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In today’s update:

  • Spotify and Dropbox
  • Newell Brands
  • Pipeline Companies
  • Oil Chart

Spotify and Dropbox: Love Us, We’ll Change. (Bloomberg Gadfly)

These are the two biggest IPO’s so far this year. Ben Thompson’s take on Spotify and Dropbox are a must read if you want to better understand these two companies.

In addition, check out his podcast on Dropbox and Spotify.

My thought bubble

I don’t have insights into either business, however, the Bloomberg article noted that both companies were pitching investors that how they would earn money in the future is different than how they are earning money now.

From the article:

All of the Dropbox customers featured in the video are businesses — tiny, medium and large — not the individuals who make up the vast majority of Dropbox’s paying customers. Businesses also were the featured customers in Dropbox’s financial prospectus to potential investors.

This makes sense. What they provide to individuals, storage, is largely undifferentiated from say Gdrive. I use both. Frankly, I like Gdrive better. It’s not to say individuals can’t make a good business, but in order to grow in the future, they have to find another source of revenue.

 

Key line from the article:

All stock market newcomers are coin-flip bets on potential rather than current circumstances. Facebook at the time it went public had almost no revenue from mobile advertisements, which now generate nearly all of its revenue.

The bold part is the money line. If you buy their stock(Spotify, Dropbox), you are betting on a different future than currently exists at both companies. Who knows, they both may pull it off.


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