Speaker 1: From Marhard. We're Innovation, Money and Power Collie in Silicon
Speaker 1: Vallet NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 3: I'm Caroline head of Bloomberg's world headquarters in New.
Speaker 4: York, and I'm Ed Lovelow in San Francisco. This has
Speaker 4: been Bag Technology.
Speaker 3: So FI shares are surging after posting its first have
Speaker 3: a profit. Our conversation with the CEO, Anthony Noto that's
Speaker 3: coming up.
Speaker 4: Plus shares of I Robots slump as the Amazon deal
Speaker 4: is scrapped and the CEO steps down, details on why
Speaker 4: the acquisition was terminated, and a.
Speaker 3: Real sign that tech companies are throwing their hats into
Speaker 3: the twenty twenty four IPO market revival ring.
Speaker 5: We talk about reddits public.
Speaker 3: Market plans and its potential valuation, but first we'll let's
Speaker 3: check in on the companies that are already public and
Speaker 3: where they're trading, because right now we are waiting on
Speaker 3: so much economic data of a Federal Reserve rate decision,
Speaker 3: of course, whether we'll be selling more debt here in.
Speaker 5: The United States.
Speaker 3: There is a lot to digest, not to mention the
Speaker 3: ten trillion dollar valuation of companies that are be coming
Speaker 3: out with their earnings this week, so we pause, we wait,
Speaker 3: We see then awst that basically up only about ten points.
Speaker 3: We're seeing the tenure yields actually just falling down about
Speaker 3: three basis point. It's interesting as we do anticipate the
Speaker 3: overall treasury to be signaling that they will be issuing
Speaker 3: yet more debt, but we are down by some three
Speaker 3: basis points. So a little bit about purchasing. Now, remember
Speaker 3: this is a mid yet more geopolitical tension. Maybe there's
Speaker 3: a flight to some sort of safety, as we see
Speaker 3: actually oil on the downside by a percentage point. We
Speaker 3: have been tracking higher after those concerns of increased tensions
Speaker 3: in the Middle East, not to mention, of course US
Speaker 3: personnel being killed over in Jordan. Were focus in on
Speaker 3: what's happening in geopolitics, but we move on what's happening
Speaker 3: in one key risk Asseler choice here at the technology show, we.
Speaker 5: See a little bit of a spike higher in the
Speaker 5: world a bitcoin.
Speaker 3: We're up about one point six percent forty two thousand
Speaker 3: tround and sixty eight.
Speaker 5: We are clawing our way back ed after what has
Speaker 5: been a bit.
Speaker 3: Of a sell off post of course, the Bitcoin Spot
Speaker 3: ETF coming in fruition.
Speaker 5: What have you got on the micro.
Speaker 4: Though, the big text story of the day is Amazon
Speaker 4: walking away and scrapping its acquisition of iRobot. Treading water
Speaker 4: on Amazon shares because I think we knew this was
Speaker 4: coming right based on all the reporting of late but
Speaker 4: I Robot is down significantly because adding to the fact
Speaker 4: that Amazon has walked away, and this is a case
Speaker 4: of Amazon jumping before it was pushed by EU regulators,
Speaker 4: I Roboteo Colin Angle is stepping down and they're cutting jobs.
Speaker 4: This is a pretty big situation. We're going to go
Speaker 4: to Brussels later in the hour speak to our reporter there,
Speaker 4: and then we'll go to Seattle and get the Amazon
Speaker 4: side of this story halfway through the show as well.
Speaker 4: Keep watch on this and as I said Amazon shares,
Speaker 4: look at the kind of muted reaction, we think that
Speaker 4: this was coming. The other big mover to the upside
Speaker 4: is in the earnings context, and that is so FI
Speaker 4: actually on track for its biggest jump since late July,
Speaker 4: first week of August. Why profitability for the first time
Speaker 4: on a net income basis. This is the milestone that
Speaker 4: the street was looking for. There's a lot going on
Speaker 4: on the technology side of sofar's business and a lot
Speaker 4: going on on the lending side and finance side of
Speaker 4: its business as well.
Speaker 6: Who do we speak to?
Speaker 4: The CEO Anthony Notto joins us now and Antie. We've
Speaker 4: been through this process psychologically that first profit with a
Speaker 4: number of companies before. What were the main contributing factors
Speaker 4: to you, guys hitting profitability on a net income basis?
Speaker 4: And how confident can the street be that you continue
Speaker 4: on this arc of increasing profitability and.
Speaker 7: Thank you for having me on.
Speaker 8: The main contributors to the profitability is that we finally
Speaker 8: reached the scale in our non lending businesses that they
Speaker 8: are now profitable.
Speaker 7: And so we have three profitable segments.
Speaker 8: When I joined the company six years ago, we're primarily
Speaker 8: a lender.
Speaker 7: That's a very profitable business for us.
Speaker 8: We've entered the technology platform services business where we enable
Speaker 8: one hundred and forty million accounts throughout the United States
Speaker 8: and lat Am to do payment processing as well as
Speaker 8: core banking technologies and a number of other financial services
Speaker 8: technologies that we use at SO, but we also sell
Speaker 8: to others. And then our third segment is our financial
Speaker 8: services segment, which consists of products like Sofi Money, which
Speaker 8: is a checking the SAME's account, so Fi invests, so
Speaker 8: Fi credit card, Sofi Protectors's insurance. Those businesses required a
Speaker 8: significan amount investment over the last six years. But we've
Speaker 8: now reached the point where they're forty percent of our
Speaker 8: revenue in the fourth quarter compared to lending at sixty percent,
Speaker 8: and they're profitable. And so that inflection point hit this quarter,
Speaker 8: and as we go into twenty twenty four, we believe
Speaker 8: the businesses will be fifty percent lending, fifty percent tech
Speaker 8: platform of financial services, and with all three being profitable,
Speaker 8: the profitability is sustainable.
Speaker 4: I'm trying to understand that guidance. So you're basically saying
Speaker 4: fifty percent compound annual growth on the financial services business
Speaker 4: over kind of this pretty wide window twenty twenty three
Speaker 4: through twenty twenty six. What gives you the confidence that
Speaker 4: you can see that far into the future in terms
Speaker 4: of how your company will grow that segment?
Speaker 8: Sure, just to clarify for viewers, I always suggest that
Speaker 8: will have fifty percent of our revenue from lending in
Speaker 8: twenty twenty four and fifty percent of our revenue from
Speaker 8: the two other divisions combined the technology platform segment and
Speaker 8: the financial services segment. In terms of our longer term
Speaker 8: revenue growth outlook, we are forecasting seventy five percent growth
Speaker 8: in the fincial services segment in twenty twenty four and
Speaker 8: twenty percent growth in the tech platform. From the twenty
Speaker 8: twenty three through twenty twenty six time period, technology platform
Speaker 8: will come down to fifty percent and sorry, technology platform
Speaker 8: will be mid twenties and the fincial services segment will
Speaker 8: come down to fifty percent.
Speaker 7: And the reason we could see.
Speaker 8: That is because we understand our customer acquisition costs, how
Speaker 8: much we spend on marketing, and that drives the adoption
Speaker 8: of the products and then they monetize at a rate
Speaker 8: that we've seen over the last couple of years, and
Speaker 8: so they're pretty strong meeting indicators of what the future
Speaker 8: brings from a growth perspective.
Speaker 3: One thing, of course, on your call, that you made
Speaker 3: clear to analysis. Let's face it, no economist has got
Speaker 3: this economy right in the last couple of years.
Speaker 5: How do you feel about the macroeconomy.
Speaker 8: Anthony, Yeah, we're very conservative about the macro outlooks. Specifically,
Speaker 8: I don't believe it will be the case that we
Speaker 8: could have six rate cuts, which is what the forward curve.
Speaker 7: Shows, and a strong economy.
Speaker 8: I think if we actually get the six rate cuts,
Speaker 8: it's because we're likely with unemployment above five percent and
Speaker 8: likely with contracting GDP. I think it's more likely that
Speaker 8: we'll have fewer cuts and maybe a stable economy. But
Speaker 8: coming into October, many market pundits we're talking about higher
Speaker 8: for longer. Ninety days later, they're talking about six rate cuts.
Speaker 8: It's such a bifurcation of views. It's really hard to
Speaker 8: know what the real outlook is. And so we're taking
Speaker 8: a very conservative view, and we can do that given
Speaker 8: the diversification that we have on the lending business and with.
Speaker 7: The other businesses.
Speaker 8: So we're going into next year with tighter credit and
Speaker 8: also lower expectations. In fact, we're really just forecasting maintaining
Speaker 8: our revenue and lending, not growing it, and the other
Speaker 8: business is driving the growth that I mentioned.
Speaker 3: And with that sort of growth, you still have that
Speaker 3: go all of a thirty percent return on equity, You
Speaker 3: still have that goal of being in the top ten
Speaker 3: in terms of financial institutions here in the United States.
Speaker 3: What gets you there in terms of your underlying investments
Speaker 3: that you now need to make company sure.
Speaker 8: In twenty twenty three, we were able to grow our
Speaker 8: revenue thirty five percent. We just hit our long term
Speaker 8: EBIDAD margin of thirty percent, which is what's required to
Speaker 8: get to the return on equity of thirty percent. Now
Speaker 8: we just have to scale the EBADAD dollars against our
Speaker 8: book value.
Speaker 7: We grew tamsible.
Speaker 8: Book value by more than three hundred and forty million
Speaker 8: dollars this year, and we're looking to grow it even
Speaker 8: faster next year at three hundred million to five hundred million,
Speaker 8: and so the profitability of the business is there. Now,
Speaker 8: it's about just scaling the revenue, which will scale the
Speaker 8: returns on equity to that thirty percent level that you mentioned.
Speaker 8: We've been in these businesses now for four to six
Speaker 8: years and we have pretty good leading indicators of what
Speaker 8: it takes to drive their growth. And that's what's giving
Speaker 8: us the confidence in our forward outlook.
Speaker 4: Anthony, our colleague Paid Smith on the Fintech team is
Speaker 4: talking about your technology business. Our colleagues at the Bomberg
Speaker 4: Intelligence they're talking about your technology business. This is the
Speaker 4: Bloomberg Technology Show. What are we talking about when we
Speaker 4: say that so far is a tech company, what is
Speaker 4: the strength that you have there?
Speaker 7: Sure, obviously we have to build our own technology.
Speaker 8: We're a financial services company with no physical locations and
Speaker 8: so the only way our products are delivered is through
Speaker 8: the mobile app or desktop services. So by definition we
Speaker 8: have to have technology to do that. In addition, we
Speaker 8: have to have processing capabilities and operating systems.
Speaker 7: We use for processing.
Speaker 8: A company that we bought, Galileo, back in twenty twenty.
Speaker 8: Galileo is powering about one hundred and forty million accounts
Speaker 8: in the United States to do payment processing on debit
Speaker 8: in ahrails. But also it's developed a whole suite of
Speaker 8: APIs that allows a developer to tap into those APIs
Speaker 8: and build account opening or a direct deposit or two
Speaker 8: day early paycheck or payment risk platform. In addition to that,
Speaker 8: we have a technology platform that's a core banking technology
Speaker 8: called Technical. It's really the operating system for products. It's
Speaker 8: a multi product platform. We use it for so far
Speaker 8: by now pay later. Those are the two main products
Speaker 8: that we sell to third parties, and as I mentioned,
Speaker 8: servicing about one hundred and forty million accounts in the
Speaker 8: United States and lat am.
Speaker 4: Today, Anthony, I think we've got to talk about the
Speaker 4: share reaction. Right your gains are holding at around twenty
Speaker 4: three percent. You know I talked about that psychological, psychological
Speaker 4: milestone of net income profit. But do you finally feel
Speaker 4: like you're getting some credit Because you've been talking about
Speaker 4: this plan for a little while, I have a sense
Speaker 4: of deja vus. We're talking about the same things now
Speaker 4: as the two previous times you've been on the show.
Speaker 8: Sure, I think that the inflection point in this quarter
Speaker 8: is one hitting our long term margins of eb adout
Speaker 8: thirty percent, so that gives people a longer term view
Speaker 8: on what our profitability could be. Second is forty percent
Speaker 8: of our revenue came from the technology platform business as
Speaker 8: well as the financial services business, which means sixty percent
Speaker 8: came from Monday, and so as we go into twenty
Speaker 8: twenty four, we're calling for that split to.
Speaker 7: Be fifty to fifty.
Speaker 8: As I mentioned, that's also an inflection point. People been
Speaker 8: waiting for that for a while. And so while there's
Speaker 8: a lot of talk and debate about the loans and
Speaker 8: fair market value accounting versus cost accounting, the reality is
Speaker 8: that our business is much more than that, and we're
Speaker 8: starting to get the perspective from investors about that broader diversification.
Speaker 7: And it's not by accident.
Speaker 8: We embarked on a strategy to be a one stop
Speaker 8: shop six years ago for all your financial services needs.
Speaker 7: Our mission is to.
Speaker 8: Help people achieve financial independence, which means we have to
Speaker 8: help them get their money right, and we can't just
Speaker 8: do that in one product. We have to do across borrowing, saving, spending, investing,
Speaker 8: and protecting. And what you're seeing in our results is
Speaker 8: that strategy playing out in diversified revenue and high profitability
Speaker 8: six years later.
Speaker 5: Interestingly, not in crypto anymore.
Speaker 3: But interestingly, what I'm taken with on a daylight today
Speaker 3: where we see the Amazon I robot merger have to
Speaker 3: be put on ice. With your background as someone who
Speaker 3: help lead the overall investment man King offering over at
Speaker 3: GOLM and Saxon kN to TMPT when you're thinking of
Speaker 3: your own acquisition strategy. Can deals get done at the
Speaker 3: moment in the world of Tear Company, I.
Speaker 8: Think they can get done. We're not focused on doing
Speaker 8: deals that so far. We're focused on our strategy and
Speaker 8: executing organic growth. We feel like we've reached the point
Speaker 8: now where it's ours for the taking, and the opportunity
Speaker 8: for us to be the winner. That takes most is
Speaker 8: completely up to our execution. But more broadly, I do
Speaker 8: believe there's still M and A that will happen across
Speaker 8: both technology and financial services. I think financial service is
Speaker 8: probably a little bit more challenged because of the regulatory
Speaker 8: backdrop than technology is per se.
Speaker 7: But deals are getting done.
Speaker 8: They're just harder to get done, and they're going to courts,
Speaker 8: But in court people are winning. I think what you've
Speaker 8: seen at some of the breakups is really about business performance,
Speaker 8: not about regulation, and businesses underperforming relative to expectations and
Speaker 8: therefore buyers being able to get out of those deals.
Speaker 3: Nothing like some bars remorse, but for now, we really
Speaker 3: appreciate the time that you spent talking us, your own
Speaker 3: numbers and your focus. Anthony NOTO so far, CEO, We
Speaker 3: thank you.
Speaker 4: Amazon has scrapped its plan one point four billion dollar
Speaker 4: acquisition of I Robot after clashing with European union regulators
Speaker 4: who had threatened to block the deal. I Robot announced
Speaker 4: that CEO Colin Ango would also be stepping down as
Speaker 4: the company implements a restructuring plan that will result in
Speaker 4: three hundred and fifty jobs being cut. Here with the
Speaker 4: latest is Bloomberg. Sam Stulton out in Brussels and Sam,
Speaker 4: you know, earlier in the show we kind of framed
Speaker 4: this is Amazon jumping before they were pushed, because we
Speaker 4: know that the Commission was looking at this very closely
Speaker 4: and probably would have blocked the deal. What did Amazon
Speaker 4: outline in their regulatory filing?
Speaker 9: Hi ed, well, good to join you here from Brussels
Speaker 9: this afternoon. Yes, indeed, we were just days away from
Speaker 9: a potential European Union veto over this one point four
Speaker 9: billion dollar acquisition from Amazon. The news was really that
Speaker 9: last week Amazon had held a meeting with EU Commission
Speaker 9: officials and the EU had signaled that it was its
Speaker 9: intention to block the deal. There was a deadline of
Speaker 9: February fourteenth for the EU to come to a decision.
Speaker 9: But Amazon seems to have jumped the gun now and
Speaker 9: decided that it's not worth risking that negative publicity from
Speaker 9: the European Commission and it's withdrawn from the acquisition.
Speaker 3: And of course we've heard from Margaret Vestia before about
Speaker 3: concerns surrounding Big M and A deals, about where they
Speaker 3: take it. She just take a listen to what she
Speaker 3: told the show a few weeks ago.
Speaker 10: In any merger, it is so that if we have concerns,
Speaker 10: it is for the businesses either to address these concerns
Speaker 10: by debunking them or by addressing them by coming up
Speaker 10: with remedies that will solve the problem. If a companies
Speaker 10: say we will not come up with remedies, well, then
Speaker 10: of course we expect that they have good arguments that
Speaker 10: our concerns should not be sustained, and we are still
Speaker 10: in the process of assessing our concerns compared to a
Speaker 10: situation where we do not have a remedy to the
Speaker 10: concerns that we have drawn up.
Speaker 5: Sam, it was interesting. We were just talking to Anthony Notto.
Speaker 3: He used to be the head of TMT Investment Man
Speaker 3: can co head over at Goldman.
Speaker 5: He's now, of course CEO are so far, but.
Speaker 3: He was saying, look, deals that aren't getting done are
Speaker 3: largely because there's buyers remorse. It's not so much that
Speaker 3: deals can't get done from your perspective in the Brussels,
Speaker 3: do you think that's true.
Speaker 9: Yeah, I think to a certain extent absolutely. I mean
Speaker 9: in cases such as Amazon I rode, but the European
Speaker 9: Commission really needed something almost symbolic to say that it
Speaker 9: could rub a stampless deal and give it the green lights,
Speaker 9: and as we heard from Maghareet de Vestaga just said,
Speaker 9: it clearly wanted some sort of a remedy to be
Speaker 9: filed in this case. The deadline for that remedy passed
Speaker 9: a couple of weeks, and Amazon in fact offered nothing
Speaker 9: to appease those original concerns from the European Commission when
Speaker 9: it said back in November that this deal could result
Speaker 9: in a distortion of competitions on the market for robot
Speaker 9: vacuum cleaners and also result in higher prices for consumers.
Speaker 9: So Amazon decided not to come forward with an olive
Speaker 9: branch or any form of concession in this case, and
Speaker 9: really from that point on the deal was dooms. Now
Speaker 9: going forward, it creates a lot of uncertainty in the
Speaker 9: boardrooms regarding these large technology mergers. This isn't the first
Speaker 9: time that companies have withdrawn from a potential deal after
Speaker 9: getting intense regulatory scrutiny. You may recall recently that Adobe
Speaker 9: walked away from their twenty billion dollar merger with Figma
Speaker 9: after getting similar scrutiny over that deal, and indeed they
Speaker 9: had to pay a one billion dollar walkaway fee in
Speaker 9: that case. For this time, Amazon's fee is a bit cheap.
Speaker 9: It's just ninety four million dollars, but I'm sure it's
Speaker 9: not lunch money at least.
Speaker 3: And certainly not for a company like Hi Robot that
Speaker 3: now is having to lay off three hundred and fifty
Speaker 3: people thirty percent of the workforce. And the CEO he
Speaker 3: goes Sam, absolutely brilliant to get the update from you,
Speaker 3: Sam Stotton over there in Russell's we thank you me.
Speaker 5: While coming up, well, we're going.
Speaker 3: To dig into companies that, oh maybe are still in
Speaker 3: growth mode and wanting to prove it to the public markets.
Speaker 3: Equity Zen head and market Insights Rihanna Lynch is going
Speaker 3: to be joining us to discuss on what twenty twenty
Speaker 3: four holds and whether Reddit is going to make a debut,
Speaker 3: and and what valuation this is bruly met technology. Could
Speaker 3: twenty twenty four finally be a bit more of a
Speaker 3: year for tech IPOs well look Reddits weighing some feedback
Speaker 3: already from early meetings, with potential investors coming being advised
Speaker 3: to target at least a five billion dollar valuation if
Speaker 3: it goes public.
Speaker 5: That's according to sources.
Speaker 3: Let's bring in someone who's at cutting edge of what
Speaker 3: valuations look like on the secondary market, Equity Zen, head
Speaker 3: of Market Insights, Prean and thench it's great to have
Speaker 3: you with us, Brian, and well, look, this was a
Speaker 3: company that raised money, and I think a ten billion
Speaker 3: dollar valuation going to eke out five billion by some
Speaker 3: of the maths that you're saying.
Speaker 6: It'll be interesting to see.
Speaker 11: I think the key here that we don't have the
Speaker 11: answer to yet is whether or not Reddit is profitable.
Speaker 11: So when they first made plans to go public in
Speaker 11: early twenty twenty two, talking about even a fifteen billion
Speaker 11: dollar valuation, they were not yet profitable. Scrap those plans
Speaker 11: coming to the market again, and I think that's going
Speaker 11: to be the crux for where this valuation plays out.
Speaker 11: When we look at the cohort of tech IPOs in
Speaker 11: late twenty twenty three, so the Klavio, Instacart, arm Group,
Speaker 11: these were all profitable companies and they still had lackluster performance.
Speaker 11: So at a minimum, I would assume that Reddit is
Speaker 11: near profitability, but there's no to be.
Speaker 3: Learned from their s one profitability key Also, perhaps talking
Speaker 3: up artificial intelligence, is that what's going to dictate where
Speaker 3: the companies could come in any sort of window that
Speaker 3: opens in twenty twenty four.
Speaker 11: Yeah, I think any company that can play into the
Speaker 11: AI buzz will obviously use that. Whether that's a marketing
Speaker 11: tactic or a key part of their business. Is you
Speaker 11: know a separate question. I would say, when we're looking
Speaker 11: at Reddit, we're really talking about their advertising business. You know,
Speaker 11: as a core social media platform, they generated over eight
Speaker 11: hundred million dollars in revenue from advertising last year. That's
Speaker 11: up twenty percent from the prior year. But there's a
Speaker 11: lot of competition with TikTok and Meta and others in
Speaker 11: the space. But I would also say that there is
Speaker 11: investor interest for these social media platforms. We haven't seen
Speaker 11: one of them go public since Pinterest back in twenty nineteen,
Speaker 11: and you know, those stocks have really rallied. Pinterest debuted
Speaker 11: at ten million dollars and is now training at a
Speaker 11: twenty five billion dollar valuation, So perhaps they're hoping to
Speaker 11: jump on some of that momentum.
Speaker 4: Brian, how much emphasis do you put on the idea
Speaker 4: if Reddit does this pulls the trigger, It opens up
Speaker 4: a broader IPO window for everyone else that's waiting in
Speaker 4: the wings.
Speaker 11: I think a lot of private companies have been waiting
Speaker 11: for the hero company to come out and have this
Speaker 11: vastly successful IPO and welcome others to follow. Obviously, we
Speaker 11: haven't seen that yet. So the companies that are choosing
Speaker 11: to go public now are taking on a bit of
Speaker 11: a leadership role and hoping to play that part. But
Speaker 11: what we're hearing from the heads of NASE and NASDAC
Speaker 11: are that there are lots and lots of companies who
Speaker 11: are starting their roadshows, putting their pieces in place because
Speaker 11: they feel the pressure to IPO and they're ready to IPO.
Speaker 11: You know, when you look at Reddit, for instance, this
Speaker 11: is a nineteen year old company. There is both a
Speaker 11: liquidity need for early employees and shareholders and just an
Speaker 11: investor access need from retail investors is well. So if
Speaker 11: a Reddit goes well, I think there'll be other companies
Speaker 11: that look to follow.
Speaker 4: Let's spare a thought for Reddit, right, Yes, you talked
Speaker 4: about their business.
Speaker 6: They have a premium subscription tier.
Speaker 4: But lots of companies go public because they want their
Speaker 4: name out there. You know, I don't think we've really
Speaker 4: been talking about Reddit for a little while. Do you
Speaker 4: think that that's a good strategy to go to market with?
Speaker 11: And I think it's a strategy that could really benefit them,
Speaker 11: especially given who their platform is. Their Subreddit, Wall Street
Speaker 11: Bets really started the whole memestock frenzy. So there is
Speaker 11: a core part of their users and their platform that
Speaker 11: is around investing, and in particular retail investing. So I
Speaker 11: think one interesting thing about this IPO to watch will
Speaker 11: be if those redditors get on board, will you know, redd.
Speaker 1: It become the next meme stock?
Speaker 4: That would be kind of meta.
Speaker 11: But at a minimum is their investor interest from these
Speaker 11: platform users. So I think, you know, from marketing and
Speaker 11: brand perspective, this ipo chatter is helping to get their
Speaker 11: name out there, and whether or not they will translate
Speaker 11: to investor interest, we'll see.
Speaker 4: Brian Lynch, head of market insights at Equisyzen, thank you
Speaker 4: so much. As we point out, five billion would be
Speaker 4: half the ten billion they raised that last year.
Speaker 5: I'll come back to Bluemore Technology.
Speaker 4: I'm Caroline hard in New York and I Ed Lovelow
Speaker 4: in San Francisco, carry you mentioned earlier in the show.
Speaker 4: We're kind of treading water on the Nasdaq one hundred
Speaker 4: right because it is a mega week for megacat tech earnings.
Speaker 4: That is what your calendar looks like for this week.
Speaker 4: Join us on bloombog Technology every single day because we
Speaker 4: will look ahead and we will review ten trillion dollars
Speaker 4: of market cat reporting this week, and those are the
Speaker 4: names that move the needle right across everything from the
Speaker 4: ad space, consumer tech enterprise. It is going to be
Speaker 4: really massive, and the AI story I'm sure will be
Speaker 4: weaved within that. Amazon's trusting Thursday, but they're in the
Speaker 4: new cycle right now. Looking at the shears, we are
Speaker 4: completely flat on Amazon stock as they scrap that one
Speaker 4: point four billion dollar deal with iRobot.
Speaker 6: Or to acquire ier Robot.
Speaker 4: We kind of knew this was coming, right, Bloomberg's done
Speaker 4: a lot of reporting on the European Commission probably likely
Speaker 4: to block this deal anyway. Amazon moved first, but from
Speaker 4: iRobot's perspective, the CEO Colin Angle is departing and three
Speaker 4: hundred and fifty jobs or so will be cut. I
Speaker 4: guess the question is, well, does Amazon lose anything by
Speaker 4: not acquiring iRobot. That's a tough one.
Speaker 6: Answer.
Speaker 3: Well, we've got the right person to ask right on
Speaker 3: this scrap deal. Let's go to Spencer Soper, who covers
Speaker 3: Amazon for US. And Spencer, the idea is that maybe
Speaker 3: this deal didn't get done because there's a bit of
Speaker 3: a buyer's remorse here.
Speaker 5: Do you feel that that's the case.
Speaker 12: Yeah, I think that's definitely a sharp point. Like if
Speaker 12: Amazon felt it was worth fighting for it would fight
Speaker 12: for it.
Speaker 7: They fight for things.
Speaker 12: So the fact that they're walking away and of course
Speaker 12: they're going to take their wipe the at the regulatory
Speaker 12: agencies and you know, while they're doing it, but really
Speaker 12: just looks like maybe the enthusiasm around this deal is softened.
Speaker 12: If you think several years ago when they were really
Speaker 12: going heavy on their on their connected devices and Alexa
Speaker 12: and there was all this buzz around the connected home
Speaker 12: and that sort of thing. A lot of it's just
Speaker 12: kind of faded, you know, these things seem more fetish.
Speaker 6: You know, I don't know.
Speaker 12: I've got one of these robotic vacuums in my house.
Speaker 12: It just sits in the corner.
Speaker 6: We never use it.
Speaker 12: It makes a racket it, you know, I just say
Speaker 12: give me, give me the vacuum. I'll do it myself.
Speaker 3: I got too you know, and I was always always
Speaker 3: being deployed.
Speaker 12: Yeah, it takes, it takes too long. So I do
Speaker 12: think that there's there's something too that Amazon. I was
Speaker 12: kind of happy to have a reason to walk away
Speaker 12: from this one.
Speaker 4: Okay, sus Spencer, You and I always try and think
Speaker 4: holistically about Amazon. When they do something, it's often to
Speaker 4: bring it into the wider ecosystem on Prime or Alexa.
Speaker 4: That's harder to see with iro robot. But your latest
Speaker 4: place on Bloomberg is about ads and turning televisions into
Speaker 4: shopping carts.
Speaker 6: Explain your thesis.
Speaker 12: Yeah, well, so Amazon turned on as on Prime Video.
Speaker 12: They're expecting us to reach one hundred and fifteen million
Speaker 12: people in the US each month, and they're they're kind
Speaker 12: of a late comer to the ad supported connected TV,
Speaker 12: but they'll be a big player.
Speaker 6: And they'll sell a lot of ads. But if they're
Speaker 6: really going to.
Speaker 12: Win here, it's going to be to get people to
Speaker 12: engage with their TV. And that's where Amazon is in
Speaker 12: a stronger position than anyone else because it's got the
Speaker 12: online store behind it.
Speaker 6: It can you know, feature all.
Speaker 12: Kinds of inventory, and potentially if you get people to
Speaker 12: watch TV in a different way, potentially people will actually
Speaker 12: shop from their television. Maybe you know, scan a QR
Speaker 12: code on the TV and get taken directly to a
Speaker 12: product page on their on their Amazon app, or even
Speaker 12: through inaudible tones. You know, your your television will be
Speaker 12: sending messages that you can't really hear, but your mic
Speaker 12: can pick up on it and take you to that
Speaker 12: page in your shopping app. So I think if they're
Speaker 12: really going to differentiate, they got to get people engaging
Speaker 12: with the television.
Speaker 4: The story on Bloomberg is titled Amazon's video ad push
Speaker 4: aims to turn TVs into shopping carts. It has those
Speaker 4: charts that we just showed you. Check it out Bloomberg.
Speaker 4: Spencer sofa with the reporting. Let's keep a conversation going
Speaker 4: with Melissa Verdict, president of the ad campaign managing platform Packview.
Speaker 4: And you just heard Spencer's reporting. Melissa, we showed you
Speaker 4: the data in the charts. What do you see Amazon
Speaker 4: doing in this kind of conversion of eyeballs through the
Speaker 4: screen to.
Speaker 6: Ads to shopping baskets.
Speaker 13: Yeah, just to add to what Spencer said, Amazon has
Speaker 13: a huge advantage with all their rich retail media data,
Speaker 13: so not just being able to have shoppable ads, but
Speaker 13: the ability to retarget people. They know what you bought,
Speaker 13: they can show you the best ad. If you're in
Speaker 13: market for baby bottles in formula, you're a new mom,
Speaker 13: can they can share and show you the most relevant
Speaker 13: ads and that has better performance. And right now advertisers
Speaker 13: are really cracking down on performance. They want to make
Speaker 13: sure that their advertising dollars are as effective as they
Speaker 13: can be. So Amazon has such a great advantage with
Speaker 13: the ability to have rich retail media data, real time
Speaker 13: sales information, and show you the most relevant ads.
Speaker 3: You've got what thirteen billion in ads spending to oversee it?
Speaker 3: Digital marketing company, patfew, how many of your clients? How
Speaker 3: much of this sort of money is going to be
Speaker 3: put to Workconomason do you think?
Speaker 13: I mean, this is a very new product, so just
Speaker 13: keep that in mind all of our we have a
Speaker 13: lot of clients that are starting to use this new product.
Speaker 13: And right now it's kind of the big brands that
Speaker 13: are starting to use this. But Amazon's ambition is to
Speaker 13: bring this to the SMB, to the smaller brands, mid
Speaker 13: market brand kind of democratize the ability to get this
Speaker 13: through self service, so you don't just have to go
Speaker 13: through a through a party or an agency. They're bringing
Speaker 13: this to the masses and so that's kind of also compelling,
Speaker 13: and that not just big brands will be using this,
Speaker 13: but ultimately everyone can can get into this space.
Speaker 3: Showpabowl TV is something that age is taken to with fools.
Speaker 3: Just's still a bit uncomfortable about the whole situation. Is
Speaker 3: this something that will just organically spread? And give it
Speaker 3: five years and I'll forget that I ever thought that
Speaker 3: this was a weird thing.
Speaker 5: Today right now it is weird.
Speaker 13: I mean, you see QR code are going to whip
Speaker 13: out your phone and you know, take a picture of
Speaker 13: it and go shop when you're watching movies, so that
Speaker 13: that experience.
Speaker 5: One, we're gonna have to get used to it.
Speaker 13: Two, Amazon will continue to innovate in a space and
Speaker 13: then three during temple events like Prime Day and Black
Speaker 13: Friday Football. I don't know if you watch Black Friday
Speaker 13: Football this year, but there are QR codes all over
Speaker 13: the place, and when you're sitting on the couch, you're
Speaker 13: you're thinking about shopping a QR code that's that's more
Speaker 13: relevant to you, So you're gonna You're gonna go ahead
Speaker 13: and do that. But when we're sitting there watching a
Speaker 13: movie and in the middle of that you see QR
Speaker 13: QR code, Are you really gonna you know, have that desire?
Speaker 13: And that is going to drive innovation and change one
Speaker 13: is changing the mindset of consumers so we'll.
Speaker 1: Get more used to it.
Speaker 13: And then two is just the formats will change. It'll
Speaker 13: continue to so you know, Amazon has this day one mentality.
Speaker 13: They're going to continue to think about how can we
Speaker 13: bring this to consumer that they're going to want to
Speaker 13: use it.
Speaker 3: Melissa Verdic love having on the show. Thank you for
Speaker 3: President of pat Few always interesting stuff. Meanwhile, coming up,
Speaker 3: we're going to be talking about how, oh, there's a
Speaker 3: sort of a depleting number of public companies out there
Speaker 3: at the moment. How is that impacting VC strategists and
Speaker 3: strategy more generally, the Hippo is going to be joining
Speaker 3: us Managing partner Eric Heppo stick with up for us
Speaker 3: as a Bloomberg Technology.
Speaker 4: The world's largest private equity firm, Blackstone is setting its
Speaker 4: eyes on AI data centers and it's on a quest
Speaker 4: to become the country's most sought after landlord, too big
Speaker 4: tech and the world's biggest by power capacity. I want
Speaker 4: to bring in Bloomberg's Carawetz, or want to buy editors
Speaker 4: here in San Francisco.
Speaker 6: So this is interesting.
Speaker 4: We're talking about Blackstone becoming an AI player, and we
Speaker 4: know all about the compute capacity needed and cloud capacity
Speaker 4: for training and inference on the other of m side.
Speaker 4: But what we're really talking about, I think, is Blackstone
Speaker 4: investing in and controlling the real estate essentially exactly.
Speaker 14: So Blackstone is a huge real estate player. It's the
Speaker 14: biggest part of its whole firm and the biggest business.
Speaker 14: And it's actually known for you know, kind of going
Speaker 14: into these industries and identifying where there's a shortage of
Speaker 14: space relative to demand. And so it's done this with
Speaker 14: warehouses when it saw the e commerce boom has created
Speaker 14: a big warehouse empire. It did the same with single
Speaker 14: family homes for housing, and now, you know, a few
Speaker 14: years ago it started to see all the demand needed
Speaker 14: for data centers and the coming you know, electricity needs
Speaker 14: that are coming. So it bought QTS Reality Trust in
Speaker 14: twenty twenty and kind of got really lucky by sort
Speaker 14: of the rise of generative AI that really just made
Speaker 14: demand explode. So now it's going all in on this bed,
Speaker 14: giving QTS a lot of money to rapidly expand and become,
Speaker 14: you know, the biggest data center provider in the US.
Speaker 3: Yeah, ten million dollar takeover all the way back in
Speaker 3: twenty twenty one. Coming home to Roostcar, I'm interested in
Speaker 3: where where this route to state footprint ends up being, Oh,
Speaker 3: we're losing some technology behind you, But tell us a
Speaker 3: little bit about where which states where looks appetizing to
Speaker 3: build out.
Speaker 14: Well, one of the biggest areas is in Phoenix, and
Speaker 14: they have a really giant data center there. They're building
Speaker 14: five buildings that have a giant complex that's gonna be
Speaker 14: sort of the crown jewel. We have a reported that
Speaker 14: Microsoft is gonna be one of the tenants there. There's
Speaker 14: another part of Phoenix that's four hundred acres they're trying
Speaker 14: to develop Northern Virginia, which has of course long been
Speaker 14: a data center hub because it's where interconnector intercontinental fibers connect,
Speaker 14: so it's a high speed area. So they're growing there.
Speaker 14: There is a big project underway called the Digital Gateway
Speaker 14: with Blackstone and Wakefield trying to build a new data
Speaker 14: sen corridor in Manassas, Virginia that has been the subject
Speaker 14: of some pushback from residents and backlash and sort of
Speaker 14: in process now. But those are some of the main
Speaker 14: growth theorists, but really kind of different spots across the country.
Speaker 3: Well, maybe everyone wins a little bit from this AI
Speaker 3: focused Caro. We so we thank you so much for
Speaker 3: that really well read story currently on the Blomberg terminal
Speaker 3: and on dot com.
Speaker 5: Meanwhile, and let's.
Speaker 3: Talk about AI opportunities more broadly and what it's doing
Speaker 3: for the VC segments.
Speaker 5: We've got VC Spotlight and I'm.
Speaker 3: Going to look at that, oh with Narra Hippo Managing
Speaker 3: partner Eric Hipoe. It is great to have some time
Speaker 3: with you tech Day, Eric. And before we go into
Speaker 3: the landscape of public versus private, I want to ask
Speaker 3: you about, well, where you're putting your money to work
Speaker 3: At the moment, you're doing deals, much of that in AI.
Speaker 2: Here in New York, we're not doing pure jen A
Speaker 2: ideals at the moment because they're too expensive and there's
Speaker 2: too much of a frenzy and it's hard to tell
Speaker 2: exactly to pick your winners at the moment, what's going
Speaker 2: to end up on the maid LM platforms, the big
Speaker 2: tech companies, and what's going to be a stand abone company.
Speaker 2: Having said that, the great majority of the companies that
Speaker 2: we we invest in these days are really data driven
Speaker 2: companies and so they employe AI in many, many different fashions.
Speaker 2: So we're doing a lot of that. We're doing a
Speaker 2: lot of animation, We're starting to do quite a bit
Speaker 2: of climate and clean technology, asset light, mostly in the
Speaker 2: electrifications phase. And we continue to do a lot of healthcare,
Speaker 2: both on the consumer and on the enterprise level.
Speaker 1: At the enterprise level, and we're.
Speaker 3: Making some new deals that I've seen on your website.
Speaker 3: Also got a lot of things in Steff. I'm interesting
Speaker 3: in your own expertise and what we all know Eric
Speaker 3: Hippo for is, well, how much experience you have in
Speaker 3: the world of media, and with the fact that you're
Speaker 3: in new offerings like now this news, but the fact
Speaker 3: that you really built up your experience having been at
Speaker 3: the likes of well, I think at the Huffington Post.
Speaker 3: How much is AI going to play in to the
Speaker 3: future of media?
Speaker 5: How much is it decimating it?
Speaker 2: We haven't really done a new media investment now in
Speaker 2: a number of years, maybe two or three or four years.
Speaker 2: And one of the reasons is that media is in
Speaker 2: shambles at the moment, as you can tell from all
Speaker 2: the layoffs that have been happening to tell from the
Speaker 2: switch and the big platforms in the video, from broadcast
Speaker 2: and cable to streaming, and so all of this kind
Speaker 2: needs to settle down.
Speaker 1: And to your question, AI is going to have a big.
Speaker 2: Role, good or bad in the media space, and that's
Speaker 2: still to be determined. What is an AI driven story?
Speaker 2: What is true, what is not true? What needs to
Speaker 2: be copyrighted, what shouldn't be copyrighted. All of these questions
Speaker 2: loom really large in the media industry, and it's going
Speaker 2: to take a few years to sort this out.
Speaker 4: Eric, good morning from San Francisco. We were just showing
Speaker 4: some of your portfolio companies and I was interested in
Speaker 4: what you were saying about electrification and asset light model.
Speaker 4: But one of those names is Zipline, and I'm always
Speaker 4: curious about Zipline. I'll always bump into Kellernaldo, the CEO
Speaker 4: at some valley. Is it lining an IPO candidate.
Speaker 2: As if I will be an IPO candidate given its
Speaker 2: size and its scale and it's growth, it's growth trajectory.
Speaker 2: You just saw that they announced a really big deal
Speaker 2: with Walmart to serve the Dallas area with their drones.
Speaker 2: That's that's it's it's a you know, we're beyond the
Speaker 2: pilots stage.
Speaker 1: We're beyond the trial stage. We're now at the stage
Speaker 1: where you can actually.
Speaker 2: Implement these kinds of deliveries and you could do it
Speaker 2: on scale.
Speaker 4: So we we've been talking a lot on the program
Speaker 4: today about Reddit. You know, we understand it's it's talking
Speaker 4: to the bankers and talking to its investors and saying,
Speaker 4: if we IPO, where should we do it from a
Speaker 4: valuation perspective, And it's looking like five billion dollars is
Speaker 4: about right down from the ten billion where they last
Speaker 4: raise or.
Speaker 6: Valued last time.
Speaker 4: But we're trying to understand if it's a starting gun
Speaker 4: for the twenty twenty for i PO window. So give
Speaker 4: me the Eric Kippo thesis and outlook for that this year.
Speaker 2: Yeah, Well, you know, there's there's there's nothing like the
Speaker 2: truth about then then going public. Uh, and you know
Speaker 2: their reported revenues are about the billion dollars, So five
Speaker 2: billion dollar valuation of five x on that seems reasonable
Speaker 2: to me.
Speaker 1: Obviously, with there's a lot we don't know.
Speaker 2: We don't know the growth rate, we don't know the
Speaker 2: bottom line that well, so it could be it could
Speaker 2: be a little bit more than five billion dollars if
Speaker 2: the growth rate is higher, and if if the.
Speaker 1: Company is profitable.
Speaker 2: But but five at the moment, given what we know,
Speaker 2: seems like a reasonable evaluation.
Speaker 3: What's so interesting is we get this breaking news across
Speaker 3: the IPO sphere. At the moment, Eric and I'm looking
Speaker 3: at how Reno, European company. They built a sort of
Speaker 3: spin off umpire, which is an only They called it
Speaker 3: the only European evy and software pure play. That intention
Speaker 3: was I PO this unit. We now learn that they
Speaker 3: are not going to be seeking an initial public offering
Speaker 3: in the near term because the current equity market conditions, basically,
Speaker 3: the evaluation isn't going to be right and there's too
Speaker 3: much volatility. How much is that going to be the
Speaker 3: theme of twenty twenty four More broadly, how much do
Speaker 3: you worry that that this window isn't going to open?
Speaker 7: Well?
Speaker 2: This has been this is this has been the problem
Speaker 2: with the IPO market for for a number of years now,
Speaker 2: with the exception of two years ago when we had
Speaker 2: the SPACs and all the SPACs and and and kind
Speaker 2: of the failure of.
Speaker 1: The SPAC structure, and we're back.
Speaker 2: To kind of like the dol drooms when it comes
Speaker 2: to to being able to go public, and and and
Speaker 2: and that's that's really dangerous. It's it's obviously dangerous in
Speaker 2: my business because we expect, you know, an exit, whether
Speaker 2: it's M and A or an IPO.
Speaker 1: But I think it's dangerous on a broader sense.
Speaker 2: We we now have less than half of the public
Speaker 2: companies that we had the mid nineties and mid nineties
Speaker 2: there was a little bit more than eight thousand public companies,
Speaker 2: and I'm talking about the US, and today there's less
Speaker 2: than four thousand, and that number keeps shrinking. So what
Speaker 2: does it mean to be in the world where we
Speaker 2: have fewer and fewer public companies and it's very hard
Speaker 2: to go public. I don't think. I don't think that's
Speaker 2: favorable to the economy.
Speaker 4: Eric, this is VC spotlight, and the story of twenty
Speaker 4: twenty three was a drop in activity, right volume or
Speaker 4: dollar perspective for venture back deals. But there seems to
Speaker 4: be some kind of like stabilization. At the start of
Speaker 4: the year, AI had such all of the very little
Speaker 4: oxygen out of the room. Are you back to kind
Speaker 4: of writing checks across a broader range of sectors?
Speaker 2: Now we are, and we've been back, i would say
Speaker 2: since mid last year. And for us, it's not a
Speaker 2: question of lack of opportunities, because we see thousands of
Speaker 2: new companies every year and we make you know, we
Speaker 2: typically make fifteen to twenty new investments every year. In
Speaker 2: good part it was because the valuations we're still too high.
Speaker 2: And remember we're seed investors first, so we are very
Speaker 2: early investors and getting started with the right footing, on
Speaker 2: the right footing, with the right valuation.
Speaker 1: It's critical to what we do.
Speaker 2: And what we're seeing now is that there's much more
Speaker 2: you know, realism in the world in that world, and
Speaker 2: people are being more you know reasonable as.
Speaker 1: Far as valuations are concerned.
Speaker 2: So we're back on track in terms of making the
Speaker 2: you know, our regular number of investments. Where the market
Speaker 2: is still kind of like shot is on the late stage.
Speaker 2: So if you take if you take serious c's and beyond,
Speaker 2: it's it's very hard to get a company financed at
Speaker 2: that level. Whether that opens up again in twenty twenty four,
Speaker 2: it's it's too early to.
Speaker 4: Tell, all right, Larry Hippo, managing partner Eric Hippo, a
Speaker 4: lot of experience and a broad conversation.
Speaker 6: We really appreciate it. Thank you.
Speaker 5: A little bit of.
Speaker 3: Breaking news when it comes to the shares owned by
Speaker 3: Delivery Hero of Delivery, which is a UK rival in
Speaker 3: food delivery. Delivery Hero will be selling up to sixty
Speaker 3: eight million Delivery Class A shares we understand. So there's
Speaker 3: gonna be some supply pressure on delivery shares in the
Speaker 3: market after the market close. Of course, that occurred about
Speaker 3: twenty minutes ago, So some European action when it comes
Speaker 3: to food delivery. Meanwhile, let's talk about social media at
Speaker 3: the moment and what's happening right here in the US
Speaker 3: and more broadly worldwide. Because the site X it's currently
Speaker 3: blocking some searchers to Taylor Swift. That's after pornographic deep
Speaker 3: fake images of the singer, well, they've been circulating online.
Speaker 3: This is as consumer protection is front and center at
Speaker 3: social media giants, with X CEO Lindi Yacarino and the
Speaker 3: CEOs of a number of other technology companies actually scheduled
Speaker 3: to appear before the Senate on Wednesday to testify about
Speaker 3: protecting children online, in particular, joining US now from Washington
Speaker 3: is ruly bad social media report, Alex Birinka.
Speaker 5: And you've really already been incredibly.
Speaker 3: Busy with twenty twenty four and deep fakes, whether it's
Speaker 3: a voice of Biden or whether it's fake pornography involving
Speaker 3: Taylor Swift, and there's just no regulation for it.
Speaker 15: Certainly, January was the month of deep fake AI videos
Speaker 15: on social media, on the heels of the Taylor Swift
Speaker 15: explicit images going viral on X last week. We really
Speaker 15: got to see kind of the slow nature of chasing
Speaker 15: and taking down some of these images and videos on
Speaker 15: social now that these tools, these AI tools are really
Speaker 15: cheap and easy to get their hands on. That Taylor
Speaker 15: Swift debacle on Wednesday was just days after robocalls of
Speaker 15: Biden went out to New Hampshire voters. They were obviously fake,
Speaker 15: and they were urging voters to hold their votes and
Speaker 15: not go to the polls, which is not how the
Speaker 15: election works here in the States. So we are starting
Speaker 15: to see kind of the real implications those of US
Speaker 15: in the tech industry. We've been seeing this happen across
Speaker 15: the Internet, but this past month it seems like the
Speaker 15: public is really getting to see some high profile examples
Speaker 15: of what happens when AI hits social media with bad
Speaker 15: actors trying to put out either fake or damaging information.
Speaker 4: Alex Azo go ahead to Wednesday. What is the aim
Speaker 4: of this committee hearing? What DC want to get out
Speaker 4: of it?
Speaker 15: Well, the CEOs of Meta, x, Discord, TikTok, and Snap
Speaker 15: will be at the Senate Judiciary Committee on a hearing
Speaker 15: focusing on child safety. Now, just before this hearing last week,
Speaker 15: Snap was the first tech company to actually come out
Speaker 15: in support of the Kids Online Safety Act, which would
Speaker 15: put in regulations to protect kids online. But this is
Speaker 15: not my first hearing, and I can tell you, guys,
Speaker 15: I bet there will be questions that are outside of
Speaker 15: just kids safety as well. TikTok and its Chinese parent
Speaker 15: owner always is a hot button issue, so we might
Speaker 15: see some questions directed to the CEO of TikTok's way
Speaker 15: around China and data protection. And also, guys, after this
Speaker 15: deep fake debacle on X, I would expect X CEO
Speaker 15: Linda Yakarino to get some very pointed questions, particularly around
Speaker 15: why some of these posts got forty seven million views
Speaker 15: and took almost a day to take down.
Speaker 3: Aksperanca, we thank you so much for the latest on
Speaker 3: the reporting across all of that.
Speaker 5: Meanwhile, that does it for this edition of My Technology.
Speaker 4: And yeah, don't forget to recap on the podcast wherever
Speaker 4: you get your podcasts, Apple, Spotify, iHeart and all the
Speaker 4: Bloomberg platforms. This is Bloomberg Technology.