Wednesday 02/12/20

1. In TECH NEWS, Salesforce buys Slack, Google/Facebook/Amazon change ad spending and Zoom’s ongoing battle with Teams
2. In RETAIL/HIGH STREET NEWS, we look at Debenhams failure, what’s on the cards for Arcadia, Caffè Nero buying time and Sephora setting up at Kohl’s
3. In MISCELLANEOUS NEWS, UK house prices continue their strength, Airbnb has a target for its IPO and lab-grown chicken goes on sale
4. AND FINALLY, I bring you a painting-by-numbers gone wrong and some elf-on-the-shelf antics…

So Salesforce buys Slack, Big Tech changes ad spend behaviour and Zoom vs Teams is likely to continue…

*** 📣 Watson’s Daily is going to start a monthly competition for SILVER members. The prize will be three weeks of commercial awareness sessions with me. I’m putting it together now and will be releasing it shortly…***

Salesforce confirms deal to buy Slack for $27.7billion (Wall Street Journal, Aaron Tilley) shows that Salesforce has agreed to purchase Slack Technologies for $27.7bn  in cash-and-stock in a deal that will shake up the cloud computing landscape! This will be Salesforce’s biggest acquisition by far (almost double the size of its previous-biggest deal to buy data analytics platform Tableau) and it is at a chunky 50% premium to Slack’s closing price before news of the deal broke. Separately, Salesforce also announced a strong set of quarterly results that exceeded market expectations and raised its full-year sales outlook. Slack also announced its quarterly figures that also came in above consensus. * SO WHAT? * This deal will bring both companies much closer to being proper competitors to Microsoft in terms of product capability and it is hoped that Slack’s software could be the gateway for customers to access Salesforce’s tools. I think it will be really interesting to see whether the seemingly growing momentum of anti-competitive Big Tech sentiment will be enough to force Microsoft to split out some of the services it includes in its bundle currently. Slack has long been complaining that Microsoft’s inclusion of Teams in its Office software is effectively shutting it out because customers are essentially getting it at no added cost. I guess this would be a bit like getting a coffee with every meal you buy at a fast food restaurant and the coffee shop next door complaining that it had lost business as a direct result of everyone getting a free coffee. If this actually happened (splitting out Teams, not getting free coffee 😁), it could be a MASSIVE win for the Salesforce/Slack combo.

Google, Facebook and Amazon gain as coronavirus reshapes ad spending (Wall Street Journal, Suzanne Vranica) is a fascinating article which says that, for the first time ever, over 50% of advertising spend in the US is digital. The breaking of this threshold just goes to show how far digital advertising has come and when you consider that placing online ads is generally cheaper than placing “offline” ones – plus the fact that audiences can be more accurately targeted – it isn’t hard to see why its

popularity has grown exponentially, especially under lockdown. Only three years ago, digital advertising made up about one third of US ad spending, so you can appreciate how much things have changed! Expectations are such that this demand will only increase as consumers increasingly spend their time online. Conversely, this year, advertising market share for newspapers, radio, magazines and local TV stands at 21%. * SO WHAT? * According to eMarketer, Facebook, Amazon and Google account for almost two-thirds of advertising dollars spent on digital advertising in America at the moment. SMEs have been particularly notable in the stampede to advertise online as it costs less and can be more targeted. I cannot see how this momentum can be arrested by traditional retailers. I think print is terminal (more people reading via their mobile devices) and radio isn’t much better (more streaming) while TV is probably the least bad (although even then it is pretty easy, these days, to fast forward through the ads especially if you don’t watch “live”). Billboards will be dire as there’s no point putting posters up if fewer people are commuting – so you are just left with more digital. The problem is that there is such a huge concentration of power in the digital ad space – something that the anti-trust brigade will no doubt be looking into.

I thought I’d include Zoom: Teams building (Financial Times, Lex) because it makes the very valid point that, successful though Zoom has been during lockdown (its share price has shot up by almost 600%!), the real threat to its upside lies in the form of Microsoft – and, specifically, Teams. Also, it is currently a one-trick pony in that it just does videoconferencing whereas Microsoft has a much more comprehensive offering. * SO WHAT? * Microsoft uses Teams to draw customers in and then sells them other products (did you notice that Teams has abandoned its 40 minute time limit on calls for free users?) whereas Zoom just doesn’t have that capability. FWIW, I think that Zoom needs to expand its product range rapidly (or REALLY enhance its conference call offering) to be able to hang on to its customers, especially when Salesforce/Slack has just stirred things up. I think that now is the time for Zoom to use its current valuation as currency to take things to the next level otherwise it could risk getting left behind IMO.

*** NEWS JUST IN – Pfizer and BioNTech’s Covid-19 vaccine wins UK authorisation (Wall Street Journal, Bojan Pancevski, Jenny Strasburg and Jared Hopkins) *** The UK has become the first Western country to give emergency use authorisation for a Covid vaccine. The two-shot vaccine is to be distributed in a matter of days. A similar authorisation is expected from the FDA later this month. Asian markets look unchanged as I type this, but I would expect European and US markets to rise on the back of this news (although some of this news is probably already in the price)

Debenhams bombs, Arcadia gets picked over, Caffè Nero buys time and Sephora goes to Kohl’s…

I mentioned this when the story broke yesterday on my daily podcast but Debenhams to disappear in new year (The Times, Ashley Armstrong) shows that the troubled department store has thrown the towel in and is starting to wind down all 124 of its stores after rescue talks collapsed. The company is now working with Hilco on a fire sale of all its stock ahead of all stores closing in the new year. 25,000 jobs are now hanging in the balance. Debenhams’ demise leaves massive hole in high street (Daily Telegraph, Laura Onita) bemoans the immediate fate of the high street and the ripple effects (suppliers Estée Lauder, Coty and Clinique were owed £2.8m, £1.4m and £1.6m respectively back in June, for instance). Meanwhile, Shoppers get set for ‘Wild Wednesday’ (The Times, Ashley Armstrong and Andrew Ellson) shows the ensuing shopping frenzy as customers try to take advantage of up-to-70% discounts but there’s no getting away from the fact that Big chains’ downfall raises the spectre of new ghost towns (The Times, Louisa Clarence-Smith, Tom Ball and Ben Martin) as the collapse of Debenhams and Arcadia and store portfolio contraction of the likes of M&S and John Lewis combine in a deadly mix that is likely to decimate many a high street up and down the land. Their failures will have a knock-on effect on smaller retailers as people can’t be bothered to go shopping in a ghost town and city centres – if left to their own devices – will just dwindle and die. * SO WHAT? * I have been saying this for a while now but I really think that retailers and councils need to work together to change the character of our town centres and think more holistically. IMO, previously rigid rules need to be scrapped so that all parties can adapt quickly to changing circumstances otherwise there is a risk that town centres could be lost forever. The retailers themselves also need to concentrate on giving consumers what they lack online – EXPERIENCE – because they just won’t be able to compete on price. I believe that people could still enjoy shopping at physical stores, but the longer stores are left vacant, the more used to shopping online people will become. Cutting business rates and taxes is all very well, but if retailers don’t change their offering they will just be rearranging the deckchairs on the Titanic as far as I’m concerned…

Meanwhile, UK ministers to ‘keep a close eye’ on Arcadia collapse (Financial Times, Jonathan Eley and Josephine Cumbo) shows that the government is keen to monitor the insolvency process at Arcadia given owner Philip Green’s questionable form on pensions at BHS while Which stores can avoid being left on the shelf (The Times) has a stab at guessing which parts of Arcadia will be attractive to prospective buyers. Topshop and Topman were the jewel in the crown for Arcadia, but they have had serious problems over the years. American private equity firm Leonard Green bought a 25% stake in Arcadia for £350m in 2012 only to sell it back last year for $1. Boohoo is a potential buyer as it already has recent form in picking up other troubled high street brands such as Coast, Oasis, Warehouse and Karen Millen. M&S could be interested in buying Dorothy Perkins, but then again it’s had a lot going on recently what with its collaborations with Nobody’s Child and Ghost and may have more to deal with if it gets involved in a rescue of Jaeger and Austin Reed. Next and Tesco could also be potential bidders for Dorothy Perkins. Other than that, Foschini (which owns Whistles, Hobbs and Phase Eight) has been touted as a potential bidder for Evans but Burton could be a tougher prospect. This is all obviously speculation, so it will be interesting to see what happens and how these businesses will be turned around.

Elsewhere, Caffè Nero in rent deal after rejecting Issa brothers bid (Daily Telegraph, Hannah Uttley) shows that the British Italian-style coffee shop has managed to buy itself some time after negotiating cheaper rents to help it continue to trade and, further afield, Sephora to set up shop inside Kohl’s (Wall Street Journal, Suzanne Kapner) shows that Sephora is effectively ending its partnership with JC Penney and setting up shops in Kohl’s stores. The partnership with JC Penney stretches back to 2006 and is scheduled to wind down in early 2023. Another kick in the teeth for JC Penney which filed for bankruptcy protection in May.

UK house prices strengthen, Airbnb has a figure in mind for its IPO and lab-grown chicken goes on sale…

UK house prices soar as homes in national parks attract premium (The Guardian, Julia Kollewe) backs up what I was saying yesterday about the housing market as Nationwide, Britain’s biggest building society, said that prices are rising at their fastest rate since January 2015. Their research says that almost 30% of people looking to move were doing so because they wanted a garden or to be close(r) to parks and 25% were just looking to get away from city centres in general. Properties located within a national park are now going for a 20% premium to those outside, with the New Forest being the most expensive. * SO WHAT? * Under normal circumstances, a strong housing market reflects increasing consumer confidence – but at the moment I think it is all desperation as people try to make a move to take advantage of the stamp duty holiday.

Airbnb looks to raise up to $2.5bn in IPO (Financial Times, David Carnevali and Miles Kruppa) highlights plans for the homes-rental business Airbnb to list ahead of Christmas, setting a price range of $44-$50 per share. If the IPO was done at $50, this would imply a $29.8bn valuation for the company. The company will begin its roadshow this week. * SO WHAT? * I would surprised if Airbnb did not manage to price at the top end of the range given investor thirst for hot tech companies with prospects at the moment. I bet that the private equity investors who chipped in to help Airbnb in the lockdown lows will be getting pretty excited at the prospect of a chunky valuation as it will no doubt give them exit options.

Then I thought I’d draw your attention to No-kill, lab-grown meat to go on sale for first time (The Guardian, Damian Carrington) because an American company called Eat Just has just had its lab-grown, slaughter-free chicken approved for sale by the Singapore Food Agency. * SO WHAT? * I think this is amazing! I have only ever heard of this for beef (Memphis Meats is probably best known for this, but Mosa Meat and Aleph Farms also do this) so it is really interesting to see that this is happening for chicken as well. If these kinds of products can get over consumer scepticism that they are eating meat that was grown in a lab, this is going to be great for chickens, but a disaster for farmers.

…in other news…

Now that we are in the final strait to Christmas and New Year, I thought I’d leave you today with a Christmas gift idea in Woman buys paint by numbers portrait to surprise boyfriend – but it goes horribly wrong (The Mirror, Paige Holland) and some dark antics from Father Christmas’ helpers in Worst Elf on the Shelf pranks as some parents are accused of taking it ‘too far’ (The Mirror, Rosaleen Fenton). I think I have seen some of these photos before, but they are still good!