Podcast Summary
Google-Apple deal: A $10 billion annual arrangement: The Google-Apple deal, worth over $10 billion annually, makes Google the default search engine on Apple devices, generating significant revenue for both companies.
The DOJ's antitrust case against Google focuses on the long-standing deal between Google and Apple, which made Google the default search engine on Apple devices, particularly iPhones. This deal, reportedly worth over $10 billion annually for Apple, represents close to 10% of Apple's operating income and is considered high-margin since it involves setting a default search engine and forgetting it. Historically, Google's Sundar Pichai acknowledged concerns about this arrangement, but now, the companies are being more cagey about it. This arrangement significantly benefits both companies, and its impact on Apple's financials is undeniable.
Google-Apple deal made Google default search engine on iPhones: Google paid Apple to be default search engine on iPhones, limiting competition and echoing Microsoft's bundling tactics of the 1990s
The current antitrust case against Google revolves around the exclusivity deal between Google and Apple, which made Google the default search engine on iPhones. At the time, there were discussions about other options like Yahoo, but Google reportedly paid for this exclusivity. This arrangement has been a subject of controversy, as it's not instantly intuitive for users to change their default search engine. Critics argue that this practice is reminiscent of Microsoft's actions in the 1990s, where they bundled Internet Explorer as the default browser, making it difficult for competitors like Netscape Navigator to gain traction. Despite the comparisons, it remains to be seen whether the legal implications will be the same. However, the echoes of this narrative are significant, as it highlights the power dynamics at play and the potential impact on market competition.
Microsoft's strategic move to make IE the default browser: Microsoft's decision to make IE the default browser led to antitrust scrutiny, but also opened the door for competition from Google and Chrome, potentially creating value for shareholders through separation of businesses.
The decision to make Internet Explorer the default browser in Windows, as discussed, was a strategic move by Microsoft to increase market share during the rise of the Internet. This action, which later faced antitrust scrutiny, opened the door for innovation from competitors like Google and Chrome. For Google, potential antitrust actions, such as fines or breakups, are seen as risks but also potential outcomes that could create value for shareholders by forcing a separation of businesses like YouTube, Google Cloud, and the core business. The speaker expresses a willingness to accept such outcomes as a shareholder. The history of Microsoft's antitrust issues serves as a reminder that such actions can have significant consequences for tech companies, but also the potential for new opportunities.
Trend towards automation in IT industry: Automation in IT industry is leading to fewer entry-level jobs, but senior positions and human expertise remain in demand
The IT industry is experiencing a trend towards automation, which is leading to a decrease in entry-level jobs. This automation is often being labeled as AI, but in many cases, it's more accurately described as algorithms or machine learning systems. The unemployment rate for IT jobs has been higher than the overall jobless rate, and some experts believe that this is due to the increasing use of automation in the industry. However, not all jobs are at risk, and more senior positions are likely to remain in demand. The conversation also touched on the potential impact of automation on customer service and marketing jobs, with some tasks being automated to reduce the need for human agents. Despite this trend, the speakers expressed confidence that there would still be a need for human expertise and decision-making in the tech industry. Overall, the discussion highlighted the importance of staying informed about technological trends and how they might impact the job market.
Clear: Beyond Airport Security: Clear, a versatile identity management platform, uses biometric technology for various applications, including airport security, stadiums, online verification, and financial security. With over 6M active members and high retention, Clear's mission for frictionless and safe journeys is expanding beyond airports.
Clear, a company known for allowing travelers to bypass airport security lines, is more than just an airport business. It's an identity management platform using biometric technology for various use cases, including stadium security, online verification, and financial security. Clear's airport business, CLEAR Plus, grants expedited entry to over 50 US airports for $189 a year. With over 6 million active members as of Q2 2023, Clear's net member retention is above 90%, and annual usage is steadily increasing. This indicates a high level of product utilization and stickiness. Clear's mission to enable frictionless and safe journeys using identity goes beyond airports, making it a versatile and expanding business model.
CLEAR and TSA PreCheck offer complementary services: CLEAR uses biometrics for airport and venue access, while TSA PreCheck focuses on airport security, both have partnered to offer bundled services and CLEAR handles TSA PreCheck enrollment and renewals.
CLEAR and TSA PreCheck, while they may seem like competitors in the airport security space, actually offer complementary services. CLEAR, which uses biometric identification for membership and offers benefits like skipping lines at boarding gates and passport control desks, has expanded beyond airports to venues like stadiums. TSA PreCheck, on the other hand, is solely focused on airport security and relies on traditional documents for enrollment. In 2020, TSA awarded CLEAR the TSA biometric pre check expansion services and vetting program, allowing CLEAR to handle TSA PreCheck subscription renewals and new enrollments. Additionally, CLEAR offers a bundled Clear Plus membership and TSA PreCheck subscription for new members. While smaller competitors like Verifly offer similar services, they lack CLEAR's airport presence and the ability to provide in-person assistance with enrollment and use of the product. Big tech companies like Alphabet, Google, Apple, Microsoft, and Meta could potentially enter the market with identity verification systems, making them potential competitors for CLEAR in the future.
Clear's commitment to privacy and security: Clear, a company handling sensitive biometric data, never sells member data and undergoes rigorous government certification and monitoring.
Clear, despite being in the business of handling sensitive biometric data, prioritizes privacy and security. The company is committed to never selling member data to outside parties and has undergone rigorous government certification and monitoring. Clear's history dates back to 2003 when it was founded in response to post-9/11 security checks and long wait times. The company faced bankruptcy in 2009 but was bought out and relaunched in 2010. Clear has since grown through strategic partnerships and investments, including from Delta and United Airlines. Despite concerns about giving more information to a company like Clear, given the amount of data they already hold, their commitment to privacy and security should provide some reassurance.
Despite growth and positive earnings, stock faces challenges: The stock of a company with 5M members and recent earnings growth trades at a 55% discount to IPO price due to tight founder control, high short interest, industry trends, and investor skepticism.
Despite the impressive growth of this company, reaching 5 million members in just over a decade, and recent positive earnings reports, the stock has experienced a significant decline, trading at around $17.50 per share with over 55% loss since its IPO in 2021. Several factors contribute to this volatility, including the tightly held nature of the company, with the founders owning a large stake and controlling the majority of the voting rights. Additionally, there is a high short interest in the company, and the stock's price can be affected by news and trends in the aviation industry, which is a significant part of the company's business. Another potential reason for the stock's decline is investor skepticism regarding the success of the company's expansion into new areas beyond the aviation industry. Despite these challenges, the company continues to grow its membership and post positive earnings, leading some investors to believe that the stock is undervalued.
Exploring Boom Supersonic's Expansion Beyond Aviation: Boom Supersonic, led by Sammeet Kumar, is making progress in the aviation industry with their supersonic aircraft, but their potential for growth beyond aviation is vast and their success in implementing these plans remains to be seen.
While Boom Supersonic, led by Sammeet Kumar, has made significant strides in the aviation industry with their supersonic aircraft, they are still in the early stages of expanding into other industries. The potential for growth beyond aviation is vast, but it remains to be seen how successful they will be in implementing these plans. As a reminder, the guests on this program may hold stocks mentioned, and The Motley Fool may have formal recommendations for or against certain stocks. Therefore, it's important not to make investment decisions based solely on this podcast. I'm Dylan Lewis, and that's it for today's episode. We'll be back tomorrow with more insights from industry experts. Stay tuned!
