This week's top story feels like a telenovela. Drama, suspense, deception, hostile takeovers!
The story of OpenAI CEO Sam Altman getting fired from the company he co-founded on Friday has continued to unfold live all day, and I've tried my best to keep you up-to-date with the latest happenings. Immediately prior to sending this week's edition, I updated Story #1 with the latest events to unfold.
Aside from the OpenAI story, this week's edition covers:
- Amazon moving into the car sales business
- Major advertisers cutting ties with X due to Elon Musk's tweets
- Amazon's advertising / e-commerce partnership with Snapchat
- How Big Tech is fighting back against the EU's Digital Services Act
- The surprise caveat in Meta's ad-free subscription option
- BNPL finally getting the government oversight it deserves
- And the U.S.'s record breaking, but simultaneously dismal, year of e-commerce
All this and more in this week's 148th Edition of Shopifreaks. Thanks for subscribing and sharing.
Stat of the Week 📈
Berkshire Hathaway boosted its cash pile to a record $157.2 billion. In 2023, the company has sold $23.6B more stocks than it has bought. – According to Fortune
1. OpenAI CEO fired, almost rehired, and then hired by Microsoft?
It's been a wild ride this weekend for OpenAI CEO and co-founder Sam Altman, who's been the face of the company as it's grown from a startup to an $80B valuation.
Here's what went down…
- On Nov 6, Altman led the keynote at OpenAI's first-ever DevDay conference and announced new features and pricing. Everything appeared to be good with him as the face of the company.
- On Thurs, Nov 16th, Altman received a text from Ilya Sutskever, the firm's chief scientist, a co-founder, and board member, asking him to join a Google Meet the next day.
- During that Meet, Altman was fired. OpenAI wrote in a blog post, “Mr. Altman’s departure follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities. The board no longer has confidence in his ability to continue leading OpenAI.”
- The company announced in the same post that Mira Murati, the company’s chief technology officer, will serve as interim CEO, effective immediately.
- OpenAI’s announcement also said that co-founder and president Greg Brockman would be stepping down as chairman of the board but remain at the company. Several hours later, Brockman posted to X that he had quit “based on today’s news.”
- Several key OpenAI staffers pledged to resign if Altman wasn't brought back.
- Investors, including Microsoft CEO Satya Nadella, were “blindsighted” and made furious by the news that Altman had been ousted.
- By Sunday, Altman was back at OpenAI headquarters with a visitor's badge, as the company, pressured by investors and employees, entertained the idea of bringing him back. It was rumored that part of Altman's negotiations included firing the entire board.
- By Sunday night, negotiations had fallen apart, and OpenAI named Twitch CEO and co-founder Emmett Shear as interim CEO, who will take over from Mira Murati, who served as CEO for like 15 minutes.
- This morning (Monday), it was reported that Microsoft has hired Altman, Brockman, and other managers from OpenAI to lead a “new advanced AI research team.”
- In a post on X, Brockman said the new Microsoft team would comprise him, Altman, Aleksander Madry, Szymon Sidor, and Jakub Pachocki. He said the team planned to “build something new” and “incredible.”
- During the day today (Monday), more than 600 employees signed an open letter threatening to leave unless the board resigns and reinstates Sam Altman as CEO, along with cofounder and former president Greg Brockman.
- The letter includes a signature from Ilya Sutskever, who posted on X, “I deeply regret my participation in the board's actions. I never intended to harm OpenAI. I love everything we've built together and I will do everything I can to reunite the company.” (Sounds like he came to the quick conclusion that he was about to get left behind.)
One thing has still not been made clear, which is, “What did Sam Altman do (or NOT do) according to the board to get fired in the first place???”
I'm hoping those details surface, or alternatively the board's true reason for firing him, because this whole scenario just does not make sense from the outside looking in. There are obviously details being withheld from the public about what went down.
What details did I miss about this emerging story? What are your thoughts about what went down? Hit reply to this e-mail or join the convo in the comments of my LinkedIn post.
2. You can now buy cars on Amazon
Beginning in 2024, auto dealers for the first time will be able to sell vehicles in Amazon's U.S. store, with Hyundai being the first brand available for customers to purchase.
Previously, customers could browse car showrooms and compare prices on Amazon but not actually buy a car.
The new shopping experience will allow customers to:
- Search for available vehicles in their area based on model, trim, color, and other features via Amazon's website.
- Purchase a car online with their chosen payment and financing options.
- Pick it up or have the car delivered by their local dealership.
- Amazon noted that the end-seller of the car is still the dealership and that its platform is simply serving as the tech middleman.
- I could not find any info about what Amazon is charging to be the middleman. I don't imagine it's anywhere near the 15% it charges traditional sellers on its marketplaces. If you have any info about Amazon's pricing model for dealers, please hit reply and let me know.
Hyundai + Amazon as more than just sales partners:
Hyundai also selected AWS as its preferred cloud provider, which means the company will migrate its current on-premises applications which support research, product engineering, and customer engagement to AWS.
Lastly, as part of the deal, next-generation Hyundai vehicles will have Alexa built-in for a hands-free experience. Drivers will be able to ask Alexa to play music, podcasts, or audiobooks, set reminders, update to-do lists, and check calendars. They will also be able to control their smart home from the road, such as asking to warm up the house on their way home, or confirming that lights are off and doors are locked.
I noticed in Amazon's announcement that it didn't mention anything about Alexa being utilized to get driving directions, control the thermostat, check tire pressure, find the nearest gas station, or any other driving-related tasks.
Will Alexa serve as a full operating system for the car? Or simply a virtual assistant to driving distractions?
3. Sponsored News
Flowspace earned a spot in the Inc. Magazine Power Partners Awards list, which recognizes large businesses that have significantly grown in size while never losing their focus of serving the best products and services to other businesses. Flowspace was recognized as a Power Partner providing best-in-class, full-service fulfillment for omnichannel merchants across DTC and wholesale, and was named in several Logistics & Transportation categories.
Want to be a sponsored news partner? Contact [email protected]
4. Everyone's suspending X ads
If all X advertisers were sitting in a room together, a representative of X could stand in front of the group and say, “Look to your left. Now look to your right. One of those people are going to suspend ads on our platform today.”
Because that's pretty much what's happening right now…
On Wednesday, Elon Musk posted, “You have said the actual truth” in response to a user who wrote, “Jewish communties have been pushing the exact kind of dialectical hatred against whites that they claim to want people to stop using against them.”
In response to the Anti-semitic post, Disney, Apple, Lionsgate, Warner Bros. Discovery, and IBM are among the companies who have since suspended ads on X (so far).
The European Commission, although not a huge advertiser, also decided to freeze ads on X after having seen “an alarming increase in disinformation and hate speech.”
The White House even issued a statement targeting X, saying, “It is unacceptable to repeat the hideous lie behind the most fatal act of Antisemitism in American history at any time, let alone one month after the deadliest day for the Jewish people since the Holocaust.”
Simultaneously while all this was going down, Media Matters published a report saying that although X has claimed that brands are safe from having their ads next to potentially toxic content, they've found ads for Apple, Bravo, Oracle, Xfinity, and IBM next to posts that tout Hitler and his Nazi party on the platform. They posted a LOT of screenshots (see link above) to back their claims.
The report has presumably been a factor in why some of the brands above have pulled their ads from the platform last week, causing Musk to accuse Media Matters of deliberately engineering a situation where X was forced to serve up ads near people posting positive comments about Hitler or engaging in Holocaust denial, by choosing to only follow accounts posting that kind of content, and then reloading the screen until ads were placed alongside it.
(However to be fair, if brands were truly protected from having their ads placed next to that type of content, no amount of refreshes should trigger them.)
Musk has now said that he plans on filing a “thermonuclear lawsuit” against Media Matters and “ALL those who colluded in this fraudulent attack on our company.”
Meanwhile, X CEO Linda Yaccarino issued her own statement saying, “X’s point of view has always been very clear that discrimination by everyone should STOP across the board — I think that’s something we can and should all agree on. When it comes to this platform — X has also been extremely clear about our efforts to combat antisemitism and discrimination. There’s no place for it anywhere in the world — it’s ugly and wrong. Full stop.”
But her statement wasn't enough to placate ad executives who have called her for resignation as a statement about her opposition towards racism and antisemitism.
5. First Pinterest, then Meta, now Snapchat
Amazon and Snap entered into a partnership that will allow Snap users to buy products directly from ads on the social app.
Snapchat shows ads to users when they click through their friends’ Stories, which can be publicly or selectively viewed for 24 hours.
The Amazon ads on Snapchat will display real-time pricing, delivery estimates, product details and Prime eligibility.
Customers can choose to link their Snapchat account to their Amazon account through a one-time setup, and then afterwards complete checkout in the product ad without leaving Snapchat.
Amazon did not comment on what percentage of in-app sales Snapchat will keep.
If this news feels a little “same, same but different”, it's because last week I reported (story #1) that Amazon entered into an almost identical deal with Meta to enable on-platform commerce on Facebook and Instagram and share data for ad targeting.
These moves with Snapchat, Facebook, Instagram, and Pinterest a few months ago are brilliant by Amazon. Effectively Amazon is saying, “Okay TikTok, if you want to take over e-commerce within your own app, we'll take over e-commerce within all the other social apps.”
6. Big Tech fights the EU
In September, I reported (story #1) that the European Union named 22 services from six gatekeeper companies, which are defined as businesses that self-preference and require users to use their own services by banning others.
Those six gatekeepers not surprisingly included: Amazon, Apple, Alphabet, Meta, Microsoft, and ByteDance.
The EU said that the gatekeepers have six months to bring their core platform services into compliance with the obligations laid out in the Digital Markets Act, which includes prohibiting self-preferencing, tying, and bundling practices, and enacts data-sharing obligations, among other things.
Since then, the gatekeepers have begun to fight back.
Meta formally challenged the EU's decisions, arguing that the European Commision was wrong to put Facebook's Marketplace and Messenger services within the scope of its Digital Markets Act.
ByteDance argued that its video sharing platform TikTok also shouldn't be hit by the rules, claiming that it's “the most capable challenger” to the industry's biggest players.
Amazon is contesting being categorized as a Very Large Online Platform (VLOP), which has led to an ongoing legal dispute. In September, Amazon secured a temporary halt on complying with a DSA mandate to provide a public ad archive. However the EU General Court did not allow Amazon to get out of another DSA requirement, which requires that VLOPs give users an option for recommendations that are not based on their profile.
A commission spokesperson said that the EU “respects companies’ right to appeal and will defend its decisions in court.”
7. Meta's paid subscription means no running ads
It turns out that if you subscribe to Meta's new ad-free subscription option in the E.U., it also means you won't be able to run ads, boost posts, or monetize your channel.
Apparently, according to Meta's documentation, if you're not willing to VIEW ads, Meta won't let you RUN ads or MONETIZE your videos with ads.
Meta noted that running ads requires a level of personal data usage, which isn't available if you choose to opt-out of data sharing.
There are a few exceptions.
If you subscribe, you can still run the following types of ads:
- Boosting posts or running ads for a Page, if the Facebook Page isn’t linked to an Instagram account that has a subscription to use Meta Products without ads
If you subscribe and are an eligible creator, you can still participate in the following monetization experiences:
- Monetizing exclusive content on Facebook or Instagram with Subscriptions for your fans
- Receiving Instagram gifts and Facebook Stars from your fans
All that seems fair, right? If you don't participate in Meta's ad economy as a viewer, you shouldn't be able to participate as an advertiser or earner.
Or is Meta being petty in an attempt to force advertisers and creators into their data sharing?
What are your thoughts? Hit reply and let me know.
8. Affirm expects increased demand, now under CFPB oversight
Affirm said that it expects an increase in demand for its BNPL loans if interest rates remain high for an extended period.
Michael Linford, the company’s CFO, told the WSJ that consumers perceive its product differently than credit cards and other loans because they focus on the monthly payment amount rather than the interest rates.
He added that even if interest rates go higher, the impact on consumers’ monthly payment amounts would be minimal, which is why he expects demand to increase.
When credit card users see their monthly balances going up, they become hesitant to make purchases and add to that balance. However BNPL users are presented with individual payment amounts on each purchase in isolation, without regard to the collective payment across all BNPL purchases — which is dangerous math.
However despite the risks, consumers are eating BNPL up. In the quarter ended Sep 30th, Affirm reported a 28% increase in GMV, reaching $5.6B compared to the previous year. Revenue also increased by 37% to $496.5M, while net loss narrowed to $171.8M from $251.3M.
In other Affirm news, the lender is now under the oversight of the Consumer Financial Protection Bureau, a change which happened some time between its most recent quarterly filing and prior filing, when it acknowledged that it expected to begin being supervised in the “immediate future.”
Linford said, “We may be somewhat unique in this, but we think it’s a positive step for the industry, most importantly. It normalizes the engagement with the regulatory bodies. It’s also good for consumers, for obvious reasons, and good for us, because we think it levels the playing field in quite a number of senses.”
Personally I can't believe it took this long. BNPL has always been a consumer loan and should have been supervised by the CFPB since its very first installment payment.
9. U.S. e-commerce to exceed $1.1T
Based on the Department of Commerce data, e-commerce in the U.S. is expected to exceed $1.1T in 2023. Last year it was $1T.
If the number sounds huge, it's because it definitely is a huge number. However in terms of growth, it'll be the slowest year since the 2009 recession.
Adjusting for inflation, the actual growth figure is even smaller.
What if there was no pandemic?
E-commerce growth remains bigger than the pre-pandemic forecasts would have suggested, meaning we're farther along than we would've been if there had been no pandemic. (Doesn't take an expert to see that.)
Today's e-commerce is 14% above what would've been the trendline if there were no pandemic.
10. Other e-commerce news of interest
Buy With Prime launched four new features: 1) the ability to track orders through Amazon's website and mobile app, 2) access to 24/7 live chats with customer service, 3) more drop-off sites for returns, and 4) shoppers can now see Amazon reviews on Buy with Prime product pages. Some of these features I covered in the 139th edition when Amazon debuted them at its annual seller conference, however, they just went live.
Meta previewed two new generative AI tools for video asset creation and picture editing, enabling creators to generate videos and edit in-stream images using text prompts. The video tool, named Emu Video, enables creators to generate short video clips using text prompts and produce high-quality video content from still image inputs. The projects will eventually be rolled out to Facebook and Instagram, but no timeline was given.
TikTok is in discussions with Indonesian e-commerce players including GoTo, Blibli, Bukalapak, and Tokopedia to revive its e-commerce ambitions, following recent regulations (story #3) in the country that put a damper on its in-app e-commerce plans. Until it stopped operations, TikTok Shop was delivering around 3M parcels a day in Indonesia, and the company now needs a way to partner with local e-commerce firms to continue its commerce operations in the country.
Meta teamed up with Louboutin to file a joint lawsuit against an individual who had been running a counterfeiting operation from Mexico and selling replica Louboutin products via Facebook and Instagram. Meta has been upping its IP enforcement lately by implementing new ways for brands to protect their properties through expanded detection and removal measures within its apps.
Amazon introduced its new Titan mobile robot, which can lift up to 2,500 lbs and carry products across its fulfillment centers. The Titan robot can lift 2x more weight than Hercules, the company's most broadly deployed robot, and will be tasked to carry larger, bulkier items like household appliances or pallets of pet food.
Perry Ellis is turning its physical stores into omnichannel commerce hubs to support its new buy online, pickup in store and ship-from-store offerings. The company operates approximately 70 brick-and-mortar stores and uses Shopify and XStore for its e-commerce and POS systems.
Bolt partnered up with Saks Off 5th, Shinola, Filson, Lafayette 148 and Toys “R” Us to help these companies automatically recognize more shoppers, increase conversions, and drive repeat purchases with its tech stack. Bolt's software automatically recognizes customers at checkout and provides an easier and seamless checkout experience across retailers, similar to Shop Pay within the Shopify ecosystem.
Shopify went down last week for merchants across the globe, which due to the timing, some speculated was a result of Taylor Swift launching her merch on the platform, but turned out to be the company deploying a code update that renamed a table in the database and took their frontend down. The outage lasted about forty five minutes. Many folks criticized Shopify for irresponsibly deploying code right before the holidays. Others said it was no big deal and that it was only forty five minutes — but those people have probably never run an e-commerce store. Forty five minutes is a lifetime.
Salesforce is adding even more AI capabilities to its platform as part of its ongoing push to help sales teams sell their products faster with the tech. The company is turning to AI to enhance its Sales Cloud platform and reduce the time teams spend on manual tasks.
Squarespace users have been unknowingly submitting their web design work to be used in AI datasets. The company explained that the feature is not actively opting you in, but instead offers you the option to opt-out and prevent your site from being crawled by AI crawlers, however, users are upset that the feature to hide your website from crawlers wasn't enabled by default.
WooCommerce 8.3 was released, adding Cart, Checkout, and Order Confirmation blocks as the default checkout flow for new installations, marking a milestone in moving WooCommerce towards a block-first checkout experience. The new version was slightly delayed to ensure it would be compatible with WordPress 6.4 and PHP 8.3, and also to give time for plugin developers to prepare for the new reality of blocks as the default.
Klarna expanded its Ads Manager and Creators Shops. The Ads Manager is built to serve the platform's 150M shoppers who “willingly share their information with Klarna in order to receive a more personalised shopping experience,” and will roll out to all of Klarna’s global markets over the next few months. Creator Shops, which gives users the ability to launch their own storefronts on Klarna.com, are now available in the U.S.
Mozilla slapped its “Privacy Not Included” labels on several products from Google, Amazon, and Microsoft, marking the first time that the company has put the warning on Google devices. The company commented that things have never been great when it comes to privacy with these companies, but they “just keep getting worse.”
Amazon is quietly replacing Android with its in-house Vega OS in some of its products including its new third-generation Echo Show 5 smart speaker. The operating system bears a striking resemblance to Amazon's Fire OS, except unlike Fire OS, it does not support Android apps.
Amazon is removing seven eyedrops products from its website after the FDA warned the company that the drops had not been recognized as safe and effective. The FDA told Amazon in a letter that it had violated federal regulations by selling the eyedrops, which claimed to help with problems including pink eye, dry eyes, eyestrain and floaters.
China's Singles Day, held annually on Nov 11th, apparently broke records this year, but none of the major e-commerce platforms are revealing their numbers, so you've just got to take their words for it (or not care). Major players like Alibaba and JD.com had always posted revenue growth after the big event, up until 2022 when Alibaba decided not to detail revenue, and other companies followed suit.
JD.com is shaking up its leadership after Singles' Day. Company CEO Sandy Xu Ran will take over leadership of JD Retail from Xin Lijun, as the firm comes under mounting competitive pressure from a sluggish domestic economy and increased retail competition.
The U.K.'s porch pirate problem is getting worse, amounting to over £200M worth of parcels stolen in the last year. U.K. police forces show parcel theft has risen 57% in the last year, most of which occurred between 9am and 5pm during the week.
Alibaba announced on Thursday that it was scrapping its plans to spin off its cloud business, citing uncertainties due to U.S. chip restrictions. The company also said that it is putting on hold plans to list its supermarket chain Freshippo.
Early Black Friday discounts were higher this October compared to the previous four years, in regards to both the depth of discounts and the total number of items on sale. Out of the eight categories that are popular during the holidays that Adobe tracks, only electronics and toys saw fewer discounts last month than prior years. Apparel, on the other hand, was 9% lower throughout October, compared to 2% and 5% lower in 2021 and 2022.
11. Seed rounds, IPOs, & acquisitions
Siena AI, a customer service chatbot with the empathy of a human, raised $4.7M in a round led by Sierra Ventures, Pari Passu Ventures, and others. The company, which currently works with 65 customers like Kitsch, Simple Modern, and Everyday Dose, plans to use the funds for hiring and development to get its solution to become a fully autonomous agent for customers over the next 12 months.
Upway, a French e-bike marketplace for buying and selling electric bikes, raised $30M in a Series B round led by Korelya Capital. The company will use the funds to expand its U.S. footprint, particularly on the West Coast where it will open a new warehouse.
Tamara, a Saudi Arabian BNPL startup, raised $250M in debt financing, increasing its warehouse facility to $400M. The increases comprises of $200M of senior debt arranged by Goldman Sachs and $50M from Shorooq Partners.
etaily, a Philippines-based e-commerce enablement platform that helps global brands build, manage, and scale their e-commerce operations, raised $17.8M in a Series A round led by SKS Capital and Pavilion Capital. The startup has about 50 global clients including Levi's, Crocs, Reckitt, and Skechers and plans to use the funds to expand into SEA, particularly in Malaysia, Indonesia, Singapore, and the Philippines.
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