Netflix is still saying ‘no’ to ads

Despite ongoing speculation and investor pressure, Netflix is still declining to adopt an advertising-based business model as a means to boost its revenue, Netflix CEO Reed Hastings confirmed on Tuesday. The company on its Q4 earnings call again shot down the idea of an ad-supported option, with Hastings explaining there’s no “easy money” in an online advertising business that has to compete with the likes of Google, Amazon, and Facebook.

Explained the exec, “Google and Facebook and Amazon are tremendously powerful at online advertising because they’re integrating so much data from so many sources. There’s a business cost to that, but that makes the advertising more targeted and effective. So I think those three are going to get most of the online advertising business,” Hastings said.

To grow a $5 billion to $10 billion advertising business, you’d need to “rip that away” from the existing providers, he continued. And stealing online advertising business from Amazon, Google, and Facebook is “quite challenging,” Hastings added, saying “there’s not easy money there.”

“We’ve got a much simpler business model, which is just focused on streaming and customer pleasure,” he said.

The CEO also noted that Netflix’s strategic decision to not enter the ad business has its upsides, in terms of the controversies that surround companies that collect personal data on their users. To compete, Netflix would have to track more data on its subscribers, including things like their location — that’s not something it’s interested in doing, he said, calling it “exploiting users.”

“We don’t collect anything. We’re really focused on just making our members happy,” Hastings stated.

That’s not exactly true, of course. Netflix does track viewership data in order to make determinations about which of its original programs should be renewed and which should be canceled. It also looks at overall viewing trends to make decisions about what new programs to greenlight or develop. And it tracks users’ own interactions with its service in order to personalize the Netflix home screen to show users more of what they like.

The company also this quarter introduced a new viewership metric — “chose to watch,” which counts the number of people who deliberately watched a show or movie for at least two minutes. That’s far longer than Facebook or Google’s YouTube, but isn’t a great way to tell how many people are watching a show to completion, as on TV.

However, none of this viewership tracking is on the scale of big tech’s data collection practices, which is what Hastings meant by his comment.

“We think with our model that we’ll actually get to larger revenue, larger profits, larger market cap because we don’t have the exposure to something that we’re strategically disadvantaged at  — which is online advertising against those big three,” he said.

This isn’t the first time Netflix’s CEO has had to repeat the company’s stance on being an ad-free business. In Q2 2019, Netflix reminded investors in its shareholder letter that its lack of advertising is part of its overall brand proposition.

“When you read speculation that we are moving into selling advertising be confident that this is false,” the letter said.

Analysts have estimated Netflix could make over a billion more per year by introducing an ad-supported tier to its service.

To some extent, the increased push for Netflix to adopt ads has to do with the changes to the overall streaming landscape.

Netflix today is facing new competition from two major streaming services, Disney+ and Apple+ — both of which have subsidized their launch with free promotions in order to gain viewership. In the next few months, Netflix will have to take on several others, including mobile streaming service Quibi, WarnerMedia’s HBO Max, and NBCU’s Peacock. The latter features a multi-tiered business model, including a free service for pay-TV subscribers, an ad-free premium tier, and one that’s ad-supported.

The service was introduced to investors last week where it was well-received.

Other TV streaming services also rely on ads for portions of their revenue, including Hulu and CBS All Access. Meanwhile, a number of ad-supported services are also emerging, like Roku’s The Roku Channel, Amazon’s IMDb TV, TUBI, Viacom’s Pluto TV, and others.

Netflix’s decision to keep itself ad-free is likely welcome news for its subscriber base, however, who see the lack of ads as being a key selling point.

 

 

 

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Unearth the future of agriculture at TC Sessions: Robotics+AI with the CEOs of Traptic, Farmwise and Pyka

Farming is one of the oldest professions, but today those amber waves of grain (and soy) are a test bed for sophisticated robotic solutions to problems farmers have had for millennia. Learn about the cutting edge (sometimes literally) of agricultural robots at TC Sessions: Robotics+AI on March 3 with the founders of Traptic, Pyka, and Farmwise.

Traptic, and its co-founder and CEO Lewis Anderson, you may remember from Disrupt SF 2019, where it was a finalist in the Startup Battlefield. The company has developed a robotic berry picker that identifies ripe strawberries and plucks them off the plants with a gentle grip. It could be the beginning of a new automated era for the fruit industry, which is decades behind grains and other crops when it comes to machine-based harvesting.

Farmwise has a job that’s equally delicate yet involves rough treatment of the plants — weeding. Its towering machine trundles along rows of crops, using computer vision to locate and remove invasive plants, working 24/7, 365 days a year. CEO Sebastian Boyer will speak to the difficulty of this task and how he plans to evolve the machines to become “doctors” for crops, monitoring health and spontaneously removing pests like aphids.

Pyka’s robot is considerably less earthbound than those: an autonomous, all-electric crop-spraying aircraft — with wings! This is a much different challenge from the more stable farming and spraying drones like those of DroneSeed and SkyX, but the choice gives the craft more power and range, hugely important for today’s vast fields. Co-founder Michael Norcia can speak to that scale and his company’s methods of meeting it.

These three companies and founders are at the very frontier of what’s possible at the intersection of agriculture and technology, so expect a fruitful conversation.

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Amazon Music passes 55M customers across its free and paid tiers, but still lags behind Spotify and Apple

Amazon Music, the streaming music service from the e-commerce and cloud giant that competes against the likes of Spotify and Apple Music, announced a milestone in its growth today: it has passed 55 million customers across the six different pricing tiers that it offers for the service, ranging from $15 per month through to a free, ad-supported tier.

The numbers represent a strong leap forward for the service, which launched in October 2016. But in the bigger race to tie down consumers making the move to streaming services with recurring subscriptions, Amazon still lags behind Apple Music, which last summer said it passed 60 million paying users, and Spotify, which last quarter said it now had 248 million users globally, 113 million of them paying.

Amazon does not break out how many users are in each of its tiers, although we are asking and will update if we learn more. The overall figure, Amazon said, includes growth of more than 50% for the top tier, called Amazon Music Unlimited, which includes HD-quality tracks for about 50 million songs in the U.S., UK, Germany, Japan and most recently Brazil. Other countries without HD-quality where Amazon Music is available include France, Italy, Spain, and Mexico, and it notes that customers more than doubled in these four countries.

“We’re proud to reach this incredible milestone and are overwhelmed by our customers’ response to Amazon Music,” said Steve Boom, VP of Amazon Music, in a statement. “Our strategy is unique and, like everything we do at Amazon, starts with our customers. We’ve always been focused on expanding the marketplace for music streaming by offering music listener’s unparalleled choice because we know that different listeners have different needs. As we continue to lead in our investment in voice with Alexa, and in high-quality audio with Amazon Music HD, we’re excited to bring our customers and the music industry even more innovation in 2020 and beyond.”

As with other Amazon products and services, the company has built its music offering around cross-selling existing customers — namely those who are already using or considering its Prime membership service — which helps Amazon with its economies of scale (promotions to customers who are already getting promotions cost less, for starters); and target consumers who are happy with the convenience of having all of its services under one bill. The discount for Prime users also serves as a sweetener for those considering subscribing to the membership tier.

Prime users get a discount on both single subscriptions the Unlimited service ($7.99/month or $79/year) and Family plans. Similarly those who only subscribe on a single device, either the Fire TV or Echo, can pay $3.99/month for the service. The ad-supported service gives a smaller range of tracks, playlists and stations for free with advertising interspersed.

The general stickiness of Amazon media services — which include storage, video, reading, games and more — is a model that Apple is also following, building out a range of its own content offerings alongside those of the third-party apps in the App Store. Spotify has taken a more music- and audio-first approach, with its forays into areas like video never quite gaining traction. In its last earnings, the company addressed its place in the market.

Specifically, it noted that Amazon appears to be picking up more ad-supported than paying users at the moment, leaving an opening for Spotify to continue growing that business.

“We continue to feel very good about our competitive position in the market,” it noted in a statement. “Relative to Apple, the publicly available data shows that we are adding roughly twice as many subscribers per month as they are. Additionally, we believe that our monthly engagement is roughly 2x as high and our churn is at half the rate. Elsewhere, our estimates imply that we continue to add more users on an absolute basis than Amazon. Our data also suggests that Amazon’s user base skews significantly more to ‘Ad-Supported’ than ‘Premium’, and that average engagement on our platform is approximately 3x.”

 

 

 

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Substack builds multi-author support into its hybrid publishing, newsletter service

Substack announced today that it has built support for multiple authors into its service. The company provides a publishing tool that blends blogs and email newsletters into a single entity, with a focus on subscription monetization.

The day’s updates also include a number of publisher-friendly tools, like shared access and homepage features closer to those of traditional websites than the linear timeline style that Substack has focused on so far.

The additions, which also include nice-to-haves like author pages for multi-person publications, mark a new level of maturity for Substack, a service that quickly attracted both authors and an audience after it launched. That early traction helped the company land an outsized — when compared to the size of its team — Series A that put $15.6 million into the business.

For users of the service, news of the funding was welcome. As was Substack’s disclosure at the time that the publications on its platform had attracted 50,000 paying subscribers. That figure was exciting, indicating that the company’s product might help writers of all sorts build a monetized audience, a holy grail for written creatives.

In light of today’s updates, TechCrunch asked Substack about the progress of its monetization, specifically curious about how many paid subscribers Substack publications had accreted. The company declined to share new numbers, with its co-founder and COO Hamish McKenzie instead saying that his team is “very happy with the growth [it has] seen over the past few months.”

In a company blog post accompanying today’s news, the firm noted “tens of thousands of paying subscribers,” implying that Substack has not yet doubled its former 50,000 person subscriber base. (Doing so would give Substack six-figures worth of subscribers. However, as it reached the 50,000 paid subscriber mark less than a year ago, it might be aggressive to expect such a rapid doubling.)

Newsletter, blog, website

Part of Substack’s initial success came from its intelligent blending of blogs and newsletters. Anyone who wanted to build one or the other got both, in a format that worked for each; bloggers could send email, and the email-focused also got a home on the internet. That the product came stapled to monetization tools made it all the more attractive.

Today’s updates help add a new form to the Substack mix: Websites. Here’s what a new Substack website can look like:

The ability to pin posts to the top of publications, the addition of photo bylines, and other tools mean that users can now do much more with the Substack publications. The company will now have to tread the line between the power of simplicity, and simply empowering its power users.

The company’s model appears to be working. Traffic to the larger Substack service has risen in recent months, according to analytics service Alexa. Substack was ranked among the 13,000th most visited global site in October of last year, according to the platform. It’s now in the 11,000s. With media companies like The Dispatch hatching on Substack, and with today’s updates, expect that number to continue to fall.

Substack is a bet that readers will pay for the written work that they care about. It’s a good wager. And better tools will tilt the odds more in its favor.

Now we can simply count down until Substack announces 100,000 paid subscribers.

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Shared inbox startup Front raises $59 million round led by other tech CEOs

Front is raising a $59 million Series C funding round. Interestingly, the startup hasn’t raised with a traditional VC firm leading the round. A handful of super business angels are investing directly in the productivity startup and leading the round.

Business angels include Atlassian co-founder and co-CEO Mike Cannon-Brookes, Atlassian President Jay Simons, Okta co-founder and COO Frederic Kerrest, Qualtrics co-founders Ryan Smith and Jared Smith and Zoom CEO Eric Yuan. Existing investors including Sequoia Capital, Initialized Capital and Anthos Capital are participating in this round as well.

While Front doesn’t share its valuation, the company says that the valuation has quadrupled compared to the previous funding round. Annual recurring venue has also quadrupled over the same period.

The structure of this round is unusual, but it’s on purpose. Front, like many other startups, is trying to redefine the future of work. That’s why the startup wanted to surround itself with leaders of other companies who share the same purpose.

“First, because we didn't need to raise (we still had two years of runway), and it's always better to raise when we don't need it. The last few months have given me much more clarity into our go-to-market strategy,” Front co-founder and CEO Mathilde Collin told me.

Front is a collaborative inbox for your company. For instance, if you want to share an email address with your coworkers (support@mycompany.com or jobs@mycompany.com), you can integrate those shared inboxes with Front and work on those conversations as a team.

It opens up a ton of possibilities. You can assign conversations to a specific person, @-mention your coworkers to send them a notification, start a conversation with your team before you hit reply, share a draft with other people, etc.

Front also supports other communication channels, such as text messages, WhatsApp messages, a chat module on your website and more. As your team gets bigger, Front helps you avoid double replies by alerting other users when you’re working on a reply.

In addition to those collaboration features, Front helps you automate your workload as much as possible. You can set up automated workflows so that a specific conversation ends up in front of the right pair of eyes. You can create canned responses for the entire team as well.

Front also integrates with popular third-party services, such as Salesforce, HubSpot, Clearbit and dozens of others. Front customers include MailChimp, Shopify and Stripe.

While Front supports multiple channels, email represents the biggest challenge. If you think about it, email hasn’t changed much over the past decade. The last significant evolution was the rise of Gmail, G Suite and web-based clients. In other words, Front wants to disrupt Outlook and Gmail.

With today’s funding round, the company plans to iterate on the product front with Office 365 support for its calendar, an offline mode and refinements across the board. The company also plans to scale up its sales and go-to-market team with an office in Phoenix and a new CMO.

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