Embracing Disruption: An Investor’s Perspective
What Is A Disruptor? A company/product/concept that changes the fundamentals of an industry and disrupts previously successful business models
Industry Players
2016 Sales & Profits Target & Wal-Mart Amazon Sales: $136 $554 Billion Billion Profits: $16.3 Billion $2.7 Billion Source: FactSet
But What Are They Worth? Target & Wal-Mart Amazon $433 Billion $255 Billion Source: FactSet s of 3/19/2017
Race to $100 Billion in Sales 35 Years 21 Years Source: http://corporate.walmart.com/our-story/our-history
96 U.S. Fulfillment 1,790 U.S. Retail 4,601 U.S. Retail Centers Stores Stores • Roughly one out of every 10 Americans works in retail Source: https://corporate.target.com/Careers/global-locations http://corporate.walmart.com/our-story/our-locations http://blog.taxjar.com/amazon-warehouse-locations/
Revenue Growth Rates 45.00% 40.00% 35.00% 30.00% 25.00% Amazon 20.00% Walmart Target 15.00% 10.00% 5.00% 0.00% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -5.00% Source: FactSet
What is Amazon’s value proposition? Better value Convenience Wide Selection
Which industries are less likely to get “ Amazoned ” Physical experiences Leisure & Entertainment Education Convenience – “want or need it now” Home Improvement / Auto Parts Prescription drugs / Convenience stores Pet food / supplies Distribution / logistics issues Products with low price points / perishable Personalization / Expert Advice / Installation Beauty salons / home furnishings
Not Just a Retailer 2015 Revenue: $99.13 Billion 2015 Revenue: $7.88 Billion % of Revenue: 92.6% % of Revenue: 7.4% % of Operating Income: 59% % of Operating Income: 41% YoY Growth Rate: 17.5% YoY Growth Rate: 69.7% Growth Rate (%) Growth Rate (%) 20 75 18 60 16 45 2013 2014 2015 2014 2015 Source: FactSet
Cloud Competitors
Storing on “the Cloud” = Storing on the Internet
Average Customer Savings From Using Amazon Web Services: 64% Maybe it’s not a surprise that in April 2017, IBM reported its 20 th consecutive quarter of declining revenue! Source: https://aws.amazon.com/economics/
“Cloud” Computing Losers Winners Mainframe & “legacy” Telecom / Communications hardware companies Infrastructure “Licensed” software vs. Communications subscription based technologies Info tech consultants Storage & security “Cloud” focused software & services
How Airbnb Works: Visiting Go to airbnb.com to list your trip criteria. Pick from the hundreds of listing results. Welcome!
How Airbnb Works: Hosting Sign Up. Guests find your listing and book. Welcome guests and get paid!
Airbnb’s Competitors
Number of Locations in Kansas City 5 23 38 306 Sources: http://www.starwoodhotels.com/corporate/directory/hotels/all/list.html http://www3.hilton.com/en/destinations/index.html http://www.marriott.com/search/default.mi airbnb.com
What’s It Worth? $12.6 Billion $16.9 Billion $22.17 Billion $30 Billion Source: FactSet NY Times
What’s Airbnb’s Value Proposition? Better value “You’re not visiting; you’re living.”
Ritz Carlton Hotel Listing San Francisco, California 2 Queen Beds 400 sq. ft. $519 Per Night Source: http://www.ritzcarlton.com/en/hotels/california/san-francisco/rooms-suites/
Airbnb Listing San Francisco, California 2 Bedrooms, 3 Beds Laundry and parking included Approximately 1,000 sq. ft. $370 Per Night Source: airbnb.com
What Could Go Wrong?
Winners Losers Hotel Industry Hosts Travel Agencies Travelers Local Government
Winners Hosts Travelers
Industry Competitors
Value Proposition No Ads Convenience Price Original Content
Minutes of Commercial Time Per Hour Netflix Cable Television Ad-Free Time Ad-Free 0% Time 25% Ad Time Ads Ads Cable television averages 15 minutes of advertising per hour. Source: http://www.latimes.com/entertainment/envelope/cotown/
Convenience: Binge-Watching Watching multiple episodes in one sitting Netflix Users 30% Binge-Watchers Non-Binge-Watchers 70% Binge-watchers average 5 episodes per sitting Source: http://expandedramblings.com/index.php/netflix_statistics-facts/
Price Comparison Sling Cable YouTube Red Sling Orange: $20/month Average cable bill: $9.99/month Sling Blue: $25/month $75-$100/month Amazon Prime Hulu Limited Commercial: $7.99/month Amazon Prime: $99/year Commercial Free: $11.99/month Student Prime: $49/year Netflix Basic: $7.99/month Standard: $9.99/month Premium: $11.99/month Sources: money.cnn.com Hulu.com Netflix.com Youtube.com/ReD Sling.com Amazon.com/prime
Netflix Originals
HBO Originals
How Do They Make Money? Netflix Cable vs. Subscriptions Advertising
Cord-Cutting On The Rise TV Subscribers Non-TV Subscribers 97.6 97.6 97.5 97.4 97.2 96.9 96.5 96.2 25.5 26.8 24.1 22.8 21.5 20.9 20.4 20.1 2010 2011 2012 2013 2014 2015 2016 E2017 Source: http://www.businessinsider.com/decline-of-us-tv-subscribers-2015-4
Netflix Subscriber Growth U.S. Subscribers: Netflix 50 45 44.7 40 39.1 Subscribers 35 (millions) 33.4 30 25 27.1 20 2012 2013 2014 2015 Year Source: FactSet
Losers Winners Advertisers Consumers Cable Companies Broadband Internet Content Providers
Winners Consumers Broadband Internet
Industry Competitors Twitter LinkedIn Snapchat
Daily Users 1.09 Billion 68 Million 11 Million Starbucks McDonalds Facebook Sources: starbucks.com answers.com newsroom.fb.com
But Not Just Facebook… Instagram WhatsApp 300 Million 320 Million Daily Users Daily Users Oculus Rift The Leader in Virtual Reality Technology Source: http://expandedramblings.com
How Does Facebook Advertising Work? Personalized Facebook Internet Ads for Each Activity Searches User
Success Stories 75% incremental reach compared to TV 11 point increase in brand awareness 2.3x increase in volume of subscription conversion 25% decrease in cost per subscription 11.7% increase in brand awareness 54% of audience (35 million people) reached in 3 days 23.6 million people reached in 3 days 30% more views than the initial target Source: https://www.facebook.com/business/success/
Industry Players
Uber Statistics Over 8 million users 160,000 drivers 300 cities 1 million rides per day Source: expandedramblings.com
Cost: Uber Vs. Taxi A 5 mile, 10 minute trip: State Uber Taxi (+20% Tip) % Savings New York $17.75 $18.60 5% Dallas $10.30 $13.50 24% Detroit $12.30 $19.80 38% Seattle $11.70 $19.20 39% San Francisco $12.30 $20.70 41% Chicago $9.50 $16.80 43% Los Angeles $9.40 $19.62 52% *Data: Business Insider 2015 Uber Is Cheaper In Every City!
The Cycle of Disruption Lower Uber prices compared to Taxis Consumers More Uber use Uber drivers are instead of available Taxis Drivers switch from Taxi to Uber
Not Just A Car Service
What’s It Worth? Uber Hertz Enterprise Holdings $68 Billion $4.7 Billion $13.5 Billion Source: skift.com
What’s It Worth? Honda Ford $45 Billion $49 Billion Toyota Uber $165 Billion $68 Billion Source: Bloomberg
Winners Losers Taxi Companies Rental Car Companies Consumers Low-Skilled Workers Local Transit Local Government
Winners Consumers Low-Skilled Workers
Tesla’s Products Electric Cars Model 3 Model X Model S Batteries
Who’s Buying Teslas? 84% Male 77% Income over $100,000 25% Owned a Toyota 11% Owned a Mercedes 10% Owned a BMW Majority male, younger and wealthier Source: http://www.latimes.com/business/autos/ http://www.cnbc.com/id/100970641
2015 U.S. Car Sales Plug-In Hybrid Total Vehicles Electric Electric Vehicles Vehicles 115,262 284,738 17.39 Million Source: http://www.csmonitor.com/Business/In-Gear/2016/0417/Global-electric-car-sales-on-the-rise http://gas2.org/2016/06/07/new-iea-report-says-1-26-million-electric-cars-sold-2015/ http://www.autoalliance.org/auto-marketplace/sales-data
China has already passed the U.S. in EVs Source: http://www.latimes.com/business/autos/ http://www.cnbc.com/id/100970641
Top 5 Electric Vehicles Sold In 2015 60,000 50,000 40,000 30,000 20,000 10,000 0 BMW i Series BYD Qin Mitsubishi Nissan Leaf Tesla Model S PHEV Outlander Source: http://inhabitat.com/tesla-model-s-was-the-best-selling-electric-car-in-the-world-last-year/ http://gas2.org/2016/02/13/bmw-i8-is-best-selling-hybrid-sports-car-in-the-world
Electric vehicle producton forecasts
EV battery cost forecasts
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