🥕 Can Instacart keep its momentum?

PLUS: What trends do we see for 2021?

December 30, 2020
The Hustle
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Instacart Ad

Instacart’s relationship with retailers may be fraying. What’s next?

There’s no other way to put it: Instacart’s numbers in 2020 are insane.

The grocery delivery startup’s orders are up 5x this year while its workforce — primarily gig workers — hit 500k, up ~2x from 2019.

On the back of this growth, it has raised $500m+ in 2020 and seen its private market valuation more than double to $17.7B.

Instacart is used by retailers from 7-Eleven to Walmart

In fact, 500+ companies utilize the startup’s on-demand shoppers.

According to the Wall Street Journal, some are souring on the deal.

Among the reasons:

  • Fees: Instacart charges a 10%+ commission on each order, which is hefty in the low-margin grocery biz (some retailers pass the cost on).
  • Marketing revenue: As Instacart controls more of the grocery customer relationship, it’s receiving more ad and promotion spend from food makers.

Many retailers encourage customers to go directly to their website (and do curbside pickup) or look at other delivery apps like DoorDash or Uber.

The Instacart pitch is its turnkey nature

Nilam Ganenthiran, the company’s president, tells the WSJ that Instacart is a quick way for grocers to get online without spending time and money on infrastructure.

Further, Instacart is a neutral partner that doesn’t “compete with retailers” — and it’s adding tech to give shoppers more control (e.g., item replacement suggestions).

Amazon’s acquisition of Whole Foods was a shock for the startup

But instead of getting crushed by Jeff “Big Baller Brand” Bezos following the 2017 deal, Instacart became a defensive play against Amazon.

Several retailers — including Sam’s Club, Costco, CVS, Albertsons, and Kroger — signed delivery deals with Instacart.

Just this August, Instacart and Walmart teamed up on one-day delivery to take on the Seattle-based Death Star.

In addition to retailer dissatisfaction, Instacart will likely face further issues around how it manages its contractors. Still, the startup’s momentum is undeniable — and it’s eyeing another insane number: a $30B IPO.

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Snippets

  • “Pay me in Bitcoin”: NFL player Russell Okung has partnered with a crypto firm (Strike) that can receive direct salary deposits and turn them into bitcoin. By letting the company turn half of his $13m salary into BTC, Okung is the first NFL player to get paid in bitcoin.
  • Shaking up Intel? Activist hedge fund Third Point is urging Intel to explore strategic options, including potentially separating its chip design and production functions. Its stock rose ~5% on the news.
  • Second time’s the charm. In 2018, Qualtrics — a SaaS product that gave companies user insights — was prepping for an IPO when SAP snapped it up for $8B. Now, with markets scorching hot, SAP will spin Qualtrics out at a potential IPO valuation of $14.4B.
  • Kinda makes sense. “In 2023, you won’t be able to fly most drones in the US without broadcasting your location,” writes The Verge. All drones will have to get a “remote ID” (effectively a digital license plate).
  • LVMH may soon close its $15.8B acquisition of Tiffany. The French luxury house previously tried to back out of the deal citing force majeure, but — as we detailed here — that’s a hard card to play in M&A.
  • Former NBA all-star Baron Davis and hip-hop legend Master P may make a bid for Reebok, which Adidas wants to sell for $2B+. If this happens… in the words of Master P, “Make ’em say uhh!”
  • Investment banks pulled in a record $124.5B on debt and equity underwriting fees. In an epic understatement, one banker calls it a “very robust” year for fundraising.
  • Mastercard released holiday shopping numbers, and the category that saw the biggest jump this year was home improvement (+80% YoY).
Fantasy M&A
Jay-Z and Jack Dorsey

Jay-Z and Jack Dorsey hanging in August (left) and December (right) (Source: Daily Mail)

Why would Square buy streaming music service Tidal?

Celebrity sightings are an American pastime.

One of the better ones in recent months: Hip-hop megastar Jay-Z has been spotted with Square/Twitter CEO Jack Dorsey and Jack Dorsey’s beard.

Now, Square is in talks to acquire Jay-Z’s streaming service Tidal

At first glance, Square’s 2-pillar businesses — seller services for merchants (e.g., the dongle) and the Cash App for consumers — seem tangentially related to music streaming.

There is a strategic play, though, according to Dan Runcie (author of Trapital, a must-read newsletter on the business of hip-hop).

Here are 2 reasons:

  • Customer acquisition: Adding a content play like Tidal to the fold is comparable to Amazon offering Prime Video. As Jeff Bezos said, “When we win a Golden Globe, it helps us sell more shoes.”

Further, Cash App is already very popular in the hip-hop community, often used for its viral bitcoin/cash giveaways. The app’s cultural relevance gives Cash App the industry’s lowest customer acquisition costs.

  • Give creators seller tools: Tidal already provides a way for creators to make music and podcasts. Square could graft on additional commerce tools, like it does for its existing merchants.One potential road map: SoundCloud, which offers creator tools (e.g., insights, promotional tools, payment splitting) on a subscription basis.

So, in the coming weeks, keep an eye out for more Jack Dorsey’s beard and Jay-Z sightings.

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  • It taps into a new generation of investors who are bullish on options but prefer easy-to-understand platforms
  • Gatsby users have placed over $50m of trades since launch

High engagement, low acquisition costs, and a zero-commission model that’s already profitable?

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Year in Review
Trends Banner

The things we got right and wrong in 2020 (and ungated Trends content to check out)

At Trends, we try to discover… well, trends, before they take off. Now that we’ve been running the show for over a year, we can look back and see how we did.

For starters, we got a lot of things right, like…

A few of our predictions didn’t pan out, including starting a trade show, opening motels, or our bullish thoughts on this “new movie industry” (AKA VR).

Post-pandemic, we still see opportunities with trade shows, many of which have 30-50% margins. And VR is still primed to be big — preorders for the latest Oculus Quest were 5x its predecessor.

As a New Year’s bonus, we’ve ungated 12 of our top Trends pieces from the past year. For one week only, you can read the following pieces for free:

👀  Looking back, we can only be sure of one thing: The year started with esports and ended with esports.

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Signal
Ratings of Apps on Google Play

Source: Statista. Note: Doesn’t include 1.59m apps that are not rated (have fewer than 3 ratings)

Trends business idea: Poorly executed but popular apps

If you’re looking for your next business idea, sometimes the best place to look is… at ideas that are already validated.

Earlier this month, Huszko Jozsef posted his pet project on Product Hunt. It’s called Validated Ideas, a list of 5k+ popular apps (100k+ downloads each) that have been poorly executed (ratings lower than 3.2).

“Coming up with innovative ideas is hard and time-consuming,” Huszko writes. “You don’t need to reinvent the wheel — just execute better.”

Below we’ve summarized the 20 categories with the most downloads, which together account for ~90% of the whole database.

We’ve sifted through thousands of these apps and pulled out some opportunities worth noticing. Here are 3 to get you started:

  • Acute Art: A 2.6-star-rated augmented reality art app with 100k+ downloads described by users as a “great app” but “super buggy.” Competing app Artivive also has 100k+ downloads and only 3.6 stars.
  • TalkingParents: A glitchy co-parenting app with 100k+ downloads and a 2.9-star rating. A competitor with seemingly bad UI design, coParenter, has 50k+ downloads and 3.5 stars.
  • Draw My Story: An app that helps users create animated drawings, memes, presentations, and instructional videos. The app has 100k+ downloads and only 2.7 stars. One user wrote, “I like the concept, but it still has way too many bugs.”

You can read our full write-ups on these and other ideas by signing up for Trends today with our 2021 discount.

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Test Time

Source: Giphy

Quiz of the day

Think you know the trends that made the biggest headlines in 2020? Take our quiz and find out (answers at the bottom of the email).

  1. Which of the following Trends article topics made it into Google’s Year in Search twice?
    1. Dalgona coffee
    2. Online plants
    3. Tiny homes
    4. Carbon credits
    5. Telemedicine
  2. Which of the following was searched the most, according to Google’s Year in Search?
    1. Where to buy hand sanitizer
    2. Where to buy Xbox Series X
    3. Where to buy face masks
    4. Where to buy PS5
    5. Where to buy toilet paper
  3. Online chess is one of Twitch’s fastest-growing categories. How many cumulative hours did people watch it in the last year?
    1. 500k
    2. 5m
    3. 10m
    4. 50m
    5. 500m
  4. According to Keywords Everywhere, which of our recent Trends “Flares” has the most search volume as of this month?
    1. Kintsugi kit
    2. Standing desk balance board
    3. Malepolish
    4. Home aquarium
    5. Monk fruit sweetener
  5. Which of these Kickstarters from our Kickstarter database raised more than $20m?
    1. PebbleTime: a color e-paper smartwatch
    2. Exploding Kittens: a tabletop card game
    3. Travel Tripod by Peak Design: a fully featured portable tripod
    4. COOLEST Cooler: a portable party disguised as a cooler
    5. Fidget Cube: a desk toy that helps you focus
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