Episode 83: The Business of Influencers, PE Pet Food Bonanza, Furniture Flying High, Biggest Losses Ever, YouTube Goes Cheap, Inflation Smashes Standard of Living and Should You Discount
The business of being a influencer, private equity's pet food profits, furniture business make a comeback, which companies lost the most money, YouTube's new pricing tier, and Adam's fashionable week.
The Contrarians catchup
Adir dialled in from London for the 6am Melbourne recording, stating that if the guys were to record at 6am in his own timezone, the podcast would be called ‘The Contrarian’.
Adam was really impressed with Melbourne Fashion Festival, with Luxury Escapes hosting a who’s who of celebrities and influential figures (and models) in its VIP marquee.
Adam thinks succeeding as an influencer is one of the hardest jobs; Adir thinks they’re perpetuating low-quality content because of the addictive nature of the algorithms.
Adam also attended the ‘Power Retail All Star Bash’ awards in Melbourne, where Luxury Escapes took home two awards: ‘Top Email Marketing’ and ‘Top Travel Retailer’. Adir said “I would’ve voted for you for email, certainly on quantity”.
Sofa, so good for furniture stores
Quadrant Private Equity has hired Macquarie Capital to oversee the sale of its retailer, Amart Furniture, as the firm looks to capitalise on increased consumer spending and a housing super cycle.
Amart has been around for over 50 years and has 68 stores across Australia. It’s known for its affordable furniture such as sofas, dining room sets, bedroom and outdoor furniture. Founder John van Lieshout sold Amart to Ironbridge Capital for around $500M in 2005, Quadrant joined as a co-owner and later took full ownership.
Adir: “It feels like the beginning of this year has started with some consumer recovery. And I think that bodes well for 2025 with the caveat that Trump is totally unpredictable. But I think in Australia, generally speaking, the worst of the consumer's experience might be behind us.”
Adam: “Maybe this is the start of a somewhat democratisation of wealth towards a smaller grade. The rich aren't going to get poorer, but maybe we'll see the poor get a little bit less poor.”
How to lose $6B
Adam: “How do you feel about failure?”
Adir: “I try to avoid it where possible.”
Amaranth Advisors was a US hedge fund founded by Nicholas Maounis, once with $9.2B in assets under management before collapsing in September 2006, after losing in excess of $6B on natural gas futures. The collapse is one of the biggest hedge fund collapses in history. Maounis is back with a new hedge fund, Verition, and a fresh $12B.
Adir: “How many people would be in the group that could say, ‘I've lost $6 billion’? There'd be maybe 100 people globally in that group. Lesson number one is if some return feels like it's too good to be true, do not go near it.”
Now watching: YouTube Premium Lite
YouTube announced a new lower-priced tier called Premium Lite, which is set to launch in the US, Australia, Germany, and Thailand soon. Premium Lite will give access to YouTube’s library of podcasts as well as most videos ad-free. This expansion comes as YouTube Music and Premium reaches over 125M subscribers globally.
Adir: “What a perfect product for me to downgrade to and for YouTube to lose revenue on".”
Adam: “I think we might differ on our spend thriftiness on this, but I think where it's good is someone like me who wouldn't pay 17 bucks, would pay seven.”
Adir: “All right. So they get $7 on you and they lose 10 on me. I mean, you don't have to be a genius to work out that’s not the greatest equation.”
[Insert a masterclass debate on Google’s “original” business and the evolution of performance marketing.]
Listener question
Do you find discounts or running really cool competitions better for attracting customers? Or do everyday low prices work better for loyalty?
Adir: “Price discounting is this crazy dichotomy. It's excellent for driving short-term sales. And it is the singular negative correlate according to the empirical research into brand equity. That means when you offer price discounts and drive sales in the short-term, you negatively affect your brand in the long-term.”
Adam: “Daphne mentioned competitions - I hate them. I don't understand why anyone does them. By a competition, what I mean is you buy this and you can win that. My thinking is I'd rather give the best possible price all the time and give great value all the time rather than a 1% chance of winning.”
Adir: “If you say to somebody, you can put a coupon code in here, then they know that there's a coupon code out there somewhere and they're going to go searching for it. And the longer they search, the less likely it is that they're going to convert.”
Adam: “Something else that I really hate, which is sort of tangentially connected to this question, is Black Friday. I hate Black Friday. We never do Black Friday. It's a collective circle jerk of stupid marketers who've elevated Black Friday to this ridiculous position of necessity for some.”
Five other stories worth following:
Apple is holding off on AI updates designed to help Siri understand “personal context” and take action within apps. This delay will also reportedly affect Apple’s rumoured smart home hub.
Adidas finally offloaded the last of its Yeezy merchandise in Q4, generating $705M profit in 2024, after severing ties with the rapper in 2022. The shoemaker also announced it will eliminate 500 “obsolete” roles from its Germany HQ to streamline operations.
Walgreens Boots Alliance is going private in a $10B deal with private equity firm Sycamore Partners. Walgreens saw a ~50% drop in its share price over the last year and its market value, once peaking at $100B, dropped below $8B last year.
Canada’s Liberal Party elected Mark Carney, a former central banker for the country, to succeed outgoing Prime Minister Justin Trudeau. With a trade war brewing, it’s perhaps not surprising that a finance guy won - since President Trump announced tariffs on Canada, the Liberal party has experienced a resurgence.
The Athena lunar lander, Intuitive Machines’ second moon lander, is dead. The lander tipped over just one day after arriving on the moon’s south pole, and cannot recharge its batteries due to extreme cold temperatures and the direction of the sun on its solar panels.