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Monthly Archives: August 2019

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U-2 spy planes have lurked all over the world for 64 years — here’s how the Dragon Lady keeps an eye on the battlefield

Category : entrepreneur

The 64th anniversary of the U-2 spy plane’s historic, and accidental, first flight came in early August.

While much about the Dragon Lady has changed in the past six decades — most of the 30 or so in use now were built in the 1980s, and they no longer do overflights of hostile territory, like the 1960 flight on which Francis Gary Powers was shot down over the Soviet Union — the U-2 is still at the front of the military’s intelligence, surveillance, and reconnaissance mission, lurking off coastlines and above battlefields.

The U-2 is probably most famous for what pilots call “the optical bar camera,” Maj. Travis “Lefty” Patterson, a U-2 pilot, said at an Air Force event in New York City in May.

“It’s effectively a giant wet film camera,” about the size of a projector screen, that fits in the belly of the aircraft and carries 10,500 feet of film, Patterson said during a panel discussion about the U-2 and its mission.

The camera has improved greatly since the 1950s. “What we can do with that, for instance, in about eight hours, we can take off and we can map the entire state of California,” Patterson said. “The fidelity is such that if somebody is holding a newspaper out … you can probably read the headlines.”

US Air Force Senior Airman Charlie Lorenzo loads test film into an onboard camera for a test in preparation for a U-2 mission at a base in Southwest Asia, April 17, 2008.
Air Force photo/Senior Airman Levi Riendeau

The aircraft’s size and power allows it to carry a lot of different hardware, earning it the nickname “Mr. Potato Head.”

“We can take the nose off, and we can put a giant radar on the nose, and you could actually image … out to the horizon, which, if you think about it, from 70,000 feet, is about 300 miles,” Patterson said. “So if you’re looking 360 degrees, you can see 600 miles in any direction.”

Another option is “like a big digital camera,” Patterson said. “It’s got a lens about the size of a pizza platter, and it has multiple spectral capabilities, which means it’s imaging across different pieces of the light spectrum at any given time, so you can actually pull specific data that these intel analysts need to actually identify what is this material made out of.”

“We also carry what’s called signals payloads, so we can listen to different radars, different communications,” Patterson said. “We have a number of antennas all across the aircraft [with which] we’re able to just pick up what other people are doing.”

“Some of these sensors can see hundreds and hundreds of miles, so even if we’re not overflying, you can get a real deep look at what you actually want to see,” Maj. Matt “Top” Nauman, also a U-2 pilot, said at the event.

‘Just a sensor’

99th Expeditionary Reconnaissance Squadron airmen prepare a U-2 pilot for a mission at Al Dhafra Air Base in the United Arab Emirates, March 13, 2019.
US Air Force/Senior Airman Gracie I. Lee

The U-2 is “just a sensor in a broader grid that the United States has all over the world … feeding data to these professionals,” Patterson said.

Whether it’s radar imagery or signals intercepts, “We bring all that on board the aircraft, and we pipe it over a data link to a satellite and then down to the ground somewhere else in the world where we have a team of almost 300 intel analysts,” Patterson said.

“So while we’re sitting by ourselves over a weird part of the world doing that ISR mission, all the information we’re collecting is going back down to multiple teams around the globe,” he added. “They’re … distilling it, turning it into usable reports for the decision makers, and [getting] that information disseminated.”

Capt. Joseph Siler, chief of intelligence training with the 492nd Special Operations Support Squadron, was tasked leading those efforts.

“I loved talking to the [U-2] pilots, and … having that pilot [who] is actually understanding the context of where they’re at and is able to dynamically change direction and help us, it just brings something to the fight,” especially when sudden changes require a new plan, Siler said at the same event, during a panel discussion about the mental and physical strain of Air Force operations.

A U-2 pilot signals flight-line personnel while taxing at Beale Air Force Base in California, September 20, 2018.
US Air Force/Senior Airman Valentina Viglianco

“I got more of the quick-time, actionable intelligence” from U-2s, Siler said. “It’s all going into this common picture, but that’s where they fit into it.”

That doesn’t mean the U-2 can’t play a role in the action on the ground as it unfolds.

“We have multiple radios on board,” Patterson said. “So let’s say you’re flying a mission over a desert somewhere and we have troops on the ground that are in contact. We’ll be talking directly to them sometimes, providing imagery.”

That imagery isn’t going straight from the U-2 to the troops, but “they can tell me what they need to listen to, where they need to look, and we’ll move the sensors to that spot, snap an image, kick it back over whatever data links we need to to get it to the intel professionals,” he said. “They will do their rapid analysis and send that, again, to the forward edge, where those folks can take a look at it.”

“You can see troop movements. You can see things like that,” Patterson said. “We’ve spent a lot of time looking for [improvised explosive devices] and providing [that information] real-time to convoys and things like that. I’ve done that personally.”

‘Constant, constant stress’

US Air Force Maj. Sean Gallagher greets his ground support crew before a mission in a U-2, at an undisclosed location in Southwest Asia, November 24, 2010.
US Air Force/Staff Sgt. Eric Harris

Patterson analogized the relay of information to a game of telephone.

It’s on “the airmen that are receiving that to be able to make that decipherable and useful,” Siler said of intelligence gathered by U-2s. “When I was in there, in that environment, receiving all that information and how that work, it’s just such a weird place. It’s different from traditional conflict.”

The waves of incoming information are a source of “constant, constant stress,” added Siler, who has spoken about his recovery from post-traumatic stress disorder.

“I’m getting information from the U-2. I’m getting information from satellites. I’m getting information from an MQ-9, and I have an Army task force that’s about to go in, and there’s people’s lives that are going to be tested,” Siler said.

“What the intelligence community does is we look at all the information we can get, from whatever sensor it is, we pipe that together, and then we say, ‘all right, based upon what the U-2 is saying and what the Global Hawk is saying and what the satellites are saying, we believe this is the best route, this is the best time.'”

Final decisions about when and where to go are made by operators. But, Siler said, “you can imagine the sense of responsibility that these young airmen, 19-, 20-years-old, feel as they make those calls, and we say, ‘is that the bad guy or is that his 16-year-old son?'”

‘Algorithmic warfare’

A U-2 pilot drives a high-performance chase car on the runway to catch a U-2 during a low-flight touch and go at Al Dhafra Air Base, United Arab Emirates, March 15, 2019.
US Air Force/Senior Airman Gracie I. Lee

The reason the U-2 funnels that intelligence back to crew members on the ground is that “it’s so much data that we just simply can’t process all of it on board,” Patterson said.

A U-2 pilot can key on an interesting signal their sensor picked up, sending imagery to intelligence analysts on the ground. Those analysts can decide to look into it, routing a satellite to take a look or sending a drone to get photos and video.

The process can run the other way as well. A tip from social media can lead analyst on the ground to send in a U-2 to gather photos and other imagery. If necessary, assets like a drone or an F-16 with video capability can be sent in for a closer look.

“As you start networking [these assets], using these algorithms and using these processing capabilities, if I hear a signal here, and somebody hears the same signal but they’re over here, you can instantly refine that” if the assets are in sync, Patterson said. “We’re able to map down some pretty interesting stuff pretty quick.”

A U-2 high above the earth.
via US Air Force

But the goal is do it quicker, and the Air Force has been looking at artificial intelligence and machine learning to sort through all the data gathered by U-2s and other aircraft and sensors and make sense of it.

Integrating that into the broader intelligence, surveillance, and reconnaissance mission is still in its “infancy,” Nauman said.

“We know the capability’s there. We know the commercial sector is really doing a lot of development on that. They’re ahead on that frankly,” Nauman said. “We’re trying to figure out, A) how to catch up and be as good, and then Part B is what do we do with that, how do we make ourselves more effective with that.”

“Processing is getting really good, really fast, so there are a number of efforts to actually take a lot … of the stuff that we collect, running it through an algorithm at … what we call the forward edge — like right on board the aircraft — [and] disseminate that information to the fight real-time, without having to reach back, and those some of the projects that we’re working right now,” Patterson said, describing what senior leaders have called “algorithmic warfare.”

“It’s easier to put racks and racks of servers and [graphics processing units] on the ground, obviously, to do the processing, but how do we take a piece of that and move that to the air?” Nauman said. “I think that’s going to be kind of the follow-on step.”

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Here are the Apple products affected by Trump’s latest move in the trade war with China (AAPL)

Category : entrepreneur

The Trump administration’s latest round of tariffs on products and goods imported from China just went into effect on Sunday, impacting some of Apple’s most popular products.

The 15% increase on Chinese imports will affect Apple products such as the Apple Watch, AirPods, HomePod, and certain Beats headphone models, according to Bloomberg. Apple’s iMac computers, components necessary for iPhone repairs, and storage components for iPhones will also be affected. The tariffs were entered into the Federal Register days earlier on Friday.

The iPhone won’t be impacted by tariffs until December after Apple is expected to debut three new smartphone models in September. Most of Apple’s supply chain is based in China, including facilities operated by Foxconn Technology Group, its main assembly partner for iPhones.

Read more: AirPods have become a millennial status symbol, and Apple’s earnings suggest they could be its next big thing after the iPhone

It’s unclear whether Apple will absorb the tariff or pass it on to consumers, thus making affected products more expensive. Analysts at Morgan Stanley believe Apple is more likely to absorb the tariffs, the firm wrote in a report from May.

Apple did not immediately respond to Business Insider’s request for comment.

Wearables like the Apple Watch and AirPods have become increasingly important for Apple in recent years. Apple’s wearables, home, and accessories product category, which includes the Apple Watch and AirPods, outpaced iPad sales and is catching up to the Mac, according to the firm’s most recent earnings report.

Apple CEO Tim Cook has raised concerns about how the tariffs could impact his company’s products when speaking with President Trump in the past. Earlier this month, President Trump said Cook “made a good case” for how the tariffs would benefit Apple’s main competitor, Samsung, which is headquartered in South Korea.

Earlier this month, Wedbush Securities analysts Daniel Ives said Strecker Backe said Trump’s tariffs on Chinese imports could be a “potential gut punch” for Apple. Apple has reportedly been considering shifting some of its production to India and Vietnam, according to reports from Bloomberg and Reuters, which would reduce its reliance on China. But doing so would likely require a lot of time and resources, says Ives.

“Apple has really bet the company’s production on China and on Foxconn,” Ives told Business Insider in June. “It would be like General Motors or Ford saying we’re going to move away from Detroit.”

The 15% increase on Chinese imports represents the latest escalation in a trade war between the United States and China that’s been ongoing since last year. Most recently, Trump raised the tariff rates on Chinese products by 5% on August 23, following China’s decision to announce tariffs on $75 billion worth of US products in retaliation.


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I drove a $109,000 Range Rover hybrid to see if technology could make a difference for an already impressive SUV — here’s the verdict

Category : entrepreneur

The real test of the Range Rover, to be honest and evocative of my favorite Roxy Music album, is to explore country life. The carmaker’s Terrain Response system enables the four-wheel-drive setup to be configured for a variety of conditions, a legacy of the brand’s reputation for formidable offroad capability.

You buy a Range if you seriously intend to bust around the back 40, surmounting hill and dale in wind and rain, perhaps passing weekends with a bit of shooting. You might contend with mud, snow, or ice, and fording a stream could be on the agenda.

But you also buy a Range if you want to tool around the ‘burbs in Sloane Ranger style. You could choose a Jeep, but the Range is more elite. It sends the right signals at the school-dropoff line and looks right in certain parking lots.

In that context, does it matter if you’re getting 30 mpg or just 20? It doesn’t, but for Jaguar Land Rover, a portfolio made up of V6 and V8 SUVs, with some robust diesels thrown in, might not, you know, survive the brave new world of higher emission and fuel-economy standards. Hybridization is a good way for the brand to come into compliance.

That might sound sort of mean-spirited of me, so let me now discuss my favorite aspect of the Range Rover HSE P400e I tested — the drivetrain!

It’s a dang four-banger! In a really big truck! And it makes almost 500 pound-feet of torque! I felt like I had a V6 under the hood, at the very least. This feat of engineering has won my undying respect. I’m not sure I’d buy it, but as technological triumphs go, JLR should pat itself on the back and give the folks responsible for this powerplant a bonus.

Otherwise, I tend to be quite taken by Range Rovers, and the HSE P400e was no exception. I’ve never much liked the infotainment system, but it’s more an issue of function than design. But the rest of the machine is superb. Range Rovers are also keeping up with the times; my tester came with a host of driver-assist features, including lane-keep assist, blind-spot assist, and adaptive cruise control.

Yeah, this Range ain’t cheap. But it is worth it. And for some owners, the added MPGs and in-town optimization could certainly be very appealing.


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These are the former high-ranking Google execs who have been accused of sexual misconduct (GOOGL)

Category : entrepreneur

Google was thrust back into the #MeToo spotlight on Wednesday, when a former Google employee Jennifer Blakely posted an essay on Medium alleging that she had an affair with David Drummond, Google’s chief legal counsel.

Though Blakely did not accuse Drummond of sexual misconduct in her essay, she outlines a disturbing power dynamic and describes suffering emotional abuse.

After their son was born in 2007, Blakely was bumped from Google’s legal department (where both she and Drummond worked) to the sales department, a field in which she had no experience and consequently struggled. Ultimately, she explains, “I quit Google, signing whatever documents they required because likewise, I wanted to protect him,” meaning Drummond.

According to Blakely, Drummond left her in 2008 and began an affair with another Google employee. She then suffered years of emotional abuse, saying Drummond refused to see their son and did not provide child support until he was four years old.

“Looking back, I see how standards that I was willing to indulge early on became institutionalized behavior as Google’s world prominence grew and its executives grew more powerful,” Blakely wrote.

“For me, the abuse of power didn’t stop with being pushed out,” Blakely’s essay continues. “Afterwards I was pushed down, lest I got in the way of the behavior that had become even more oppressive and entitled.”

Drummond said in a personal statement that he was “far from perfect,” but he pushed back against some of Blakely’s claims, saying that there are “two sides” to the story.

Drummond was the second highest paid executive at Google parent company Alphabet in 2018. Public filings show he received $47 million in compensation, with a salary of $650,000 and $46.6 million as equity.

Read more: The Google exec at the centre of explosive #MeToo allegations is one of the highest paid at the firm, earning $47 million

An October 2018 New York Times investigation reported that three Google executives — Andy Rubin, Amit Singhal and Richard DeVaul— were accused of sexual misconduct. The Times reported that Rubin and Singhal were given multi-million dollar exit packages when they left Google in 2014 and 2016, respectively. The Times also reported that the woman who accused DeVaul of misconduct said a Google human resources official told her to stay quiet (Google disputed that claim).

One week after the Times published its report, roughly 20,000 Google employees participated in a global walkout protesting the company’s handling of instances of sexual misconduct.

Read about three former Google executives who have been accused of sexual misconduct below:


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An influencer with over 50 million podcast downloads gives her advice on how to start a successful podcast in 2019

Category : entrepreneur

Podcasting has become a popular medium for influencers, and Lauryn Evarts Bosstick is at the forefront.

“Podcasting is the only medium that saves time,” Bosstick told Business Insider. “Every other medium takes the consumer’s time.” Instagram and Facebook require the user to sit and watch a screen, but podcasting respects an audience’s time because they can passively listen while multitasking, she said.

“As a creator that feels really good,” she added. “Think about who you are talking to and care about their time.”

Bosstick cohosts the show, “The Skinny Confidential Him & Her Podcast,” with her husband Michael Bosstick, who is the cofounder and CEO of the female/influencer-focused podcasting network, Dear Media.

The podcast, which has over 50 million episodes downloaded and over 5,000 five-star reviews on iTunes, launched as an extension of Lauryn’s already-established brand (under the same name) online. Lauryn launched her blog, TSC, after she graduated from San Diego State University with a degree in TV broadcasting. What started out as a fitness blog turned into a full-on lifestyle page, with tips on relationships, fashion, home decor, beauty, and travel.

On the podcast, the Bossticks interview industry professionals within the lifestyle, beauty, and wellness space, like actress and entrepreneur Jessica Alba, social-media influencer Gigi Gorgeous, and Kamiu Lee, the CEO of the influencer marketing company Activate.

“I was bored with a picture on Instagram and a caption,” Lauryn, who has 898,000 Instagram followers, said of starting the podcast. “It’s just not enough anymore, even as a consumer.”

But not every Instagram star is prepared for podcasting. Lauryn spoke to Business Insider about her tips to launching a successful podcast as a social-media influencer in 2019.

1. Have a unique perspective and stop blaming market saturation.

Any social-media influencer can start a podcast, Lauryn said. But to be successful, the first step is to stop using the word “saturated” as an excuse not to get started in earnest, she said.

“I think that people who say the space is saturated don’t want other people to come in,” she said. “Personally, I’m in the space and I don’t find it to be too saturated if you have a unique perspective.”

Lauryn keeps the content she creates across all of her platforms online consistent, she said. Her followers know to expect beauty and lifestyle content from her. By podcasting about a niche topic you care about, you are able to build a specific community around the perspective you are sharing.

The Bossticks recorded their first podcast episode in their kitchen, with affordable equipment they found online, Lauryn said. Their first guest was Michael’s sister.

“My advice is always to stop talking about it and take action,” she said. “Get out there, get your hands dirty.”

⁠2. Make sure your content provides value and find ways to distribute it.

Lauryn said a podcaster should have a strong voice, strong opinion, and the “right sort of recipe.”

“The recipe is like a cake: When it comes to content creation, you have to have the discipline, patience, and quality of content,” she said. “If you have the right mixture, you can be successful.”

When they were first starting out, she said they recorded a podcast every week and learned from experience as they went along.

Once you have the technical aspects down, Lauryn said that it’s important to find ways to distribute your content online, and said Instagram and an email newsletter are two that she’s found to work well.

“It’s so important for scaling your business and distributing your content,” she said. Use Instagram, and the Instagram Story feature, to spread the word that you’ve published an episode, and create a weekly or monthly email newsletter as a way to highlight an individual episode.

Lauryn also said more people need to focus on the overall reachability of a podcast across the world. Many topics that seem niche can appeal to similar communities worldwide, vastly improving the reach of a podcast.

3. Gain your audience’s trust and build intimacy.

Lauryn said she only works with brands she actually uses and recommends to people in her life. Because of that, she said it’s really easy for her to talk about a specific product in a brand sponsorship deal on her show.

“I have to think, ‘Is someone going to buy this product?’ And not only are they going to buy the product, but are they going to recommend it to 10 of their friends?” she said. “If the answer is no, then for me, I don’t want to talk about it. It’s all about gaining the audience’s trust, which is so important as an influencer.”

Podcasting may not be for everyone, she said, but it’s a way for an influencer to build a deeper connection with their audience.

“Nowadays, the audience wants more from their favorite content creator,” she said. “Audio is a way to really zone in on that ‘more factor,’ and gain an intimacy with the audience.”


For more on the business of being an influencer, and a breakdown of how YouTube creators make their money, check out these Business Insider Prime stories below:

The financial adviser to the world’s top-earning YouTube star shares the tips he gives clients to kick start their businesses

A top talent manager breaks down the big trends in how YouTube stars are making money in 2019

YouTube star Shelby Church breaks down how much money a video with 1 million views makes her


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Peloton’s pitch, a deadline at D.E. Shaw, and SoftBank’s Deutsche Bank connection

Category : entrepreneur

Hello and happy Labor Day weekend!

First it was WeWork. Now it’s Peloton that’s aiming to go public. As my colleague Alexei Oreskovic wrote this week in his weekly Trending email (sign up here if you don’t already receive it), there’s more than just the red ink on their income statements that ties the two companies together.

Both of these New York companies have garnered rich valuations in the private markets despite spiraling losses, they both have dual stock structures giving insiders 20 votes per share (one-upping the already controversial 10-votes-per-share norm of their Silicon Valley counterparts) and both stretch the definition of what it means to be a “tech” company.

Troy Wolverton previously spoke to Peloton investors to find out why they think the business is set to explode. And as Shona Ghosh reported, while Peloton played up its subscription business in its IPO filing, its hardware margins are actually more impressive than Apple’s. Peloton’s hardware margins were 44% in 2018, while Apple’s were about 30%.

Troy had some analysis on Peloton’s ultra-low churn rate. Peloton says only 0.65% of its subscribers cancel each month. Customer retention experts told Troy that number “doesn’t pass the smell test.” He also noticed that the company disclosed in its IPO paperwork that it had discovered problems with its internal controls.

The S-1 also lifted the lid on the extent of Peloton’s marketing spend, which increased by 114% ahead of its IPO in its quest to win over a young, affluent audience. Tanya Dua has the details there.

Julie Bort meanwhile had a breakdown on the compensation packages of the top two execs, including CEO John Foley, with each getting $21.4 million.

One thing I found interesting in the IPO filing: There wasn’t a lot of information on the performance of Tread, the company’s $4,000-a-pop treadmill. I’ll admit to being a regular Peloton user and spin bike owner. New York’s a tough place to cycle around and the winters can be rough. I’m less clear though on the growth prospects for Tread.

What am I missing? What do you think to Peloton’s prospects? Let me know.

— Matt

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Patty McCord was the original chief talent officer at Netflix. Now she’s an HR consultant and the author of the book “Powerful.” During a Business Insider Prime webinar, she shared some of the most common people-management mistakes she sees — and how to avoid them. You can get the key takeaways from her presentation and access to a recording of it right here.

Courtesy of Patty McCord; Samantha Lee/Business Insider

Finance and Investing

D.E. Shaw asked staff to sign a take-it-or-leave noncompete, and the deadline is weeks away. Insiders say some people could walk even after management improved the payout.

D.E. Shaw has relaxed terms of its deferred-compensation structure ahead of a mid-September deadline on the firm’s new noncompete contract for all investment staff to either sign the agreement or get fired, insiders said.

UBS’s Americas private-wealth head says he thinks losing a ‘few hundred’ advisers would not be a bad thing, and is looking at how robos can help keep the bank’s richest clients

UBS rolled out a digital-wealth platform in April 2018 by teaming up with the fintech startup SigFig and, at the time, promoted it largely as a nice-to-have enhancement for smaller US clients.

Ray Dalio sees ‘serious problems’ stemming from the next recession. Here’s why he warns even the Fed might be powerless to save the economy.

Few things can conjure up a panic among investors quite like a recession.

Tech, Media, Telecoms

$100 billion SoftBank Vision Fund has shaken up Silicon Valley with mega fundings. A cadre of Deutsche Bank alums are behind many of the deals.

The SoftBank Vision Fund is most closely associated with SoftBank Group’s CEO, Masayoshi Son.

‘It gives a sense of elitism’: Netflix is pioneering brand deals for streaming TV, but some partners bemoan its approach

If you’re a brand looking to land a high-profile tie-in to a Netflix original like “Stranger Things,” Netflix will call you — you won’t call them.

Beleaguered media measurement giant Comscore is turning over a new leaf, again — and says it will be cashflow positive by the end of the year

Beleaguered media measurement and and analytics giant Comscore is recalibrating itself again.

Healthcare, Retail, Transportation

A startup working with 200 pharmacies is trying to break into the hypercompetitive drug-delivery business and give elderly Americans cheaper medications

In 2014, Stu Libby wanted to do something about the long wait times at pharmacies. He thought there must be an easier way to pick up prescription drugs.

Beauty mogul Huda Kattan, who built a $610 million fortune from online fame, shares 3 business tips for influencers starting their careers

Huda Kattan, the 35-year-old self-made beauty mogul worth over $600 million, is one of the most successful influencers of all time and has a whopping 38 million Instagram followers.


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Amazon Web Services is seeing its ‘growth engine’ change from infrastructure services to platform, as a new report shows how it continues to dominate the cloud wars (AMZN, MSFT)

Category : entrepreneur

Amazon has recently become even more dominant in the cloud as it grew more rapidly in a key segment of that market, a tech expert said Thursday.

Amazon has been grabbing more share in platform-as-a-service (PaaS) — the segment that makes it easier for customers to write and run cloud software by removing the need for developers to worry about individual servers and other aspects of infrastructure, focusing instead on the programming tools and processes they need.

“In platform-as-a-service, Amazon is growing very aggressively, that’s why they are picking up significant share,” Gartner analyst Ed Anderson told Business Insider.

Amazon held 31.3% of the $25 billion market in 2018, up from 28%, according to Gartner. Rival Microsoft had 15%, up from 12%. Salesforce had 11%, followed by SAP, Oracle, Alibaba, Google and IBM with single digit shares.

Amazon remains the biggest player in infrastructure-as-a-service (IaaS), which covers the basic components of a cloud platform, including access to servers and storage. Amazon’s share of the $32 billion market actually slipped last year to 47.8% from 49.4%. Microsoft rose to 15.5% from 12.7%. Other players in the top 5 were Alibaba, Google and IBM.

Anderson said he didn’t consider the change an indication that Amazon had started to lose market share.

“They have such a huge percentage of share as it stands that it’s hard position to sustain,” he said. “So we’re seeing a little bit of what I would consider normalization the market, and not really a failure by Amazon to hold market share.”

The IaaS space, considered the core segment of the cloud market, “is consolidating,” Anderson said. As the market matures, says Anderson, companies are moving beyond just using IaaS to set up servers in the cloud, and have an increased appetite for higher-end services that can help them build better software.

“We’re seeing some leveling between the top vendors, which is why Amazon is coming down. But Amazon’s growth engine is shifting toward more of the value-added platform services.”

That’s significant for Amazon since platform-as-a-service is expected to drive more cloud growth as more businesses require more tools in setting up their infrastructure in the cloud.

“Amazon, because of its dominant position in infrastructure, is sort of a natural inheritor of the growth,” Anderson said.

Got a tip about Amazon or another tech company? Contact this reporter via email at bpimentel@businessinsider.com, message him on Twitter@benpimentel. You can also contact Business Insider securely via SecureDrop.


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Before it was a smash hit, clothing resale app Poshmark struggled to convince investors that mobile was the future. Here’s the original, 2011 pitch deck that inspired one VC to bet on it.

Category : entrepreneur

Poshmark, the popular clothing resale app, is preparing to list shares on the public markets after filing confidential IPO paperwork with the SEC in April.

The timing sets up the buzzy startup, which has raised more than $159 million in venture capital, to go public in mid or late September along with other high profile startups like WeWork and Peloton. Similar to those companies, Poshmark isn’t profitable, but has looked at expanding into home decor, men’s clothing, and children’s clothing resale to up the ante ahead of a public debut.

The 8-year-old company was originally founded as GoshPosh by CEO Manish Chandra, Tracy Sun, Gautam Golwala, and Chetan Pungaliya.

“The original idea of GoshPosh was “Gosh, it’s posh,” like it was surprisingly stylish,” Chandra told Business Insider. “But ‘gosh’ has a really interesting connotation so we started looking for something else, but I was insistent to having posh in the name. The name search was a crazy process, but Poshmark appealed to us because it worked on a few levels.”

Read More:This CEO didn’t want to go with traditional venture capital, so he challenged his employees to use this pitch deck to find individual investors. They raised $13 million from 70 people.

Poshmark’s planned IPO will be Chandra’s first time taking a company public even though the company is his second. He sold his first company Kaboodle, an earlier version of Pinterest, to Hearst in 2007 for an undisclosed amount.

“That was the first time in understanding social shopping,” Chandra said. “When I left Kaboodle and Hearst in 2010, I knew I wanted to pursue this, but the technology didn’t exist. The idea was reborn with the advent of the iPhone 4 because it had great picture taking capabilities and editing capability.”

Chandra said he and his founding team struggled to convince investors that Poshmark could be a successful app that only lived on a user’s mobile device. According to Chandra, multiple investors asked the team to develop a version that worked on a web browser or completely abandon mobile for more familiar territory. But the entrepreneur’s track record was enough to convince Navin Chadda, managing partner at Mayfield fund.

“He pitched me his last company Kaboodle but I didn’t think that was a venture opportunity so I didn’t invest,” Chadda told Business Insider. “We kept in touch, and in 2010 he was thinking about what to do next and was very intrigued with what the iPhone had done. He had shut off from using PCs entirely and was only on mobile, so we brainstormed what you could do to marry social networks around photos with commerce.”

Chadda ended up leading Poshmark’s $3.5 million Series A in February 2011 that valued the company at $6.5 million. His conviction in Chandra and his team paid off: the company was recently valued at $625 million and will raise even more if the public offering goes as planned.

“He is the soul and driving force,” Chadda said of Chandra. “He is the person to keep leading this company and build it into an industry giant.”

See Chandra’s original pitch deck for GoshPosh that convinced Mayfield to back the company when other investors turned away.


  • 0

Here’s the real reason that Juul’s CEO is warning people against using his e-cigs

Category : entrepreneur

In an interview with CBS on Thursday, the CEO of the $38 billion e-cigarette company Juul warned against using his products.

Specifically, Juul CEO Kevin Burns said anyone who isn’t already using nicotine, the addictive drug in Juul, should not start.

“Don’t vape. Don’t use Juul,” Juul CEO Kevin Burns told Tony Dokoupil in an interview that aired on “CBS This Morning.”

“Don’t start using nicotine if you don’t have a preexisting relationship with nicotine,” he said. “Don’t use the product.”

Burns’ remarks are the clearest sign yet of how Juul is being forced to shift its marketing as the sleek devices face increasing scrutiny over their role in sparking a teen vaping epidemic and potentially being tied to seizures.

Products like Juul cannot be explicitly marketed as tools for quitting smoking, according to federal law. But that doesn’t mean companies who make them can’t suggestively advertise them as such.

And on Thursday, shortly after warning people not to Juul, CEO Burns said the company was helping American smokers quit.

Juul declined to comment for this story beyond Burns’ recent remarks. The company pointed to a recent opinion piece in which Burns says that the “1 billion adult smokers worldwide who should have the opportunity to switch to vapor products if they so desire.”

Juul is part-owned by tobacco giant Altria

A woman uses a Juul.
AP Photo/Craig Mitchelldyer

Juul has walked a fine line between portraying its products as a trendy gadget and a healthcare tool.

The company launched its devices in 2015 with a series of promotional events that included parties, free giveaways of its devices, and posters that featured young-looking models. At the time, the e-cigarettes were sold in flavors that included dessert with labels that included the word “cool.”

Juul has now risen to prominence as the most popular e-cigarette in America. It is also now partially owned by Altria, the tobacco giant behind Marlboro.

In recent months, Juul has been edging into the healthcare space: first by pitching its e-cigarette as an anti-smoking tool to employers and insurers, then by outlining plans for a mobile app geared at turning smokers into Juulers.

Read more: E-cig company Juul is diving further into health with an app geared toward turning smokers into Juulers

But while Juul aims to show customers that it can improve their health, regulators are increasingly pointing to the potential health risks of its products.

Two federal agencies are now investigating whether Juul engaged in deceptive marketing. The FDA is also looking into reports of seizures linked with the Juul, Bloomberg reported. And US health agencies are investigating a spate of lung illnesses tied to vaping.

Read more: Here are all the health risks of vaping

Addictive gadget or anti-smoking tool?

Federal regulations prohibit companies like Juul from stating outright that their devices can help people quit smoking, in part because it’s still unclear whether or not they can.

Meanwhile, vaping appears to have helped hook young people on nicotine. Experts have suggested that Juul has played an outsize role in this phenomenon. Teens who vape are also more likely to go on to smoke, according to two large studies.

“The dramatic spike of youth [vaping] — that was driven in part at the very least if not largely by Juul,” former FDA commissioner Scott Gottlieb told Vox.

Burns previously apologized to parents of kids addicted to Juul’s products.

In March, Juul put out a study suggesting that some adult smokers may be using Juuls to wean themselves off regular cigarettes. The study, published four years after Juul’s products had been on the market, was paid for by Juul.

During Thursday’s interview, Burns, Juul’s CEO, said Juul was “absolutely contributing to the decline of the smoking rate.” Smoking rates in the US have been steadily declining since the 1960s, reaching the lowest level ever recorded in 2017, according to the CDC.


  • 0

Peloton says only 0.65% of its subscribers cancel each month. Here’s why customer retention experts think that number ‘doesn’t pass the smell test.’

Category : entrepreneur

Peloton wants potential investors to know its customers love its fitness service so much, that few of them ever give it up.

But experts in customer retention think there’s more to the story than the company is saying.

The debate centers on something called churn, which is a term for the portion of a company’s subscriber base that cancels service during a given period. Although Peloton is known for its fitness equipment, it also offers a subscription service that streams live and recorded workout videos to screens on those devices. The subscription service allows it to stay connected with its customers — and provides it with an ongoing revenue stream — after they purchase its equipment.

According to data in the paperwork Peloton’s filed this week for its planned initial public offering, it has remarkably low churn, which could bode well for the long-term prospects of its business.

“Our compelling financial profile is characterized by high growth, strong retention, recurring revenue, margin expansion, and efficient customer acquisition,” the company said in its IPO paperwork. “Our low Average Net Monthly Connected Fitness Churn, together with our high Subscription Contribution Margin, generates attractive Connected Fitness Subscriber Lifetime Value.”

Read this: Peloton, the fitness startup with a cultlike following, could go public at an $8 billion valuation. Insiders reveal why its business seems set to explode.

But customer retention experts think Peloton’s churn rate is understated in multiple ways and in the future will likely be significantly higher than it is now. Churn rates are commonly reported in the fitness industry, but they’re not a particularly meaningful measure of customer value, said Paul Bedford, a principal at Retention Guru, a consulting firm that helps health clubs improve customer retention.

“I wouldn’t invest any money based on that [churn] number,” Bedford said. He continued: “When I see that number, I just disregard it … It’s a vanity metric.”

Peloton’s churn rate is far lower than Netflix’s

Peloton offers two different subscription services: one that’s targeted at people who own one of its fitness bikes or treadmills, for which it charges $39 a month, and one that designed for folks who don’t own any of its equipment, for which it charges $19.49. The churn rates it discloses are for the former — for people who own its equipment, which it calls its “connected fitness subscribers.”

In its IPO filing, Peloton reported that it had a churn rate of just 0.65% per month in its most recent fiscal year, which ended in June. That rate was up slightly from fiscal 2018, when its churn was 0.64%, but down from fiscal 2017, when its rate was 0.7%.

Peloton offers both fitness equipment, like its stationary bike, and a subscription video service that streams live and recorded workouts.
Peloton

The churn rate Peloton posted in its most recent year works out to be a little less than 7% on annual basis. That’s an extraordinarily low figure. Planet Fitness, which operates a chain of gyms, has an annualized churn rate of 18% to 30% — and far higher than that in the first few months after people sign up for a membership, according to a recent report in The Wall Street Journal. Meanwhile, Netflix, long the paragon of a successful digital subscription business, has a churn rate of around 9% a quarter — or about 36% a year — the Financial Times estimated last year, citing several different studies.

Peloton thinks the churn figures are so important that it touts them on the second official page of its filing and talks about its low churn rate some 27 other times.

“Usage drives value and loyalty, which is evidenced by our consistently low Average Net Monthly Connected Fitness Churn,” it says in one section of the document. “Our unit economic model benefits from low Average Net Monthly Connected Fitness Churn and high Subscription Contribution Margin,” it continues in another section.

But Peloton’s churn rate shouldn’t be taken at face value, retention experts said.

Its churn rate “doesn’t pass the smell test”

By dividing 1 by the churn rate, you can get a rough estimate of how long the average customer sticks with the service before cancelling, said Daniel McCarthy, an associate professor of marketing at Emory University’s Goizueta Business School. Doing that calculation with Peloton’s customer churn rate implies that the average customer would stay with its service for about 154 months or nearly 13 years, he said.

That’s almost twice as long as Pelton has been in existence. It’s also far longer than its equipment is likely to last, McCarthy said. And when their bikes or treadmills breakdown, some customers may replace them, but others won’t and will likely cancel their service.

The churn rate Peloton gave “doesn’t pass the smell test,” McCarthy said.

Reed Hastings has built one of the leading digital subscription businesses as the CEO of Netflix, but his company’s estimated churn rate is far greater than Peloton’s.
Ernesto S. Ruscio/Getty Images for Netflix

Indeed, Peloton’s filing makes clear that the churn rate is almost certainly understated.

For example, the company allows customers to pause the subscription service for as long as three months. But it continues to count those customers as active subscribers even while their subscriptions are paused. Such customers may not have churned yet, but they aren’t paying company any money either.

Peloton didn’t disclose what portion of its connected fitness subscriber base — which hit 511,202 at the end of June — had paused its subscriptions. Nor did it reveal what portion of those that paused their subscriptions cancelled them right after that interruption of service.

But there’s likely a bigger factor at play with Peloton’s churn rates. Up until July of last year, the company offered customers the chance to sign up for extended subscription agreements. Customers could sign up for one or two years of service and get anywhere from one to three months for free. Alternatively, customers who used Peloton’s financing service to purchase their equipment could include with their purchase a prepaid subscription lasting anywhere from one year to 39 months.

The company didn’t disclose how many of its customers are still on those extended subscription plans. But it did say it will still have some customers on them into its 2022 fiscal year. Peloton includes those customers when calculating its churn rate. That’s a bit misleading, because it means the churn figure includes people who haven’t really had the opportunity to leave yet, Bedford said.

“Why would you leave after you prepaid [for the service] with a great deal?” said Joel Shapiro, an associate professor of data analytics at Northwestern’s Kellogg School of Management. “When you talk about churn rate being low,” he continued, “you sort of assume that the people in the calculation should be those that actually, arguably, could churn. And when you have somebody who’s under contract for two more years, it arguably doesn’t make any sense to include them in the calculation.”

It’s quite likely that as those long-term deals expire, Peloton will see a spike in its churn rates, retention experts said. The company might well be seeing an uptick in subscription cancellations now, one year after it stopped selling its one-year plans, Bedford said.

“There’s a whole bunch of people who are coming to the end of the subscription period who may not renew,” he said.

New subscribers are likely distorting the picture

Another factor that’s likely helping Peloton minimize its churn rate is just the sheer number of new subscribers it has been adding. The number of people subscribing to its connected fitness service more than doubled in each of its last two fiscal years, going from 107,708 in June 2017 to 245,667 in June 2018 to more than 500,000 this past June.

Because the churn rate is derived in part from the number of overall subscribers a company has, even if it’s losing a large number of subscribers, the rate can look low if it’s consistently adding many more.

“Their [churn] numbers in the early years you would expect to be low,” said Dave Rochlin, the executive director of the Innovation, Creativity, and Design Practice at the University of California, Berkeley’s Haas School of Business.

What’s more, new subscribers are often less likely to cancel a service, because they tend to be the most enthusiastic customers, Rochlin That’s particularly true with Peloton, because it’s new subscribers have just spent — or are in the process of spending — thousands of dollars on its equipment, he said.

“If you think about the size of investment you’re making on that piece of equipment, it’s pretty likely you’re not going to turn around and cancel service right away,” Rochlin said.

That doesn’t mean that Peloton has a bad business or that it’s done anything wrong in calculating or presenting its churn rate, the retention experts said. But it does mean that investors shouldn’t be surprised if that rate starts to tick upward in the near future.

Because of the factors that seem to be playing a role in keeping Peloton’s churn rate low, “this all feels a little bit like a game that’s being played,” Shapiro, of the Kellogg School, said.

Got a tip about Peloton or another company? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

  • Read more about Peloton’s IPO:
  • Peloton, the buzzy exercise-bike startup that ignited the connected-fitness craze, has filed for an IPO and revealed spiraling losses
  • Peloton insiders will have 20 votes per share — twice as many as those at other startups — but CEO John Foley may not wield all the power after the IPO
  • Peloton is paying its two top execs $21.4 million apiece, even as its losses quadrupled to $245 million in its most recent fiscal year
  • In its IPO documents, Peloton warned it’s got some particular shortcomings as a business that could lead to fraud or financial restatement