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When did profitability become optional?

I've been thinking a lot about whether I should start my own business recently.

After all, business has always been a passion for me. It's what I went to school to study -- twice, actually -- and I've picked up a thing or two while working with some of the best brands in the world over the past 20 years.

At least... I thought I had. Because all of my studies and training led me to believe that a successful business has to be profitable, and it seems that's no longer a requirement.

Mattress-maker "unicorn" Casper recently filed the paperwork necessary to go public. And the numbers they revealed as part of the process... aren't very good. I can't sum it up better than this insightful tweet from Derek Thompson, a writer for "The Atlantic", so I won't even try:

Now tell me the truth: if I came to you asking you to invest in my business, and I said, "We have a history of losses and expect to have operating losses and negative cash flow as we continue to expand our business"... would you give me a dime? Probably not. But that sentence is straight from Casper's IPO filing, where they're asking investors for a whole lot of dimes.

Yes, most companies are unprofitable in their early stages; they have start-costs they need to incur just to open their doors, but may not yet have any customers or revenues to cover those costs. I get it. But common sense would dictate they should have a plan for profit at some point. Amazon famously appeared to lose money for years (and years), but we now know founder Jeff Bezos was taking the company's profits and reinvesting them into the business to create what Professor Scott Galloway would refer to as "moats". And if you've had a look at Amazon's stock chart lately, it's tough to argue that wasn't the right thing to do.

This doesn't seem to be the case with Casper, however. They're not losing money because they're building moats to protect their core business; their core business model is fundamentally flawed. They lose money on every single transaction, and as a mentor of mine liked to say, "when you lose money on every sale, the last thing you want is volume."

To ever achieve profitability, Casper would need some combination of higher prices (which makes the products less attractive relative to competitors and could impact the number of units they sell), fewer returns (which, if the policy changes, increases the trial-barrier for customers unsure of the start-up's product quality), or reduced marketing spend (which means less brand awareness and customer acquisition). None of those are attractive options. But neither is losing money on every sale.

It's fairly common knowledge that most start-ups don't place much value on those with MBAs. But... perhaps they should. After all, MBA graduates have all had to take some version of "Introduction to Finance."


I continue to evolve this newsletter based on the feedback you provide. This week, I'm trying something new with the text-talk feature to increase it's readability... but it does require you to click in order to read the entire feature. (I hope you do, because it's a really interesting interview!) I also hope that if you use Gmail, you'll click "View entire message" when you get to that... because although the newsletter is a bit long, I think you'll really like the three blurbs that you'll miss if you don't. And finally, please keep that feedback coming.

- dp

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  • A relative recently forwarded me a McKinsey Insights article titled, "The Changing Face of Marketing", which "analyzes six major changes that promised to transform future marketing efforts." It was a really good read, and quite relevant for today's marketers... which is somewhat surprisingly considering this piece was written in 1966.
  • Although Disney+ only launched a few months ago, one Barclay's analyst has suggested their direct-to-consumer operations (which include Disney+, Hulu, and ESPN+) may already be worth almost $108 billion! Wait, a business built just 3 months ago that's already worth 69% of what all of Netflix is worth today? That kind of speed puts Hans Solo's Kessel Run to shame. 
  • Speaking of Disney, if you haven't watched this video of how this man arranged for himself and his girlfriend to appear in her favorite Disney movie as part of an elaborate proposal, you should... especially if you're someone who's thinking of proposing in the next little while. (You probably don't want your significant other to compare whatever it is you have planned to this herculean effort...)


Business Insider released their "Best Ads of the Decade" list, and it's a good one! I encourage you to click the link and have a look, because I love almost every ad on there!


Personally, I think Bud Light's "Dilly Dilly" is just silly-silly, and while Gillette's "The Best Men Could Be" ad might have been well-intentioned, it was also preachy, hypocritical (given past Gillette ads that used beautiful women as props to clean-shaven men), and arguably contributed to an $8 billion write-down for the company. (To what extent is certainly debatable, but you'd have a tough time arguing it helped.) Also, while Under Armour's "I Will What I Want" ad featuring Misty Copeland is very good, I'd argue Michael Phelps' "Rule Yourself" is better.

What spots would I use to replace Bud Light and Gillette on the list? That's easy: Red Bull Stratos (because they dropped a guy from the edge of space!!!), and the hilariously effective "It's a Tide Ad" (which was amazingly brilliant in context of the Superbowl.)

What do you think about BI's list or my modifications to it? Let me know here.

Seeing the future... with Pinterest.

When a person knows what they want to buy, they search on Amazon.

When they have a general idea of what they want, but don't have a specific product in mind, they search on Google.

But where do people go when they don't yet know what they want to buy... or even that they need to buy anything at all? They head to Pinterest.

You might be THINKING about renovating your kitchen, but not yet know what you want to do, let alone specifically what you need to buy. Pinterest is a way to search for ideas and become inspired... and that makes it a pretty incredible bellweather for future trends.

Every year for the past few, Pinterest has released their "Pinterest 100" report, outlining the top themes and emerging trends of the year. The 2020 report is fascinating, and worth your time. Download it here.


* an interview conducted completed via text message... so please excuse all typos *

For this week's text-talk, I was lucky to connect with Erin Elofson, Country Manager for Pinterest! A portion of the interview is below, but you can read it all by clicking here.

Don't stop now... read the full interview here!
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Win-of-the-Week: Ken Jennings

This week Jeopardy, G.O.A.T Ken Jennings won the internet with his savage Twitter game...
Wow. "I'll take 'Hot Burns' for $1,000, Alex..."

(If you've been living in a cave and don't know the names "Ken Jennings" or "James Holzhauer", you can read all about it here and here.)

Netflix and Chill...'d?

How do you make "Netflix and Chill" even better? With ice-cream, of course.

People reported that Ben & Jerry's has worked with streaming giant Netflix to create "Netflix & Chill'd", a "Netflix Original Flavour". The peanut butter ice-cream contains "Sweet & Salty Pretzel Swirls and Fudge Brownies."

Um, yes please!

Drooling aside, this is a really interesting brand partnership, and one I think benefits both brands. Ben & Jerry's continues their tradition of developing new flavours inspired by pop culture, and Netflix effectively gets brand impressions in grocery stores where they'd otherwise have no presence.
Think about it, you're wandering the grocery aisle looking for a snack, you see this ice-cream, and you think, "You know what, that's what I want to do tonight... curl up on the couch with my friends Ben and Jerry, and watch a film on Netflix." It's exactly the thought Netflix would want you to have, and I call that a win for their Consumer Products group.

The Last Word.

Earlier this week, Maple Leaf Foods CEO Michael McCain sent out this series of tweets, and in doing so, prompted a number of different reactions...

I'm not the first person to write about this -- and I likely won't be the last -- but I wanted to share a few thoughts on why I think it was perfectly fine for Michael McCain to do what he did, even using the Maple Leaf Foods Twitter account.

First, it's painfully clear these tweets weren't part of a publicity stunt, and they weren't from a man seeking attention. This is clearly personal for McCain; in his very first tweet, he clearly mentions one of his colleagues lost his wife and 11-year-old son when the plane went down over Iran. To slightly paraphrase a line from Network, "he's mad as hell, and he's not going to take it anymore."

Second, while it may not be an excuse that McCain's personal Twitter account is private with only 262 followers (versus the almost 6,500 people following the Maple Leaf Foods corporate account) and that he clearly wanted his view on this particular matter to be widely seen, it is a reasonable explanation for why he chose to use the account he did. And although not using the corporate account to share personal views is usually PR 101, Michael McCain is inextricably linked with Maple Leaf Foods, and it's ridiculous to suggest that any backlash he may have received for his tweets wouldn't reflect on the company he leads regardless of what Twitter account he used. When Howard Schultz says something, people who disagree call for boycotts against Starbucks. It's no different here.

Third, it's possible -- even probable -- that some supporters of President Trump's actions will choose to boycott Maple Leaf Foods as a result of McCain's stance, it's equally likely that those who agree with him will double-down on their support of the company. When Nike released their incredible -- and incredibly controversial -- "Dream Crazy" ad featuring Colin Kaepernick, there were people filming videos of themselves burning their Nike gear in protest. But just as many people went out and bought new Nike shoes as a show of support. You can't ever please everybody, and it's more than okay not to try.

And finally, while CEOs need to maintain a certain composure and decorum to ensure they maintain the confidence of their stakeholders, we have to remember that they're human too. Perhaps my friend Ron Tite said it best when asked for this thoughts: “We can’t ask business leaders to have a soul and then complain when they expose it.”

Until next week,
- dp

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