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We already wrapped up the first quarter of 2024!
Missed some headlines? Here’s a quick recap to get you caught up.
Our Earnings Visuals report for March dropped earlier this week. These reports now cover 200+ companies throughout the earnings season.
🔎 Google Considers Charging for AI Search
The undisputed king of search might make us reach for our wallets soon. A report from the Financial Times suggests Google is considering a paywall for its cutting-edge AI search features.
🔎 AI-powered search isn’t cheap: Despite decreasing inference costs over time, search boosted by powerful AI models would be much more expensive for Google than the typical 10 blue links. This makes a premium subscription model increasingly likely.
🐾 Following the trend: Google wouldn't be the only company charging for AI search. Competitors like ChatGPT and Perplexity have already launched premium AI-powered features, setting a precedent. The future of AI search might require subscription fees.
▶️ Google's integration: Instead of offering a standalone AI search subscription, Google could bundle these features with its existing subscription offerings (like Google One). Basic AI features could stay widely available, while the most advanced features would be paywalled, like Gemini Advanced.
Search advertising was 57% of Alphabet’s revenue in FY23, compared to 62% in FY18. The company’s revenue mix is evolving with the rise of subscriptions like YouTube Premium and the rapid growth of Google Cloud.
A potential HubSpot acquisition?
I usually don’t comment on rumors, but this one is too juicy.
From Reuters:
Google parent Alphabet (GOOG) has been talking to its advisers about the possibility of making an offer for HubSpot (HUBS), an online marketing software company with a market value of $35 billion, people familiar with the matter said.
For context, G2 named HubSpot the top global software company for Marketing, Sales, and Services in 2023. They are focused on CRM (Customer Relationship Management).
💰 That would be a big one: A HubSpot acquisition would potentially eclipse Google's $12 billion purchase of Motorola Mobility in 2011 and even Salesforce's $27 billion acquisition of Slack in 2020.
☁️ Competing with the leaders: The acquisition could boost CRM offerings on Google Cloud, helping to bring HubSpot upmarket and compete with Salesforce (CRM) and Microsoft (MSFT).
🌐 Already back in the CMS game? Interestingly, HubSpot offers a CMS (Content Management System), which would be an odd addition after Google's recent divestment of Google Domains to Squarespace as part of cost-cutting efforts.
Key HubSpot metrics in FY23:
205K customers.
Paying $11,365 per year on average.
Generated $0.4 billion in operating cash flow.
$2.2 billion of annual revenue, growing 25% year-over-year.
It could be instantly accretive to Google Cloud’s $33 billion yearly run rate.
Here’s a look at HubSpot’s latest quarter. The company is close to breaking even. Salesforce's recent financials illustrate that subscription businesses like this can be very profitable at scale.
Keep in mind that this is all speculative.
There is no offer yet, and it could face regulatory scrutiny. Adobe recently abandoned its $20 billion Figma acquisition for this reason. However, Google would enter a new market with larger competitors, so this acquisition may have better odds.
Disclosure: HUBS is the third-largest holding in App Economy Portfolio.
🏰 Disney Wins Its Proxy Fight
After a contentious battle, Disney successfully fended off activist investor Nelson Peltz in his bid to win board seats. It’s a decisive victory for CEO Bob Iger, but the fight isn't without crucial lessons for the entertainment giant.
⚔️ The battle lines:
Peltz's push: The activist investor argued that Disney needed a shakeup, citing lagging stock performance and poor succession planning.
Iger's defense: Disney fought back aggressively, touting bold cost-cutting initiatives, recent stock gains, and a shakeup in the movie division.
🗳️ Shareholder choices: New SEC voting rules changed the game. Shareholders could pick individual nominees from competing lists, leading to more targeted attacks. This dynamic even caused division among activist investors, leading Blackwells Capital to oppose Peltz.
👑 CEO succession: One of Peltz's strongest criticisms was Bob Iger's repeated failure to groom a successor. This argument resonated with some shareholders, even as they ultimately sided with Disney. The win pressures Disney to find and develop a successor before Iger's contract ends in 2026.
🔮 What's next? While this victory gives Iger breathing room, the company faces ongoing scrutiny. Expect an accelerated focus on succession planning and a continued push for better performance. The question isn't whether Disney needed a change but how best to achieve it.
Check out our full report for more on Disney’s latest quarter and other streaming giants like Warner, Paramount, Comcast, and Roku visualized.
🌎 12 Global Titans in 28 Visuals
We consolidated the Q1 performance of the world's 12 largest companies to visualize the trends shaping the global economy, from GPT to GLP.
All in a single report.
🦅 CrowdStrike: AI-Powered Security
In the AI gold rush, cybersecurity is an obvious beneficiary of secular tailwinds. CrowdStrike (CRWD) is on track to cross a $100 billion valuation (possibly overtaking Palo Alto Networks).
What are key metrics to watch for, like ARR and DBNR?
What makes CrowdStrike’s security platform different?
What does SaaS business look like at scale?
🦉 Duolingo: Gamified Learning
As a finance executive in the gaming industry for over a decade, I've seen firsthand how games can drive incredible engagement and monetization. Duolingo's success is a fascinating case study in applying these same principles to education.
How’s the app’s gamified model successfully retaining users?
What is the hilarious marketing strategy that made the app viral?
What traits does Duolingo borrow from successful mobile games?
🤖 NVIDIA' AI Woodstock'
In March, NVIDIA’s CEO Jensen Huang took center stage at the company's annual GPU technology conference (GTC), which some analysts have called ‘AI Woodstock.’
What is unique about Blackwell, NVIDIA’s latest AI architecture?
How’s NVIDIA trying to create a software lock-in with services?
Why are Sovereign AI solutions a significant tailwind?
Join us on social media for a daily dose of company earnings and news, and stay tuned for a new earnings season kicking off in the coming weeks.
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That’s it for today.
Stay healthy and invest on!
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Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
Disclosure: I am long AAPL, CRM, CRWD, GOOG, HUBS, and NVDA in the App Economy Portfolio. I share my ratings (BUY, SELL, organization'sApp Economy Portfolio members.
Thank you very much for this summary post!