Episode 50: Microsoft Takes on Canva, July and Oroton's colab and is Flippa the World's Coolest Marketplace
The guys chat about Microsoft launching its Canva killer, Smiggle's customer service woes, the July and Oroton collaboration, and Flippa's superstar CEO discusses the business of selling businesses.
The Contrarians catchup
Episode 50! Adir: “I feel like I was using a lot of cricket analogies because we both played cricket, but when we started this podcast, I felt like I was coming in at number ten, and I did not think I was getting to 50. I was just going to try and see it out until the close of play. One run at a time, it’s the hardest way to get to 50”.
Besides French Fries, Adir thinks that “nothing that uses the word ‘French’ has been great”.
A heated debate formed over whether you should wash new clothes purchases before wearing them, which Adir connected to the ‘germ theory of disease’.
Adir predicts that by the end of this decade, policies for returns of apparel will be tied to tax rate hikes.
Smiggle's customer service niggles
Adam shares a frustrating customer service experience with Smiggle over a faulty lunchbox. Despite sending proof of the defect, Smiggle demanded the product be returned, costing more in postage than the product's value. This led to a discussion on the importance of valuing long-term customer relationships over short-term transactions.
Adir: “In life there are just two ways that you can interact with people. It doesn't matter if it's a business or a relationship or whatever it is. There's the relationship, like the long term relationship way, and the transactional way”.
Adir: “The thing about this is it's the classic mistake that they've made, which is they've treated you as a transaction. People always roll out this line, they say ‘you’ve got to be nice to your existing customers because it costs one trillionth to keep the customer’, or whatever the number is. That's not why you should be nice to your existing customers. You should be nice because the way you build a long-term competitive moat is by having people running around town saying ‘this is a great company’.”
July x Oroton
The conversation shifts to the struggles of Australian premium brands like Oroton (“Australia's oldest luxury fashion company founded in 1938”) and the competitive landscape of the luggage industry. Adir praises July for outcompeting established brands like Away in Australia. The discussion touches on the challenges and opportunities in the direct-to-consumer market and the importance of maintaining a premium brand position.
Adir: “This is a very complicated category. What effectively happened in this category is that a brand called Away took the US by storm and they tried to come to Australia. And July has a product that, I don't think it's going to be a massive revelation to say, looks quite similar. And July did a great job of running them out of town, and they went back to the US. In my view, Away stores in the US are no match for the July stores in Australia”.
Microsoft Takes on Canva
After dominating the non-professional design sector, decacorn Canva has just encountered its first big competitor, and it’s a doozy. The 100 pound gorilla of tech, Microsoft, last week announced that its AI powered design app is officially coming out of preview, and is now available to all users.
The product lets people generate images, designs and text prompt and create things like stickers, greeting cards, invitations, collages, and more. And it looks identical to Canva.
Adir: “What Microsoft understood a long time ago is that an integrated suite, where you can easily move between products, is worth more than being the best in any product.
“If you have an integrated suite, whether it's just price bundling or deeper integration. You don't have to be the best product in any one of the categories in order to win. And so if you fast forward to today, we call integrated bundling a platform. That's the word for it today. And there is no doubt that the most powerful strength to have in the consumer space today, the consumer internet is a platform that is the most powerful thing to have.”
Adam: “It's the biggest competitor in the world who we know will take market share. The question is how much. No ‘if’ but ‘how bad’.”
Flippa might be the World's Coolest Marketplace
Friend of The Contrarians, Blake Hutchison, CEO of Flippa (a private marketplace for buying and selling online businesses), joined the guys to discuss his journey.
Flippa has uniquely created a valuation methodology for YouTube channels, which has exploded in the six weeks since launching it - “The biggest one we've sold so far was a million bucks. It was a faceless YouTube channel that basically helped other people create YouTube channels.”
In 2020, Catapult (where Adir is Executive Chairman) used Flippa to acquire Science for Sport, a content platform that perfectly aligned with its addressable audience and was integrated into the business and managed by a superstar employee.
Blake: “Like any good marketplace, there’s two ways to think about it. Supply will either breed demand - great asset, buyers flooding saying ‘I really want that’. But better than that, if you've got all the demand, then the supplier needs to find the buyers, and they use Flippa to do that.”
Adir: “Have you ever had a valuer value, a business? I think there's no one that knows less about what a business is worth than a professional valuer.”
Blake: “We are better at valuing businesses that anyone in the world, because we've sold more of than anyone in the world. So we don't need professional valuers. What we need is more and more data.”
[There are too many interesting takeaways in this section of the podcast. Listen to catch them all!]
Five other stories worth following:
Netflix streamed past expectations after its global paid subscribers grew 16.5% to 278M in Q2. Its cheaper ad tier saw 34% subscriber growth, but it expected overall sign-ups to slow this quarter.
Google parent Alphabet is said to be in talks to buy cloud cybersecurity co Wiz for $23B in what would be its biggest acquisition ever. The move could boost Google’s cloud biz, which lags behind Amazon’s and Microsoft’s, and help it diversify (FYI: its Q1 cloud revenue was $9.6B, versus $62B from ads).
So far, humans and AI complete the average task better when they aren’t working together, per an MIT analysis of 74 experiments in which humans and AI perform tasks separately and collaboratively.
A 90-second trailer for “Grand Theft Auto VI,” due in 2025, has had over 200M views. For context, a popular trailer for Barbie, 2023’s biggest blockbuster, racked up 85M views. In 2023 alone, Americans spent $57B+ on video games, or $6.43 for every buck spent at the movie theatre.
$24B of funding went to AI startups in Q2, representing 30% of the $79B in total global startup funding, per Crunchbase. Of the quarter’s six billion-dollar funding rounds, five pertained to AI companies, including Elon Musk’s xAI, biotech company Xaira Therapeutics, and automated driving company Wayve. The sole non-AI company was Wiz, the cybersecurity company Google is looking to acquire for $23B.