Warning Signs for Tech, the Problem with Influencer Marketing, a New Business Model for Hotels

Get the Oxford Morning Report every day. Click here for a free subscription.

Good Monday Morning,

DAYLIGHT  

The tech sector is flashing a warning sign, and it’s called the “chip dip”: “China, smartphones, Bitcoin and cloud computing have been among the major drivers of the long tech boom, which in turn has powered the global economy for the last decade. The ingredient common to all of these sectors is computer chips, which form the brains of devices and whose ubiquity means they provide early signals about changes in supply and demand.

“Warnings about a sales slowdown this year have come in recent weeks from big chip suppliers that also include Taiwan Semiconductor Manufacturing Company, Micron Technology and Western Digital. It’s an abrupt reversal, coming on the heels of stellar results in 2018 for the business that gave Silicon Valley its name.”

Venture capitalists are telling startups to hoard cash because fundraising is getting more difficult: “Ten years ago, Silicon Valley venture firm Sequoia sparked concerns about a tech bubble with a presentation to its entrepreneurs declaring ‘RIP good times.’ Sequoia’s presentation, which was sent out to portfolio companies at the height of the financial crisis in late-2008, warned that any startup without a year’s worth of cash in the bank could find itself in trouble as the economy slowed.”

Confidence is falling at smaller companies:An Alabama welding supply company is delaying purchases of new gas cylinders. A men’s clothing store in Louisiana has trimmed fall orders for suits and high-end sportswear. An information technology consulting firm in California is holding back on planned hiring…

“Economic confidence among small firms, which edged downward for much of 2018, in January reached its lowest level since President Trump’s election, according to a monthly survey of 765 small firms for The Wall Street Journal by Vistage Worldwide Inc. (Vistage polls firms with between $1 million and $20 million of revenue.) Just 14 percent of firms expect the economy to improve this year, while 36 percent expect it to get worse.”

MARKETING

Not only was this year’s Skittles Super Bowl commercial not shown during the Super Bowl, it wasn’t even televised. In fact, it’s not even an ad: “It’s a live musical skewering its own industry. But it’s very much in keeping with recent shifts in the marketing world. Running an ad during the Super Bowl used to be the pinnacle of American marketing prestige, but in an age when Super Bowl viewership is slipping and even avid watchers are splitting their attention between the game and the conversation about the game on social media, appealing to the internet has become more important than crafting a sizzling 30-second TV spot.”

The theory behind “influencer marketing” is that people are more likely to believe a sales pitch from someone they know than one from a celebrity. But on Instagram, which is trying to become “the world’s largest personalized mall,” it’s not always obvious what’s genuine and what’s a pitch: “So murky is the morass of who’s hyping something because they genuinely like it and who’s doing it to get paid that, in 2017, the Instagram account SwearBy was launched to help ‘smart women find real and #notsponsored recommendations for the best products around.’

“I first found out about SwearBy when a beauty editor I follow announced that she had 10 boxes of hydrating face masks, lip balms and face cleansers from a luxury skin care brand to give away. Would-be winners had to follow SwearBy, follow her, like her post and post a comment naming a product they swear by. The post may not have been sponsored (although I wondered who paid for the 10 boxes) but it was an advertisement for many things: SwearBy, the luxury skin care brand, and the editor whose opinion carried so much weight that she was given 10 boxes of stuff to give out.”

PRICING

Challenged by the home-sharing economy—Airbnb reported more than $1 billion in revenue in the third quarter of 2018—hotels are toying with new business models: “New hotel brands are routinely asking a series of ‘what if’ questions: ‘What if customers could check in anytime they like? What if the room was customized to the needs of the guest? What if the room could be rented in parts or in combination with others? What if the guest determined the value of the room?’”

For example: “The new SCP Hotels stands for ‘soul, community, planet,’ with the aim to operate sustainably and nurture connections between guests. Its first location, which opened in June in Colorado Springs, Colo., introduced a key component of its intended transparency with what it calls ‘fair trade pricing.’ It allows guests to name their rate when checking out, meaning they can lower the suggested price if they feel the value doesn’t align…A renovation of a derelict Knight’s Inn, SCP suggests rates from about $100 to $200, depending on the season. The name-your-rate strategy aims to entice travelers to take a chance on a new brand.”

HUMAN RESOURCES

Last week, the National Labor Relations Board issued a business-friendly rulingare you listening Uber and Lyft?about employees and contractors: “The SuperShuttle holding signals that the Board will not follow the lead of an increasing number of states that seek to expand employment protections to workers in the ‘gig’ and ‘share’ economies. This reflects a significant reversal of course by an agency that, in 2016, issued complaints against Velox, Inc. and Postmates, Inc. on behalf of drivers it contended were statutory employees protected by the NLRA…

“It’s hard not to think of the two ride-share giants while reading the reasoning behind the Board’s determination that SuperShuttle’s drivers are independent contractors because they work ‘as much as they choose, when they choose’ in spite of their reliance on SuperShuttle’s electronic dispatch system.”

More companies are choosing to cover IVF treatments for their employees: “The slow but rising trend can be credited to a combination of fading taboos around difficulty conceiving; a competitive job market with employers eager to adopt recruiting and retention tools; and the reframing of infertility as an issue less about ambitious women who have waited too long than one of corporate diversity and inclusion. The rising power in the workplace of women in their 30s, many of whom take responsibility for building a family, cannot be discounted.”

DIGITAL MEDIA

The recent layoffs have a lot of people asking, What went wrong at BuzzFeed? Maybe branded cookware and a toy store weren’t part of the media company’s core competency? “Wasn’t this the company that was supposed to have it all figured out? Didn’t its team of wizards, led by the M.I.T.-trained chief executive, Jonah Peretti, know tricks of the digital trade that lay beyond the imagination of fusty old print publishers? …

“Mr. Peretti seemed to be on the right track with his reliance on sponsored posts to generate revenue before his reluctant pivot to banner ads last year. That money encouraged him to stick to his idea of creating free content that readers can’t resist sharing on social media. Hedging his bets, he varied BuzzFeed’s money stream by selling branded cookware in association with Wal-Mart and opening a toy store in Manhattan.

“The company’s revenue grew more than 15 percent in 2018 — not quite enough to stave off Mr. Peretti’s decision to cut about 220 of BuzzFeed’s roughly 1,500 employees. As he put it in a recent staff memo, ‘Unfortunately, revenue growth by itself isn’t enough to be successful in the long run.’”

If you were forwarded this newsletter, click here for a free subscription.

SOCIAL MEDIA

Facebook pushes ads to 2.32 billion people as registered users on the social network. But how many of those people are real? “Facebook had previously reported that about 3 percent to 4 percent of its active users were fake. According to the new figures, the accounts taken down each quarter were equivalent to 25 percent to 35 percent of its active users (though those accounts were not counted in Facebook’s active-user tallies because they had been removed).”

MANUFACTURING

First Foxconn said it was making for blue collar jobs, then it went back on its promise. But after a personal conversation with President Trump, the electronics company says it will stay the course and continue building the factory: “The surprise announcement followed heavy backlash in Wisconsin, which agreed to pay the prominent electronics maker and supplier to Apple at least $3 billion in state tax incentives in exchange for up to 13,000 blue-collar jobs and a $10-billion display-making plant in the state’s southeastern corner.”

VENTURE CAPITAL

Marie Kondo’s Netflix show “Tidying Up” has launched a decluttering trend, and startups are looking to capitalize. The storage on-demand service startup, Clutter, is raising up to $250 million. “For it and a number of its competitors, the target users are consumers based in urban areas who live in smaller spaces with less storage options; have the disposable income not only to buy stuff but to pay to keep it somewhere else; and likely already use of other app-based on-demand services for food, transport, work-space and so on, making them familiar and ready to work with startups offering the same services to manage their material possessions.” But its barriers to continued success are incumbent brands of U-Haul and Public Storage making the market a little crowded.

BRANDING

What were your favorite Super Bowl ads? Not the funniest, but which one did you find the most compelling and why? Or tell us why they all stunk and why Super Bowl commercials are a thing of the past. Your commentary could be featured in tomorrow’s Morning Report. Send to mattg@oxfordcenter.com.

SPOTLIGHT

Oxford Commerce Dinner

Tuesday, February 12, 2019

Cooks & Soldiers Restaurant

691 14th St NW, Atlanta, GA 30318

Contact events@oxfordcenter.com for more info and to RSVP.

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

BECOME AN OXFORD MEMBER