Speaker 1: From the heart of where innovation, money and power colli
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily j F'm Emily changing San Francisco and this is
Speaker 1: Bloomberg Technology. Coming up in the next hour. Met Up
Speaker 1: falls after reporting its first ever decline in quarterly sales
Speaker 1: added to the list of social platforms. Warding and add
Speaker 1: pullback will hurt the bottom line and the division that's building.
Speaker 1: The metaverse Reality Labs lost two point eight billion dollars
Speaker 1: in the quarter. We will discuss class The Senate passes
Speaker 1: ability to reinvigorate the U S ship industry, but PC
Speaker 1: sales are slowing. US consumers get out of this pandemic mindset.
Speaker 1: How will this change how Silicon Valley does business abroad?
Speaker 1: Will discuss and more bad news for coin based Kathy Woods.
Speaker 1: Arc just sold seventy five million dollars in shares after
Speaker 1: the SEC announced an investigation into trading activity. So why
Speaker 1: are shares up double digits? We will explain. Let's stick
Speaker 1: with Metta now and bring in Deborah Ojo Williamson, principal
Speaker 1: analysts at Insider Intelligence, as well as our own bloo
Speaker 1: Room News Executive editor Tom Giles. Let's let's let's break
Speaker 1: down these meta results, Tom. You know, they don't look good.
Speaker 1: Engagement was, you know, came in slightly better than estimates
Speaker 1: when you look at daily active users, but revenue dropped. Uh,
Speaker 1: you know, ad revenue UM coming in light and the
Speaker 1: first quarterly sales decline. Ever. Yeah, well thanks for having me.
Speaker 1: The thing that people are really focused on the outlook
Speaker 1: for the third quarter, and it's not good. It's going
Speaker 1: to come in well below analysts estimates UM. The miss
Speaker 1: on the revenue side. Some of the active users they
Speaker 1: gained on the daily but not on the monthly. So
Speaker 1: it's a very mixed picture there. The shares are down,
Speaker 1: they're not falling out of bed. People aren't looking this
Speaker 1: and looking at this and running around like their hair
Speaker 1: is on fire. Still, it's not a great look. You
Speaker 1: have remember that that Mark Zuckerberg has made this big
Speaker 1: pivot toward the metaverse, and he's talked about we're gonna
Speaker 1: lose money on that, We're gonna spend ten billion dollars
Speaker 1: on it, We're not going to make a profit for many,
Speaker 1: many years. Right around the same time we get the
Speaker 1: war in Ukraine, we get this this sense of a
Speaker 1: slowdown in the US economy and the global economy and
Speaker 1: advertisers really pulling back. We saw it yesterday from Alphabet,
Speaker 1: and we're seeing it again today. And David Winner, the
Speaker 1: CFO for just a few more weeks, came out and said,
Speaker 1: we really see advertisers facing headwinds and there's a lot
Speaker 1: of economic uncertainty and they're pulling back. Same messages we
Speaker 1: got from Ruth Poor at CFO of Alphabet yesterday. All Right, Uh, Deborah,
Speaker 1: let's talk a little bit more about this. Obviously, we look,
Speaker 1: we're we're looking at chairs. They're uh. Zuckerberg saying Metas
Speaker 1: products are continuing to grow in a challenging macro environ men,
Speaker 1: challenging macroeconomic environment. Those are the words he's using. The
Speaker 1: company also saying they've reduced hiring an overall expense growth
Speaker 1: plans this year. What are your headline takeaways, Debra? Yeah,
Speaker 1: So I remember years past when Mark Zuckerberg would start
Speaker 1: out his quarterly earnings recap with phrases like it was
Speaker 1: another good quarter or it was another great quarter. Um,
Speaker 1: we are not seeing that anymore, and not for the
Speaker 1: foreseeable future. When it comes to Meta. Uh, this year
Speaker 1: over year quarterly drop in revenue. Well, I think it
Speaker 1: was pretty much baked into expectations by this point um
Speaker 1: among investors. Uh, it's really showing just how quickly Meta's
Speaker 1: business has deteriorated in this uncertain economy that's affecting all
Speaker 1: of the digital ad supported businesses. You mentioned Google, you
Speaker 1: mentioned Staff and Twitter. Uh, you know, we're all seeing
Speaker 1: them having difficulty in this economic environment. One thing that
Speaker 1: stood out for me with regards to Meta was the
Speaker 1: drop in ad prices. So we saw a fourteen percent
Speaker 1: drop in add prices in Q two That came after
Speaker 1: a QU one drop of of eight percent. So you
Speaker 1: know that really I think factors into what we're seeing
Speaker 1: going on with Meta's platforms. Now where the the ads,
Speaker 1: I mean, I guess to the advertisers, that's good news.
Speaker 1: The ads are getting cheaper but for them, but it
Speaker 1: doesn't add up to very much revenue. And as Tom
Speaker 1: pointed out, you know, we're looking at Q three in
Speaker 1: Q four now and we are not expecting anywhere near
Speaker 1: the performance that our forecasts had led us to to
Speaker 1: uh to predict, at least even as as recently as
Speaker 1: just a couple of months ago. Now, Dave Oyner, the
Speaker 1: current CFO, moving on to become Chief Strategy Officers, Susan
Speaker 1: Lee VP of Finance becoming CFO, the first female CFO
Speaker 1: at Meta I believe, ever, and this is get to
Speaker 1: be Cheryl Sandberg's last earnings call. Does Facebook have the
Speaker 1: bench Tom too, you know, continue to grow this company? Well,
Speaker 1: you've got You've still got other leaders there. You've got
Speaker 1: Chris Cox, You've got bos you know, You've got a
Speaker 1: lot of people who are who who are around Zuckerberg.
Speaker 1: But remember he's the guy making decision at the end
Speaker 1: of the day, and if people start to lose patience
Speaker 1: with him, there's nothing that the investors can do. Given
Speaker 1: his ownership, given his control of the stock in the company,
Speaker 1: he really does need to bring smart people around him,
Speaker 1: especially when you see when you see Cheryl leaving. This
Speaker 1: is the woman who has built that advertising business into
Speaker 1: this this monster. Not doing so great right now, but
Speaker 1: she's got quite a legacy and big, big shoes to
Speaker 1: fill and this company is making an enormous pivot. And
Speaker 1: Reality Labs lost Deborah two point eight billion dollars in
Speaker 1: the quarter. This is a bet on a metaverse in
Speaker 1: a future that some people don't really believe is even possible.
Speaker 1: What do you make of that? Are these investments, these
Speaker 1: losses worth it? Yeah, that is really the big question.
Speaker 1: And getting back to the the idea of Mark Zuckerberg
Speaker 1: being in charge, I mean this is his call. I
Speaker 1: mean he has changed the name of the company, he
Speaker 1: has decided to pivot the company towards the metaverse. Uh,
Speaker 1: he is building this company towards that future ambition which
Speaker 1: we don't see any hardly any revenue potential from four years.
Speaker 1: And at the same time, the core business is suffering.
Speaker 1: And so I will be the first to admit that
Speaker 1: I am a metaverse skeptic. I have been for quite
Speaker 1: a long time, since the days of virtual reality of
Speaker 1: Second Life. I think there's a lot for meta to
Speaker 1: prove here with regards to the metaverse, about the potential
Speaker 1: for marketers, for advertisers, even for consumers to engage in
Speaker 1: the in it. And we just saw earlier today that
Speaker 1: the FDC is now starting to investigate an acquisition that
Speaker 1: Facebook made in the metaverse realm. So Facebook and metas
Speaker 1: having it just so many challenges in front of it, uh,
Speaker 1: on so many fronts that you know, this is really
Speaker 1: the quarter where I've really become more concerned about the
Speaker 1: company than I think I've ever been before in all
Speaker 1: the years that I've covered it. Interesting, as you mentioned,
Speaker 1: the FTC is trying to block Meta from buying a
Speaker 1: VR company called Within Unlimited, and Tom, it's interesting that
Speaker 1: there are already antitrust issues in a metaverse that doesn't
Speaker 1: exist yet, and that Mark Zuckerberg seems to be pursuing
Speaker 1: the straight same strategy, which is by not build exactly.
Speaker 1: And the FTC has to be really careful here. Remember,
Speaker 1: they have come under a lot of fire in recent
Speaker 1: years for not calling out Facebook when it bought when
Speaker 1: it bought out its potential competitors. It bought Instagram for
Speaker 1: a billion dollars and that's become this huge business for them.
Speaker 1: It bought it when Instagram was tiny and nobody batted
Speaker 1: an eye What'sapp. It paid a lot more money for again,
Speaker 1: a potential competitor. And so the FTC has been criticized
Speaker 1: for not calling out Facebook and not saying, hey, we
Speaker 1: need to take a really close look at these acquisitions
Speaker 1: because you're taking out somebody who down the road could
Speaker 1: be your competitors. You've got to bet they're looking really
Speaker 1: closely at this deal, even though it's small. Well, either way,
Speaker 1: big changes in store for Meta. This big executive leadership
Speaker 1: change is going to be happening in November um and
Speaker 1: we will of course be watching Bloomberg's Tom Giles thank
Speaker 1: you as well as Debra Ajo Williamson insider intelligence. Always
Speaker 1: great to have you as well. Meantime, Apple just poached
Speaker 1: a twenty year veteran of Lamborghini to work on its
Speaker 1: electric car. Luigi terra Barelli will join the project, which
Speaker 1: has been under wrapped for years. The Apple car is
Speaker 1: being designed by hundreds of former engineers from Tesla, Ford,
Speaker 1: Rivian and other automakers. Apple plans to launch a car
Speaker 1: coming up. The Senate passes a bill to make the
Speaker 1: US less reliant on chips from abroad. How this could
Speaker 1: dramatically reshape Silicon Valley's relationship with China. That's next, Mrs Bloomberg.
Speaker 1: Qualcom earnings are the latest signal that there is a
Speaker 1: change in consumer habits. The biggest maker of chips for
Speaker 1: smartphones reporting and earnings miss reiterating a lackluster forecast for
Speaker 1: the rest of the year. Meantime, this Senate has approved
Speaker 1: a fifty two billion dollar bill to boost chip manufacturing
Speaker 1: in the United States, which relies heavily on parts from overseas.
Speaker 1: But the semi conductor industry is in for a rough
Speaker 1: patch these next few years. The research firm Gartner slashed
Speaker 1: its two global semiconductor sales growth forecast from to seven percent.
Speaker 1: That is a huge drop from the tent jump in
Speaker 1: chip sales we saw. Meantime, the Pentagon is making contingency
Speaker 1: plans if how speaker Nancy Pelosi makes that trip to Taiwan,
Speaker 1: though they say they don't think China would attack her lane.
Speaker 1: They say the speaker is entering a hotspot. China, of course,
Speaker 1: considers Taiwan part of its own territory and long source
Speaker 1: of controversy now for decades. Bloomberg's Peter Elstrom are managing
Speaker 1: editor out in Tokyo. Joins us now to discuss who
Speaker 1: just happened to be here in town. There's a lot
Speaker 1: going on here. What do you make of this Pelosi
Speaker 1: visit to Taiwan in the middle of all of these
Speaker 1: others very controversial at this point. I mean, clearly she
Speaker 1: has ended up in a very tight spot where their
Speaker 1: tensions on both sides. If she decides to proceed with
Speaker 1: the visit that's going to cause problems with China. But
Speaker 1: at this point it's very hard for her to also
Speaker 1: back down and pull out of a visit that she
Speaker 1: has been thinking about because it looks like they're stepping
Speaker 1: back or retreating from this issue with China. Clearly, she
Speaker 1: is going to put pressure on Biden during their phone
Speaker 1: call to try to get him to apply pressure to
Speaker 1: Nancy Pelosi uh sidestepping the fact that actually doesn't have
Speaker 1: control over her action. She gets to make this decision herself. Anytime,
Speaker 1: you have this Chips Act, which seems to be heading
Speaker 1: to Biden's desk unlike other pieces of legislation, and this
Speaker 1: is going to potentially massively reshape the relationship between China
Speaker 1: and the rest of the tech world. Right that's the
Speaker 1: hope of the US. I guess the question is are
Speaker 1: we there yet? It's taken three years to get to
Speaker 1: this point where the Senate has now passed the legislation,
Speaker 1: but the House still has to sign off on this
Speaker 1: legislation too, and then they have to reconcile the two bills.
Speaker 1: It is fifty two billion dollars. As you say, that's
Speaker 1: about thirty nine billion dollars in financial assistance, along with
Speaker 1: another thirteen billion dollars for training and research and that
Speaker 1: sort of thing. Just to put that in context. Fifty
Speaker 1: two billion dollars, of course, sounds like a lot of money,
Speaker 1: but tis m seats. How want Semi Conductor is going
Speaker 1: to spend forty four billion dollars on capex just this year,
Speaker 1: and the Chips Act is fifty fifty two billion dollars
Speaker 1: over five years. So it's modest in the grand scheme
Speaker 1: of things. It also signals that the US is uncomfortable
Speaker 1: doing this kind of industrial policy. It historically has not
Speaker 1: done it. But this crisis that we've seen in the
Speaker 1: chips industry with shortages, chronic shortages that have knocked out
Speaker 1: auto production in particular, has forced them to rethink how
Speaker 1: they're going to do this, and instead of focusing on
Speaker 1: the efficiency of the of the chip industry, they need
Speaker 1: to focus on resiliency. To meantime, you've got another potentially
Speaker 1: big shift happening in the chip industry itself, Qualcom coming
Speaker 1: out missing estimates. We're hearing from the CEO of Qualcom
Speaker 1: right now, Christiano Aman, on their earnings call, saying the
Speaker 1: phone market is smaller than forecast this year. Um. You know,
Speaker 1: obviously we've talked so much about the lack of chip supply.
Speaker 1: Are we now going to see a glut of chip supply?
Speaker 1: These cycles do happen in the chip industry all the time,
Speaker 1: right That is the big question in the chip industry
Speaker 1: right now, that we do go through these cycles, and
Speaker 1: we've had shortages for so many years. Wait times are
Speaker 1: still very very long. The signals seemed to be that
Speaker 1: we need more production of chip, but Qualcom is an
Speaker 1: early sign that they are seeing a slowdown. Part of that,
Speaker 1: there's a caveat to that, and that's that they really
Speaker 1: focus on the smartphone market right now. And you have
Speaker 1: seen smartphone demands softening as consumers are hit with inflation
Speaker 1: and some rising prices in other areas too. So that
Speaker 1: may be a Qualcom specific issue, and you may still
Speaker 1: have some of these chip shortages and the rest of
Speaker 1: the supply chain. So what are you watching? Obviously, the
Speaker 1: supply chain issues continue to evolve, and we've got a
Speaker 1: big one. We've got Apple coming up tomorrow where we'll
Speaker 1: get more insight into the supply chain. Well. Um, the
Speaker 1: industry is very closely watching weight times around the chip
Speaker 1: industry and exactly where those white weak times are. So
Speaker 1: we've seen a little bit of a loosening in terms
Speaker 1: of the ability to ship these chips. That's helped some
Speaker 1: of the automakers. They're beginning to see some signs of improvement.
Speaker 1: Tesla has talked about some improvements in the supply chain also,
Speaker 1: but it's not resolved at this point. And to be clear,
Speaker 1: this Chips Act is not going to address any of
Speaker 1: this because these chip plants will take years to build,
Speaker 1: at least two or three years before you can get
Speaker 1: any of this production online. So that's a long term solution.
Speaker 1: It's not going to address the short term problem, all right.
Speaker 1: Peter Elstrom in time from Chokya, Thank you Now to
Speaker 1: Going viral. Meta platforms is facing some backlash after some
Speaker 1: of the most influential figures on their platforms, The Kardashians
Speaker 1: are speaking out. Kylie Jenner and Kim Kardashian specifically speaking
Speaker 1: out against recent changes to Facebook and Instagram that make
Speaker 1: both platforms look and feel more like TikTok. The pair
Speaker 1: have a combined six hundred eighties six million followers on
Speaker 1: Instagram alone. Instagram CEO Adam Missary even posting a video
Speaker 1: explaining the moves, which some belief puts Meta's interests before
Speaker 1: their users. Bloomberg Sarah Fryer had a back and forth
Speaker 1: with Massari on Twitter. She joins us now, and of course,
Speaker 1: she wrote a book about Instagram. Am, what do you?
Speaker 1: First of all, let's let's let's talk about what Kim
Speaker 1: and Kylie have said. Don't make Instagram look like TikTok, right,
Speaker 1: don't make it a little like TikTok. Make it so
Speaker 1: I can see post from my friends again. Please, And
Speaker 1: then Kim Kardashian added pretty please, So so listen. I
Speaker 1: think the Kardashians also have another interest here, which is
Speaker 1: that they have built their fame, They've built their businesses
Speaker 1: via Instagram, via building that relationship with followers that makes
Speaker 1: people want to buy their project products, by into their
Speaker 1: projects and and really focus on everything that's happening in
Speaker 1: their lives. It's part of reality TV, and they really
Speaker 1: lean into that. And the changes that are happening on
Speaker 1: Instagram right now and Facebook as well, are d prioritizing
Speaker 1: those follower friend relationships in favor of injecting your feed
Speaker 1: with content from people you may not follow like TikTok,
Speaker 1: trying to have this discovery of new things to keep
Speaker 1: you entertained, to retain young users, and to fend off
Speaker 1: this competition from the fastest growing up out there. Now,
Speaker 1: you had to back and forth with our Adamissary on Twitter,
Speaker 1: and you talked about how look Kim and Kylie are
Speaker 1: saying they want this. Instagram is saying they're making changes
Speaker 1: based on what users seem to want, not just what
Speaker 1: they say. They want to talk to us about your
Speaker 1: back and forth. So I pointed out that adamissaries explanation
Speaker 1: this video that you talked about was getting a lot
Speaker 1: of backlash, and and he said, you know, I get
Speaker 1: a lot of backlash all the time. People. People are
Speaker 1: pretty pretty vocal when it comes to hating on what
Speaker 1: I have to say and listen, I said, like executives
Speaker 1: and social platforms, I have to figure out if they
Speaker 1: want to listen to the loudest voices what their users
Speaker 1: are saying, or if they want to listen to the
Speaker 1: data in the Facebook has always been airing on the
Speaker 1: side of listening to the data. Now I got a
Speaker 1: lot of pushback for my comment because people were saying, well,
Speaker 1: how is this data making sense if it's a Facebook
Speaker 1: and Instagram are showing to us. Of course we're using
Speaker 1: reels more because that's all we get to see. Show
Speaker 1: us content from our friends, and we'll look at that too.
Speaker 1: So so the design of a platform really has a
Speaker 1: lot of impact on what users choose to do, because
Speaker 1: these platforms are getting more and more passive, less and
Speaker 1: less about what we choose. And you know, I wonder
Speaker 1: if it makes sense, doesn't make sense to keep them
Speaker 1: more differentiated. Is that a competitive advantage or does Instagram
Speaker 1: just followed tik talk and say, well they're onto something.
Speaker 1: You know. Another thing that Adam Sarry told me, which
Speaker 1: confirmed one of my big suspicions, is that a lot
Speaker 1: of the friends and family conversation is moving into the
Speaker 1: other parts of their app Instagram stories, Instagram direct messaging,
Speaker 1: and he said, yeah, that's that's really where we're seeing it.
Speaker 1: And so from my perspective, I feel like the reason
Speaker 1: that they need to stuff the main Instagram feed with
Speaker 1: with reels their TikTok copycat is because people aren't posting anymore.
Speaker 1: When's the last time you posted on your main Instagram feed?
Speaker 1: It feels really formal like a big lift now and
Speaker 1: people are posting more and more in stories because it
Speaker 1: just feels less like part of their permanent record, less
Speaker 1: like it has to be a huge life event. And
Speaker 1: the same thing we saw happen on Facebook maybe five
Speaker 1: years before UM, where people are now posting on Facebook
Speaker 1: mostly if they have something really big to say, like
Speaker 1: a new job or a wedding or a baby, as
Speaker 1: opposed to just the mundane life updates that used to
Speaker 1: seem worthy of such a platform. As we grow our
Speaker 1: basis of of followers and following, it just seems less worthy.
Speaker 1: That audience seems less worthy of our mundane life updates.
Speaker 1: Who's winning, well, TikTok's definitely winning right now. I think
Speaker 1: that's that's very clear. In Facebook's earning today, Meta's earnings today,
Speaker 1: we see a slowdown in advertiser spending. But you have
Speaker 1: to think, you know, that's not just about the economic
Speaker 1: factors that they're citing. That's about this big change, the
Speaker 1: sea change happening at the apps that is causing people
Speaker 1: to use them, to rely or maybe abandoned them UM
Speaker 1: And they have to do everything they can to make
Speaker 1: this that work in order to fund the Metaverse Vision.
Speaker 1: Down the line are resident Instagram expert Serafi Er. Thank
Speaker 1: you so much for your analysis. Welcome back to Boomore Technology.
Speaker 1: I'm Emily Changing in San Francisco. Welcome back. We're going
Speaker 1: to talk about earnings now, a lot to unpack. I
Speaker 1: want to dig into Spotify, which somehow avoided and add
Speaker 1: slow down in the second quarter, escaping the fate of
Speaker 1: other text docks like Snap. I want to bring in
Speaker 1: Bloomberg's Ashley Carmen, who covers Spotify for us for more. So,
Speaker 1: why did Spotify somehow pull out of this? You know,
Speaker 1: they didn't actually give us a full reason as to
Speaker 1: how they avoided this. They did say though, that you know,
Speaker 1: maybe it was just this quarter. It does sound like
Speaker 1: they're looking over their shoulder a bit more. I spope
Speaker 1: that there's CEO Paul Glogal earlier to day. He said,
Speaker 1: you know, Q three, they expect the slowdown, although still growth,
Speaker 1: but they are looking over their shoulder. You know, could
Speaker 1: it could crater? Could not? You know? It sounds like
Speaker 1: they're kind of riding the way a little bit here.
Speaker 1: But I guess I should also note that we're talking
Speaker 1: about a lot less revenue here. I mean hundreds of
Speaker 1: millions of dollars versus billions as far as the tech
Speaker 1: stocks go. So you know, I think it's a bit
Speaker 1: of a different scale as well, and a lot a
Speaker 1: lot less to wrinkle. I'm curious how what's happening me
Speaker 1: with Spotify. You know, perhaps on a smaller scale though,
Speaker 1: is some sort of um, you know, signal about what
Speaker 1: is happening on a larger scale as well. You know,
Speaker 1: you see a platform that's adding users, but gross margin declining?
Speaker 1: Is that a concern? So last quarter for Q one earnings,
Speaker 1: gross margin was all anybody could talk about. When it
Speaker 1: came to Spotify earnings, the stock crater, investors, it was
Speaker 1: at the lowest levels it's ever been. Investors were concerned
Speaker 1: about the margins because they, you know, Spotify has been
Speaker 1: making all of these podcast investments, so the investors want
Speaker 1: to say, hey, one of those gross margins going to
Speaker 1: go up um. And then this quarter we really weren't
Speaker 1: expecting them to improve drastically, but the gross margin actually dropped,
Speaker 1: and Spotify said that's because they are ceasing production of
Speaker 1: their car thing, which is basically a Bluetooth Spotify remote
Speaker 1: for the car, and so that actually caused their gross
Speaker 1: margin to go down. But that said, the stock is
Speaker 1: up today. It doesn't seem like that spooked investors. Spotify
Speaker 1: had an investor day in June where they said they
Speaker 1: expect their margins to not drag so much from the
Speaker 1: podcast investments going into three, so we'll see if that
Speaker 1: long term vision holds true. Meantime, you of course still
Speaker 1: have some artists who just won't put their music on Spotify.
Speaker 1: Now you're seeing some podcasts leaving Spotify. What's happening there? Yeah,
Speaker 1: So earlier today I published a story about a show
Speaker 1: called The Pitch, which was kind of this original Gimlet
Speaker 1: Media show, which Spotify acquired that company in twenty nineteen,
Speaker 1: and how the host of that show actually just bought
Speaker 1: it back from Spotify and is going to launch it independently.
Speaker 1: And it's just an interesting move given that we saw
Speaker 1: reply All kind of another Gimlet original show before the acquisition.
Speaker 1: It ended its production in June. Another show that was
Speaker 1: made by Gimlet called The Get Up, which was kind
Speaker 1: of Spotify's attempt at a morning radio show format, that
Speaker 1: also ended. So I'm not entirely clear what's going on
Speaker 1: there to be Frank I think, you know, it's just
Speaker 1: interesting to see all three of these shows. Clearly some
Speaker 1: things that put They've had some leadership shakeups and promotions,
Speaker 1: so you know, something is clearly going on with their
Speaker 1: content strategy. It's just unclear what. Now. I'm gonna keep
Speaker 1: talking about earnings. I want to bring in Mitchell Green,
Speaker 1: founding partner of lead Edge Capital, his take on Meta's
Speaker 1: results and more so, Mitch, look, you know, not great
Speaker 1: across the board. That we did see daily active users
Speaker 1: coming in slightly higher than estimates, but add revenue light,
Speaker 1: overall revenue light, a big loss in in Reality Labs
Speaker 1: two point eight billion dollars. You know where they are
Speaker 1: investing heavily. What's your takeaway? Really, I haven't you know,
Speaker 1: we don't own Facebook, and I'm not deep deal super
Speaker 1: detailed involved in it. I think the stock was up
Speaker 1: a little bit after hours, so the street must think
Speaker 1: it was positive on it, and and I would tell
Speaker 1: you that expectations, I'm sure we're pretty darn low on it.
Speaker 1: I still think I think I think Facebook has some issues,
Speaker 1: maybe under the covers um you're you're seeing. I think,
Speaker 1: like Kim Kardashian, one of the Kardashians was out recently
Speaker 1: tweeting or something up talking about how like she wished
Speaker 1: Instagram we just stopped copying all the bite the bite dance,
Speaker 1: slash TikTok uh you know, um, you know features, um,
Speaker 1: you know, any bit's on their Instagram feeds can't help.
Speaker 1: But notice how many ads there are. I think TikTok
Speaker 1: has given these people. These guys are running for their
Speaker 1: money in um in this you know, in this younger demographic.
Speaker 1: And I think I think like Snapchat still is trying
Speaker 1: to use the macro as the biggest reason, Like I
Speaker 1: think they have other reason and that their users are
Speaker 1: you know, on other platforms. Right, So, just how serious
Speaker 1: do you think Facebook, slash Instagram's TikTok problem is? It's
Speaker 1: pretty darm serious and it will be you know, I
Speaker 1: don't know when you know full the sculosure we're bite
Speaker 1: daanst investors, But whis TikTok um? I don't It would
Speaker 1: be really fascinating to know, you know what, the very
Speaker 1: specific when the public starts to know how fast the
Speaker 1: bite dance and TikTok are growing. Um, I think there's
Speaker 1: gonna be a lot more written about how much pain
Speaker 1: these these companies are experiencing from these two. By the way,
Speaker 1: just go ask a bunch of year olds or thirty
Speaker 1: year olds, you know how much time they spend on
Speaker 1: TikTok versus Instagram versus you know, Facebook blue Like that'll
Speaker 1: our snapchat, That'll answer your question right. Well, the question
Speaker 1: is is the digital ad spend also shifting stramatically? It
Speaker 1: certainly seems like there's an attention shift, but is the
Speaker 1: money's going to follow? I think I think it's like
Speaker 1: it's so I was speaking the system again, um, due
Speaker 1: to our bite Dance research and TikTok research. Um, I
Speaker 1: think a lot of the TikTok um ad budgets are
Speaker 1: still in the experimental phase. I think they're moving quickly
Speaker 1: out of it and a much begger phases. But like again,
Speaker 1: just relative to the size of Facebook, like you know,
Speaker 1: TikTok's US business is not that big yet, but there's
Speaker 1: obviously a huge amount of room to Expand you're also
Speaker 1: an investor in Ali Baba and you know they're now
Speaker 1: exploring this primary listing in Hong Kong. How are you
Speaker 1: thinking about Chinese tech companies right now? There are so
Speaker 1: many complicated dynamics. That's an understatement. UM. First, on the
Speaker 1: Ali Baba question, UM, I think what they're I think
Speaker 1: the biggest impact like the market as of when it
Speaker 1: was kind of yesterday it was leaked to the day before.
Speaker 1: It was kind of a muted response of a couple percent.
Speaker 1: It wasn't down market, so it was a little more
Speaker 1: big of but it wasn't like huge. I think the
Speaker 1: biggest advantage to Ali Baba being the primary as I
Speaker 1: understand that the primary listening to be in UM in
Speaker 1: Hong Kong not in the US, is that they'll have
Speaker 1: access to the China Connect, to the Hong Kong Connect,
Speaker 1: which is a you know could I think I saw
Speaker 1: one research channel, let's say anywhere from six billion of
Speaker 1: incremental demand coming out of domestic China, I would want
Speaker 1: to buy the stock. It's cheap, so was every other
Speaker 1: Chinese you know internet company. UM. It will either prove
Speaker 1: right now to be the best buy an opportunity or
Speaker 1: probably dead money. UM. Your guests is I don't really
Speaker 1: understand the zero COVID thing, UM, but it just makes
Speaker 1: it appears to me these people are like like taking
Speaker 1: their economy and they don't need to be But you
Speaker 1: guess as good as mine is. Why and when that
Speaker 1: ends and things like that. I like, you know, Wa
Speaker 1: owned Somemali Baba, haven't bought more, haven't sold it? I
Speaker 1: don't know. I you think though, that multiples are will
Speaker 1: be in the multiple that somebody will pay for a
Speaker 1: Chinese equity is going to be impaired for a long
Speaker 1: time because but let's say, all of a sudden, they
Speaker 1: get like you know, they get like more government approval
Speaker 1: of the government looks friendly. Well guess what it doesn't
Speaker 1: mean in two years they change their mind. And I
Speaker 1: think people are gonna remember that. Well, hopefully for you
Speaker 1: not dead money. I understand Dial Capital got acquired a
Speaker 1: minority stake and lead Edge Capital. How do you see
Speaker 1: lead Edge differating, differentiating itself from the pack? You know,
Speaker 1: where do you think you're going to find the next uber? Yeah,
Speaker 1: that's a good question. So how we how we differentiate
Speaker 1: ourselves is very unique for most funds, and that like
Speaker 1: most funds are solely backed by the endowments, pension funds, universities,
Speaker 1: insurance companies. Most of our capital by number, actually of
Speaker 1: our capital by a number of investors is actually like
Speaker 1: world class exacts and entrepreneurs, and we leverage those people
Speaker 1: to like help our companies grow faster. UH. And so
Speaker 1: whether you know, somebody might be looking for a female
Speaker 1: audit chair, are looking for like customer intros or things
Speaker 1: like that. And in the whole LP base has grown
Speaker 1: via like word of mouth over the last decade UM
Speaker 1: and so like, we think there's a ton of interesting
Speaker 1: opportunities in software and that our LP base can help
Speaker 1: UH and enable companies to grow faster and even fortunate
Speaker 1: to back a bunch of great companies, whether it's companies
Speaker 1: like Toast or Asana or Bizarre Voice and Marcato earlier
Speaker 1: on our companies like Well Health, the whole host of companies.
Speaker 1: Mitchell Green always great to have you here on the show,
Speaker 1: founding partner of lead Edge Capital, Thanks for stopping by. Meantime,
Speaker 1: Twitter is leaning harder into cost cutting itself and remote work,
Speaker 1: the company cutting back on physical office space in a
Speaker 1: number of cities including San Francisco, New York, and Sydney.
Speaker 1: This in a memo to employees, Twitter says the move
Speaker 1: doesn't affect current headcount of employees UM And of course
Speaker 1: there's that ongoing lawsuit with Elon musk time now for
Speaker 1: crypto report, and the crypto winter has been brutal. But
Speaker 1: let's take a look at DEFY and see how that
Speaker 1: is faring this downturn. Our crypto contributor Sali Bostick here
Speaker 1: with more sale. Yeah, absolutely, Emily, because the reason we're
Speaker 1: talking about this is a lot of the big failures
Speaker 1: you've seen, the big withdrawals you've seen, and the big
Speaker 1: issues you've seen with regulation are with the centralized platform.
Speaker 1: So let's take a look at DEFY. Then. Yes, it's
Speaker 1: down on the year about sixty two. That is more
Speaker 1: than you've seen in bitcoin. But at the same time,
Speaker 1: you're seeing a big hop back up this month about
Speaker 1: about percent higher. And I've got to say even today alone,
Speaker 1: you've seen bitcoin jump on the heels of the Federal
Speaker 1: Reserve interest rate hike, and you've seen the Defy index
Speaker 1: here the Bloomberg Galaxy Defy Index hop up even further.
Speaker 1: So you are seeing that, yes, big drop off more
Speaker 1: than six percent this year, be more than you're seeing
Speaker 1: bitcoin more than fifty this year. The DeFi index that
Speaker 1: we're looking at, we're going to be diving deeper into
Speaker 1: because what does it, what is it made up of
Speaker 1: It's made up of things like unite Swap, of a Maker,
Speaker 1: Doubt Curve, and just a lot of companies and projects
Speaker 1: that have really held up more than you've seen in
Speaker 1: other areas in centralized finance. So the big question here,
Speaker 1: Emily is what is the future of defy. Is it
Speaker 1: the answer to the industry's problems and does it start
Speaker 1: to hop back even more than what we've seen this month?
Speaker 1: C five versus tv Ocationale. We're going to dig into
Speaker 1: this a little bit more. I want to bring in
Speaker 1: Mary Catherine later, CEO of the Decentralized exchange unice swap,
Speaker 1: which allows users to trade cryptocurrencies without the involvement of
Speaker 1: a centralized third party like other platforms like coin based cracking. Uh.
Speaker 1: Mary Catherine, I want to ask you first of all,
Speaker 1: we saw today Kathy Would, for example, selling some coin
Speaker 1: based shares. There is a lot going on here and
Speaker 1: investors trying to interpret some nick signals. What's your take
Speaker 1: on what's happening in in C five versus d FI
Speaker 1: and where this is all headed? Well, thanks for having
Speaker 1: me first. Let me Esa whige a little bit of
Speaker 1: from a distinction between c FI and d FI. So UM.
Speaker 1: While we know SAP certainly believe in crypto broadly, but
Speaker 1: that's as an asks the class or the underlying technology.
Speaker 1: Un swap and DeFi really is about the technology. It's
Speaker 1: really about decentralized rails for financial activity UM. In contrast,
Speaker 1: a centralized exchange, as you know, operates the same way
Speaker 1: frankly that a traditional exchange does, but with digital assets.
Speaker 1: So that's a critical difference. It means that they're taking
Speaker 1: buy and sell orders, they're managing risk, they may be
Speaker 1: managing a balance sheet UM, whereas in contrast, unit swap
Speaker 1: with de centralized protocol is self executing code. It's kind
Speaker 1: of like you think about it as like SMTP as
Speaker 1: the core protocol at the core of email, and then
Speaker 1: you have applications like Gmail and others on top of
Speaker 1: them that help you UM actually use those protocols. So
Speaker 1: in the what we've seen in the past few months
Speaker 1: is frankly risk mant challenges at some of the centralized
Speaker 1: players that have struggled UM, and and also some some
Speaker 1: internal risk control challenges. Again, in contrast, these decentralized protocols
Speaker 1: don't ever touch customer money, they don't have customer accounts
Speaker 1: and so that means that um, the what you manage
Speaker 1: risk is by having really effective software that's audited, that's
Speaker 1: battle tested, and so in the past few months there's
Speaker 1: been plenty of volatility and defied protocols have have proven
Speaker 1: themselves generally resilient and have not been hacked, have been
Speaker 1: have been secure, and have performed well. Let's talk about
Speaker 1: this a little more in terms of the customer itself.
Speaker 1: There's a lot of talk about how customers get paid
Speaker 1: back more fairly when it comes to defy rather than cify.
Speaker 1: Is that true and to the extent that it is
Speaker 1: true or not true? What is allowing that to happen
Speaker 1: at M with more certainty? Totally? So it is a
Speaker 1: completely different business model. So when you're training with the
Speaker 1: centralized exchange, their entire business models to make the spread
Speaker 1: in the same way this for a traditional market maker
Speaker 1: or exchange UH to make the spread on a transaction
Speaker 1: as well as a transaction fee, whereas in a decentralized
Speaker 1: exchange there is a two sided marketplace. So anyone can
Speaker 1: become a liquidity provider or a market maker, and that
Speaker 1: liquidity provider then gets their proad of share of the
Speaker 1: fees from the trades executed on the platform, so UNI
Speaker 1: swap actually has no revenue associated with the decentralized you
Speaker 1: know swap protocol. Instead, all of those fees are they're
Speaker 1: essentially flat fees that are redistributed and predescribed the flat
Speaker 1: fees at predescribed rates that are then redistributed to liquidity providers.
Speaker 1: What that means is that you could trade on a
Speaker 1: centralized exchange for three to five percent, and you could
Speaker 1: trade on UNI swap for one basis point to a
Speaker 1: hundred basis points. So it ends up being a really material,
Speaker 1: material difference. I should add the fees that you do
Speaker 1: have and defy are the network fees. So like gas
Speaker 1: fees on the theory ofm that you and your audients
Speaker 1: are likely familiar with right now, those are very low
Speaker 1: because there's less network activity. But overall the business model
Speaker 1: for defy is fundamentally different. It's using and source code
Speaker 1: to provide the activities that have traditionally been performed by
Speaker 1: central intermediaries. And so we think about the promise of
Speaker 1: blockchains that we've been sort of awaiting to see in
Speaker 1: UH in traditional markets for some time. I think what
Speaker 1: we've seen in the past few months, is how that
Speaker 1: can become very very different, how the benefits of the
Speaker 1: user is very different, and how in the case of
Speaker 1: market volatility, they still can really perform and and prove resilient.
Speaker 1: What are the lessons you've taken from this very tumultuous
Speaker 1: time about how to make defy more resilient. I think
Speaker 1: most important is to anticipate how to protect your users
Speaker 1: and how to ensure security that if we want to
Speaker 1: grow at this point all of Defy is still only
Speaker 1: about four million users. In order for this technology to
Speaker 1: get broader mass adoption, we have to explain its benefits better.
Speaker 1: Uh so the cost benefits that I've just described, but
Speaker 1: then we also have to ensort making it simpler and
Speaker 1: easier to use. Part of why people use centralized exchanges
Speaker 1: is that they have on ramps you can exchange your
Speaker 1: dollars for crypto. Uh they buy sports and stadium sponsorships
Speaker 1: and so you heard of them. And this is an
Speaker 1: opportunity I think to gred drive greater awareness of Defy
Speaker 1: so that people understand some of those benefits. And the
Speaker 1: second thing I mentioned is that it's an opportunity to
Speaker 1: introduce risk management measures and screening that can help people
Speaker 1: understand the risk that they're taking even if we don't
Speaker 1: yet have regulatory clarity in the great level of detail.
Speaker 1: All right, Mary Katherine later Unit SWAP Chief operating Officer,
Speaker 1: along with our Sinali Bossic. Thank you for helping us
Speaker 1: better understand a very complex topic. Appreciate it. Coming up
Speaker 1: more updates on metas earnings. Stay with us. This is
Speaker 1: Glover tex stox rallied as Jerome Pal said, the FED
Speaker 1: will slow the pace of rate increases at one point.
Speaker 1: Let's talk above hat and wrap attack results of the
Speaker 1: day with our own Ludlow. You've been listening into the
Speaker 1: medical Yeah, I think it's really interesting to take away
Speaker 1: from the FED. Was Fed Jpal saying we don't see
Speaker 1: a recession. We see no signs of recession, and yet
Speaker 1: on the earnings called. Mark Zuckerberg, CEO of Meta, had
Speaker 1: this to say, they do see an economic quote downturn. Now,
Speaker 1: economic downturn is another word for a recession. However you
Speaker 1: want to slice it and dice it. The main thing
Speaker 1: is that budgets from advertisers are getting smaller, and no
Speaker 1: matter what Meta says, that's going to hurt them. The question,
Speaker 1: of course is what's the broader takeaway here? And is
Speaker 1: this is this a downward the start of a downward
Speaker 1: trend for sales, the first quarterly decline ever. You and
Speaker 1: I were talking about how this has been a weird week,
Speaker 1: you know, on the one hand, yet where is my
Speaker 1: sound effects? Right? Okay? Alphabets saying lots of search for travel,
Speaker 1: but I point out something's in bugging me for twenty
Speaker 1: four hours. They also said that travel partners have been
Speaker 1: seeing headwinds. In other words, lots of people are googling
Speaker 1: where should go on holiday, but the advertisers are pulling back.
Speaker 1: But alphabet stock went up. Metas results the outlook for
Speaker 1: the current period not strong, but it's getting tighter. It's
Speaker 1: they are giving the opposite view that actually the strength
Speaker 1: in their market's not there. We're getting inconsistency. We're seeing
Speaker 1: in the chip sector as well. Remember Texas Instruments earlier
Speaker 1: in the week, very good, Malcolm, not so good today.
Speaker 1: And we're also talking about mrs and beats by you know,
Speaker 1: very small margins. Alphabets add revenue beats by a small margin.
Speaker 1: Facebook's ad revenue missed, yes, by a small margin, and
Speaker 1: that sends a big signal to investors, and you're always
Speaker 1: wondering if they're over interpreting those signals. But you wonder
Speaker 1: if Alphabet is in a better position than matter. Yeah,
Speaker 1: there there seems to be strength in search. You remember
Speaker 1: with with alphabet, YouTube was not as strong. It's all growth,
Speaker 1: but nothing like the same period a year ago. If
Speaker 1: there's a shining light for Meta, and we've got to
Speaker 1: give them some positivity this time a year ago, what
Speaker 1: was happening Apple was changing its iOS settings. That was
Speaker 1: when we first started to see the pain for Meta
Speaker 1: and advertisers around tracking right on the platform. And what
Speaker 1: they're saying is that thankfully, going into the next period,
Speaker 1: the comparable as a favorable as lasts last year as
Speaker 1: a disaster. So glad you mentioned App because we're gonna
Speaker 1: be all over Apple tomorrow as well as Amazon, Apple
Speaker 1: and earning Apple and Amazon the next to report. Okay,
Speaker 1: ed Letlow, thank you. That does it for this edition
Speaker 1: of Bloomberg Technology. We're also gonna be talking to Qualcom
Speaker 1: CEO Cristiano I'm on Thursday on the back of their results.
Speaker 1: In addition to Apple, Amazon and so much more. Don't
Speaker 1: forget to check out our podcast wherever you get your podcast.
Speaker 1: I'm Emily checking in San Francisco. This is Bloomberg