Wrong About Roku
One of the more interesting companies and stocks to watch has been Roku. In all honesty, I’ve been wrong about this company as my core thesis for the company was more on the negative side. Roku is interesting because, for now, their primary value proposition is the user interface. We can argue they are a platform, and that may be accurate as well.
If Roku had been stuck to streaming TV hardware like a separate set-top box, or HDMI stick, then I don’t think they would have anywhere near the success they have. What has changed Roku’s fortune has been their integration with TV brands where essentially they are becoming the default smart TV UI for a number of major TV manufacturers. The bullish view for Roku is that they are the Microsoft Windows or Google Android of Smart TVs.
While TV manufacturers may still offer some platform choice like Apple TV, or even Android TV, my gut tells me those hardware companies may still prefer to work with Roku because Roku is not playing favorites and being willing to customize and heavily partner with OEMs. Apple and Google have a specific agenda with their TV OSes while Roku’s agenda is available to be more partner and customer-centric since it’s essentially neutral.
Roku’s CEO Anthony Wood has been vocal that they are in the best position to benefit from the cord-cutting trend, and I’m beginning to come around to his position. I cut the cord earlier in the year and have had an overwhelmingly positive experience moving away from traditional cable. I tried this experiment in 2011, and it was miserable. This time is completely different.
I have an Apple TV. I use my streaming services on, and a TV with Roku integrated. They both have their advantages, but the different between Roku’s approach and Apple’s is quite different. While I still like many of the UI features of Apple TV, there is no doubt that Roku’s integrated software as the primary TV OS is much more clean, simple, and quick to get to the apps I want.
This gives me hope that as Apple can do deals with TV makers that they will see more success with tvOS. Even then, I think Roku is better positioned than I originally thought as they focus on being the smart TV platform which plays nice with everyone.
Uber’s earnings made headlines on the back of their losses. No one who studies the fundamentals of Uber, or ride-sharing in general, is surprised that Uber is still losing a significant amount of money. Their strategy to subsidize the cost of a ride in order to be cheaper than traditional Taxi is no secret.
This strategy is critical to scale as they seek to acquire new users and provide a better service, including lower prices, to customers. While in Vegas for work recently, I took a taxi from my hotel to the airport just to see how much it would cost compared to Uber. Before getting in the Taxi, I looked at Uber to see what it would cost my estimate was just over $11. With the Taxi, I had no idea how much it would cost since the meter goes up as you travel and fees are added along the way. In the end, I ended up paying $24 dollars for the taxi ride to the Las Vegas airport. That was quite the price difference and enough to convince me never to use Taxies again.
The long game with Uber, or Lyft, or any rideshare, is a belief in Robo taxis. As rideshare companies eliminate human drivers, they will not lose as much money subsidizing the cost of rides and may even make money still being extremely cost-competitive against taxis. This is ultimately the death blow to taxis as those companies will likely not succeed moving to Robo taxis. Again, this is the long view of Uber and Lyft.
The data is positive though for Uber. Looking at research and customer behavior data, I have access to for Uber a few things stand out. Across Uber Rides, Uber Bikes, and Uber Eats the average customer is using Uber 6 times a month with a steadily increasing average cost per transaction now nearing $16 dollars. Customer retention is one of the more interesting data points as Uber customers spend more money with Uber the longer they are a customer. Dollar retention has been on a steady uptick from returning customers. Uber has also recently crossed the 30% mark of the population of US citizens who have used the service at least once.
The data suggests, Uber is well-positioned if they can just acquire the customer. That user growth, and costs to acquire new users, will the data points to keep an eye on going forward.
Apple Card Approvals
This morning CNBC published an interesting article digging into some more details of Apple Card. The report details Apple’s goal to make Apple Card available to as many of its customers (above the age of 18) as possible. That includes ways to approve customers with lower credit scores.
The report details a customer who did get approved with a FICO score of 620 who got approved but only for $750 with an interest of 23.99% which he said was lower than other credit cards. This is a really interesting approach and will be fascinating to see how it plays out. The potential here is that these customers are able to improve their credit scores and hopefully make better financial decisions. The downside, however, is what happens if poor credit customers end up being late regularly or possibly defaulting and then get hounded by debt recovery companies or painful experiences if their account goes delinquent. The risk is an experience like that turns a customer sourer on Apple because even though Apple is working with Goldman Sachs, they are still the front brand and may be blamed for negative experiences around Apple Card.
The report goes onto detail an earlier credit card concept Steve Jobs was involved in but ultimately didn’t do because he didn’t want Apple customers to face rejection over an Apple product. This attempt with Goldman Sachs seems designed to get as many approved as possible but, as I point out, that is not without risks.
This is one of the more interesting products to watch from Apple due to both its rewards, and potential upside, but because it also carries more risk than other products of Apple’s.