WEBVTT - Breaking Down Earnings With Reddit, Lyft CEOs 0:00:01.360 --> 0:00:04.720 From Mark Hard We're Innovation of Money and Power Collie 0:00:04.920 --> 0:00:09.639 in Silicon Valley, NBN. This is Bloomberg Technology with Caroline 0:00:09.720 --> 0:00:11.000 Hyde and Ed Ludlove. 0:00:24.640 --> 0:00:27.160 I'm Caroline Hyde at Bloomberg's World headquarters in New York, 0:00:27.560 --> 0:00:29.280 and I'm Ed Ludlow in San Francisco. 0:00:29.400 --> 0:00:31.280 This is Bloomberg Technology coming up. 0:00:31.400 --> 0:00:34.080 Full earnings coverage ahead, and we're going to be kicking 0:00:34.240 --> 0:00:36.839 off the show with Reddit CEO Steve Huffman. 0:00:37.600 --> 0:00:39.920 Plus later this hour we'll turn to ride sharing and 0:00:39.960 --> 0:00:42.599 sit down with the CEO of Lift, and. 0:00:42.560 --> 0:00:45.240 We'll hear from Alphabet CEO so No a pitchy ahead 0:00:45.280 --> 0:00:48.559 of Google's developer conference. Io will break that down and 0:00:48.600 --> 0:00:51.239 discuss so much more throughout this hour, But first we 0:00:51.280 --> 0:00:53.960 turn our attention to what is happening more broadly on 0:00:54.000 --> 0:00:56.560 the markets. Maybe we look at this risk asset of 0:00:56.640 --> 0:00:59.480 choice to start bitcoin currently on the downside versus the 0:00:59.560 --> 0:01:02.200 US dollar, or it really shows risk appetite is waning 0:01:02.200 --> 0:01:04.200 at the moment. Ed, we've got a stronger dollar though, 0:01:04.480 --> 0:01:07.640 and more broadly, we've seen kind of lackluster moves on 0:01:07.680 --> 0:01:09.720 the benchmarks. More broadly, I wonder if the director can 0:01:09.760 --> 0:01:12.000 bring up at the moment. What's happening when the Nasdaq 0:01:12.040 --> 0:01:15.080 more broadly and tex stocks have been underwater a little 0:01:15.080 --> 0:01:17.720 bit as we've pulled lower on some of the chip 0:01:17.800 --> 0:01:20.320 names in particular. Look at the Nasdaq basically trading flat. 0:01:20.319 --> 0:01:22.759 We're off by seven points. There's caution out there ahead 0:01:22.760 --> 0:01:24.200 of maybe some bond auctions to come. 0:01:24.200 --> 0:01:25.640 We've seen the sell off in the bond market. 0:01:25.959 --> 0:01:28.360 Yields as we've been seeing on the tenure just up 0:01:28.360 --> 0:01:30.720 about two three basis points. We've got a big flood 0:01:30.840 --> 0:01:34.119 of money coming with a supply of tenure debt coming 0:01:34.120 --> 0:01:35.360 on auction a little bit later. 0:01:35.400 --> 0:01:37.920 How will that be taken down supply goes up? Of course, 0:01:38.000 --> 0:01:39.560 maybe a little bit of a sell off. But I'm 0:01:39.560 --> 0:01:40.280 showing a light. 0:01:40.319 --> 0:01:43.120 And what's happening more broadly with the socks the Philadelphia 0:01:43.240 --> 0:01:46.080 Semiconductor Index. Why is that lower when we've seen some 0:01:46.160 --> 0:01:49.520 real ramifications from that news that broke yesterday all regarding 0:01:49.760 --> 0:01:53.000 HUAWEIH once again limitations on the access to chips made 0:01:53.000 --> 0:01:55.400 here in the United States by Intel by Qualcom. We 0:01:55.520 --> 0:01:57.080 can dig into that story a little bit later, ed, 0:01:57.080 --> 0:01:58.720 but I want to show that actually we're bouncing off 0:01:58.760 --> 0:02:00.400 our loads when it comes to the socks. But what 0:02:00.440 --> 0:02:01.760 if you've got on the micro perspective. 0:02:02.320 --> 0:02:04.240 Well, in the first instance, earnings, there's going to be 0:02:04.280 --> 0:02:06.720 a lot throughout the hour outside of earnings. But let's 0:02:06.760 --> 0:02:09.560 start there with the tail of two ride sharing apps, 0:02:09.800 --> 0:02:11.960 Uber and lyft Okay. Uber has a lot more to 0:02:12.000 --> 0:02:15.040 it than ride sharing, but in its quarter there was 0:02:15.120 --> 0:02:18.239 issues of seasonality. Regionally, it was a bit weaker and 0:02:18.280 --> 0:02:21.360 the stock is down pretty significantly. Then you have the 0:02:21.360 --> 0:02:24.200 little brother of ride sharing, Lyft, and its stock is higher. 0:02:24.520 --> 0:02:27.320 It actually was pretty strong. You know. It wasn't just 0:02:27.400 --> 0:02:30.760 that gross bookings, which is the industry standard metric, was 0:02:30.800 --> 0:02:35.440 stronger than expected. They're also seeing kind of some bump 0:02:35.480 --> 0:02:38.920 in activity for the riders themselves, not just rider growth, 0:02:38.960 --> 0:02:41.920 but stickiness the amount they're using it. Then you have Rivian. 0:02:42.360 --> 0:02:44.960 Rivian's a difficult one. It's not really about in the moment, 0:02:44.960 --> 0:02:47.200 it's about the future. Later in the hour, we hear 0:02:47.240 --> 0:02:50.360 again from the CEO Rjscarrange, and what I tried to 0:02:50.400 --> 0:02:53.160 get from him was a sense of like, is this 0:02:53.240 --> 0:02:58.280 really going to plan? Then there's Reddit redd its debut earnings. 0:02:58.360 --> 0:03:00.520 We want to get to that stock and welcome our 0:03:00.560 --> 0:03:03.920 Bloomberg TV and radio audiences worldwide. Read it out with 0:03:03.960 --> 0:03:07.720 its first earnings report as a public company, shares markedly 0:03:07.840 --> 0:03:11.640 higher seven percent. Let's bring in Reddit CEO Steve Huffman 0:03:11.720 --> 0:03:14.960 and Steve the quarter gone forty eight cent top line growth. 0:03:15.160 --> 0:03:17.960 You're doing well. The ad environment seems really good. But 0:03:18.040 --> 0:03:19.840 I actually want to start with the next big thing, 0:03:20.280 --> 0:03:22.640 and that seems to be the user economy. That seems 0:03:22.680 --> 0:03:25.760 to be your focus. Tell me about the user economy strategy. 0:03:26.600 --> 0:03:28.240 So, good morning, thanks for having me. 0:03:28.800 --> 0:03:35.400 So, the user economy is the family of products and 0:03:35.440 --> 0:03:40.520 features that we're building to facilitate transactions between users on 0:03:40.560 --> 0:03:44.360 the platform, so user to user, gifting user to use 0:03:44.360 --> 0:03:49.280 their subscription, user community, subscriptions, things like that. We think 0:03:49.600 --> 0:03:52.880 there's a ton of potential here. One of our sayings 0:03:52.880 --> 0:03:54.560 that Reddit is the only thing that scales with the 0:03:54.640 --> 0:03:58.480 users is users. And so look, the ads business is 0:03:58.720 --> 0:04:02.680 great and can scale pretty much infinitely from our point 0:04:02.680 --> 0:04:06.480 of view, but we'd love to have another business model 0:04:06.560 --> 0:04:09.760 to sit alongside it, and that's what the user economy. 0:04:09.400 --> 0:04:11.040 Is, Steve alongside. 0:04:11.080 --> 0:04:15.200 Also, the ad business that you say can infinitely scale 0:04:15.640 --> 0:04:18.720 has been AI in the selling of data and licensing 0:04:19.120 --> 0:04:21.880 to some of those big businesses that are creating large 0:04:21.920 --> 0:04:25.520 language models based upon the data that you license, Google being. 0:04:25.320 --> 0:04:25.760 One of them. 0:04:26.080 --> 0:04:29.440 How infinite is that revenue stream? Because once the models 0:04:29.440 --> 0:04:32.120 are trained, how necessary is it to keep on licensing. 0:04:33.240 --> 0:04:34.680 So I think there's a couple of ways to look 0:04:34.720 --> 0:04:34.919 at this. 0:04:35.320 --> 0:04:40.239 First, the potential value here is I think quite large, 0:04:40.440 --> 0:04:43.800 and between us and other folks in the market, we're 0:04:43.800 --> 0:04:47.440 actually still developing that. You know, we're finding increasingly folks 0:04:47.480 --> 0:04:51.320 coming to Reddit. And I think what we're seeing overall 0:04:51.440 --> 0:04:56.520 big picture is in the AI era, where increasingly content 0:04:56.560 --> 0:05:02.640 online is written by machines, there's this increasing premium content perspectives, 0:05:02.720 --> 0:05:06.440 conversation that comes from real humans, and that's what Reddit provides. 0:05:06.880 --> 0:05:11.080 So so far we've done one kind of major content 0:05:11.120 --> 0:05:14.440 licensing deal with Google, but we're talking to others as well. 0:05:15.520 --> 0:05:19.159 But your question about is is it a one time 0:05:19.200 --> 0:05:22.600 thing or ongoing? I think what's really important here is 0:05:22.640 --> 0:05:26.599 folks want real time access to up to date information, 0:05:26.800 --> 0:05:28.280 conversation perspectives. 0:05:29.080 --> 0:05:29.359 Right. 0:05:29.560 --> 0:05:33.080 Imagine a search engine that stopped indexing in twenty twenty one. 0:05:33.240 --> 0:05:35.240 It wouldn't be very helpful. And so I think that 0:05:35.360 --> 0:05:38.640 real time feed is really important. 0:05:40.080 --> 0:05:44.359 Steve, you took the interesting step to ask redditors and 0:05:44.400 --> 0:05:48.680 particularly redditors who investors in the IPO, to submit questions, 0:05:49.080 --> 0:05:51.000 and those some of which you answered on the call 0:05:51.040 --> 0:05:53.160 and some of which you will follow up in video form. 0:05:53.320 --> 0:05:55.520 We're showing one of them now, which is what is 0:05:55.560 --> 0:05:59.440 the justification for having one billion dollars in working capital? 0:06:00.040 --> 0:06:02.400 I want to take that question and apply it to AI. 0:06:03.000 --> 0:06:06.039 You know, data licensing is a revenue generation tool for you. 0:06:06.360 --> 0:06:08.760 But on the technology side, might we see some m 0:06:08.839 --> 0:06:12.320 and A that answers that question from your redditor community, 0:06:12.720 --> 0:06:15.240 but also helps us understand a bit more like what 0:06:15.279 --> 0:06:17.839 are you guys going to do to increase competence to 0:06:17.880 --> 0:06:19.599 increase the technology offering on AI? 0:06:20.920 --> 0:06:21.520 Sure, we'll look. 0:06:21.520 --> 0:06:23.440 Our first priority with the cash is to invest in 0:06:23.440 --> 0:06:27.679 the business, so to continue to develop the core Reddit product, 0:06:27.800 --> 0:06:31.640 the user economy, which we discussed, the developer platform, our 0:06:31.680 --> 0:06:33.279 AI efforts, all of those things. 0:06:33.680 --> 0:06:35.200 Our second priority would be M and A. 0:06:35.640 --> 0:06:38.000 And so you know, we're always I think looking in 0:06:38.040 --> 0:06:42.920 the market for teams and technology that can really kind 0:06:42.920 --> 0:06:47.839 of help advance our initiatives. And right as you allude to, 0:06:48.400 --> 0:06:52.240 I think there's just a tremendous opportunity in AI in search, 0:06:53.279 --> 0:06:57.560 both to make our core product better and potentially to 0:06:57.600 --> 0:06:59.120 expand it as well. 0:06:59.240 --> 0:07:03.800 Let's talk about expansion and particularly internationally, Steve, because there's 0:07:03.880 --> 0:07:07.000 much talk about how you're basically translating able to bring 0:07:07.480 --> 0:07:10.800 what is all the reviews, the content, the discussion groups, 0:07:10.960 --> 0:07:13.080 not just to those that are writing and speaking in 0:07:13.120 --> 0:07:16.040 the English language, but in French and European countries. 0:07:16.160 --> 0:07:16.800 How is this. 0:07:16.920 --> 0:07:20.360 Likely to be enabled by AI but also add to 0:07:20.440 --> 0:07:22.040 the scale of international growth. 0:07:22.960 --> 0:07:24.160 Well, this is really exciting. 0:07:24.360 --> 0:07:29.560 Like, not that long ago, we didn't have the capability 0:07:29.600 --> 0:07:35.200 of translating our content at human quality, but with today's 0:07:35.280 --> 0:07:37.680 large language models, we can do that, and so we 0:07:37.720 --> 0:07:41.440 can translate our what is today our mostly English corpus 0:07:42.400 --> 0:07:45.840 into just about any language. And so we're doing that 0:07:45.880 --> 0:07:48.600 in French right now and testing that in France, and 0:07:48.640 --> 0:07:55.600 it's going very well, and so almost immediately French speakers 0:07:55.640 --> 0:07:58.720 can see the entire Reddit corpus or consume their entire 0:07:58.720 --> 0:08:03.120 redit corpus in English. And a lot of reddits content 0:08:03.520 --> 0:08:07.240 is universal, right, it's just people talking about life. But 0:08:07.320 --> 0:08:13.080 even the content that is maybe regionally specific to America, 0:08:13.240 --> 0:08:15.840 I think it's still really interesting to read and vice versa. 0:08:16.000 --> 0:08:18.320 And so I'm really excited. 0:08:17.960 --> 0:08:21.360 At this idea that we can fulfill the promise of 0:08:21.440 --> 0:08:24.080 the Internet, which is allow people around the world, in 0:08:24.120 --> 0:08:29.960 different countries and different cultures to communicate in their native language. 0:08:30.120 --> 0:08:33.440 For our Bloomberg television and radio audience worldwide, we're speaking 0:08:33.480 --> 0:08:36.760 to the Reddit CEO Steve Huffman, and Steve things are 0:08:36.800 --> 0:08:40.600 going well right now. It seems one of the technology 0:08:41.880 --> 0:08:45.160 changes at the start of this year and even before that, 0:08:45.320 --> 0:08:48.880 was that Google started applying its work in large language 0:08:48.920 --> 0:08:52.400 models and AI to its search engine. And there is 0:08:52.440 --> 0:08:55.960 a school of thoughts that Reddit was a beneficiary of 0:08:55.960 --> 0:09:00.400 that that just within search, Reddit becomes more commonplace up 0:09:00.800 --> 0:09:03.800 the results that are given. Can you give us any 0:09:03.840 --> 0:09:07.360 sort of granularity on how that's helping you with growing 0:09:07.400 --> 0:09:10.439 the redditor base and keeping the redditor base. 0:09:11.640 --> 0:09:14.960 Well, let's just take a step up for a second. 0:09:15.640 --> 0:09:19.320 Reddit has what people want, right, People have questions. 0:09:19.360 --> 0:09:21.680 They often go to Google with questions. Reddit has the 0:09:21.679 --> 0:09:22.840 best answers on the Internet. 0:09:22.960 --> 0:09:27.160 They want advice, they want information, they want a sense 0:09:27.160 --> 0:09:29.320 of community and belonging. These are the things that Reddit 0:09:29.360 --> 0:09:36.199 provides and search engines like Google ten years ago, last year, today, tomorrow, 0:09:36.640 --> 0:09:41.360 help people find that content on Reddit. They're looking for 0:09:41.440 --> 0:09:44.800 those answers, they're looking for those communities they're looking for. 0:09:45.200 --> 0:09:47.280 And so I think I look at this as a 0:09:47.880 --> 0:09:48.720 natural evolution. 0:09:49.559 --> 0:09:52.120 Search engines are getting smarter, they're getting better, they're getting 0:09:52.160 --> 0:09:56.800 more effective, which means they're getting more effective at helping 0:09:56.920 --> 0:10:00.760 users find what they're looking for on Reddit, which of 0:10:00.840 --> 0:10:04.880 course benefits our platform and our business. And so I 0:10:04.880 --> 0:10:09.720 think these are all I think welcome evolutions. But Reddit 0:10:09.679 --> 0:10:14.160 it's been a net beneficiary of search for a long time, 0:10:14.200 --> 0:10:15.560 and I expect that to continue. 0:10:15.760 --> 0:10:19.680 How much have you been a net beneficiary of going public, Steve? 0:10:19.800 --> 0:10:23.200 How much did the IPO help draw people to the platform. 0:10:23.240 --> 0:10:25.160 How much was it a pr event do you think 0:10:25.200 --> 0:10:27.560 and actually boosted some of the community there. 0:10:28.480 --> 0:10:30.120 Well, look, I'm sure that's an aspect to it. 0:10:30.240 --> 0:10:31.840 You know, it's hard to say and that you know, 0:10:31.880 --> 0:10:36.599 Reddit primarily grows through word of mouth anyway. You know, 0:10:36.640 --> 0:10:39.440 we don't really do consumer marketing, and so I think 0:10:39.720 --> 0:10:43.560 anytime we're in the news that helps in the IPO 0:10:43.720 --> 0:10:46.120 with a lot of news. But look, the reason I 0:10:46.160 --> 0:10:49.199 was most excited about the IPO is that we are 0:10:49.240 --> 0:10:49.760 able to. 0:10:51.120 --> 0:10:52.920 Include our users as investors. 0:10:53.640 --> 0:10:56.480 Our users have this deep sense of ownership over Reddit, 0:10:56.679 --> 0:11:00.160 right they create the communities, they create the culture, they 0:11:00.240 --> 0:11:03.440 create all of the content, and for them to have 0:11:03.480 --> 0:11:06.920 the opportunity to be actual owners. That was our dream 0:11:07.160 --> 0:11:09.240 and that was one of the main reasons we went 0:11:09.280 --> 0:11:11.079 public in the first place. So that's actually what I'm 0:11:11.120 --> 0:11:12.000 most excited about. 0:11:13.040 --> 0:11:16.720 Steve is a kind of returning founder. CEO of Date, 0:11:16.840 --> 0:11:19.800 what's your one personal goal for this year, it's something 0:11:19.840 --> 0:11:20.800 you want to achieve. 0:11:22.480 --> 0:11:24.120 Well, we mapped out two of them. 0:11:24.440 --> 0:11:27.840 We got the company public and I had my second kid, 0:11:27.960 --> 0:11:31.480 and so for the rest of this year, I want 0:11:31.520 --> 0:11:34.160 to deliver on some of the product initiatives that I've 0:11:34.200 --> 0:11:38.960 been very excited about, so developer platform, the user economy, 0:11:39.040 --> 0:11:42.200 the machine translation that we've discussed. These are all things 0:11:42.240 --> 0:11:44.760 I think in the day to day building of Reddit 0:11:44.800 --> 0:11:46.160 that I'm very excited about. 0:11:47.640 --> 0:11:51.800 Steve, congrats, I'm the second kid. Reddit CEO, Steve Hoffman, 0:11:52.160 --> 0:11:53.160 I try to have you with us. 0:11:53.200 --> 0:11:53.520 Thank you. 0:11:56.000 --> 0:11:58.400 Now, coming up, we'll hear from the Alphabet CEO Sin 0:11:58.480 --> 0:12:02.040 of hitsheie his vision for the future of artificial intelligence 0:12:02.320 --> 0:12:03.200 as next and. 0:12:03.120 --> 0:12:03.720 What are you watching. 0:12:04.880 --> 0:12:07.760 We continue with the earning story and we take a 0:12:07.760 --> 0:12:10.960 look at shares of a firm lower again eight and 0:12:10.960 --> 0:12:13.880 a half percent. It's really been a season of if 0:12:13.880 --> 0:12:17.439 you don't beat expectations or your prior guidance, you go 0:12:17.520 --> 0:12:21.880 down lower. Continued about product differentiation, continue discussion about the 0:12:21.920 --> 0:12:24.400 rate environment with the firm as well, or continue the 0:12:24.400 --> 0:12:31.880 earnings coverage. Much more ahead. This is Bloomberg Technology. 0:12:37.559 --> 0:12:40.320 Let's talk open AI because it's developing a feature for 0:12:40.400 --> 0:12:44.120 chatchbt that can search the web and cite sources and 0:12:44.160 --> 0:12:45.440 its results according to a source. 0:12:45.480 --> 0:12:47.559 Now, the future, we would all allow users. 0:12:47.280 --> 0:12:50.640 To ask chatchbt a question and receive answers that use 0:12:50.720 --> 0:12:53.319 details from the web with citations to sources. 0:12:53.440 --> 0:12:55.959 Just think Wikipedia entries and blog posts. 0:12:56.320 --> 0:12:59.720 Now, this could potentially be competing head on with AI search, 0:12:59.720 --> 0:13:04.360 Startle Perplexity, and of course Google Search. And speaking of which, 0:13:04.800 --> 0:13:06.920 Google and Alphabet CEO so on a pitch I sat 0:13:06.960 --> 0:13:10.040 down exclusively with blubgo Original's host Emily Tang to discuss 0:13:10.080 --> 0:13:13.959 the future of search and accelerating work on Google's AI models. 0:13:14.240 --> 0:13:16.040 Here's what he had to say on some of the 0:13:16.080 --> 0:13:19.319 growing pains of Google searchers adaptation to the AI revolution. 0:13:21.840 --> 0:13:26.000 Anytime there's a transition, you get an explosion of new content, 0:13:26.600 --> 0:13:30.160 and AI is going to do that. So for us, 0:13:30.160 --> 0:13:33.360 we view this as the challenge, and I actually think 0:13:34.040 --> 0:13:36.600 here there'll be people will struggle to do that right. 0:13:36.679 --> 0:13:38.080 So doing that well is what. 0:13:38.040 --> 0:13:40.400 Will define a high quality product, and I think it's 0:13:40.440 --> 0:13:43.119 going to be the heart of what makes so successful. 0:13:43.800 --> 0:13:45.439 You make a ton of money on ads next to 0:13:45.480 --> 0:13:48.640 the links generated by searchers if a chatbot is giving 0:13:48.679 --> 0:13:51.880 you answers and not links, and maybe more answers in links. 0:13:51.880 --> 0:13:54.640 Sometimes are we in the midst of an assault on 0:13:54.679 --> 0:13:55.800 Google's business model. 0:13:56.360 --> 0:13:59.960 So we've always found people want choices, including in commercial area, 0:14:00.559 --> 0:14:03.120 and that's a fundamental need and I think we've always 0:14:03.160 --> 0:14:06.160 been able to balance it. As we are rolling out 0:14:06.320 --> 0:14:11.000 Aiovius and Search, we've been experimenting with ads and the 0:14:11.080 --> 0:14:14.600 data we see shows that those fundamental principles will hold 0:14:14.600 --> 0:14:16.120 true during the space as well. 0:14:16.440 --> 0:14:20.600 The images that Gemini initially generated of Asian Nazis and 0:14:20.680 --> 0:14:23.720 black Founding fathers, you said that was unacceptable. 0:14:24.000 --> 0:14:25.320 If you look at any pictures of the. 0:14:25.240 --> 0:14:28.280 Founding fathers, you're seeing old white men. People are calling 0:14:28.320 --> 0:14:31.000 this Woki and it's not just happening here, It's happening 0:14:31.080 --> 0:14:34.080 across the industry. How did the model generate something that 0:14:34.160 --> 0:14:34.840 it never saw. 0:14:35.640 --> 0:14:38.800 We are a company which serves products uses around the world, 0:14:39.520 --> 0:14:43.040 and there are generic questions. For example, people come and 0:14:43.080 --> 0:14:48.080 say show me images of school teachers or doctors or nurses. 0:14:48.600 --> 0:14:52.280 We have people asking discovery from Indonesia or the US. 0:14:52.880 --> 0:14:55.800 How do you get it right for our global user base. 0:14:56.200 --> 0:15:02.600 Obviously the mistake was that we over applied, including case 0:15:02.640 --> 0:15:04.120 the spirit should have never applied. 0:15:04.240 --> 0:15:05.440 So that was the bug. 0:15:05.520 --> 0:15:07.720 And you know, you know, so we got it wrong. 0:15:11.120 --> 0:15:14.400 That was alphabet CEO Cunda Pinschai and Bloomberg Original's host 0:15:14.480 --> 0:15:17.280 Emily Changi. You can catch the full interview from the 0:15:17.400 --> 0:15:21.479 circuit tonight at six pm Eastern on Bloomberg Television. 0:15:29.400 --> 0:15:32.240 Let's just check in on the shares of Shopify because 0:15:32.280 --> 0:15:34.920 they're down the most on record US after the company 0:15:35.040 --> 0:15:38.320 forecasts lower profit margins as I can induce to really 0:15:38.320 --> 0:15:40.680 be boosting the marketing spend now. The comments company also 0:15:40.720 --> 0:15:43.360 reported a surprise net loss in the first quarter after 0:15:43.360 --> 0:15:46.200 the sale of its logistics business last year. Joining us 0:15:46.200 --> 0:15:49.800 now to break down the results. Harley Finkelstein, Shopify president, 0:15:50.000 --> 0:15:52.760 and Harley I remember speaking with Toby look At, the 0:15:52.760 --> 0:15:55.000 CEO of the business once and he said that anytime 0:15:55.040 --> 0:15:57.760 anyone talks about the share price in the office, while 0:15:57.840 --> 0:15:59.960 everyone has to be bought donuts, I have a fee 0:16:00.240 --> 0:16:01.360 that might be some downuts. 0:16:01.040 --> 0:16:04.040 To day specific specific. 0:16:03.760 --> 0:16:07.080 Yeah, Harley, I mean, what what does it feel like 0:16:07.120 --> 0:16:08.640 when you see the shares down that hard? 0:16:09.560 --> 0:16:09.760 Oh? 0:16:09.880 --> 0:16:13.240 I'm I mean we've always managed the business in a 0:16:13.240 --> 0:16:15.720 long term way. What we actually and what you're seeing 0:16:15.720 --> 0:16:18.320 at Shopify right now is we got came on the show. Actually, 0:16:18.320 --> 0:16:19.720 I think it's wo to end about this new shape 0:16:19.760 --> 0:16:23.040 of Shopify is unlocking our potential. We're helping all different 0:16:23.040 --> 0:16:25.440 types of merchants take more and more of our products. 0:16:25.640 --> 0:16:27.120 But let's just kind of break down. You know, how 0:16:27.160 --> 0:16:29.520 the quarter went. I mean, we generate almost two billion 0:16:29.560 --> 0:16:31.920 dollars of revenue. That was a twenty three percent year 0:16:31.960 --> 0:16:33.920 a year. We had a billion dollars a gross profit 0:16:34.240 --> 0:16:37.680 and very important in this particular macro environment, Carolyn. We 0:16:37.760 --> 0:16:40.600 had free cashual of two hundred and thirty two million 0:16:40.640 --> 0:16:43.520 dollars for the quarter. In fact, free cash margin doubled 0:16:43.520 --> 0:16:45.960 from Q one of last year, so you're seeing I 0:16:45.960 --> 0:16:48.240 think one of the best versions of Shopify with a 0:16:48.280 --> 0:16:52.640 ton of opportunities, whether it's enterprise, physical, retail, international B 0:16:52.680 --> 0:16:55.640 to B. We are very excited about about what we 0:16:55.680 --> 0:16:57.440 did in Q one. We're very excited about the future 0:16:57.440 --> 0:16:57.920 of this company. 0:16:59.480 --> 0:17:02.840 Hally. The anxiety from investors about fitting margins, right, I 0:17:02.880 --> 0:17:05.679 think we all set that as the baseline. One thing 0:17:05.760 --> 0:17:09.080 you've been focused on is marketing, right, which accounts for 0:17:09.119 --> 0:17:12.119 that in part? Give me some specifics. What kind of 0:17:12.200 --> 0:17:14.800 marketing are you doing? And I think you've also said 0:17:14.840 --> 0:17:17.160 it's going to pay off in about eighteen months time. 0:17:17.520 --> 0:17:20.680 How do you know the marketing spend will pay off? Well? 0:17:20.720 --> 0:17:23.000 First of all, we think about marketing and the same 0:17:23.000 --> 0:17:26.000 way we think about building products, build the best solutions, 0:17:26.119 --> 0:17:29.040 build the best internal tools to drive decision through data, 0:17:29.119 --> 0:17:31.280 and the results are evident. 0:17:31.480 --> 0:17:32.399 I'll go with them in a second. 0:17:32.480 --> 0:17:34.320 But one of the things that we really believe is 0:17:34.359 --> 0:17:37.680 that shopi line needs to be agile and at times countercyclical. 0:17:37.840 --> 0:17:40.479 When we see opportunities for us to take advantage and 0:17:40.520 --> 0:17:42.960 gain more market share across any of our core products, 0:17:43.000 --> 0:17:45.000 We're going to do that. But the key for us 0:17:45.040 --> 0:17:48.480 is striking a balance between top line growth, operational leverage, 0:17:48.480 --> 0:17:51.679 and profitability. And I think what differentiates Shopify from a 0:17:51.720 --> 0:17:54.440 growth perspective or marketing perspective to user words is that 0:17:54.480 --> 0:17:57.360 the way we interpret data, the way we experiment, actually 0:17:57.400 --> 0:17:58.720 helps us to win. 0:17:58.920 --> 0:18:00.680 And we have multiple drivers of this growth. 0:18:00.720 --> 0:18:02.080 But the best proof I can give you is we 0:18:02.119 --> 0:18:04.520 drove a nearly one hundred and thirty percent increase immersion 0:18:04.560 --> 0:18:07.359 ADS within one of our key marketing channels, sure you know, 0:18:07.400 --> 0:18:10.080 the one from Q four to Q one, while still 0:18:10.119 --> 0:18:13.360 remaining squarely within our payback Guardrails. So when we see 0:18:13.400 --> 0:18:15.800 the people that other companies are pulling back and we 0:18:15.840 --> 0:18:18.000 think we can get a return on our AD spend, 0:18:18.080 --> 0:18:20.560 that again is within Guardrails has the right CAC to 0:18:20.640 --> 0:18:23.240 L two ratios that in twenty twenty five you will 0:18:23.240 --> 0:18:25.920 see the growth from these efforts. We're going to take 0:18:25.960 --> 0:18:28.400 those and back to sort of the question Caroline open with, 0:18:28.520 --> 0:18:30.119 that's the reason why we don't really care about the 0:18:30.200 --> 0:18:32.359 day to day stock fluctuation. We care about over the 0:18:32.400 --> 0:18:34.760 long run, does a stock price reflect the real value 0:18:34.800 --> 0:18:38.760 of the company. And Shopify is becoming the global retail company. 0:18:39.880 --> 0:18:41.760 Next month, you're going to have a big event, and 0:18:41.800 --> 0:18:43.600 I think I'm right in saying it's the first in 0:18:43.640 --> 0:18:47.479 person event at least since before the pandemic twenty eighteen. 0:18:47.880 --> 0:18:50.240 That is a marketing expense, but there must be a 0:18:50.280 --> 0:18:51.320 reason for doing. 0:18:51.080 --> 0:18:52.520 It, certainly. 0:18:52.560 --> 0:18:55.960 I mean, we are thriving in this remote first environment 0:18:56.040 --> 0:18:59.800 and we see immense value in getting people together as well. 0:19:00.200 --> 0:19:03.080 So some at SHOPIAY Summit is accommodation of multiple events 0:19:03.119 --> 0:19:05.880 that brings together our team, our partners, our top one 0:19:05.880 --> 0:19:09.199 thousand developers from all all over the world. And you know, 0:19:09.280 --> 0:19:13.080 we think that it's this remote first philosophy and working 0:19:13.080 --> 0:19:15.159 model allows us to recruit the best of the brands 0:19:15.200 --> 0:19:17.439 from all over the world. But a key component of 0:19:17.480 --> 0:19:20.560 this digital bide design approach is also supplementing it with 0:19:20.640 --> 0:19:23.160 a few real life events, and we have not done 0:19:23.200 --> 0:19:25.440 We've not brought the entire company together in person, and 0:19:25.600 --> 0:19:28.520 since like twenty eighteen, we think it's important to do so, 0:19:28.800 --> 0:19:31.560 especially because we can also get our developers, our third 0:19:31.560 --> 0:19:34.119 party developers in the room, explain to them all the 0:19:34.160 --> 0:19:36.359 opportunities of how they should be building on Shopify. Then 0:19:36.359 --> 0:19:38.479 they go back home and they and they continue their 0:19:38.520 --> 0:19:40.520 businesses as well. So it's an important event for us, 0:19:40.560 --> 0:19:42.280 and we're excited by the Shopfy summit, and. 0:19:42.200 --> 0:19:45.240 I can imagine that it's important for morale, particularly after layoffs. 0:19:45.240 --> 0:19:46.960 Holly, are layoffs done now? 0:19:48.119 --> 0:19:51.479 We have no plans to do any additional layoffs at 0:19:51.520 --> 0:19:54.560 this point. What you are seeing, Caroline is this new 0:19:54.560 --> 0:19:57.960 shape of Shopify. We have been able to grow top line, 0:19:58.000 --> 0:20:00.359 We've been able to grow bottom line. We're making serious 0:20:00.359 --> 0:20:02.600 investments in the future of our business now we're doing 0:20:02.640 --> 0:20:05.119 so with a relatively flat headcount. In fact, if you 0:20:05.200 --> 0:20:07.680 go back three quarters, headcount has not grown that much. 0:20:07.760 --> 0:20:10.400 What matters to us is the talent density of the company, 0:20:10.480 --> 0:20:13.119 and this is the best talent team, the best version 0:20:13.160 --> 0:20:15.560 of Shopify I've seen in my fifteen years of being here. 0:20:15.680 --> 0:20:18.480 And you've talked about how this is. You're being countercyclical 0:20:18.600 --> 0:20:22.520 right now. Just tell us how countercyclical. How many headwinds 0:20:22.560 --> 0:20:25.680 are you experiencing in the world of the consumer right now? 0:20:25.720 --> 0:20:27.160 How reticent are they to shop? 0:20:28.080 --> 0:20:30.400 Yeah, I mean it's really important, obviously because the state 0:20:30.400 --> 0:20:32.280 of the consumers as obviously, and the whole macro trend 0:20:32.280 --> 0:20:34.439 is something that everyone's thinking about. First of all, we 0:20:34.520 --> 0:20:38.120 see the consumer actually remaining quite resilient. What we do see, 0:20:38.160 --> 0:20:40.920