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Reflections on the first all-virtual CES

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I’ve spent more time than I care to mention over the last several years wondering aloud about the value of in-person trade shows. There’s something seemingly antiquated in the idea of jamming a bunch of people in a room, walking from booth to booth. Sure, they’ve fulfilled an important need in the past, but aren’t they just a relic in this hyperconnected world?

I’ve always assumed that if trade shows were to go extinct, it would be a gradual process — a slow fade into cultural irrelevance, like bookstores and record stores (both things I miss dearly). Technology has, for many intents and purposes, dramatically reduced their relative value to our society.

While it’s undoubtedly true that Spotify and the Kindle Store are lacking in much of the appeal and all of the charm of their real-world counterparts, we’re happy to sacrifice all that and more at the alter of convenience.

A rampaging pandemic has effectively given us a year without in-person trade shows. That means, among other things, we’ve had a much more immediate control variable in this question about trade shows. Last year’s CES managed to get in just under the wire. The next major consumer electronics show — Mobile World Congress — was eventually canceled after much hand-wringing.

The CTA (the governing body behind CES) appeared to have been planning a scaled-back in-person version of the show this year, following a similar move by the team behind the Berlin-based IFA over the summer. By July, however, it was clear that such a plan was untenable. To put it bluntly, the United States didn’t have its shit together when it comes to keeping this virus in check (I’d be remiss if I didn’t acknowledge that we just hit 400,000 deaths on the day I’m writing this).

CES 2021 was far from the first tech show to go all virtual over this past year. The size and scope of the event, on the other hand, are relatively unique here. Per the CTA, the 2020 show drew north of 170,000 attendees. The majority of the tech events I’ve attended virtually in the past year have been put on by a single company. CES is obviously a different beast entirely.

The CTA’s (nee CEA) role in the industry certainly afforded it a fair bit of goodwill up front. The show, after all, dates back to the late-60s. It has ebbed and flowed over the years (taking hits from external forces like the 2008 financial crisis), but it has remained a constant. Those of us who’ve been doing this for a while tend to face the show with equal parts anticipation and dread. But the companies always come out.

Per the CTA’s numbers, nearly 2,000 companies launched products at the 2021 event. The figure pales in comparison to the 4,419 companies exhibiting last year, but that’s to be expected. In addition to the uncertain nature of the event, it’s been a remarkably crappy year for plenty of companies. I certainly had my questions and doubts going in — chief among them was the value of an event like this for a startup? Without an in-person element, wasn’t this just yet another chance to get lost in the noise?

I heard similar feedback from startups on the side, though ultimately nearly 700 chose to exhibit at the show. I know because I ended up going through all of them for the purposes of our coverage. It brought back a kind of visceral memory of the year I challenged myself to walk every square inch of the show, and ended up being challenging for entirely different reasons.

Ultimately, this was the element I missed the most. For me, CES’s biggest appeal has been the element of discovery. Eureka Park, the jam-packed startup portion of the show at the Sands Expo, is easily the best part. The vast majority of exhibitors are not for us, but I still get a charge stumbling on something new and innovative I’ve not seen before. The blogger instinct that lives dormant inside kicks in and I can’t wait to get back in front of my laptop to tell the world.

There was no Eureka Park this year — not even a virtual version. There’s just no good way to approximate a show floor online — at least none that I’m aware of. A couple of existing contacts offered to send me stuff in the mail to look out. Sensel, for instance, has a new version of its trackpad (which it announced today will be integrated into Lenovo’s latest ThinkPad). But for obvious reasons, it’s just not possible to get all 700 startups to send review units to my one-bedroom in Queens.

More than anything, the virtual event highlighted the technology limitations of an event at this scale. Press conferences are simple enough (though I found frustration in the various different platforms the CTA employed). More often than not, these felt like lengthy commercials for the exhibiting company. The in-person versions are, as well, of course, but we tend to be blinded by the spectacle. For my own purposes, there just wasn’t a lot that that couldn’t have been accomplished more efficiently with a press release.

The nature of news releases was far more nebulous this year. More companies seemingly took liberties by dumping their news well ahead of the show. Other companies offered their own sort of counter programming. One of the biggest advantages to these events when it comes to my own peace of mind is how they regulate the news flow. I know going into the year that there’s going to be one hair-pullingly difficult week at the beginning of the year where a ton of news is announced.

With CES less of a center of gravity this year, I anticipated seeing a less segmented news flow. I’ve commented to colleagues over the last couple of years that there’s “no more slow season” when it comes to hardware news, and this will likely only increase that sentiment. Obviously there’s upside in having things more evenly spread out, but I’ve got the feeling we’re moving toward something more akin to a series of small CES-like events throughout the year, and the thought makes my blood turn cold.

It’s been clear in recent years that companies would rather break out from the noise of CES in favor of their own events, following in Apple’s footsteps. Virtual events are a perfect opportunity to adopt that approach. Apple, meanwhile, moved from one event to a series of one smaller event every month toward the end of the year. When you’re not asking people to fly across the country or world to attend an event, the bar for what qualifies as news lowers considerably. Perhaps instead of having thousands of companies vying for our attention at one event, we’re moving toward a model in which there are instead thousands of events. The mind boggles.

I have some hyper-specific grievances about the CTA’s format, but I’ll save them for the post-event survey that I may or may not get around to filling out. I still found value in the virtual event. It was an excuse to talk to a bunch of startups I wasn’t familiar with. Ultimately, however, I think the event served as a testament to the fact that as much as we bemoan all of the headaches and head colds that come with an event like CES, there’s still a lot of value to be had in the in-person event.

There’s little doubt that the CTA and the rest of these sorts of organizations are champing at the bit to return to in-person events, even as a bumpy vaccine rollout leaves a big question mark around the expected timeline. There’s a very good chance that we’ll view 2020/2021 as the beginning of the end for the in-person trade show. But given the sorts of limitations we’ve seen in the past year, I’m not ready to declare them fully dead any time soon.

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

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EV rivals Tesla, Rivian unite to target direct sales legislation

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Tesla, Rivian, Lordstown Motors and Lucid Motors — potential rivals in the burgeoning EV market — are working together to pass laws that would allow direct sales in at least eight states with another batch of proposed legislation likely being introduced this year.

Passage of such legislation would clear the way for EV giants like Tesla, along with newcomers Lucid and Rivian, which have yet to bring a vehicle to market, to sell directly to consumers. However, Tesla’s cooperation could also cost the company its monopoly on direct sales in some states.

Tesla and a growing number of new EV companies have a different business model than legacy automakers like GM, Ford and Stellantis. Tesla sells vehicles through their own branded stores — similar to how Apple sells its products — and do not have franchised dealerships. The direct sales model has attracted the ire of auto dealers, who benefit from long-established rules in all 50 states that prevent manufacturers with existing franchisees from opening their own dealerships to compete with them. Tesla and other allies argue that because they don’t have franchise dealers, they should be allowed to sell directly to consumers.

“We support our other EV-only manufacturers and their desires to sell direct-to-consumers, to invest, to create jobs and to do that unfettered as we are allowed,” Thad Kurowski, senior policy manager at Tesla, said while testifying in the state of Washington during the House’s Consumer Protection and Business Committee. Washington is one of many states where such legislation is being considered. Tesla has six retail locations in the state.

Similar legislation is being considered in Connecticut, Nebraska, Georgia, New York, Wisconsin, Pennsylvania and Nevada. Some of these states ban all EV manufacturers from directly selling to customers; some only permit Tesla, at the exclusion of other companies, but cap the number of retail stores it can open.

It’s a rare moment of cooperation for EV manufacturers, companies that must contend not only with each other but with legacy automakers for market share. Relations between the companies have not always been so copacetic: Tesla last July filed a lawsuit against Rivian alleging theft of trade secrets and talent poaching. Rivian responded that two of the three claims in the case were nothing more than an attempt to smear its reputation.

Tesla is a veteran of battles with state legislatures over direct sales. At least a dozen states, including Arizona, Colorado and Utah have reversed bans that prevented Tesla from selling directly to consumers either through new legislation or via the courts.

Michigan, home to major automakers GM and Ford, has been a longtime battleground.

Former Gov. Rick Snyder signed a bill in 2014 that was initiated and backed by the Michigan Automobile Dealers Association, banning Tesla from selling directly to consumers in the state. Two years later, Tesla sued the state of Michigan when it denied Tesla a dealership license. The Michigan Legislature last December considered a bill that would have banned all direct sales except for Tesla, an arrangement that allowed the automaker to deliver cars to customers, so long as the vehicle sale and title transfer didn’t occur in the state. That special exception for Tesla was removed from the proposed legislation, a move that would have threatened what little progress it had in the state. At the end, though, the legislation died, leaving Tesla’s arrangement intact.

Lucid is leading the charge in some states where direct sales legislation is being considered, according to Daniel Witt, who worked at Tesla before joining the new EV entrant as a public policy lead. Witt emphasized the bills are the result of efforts from the coalition of EV companies, grassroots lobbying from EV owners and EV enthusiasts and consumer groups. The legislation has also found support from environmental and clean energy groups, which argue that consumer choice and ease of access are key to helping people transition away from internal combustion engine cars.

“Any situation where the door got closed behind Tesla was not a matter of trying to gain a market advantage so much as it was just a product of the negotiations in a given legislature,” Witt said. “By and large, whether it’s New York, or Washington or Connecticut, we’re all rowing in the same direction.”

In a statement to TechCrunch, the Washington State Auto Dealers Association said franchised dealers support the transition toward zero-emission vehicles and want to sell them at their locations. But it said the direct sale bill is a “battle of Main Street vs. Wall Street.”

“Electric vehicle manufacturers perpetuate [the] myth of the middleman when the reality is that they would bear the same costs if they built their own stores, but would ship their revenue to their billionaire investors out of state after the sale is made instead of reinvesting in the community,” the group said.

The organization pointed out that Rivian has garnered $500 million in funding from Ford.

“What would stop Ford from abandoning its dealer network, and shifting the profits dealers generate for the company out of Ford and into greater ownership of Rivian? Or GM from spinning off an EV subsidiary?” the group said in its statement.

EV manufacturers have a long legislative road ahead of them. Bills generally must clear legislative committees and receive majority votes from both the House and Senate before being sent to the governor’s desk to be signed into law.

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Netflix launches ‘Fast Laughs,’ a TikTok-like feed of funny videos

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Late last year, Netflix began experimenting with a new TikTok-like feed of funny videos inside its mobile app, which it called “Fast Laughs.” Today, the company announced the new feature is now rolling out on iOS, allowing users to watch, react, or share the short clips as well as add the show or movie to your Netflix watchlist. You can also push a “Play” button to start watching the program immediately.

At launch, the feature will include short clips from Netflix’s comedy catalog, including films like “Murder Mystery,” series like “Big Mouth,” sitcoms like “The Crew,” as well as snippets from stand-up comedians like Kevin Hart and Ali Wong.

Netflix confirmed to TechCrunch the feature will tap into its full catalog, not just its own original programs. However, the company couldn’t says how many total shows or movies would be featured in the new experience.

Image Credits: Netflix

The new feature has been given prominent placement in the Netflix app, where it’s accessible from the bottom navigation menu on its own tab, next to “Coming Soon.” This is no small experiment, then — but rather an indication of how successful the early tests of the “Fast Laughs” feature must have been in terms of engaging users and connecting them to Netflix content.

This is not the first time Netflix has borrowed concepts from social media to help users discover new shows or movies to watch in its app. A few years ago, Netflix introduced its own short-form video “Stories” feature, called Previews, for example. But times have changed. Now users are drawn to short-form vertical video feeds, like those popularized by TikTok.

Image Credits: Netflix

“Fast Laughs” heavily borrows from the TikTok format, as its feed also features full-screen videos that you can swipe through vertically, and places the engagement buttons on the right side of the screen. These buttons let you react with an “LOL” (crying/laughing) emoji to the clip or share it via iMessage or social media apps, like WhatsApp, Instagram, Snapchat or Twitter. You can also start watch the show immediately or save it for later viewing by adding it to “My List.”

During tests, “Fast Laughs” clips ranged in length anywhere from 15 to 45 seconds. Today, Netflix says there’s no exact clip length for these video snippets.

Image Credits: Netflix

The company is positioning the feature as a discovery tool.

“We wanted to give members a fun, fast, and intuitive way to discover our catalog by letting these comedic moments across genres speak for themselves in a mobile-native, full screen experience,” said Product Designer Kim Ho, previously worked on product design at both Facebook, Instacart, and Coin. “We worked hard to cut to just what was necessary in an intentional and minimalist UI design, from the transparent tab bar to ways to react in the moment (‘LOL’) and plan their next laugh by adding to their list,” she added.

But though “Fast Laughs” is focused on finding new things to watch, the feature could, in fact, help Netflix compete with TikTok in terms of time spent on mobile devices, as it caters to the growing demand for shorter, more “snackable” video content.

Netflix says the feature is rolling out now to iOS and will begin testing on Android in the months to come.

 

 

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First impressions of AppLovin’s IPO filing

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AppLovin released its S-1 filing yesterday, bringing the Palo Alto-based mobile app-focused software company a step closer to joining the public markets.

The business results detailed in the document are generally impressive. While some companies going public in recent months have detailed pandemic-fueled growth to lean against or membership in a sector hotter than individual results, AppLovin’s filing tells the story of a rapidly growing company that has managed to scale adjusted profit as it has grown.

And now, with annual revenue north of $1 billion, AppLovin is also a very large company, meaning that its IPO will be widely watched.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


So this morning we’re rifling through its IPO filing and yanking out what matters as we add one more name to our IPO lists.

The Exchange has a lengthy list of non-IPO topics that we’d like to get to. If everyone could stop going public for a few days, we’d love to write about something else! OK, let’s get into it!

Most of the news is good

As a short introduction, the company’s products are designed to help developers find users and monetize their apps. And AppLovin has its own in-house suite of mobile apps, what its S-1 calls a “globally diversified portfolio of over 200 free-to-play mobile games run by 12 studios.” Those apps have 32 million global daily actives, the document added.

It’s a pretty neat company to dig into if you’re into mobile apps at all. Regardless, what we care about today are its numbers. So let’s talk growth, revenue quality, profits, cash consumption and capital structure. Most of the news is good, even if there are some downsides to AppLovin’s capital structure.

Recall that KKR bought a chunk of AppLovin back in mid-2018 at a valuation of around $2 billion. That number appears comically low, given that the company posted $483.4 million in revenue that year, a figure that it roughly doubled in 2019 to $994.1 million. Growth slowed in percentage terms in 2020, when AppLovin saw total revenues of $1.45 billion, though the company managed similar growth in gross-dollar terms.

In percentage terms, AppLovin grew 106% from 2018 to 2019, and 46% from 2019 to 2020. How KKR got to buy into the company at 4x revenues when it was growing at 100% is not clear.

The company is growing well, but is AppLovin accreting revenue of high quality? Yes, but we need to scrape some grime off the numbers to understand them. Turning to the company’s yearly results, AppLovin’s cost of revenue rose steadily as a percentage of revenue from 2018 to 2020. Indeed, the numbers went from 11% in 2018 to 24% in 2019 and 38% in 2020. That’s an awful progression, and if we lacked more information we’d posit that the company’s overall revenue quality was sharply declining.

It’s not that bad. There’s about $1 million in share-based compensation inside the 2020 cost of revenue figure and $228.3 million of “amortization expense related to acquired intangibles.” If we yank out those from the cost-of-revenue line item, AppLovin’s gross margin for 2020 grows from 62% to 77.5%. That’s much better.

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