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The Unbundling of Microsoft
Plus, virtual economies, TikTok's boom, and the retail reckoning
This is a newsletter about how tech is changing how we live and work
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The Unbundling of Microsoft
There are 1.2 billion users of Microsoft Office products around the world—products such as Microsoft Word, Microsoft Excel, and Microsoft PowerPoint. Thirty years ago, Microsoft reinvented work productivity tools with its Office suite; in the decades since, the company has ridden this dominance to become the most valuable company in the world, today valued at $1.4 trillion.
But new upstarts are encroaching on Microsoft’s turf. Startups are creating products that are simply better than Microsoft’s. These products are driving the unbundling of Microsoft Office and launching a new generation of workplace tools.
Airtable is more powerful and more versatile than Excel. Notion is orders of magnitude better than Word. Figma is a better creation tool than PowerPoint, Superhuman offers a better email experience than Outlook, and Slack created a category while Teams plays catch-up.
(A side note: I spoke with friends at Notion and Airtable who weren’t thrilled with these comparisons. These new tools are much more than simply a replacement for a Microsoft product; in many ways, each alone is disrupting the entire Microsoft Office suite. But in pursuit of a clean graphic, here we are 🙂 )
There are five key characteristics of next-generation work tools:
Low code / no code: Tools like Airtable, Retool, and Glide are making it possible to build web apps and automate workflows without writing a single line of code.
Cloud collaboration: The cloud is enabling real-time collaboration. No more sending documents back and forth over email and no more version control issues. With tools like Figma, Notion, or Pitch, entire teams can create together simultaneously.
Design-first: These tools aren’t only useful—they’re beautiful. Work tools are a new art form. Last week, announcing Figma’s Series D, a16z partner Peter Levine said, “We’re moving from what I would call the decade of code to the decade of design. Products are going to be design-led, as opposed to code-led.”
API integration: New work tools work seamlessly with one another through simple API integrations—there’s no need to toggle between a million apps.
Go-to-market motion: Previously, work tools were sold top-down; a sales rep from Microsoft would go to the CIO at an org to sell the Microsoft Office suite. Increasingly, sales are bottoms-up and driven by freemium business models. Employees start using tools like Notion because they’re better; eventually, enough employees are using Notion that the organization pays for an enterprise account.
There are dozens of interesting startups changing how we work. Here are some that I find especially interesting:
Because of these companies, we’re more productive, more collaborative, and we can work from anywhere. These tools are more powerful, more flexible, and more delightful to use than Microsoft products ever were.
Over the next 10 years, how we work will be fundamentally reimagined. If you’re building tools for the future of work, I’d love to chat.
Sources & Additional Reading — here are the pieces that inspired and informed this content; check them out for further reading on this subject:
The Commoditization of Enterprise (James Pember)
Mapping Workplace Collaboration Startups (Merci Victoria Grace, Lightspeed)
Lessons in Enterprise GTM (David Ulevitch, a16z)
Seed to Scale with Sarah Cannon (Sarah Cannon, Index)
Ian Spear, for his work on the future of work space and this theme
Chart of the Week
We’re living in the era of “peak TV”. In 2019, the number of scripted original shows swelled to 532, up 52% over the 349 shows that existed in 2013. This glut is driven by the “streaming wars”, in which Netflix, Disney+, HBO, and others are vying for subscribers. This chart from Matthew Ball depicts which shows are most popular—for instance, Stranger Things is 75x as popular as the average show, and Game of Thrones is 150x as popular.
The Anti-Amazon Alliance (Stratechery)
Ben Thompson’s free weekly piece covers the growing anti-Amazon movement; I recommend reading it in whole. Today, 49% of Internet shoppers start their searches on Amazon, and only 22% on Google; Amazon’s share is far higher for Prime subscribers, which include over half of U.S. households. Amazon has completely upended the purchase funnel. In the past, advertising focused on brand recognition. Take Procter & Gamble’s Tide: ubiquitous TV ads for Tide made the brand instantly associated with laundry. In the supermarket aisle, a shopper would recognize the brand and packaging, and make the purchase. But on Amazon, everything must go through search. If a customer searches “laundry detergent”, the first listed product will be for an Amazon private-label good. P&G must now make a customer search “Tide” versus simply recognizing the brand on the shelf, a much more difficult advertising problem—now, advertising must focus on brand recall vs. brand recognition. This is more expensive for advertisers, tilting the balance of power in Amazon’s favor.
Virtual Worlds—the Multiverse, Not the Metaverse (TechCrunch)
I debated which category to put this in—tech, media, or commerce—because it blends all three. This article (Part One of a seven-part TechCrunch series) outlines how gaming will fade into the background as socializing takes center stage in virtual worlds. The goal is increasingly not to win a game, but to meet and hang out with other people online:
Multiverse virtual worlds will come to function almost like new countries in our society, countries that exist in cyberspace rather than physical locations but have complex economic and political systems that interact with the physical world.
Some of these more casual, socializing-oriented multiplayer games will gain widespread popularity, the economy within and around them will soar and the original gaming scenario that provided a focus on what to do will diminish as content created by users becomes the main attraction.
Speaking of virtual worlds, we may now have the first full-fledged virtual economy. In the hit game Animal Crossing, Nintendo reduced interest rates from 0.5% to 0.05%, infuriating players. Apparently, high interest rates were causing people to not work, instead coasting off of dividends from their free market enterprising. There are also a whole host of other bad behaviors in the game, like insider trading. This is a fascinating harbinger of what virtual worlds will become.
With movie theaters closed, Universal released “Trolls World Tour” directly for a $19.99 rental on streaming. The film went on to gross $100M—and importantly, Universal keeps 80% of this revenue, vs. a 50-60% cut of theater ticket sales. As a result, Universal announced it would increasingly forgo theaters in favor of streaming services. Predictably, the theater chains weren’t too happy with that: AMC announced that it will boycott all Universal releases. The outcomes of this battle will have a massive impact on theater windows and the long-term shifts of entertainment. In my view, movie studios hold the better hand.
How the Pandemic Will Change the Face of Retail (The Atlantic)
The pandemic’s impact on retail is cruelly uneven. The Atlantic’s Derek Thompson dives into this inequity in this excellent piece. Travel spending—including on airlines, hotels, and cruises—is down over 100% when you account for refunds. Department stores and clothing stores are facing extinction. Meanwhile, grocery stores and liquor stores just had their best-ever month of growth; Instacart reported sales up 4-5x over last year. The pandemic will accelerate trends that were in motion while reversing others—
The death of the mall: Over the past 50 years, the number of American malls grew twice as fast as the U.S. population; in 2015, the U.S. had 10x more shopping space per capita than Germany. Before the crisis, malls were dying out, driven by the bankruptcies of suburban totems like Sports Authority and Payless ShoeSource. This year may be the death knell: Macy’s has furloughed 100K workers and Neiman Marcus has filed for bankruptcy.
The decline of small, local businesses: Large chains have the balance sheets to withstand this crisis, while local shops often have only a month of cash on hand. After the dust settles, city street corners will be a dependable array of CVS locations, bank branches, and Starbucks shops—all at the expense of local retail.
A decline for restaurants: Dining out in America was booming—in 2015, for the first time in history, Americans spent more money dining out than in grocery stores. The pandemic will bring this golden age to a close.
A shift to online commerce: Online shopping’s share of total retail sales has been increasing about one percentage point per year and currently sits at 15%. A recent analysis predicted that Covid-19 will immediately increase that share to 25%—a decade of change concentrated in several months.
The consumer goods giants Unilever (13 brands over $1B in sales, including Axe, Dove, and Lipton) and Procter & Gamble (22 brands over $1B in sales, including Tide, Gillette, Charmin, and Pampers) announced earnings. Their performance is a window into consumer purchasing patterns through the pandemic. Sales for laundry detergents and soaps are up, as are sales for instant noodles. Cosmetics sales, on the other hand, are down sharply. Unilever’s CEO said that he expects the uptick in sales for soaps and hand sanitizers to be a permanent change. One thing that surprised me—Unilever’s earnings were hurt by a sharp decline in ice cream sales. Apparently, 40% of ice cream sales come from outdoor parks and beaches—a much greater share than I would’ve expected.
🎵 Related to last week’s post on livestreaming, Facebook announced that it will begin offering paid livestreams. For instance, a virtual concert could be held on Facebook and concertgoers would have to pay ~$10 to gain access to the livestream. There’s also a tipping feature for patrons to support their favorite creators.
🧪 In one of the more interesting venture deals announced last week, Knowde raised a $14M Series A. Knowde is building a digital marketplace for chemicals. Chemicals are a $5 trillion global market and touch nearly everything: plastics, coatings, films, flavors, fillings, soaps, toothpastes. The market is also highly fragmented—no player owns more than 2%—and Knowde aims to streamline and centralize buying and selling chemicals.
📺 TikTok is booming. It’s been downloaded two billion times; in the past two months, it’s been the world’s most-downloaded app. Up next? TikTok executives are batting around ideas for a reality show.
🤳 Speaking of TikTok, it’s the new hot influencer platform. The influencer marketing industry has exploded from $1.7 billion in 2016 to $6.6 billion in 2019—influencers like Kylie Jenner earn over $1M per post. For businesses, the incentive is there too: they can earn up to $18 in media value for every dollar spent on influencer marketing. TikTok influencers are proliferating—this article chronicles a woman who became famous on TikTok because she bears a striking resemblance to Edna Mode, the fashion designer from The Incredibles (you can’t make this stuff up). Being an influencer enables the flexibility of The Passion Economy: a 2019 poll found that a third of Gen Zs would never tolerate an employer who told them when to work or who gave them no control over their work schedule.
🎮 Fortnite began with “Battle Royale”, a competition for players to fight to the death. But as the game evolves, it’s becoming less like a game and more like…life. First, there was the Travis Scott concert last week, which drew 12.4M concurrent viewers. Now, Fortnite is announcing “Party Royale”—a relaxed environment where you can hang out with friends. There’s an outdoor movie theater and a club with towering holographic dancers, alongside race courses and other points of interest like a pirate ship and soccer field. Expect to see more virtual events happening here.
🎓 Barack and Michelle Obama are headlining a YouTube commencement livestream that will be held on June 6th. That announcement reminded me of my all-time favorite commencement address—David Foster Wallace’s “This Is Water.” The speech is especially resonant right now, as we’re all increasingly impatient, irritated, and frustrated. I recommend reading it in full here, but I’ll end this newsletter with an excerpt:
You finally get to the grocery checkout line's front, and you pay for your food, and you get told to "Have a nice day" in a voice that is the absolute voice of death. Then you have to take your creepy, flimsy, plastic bags of groceries in your cart with the one crazy wheel that pulls maddeningly to the left, all the way out through the crowded, bumpy, littery parking lot, and then you have to drive all the way home through slow, heavy, SUV-intensive, rush-hour traffic, et cetera et cetera.
The point is that petty, frustrating crap like this is exactly where the work of choosing is gonna come in. Because crowded aisles and long checkout lines give me time to think, and if I don't make a conscious decision about how to think and what to pay attention to, I'm gonna be pissed and miserable every time I have to shop. Because my natural default setting is the certainty that situations like this are really all about me. About MY hungriness and MY fatigue and MY desire to just get home, and it's going to seem for all the world like everybody else is just in my way.
If I choose to think this way in the store, fine. Lots of us do. It is my natural default setting. It's the automatic way that I experience the boring, frustrating, crowded parts of adult life when I'm operating on the automatic, unconscious belief that I am the center of the world, and that my immediate needs and feelings are what should determine the world's priorities.
Or I can choose to force myself to consider the likelihood that everyone else in the supermarket's checkout line is just as bored and frustrated as I am, and that some of these people probably have harder, more tedious and painful lives than I do.
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