1/ This week's Q3 earnings call w/ $FB will likely go down as one of the biggest bets in history. IMO they'll spend >$170B over the next decade on building the metaverse. Since it's my largest position, I've been spending a lot of time reflecting. Attached are my "scratch notes" 2/ At least in recent memory, never has a tech company made an investment like this. IMO what makes this so different from other bets like AWS, Netflix originals, etc. is the following..

1/ Quick thoughts on $TKWY CPM day. Overall, not a lot of new news, mostly the same talking points that we've heard over the last year. I am generally a little bit *more* bullish on $GRUB but it's clear now it's mostly a tool to divert $UBER and $DASH resources away from Europe 2/ I have generally thought the long-term penetration of food delivery is >70% over the next 1-2 decades (let's assume AV doesn't rollout and accelerate that). As you can see, lots headroom left even in their "mature" markets

1/ As we enter Q4, a lot of people are starting up strategic planning for the next year. At Uber Eats, I was lucky to have the opportunity to run annual strategic planning. On the way I made a ton of dumb mistakes, so here are some learnings that hopefully save ppl some headache: 2/ First time I ran planning we didn't have a good definition of what a strategy was. Here's mine:

A strategy is a set of major long-term decisions on where you'll compete (industries, segments, geos, etc.) and how you'll win.

1/ Last $UBER update for the day from Dara at a GS conference, lots of new info:

Delivery
- Was the fastest growing delivery platform in the US in Q3, took market share from $DASH and $GRUB 👀
- #1 in 8 out of 10 largest markets. Will be profitable rest of the year 2/ Delivery cont'd
- 7% of users are engaging with new verticals (grocery, alcohol, etc.), $3B GB run-rate. For these users, freq goes up 1.5x and monthly retention is up by 10%
- Thinks ads can surpass 1-2% of GB (currently $52B)
- Brought in new ad exec from $AMZN, Mark Grether

1/ $UBER Q2 earnings a mixed bag. Driver incentives larger than expected leading to a miss on Adj. EBITDA (-$509M vs. -$325M) but a beat on rev ($3.9B vs. $3.7B). Experience has deteriorated in the US, so long-term investing in supply right move but losses still hard to swallow 2/ The good news is that July trends are positive. In the US, active drivers up 75% YoY and new drivers up 30% MoM even as incentives are being tapered. US/Can mobility down 76% vs. 2019 but EMEA fully recovered. 90% of US drivers surveyed said they'll be back in Sept.

1/ Have been researching $GOOG and it's now my 3rd largest position by book value after $FB and $UBER. Initially ignored assuming it was too obvious, "law of big numbers", and that Search was maturing. Instead I've concluded the next Google might be.. Google?

Notes attached. 2/ Implied expectations from CS - only 5% sales growth with EBITDA margins falling to 34% longer term. If 11% sales growth through ‘30 = 40% upside. Est. ’21 growth rate at 28% and EBITDA margins at 37%. FCF expected to compound ~20% from ‘21-‘26

1/ Reflecting at my time at $UBER, I do think it’s possible for start ups to have “too much capital”. I personally fell into two traps in retrospect: 2/ When I first started Uber Eats didn’t have much of a budget. When faced with challenges (ie growth), the default question was, “how do we do this for free?”. The constraints forced creativity and capital efficiency. Ie where would Zillow be without Zestimates?

1/ Whenever a competitor makes a move (new product feature, pricing, segment, etc), the worst thing to do is dismiss it if it doesn’t make sense at first. Instead, ask yourself;

1) Why are they doing this? What’s the end game?

2) What’s the insight they know that we don’t? 2/ The second question is built on the premise that your competitors are smart and capable. You should assume there was a lot of research, debate, etc for each move. A many of times have I called something “stupid” only to realize afterwards I just didn’t dig deep enough.

1/ Zomato S-1 just dropped.

FY20
--
Orders - 403M 🤯
GOV - $1.5B USD
Rev - $368M USD
Adj EBITDA - ($226M) USD

As you can see from the chart, COVID created a lot of volatility. Unlike in Europe and North America, a lot of restaurants were forced to close, esp in Q1 2020. 2/ You can also see they've been aggressively cutting costs. Adj EBITDA % losses as a % of revenue rapidly going down.

1/ Something that keeps me excited about $UBER is it’s global operations. One of the secret sauces to scaling up Uber Eats so quickly was that we had small teams around the world ready to help launch a new product. 2/ Unlike a $GOOG or $FB, Uber is extremely decentralized. Partly because it’s a physical product and partly because execution and strategy require a lot of “boots on the ground” for localization (regulations, marketing, competition, etc).

1/ I spent a few years at Uber Eats watching us sometimes struggle to grow new businesses on top of rides. After a while I noticed a similar pattern at other big tech co's ($FB, $GOOG, $AMZN, $MSFT, etc). Below are my thoughts on why this happens and how it's related to marketing 2/ First, if you look at most big tech, they were all primarily started by engineers or "technophiles" and their core product grew virally with very little traditional marketing. Instead, there was a focus on "growth hacks" and improving the CX

1/ People often talk about $FB's network effects but for me what really flies under the radar is their SMB acquisition engine. This is part of a three step playbook that they've replicated for reach of their properties (Facebook "Blue App", Instagram, etc.) 2/ Step 1 - focus on user acquisition, engagement, and retention. Once they understand the primary behaviours and moments of delight that hook users and drive stickiness, do everything possible with the product to reinforce this.

1/ It's a misconception that superior restaurant supply creates an impenetrable network effect amongst food delivery platforms. Yes - the below flywheel from $DASH's prospectus is real. Restaurant supply increases demand which in turn increases restaurant supply, and so forth. 2/ But the key is to understand that resto supply shows a diminishing return to network effects (see chart).

Restos fall into three categories; chains, differentiated SMBs ("local favourites") and undifferentiated SMBs. Local favs are the unique must haves, the top 10%.

1/ Been following $BABA comments on FinTwit, not an expert but some observations and thoughts:

(1) Lots of ppl selling seemed to have bought the stock speculatively; assuming it'll go up and to the right
(2) China experts I've spoken to think the 13% drop is a major overreaction (3) IMO if your primary source of info is the WSJ that's probably a red flag. Owning $BABA probably requires either first hand research and a network of experts. If not, then your going to be out arbitraged based on information flow alone (let alone the follow on analysis)

1/ So I use to run a competitive intel team and spent a god awful amount of time sourcing data.

If you aren't familiar with Second Measure they effectively aggregate online sales data (ie credit cards) which they then sell to co's as market share data

bloomberg.com/company/press/… 2/ In the old offline world, retailers such as Walmart, Target, etc. would sell their sales data to someone like Nielsen. Nielsen packages this up with consulting services and resells it back to manufacturers (ie P&G, Colgate, etc.) or other co's such as investment firms

1/ $DASH about to IPO for around $30B. On top of the profitability question, there's another one about the durability of that profitability (moats). Having launched 2 and 3 sided mktplces for Eats, I can tell you the latter was exponentially harder to build *and* manage. 2/ In food delivery, a 2 sided mktplace is a traditional aggregator. A sales team adds restos to the platform and marketing acquires users. Restos complete their own delivery, so the aggregator gets to skip all the messy parts and friction in the physical world.

1/ Finally bought some Sea ($SE) after months of due diligence. Current price is $177, here is my expected value:

Bear - $49 * 15%
Base - $140 * 60%
Bull - $377 * 25%

Price Target = $185

For a great summary checkout @juliey4’s substack. Instead, below is a thread on risks 👇 1/ Still Building its Moat - right now SEA’s entire strategic focus is on creating their flywheel which Free Fire (FF) is at the heart of. It generates the CF that is reinvested into Shopee and SeaMoney to drive growth and build their moats (free deliveries, R&D, etc.).

1/ There were a bunch of q's to yesterday's thread on $DASH about economics. For those thinking about buying shares at the IPO but are unsure about profitability, I thought I'd share some opptys for margin expansion for 3P platforms (DD, Uber, etc.) 👇

https://twitter.com/ProtagorasTO/status/1327276303607881728?s=20

2/ As demand scales, driver costs go down. Say I'd like to pay drivers $14 / hr, if they only do one delivery / hr, I'd pay them $14 / delivery. If they do 2 deliveries / hr, I can bring that down to $7, etc. So lots of room in newly launched markets to reduce per delivery costs