More About Clouds

Market Scorecard

Yesterday, US markets retreated from record highs with the exception of the tech-heavy Nasdaq. Trading volumes were light as market participants enjoy their summer holidays. A special mention to Amazon (NASDAQ:AMZN) as it rallied 4.7% to a new record high. More on this from Paul below.

In company news, the new Mercedes-Benz electric EQS has been ranked the "best EV in the world". This car was launched in April and will ship to European customers in August.

At the end of the day the JSE All-share closed down 0.48%, the S&P 500 closed down 0.20%, and the Nasdaq closed up 0.17%.


One Thing, From Paul

The Amazon share price shot up by nearly 5% last night in New York. That's a big move for a company with such an enormous market capitalisation.

Was the move because Andy Jassy took over as CEO? Probably not. The reason appeared to be that the US Defense Department cancelled its $10 billion JEDI cloud-computing project, pulling the Trump-era award to Microsoft (NASDAQ:MSFT) and announcing a new multi-vendor contract expected to include Amazon. This is part of a broader digital modernisation of the Pentagon, aimed at making it more technologically agile.

The contract was awarded in late 2019 and has been on hold since Amazon filed a lawsuit challenging the award to Microsoft. At the time, President Trump publicly derided Jeff Bezos and directed the Pentagon to "screw Amazon". Trump, what a genius.

The new contract will probably be shared between the two giants. Microsoft shares held steady.


Byron's Beats

We often talk about how massive companies compete against each other. But leading tech giants also do a lot business together. Did you know that Apple (NASDAQ:AAPL) is Google Cloud's biggest client? When you pay Apple a monthly iCloud fee for your data storage, you are actually using Google.

Apple pays Google $300 million a year for the 8 exabytes of storage their users require. 1 Exabyte is 1.073 billion gigabytes. This number will increase by 50% in 2021 compared to 2020. As Apple users take more videos, download more music and save Netflix (NASDAQ:NFLX) shows to their devices, the demand will only grow. Very interesting.

Google Cloud has the potential to be a huge profit driver for the whole Google group (also known as Alphabet (NASDAQ:GOOGL)). It's under the radar because they are still far behind Amazon Web Services and Microsoft's Azure, but they will catch up quickly with a-list clients like Apple, Spotify, and ByteDance.


Michael's Musings

Last year I wrote about a massive wealth transfer from rich venture capital companies to consumers. This happens because of consumer-facing start-ups making massive losses, which are funded by early investors. Uber and Airbnb (NASDAQ:ABNB) are two good examples.

Many of these new tech companies have marketplace business models, bringing suppliers and consumers together. To be successful, they need to scale up. It's a bit of a chicken and egg problem because consumers won't join an app unless there is already a large selection and suppliers won't participate unless there is an established customer base.

To solve the problem, these companies lure consumers with massive loss-inducing discounts. Consumers pile in and suppliers jump on board. A good plan, but not sustainable. Now Covid has sped up the shift back to a more traditional approach. Goodbye, super cheap Uber rides.


Bright's Banter

Dating app giant Bumble announced a partnership with Pasquale Jones of Delicious Hospitality Group to launch a cafe and wine bar in New York city. Bumble Brew, as it's called, will be a space for "the community to gather, for genuine connections to be built, and for guests to interact".

My colleague Paul said this is like Uber mimicking Putco, and transporting people in big vehicles at set times on predetermined routes. Bumble is an online dating app that wants to get into coffee? You might as well ditch the app and meet people the old-fashioned way? Bingo, sign me up!.

The idea to open a permanent location was inspired by the major success of the Bumble Hive pop-ups. This is what Julia Smith, head of brand partnership at Bumble had to say: "At Bumble, we're fuelled by bringing people together to build genuine connections - both on and off the app. We hope that people can gather at Bumble Brew and connect over an espresso or delicious meal, whether it's with friends, a potential partner, or a new business connection."

Prof. Scott Galloway always emphasised that internet businesses would see more value unlock if they had a bricks-and-mortar presence too. Amazon Fresh and Google stores are based on the same idea. Bumble is taking this playbook to the next level, and I love to see it!


Signing Off

Asian markets continued to fall this morning on concerns about Covid-19 variants and China's bullying of their tech sector. Somehow the Shanghai bourse is the only one in the green. The Rand slipped to around R14.34 to the Dollar.

Today the US Fed will release minutes from last month's rate-setting meeting. Locally, the Zuma arrest shambles continues. Ignore that and get to work.

Original Post