Volume 33: Uber, Doordash & and a confusingly Golden Wattle.

1. Uber buys Postmates, Doordash wins. Stock market is a Ponzi scheme.

Tl;dr: Uber pays the price while Doordash gets the benefits.

Following their failed merger with Grubhub, Uber announced the all-stock acquisition of another terrible company and rival, Postmates, at a valuation of $2.65bn. Combining Uber Eats with Postmates will lift Uber’s US food delivery market share to around 31% from its current 23%. But the deal is unlikely to materially change the trajectory of Uber Eats as it continues to scale losses (over $300m in the last quarter alone.) As a merger candidate, Postmates is particularly unhealthy. Brutal price competition has seen its market share slide 5% in the past year, a proposed IPO collapse in the wake of the WeWork fiasco, and as a part of the deal, they require a bridging loan to cover cashflow until the contract signing. If you’re an Uber shareholder, you should really be asking why they didn’t just wait until the inevitable collapse of Postmates and then pick up the pieces for a lot less.

This means the real winner in this deal is Doordash, which gets the same benefit from reduced competition and consolidation that Uber gets, but without having to shell out $2.65bn for the privilege of absorbing Postmates operating losses.

So, why you might ask, did Uber’s stock price climb upon what looks like a bad deal that will be paid for 100% out of shareholder equity? Well, the very, very, charitable response is the market is demonstrating optimism that reduced competition in food delivery means Uber Eats will become profitable at some point in the future. The less charitable response is that the stock market has become a Ponzi scheme.

By late 2019, we had arrived in tech-bubble territory, with 70% of tech IPOs from unprofitable companies. When you have no profits, what you’re selling to the markets is a growth story that you will at some point in the future. But, even as the 2020 economic environment turned distinctly sour, the markets haven’t demanded evidence of a path to profitability or sound economics from public companies, not even the 20% or so that are walking-dead zombies. Instead, an injection of trillions of dollars worth of government stimulus allied to a zero-rate interest environment has encouraged a blindly optimistic approach that’s driven stock-price increases that bear little or no connection to economic fundamentals. This means the markets are starting to look a lot less like an efficient means of allocating capital and a lot more like a Ponzi scheme that’s just waiting to collapse.

2. Booking.com loses by winning.

Tl;dr: Adding .com makes generic names legally protectable. Don’t do it.

This week, Booking Holdings won a long-running legal battle that went to the Supreme Court. It argued that adding .com to a generic word like Booking makes it distinctive enough to be a legally protectable company asset. The judges agreed. I now anticipate a slew of engineering-led companies with highly descriptive .com names appearing over the next few months, but they’d be wise to think again. While Booking may have won legally, this actually represents a massive loss. Let’s take a quick tour through history to understand why.

Booking is part of an era of companies that grew tremendously in the early 2000s off the back of a simple but powerful insight: Search is a very effective front door for certain transactions, and the more surface area you can apply to a search engine, the more effective your transactional ability will be.

For years, Booking grew through SEO and Google AdWords, so anytime you searched for, say, “hotel in Paris” on Google, Booking would take you straight to a booking page for hotel rooms in Paris. So far, so good.

The problem with this strategy is twofold. First, because you aren’t building your own brand independently of Google, you continue relying on them to attract customers. (To put this in perspective, pre-pandemic Booking spent approximately $4 billion yearly with Google.) Second, Google isn’t your friend. It’s a capricious operator of a protection racket.

In 2011, Google bought travel data company, ITA, which it used to create Google Flights and then Google Hotels, services that compete directly against Booking and its subsidiary companies. Why would Google create direct competitors to some of its most lucrative advertisers? Simple, it provides leverage. Google doesn’t really care how it makes money, it just cares that it does. By having a competing service, it keeps travel businesses like Booking locked to its platform even as ad-rates go up. If Booking doesn’t advertise on Google, Google will push its own service and take the business instead. Either way, Google wins.

So, by 2013, Google had shifted from an asset to be leveraged by Booking to now being a major risk to its business that left it with only one path forward: Break the dependence on Google and drive more organic search traffic directly to its own website by building its own brand. Something its tried and consistently struggled to achieve ever since. To put this in perspective, Google is typically mentioned repeatedly in Booking quarterly and annual reports as a threat to its business.

Clearly, you can’t put all of this down to the name, but it has a significant part to play. The brand challenge for Booking is that while most people search on Google multiple times daily, they don’t search for travel daily. This means Booking must change an embedded habit by establishing the idea that when you search for travel, you should go directly to Booking.com instead of Google. It’s a difficult but not impossible task - Amazon has successfully done this in retail - but it’s costly and requires years of commitment.

That’s why Booking, or any other generic name, is terrible when you understand the circumstances. It’s so instantly forgettable that the next time you search for a flight or hotel room, you’ve already forgotten about Booking and searched using Google instead. Building a brand to compete with Google is hard enough; shooting your own foot off with a name nobody remembers is akin to setting your dollars aflame.

3. Unimaginatively named Walmart+ gunning for Prime & Instacart.

Tl;dr: CV-10 accelerates Walmart’s digital shift.

If there’s one thing Walmart learned during the CV-19 crisis, it’s that its brand is bigger than the traditional limitations of its stores. In other words, many people are perfectly happy to buy from Walmart as long as they don’t have to go to a Walmart store. Which shouldn’t really come as a surprise to anyone who’s actually been to a Walmart store.

So Walmart+ seems like a perfectly logical move. Like Amazon Prime, this is essentially a subsidized loyalty program that’ll offer a range of free delivery options, discounts on gas purchases, and access to an as yet unannounced streaming media bundle. Part offense (Walmart can deliver faster) and part defense (50% of all Walmart customers are also Prime members), this is yet another drive from Walmart to reassert dominance in retail and claw back some of what it lost to Amazon.

The big advantage that Walmart can wield over Amazon is that there are 4,756 Walmart stores compared to only 75 Amazon fulfillment centers in the US. This means there’s a Walmart within 10 miles of 90% of the US population. So, while people may not actually want to go to a Walmart in person, the idea of same day delivery from Walmart is very enticing indeed.

Which is very important relative to their core grocery business. Even after buying Wholefoods, Amazon hasn’t yet fully cracked grocery, Walmart, on the other hand are huge a huge grocery retailer, accounting for 56% of their revenue. But their real challenge right now in grocery isn’t Amazon, well not directly. It’s Instacart. Since the pandemic began, their relative shares of the grocery delivery market have inverted. Walmart dropping from 50% share to 25% and Instacart climbing from 25% to a high of 57% in April.

Which makes this a fascinating strategic move as Walmart seeks to fight off Amazon on the one hand and Instacart on the other. Will they succeed? Well, they have the scale and they’ve significantly built out their digital infrastructure in recent years, so I think this ultimately comes down to a marketing battle. Walmart is far behind Prime, which has 112 million members in the US and they also need to try and break the grocery delivery habit that Instacart now represents to millions. This won’t be cheap to do and fighting on multiple fronts is always difficult, but if anyone has the scale and the will to play the long game on this one, it’s likely Walmart.

4. Confusingly unnecessary new Australia logo looks like a disease.

Tl;dr: Supposed to be Golden Wattle, looks like Coronavirus.

Place branding can be very difficult to navigate, which is one of the reasons it almost always turns out awful. You’re usually dealing with an array of governmental entities, non-profits and citizen groups all with a wide and diverging array of passionate opinions, and where the only point of commonality is the obvious statement that their place is unlike everywhere else. Which is one of those factually accurate yet utterly useless observations that leads you precisely nowhere.

So, it was with great interest that I read that Australia has its very own Brand Advisory Council, which you’d be forgiven for thinking would help people within governmental departments, non-profits and citizen groups navigate the obvious errors, cliches and challenges that branding presents. But nope. They recommended this instead.

While it’s a decently well-designed mark (unlike most place branding to be honest), let’s count the ways it confuses. First, this logo is supposed to be used as a means of promoting trade, but that’s not at all clear, which has led to all sorts of confusion about what it will and won’t be replacing to the point where “Australian Made,” had to issue a press release stating that it’s logo would not be changing. Which brings us to the second big problem: Australia has too many logos, few of which actually mean anything to anyone. Which means the Brand Advisory Council should’ve really been focused on consolidation rather than proliferation. Then we come onto the logo itself. It’s gold and it uses the letters AU, which is how we identify gold in the periodic table, and Australia is the world’s 2nd largest gold producer. So it’s for gold, right? But no, it’s not for gold, it’s for trade, which represents more than just gold. Confused yet? Then, we get to the combination of AU and the inspiration for the logo itself, Australia’s national flower the “Golden Wattle.” AU is an obscure metaphor for Australia (While it is the Internet domain for Australia, it’s hardly a well known contraction for the country) and the Golden Wattle is an equally obscure flower. So they’re using two obscure metaphors for Australia that nobody outside Australia is likely to recognize in a logo that’s specifically designed to encourage people who are not Australians to undertake trade with Australia. And it looks mostly like some kind of modernist gold producer. By this point, I’m just completely lost in all the levels of metaphorical confusion.

Which leads us neatly to the final indignity. Aesthetically, it looks like a fancy golden Coronavirus, which is more than a little unfortunate.

But it’s not the logo, but all the rationale that I want to highlight as the heart of everything that’s wrong with this work. It’s what’s commonly referred to as “brand-wank.” What do I mean by that? Well, first the Brand Advisory Council weren’t actually thinking about what this logo was meant to do, it’s commercial role, and the impact it’s supposed to have. They claim a deliberate desire to avoid imagery of things like kangaroos that represent what people already think of Australia, blindly ignoring that these are distinctive assets that ONLY Australia can use and that people already recognize. Instead, they claim a desire to build new equity and tell a completely new story of Australia. Clearly, nobody took into account that trade missions typically lack the kinds of marketing budgets necessary to build meaning in anything (Unlike, say, tourism, which funnily enough for Australia, uses a Kangaroo). So these so-called branding experts really just undertook a navel gazing graphic design project to serve their own egos that will achieve little but confusion among the audiences it’s meant for. Taxpayer dollars wasted. Opportunity missed.