Amazon’s next play 🚚


November 12, 2020

PLUS: Sex robots are…coming.
November 12, 2020
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The Big Idea
Amazon truck

The next frontier in Amazon’s empire

In a viral presentation slide, venture firm Social Capital shared an incredible insight about Amazon. Over the years, it has turned each of its main cost centers into a source of revenue.

To wit, it transformed: 

  • book inventory into digital assets with the Kindle
  • backend tech expenses into cloud giant Amazon Web Services
  • fulfillment costs into Fulfillment by Amazon

According to The Information, Mr. Burns Jeff Bezos’ logistics and shipping business is shaping up to do the same.

Shipping is currently an insane expense for Amazon

Through the first 9 months of 2020, Amazon’s shipping cost amounted to ~$40B (for reference, Fedex’s 2019 revenue was ~$70B).

But underneath this spend there’s a big change happening at the company.

By the end of 2019, ⅔ of Amazon’s “middle-mile” delivery — which moves a product between distribution facilities in preparation for delivery — was done in-house.

Amazon Transportation Services (ATS) is the new sheriff in town

Launched in 2015, ATS’s goal was to reduce Amazon’s dependency on 3rd party freight brokers like C.H. Robinson and XPO Logistics.

The shipping army that ATS put together is impressive:

  • 30k branded 53-foot trailers
  • 80 leased cargo jets
  • 69 US package sorting centers

While Amazon hasn’t fully given up on 3rd party providers (particularly during the pandemic), XPO Logistics said in early 2019 that $600m of its revenue was at risk from its “largest customer” (AKA the ‘Zon) leaving.

East Coast shippers started using ATS in April 2019

In a move familiar to Amazon’s other competitors, ATS offered trucking rates far below market prices.

Amazon has also built an “Uber-like” platform to match independent commercial truck drivers (called Relay) and launched a program to entice drivers to effectively lease an Amazon-branded truck.

ATS is rolling out the freight trucking program nationwide and aggressively expanding its sales team. While certainly terrifying for shipping competitors, ATS is not guaranteed victory.

The trucking industry is undermanned and sees high driver churn while Amazon’s current pay scale is way below market rates. If Mr. Burns Bezos wants to make trucking work, he’ll have to adjust the playbook.

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Snippets
  • You know the “three bubbles” that appear when someone is typing a message… and then it just hangs? The Trump admin is doing that to TikTok, which has no idea what’s going on with its ban.
  • The pandemic is shifting SNAP benefit spend. A portion of the $13B spent annually on Walmart is moving to Amazon.
  • Facebook claims only 6% of posts that users see are political. This gives off an “80% of consequences come from 20% of causes” vibe (AKA Pareto principle).
  • A new right-to-repair law in Massachusetts may compel Tesla to give up valuable vehicle data. The EV maker isn’t expected to play nice.
  • We have a new 2nd richest person in the world: Bernard Arnault, head honcho of French fashion house LVMH, is worth $137B… he trails only Mr. Burns Jeff Bezos.
  • Bonus: The Vatican is getting in the merch drop game with a $22k book about the Sistine Chapel.
 
Hear me out
Podcasts

How Spotify is reimagining podcast ads

Oh, the antiquity of podcast advertising.

For years, hosts have awkwardly tried to sell us mattresses, underwear, and a slew of other products that have no relationship to the show.

But Spotify has been on a quest to make podcast ads more relevant (and more valuable) through automation. And on Tuesday, it announced a $235m deal for the money-making engine of the podcast world: Megaphone.

Spotify’s shopping spree continues

Having secured some of the biggest names in the podcast industry (Gimlet, The Ringer, Joe Rogan), Spotify now is shifting its focus to monetizing its talent.

Megaphone was launched in 2015 as Panoply, the brainchild of the online publishing entity The Slate Group.

Over the past 5 years, it has quietly grown into one of the premier podcast hosting and ad distribution businesses.

We’re no longer in the age of Mad Men

According to leading podcast reporter Nicholas Quah, Spotify was drawn to Megaphone for ad targeting and audience segmentation software.

Spotify has been building out its Streaming Ad Insertion (SAI), which sells ad inventory for the streaming giant’s original programming. Megaphone will help bring scale and expand this type of ad inventory.

But some traditionalists think Spotify’s automated ad solution will ruin what makes old school “friction-filled” podcast ads effective in the first place.

“[This complaint] presupposes that the ad experience is going to get worse for the consumer,” one Spotify exec tells Quah, “which is a premise I don’t buy.”

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SPONSORED

1 week left to invest in the AI assistant chef that is targeting launches at 10 new White Castle Locations

You’ve heard of Flippy the frying robot — the AI assistant chef that’s creating safer work environments by taking on the dangerous tasks usually reserved for human chefs. 

Now, with 12 patents pending and 1 awarded, Flippy is making money moves… 

Next up? A North American beta rollout with White Castle. 

After seeing stars (big, meaty stars) with their initial Flippy test, White Castle is targeting up to 10 new locations to launch Flippy at.

What does that mean for Miso Robotics? Just another step toward becoming one of the main players in the up-and-coming cloud kitchen market. 

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New Funding Alert
Nuro

This “toaster on wheels” is valued at $5B

Nuro is a startup creating autonomous delivery vehicles.

Forbes calls it a “toaster on wheels” — which apparently makes it the most valuable toaster in the world.

Founded by 2 ex-Googlers (or Xooglers, per obnoxious company parlance), Nuro is fresh off a $500m funding round that values the company at $5B.

Nuro’s self-driving toaster is smaller than a car

Formally known as the R2, the vehicle has no steering wheels or pedals, tops out at 25mph and is “about half the size of a mid-size passenger car.”

Its feature sheet is also a real hoot:

  • Touch screen: For customers (or law enforcement, lol)
  • 360-degree view: Sensors all around the car make it road safe
  • Pedestrian-protecting front end: Specially designed panels absorb front-end impact

The business model won’t charge customers

Rather, restaurants, grocers, and retailers who want their goods delivered locally will pay a fee.

Per TechCrunch, Nuro ran a pilot with Walmart, Domino’s, and CVS in 2018. With $1.5B in total funding, the startup will continue to improve its product by testing on public roads in Arizona, Texas, and California.

This all sounds very exciting but we should mention that none of the funding news answers our most pressing question: How many slices of sourdough bread can a Nuro toast at once?

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I, Robot
female doll

What will sex robots do to society?

Sex robots are… coming.

One forecast suggests the sex tech industry will be worth $122B by 2024. Sales have been booming during the pandemic — and even Buzzfeed is getting in on the action.

While the numbers are huge, a bigger implication is who the end consumer will be: a large number of men.

The porn gap

One study from 2017 found that, among casual daters, men are 42x more likely than women to report viewing pornography at least once a week.

This imbalance could find its way into the sex robot market.

One manufacturer of sex dolls says that less than 5% of its products are male replicas (meaning 95%+ of its sex dolls are female).

Sex robots will shift the dating scene

A recent article from evolutionary psychologist Diana Santos Fleischman describes 2 heterosexual mating scenarios:

  • Male majority (more men than women): Men compete for access to scarce women with long-term commitment
  • Female majority (vice versa): Women compete for access to mates with casual sex

Fleischman predicts that widespread usage of functional sex robots will create a female majority situation.

She is unsure of the implications but cautions, “counterfeit or ‘fake’ fitness, which delivers the cues of status and sexual popularity’ is evolving much faster than our minds can evolve to contend with them.”

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Editing by: Zachary “Truckstop” Crockett, Director of Firestone Tire Recalls (Ivana Michelin).

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