📧 The big problem with subscriptions


June 4, 2021

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The Hustle

Congress will receive an intelligence report on UFOs in late June. This is another way of saying The Hustle may spend the entire month of July discussing how to monetize alien technology.

The big idea
unsubscribe gif

The government is trying to regulate the fast-growing $650B subscription economy

Pet food, groceries, fitness programs, TV, a random box of bones — what can’t we subscribe to these days?

But the subscription economy — worth ~$650B and projected to hit $1.5T by 2025 — is growing faster than the Federal Trade Commission (FTC) can regulate it, The Washington Post reports.

The FTC is exploring ways to respond to consumer complaints, but the agency is understaffed — and new rules take time to implement.

Right now, customers have 2 big gripes

The first is “negative-option” billing.

Many subscription companies use negative-option marketing, which is when a customer’s inaction serves as permission to be charged. It’s like when you forget to cancel a trial, so you get enrolled for a full month.

Negative-option billing is fine if the company is clear about what will happen, but companies that aren’t upfront violate the Restore Online Shoppers’ Confidence Act (ROSCA) of 2010.

Example: In 2016, the FTC made beauty supplement company NutraClick change its practices and repay $350k for offering “free” samples that turned into subscriptions.

The other gripe: Subscriptions are hard AF to cancel

ROSCA states businesses need to provide “simple mechanisms” to cancel, but doesn’t define simple. So, the process could actually be more complicated — like making someone who signed up online call customer service.

For now, some credit card companies are providing the extra rules for business. Because guess who customers complain to when they get a surprise bill?

Hint: they rhyme with “SchAmex” and “Bisa.”

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SNIPPETS

Facebook appointed its first chief business officer ever: Marne Levine, a 10-year company vet, will take on the new role. #big-tech

Live in Phoenix? You can now order a driverless taxi from Google’s Waymo service. #emerging-tech

Here is Visa’s 5-point plan to on-ramp users into cryptocurrencies. #fintech-cryptocurrency

What you can do… I can do better: Target and Walmart will both have large sales events starting June 20, one day ahead of Amazon’s Prime Day. #ecommerce-retail

Toyota’s venture capital arm just raised $300m and will focus early-stage investments on climate-related startups. #clean-energy

JBS, the world’s largest meat producer, had its supply chain hacked. The FBI has identified the group as Russia-based REvil. #privacy

Tech Beef
Dropbox logo

Can Dropbox survive an active hedge fund?

In 2007, when Drew Houston was pitching Dropbox — the cloud-based file storage provider — to investors, he often had this exchange:

Venture Capitalist: “There are [already] a million cloud storage startups.”
Houston:Do you use any of them?”
Venture Capitalist:No.”

Houston went out and built Dropbox…

… into what is now an $11B public company with 700m registered users and — in 2020 — revenue of $1.9B, per The Wall Street Journal.

There’s a problem, though.

Unlike Houston’s conversations from the early Dropbox days, there are countless cloud storage companies now… that people do use. You may know these 2: Apple and Google, which both offer loads of free storage.

Dropbox has expanded its product line

It includes efforts in centralized document editing and 2 notable acquisitions: DocSend (document tracking) and HelloSign (digital signatures).

However, revenue has slowed and its core cloud business is largely commoditized.

Activist hedge fund Elliott Management…

… has taken a sizable stake in the company, per WSJ. To get a return on its investment, the hedge fund will likely have to find a private equity buyer for Dropbox or a merger partner.

The hedge fund has notched some recent high-profile wins, catalyzing change at AT&T (to leave the media business) and Dell (to spring off VMware).

However this shakes out, Houston will likely be facing much tougher investor conversations than he did in 2007.

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Incentive Design
Vaccine freebies

Vaccine freebies may not be incentives (but people like them)

Since announcing it would give free donuts to any adult with a vaccination card, Krispy Kreme has given away 1.5m fried treats.

Several other companies and even governments have followed suit:

  • Ohio’s Vax-a-Million lottery will award $1m to 5 vaccinated adults and full-ride scholarships to 5 Ohioans ages 12-17.
  • Larry Flynt’s Hustler Club in Vegas and New Orleans have held vaccine clinics with perks including free booze and dances from vaccinated performers.
  • Free beer is a popular incentive among towns and beer brands, including Budweiser, Sam Adams, and Erie County, New York.

But do these incentives work?

Most likely… no. Health data doesn’t reflect much of a surge in vaccination rates, per ABC News. And health experts who spoke with the news outlet don’t think the incentives alone would motivate vaccine holdouts.

But a poll from data intelligence company Morning Consult found that while they might not increase vaccination, incentives don’t hurt a business’ brand:

  • 57% of adults said they’d be no more likely to get vaxxed due to an incentive
  • 41% of adults said they’d view a brand that offered freebies more favorably while only 17% said they’d view a brand less favorably

Plus, freebies often encourage customers to buy other stuff.

Comic book shops have seen a rise in sales on Free Comic Book Day. And despite giving away 4.5m free Slurpees on July 11, 2011, 7-Eleven saw a 38% increase in Slurpee sales that day.

In the mood for a donut now? Krispy Kreme will keep at it all year long.

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Meme of the day

The best part of watching memes go viral is seeing how creative people get with remixing jokes. Here’s one example: you know how spinach wilts when you cook it? And it shrinks from a handful down to… well, nothing?

Here are some related memes.

The original:

The remix:

(P.S. This segment was written by Dr. Parik Patel, one of Twitter’s funniest parody accounts. Periodically, he will round up the “tweets of the week” for The Hustle. Check out his latest post here.)

Shower Thoughts

  1. “Putting a wool sweater on your dog is putting a wolf in sheep’s clothing.”
  2. “Pie can be made of fruit, meat or a never-ending series of numbers.”
  3. “Kids in the future will probably be impressed that some watches don’t need to be charged.”
  4. “The voice inside your head never has to stop to take a breath.”
  5. “Archaeology is going to be REALLY interesting in a few thousand years because of plastic surgery, bionics, and prosthetics.”
via Reddit
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