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As the tariff news continues, looks as though Temu and Shein are not only indicating a price increase but also aggressively pulling back on advertising on Google and TikTok. Some reports have come out that Google Shopping is completely turned off by Temu. Reports of up to 10% of Facebook and Instagram ad revenue was from Temu.
Some of these charts are staggering:
Bloomberg’s feature piece this month is all about the changes underway at Google to stem the slow bleeding of query searches to ChatGPT. The focus of keeping the queries on Google as opposed to pushing to a website or advertiser.
I found this quote from creators and publishers to be the most interesting and comprehensive:
“Something they told us in that meeting was to never expect to go back to our old levels of traffic,” she says, “because search has changed.”
Here comes OpenAI/ChatGPT. The fight for defaults in both search and assistants is heating up.
We know that ChatGPT is the most sticky and now the offerings are being made available on iOS for the default search engine (currently Google). Although the default search engine change has been available for quite some time, the choices of Yahoo, Bing, DuckDuckGo and Ecosia aren’t the most compelling alternatives. This offering is also a bit more technical and likely won’t lead to widespread updates from users until the selection process is easier or Apple shifts away from Google. Unlikely until OpenAI can outspend Google to the tune of $20 billion plus for the default luxury.
Don’t think that OpenAI is stopping there. Android now provides the ability to change your default assistant from Google to ChatGPT as well.
Latest views Robinhood ($HOOD) stock are here but company provided a preview into how Q1 is shaping up.
“Gold Subscribers have reached 3.1 million, up over 400 thousand this year and representing 12% adoption relative to our Funded Customer base
Net Deposits in Q1 have already surpassed $10 billion, marking our fifth straight quarter of over $10 billion in Net Deposits”
The 3.1 million subscribers is up from 2.6 million reported last quarter at 10.5%. As for net deposits, last Q1 net deposit totaled 11.2 billion. The CEO also mentioned the Robinhood credit card now numbers >100,000 cardholders but will be “getting to multiples this year.” Sounds a bit lite in deposits but the stickiness factor clearly is there and growing.
Replay is here.
Gap clearly hit all the high notes Wall Street needed to hear: Comp sales improvements, higher year over year earnings and minimal tariff impact.
“For the fourth quarter, Gap posted a profit of $206 million, or 54 cents a share, compared with $185 million, or 49 cents a share, for the same period a year earlier. Analysts had forecast per-share earnings of 36 cents.
Meanwhile, comparable sales rose 3% after Banana Republic returned to growth during the quarter. Overall, Gap, Banana Republic and Old Navy logged gains of 7%, 4% and 3% in comparable sales, respectively, offsetting a 2% decline from Athleta.
The company said its exposure to tariffs is “minimal.”
“We currently have less than 10% of our product coming from China and less than 1% from Canada and Mexico,” O’Connell said.”
However, we must keep in mind that sales are not growing. Yet.
“Quarterly revenue fell 3.5% to $4.15 billion, but came in ahead of Wall Street expectations for $4.07 billion, according to FactSet.
Looking ahead, Gap said it projects first-quarter sales to be flat to up slightly and full-year sales to rise between 1% and 2%. Analysts polled by FactSet had forecast first-quarter sales to grow around 1.5% and full-year sales to rise around 1.7%.”
Quite impressive. If continued comp sales increases happen, store closures are minimized and sales flip to positive, this is worth a bet despite being range bound for well over a year.
Disclosure: Long common stock, initial position started February 11 and accumulating.
Why the new position? Building a huge moat with a broad offering leveraging 1st party data with massive addressable market:
Market Leader - SimilarWeb plays in all the hottest sectors and arguably provides the most compelling aggregated datasets available. Within eCommerce, our firm uses both the Web and the Shopper suite to gauge where traffic comes from and the size of competitive brands. SimilarWeb collects data via extensions but also has strategic data sharing agreements with major players like Amazon.
2. Peak to Trough Drop - SimilarWeb announced weak guidance saying they are further investing into AI enabled offerings. The earnings also missed expectations which resulted in a 47% peak to trough drop in calendar year 2024. With the size of the addressable market and the compelling datasets SimilarWeb provides, I believe this drop has resulted in a compelling value.
3. Acquisition Target - With SimilarWeb’s market cap of ~$780mm on most recent trading, this could easily be a tuck-in acquisition for some of the larger players. SimilarWeb’s access to 1st party data is a clear differentiator for a major agency group or analytics firm.
Bottom line: Catching this falling knife is one worth taking a shot on. This could trade down into the $8’s but worthy of starting to accumulate at this point.
Disclosure: I have a personal position in Robinhood common stock.
Since I previously wrote about Robinhood in July 2024, the stock has seen a 126% increase. Despite the dramatic rise, I still find the company to have significant growth ahead. There were a few points I outlined in July that I thought were worth checking in on:
Assets Under Custody/Net Deposits - Assets saw an increase of 88% in the latest quarter versus last year. A significant portion of the increase was due to higher equity and crypto valuations BUT overall net deposits are up 42% on an annualized basis.
2. Gold Stickiness - In Q4 of 2023, the Gold subscription rate was 6.1%. In the latest quarter, Gold subscriptions as a percent of funded accounts was 10.5%. The platform continues to become a sticky one to leave as the retirement accounts grow.
3. Crypto Reliance - The one major callout of the quarter was the increased reliance on crypto to drive the revenues and EBITDA. In Q4 2023, crypto accounted for 21% of the overall revenues versus the latest quarter exploding to 53%.
Clearly the growth story remains intact. However, the stock truly remains a crypto proxy until we see total revenues via options, equity and other means significantly exceed that of crypto. Regardless, there is more left in this one and I continue to bullishly hold.
Zelle, the payments network run by banks-owned Early Warning Services, crossed $1 trillion in total volumes last year, which it said was the most ever for a peer-to-peer platform.
The firm said Wednesday that its user base jumped 12% to 151 million accounts in 2024, and that the total dollars sent on the platform jumped 27% from the year earlier.
Absolutely wild scale. Compare this to PayPal’s $400 billion in 2024.
A recent report from Authoritas points out how volatile a Google organic search ranking is vs AI Overview ranking is. The study show that over 70% of the AI rankings changed over 13 weeks which compares to organic Google search being 55%:
AI Overview ranking volatility score: 0.68 (8 weeks), 0.73 (13 weeks)
Google Search organic ranking volatility score: 0.49 (8 weeks), 0.55 (13 weeks)
Additionally, websites within the top 10 weren’t automatically given AI Overview privledges automatically:
60% of the time, pages ranking in the top 10 appear in AI Overviews.
40% of the time, AI Overviews rank a webpage that doesn’t appear in the top 10 of Google organic search.
Bottom line: SEO has two layers: Search and AI Overviews.
Amazon has been clearly pushing Buy With Prime. And they just clearly landed their largest fish…
With Buy with Prime, Prime members can shop directly from thousands of brands’ online stores using the shopping benefits they already know and love—including fast, free delivery, easy returns, and 24/7 shopper support.
How soon before every site has a Buy With Prime checkout button similar to Apple Pay? You will be surprised. The fulfillment network is just that compelling.
Here are some key trends we’ve been tracking over the past few weeks with accompanying charts below:
Temu & Shein Turbulence: Sales for Temu and Shein dropped between 16% and 41% over a five-day period starting February 5, following the removal of a duty exemption on their small parcel shipments by the U.S. government. While the ban was later reversed, the sheer volume of Section 321 shipments remains a major force in cross-border eCommerce.
Retail Sales Slowdown: January saw the steepest retail sales decline in two years, with a 0.9% dip (not adjusted for inflation). The likely culprit? Consumers maxing out credit cards in December after stronger-than-expected holiday spending. That said, auto sales, food & beverage/restaurants, and health & personal care stores were bright spots.
Walmart’s Momentum: Walmart continues to outperform and gaining share in higher-income households, with an 83% stock gain over the past year. Its success is largely driven by Walmart+, an expanding 3P marketplace, and an aggressive pricing strategy (-11% vs. competitors). The retailer has also perfected its Wall Street messaging, further solidifying its position.
“The three biggest retailers by revenue in the U.S.—Costco, Walmart, Amazon AMZN accounted for about 11% of total retail sales back in 2014, based on their reported figures measured against national retail sales data from the Commerce Department. Their share of the market has been growing since then. In their last three reported quarters, the behemoths selling everything from groceries to appliances made up about 17% of retail sales and roughly 57% of retail sales growth over that period.”
Grocery has been the hardest hit declining from 66% to 54% but add in the other major players in off-price such as TJ Maxx as specialty shrinks…it isn’t pretty. When noting likelihood of membership renewal, this trend is here to stay and arguably will further accelerate.
ChatGPT had the highest stickiness rating with greater than 70% keeping their paid subscription greater than 6 months. Claude and Gemini next closest and Perplexity was below 50%.
Menlo Ventures had a particularly interesting market share chart for 2023 vs 2024 for LLMs for enterprise showing OpenAI losing considerable share. Anthropic (Claude 3.5 Sonnet) gained considerable share along with Google.
On the consumer side, a16z reported the top 50 Gen AI web products by unique monthly visits. OpenAI’s ChatGPT remains at the top followed by Gemini. Google’s Pichai has stated an internal requirement for Google to ready the Gemini product for 500 million users in 2025.
The first mover and hype advantages don’t appear to be holding and Google clearly gaining traction in both the enterprise and consumer side of the business.
Total spending for the holiday period, from Nov. 1 through Dec. 24, rose 3.8 percent, according to data released on Thursday by Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment. That’s above Mastercard SpendingPulse’s estimate of 3.2 percent for this year and more than last year, when growth was 3.1 percent.
Online sales stood out, rising 6.7 percent compared with a gain of about 2.9 percent for in-store sales. The data is not adjusted for inflation.
Note the very key detail at the end. Data is not adjusted for inflation. Based on Mastercard data, spending for the holiday period was up marginally for second consecutive year. Let’s see how the numbers from Census, American Express (higher overall net worth customer) and others come in. I would guess that shopping for physical items was lite whilst travel, experiences and motor vehicles remained high. One bright spot is Department Stores have seen a bit of relief recently.
Apple is quietly building another stool with Apple Advertising. This is the latest quietly building multi billion dollar business. Remember when Apple Pay was just another small launch? It now has >92% sharew.ryanmcraver.com/blog/apple-pay-walmart-time-to-give-up.
Bloomberg posted a few noteworthy charts showcasing the catalyst that ChatGPT became 2 short years ago. Although AI was already in motion for many years, the race to spend clearly accelerated. Nvidia’s dominant rise with AMD growing and Intel continuing to lose share.
The could business across the three majors of Amazon AWS, Microsoft Intelligent Cloud and Google Cloud are well over $250 billion in annual revenues.
Consulting and professional services clearly has beneefited.
Data Center spend is projected to be above $350 billion in 2025.
And lastly, the server market growth.
The Children’s Place is now selling its apparel directly to users of the global on-demand fashion app Shein. The collaboration offers product assortments and limited-time promotions aimed at families with children.
Currently, The Children’s Place storefront is available to U.S. Shein customers and will soon be made available globally in a phased roll-out. The partnership is somewhat of a departure from normal business practices for Shein, which mostly offers Shein-branded, affordable apparel and accessories from a global network of vendors.
Children’s Place has always been an early adopter of marketplaces and was one of the first retailers to use Amazon Seller Central as a 3rd party seller. Excitement around Shein has been relatively tame but landing Children’s Place as a seller could be a major catalyst.
Back again for another quarter from the toll booth of eCommerce: Amazon. This quarter saw some tepid growth yet was incredibly profitable as online sales accelerated slightly from last quarter and AWS returned to nearly 20% quarterly growth year over year.
Total revenue growth of 11% growth in revenue which was slightly faster than Q2. While growth accelerated a bit in online store sales, advertising and revenue from 3rd party sellers slowed. Amazon Web Services remains the bread winner in terms of revenue growth and profitability.
2. Historically, Third-party Seller Services have accounted for 28-35% of the sales growth in prior quarters. This quarter slowed and only accounted for 22% of the sales growth. This is an indication of Amazon realizing marketplace fee increases to merchants selling on their site are nearly peaking. The focus by Amazon to earn more of the supply chain via their AWD program and lowering fees to compete against Temu and Shein is evidence of this belief.
3. Advertising continues to slow on the larger base. Whilst cost per click was considerably higher year over year, Amazon will keep focusing efforts to gain advertisers budget at the top of the funnel for awareness advertising. The major growth for bottom of funnel will continue to grow but at a much slower rate.
Bottom Line: Whilst there was some growth in online and brick and mortar for Amazon (Jassy statements from April), AWS has clearly returned as the focus area for growth. There is no slowing this beast with double digit growth held up by a robust ecosystem in AI and a dominant logistics infrastructure earning service fees from merchants, shippers and advertisers.
Other Points To Note:
Change in search is gradually, then suddenly. Perplexity is launching advertising, Reddit explodes, SearchGPT is publicly released and ChatGPT integration with Siri is here. What does all of this mean? Traditional search (mainly Google) is estimated to decline 25% by 2026 and 50% by 2028.
Brick and Mortar is back. General merch, clothing stores and even department stores are posting some of their best numbers in years.
Walmart is still the biggest Apple Pay holdout by a wide margin, and the company has shown no signs of changing its tune.
With Home Depot and Kroger on the bandwagon and Apple Pay now sitting with a 92% market share…I think Walmart might want to give up on forcing their digital wallet service.
