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July 2nd, 2019

Where digital companies are flocking

Where digital companies are flocking and what teenagers are stocking.

Last month we hosted a handful of high school seniors for an intern day. There were two things I noticed: They all wore Vans and they mentioned Twitter often.

When I asked them why Twitter, they told me Twitter is what all the high school kids are using. Had I invested in VF Corp (Vans owner) and Twitter when these kids were sophomores, I’d be up 48% and 125%. (Note to self: host sophomore interns instead of seniors.)

But that’s in the past. Let’s focus on things we can pounce on today… 

Today’s edition contains:

  1. Trends Report: Billboards were one of the hottest advertising trends last year. We show you the white space in the $33B market. 
  2. Interview: Tim Westergren created Pandora, a $3.5B music behemoth. What trends does he see next?
  3. Quick Takes: We explain why the secondhand goods market is poised to expand and a look into the pillow industry.

Last week’s recap (link): Our most popular stories were on the fast-growing online plant business and an interview with a CEO who’s built an $80m-a-year business catering to stressed-out consumers. Another winner: Marc Andreessen’s revealing guide to startup life.

Now let’s get to it!

– Sam from The Hustle

PS: Last week Ryan Krebs, a Trends subscriber, hosted the first Trends NYC meetup. I stopped by and have an obligatory selfie to prove it. If you want to host a Trends meetup, holler at [email protected] We’ll buy the first $100 of drinks.

Would you recommend Trends to your friends? 

  • No chance

  • Meh

  • Very much

Trends Report

Digital companies are flocking to billboard advertising. Yet this $33B business is shockingly archaic. 

A decade ago, billboards were relics of the past. Today, they’re one of the fastest-growing ad commodities.

Our 3,000-word deep dive deconstructs the market, highlighting dozens of ways you can capitalize on the business.

We examine innovations in digital advertising (i.e., geotargeting, heat mapping, and logistical efficacy) that have helped digital ads take off. Similar features could help the out-of-home ad market explode.

The Gist: Outdoor advertising makes up only 4% of the advertising market but has grown for 31 consecutive quarters. Billboards are the only products within that category that are growing. The companies that own the space are making huge profits — and there’s plenty of room for more digital innovation.

The opportunities we explore: Software that makes the buying process simpler, companies that use mobile data to improve targeting, and new display methods (Uber mini-billboards, anyone?).

Read the report →

Around the Web

Why no one’s upgrading their smartphones (TechCrunch). ~25% of cellphone users have had their current phone for three years or longer. That number was only 7% two years ago. Customers are opting to hang on to old phones until big, new features launch.

Behind the numbers at YouTube (Pex/Twitter)Analytics platform Pex crunched 14 years’ worth of data on YouTube. Gaming videos make up 31% of content uploaded to YouTube but just 7% of views. Music makes up 5% of content but 20% of views. We’re all watching the same damn thing: 0.64 percent of all videos represent 81% of total views.

Tamagotchi for the 21st century (Wired)Former Google employee Mita Yun is set to pre-release Kiki, an interactive robotic pet that has the droopy eyes of a puppy and pointed ears of a kitten. Kiki is one of many new robot models that isn’t used for work. They’re for companionship.    

Are collectibles a goo investment?
(Twitter). “There’s an argument to be made that art and collectibles should be included in a diversified portfolio once it reaches a certain size. Masterworks claims blue-chip artwork outperformed the S&P 500 by ~15% in 2018 and is practically uncorrelated with other asset classes.”

Snap is on the brink of a Cinderella story (MarketWatch) Analyst sees room for a ‘massive upside surprise’ in daily active users. His research indicates that Snap saw daily active users grow by 15 million since March and the company could be in for a “blowout” earnings report.

Scooter Braun buys Big Machine, but here’s a cool stat (WSJ). Most people saw this story. Scooter Braun, the man who discovered Justin Bieber, bought Big Machine, the record label that signed Taylor Swift, Florida Georgia Line, and others. But there was a shocking stat: Big Machine’s annual revenue is more than $100 million and last year EBITA was north of $40 million.


How to make $300 million selling pillows

In our Facebook group, we discussed, a $300m pillow company made famous from its impassioned infomercials (and its bogus health claims that led to the settlement of a class action lawsuit).

Historically, pillow businesses can be quite big. And everyone’s talking about a “sleep revolution.” (This book on the power of sleep, which is making the rounds in our office, will change your life.)

We found a few stats on MyPillow and went looking for other available pillow niches.

About MyPillow:

  • Founded in 2004 in Chaska, Minnesota
  • 1,500+ employees
  • First pillows sold out of mall kiosks. Not successful. Infomercials started in 2011. Took off. First infomercial cost $300k.
  • Infomercials still run 200 times a day on local and national networks.
  • Revenue in 2018 was $300m with 43 million pillows sold since launch.

We spoke with a former MyPillow employee about the business. Here is what we gathered:

  • The cost per pillow was around $9, which took into account the 10-year guarantee. The most popular pillow sells for $70.
  • The company receives roughly 6,000 customer calls a day.
  • Average customer is over 60 and lives in the Midwest.
  • The company would buy booths at Midwest state fairs, bringing in as much as $300k in a few weeks. 
  • MyPillow spends about $1.5m a week on ads, with a huge surge of $40m happening between November and January. The holiday selling season can make or break the business.

Inspired to start a pillow business? It’s not a slam dunk, as this DIY entrepreneur discovered. But the below figures give you an idea of how often various pillow niches are searched for on Google: 


An amazing tool that shows you how rich people make money (link)

Darrell Issa started an electronic security company in the 1980s. He then sold it and invested tens of millions of dollars in real estate and stock, which has produced millions of dollars in income. He’s now worth close to $500m.

How I know Darrell’s secret: Issa is now a US congressman. Because of that, he discloses his personal income. And the website Open Secrets publishes it all.

Why this is helpful: Seeing how wealthy people invest and earn can give you a blueprint. For example, Issa earns at least $5m a year in rental income from owning properties like 5931 Priestly Drive in Carlsbad.

Click here to go down the rich person’s rabbit hole.

The Resale Boom

Finding the next RealReal

Resale news was everywhere last week. The RealReal, a luxury consignment business with an online presence and physical stores in New York and Los Angeles, went public on Friday, and its share price increased ~ 40% the first day, from $20 to $28.

StockX, a hip marketplace for streetwear and sneakers (like the popular Nike Air Max 1 USA, above), was valued at $1B. It was like watching a teenage industry pack its Supreme bags and head off to college.

And yet there’s still room for resale to grow and mature — perhaps doubling from $24B to $50B in 5 years.

The drivers? Gen-Z and rapidly changing views on secondhand goods.

The percentage of women open to buying secondhand goods increased from 45% in 2016 to 64% last year, according to GlobalSurvey data compiled by resale clothing website thredUP. (Men buy secondhand, too.)

But Gen-Z digs resale more than anyone. According to GlobalSurvey, about 37% of this next generation of consumers, the oldest of whom are graduating college now, buy secondhand products. That’s compared to 29% of millennials, 19% of Boomers, and 18% of Gen-Xers.

The future of resale lies in picking a niche item that people value and creating a marketplace, just like StockX and Stadium Goods have done for sneakers. (Next week, we’ll explore the secrets of the sneaker resale business.)

One possible area for entry? Athleisure. Lululemon and Patagonia rank among the top 10 brands with the best resale value right now, and the popularity of big brand athleisure and its recent move toward high fashion signals one opportunity.

The kids’ resale market is also ripe for expansion, from barely worn shoes and apparel to used sporting goods. If you’ve got kids, you know what we’re talking about.

Hey, at least someone will get some use out of those $99 soccer cleats your daughter grew out of in 6 weeks…


Andrew Wilkinson: Build a feature, not a product

Andrew Wilkinson helped build Slack into the crisp, colorful product you use every day. His company Metalab spent six weeks in 2013 creating its interface, and has worked with Google, Facebook, and Amazon as well.

Wilkinson has a new gig running the investment firm Tiny. His goal is to acquire internet companies like Warren Buffett — by purchasing them in quick, handshake deals and setting them up for continued success.

We’re writing a longer story about Wilkinson and his strategies. But we wanted to share a few of his insights on acquiring internet companies and other investments he’s made.

Q: You’ve written about the importance of gut reactions in gauging the quality of software. How does that influence your strategy for buying companies?

A: For us, everything comes down to product. I would never want to buy a business that doesn’t have a good product, even if the marketing and sales are incredible or the financial results are incredible. So that’s always where we start is by looking at, what is the service? Are the customers happy? Is it well-designed? Is it thoughtful? And you can see that thread play out through our entire portfolio of companies. Generally they are very well-designed, product-oriented businesses that have been successful on that basis, not on pumping them up via marketing and sales — although, those are things we also help them with.

Q: What are people undervaluing right now?

A: Earnings. Earnings and profitability are really underrated, and there’s not enough people paying attention to them. I think there’s going to be a lot of pain over the next 5 years in Silicon Valley and around the world.

Q: What mistakes do people make when they start internet companies?

A: One of the most common ones I see is people are building a feature, not a product. I saw a business recently and it was a way to search across all of your services, like your Dropbox and your Google Drive. To me that’s the perfect sort of thing that Apple or Google will do. It’s a feature they’ll add. It’s not something I’d build a company around, and I see so many people doing that. Your best-case scenario in that is you either get to scale and get disrupted by one of the big players, or maybe you get acquired.

Trends Interview

From nanny to IPO: How Tim Westergren built Pandora

We spent an hour with Tim Westergren, founder of Pandora, the digital radio and streaming service that was recently acquired by SiriusXM for $3.5B.

Interesting takeaways:

  1. Tim was in his early 30s when he started Pandora. Before that, he was a nanny (aka no tech experience), musician, and composer.

  2. The company existed for years without making a cent and was often weeks away from bankruptcy.

  3. Tim suffered from panic attacks and insomnia in the early stages.

  4. The early vision of Pandora was nothing like it turned out. It took them years to pivot.

There are a ton of gems in this interview. Click below to read.

Read the interview →

Would you recommend Trends to your friends? 

  • No chance

  • Meh

  • Absolutely
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