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June 17, 2020
Good morning! This Wednesday, Salesforce invested in a sales engagement startup, Apple's commissions are still contentious, and people are trying to game the TikTok algorithm. Want Index in your inbox each morning? Subscribe here.
- AT&T has started to lay off "thousands" of employees.
As of 5:35 a.m. PDT: Nasdaq Futures: 0.43% | Euro 600: 1.06% | Nikkei: -0.56% | Hang Seng: 0.56%
- Amazon said it would use computer vision to enforce social distancing.
- ByteDance reportedly brought in $5.64 billion in revenue last quarter, up more than 130% year-on-year.
- India's investment body said Samsung should get government incentives for a new display plant in the country.
- A Chinese political advisory group proposed an East Asian cryptocurrency, which would include China, Japan, South Korea, and Hong Kong's currencies.
- Boston Dynamics' Spot robot is now available for sale. It costs $74,500.
- From Protocol: Bose shut down its AR initiative, saying the technology "couldn't be commercialized."
- Oracle revenue was down 6% year-on-year, missing expectations. Its shares dropped after-hours.
- San Francisco's district attorney sued DoorDash, accusing it of misclassifying drivers as independent contractors.
- Facebook will let U.S. users turn off political ads.
- Huawei has reportedly delayed production of its new Mate phone due to U.S. supply restrictions.
- BYD raised $113 million for its semiconductor unit. Xiaomi and SMIC participated in the deal.
- Blued, a Chinese gay dating app, filed for a $50 million U.S. IPO.
- SoftBank is reportedly planning to sell up to $20 billion worth of T-Mobile shares next week.
- Square Peg Capital says it's now Australia's biggest venture firm, with more than $690 million under management after a new fundraise.
A 'fundamental shift' in selling
The funding rounds just don't stop coming: Today, sales engagement platform Outreach announced a round that values the company at $1.33 billion. The round, led by Sands Capital, was just $50 million — but with "strong participation" from Salesforce Ventures, it sends a big signal to the market.
- Outreach is designed to help sales reps act on their data, CEO Manny Medina told me yesterday. Its dashboard gives reps an ordered list of what they should be doing to engage their clients, automating some of the more repetitive tasks.
- Salesforce has a competing product, Medina said, but it's not its primary focus. "They thought sales engagement was going to be a component of normal Sales Cloud," he said, whereas Outreach thinks it's a separate category altogether.
- "This investment shows they have changed their minds," Medina said.
Salesforce Ventures took a "good chunk" of the round, but it's still "peanuts for them," he said. The play, he thinks, is for them to "stay abreast of the category while they try to decide what to do about it ... It gives them optionality, if you will."
- But it "doesn't protect us from them competing against us," Medina said. He thinks Outreach can stay ahead, though, saying "I still fundamentally believe that there is inertia to innovate for the large companies."
Medina said the company decided to raise after the pandemic hit, "just to make sure that we're on the safe side of this, and to signal to the market that there is a strength in sales engagement — that COVID is not going to slow us down."
- COVID has actually spurred growth among large clients, Medina said. "We tend to be a better fit for inside sellers," he said, referring to sales reps who work from an office rather than constantly hitting the road. Right now, that means just about everyone is a potential Outreach client.
- "I think that this is a fundamental shift to a new normal," he explained, saying that he doesn't think face-to-face selling will come back in the same way. "The amount of production that you're seeing per customer-facing rep has gone up quite a bit during this time. I think it's going to be really hard for people to go back in the other direction."
- "We can't come in the room wearing a hoodie, not using our words properly, not sitting up, not looking you in the eye. We're not going to be taken seriously." — Pilotly's James Norman is one of many Black entrepreneurs who says VCs treat Black people differently.
- "Hong Kong is ultimately a very small place. You could feasibly send internet companies cease and desist letters, and ask them to block certain websites." — Author James Griffiths thinks the Great Firewall could easily come to Hong Kong.
- "As fears for the second wave of coronavirus grow, people are taking a second look at [stay-at-home] stocks." — Asunaro Investment's Katsuyuki Fujii thinks Nintendo's stock is soaring on pandemic fears.
- "We felt really confident about moving to Belgrade because of the solid tech talent in the country and the region." — Nordeus's Branko Milutinovic thinks Serbia is a great place to run a tech company.
Everyone's Talking About
Apple vs. devs
Tech Twitter was talking about one thing yesterday: Apple's big fight with the new Hey app. Protocol's David Pierce has the rundown — in short, Apple has threatened to remove the app from the App Store unless it enables in-app payments for its subscription, something Hey refuses to do.
- The core dispute here is as old as the App Store itself: Apple thinks it deserves a 30% commission for having built a giant platform, and some devs think they shouldn't have to pay that commission. Because the policy is so well-known, some have accused Hey of just using it to generate publicity.
- But that misses the point: Something has shifted. Apple has previously allowed some subscription apps to exist without using Apple's In-App Purchases, as long as they don't let you pay in the app (apps which let you sign up and pay in your browser, for instance, and then let you log in to the app).
- Now, though, it seems Apple requires consumer-facing SaaS apps to include In-App Purchases no matter what, forcing them to give Apple a commission. Popular email app Superhuman says it had "no choice" but to add an In-App Purchase, while analyst Ben Thompson says he's heard from "10s of developers" that Apple has changed its stance in recent months.
There's a lot at stake here. Earlier this week, an Apple-funded study said the App Store facilitated $519 billion in commerce last year, with $61 billion of that coming from digital goods and services. If Apple's taking a 30% cut on that, that's as much as $20 billion a year in revenue — a significant chunk of the company's total annual revenue of $260 billion.
- App Store revenue falls under Apple's big "services" push, which brought in $46 billion last year. With iPhone sales plateauing, the company has been increasingly reliant on services as a way to pursue growth, with services revenue now a big driver of its stock price.
- And with the EU announcing an antitrust investigation into Apple's App Store rules yesterday, that revenue is now under threat.
Apple's strategy here is ... interesting. The company has doubled down on taking commissions just as it's come under increased scrutiny — which also happens to be a week before WWDC, its big "we love developers!" event. It all sends a strong signal that the company is planning on fighting — and winning — and isn't worried about how it looks to outside observers.
- For what it's worth, investors don't seem worried: Apple's stock was up almost 1% ahead of markets opening this morning, giving the company a valuation of more than $1.5 trillion.
Can Xi boost your views?
Algorithms sure are mysterious — as are Chinese companies. No wonder then that TikTok users are trying to game its algorithm by saying nice things about China and its president. Some anecdotal evidence says that might actually work — though ByteDance denies it, of course.
Thoughts/feedback/tips? Email me — firstname.lastname@example.org — or email@example.com. And subscribe to get Index in your inbox each morning. Thanks for reading, see you tomorrow.