Google’s antitrust case, explained


October 21, 2020

PLUS: How WeChat inspired Substack.

October 21, 2020
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So we got a few Golden Ticket related messages yesterday:

  • “Stop pushing this sh*t if Canadians can’t win.” (They can)
  • “HAHAHHA sucka b****es, I got dat golden tick!” (Nice)

These are 100% real, so keep opening the email to win that Golden Ticket prize. And — c’mon — “dat” is not a word and please stop swearing!

The Big Idea
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The US Government v. Google: What you need to know

Finally, we can party like it’s 1998.

In the biggest US tech antitrust action since the government took on Microsoft and Bill “Don’t call me Dollar Bill” Gates, the Department of Justice (DOJ) filed an antitrust suit against Google on Tuesday.

What’s the allegation?

According to the Wall Street Journal, Justice officials will lay out the case that Google is abusing monopoly positions in search (~80% of US search volume) and search advertising.

The DOJ claims the company is acting as a gatekeeper and shutting out competition by:

  • Paying browsers billions of dollars to be the default search engine
  • Pre-loading its search app (which can’t be deleted) on Android phones
  • Preventing competing search pre-loads on phones under revenue-share agreements
  • Owning industry-leading tools at every part of the digital advertising chain

Predictably, Google has called the suit “deeply flawed.”

The stakes are huge

A similar investigation by the Federal Trade Commission in 2013 never made it to court. But the DOJ suit could set a huge precedent:

  • A loss for Google could change the structure of its business, (e.g., a potential spinoff of the Chrome browser).
  • A win for Google would hamper DC’s efforts to wrangle other antitrust targets (Amazon, Apple, Facebook).

Don’t expect anything overnight, though. It took 3 years to reach an agreement with Microsoft.

Google will be deploying some of its $120B in cash to fight this case

As we previously covered, the company has a ready-made defense.

The US government recently sued American Express for charging merchants high fees, but the payments firm won the case by saying it was a “net positive” across its entire network (e.g., customers get points).

Google certainly has a claim. One study showed that consumers would have to be paid $17.5k a year to give up search.

Either way, this brings back memories of 1998. One other thing that happened that year? Larry Page and Sergey Brin founded Google.

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Snippets

  • Fuhgeddaboutit: Intel is tossing in the towel on memory, selling its flash chips biz to S. Korea’s SK Hynix for $9B.
  • Splitting checks: Stir raised $4m to help creators split revenues on collaborative efforts from big (working on a YouTube series) to small (swapping newsletter articles).
  • Massive TikTok stars are splitting checks by launching  podcasts with pod OGs like Dave Portnoy (+ Josh Richard, BFFs) and Pomp (+ Bryce Hall, Capital University).
  • Impossible Foods is tackling milk by creating a plant-based substitute that’s as creamy as milk and doesn’t curdle in hot drinks (like soy or almond). Our thoughts? Impossible.
  • Perch raised ~$124m to build D2C brands that sell on Amazon’s marketplace, which does $200B of merch/year.
  • Bonus (earnings edition): Snap’s ads impressed (+24% after hours) while Netflix’s subs underwhelmed (-5%).
WeStack
WeChat logo

The newsletter startup Substack was inspired by China’s superapp WeChat

If you’ve turned on the internet at any point in 2020, you’ve probably encountered Substack, the publishing platform that lets anyone quickly spin up a newsletter and sell subscriptions.

Names with big followings and expert coverage (Andrew Sullivan, Casey Newton) have left traditional publishers to go solo on the platform.

Many have likened Substack to Medium 2.0, but a more apt comparison for the startup may be the Chinese superapp WeChat.

Expert voices straight to reader inboxes is not new in China

This model has been around on WeChat since 2013, according to the SCMP.

WeChat is like Facebook, WhatsApp, Tinder, Apple Pay, and email all rolled into one. WeChat’s messaging DNA comes from the fact it was created by a team of email specialists from parent firm Tencent.

The specific inspiration for Substack is the WeChat Public Accounts, which are media accounts (publications, solo influencers) that send blogs and articles directly into a user’s message feed.

WeChat has over a billion monthly active users

And more than half of them check WeChat Public Accounts on a daily basis. Users have 8m+ public accounts to choose from and the biggest accounts — like Shidian Read — have tens of millions of followers.

No Substacker is in that league but a handful are earning 7 figures in annual subscriptions (e.g., Sinocism, which — funny enough — offers in-depth China coverage).

Based on Medium’s completely inexplicable logo redesign, Substack should probably keep drawing publishing inspiration from WeChat.

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LATAM Fintech
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You should know about MercadoLibre, the $66B ‘Amazon of Latin America’

Speaking of borrowing from China, MercadoLibre is a Latin American ecommerce powerhouse that is aping Alibaba’s style.

Over the past 2 decades, Alibaba took its ecommerce dominance in the Middle Kingdom and created Ant Group, a payments biz which is looking to go public at a valuation north of $200B.

Often called the “Amazon of Latin America,” MercadoLibre has leveraged its own payments arm (Mercado Pago) to a $66B valuation, ~3x its March lows.

Latin America is ripe for financial disruption

Half the region is unbanked — and 99%+ of the firms are small-and-medium-sized businesses (SMB), which operate more informally and have difficulty accessing credit.

Along with the rest of the world, Latin America’s economy had to go digital during the pandemic.

Mercado Pago — which offers digital wallets, debit cards, and QR payments — saw payments on its platform double in Q2. And, like Ant before it, the payments platform offers users investment options.

The digital change is here to stay

Pago’s head Osvaldo Gimenez tells Reuters that once people use its services, “there is no way back to lining up for 20 minutes to pay an electricity bill.”

Other Latin American fintech startups are getting in on the action include Ualá (Argentine mobile bank), dLocal (Uruguayan payments platform), and Nubank (Brazilian neo-bank).

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World Series Mania
Baseball fans

So, you’ve always wanted to go to the World Series?

Until last Sunday, this seemed like the year to do it.

A potential showdown between the Atlanta Braves and Tampa Bay Rays — 2 small-market teams — didn’t figure to make this 2020’s fixture a big draw.

Toss in anxiety over attending live events and the need to hop on a flight to Dallas (the site of this year’s World Series), and many die-hards were content to watch from the comfort of their couch.

Things changed quickly

The Los Angeles Dodgers rallied to knock off Atlanta in the National League Championship Series (NLCS), sparking a frenzy that has seen tickets surge on secondary markets like SeatGeek and Gametime.

While the NBA and NHL finished out their bubbles in empty arenas, the NFL and MLB have welcomed back fans in a limited capacity.

It’ll cost you…

Major League Baseball capped the number of tickets it would sell per game for the World Series at ~11.5k. Ranging from $75 to $450, ticket prices were down 40% to 50% versus last year’s World Series.

Those discounts were short-lived, as ticket prices have skyrocketed to between $1.6k and $17k.

Turns out there’s more than a few people willing to shell out for the chance to see the Dodgers win their first title since 1988.

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