PayPal Just Made Your Online Impulse Purchases Even Easier
Venmo is a small slice of PayPal’s business, relatively speaking, but it still accounts for a tremendous amount of transactions. In the fourth quarter of 2014, Venmo posted a total payment volume of $906 million, up 29 percent from the previous quarter and nearly half of the $2.4 billion it processed that whole year. There are, of course, lots of factors that explain Venmo’s success, but one of the most important is the app’s simplicity. Paying a friend on Venmo requires only a few steps: Find the person, fill in the transaction amount and reason, tap to pay, tap to confirm, and voilà!
Now it looks like PayPal wants to bring that same simplicity to its main product, announcing on Tuesday that its “One Touch” payments system will be made available to PayPal’s 165 million customers on all platforms. One Touch simplifies the user experience so that instead of filling out a bunch of payment details and personal information on each transaction, you simply sign in, review the specific purchase or charge, and then click OK to confirm. An estimated $4 trillion worth of purchases will be left sitting in online shopping carts in 2015. With One Touch, PayPal is hoping that completing the transaction may finally be easier than abandoning it.
One Touch rolled out to native mobile apps last fall and, since then, has led to major sales increases for merchants, PayPal says. The best comparison to One Touch might be an Amazon account. Sign into Amazon and a seemingly endless amount of merchandise becomes available to purchase with a few clicks. Of course, the features that make online payments most convenient are also often the ones that make them the least secure. The social ease and simplicity of Venmo also renders it more vulnerable to fraud and so-called social engineering attacks. But what’s also true is that people largely seem to prefer “frictionless” systems to highly secure but cumbersome ones. And at any rate, PayPal One Touch isn’t quite one-touch simple. If we're being technical about it, there are two clicks involved.
It’s Official: MacBooks Are Hurting iPad Sales
There was just one piece of bad news for the company in Monday’s otherwise glowing earnings report: iPad sales are down—again. Apple sold just 12.6 million of its sleek tablets in the first three months of 2015, down from 16.4 million in the same quarter a year ago. The disappointing figures continued a slump that has worsened over the past year. I examined some of the forces driving down iPad sales in a column last year in which I asked whether, at the tender age of 4, Apple’s tablet had already passed its peak.
The conventional wisdom is that the iPad’s sales have been hurt by a trend toward larger smartphones, including Apple’s own iPhone 6 and iPhone 6 Plus. Analysts on Monday were quick to contrast the iPad’s decline with the seemingly endless growth in iPhone sales. You can see the gradual decoupling in this chart from the German statistics portal Statista.
No doubt some consumers are opting for generously sized new iPhones rather than iPads. But that can’t be the whole story. After all, the iPad’s woes significantly predated the arrival of the 6 and 6 Plus. I’ve long suspected that the squeeze is coming not just from smartphones, but from computers—in particular, Apple’s own ever-slimmer, ever-lighter MacBook line.
Monday’s earnings brought the strongest evidence yet for this hypothesis.
In the same quarter that iPad sales sank to three-year lows, Mac sales grew by a surprising 10 percent year over year. That’s especially impressive when you consider that, as Apple CEO Tim Cook emphasized Monday, sales of all PCs worldwide were down an estimated 7 percent in the same time period.
The strong numbers continue a trend of quiet Mac sales growth that has neatly coincided with the iPad slump. Below, courtesy of Slate Moneybox blogger Alison Griswold, is a chart comparing second-quarter iPad sales and second-quarter Mac sales each year since 2010, when the iPad was introduced. (Quarterly sales data prior to 2015 are courtesy of Statista, whose own recent charts of Mac and iPad sales you can find here and here.)
As you can see, second-quarter iPad sales peaked in 2013, the same year that Mac sales hit a nadir. In the two years since, Mac sales have rebounded in tandem with iPad sales’ recession. You can see the trend even more clearly when you look at year-over-year growth for both product lines. (Again, the chart uses only data from the second quarter of each year, for consistency’s sake, but you’d find broadly similar trends if you looked at other quarters, or at annual figures.)
Until now, Apple has been reluctant to acknowledge that the downward trend in iPad sales is much more than a blip. That changed Monday, when Cook addressed the issue directly in a phone call with investors and media. For the first time that I’m aware of, he pointed to Mac sales as well as iPhone sales as major factors in the iPad’s relative doldrums.
“Have we had cannibalization?” Cook asked rhetorically, referring to the idea that sales of other Apple devices have cut into the iPad’s fortunes. “The answer is yes. We’re clearly seeing cannibalization from the iPhone, and on the other side from the Mac.”
But that doesn’t mean the iPad’s days are numbered, Cook insisted. “We’re never worried about that,” he said of the cannibalization. “It is what it is. That will play out, and at some point it will stabilize. I’m not precisely sure when, but at some point it will.” Underwhelming sales numbers aside, Cook added, customer satisfaction with iPads remains high, and a healthy portion of iPad buyers are first-timers, suggesting that the market remains unsaturated. iPad sales in China are also on the rise, along with Mac and iPhone sales.
In the meantime, Apple is banking on a big deal with IBM to supply iPads to large business customers as a way to resuscitate the tablet’s popularity. That might work, although it would also mark a rare transition for an Apple product from coveted consumer gadget to humdrum workplace staple. And the iPad is likely to face heavy sales pressure in the enterprise market, not to mention resistance from an IT workforce that still breathes Windows.
All that said, I actually believe Cook when he says the company is not too concerned about Mac sales eating into iPad sales. After all, Macs are more expensive than iPads, and Mac revenues actually exceeded iPad revenues in the most recent quarter. As long as the iPad continues to outpace rival companies' tablets—which it has—Apple will keep raking in profits one way or another.
Two or three years ago, all the pundits were predicting the tablet would soon kill the personal computer. I’ve always been skeptical of that narrative, although it has become something of a self-fulfilling prophecy in the PC world, where trend-chasing hardware manufacturers have largely given up on making great laptops. Apple has not, and the result has been surprising resilience in demand for its MacBooks. Its latest, the ultra-light 12-inch MacBook, went on sale earlier this month, and Cook said Monday that the company is “very happy with the response” from consumers. The iPad may not be dead, but neither is the personal computer—and right now, for Apple, they’re heading in different directions than everyone expected.
Read more in Slate:
Chipotle Wants to Sell “Food With Integrity.” Dropping GMOs Is the Wrong Way to Do It.
Chipotle, America’s favorite fast-casual Mexican chain, wants your burrito to be high-quality and guilt-free. And the company thinks it's getting closer to that, announcing Monday that ingredients containing genetically modified organisms have finally been eliminated from its menu. Everything Chipotle serves up can now be made from just 46 different ingredients “that could be purchased at any local supermarket,” the chain says, except for its tortillas, which still contain additives, and which Chipotle says it’s working to reformulate so that they can be GMO-free yet still support the tremendous weight that a Chipotle burrito must bear.
Already, Chipotle’s decision is being hailed as an “industry breakthrough.” It shouldn’t be.
GMOs are nearly ubiquitous in American agriculture, especially in ingredients that are vital to Chipotle menu items. In 2014, 94 percent of soybeans and 93 percent of corn grown in the U.S. were genetically engineered, according to the Department of Agriculture. Chipotle has historically used soybean oil to cook its chips and taco shells. Corn, of course, is in corn tortillas and the corn that can be added to entrée items. Shifting away from GMO-ingredients “did not result in significantly higher ingredient costs for the company,” Chipotle notes, and will not result in price increases for consumers. (Although Chipotle does plan to raise the price of some burritos this year because of rising meat costs.)
“There is a lot of debate about genetically modified foods,” Chipotle founder and co-CEO Steve Ells said in a statement. “Though many countries have already restricted or banned the use of GMO crops, it’s clear that a lot of research is still needed before we can truly understand all of the implications of widespread GMO cultivation and consumption. While that debate continues, we decided to move to non-GMO ingredients.”
On this point Ells is right—there is a lot of debate about GMOs, and a lot research is still needed to fully understand their implications—which might explain why the announcement also feels a bit like Chipotle jumping on the popular but scientifically dubious anti-GMO bandwagon. While there’s little evidence to suggest that GMOs in and of themselves are harmful, Americans overwhelmingly fear them. A recent study conducted by the Pew Research Center and the American Association for the Advancement of Science found that 88 percent of AAAS scientists considered GMO foods “generally safe,” compared with just 37 percent of the public. Slate has previously called GMO opponents the “climate skeptics of the left.” Then again, until very recently, their ranks also included the likes of Bill Nye.
Chipotle is framing the move away from GMOs as a logical next step in its mission to sell “food with integrity.” “We are always looking to find the very best ingredients we can, and have a long history of achieving things that no other restaurant companies have,” Chris Arnold, a company spokesman, said in an email. That includes “responsibly raised” and antibiotics-free meat, local and organically grown vegetables, and dairy products made with milk from cows raised without synthetic hormones like rGBH. “For too long, these better ingredients have been available only in high-end restaurants and specialty food markets, but we think that everyone should have access to really great food,” Arnold continued. “It’s how we are changing the way people think about and eat fast food.”
Perhaps, but is that really changing the way people think about food for the better? GMOs have the potential to do a tremendous amount of good. Genetic engineering can help plants resist drought and combat disease and can help societies tackle complex malnutrition problems. So far as there are known problems—such as contributing to super-pesticide resistant bugs—they’re worth considering. But by broadcasting its decision to go GMO-free, Chipotle is condoning the notion that GMOs are bad, much in the way Whole Foods evangelizes pseudoscience by stocking its shelves with books about herbal medicine and homeopathic remedies.
What’s weird in Chipotle’s case is that up until now the chain has had a fairly strong track record on these decisions. Supporting local produce growers and cutting hormones from meat are things that the public and scientists alike will cheer. Chipotle had also disclosed that its food contained GMO ingredients since March 2013. But disclosing and eliminating are two different things. With the latter, Chipotle may be taking the anti-everything-that-isn’t-natural craze a little too far.
McDonald’s, Bewildered by Modernity, Is Now Selling an “Artisan” Chicken Sandwich
This morning, I stopped by McDonald's to grab an Egg McMuffin, when I noticed this poster by the cash register:
There are, I think, two ways one could read the fact that McDonald's is using the word artisan to market its chicken. On the one hand, it could be a self-aware joke meant to finally deal a death blow to one of the most grating words in the pop lexicon. The king of mass-produced fast food has officially appropriated a phrase that once denoted something expensive and handmade, thus rendering it fully devoid of meaning. In which case: McDonald's 1, upper-middle-class foodies 0.
The other possibility: The chain is struggling to reverse its sales woes, and bewildered by the brave new world ushered in by Shake Shack and Chipotle, it has latched on to "artisan" as an inadvertently desperate-sounding synonym for “less industrial.” Apparently, the new chicken recipe leaves out some additives in order to appeal to chemical-averse consumers. Previously, McDonald's debuted an “artisan” roll for its sandwiches that, as Serious Eats put it, "looks like a shellacked brioche."
Either way, shoppers in Cobble Hill and Park Slope now need to find a new class signifier to describe their groceries.
Starbucks Can Thank Mobile Payments and Breakfast Sandwiches for Its Incredible Quarter
The latest quarter was a “stunning” one for Starbucks, CEO Howard Schultz said on Thursday. The company grew revenue by 18 percent to $4.6 billion to beat expectations while profit jumped 16 percent. Sales of food were strong, with breakfast sandwiches in particular recording 35 percent year-over-year growth. But perhaps more important were the numbers Starbucks gave on its signature My Starbucks Rewards program. Last quarter, a record 1.3 million new members enrolled in the loyalty program to bring total active sign-ups to 10.3 million.
“We are now seeing large numbers of last holiday’s first-time gift receivers become loyal, engaged, repeat Starbucks customers, supporting and contributing to the growth we are seeing across our global base,” Schultz said on the company’s earnings call. More than $1.1 billion were also loaded on Starbucks cards during the same period, for 19 percent year-over-year growth. “We know that increased Starbucks cards sales drive increased My Starbucks Rewards membership, and in turn increased traffic and sales in our stores,” Schultz said.
Much has been made of Starbucks not just being a food company but also a tech company. That was certainly a theme Thursday. Kevin Johnson, Starbucks’ recently appointed president and chief operating officer, hails from the tech industry. Starbucks is now processing more than 8 million mobile payments per week. Its mobile order-and-pay program, which lets customers place orders ahead of time and then pick them up in-store, has been added to more than 600 stores in the Pacific Northwest and is exceeding all internal goals, company execs said. Once rolled out nationwide, the pre-order program is expected to be a major driver of store traffic in the U.S.
“If there were one word to describe Starbucks' record performance in the quarter, I think it would be innovation,” Johnson told investors. Sure, that’s corporate cheerleading. But it’s an awfully tech-y thing to say, too.
Google Misses on Earnings. Investors Distracted by Project Fi’s Cheap Wireless.
In the first quarter of 2014, when Google missed expectations for both revenue and earnings per share, its stock fell more than 5 percent after hours. This year Google fell short again, but investors pushed shares up almost 3.5 percent in after-hours trading. What gives? Maybe it's all the neato stuff Google has going on.
Google reported revenue at $17.26 billion against a $17.5 billion industry prediction, and earnings per share of $6.57 compared with a $6.63 forecast. Foreign exchange rates negatively impacted revenue by about $795 million and the strength of the dollar also ate at sales. The company attempted to explain away concerns about its rocky performance in mobile advertising and was adamant that the competing Apple Pay is actually a good thing for its Google Wallet and Android Pay mobile payment platforms. ("It’s wonderful to see that the industry is opening up here," Google chief business officer Omid Kordestani said, optimistically.)
OK, but enough about business. Let's get to the fun stuff. That new wireless service sounds cheap! Yesterday Google conveniently announced Project Fi, which offers voice and text for $20 per month, plus $15 per gigabyte of data. Outgoing CFO Patrick Pichette said on the earnings call that projects like Google Loon and Google Fiber are funded by Google's assets as an investment in innovation. By contrast, Pichette views Project Fi as an extension of existing infrastructure. "We wanted to try this new idea of fast and easy wireless service," he said. "This one is really about how can we use today's platforms to actually just drive for more innovations. We're pretty excited. It will be interesting to see how the market responds to it."
Google is known for throwing things against the wall to see what sticks, but the company also wants to be clear that it's not all skateboarding and keg stands. "This is a disciplined organization that looks at the facts," Pichette said. Whether it's because they want cheaper cellphone bills or because they actually believe him, investors seem satisfied.
Report: Comcast Will Walk Away From Its Huge Deal With Time Warner Cable
Comcast is planning to drop its $45.2 billion bid for Time Warner Cable, Bloomberg reports, citing “people with knowledge of the matter.” The company will reach a final decision on Thursday and could make a formal announcement as soon as Friday, according to Bloomberg. Comcast declined to comment to Bloomberg.
Should Comcast walk away, it would spell the end of a mega-merger that would have created a company with some 30 million customers and control of more than 57 percent of the market for broadband and 30 percent of the market for pay TV. Late last week, Bloomberg reported that lawyers at the Justice Department were getting ready to recommend blocking the Comcast–Time Warner Cable deal on antitrust concerns.
Comcast met with officials at the Department of Justice on Wednesday, and late that night the Wall Street Journal reported that the Federal Communications Commission had recommended the proposed merger head to a hearing—a decision widely viewed as a death knell for the deal. “Mergers are never put to hearing in order to approve them,” Robert McDowell, a former Republican commissioner of the FCC, told the Journal over the weekend. “They are designated for a hearing in order to kill them.”
A Lesson From Tidal: Nobody Cares About Artists, Especially Rich Ones
Tidal, the new music streaming service from Jay Z, already looks like a wash. Less than a month after launching, it is sitting in the deep, subterranean reaches of the App Store's U.S. app charts, at No. 664. By comparison, Spotify, the leader in on-demand streaming, is the 17th most downloaded app in America. Beats Music, which is in the middle of getting a major revamp from owner Apple, is in 58th place. "Any hot new app will see a big drop in downloads after the hype from its launch dies down, but it doesn’t look like Tidal was all that hot to begin with," Gawker's Jay Hathaway noted Wednesday. "It briefly peaked at #19 overall before falling out of the top 200 less than two weeks later."
It's hard to pick out just one reason why Tidal is failing. You can start with its oblivious marketing message. The service promised to compensate musicians more fairly than its competitors, namely Spotify, which is known for effectively paying pennies per stream. But at its glitzy unveiling ceremony, the company shared few specifics about exactly how it would do so. Meanwhile, Jay Z was joined on stage by a phalanx of his fabulously wealthy pop-star friends, including Madonna, Jack White, Kanye West, Daft Punk, Rihanna, and Nicki Minaj, in a rather tone-deaf demonstration of solidarity among superstar entertainers (all of whom, it was revealed, owned equity in the project). As Death Cab for Cutie's Ben Gibbard put it, "I think they totally blew it by bringing out a bunch of millionaires and billionaires and propping them up onstage and then having them all complain about not being paid."
But the problems go deeper than poor optics. Tidal is a paid service—it costs $9.99 for a basic package, or $19.99 for lossless, high-fidelity audio (which nobody but a few fanatics cares about). Unlike Spotify, there is no free, ad-supported tier to get users hooked. So, in order to attract subscribers, it needs to offer a truly superior service, or really press the moral case that Spotify is screwing over the industry. The problem is that there's absolutely no evidence fans particularly care about artists, at least as an abstract category of professionals. Sure, Nielsen has produced surveys finding that listeners will pay extra for exclusive content, which Tidal is offering. But the past 15 years of revealed preferences tell us that most people just want cheap access to as much music as possible. That's why piracy became a problem. That's why Spotify gained traction, despite the wailing of singers and songwriters about their paltry checks. As industry analyst Bob Lefsetz wrote a while back, people "love their money more than their favorite artists, never forget it."
Things are a bit different when we talk about how fans connect with individual artists. Amanda Palmer has succeeded at raising money from her rabid devotees on Kickstarter, while Patreon, a service that lets fans pledge a certain amount of money for each new piece of work their favorite artists produce, is showing promise. But that's the thing: We're talking about specific bands and musicians. It's a bit like the Nicholas Kristof principle in action.* Much in the way readers get more invested in the story of a single impoverished girl in India than they do in an abstract stat about the fate of the poor, people care more about a single beloved band than they do the nebulous category of struggling musicians. Likewise, as anybody in philanthropy will tell you, people are much more willing to give money when they know exactly how it will be used. And, to a lot of people, paying for music feels a bit like philanthropy.
It doesn't help matters that, in the end, it doesn't look like Tidal really is all that more generous, anyway. Whereas Spotify pays 70 percent of its revenue out to artists and rights holders, the Los Angeles Times reports that Tidal is paying 75 percent. If you think streaming screws your favorite band, Tidal is only going to screw them the tiniest bit less. Not that many of us care.
*Correction, April 23, 2015: This post originally misspelled Nicholas Kristof’s last name.
It’s a Good Day for Pizza and Doughnuts on Wall Street
Investors are gobbling up stock in Domino’s Pizza and Dunkin’ Donuts today after both companies impressed the Street with unexpectedly strong quarterly sales. Shares of Domino’s are surging roughly 10 percent, or around $10, on the company’s best U.S. same-store sales growth in “at least the last 65 quarters,” according to analysts at Janney Capital Markets. At Dunkin’, the stock has popped 8 percent, or a little less than $4, on sales that were surprisingly unhampered by the miserable New England winter as well as big gains in same-store sales for Baskin-Robbins.
The current fervor for Domino’s stock is so great that it’s pushed shares to a new all-time high of $109 and change. In the U.S., same-store sales grew 14.5 percent in the first quarter. Abroad, they added 7.8 percent, which Domino’s reports was the 85th straight quarter of international same-store sales growth. Earnings per share and revenue also came in well over expectations. J. Patrick Doyle, Domino’s president and CEO, called it an “outstanding” start to the year.
Over in doughnut land, Dunkin’s stock is approaching a similar all-time high. Shares of Dunkin’ Brands Group (the official name of the company that makes the deliciously sprinkled doughnuts you see above) peaked in March 2014 right around the $53 mark. Now they’re only a little ways off from that, at $51.73 as of midday trading. Beverage sales, which tend to carry the highest profit margins, were strong, with orders of iced coffee and dark roast coffee leading the way. Dunkin’ also reports seeing “continued breakfast sandwich momentum” in its core breakfast offerings, as well as with the relatively new “croissant donut,” the chain’s answer to the Cronut.
FCC Recommends a Potentially Deal-Killing Hearing for Comcast–Time Warner Merger
The Federal Communications Commission has recommended that the proposed $45.2 billion Comcast–Time Warner Cable merger head to a hearing, the Wall Street Journal reports, citing “people familiar with the matter.” What does that mean for the deal? Robert McDowell, a former Republican commissioner of the FCC, told the Journal over the weekend that “mergers are never put to hearing in order to approve them ... they are designated for a hearing in order to kill them.” Here’s more from the latest Journal report:
The [FCC] staff reached a conclusion that the best option for the FCC is to issue a “hearing designation order.” In effect, that would put the merger in the hands of an administrative law judge, and would be seen as a strong sign the FCC doesn’t believe the deal is in the public interest.
A merger of Comcast and Time Warner Cable, the No. 1 and No. 2 biggest cable operators in the U.S., respectively, would create a cable and Internet behemoth serving roughly 30 million customers. Right now, Comcast has nearly 22 million high-speed Internet users and slightly more video subscribers. The resulting Super Comcast would control approximately 30 percent of the market for pay TV (i.e. your traditional channel bundles) and 57 percent of the market for broadband.
Comcast was scheduled to meet with officials from the Justice Department on Wednesday to discuss the proposed merger. Late last week, Bloomberg reported that lawyers at the DOJ were getting ready to recommend blocking the deal on antitrust concerns. Comcast, for its part, has maintained that the merger isn’t anti-competitive and will “bring substantial benefits to consumers.” For more on who you should believe about that, see Slate’s Comcast-TWC explainer.