WHAT WE CAN COUNT, WE CAN UNDERSTAND
What we can count, we can understand
Or if we don't, at least ask the right questions
By Ignasi Vargas · FALCA, creative studio · Barcelona
I like to count things. It's a good way to get opinions.
I count now my calories
My steps.
People can be read in this way too: do they talk as much as they ask (%), do they do what they say they will (binary), do they give while they receive.
It is a balance sheet.
It is a useful filter beyond the words and the promises.
For companies it works even better. As in theory, they are all doing great, they are all on a mission, they declare to be ready to change the world. It isn't that they are lying. Optimism and some sort of delusion are necessary for entrepreneurship.
The P&L, like the ball, doesn't lie (or rarely). https://www.youtube.com/shorts/YPpiQHgX2vU
For those in public markets, the stock is a form of public opinion more relevant than polls.
This is why I torture you with these posts, with valuations, results and quarterly documents.
So we can together discover the truth.
Or at least try to interpret the reasons of what is happening.
This month Netflix's stock did extremely poorly. Not the business: the results were fine, revenue up 12% (shareholder letter). It doesn't matter that it won the streaming wars. What fell was the belief in what comes next.
The outlook for next quarter came in below expectations, and people started to think it can't grow much more, that attention is divided, quality of programs is in decay.
Ben Thompson asked it straight: Is Netflix washed?
In an interactive fashion, ask these questions: Are you even a Netflix subscriber?
Interestingly enough, the one that in theory is crushing it, YouTube, is also not doing great. YouTube ads still grew 9%, to $11.2B, but slower than expected. Its parent company Alphabet got annihilated this week too, for different reasons: shares fell 12.6% the day after results, about $500B, the biggest loss of market value in its history.
The worry is search: more searches than ever, but AI answers make less ad money.
Chamath explains it well in his newsletter this week: Is AI cannibalizing Google's core business?
To add to this war without winners.
Look now at Instagram. We use it every day at FALCA. Part of our success is evaluating engagement. We work hard in it as a tool as it is a prestige thing. Probably a business too. Its owner, Meta, just had the best quarter in its history: revenue up 26%, to $64.6B. More ads shown, and each ad sold for more. And after jumping 30% in September, it went down again.
Who is winning?
Not Snapchat. While who writes this (and probably who reads it) are too old to use it. Still, hundreds of millions of people open it every day, and the stock is around $5, less than a third of what it was sold at in 2017.
Plenty of attention, never turned into enough money.
That's the pattern. The market doesn't pay for the attention you have today. It pays for the hope of what you'll do with it tomorrow.
And right now it isn't clear who will be the real winner and what will remain relevant in 2-3 years.
People spend more time than ever watching things. These companies have absolutely captured our attention, and still the market is concerned.
Is it because they are not monetizing enough, or because it doesn't see how they can keep growing?
Are we finally saturated?
The fact that we don't have clear answers may give us the option to think about new things and to doubt when people come to us with absolute certainties.
We work in an industry where nobody can know anything for certain.
For good and for bad.
Data: FALCA Backrooms report. Also on Ignasi's Substack: Las Métricas (lasmetricas.substack.com).
STILLS + MORE
