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The delivery dream is dying

The delivery dream is dying

Good morning! This Tuesday, it's still not clear that the delivery business can ever be a good one, the tech industry seems to be turning on crypto, a homework lamp is coming to an office near you, and the latest in the WhatsApp privacy craziness.

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The Big Story

No such thing as free shipping

"Anything you want, delivered anywhere in no time flat" has been a core promise of the tech industry over the last decade. (The last couple of decades, really, but let's not bring Kozmo and Webvan into this.) Uber and Lyft move people; DoorDash and Grubhub move food; Amazon moves toilet paper and iPhone cases. All for rock-bottom prices, at blistering speeds.

It's a customer's dream, but the question was always the same: Can it sustain itself once investors stop subsidizing the system? The answer increasingly seems to be no, and the latest favorite solution seems to be to charge customers more.

  • Uber and Lyft prices are surging all over. Both companies are having trouble finding drivers, so they've spent $350 million combined on incentives … and passed on the cost to riders. One study found that the cost of a ride was up 40% over last year. The shocked "It cost HOW MUCH?" tweets are everywhere.
  • Prime Shipping is under antitrust scrutiny. The most recent case against Amazon hinges in part on the fact that Amazon subsidizes two-day shipping through something like an internet-wide price-fixing scheme. "Amazon forces brands/sellers to bake the cost of Prime into their consumer price," Matt Stoller wrote over the weekend in a widely-shared newsletter, "so it appears like Amazon offers free shipping when in reality the cost is incorporated into the consumer price."

It's no accident that this is happening now. Delivery was a key part of many people's lives over the last year, and companies like Instacart saw valuations spike in the process. The growth doesn't seem to be slowing: DoorDash's non-restaurant orders jumped 40% in the first three months of this year, The Wall Street Journal reported, and Uber's went up 70%. The product-market fit is real. Now they're having to figure out how to turn mainstream appeal into a sustainable business.

One solution companies like? Convenience-store stuff. DoorDash, Uber and others are all flocking to "next-hour commerce," delivering things like booze and pet food. "Amazon powers next-day delivery," Uber's Raj Beri told the WSJ. "We're going to power next-hour commerce."

  • The margins for stuff-delivery can be higher, and the stakes are much lower. People are less mad when the dog food takes a few extra minutes than when the pizza does.
  • But combining groceries with people and takeout rides requires a truly incredible logistics operation, sending drivers and shoppers to exactly the right places in the right order to get everything delivered just so. (Delivery logistics is becoming its own super-hot industry, by the way.)
  • Ultimately, the only way it works is at massive scale. (Actually, even then it might not work.) And as every delivery company tries to vertically integrate, and more companies go the Domino's way and build their own curbside pickup and delivery systems, the One Delivery App To Rule Them All idea seems to be getting further away.

It was always going to be difficult for all three sides of this market — the customers, the drivers/shoppers and the platforms themselves — to get what they want. The platforms continue to push their workers (Instacart just launched a 30-minute delivery option, for instance), continue to say that robot deliveries will eventually solve everything and continue to burn money trying to find that elusive sliver of profit.

In the meantime, they're coming around to the idea that customers are going to have to pay more for fast delivery going forward. And there's bound to be a limit to how much people will pay for toothpaste, no matter how convenient the shopping system is. Right?

— David Pierce (email | twitter)


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People Are Talking

Bitcoin's huge price swings are threatening its legitimacy — and convincing Congress it needs to be reined in, Sen. Elizabeth Warren said:

  • "Our country needs to take a deeper dive on how to deal with cryptocurrency before any regulations are put in. The wild swings of crypto prices sound an alarm that every regulator hears."

And developer Maciej Ceglowski said it's time to wake up about crypto in general:

  • "I think it's time for us in the tech world to speak out and make it clear the emperor has no clothes here. Cryptocurrency is sustained by a mix of money laundering, vaporware, fraud, ransomware, gambling, and delusion. It has no social benefit except helping end first dates fast."

Andreas Schwab is one of the EU's most powerful tech-focused lawmakers, and he said he's focused on Google, Apple, Amazon, Facebook and Microsoft above all else:

  • "Let's focus first on the biggest problems, on the biggest bottlenecks. Let's go down the line — one, two, three, four, five — and maybe six with Alibaba. But let's not start with number 7 to include a European gatekeeper just to please Biden."

The rest of the world needs to take on China together, former Australian prime minister Kevin Rudd said:

  • "If you are going to have a disagreement with Beijing, as many governments around the world are now doing, it's far better to arrive at that position conjointly with other countries rather than unilaterally, because it makes it easier for China to exert bilateral leverage against you."

Coming this week

Facebook's F8 Refresh developer conference is tomorrow. It's all virtual.

Bitcoin 2021, a big crypto conference, starts on Friday in Miami. It is ... not all virtual, and $20,000 Whale Tickets are still available! Or join the auction for the Ultimate Whale Pass Experience, which include three bottles of 1996 Dom Pérignon, among other things.

On the earnings calendar this week: Asana, Salesforce, Zoom and MongoDB.

In Other News

  • On Protocol: JEDI is back. Microsoft and the DoD said they're still working on finalizing the $10 billion cloud contract, even as Amazon continues to fight it.
  • The hot new thing in the Hamptons this summer: a … cell phone booster. A huge influx of tourists has brought networks crashing down, The New York Times reported, and providers are scrambling to catch up.
  • Sprinklr filed its S-1, with plans to go public under the symbol CXM.
  • WhatsApp backtracked on its new privacy policy rollout, saying it will no longer limit functionality for users that don't opt in to the updated terms. It said "recent discussions with various authorities and privacy experts" were responsible for the change.
  • Venmo is letting users make their friends list private. And to think, all it took was a bunch of information leaking about President Biden after Venmo, for years, made everything public by default.
  • Here's a name you should know: Bob Lord. He's a big part of the reason the DNC didn't get hacked in the 2020 election, The New York Times reported, and there's a lot to learn from how he did it.
  • Sonos is betting big on Malaysia. In part to get around tariffs, the company is attempting to build all its U.S.-bound products in the country, though the plan has been slowed by chip shortages.
  • Today in weird politics:Thanks to an old Texas law, Teslas made in the state will have to be shipped out of the state before they can be sold to Texas residents (and then shipped back). Elon Musk said, "Tesla sure would appreciate changing the law."
  • On Protocol: The Chinese government continues to crack down on crypto mining, publishing an article on Friday arguing that the process uses too much energy.
  • Hate the new iMac? Blame Jony Ive. Ive doesn't work at Apple anymore, but Wired reported that he was part of the design process before leaving in 2019.

One More Thing

The all-seeing lamp

ByteDance has a new hit on its hands: the "Smart homework lamp," a $120 gizmo that can help kids with their math, and has two built-in cameras so parents can keep an eye on their kids while they study. (An upgraded version even sends alerts when the kids start slouching.) You'd be hard-pressed to find a better example of the trade-offs between convenience and surveillance, productivity and privacy. They're already a huge hit in China, The Wall Street Journal reported, and I can only imagine they're coming to a school/library/living room/cubicle near you.


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