlighted two broad economic trends that it says has benefited from during the pandemic: The “ongoing shift towards online commerce” and “the shift in consumer demand towards products and away from services.” But again, it took a cautious stance, writing that “a moderation or reversal in one or both of these trends could serve as a headwind to our advertising revenue growth.”

As for those fourth quarter earnings earnings, Facebook reported $28.1 billion in revenue, of which $27.2 billion came from ads, with earnings per share of $3.88. Wall Street analysts had predicted EPS of $3.22 and revenue of $26.4 billon.

Facebook also reported an average of 1.84 billion daily active users and 2.80 billion monthly active users for the quarter, up 11% and 12% year-over-year, respectively.

“We had a strong end to the year as people and businesses continued to use our services during these challenging times,” said CEO Mark Zuckerberg in a statement. “I’m excited about our product roadmap for 2021 as we build new and meaningful ways to create economic opportunity, build community and help people just have fun.”

As of 4:45pm Eastern, Facebook shares were up 0.7% in after-hours trading.

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How trading apps are responding to the GameStop fustercluck

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The furor surrounding GameStop and its stock price has consumed social media, business television, and the hopes and dreams of many retail investors. It has even convinced some folks that causing short-term economic damage to a few hedge funds is similar to shaking up the global financial market.

It isn’t, but a lot of folks are doing some downright risky things with their personal capital all the same. And some of them are making those investments — bets, let’s be honest — on platforms that have lowered barriers to buying and selling stocks by cutting trading fees to zero. Apps and services like Robinhood, Public, M1 Finance and Freetrade.

After noting reports that some traditional brokers were limiting access to GameStop and other so-called meme stocks, TechCrunch was curious what the newer, app-based investing services were doing for their own users.

A spokesperson for M1 Finance, a Midwest-based consumer fintech player that offers a basket of banking and investing services — more on its growth here and here — told TechCrunch via email that it wasn’t taking “specific” steps regarding individual stocks.

But the company also provided a statement from its CEO, Brian Barnes. In his comment, Barnes drew a delineation between investing, and trading, which he likened to a casino, adding that his firm “question[s] whether short-term trading is predictable, sustainable or repeatable.”

It isn’t for nearly anyone, of course. Barnes went on to say that his company thinks that “ownership of great companies and assets at reasonable prices that compound for long periods of time is the most straightforward and repeatable way to build wealth,” and that they have focused their company more around that ethos, “forego[ing] the mania of the moment.”

Turning to the well-known Robinhood, an impressive 2020 growth story, TechCrunch asked the same question regarding warnings or other guardrails for users concerning certain equities.

In an email a Robinhood spokesperson directed TechCrunch to a comment that its CEO, Vlad Tenev, made on CNBC earlier today:

Like other brokerages do, we monitor volatility and we take steps as appropriate like raising the margin requirements. I do think it’s wrong to assume though that most of our activity is characterized by trading of volatile stocks. As I’ve said before, most of our customers are what’s called buy and hold. They deposit and buy over the long term.

Robinhood changed margin requirements for GameStop and AMC Entertainment to 100%, TechCrunch understands. And like M1, Robinhood doesn’t allow users to short equities. So, there’s that.

Something notable about the companies we are discussing is that not one of them wants to be labeled as the place where folks like to trade a lot. Which amuses me as cutting fees to zero, which they have largely done, is at once a great way to democratize investing, and, also, a great way to encourage folks to trade more frequently. And as the apps and services that offer free trading often make money when users trade (read this), their chatter about their users being focused on buying and holding always rings slightly thin.

Anyhoo, some apps are going as far as adding warnings. Public, a company that TechCrunch recently covered, said that the company has added “‘High Risk’ safety labels” to the meme stocks that are causing so much ruckus.

Public has long had a stated focus on building community over trading, which led to us having a question or two about when it is going to kickstart its monetization plans. The company did just hire a CFO, which makes this move appear in concert with its general ethos, so more to come there we presume.

And, finally, U.K.-based Freetrade. TechCrunch has covered the service before, making it a good company to rope into this group. Per the company, Freetrade restricts small-cap stocks to the subscription tier of its service, which should limit access amongst its user base to GameStop and other memetic equities.

The company also stressed that it does not offer options or “any other form of leveraged derivatives” and has made “huge investment in investor education and financial literacy.”

So there’s a general bent toward either building products that are not tuned for day trading in silly stocks or providing some protection against users’ worst instincts amongst the cohort of companies that have also made it inexpensive to trade. There’s tension there, akin to this.

But they can only do so much. People are dumb, and it’s not looking like that’s going to get much better anytime soon.

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SoftBank teams with home goods maker Iris Ohyama for new robotics venture

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You’d be forgiven for being underwhelmed by the output from SoftBank Robotics thus far. The firm’s best-known product to date is almost certainly Pepper, a humanoid robot designed for greeting and signage that grew out of it 2015 acquisition of French robotics company, Aldebaran.

There’s also the matter of the investment firm’s acquisition and eventual sale of Boston Dynamics. The deal certainly went a ways toward accelerating the company’s go-to-market approach, but Boston Dynamics changed hands fairly quickly, when it was sold to Hyundai late last year (SoftBank maintains 20%).

The latest wrinkle in SoftBank’s robotic ambitions is nothing if not interesting. The firm announced today that it is joining forces with Iris Ohyama. The Japanese brand, which will hold a 51% stake in the venture (with SoftBank controlling the remainder), is best known for its home goods. The company makes a broad range of products, that includes, as Reuters put it, “everything from rice to rice cookers.”

You’ll be able to add robotics to that list, soon enough. The newly formed Iris Robotics has set an extremely aggressive goal of $965 million in sales by 2025. In a joint press release, the company noted Covid-19-related concerns as a major catalyst in the launch of the division. Certainly that makes strategic sense. There’s little question that the past year has kickstarted serious interest in robotics and automation.

The first couple of products from the venture don’t appear especially ambitious out of the gate, however. To start, it seems they’ll be rolling out “Iris Editions” of a pair of existing devices: Bear Robotics’ restaurant robot Servi and cleaning robot, Whiz.

Here’s a quote from SoftBank Robotics CEO (forgive the Google translate),

With the urgent need to realize the new normal in the corona virus, various new expectations are being placed on robots. This strong partnership with Iris Ohyama is a huge step forward for the expansion and penetration of robot solutions. Taking full advantage of the strengths of both companies, we will respond quickly to the challenges facing society.

Certainly the technical ambitions seem more modest than what the folks at companies like Boston Dynamics are currently working on, but Iris Ohyama seems well positioned to make some headway in the home robotics category to start.

 

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