Adam Neumann's bid for WeWork's scraps

Here’s the rundown: Deals of the Week: Adam Neumann wants to buy WeWork from bankruptcy, Starship Technologies raised $90 million for a product that 100% of the crew love, and Ambience Healthcare’s massive $70 million round also got a warm reception for its target market. LatAm Rising: We love Latin America here at Equity, but have been a bit puzzled why its venture capital totals have fallen as far as they have. New data makes it plain that startups in the region are doing rather well. What gives? And to close out, earnings, ad spend, and the state of the economy. Advertising can operate a bit as a ‘canary in the coal mine‘ for economic health, Kirsten points out. Alex also brought up AI as a potential growth catalyst for tech companies. All told? Things aren’t perfectly sunny, but when we consider the tech forecast there’s no rain to be found. We’ll be back on Monday! For episode transcripts and more, head to Equity’s Simplecast website. Equity drops at 7 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders and more! Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:10Speaker 00

  Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. Today is February 9th, 2024. My name is Alex and I'm joined today by my friends. In one corner, I have senior TechCrunch reporter on the FinTech Beat. It's Mary Anne Esaveto. Mary Anne, hi.

• 0:30Speaker 01

  Hi, I'm happy to be back. It feels like it's been so long when it's really only been two weeks.

• 0:35Speaker 00

  I know, but podcasting time is really painful. Like when you stop podcasting for a minute, you feel like your entire voice has been cut off. It's oddly brutal.

• 0:43Speaker 01

  Right. Happy to be back.

• 0:44Speaker 00

  Well, we're glad that you're here. We're also glad that Kirsten Korsak is back with us. Kirsten, of course, runs the TechCrunch Transport Desk. She's a fan of all things EV and Zoom Zoom. Kirsten, hey, how are you?

• 0:54Kirsten Korosec?

  Zoom, Zoom, Zoom. I'm great. Here to talk about all things AVs and EVs today.

• 1:00Speaker 00

  And on the pod for deals of the week, we have what the hell Adam Neumann is doing with WeWork, Starship Technologies and the rise of cute robots, and then Ambience Healthcare at the intersection of AI and health. Then we're going to talk about Latin America and why startups down there might not be getting the respect they deserve. And then to wrap things up, what's going on with the big tech advertising market and what that tells us about the health of startups. But first, Mary Anne, Adam Neumann's back on the show. We're talking about WeWork again. Tell me why.

• 1:31Speaker 01

  Well, earlier this week, it came out that Adam Neumann is trying to buy back WeWork, which, I mean, it's once again another display of arrogance, I believe, on the part of this man. He basically was, well, he was forced to resign. The company went bankrupt, all sorts of negative stuff surrounding his leadership. And yet, he still wants to buy back the company out of bankruptcy. One thing that is interesting is that he claimed in a letter, or his attorneys claimed in a letter to WeWork that he had A partner in investor Dan Loeb's hedge fund Third Point.

• 2:14Speaker 01

  And that firm has kind of distanced itself a bit from that claim, saying that they've only had preliminary conversations with Flow, which is Adam Neumann's latest proptech startup, by the way, backed by Andreessen Horowitz.

• 2:29Speaker 00

  So.

• 2:30Speaker 01

  Lots to unpack here.

• 2:31Speaker 00

  Let me try to put this in dissequential order. Adam Neumann, WeWork, up, down, crash, fired. People try to save WeWork. It goes public via SPAC, eventually ends up dying, as we all know, the commercial real estate market's not what it used to be. And now Neumann, who is building Flow with Andreessen money, wants to buy back the corpse of WeWork, and it's not going that well. Kirsten, I'm curious what your gut take on this is, because you're slightly cynical.

• 2:58Kirsten Korosec?

  I'm not cynical. I'm just a realistic human being, so don't put me in that box. Well, it's not surprising to me that he overstated his relationship with Third Point, because that is a classic, I think, Adam Neumann stretch that helped him rise to the top and then crash with WeWork before. So that doesn't surprise me so much. I want to know more about what Flow Global Holdings actually is and what the point of this whole WeWork reclamation is about. Is this about him saving face and bringing it back to its former glory? I mean, what's the motivation here?

• 3:41Kirsten Korosec?

  And how does it fit into what Flow Global Holdings does? So I have more questions than a cynical take, Alex.

• 3:48Speaker 01

  Yeah, I mean, honestly, I've been trying to figure out also what Flow does, because it's a little ambiguous to me. But basically, the claim is that it wants to kind of like brand apartments, like build communities out of apartment complexes. Andreessen wrote, I think it was a $350 million check into the company a couple of years ago. I saw that like an article where someone was writing about one of the branded apartments. Like I think they finally did something with one. I do not understand where WeWork fits into this model.

• 4:20Kirsten Korosec?

  I mean, one total speculation would be like a work-life model because we've gone to remote work and we, you know, something like that, which is by the way, not a new concept in real estate. In new urbanism, which came around just a couple of decades ago, the idea of urban density, instead of in fighting against sprawl, one of the concepts is, you know, having a little shop and then living above the little shop and that type of thing. So maybe, and again, total speculation on my point, but if you ask the question, where does WeWork fit in to apartments? Maybe it's combining office space and living, not a new idea, but I'm sure it'll be branded as such, if that's the case.

• 5:06Speaker 00

  I just can't tell you how unattractive that sounds as a person who works remotely and lives in a city. I mean, clearly what Adam Neumann is very good at is fundraising, you know?

• 5:15Kirsten Korosec?

  Oh, yeah.

• 5:15Speaker 00

  And I don't know if that extends to building excellent live-work communities for regular folks. I just find this whole thing to be a little cynical because Neumann seems to be a little bit irked that his bid, or whatever you want to call it, for what's left of WeWork hasn't gotten the respect he thinks it deserves. But he waited until it was in bankruptcy to try to buy it, as far as I can tell, as a whole cloth entity, which means that he waited until the company he put together died. And then now that it's going to be able to shed some of its obligations, leases and so forth, and bankruptcy, now he wants to buy it back. It just, I don't know. It just, I'm just shaking my head.

• 5:54Kirsten Korosec?

  That's fiscally, fiscally prudent though, Alex.

• 5:58Speaker 00

  Fiscal prudence and moral resonance often run cross-current to one another.

• 6:02Speaker 01

  Very true there. And I was looking back at the letter to WeWork from his lawyers. And here's one quote from that. "In a hybrid work world where demand for WeWork's products should be greater than ever, my clients believe that the synergies and management expertise offered by an acquisition could significantly exceed the value of the debtors on a standalone basis."

• 6:22Speaker 00

  Sure.

• 6:23Kirsten Korosec?

  Yeah.

• 6:24Speaker 00

  Management expertise, yes, famously well shown in the company's governance and structure. Putting aside my cynicism, apparently I'm alone there because Kirsten won't join me upon the great cynicism parade. WeWork did have WeLive back in the day, and I think it had WeGrow, which was aimed at kids. So there's some history of whatever WeWork was at some point.

• 6:43Kirsten Korosec?

  I want to bring us back, though, to see how it all flows together. I mean, I think this is what we're going for. There is another startup, though, in the mix here that I wrote about back in 2020, and it's GoToGlobal, which was a startup that he created and got funding for. He took a 33% equity stake in it, actually. It's a shared mobility company that operates in Israel and Malta, and the aim was to expand to Europe. And this was an investment. So he didn't start this company, but he owns a third of it. And I was just looking into like, whether this is still, it still has a website, and it still seems

• 7:25Kirsten Korosec?

  to be a functioning company. But it's sort of this idea around offering a range of shared vehicles. So again, I wonder if he's still aiming, he seems very interested in things that are sharing economy, like reusing. And so I'm wondering if what we're seeing now kind of all fits together in this work, live, play, raise kids, mobility ecosystem.

• 7:51Speaker 00

  But when he was running WeWork, he famously used company funds to buy a private jet to avoid doing transit with other people. And if I recall the reporting around his time there, he also bought a bunch of houses for himself, right?

• 8:07Kirsten Korosec?

  Oh, right. Not for him to share, but to make money off of other people sharing.

• 8:12Speaker 00

  That's, that's where I get kind of, I have a little bit of beef, because I'm trying to think of an analogy here. It's like, I'm going to open a cafeteria for everybody, and then I'm going to sit in my private dining room. Like, I don't believe you. I don't believe your heart's in the right place.

• 8:24Kirsten Korosec?

  Yeah, I mean, okay, so I would say this, like, is it, oh, it's fine as a businessperson to recognize that there is a market. For something and make money off of that market, but he turned it into something of a whole entire philosophy and way of living that he didn't, he didn't mirror the way he lived his life.

• 8:43Speaker 01

  Right.

• 8:43Kirsten Korosec?

  So those are two different things.

• 8:44Speaker 00

  Yes.

• 8:44Kirsten Korosec?

  Secondly, I'm actually not, I've never been convinced that people want to share in, certainly not in the US, share anything to do with mobility. People don't like sharing. Yes, we get on subways and trains, but we don't want to share a car. So that's a little bit separate from this latest news, but the whole sharing idea is, I don't know, a little bit different. I don't know if you can make money off of it.

• 9:09Speaker 00

  Yeah, I, I don't know either. I know we have to move on, but I did think that we had passed the era of discussing Mr. Neumann on this podcast.

• 9:17Speaker 01

  Never.

• 9:17Speaker 00

  And we apparently will never be past that. So that's

• 9:20Speaker 01

  He will not go away.

• 9:22Speaker 00

  He will not go. Well, people keep giving him money, which is the crazy thing. I mean, I don't know if I would invest $3.50 into him, given what he did with corporate funds in his last company, but hey, maybe that's why I'm not a billionaire. Anyways, let's talk about cute robots. Kirsten, what's up with Starship?

• 9:37Kirsten Korosec?

  Starship Technologies. This is an Estonian startup that is actually had a lot of success in spite of severe, I would call severe headwinds and consolidation in the robotics and autonomous vehicle technology space. So this company recently raised $90 million in a round co-led by Plural and Ionicle. This has, they didn't share their valuation, but they raised a total of 230 million to date. And if you're not familiar with Starship Technologies, these are small delivery robots with, you know, like think four wheel little robots. The most common sight to see them in the United States is on university campuses where I live, near the University of Arizona. It's common to

• 10:22Kirsten Korosec?

  see them and they might be delivering, say, a burrito to a student in a dorm room. And this is sort of where, at least in the US, they've made a lot of headway. But the interesting thing about this company is its survival. So many other companies have struggled or shut down, and it survived in spite of COVID when universities were going to remote learning and things like that. So I think that that is quite interesting. They haven't been free of troubles. Their CEO suddenly left and the founding, one of the co-founders is now back in the CEO spot, but they're here still, which I think says something.

• 11:01Speaker 00

  And if I'm not mistaken, they're profitable now.

• 11:04Kirsten Korosec?

  Yeah, that's the claim at least. I mean, this is a privately held company, so there's only so much that we can see into their financials. But but yes, that's that's the claim. They've also, you know, hit some milestones in terms of number of miles. They shared a metric 11 million miles across neighborhoods and campuses and some 80 locations across Europe and the US, making 6 million deliveries. I do think it's important to note that you have to kind of put that next to like maybe what Amazon does, which is, you know, in the billions, Amazon in 2023 made well over 2 billion deliveries. So we're not at the same level here.

• 11:46Speaker 01

  I will say, I will say that the idea of these sidewalk robots to me is much less, offensive is the word, than self-driving vehicles. You know, sidewalk, yay, not on the streets. I like that. I do think it's it's a cool concept. I was amused by one of the comments at the end of the story where a reader commented about having seen these on a campus and seen two of them hit each other head on and just kind of like sitting there face to face for over 10 minutes. The visual was funny.

• 12:20Kirsten Korosec?

  That's funny.

• 12:21Speaker 01

  Anyway, I think I think it's a cool concept and it's it's kind of like, yeah, I know it's far way much less than Amazon, but no startup is going to get to the scale of Amazon. And you know what? Good for this company. It's plugging on. It's seems to be growing and doing well in a challenging space. And Inger did a great job of reporting on it.

• 12:40Speaker 00

  First of all, first of all, those two robots were not stuck. That is a rarely seen mating ritual of sidewalk robots out in the wild. So let's not let's not shame other species here.

• 12:50Kirsten Korosec?

  Next on National Geographic, right?

• 12:52Speaker 00

  Right.

• 12:53Kirsten Korosec?

  I will say that there's one interesting change in the company's not business model, but where they're focusing. So, you know, when I have reported on them in the past, it was very much very US centric. They had they came from Estonia and it wasn't that they were ignoring that, but it just seemed very much a focus on US. But what they told Ingrid was that they're actually starting to go deeper into Europe, which it will be interesting to see what cities and where they go. Are they going to do the university business model? Are they going to do something else? So remains to be seen, but I do think that's interesting that they're, I'm not going to say pulling back from US, but certainly like paying a little bit more attention to Europe.

• 13:36Speaker 01

  Yeah. And plus, I mean, so many companies I've been hearing about lately that are based in Europe seem to want to grow or expand in the US. So it is a little bit counter to that, that narrative.

• 13:46Speaker 00

  Yeah. Also, I just want to say like, my parents are not the most technology forward people. And they're, you know, in their seventies now. And so you don't expect them to be, you know, on TikTok, but they have a soft spot for these robots on the local university campus of my hometown. And to me, that bodes very well for these things doing well. I'll just say that I find it very ironic that Mary Ann wants the robots on the sidewalk to be driven by AI, but not the several ton SUVs, which 16 year olds are clearly, clearly ready to drive on their own at high speeds. Cause that, that is the peak of, I think, efficiency and safety. And that's where we should put our children out on their small bicycles without helmets. All right, moving on. Ambience Healthcare raised $70 million.

• 14:31Speaker 00

  This is my deal of the week. I'm trying to figure out where we're going to see AI find the most purchase inside of the world that we live in. And one place we've heard a lot about AI usage over time has been in places like healthcare imaging. You know, if you're taking a look at several hundred scans, you might miss something. That might be a place where AI sits. This is not that. This is instead an attempt to bring modern AI technologies and attack the administrative, AKA paperwork side of healthcare, which I think is brilliant because one thing we don't have enough of is enough healthcare professionals in both the nursing and doctor roles. And so if we can make those people more efficient, we can essentially unlock more productivity from them. And so to me, this is brilliant.

• 15:14Speaker 00

  Mary Ann, I know you've done a lot of medical paperwork in the last couple of years. So I'm curious, what is your take on this, this push?

• 15:19Speaker 01

  I'm with you. I love this application of AI. I think it's one of the most promising and important ones that we've talked about. If you've had a loved one or yourself been hospitalized anytime recently, you will know a few things. One, there is a massive shortage of nursing staff, of staff in general. Communication is not great. I have personally found that even if something isn't quote someone's record, very few people have the time to look through an entire record of a patient. Things are missed all the time. I saw this with my mother recently. She was not given a very important medication she needed, hence delaying her recovery by weeks, all sorts of things, all sorts of real world examples I could bring up.

• 16:02Speaker 01

  So the idea of AI coming in and making things easier not only helps the staff, it helps patients who who are suffering. They're the ones that are paying the price of all these things. So I love this. I love this company. I'm excited about it. It's raised $70 million in a series B co-led by Kleiner Perkins and OpenAI startup fund. So let's go, Ambience Healthcare.

• 16:26Kirsten Korosec?

  I had a technical question, Alex, and I don't know how deep you got into this, but so this is providing an operating system for healthcare organizations. So how is this different from like any other software? And also importantly, better than existing administrative software out there?

• 16:43Speaker 00

  Well, I know this mostly from watching my spouse who works in the healthcare profession. So I know what current tooling looks like in terms of what she has to go through. And a lot of this boils down to EMR systems, so electronic medical records, which are run by a couple of major companies in this country, including Epic, which is not Epic Games as an Epic Games like store and so forth. It's the other Epic, the less epic Epic, you might say. The thing that I'm very excited about here is, one, the partnership with OpenAI, I think, tells us probably where they're getting their models. So we're dealing with cutting edge stuff. I doubt OpenAI would invest in them and then send them over to Gemini Ultra from Alphabet, for example.

• 17:24Speaker 00

  So we know the place where this stuff has to work. We know the models that are being used and we know. The work that's required. The thing that I think makes it different than other bits of software is that it's built tools for different parts of the doctor's experience or the nurse's experience. So it has a way to analyze past conversations. It has a way to look at after visit summaries. And so they appear to have taken AI and then applied it to specific tasks in the medical world. And to me, I think that focus is super cool, because I don't think you could build an AI tool today that does everything. But I do think different applications that add up to something quite large, hence the OS point, is very interesting and potentially awesome.

• 18:05Kirsten Korosec?

  Yeah, it looks like there's almost, like you said, an application that is analyzing past conversations, one that is supposed to improve handoffs between specialists. That's a really important one. After visit summaries. And so all of that looks really compelling. You know, one of the downsides of AI has been, is there a potential for hallucination or, you know, that risk? So the way that this is confined, is that even a risk? Like, could it introduce a hallucination? Or is this the latest example of using free ranging AI, but in such a limited way that it would prevent that from happening?

• 18:45Speaker 00

  Okay, so I'm gonna go over my skis here, and I may sound very stupid. So if everyone listening to this is better at AI than I am, feel free to mock me, send me a tweet. But Ambiance Healthcare is not alone in pursuing this kind of like doctor copilot AI strategy. So there's a lot of people working on this. I don't know who's gonna get it right first. But remember when OpenAI announced that you could build your own GPT? One thing that I tried there was uploading my own information. So essentially, you can go and kind of like give it stuff, and then it'll have that in its, I don't know, brain or whatever. What I found when I was tinkering with this is, it's very focused on using what you bring to it versus trying to invent something. So I uploaded

• 19:27Speaker 00

  some of my blog posts and tried to make it like an Alex GPT. And it was very focused on just pulling from the information I had given it. So when I gave it three articles and then asked it a question about Metallica, it was like, interesting question, have you heard about SaaS gross margins?

• 19:43Speaker 00

  So it was pretty anti-hallucinatory. And in fact, it was almost like a little boring. So I think that at least what I have seen in the AI world, when it comes to bringing proprietary data to these models, it does seem that in those cases, hallucination is less of a risk, not a zero risk. Not trying to say it's been obviated, but I don't think it's quite the same thing as we've seen when it comes to like inventing legal briefs and so forth. So we'll have to see. Clearly, Kristen, that's one of the key questions that we have about this, but we'll see how it unveils. I don't think Kleiner, Perkins and OpenAI would be putting this much capital into the company if they didn't have some answer to that. So we'll see how it plays out. Now, we have to take a very short break, but when we come back, Latin America and why its startups aren't getting the respect they deserve.

• 20:30Speaker 00

  Mary Ann, if there's one thing you love besides fintech, it's Latin America. And we have a grip of data on Latin American software companies. And I have many, many thoughts about this, but I want you to walk us into it.

• 20:41Speaker 01

  Well, Anna Heim, who does a brilliant job of covering the region, unpacked SaaS startups in Latin America and how they're different from their US peers. Her findings were unsurprising to me as someone who's been covering the region for a few years now. There are, you know, some differences in the startup ecosystems in both regions, primarily the availability of capital in Latin America, even though things have changed and there was this rush of capital to the region a few years ago, it's still not nearly as accessible there as it is here. As a result, companies there do tend to operate in a much more lean manner. And that's reflected in the SaaS world as well, according to Anna. Interestingly, she

• 21:24Speaker 01

  found something related to customer acquisition cost payback. For example, she says in LatAm, it typically is about 32% lower than their US benchmarks. And in one case, it was a dramatic difference. She compared two companies in the same space and one was, I think, 79 months of a CAC payback. That's for DocuSign. And then a company called ClickSign had a CAC payback of 5.6 months. So anyway, I'll stop there. But lots of interesting points that Anna made.

• 21:54Kirsten Korosec?

  Those points are really interesting to me, those data points. And I'm wondering, what is the primary driver? Is it just because, because there isn't as much money going towards a startups? They have to, they're forced to create very efficient business models? Or is there something else at play? I mean, that seems like the obvious one, but is there anything else happening?

• 22:14Speaker 01

  Mm hmm. I think that's the primary driver. And I talked to New Bank's CEO last year for equity, actually, on a very similar subject about the fact that in Latin America, it's different. The ups and downs in the economies, companies are kind of always braced for the worst. They operate that way, like that the worst could happen at any time. They, they're not operating under their assumption that they can just go out and raise more money. So they do, they do tend to have more runway. Another point that Anna found, she said that the median Latin company with more than 1 million ARR still has 15 months longer runway than their US counterparts. So yeah, I think that, I think that's the main driver, Kirsten. It may seem too obvious and simple, but it's, I believe it's reality.

• 22:58Kirsten Korosec?

  One of the more interesting examples was this Argentine startup that's hoping to disrupt through the construction space. And for a company in Argentina to be operating successfully is really interesting because inflation is absolutely insane. I think it has one of the highest inflation in the world. And so it's not just dealing with small amounts of money or less money than then say their counterparts in the US, but also runaway inflation and some other volatile economic conditions.

• 23:25Speaker 01

  Right, exactly. And I, again, I think because that is something that, that you see a lot, unfortunately, in Latin America, and Brazil has had similar issues. These companies kind of, they're just, they're not as shocked, you know? They're not as shocked by them as we are in the US when something even, you know, when interest rates go up and everyone freaks out. I feel like in Latin, they're just like, okay, it's another, you know, another case of crazy inflation, we'll deal with it, keep going.

• 23:50Speaker 00

  I think that's a really great way to think about it because what have people been screaming from the tops of every building and tree since we started to raise rates in the US? Which is, we need to stop raising rates, this is not good for business, they must come back down, what are you doing? Stop, stop, stop, stop, stop. I think we kind of have a bias in the US towards the expectation of an incredibly business-friendly climate and strong economic growth as the baseline. That's just a cultural moat versus in Latin America, there might be a little bit more anticipation of tougher times for business. So that all makes good sense to me. I have some other hypotheses, though, about why this is the case, why we're seeing startups in Latin America have better SaaS metrics. I wonder if their social media channels are as stuffed, for example. I mean, there was a period of time when you could buy ads on Facebook that were relatively cheap, and then Instagram was relatively cheap.

• 24:35Speaker 00

  All that's been kind of like gamed out in the US market, which is why it's very expensive to grow here. It may be the case that those channels are less gamed out down there and therefore it's easier to acquire customers less expensively, which might be a kind of secular advantage to Latin American software companies. My question, Mary Ann, though, is, you know, you and I have written about together the rise of Latin American-focused venture capital and the decline of Latin American-focused venture capital. But given these numbers, it seems like a, I don't know, if I had, if I had a $10 million fund and I had to pick a market, it seems like you can make a lot of money betting on these very efficient Latin American SaaS companies compared to their US peers.

• 25:17Speaker 01

  Yeah, I mean, you know, I would agree with that. And numbers are down, but they are also down everywhere in the world. So 2023, according to CBE Insights, Latin American startups raised $3.3 billion across 819 deals. That compares to $7.5 billion over 1,413 deals in 2022. Interestingly, though, last year, 83% of those deals were early-stage.

• 25:41Speaker 00

  Well, that's, are you saying that's good or bad?

• 25:44Speaker 01

  Well, I mean, I actually think it's good. That shows there's still a lot of promise and potential and investors see that potential.

• 25:51Speaker 00

  Absolutely. You could also flip the coin and say that shows a dearth of late-stage capital availability in the Latin American market. But that actually does point towards these companies being essentially break even to profitable-ish per Anna's story because if you don't have an ability to go out and raise a $100 million Series D check, you probably want to make sure that you're not burning too much capital so you can self-fund. Doesn't mean that exits will be as frequent as people might want, but doesn't imply that startups there are more durable for any kind of economic change or potential downturn. So I don't know. There's been a period of time in which SaaS has been too much an American and Northern European phenomena, but now we're seeing it really do better in big markets

• 26:34Speaker 00

  of Latin America and India. And so I think it's pretty cool to see the kind of, not the Yassification of the world, but the Sassification of the world. I'm so proud of that. I could literally explode.

• 26:46Speaker 01

  I can tell. I can see it in your face.

• 26:48Speaker 00

  Oh, man. Kirsten, on the last point about Latin America, I know there were a bunch of scooter companies that blew up down there back when Bird and Lime were also taking off in the US. Did those companies have a similar trajectory as some of their North American counterparts?

• 27:04Kirsten Korosec?

  I am less clear about what's going on in the mobility market these days down there, and it's a good reminder to get back into it. But there was a period of time where a lot of it was around like the sharing piece, but also was like very much connected to their subscriptions or like even a financials angle to it. And I was getting a lot of inbound, let's say, pre-COVID, and that has definitely fallen off. But is that really reflective of what's happening in the marketplace? I don't necessarily think so. There was a recent report that came out, and I'm not sure, Mary Ann, if you have any insight, if you've seen like specific, not just mobility, which is what I focus on, but specific categories of where SaaS is being applied more.

• 27:50Speaker 01

  Well, obviously in fintech is where I'm going to be noticing the most. Yeah, I am seeing it applied more there. Honestly, I can't speak to other industries as much.

• 28:00Speaker 00

  Well, we'll be able to know when the growth in SaaS has reached its zenith, when we start to hear about subscription fatigue in Latin America as we do up here in the US, for example. I think that's when things have been overly subscriptionized. Now, to close off, Kirsten, you had a very interesting thesis about the rise and fall of advertising dollars and what that means for the broader economy. And we're going to use that as a segue to talk about some tech earnings and also the state of startups.

• 28:25Kirsten Korosec?

  Okay, oh, you're just handing me the mic. Okay, so I get the platform. Thank you, thank you. Well, we were talking about this earlier this week because, you know, we were looking at different earnings, Snap, and we were talking about Meta. And one of the things that we were talking about is like how they had very different results and what was pushing that forward or why was that happening? And I was reminded of something I learned very early on back in the Great Recession days, which is one of the first things that companies get rid of when there is uncertainty in the economy is advertising. It is considered a leading indicator of a recession, even oftentimes looked at before

• 29:08Kirsten Korosec?

  there's an official recession, which is multiple quarters of falling growth. And that's kind of what we've seen in one case, but not in the other case. Advertising is also interesting in that it's one of the last things to come back, even when an economy is recovering. So it's a leading lagging indicator in a lot of ways where you can have a scenario in which companies cut back, they cut back on advertising first, then ultimately usually what happens is that then job cuts happen and other cuts happen and efficiencies. But then even as an economy recovers or you start to feel more confident about what you think the economy is going, you still hold off on those advertising dollars.

• 29:52Kirsten Korosec?

  The question is, what is happening as it relates to Meta versus Snap?

• 29:59Kirsten Korosec?

  Because it seems like advertising has returned for one and not so much for the other.

• 30:05Speaker 00

  Yeah, so you know, tech ranch cares about startups. We are not CNBC. We don't aspire to become CNBC, but we also can't not pay attention to at least a subset of the performance of the major tech companies. So when Meta rolls out a set of numbers that blows the socks off of Wall Street and starts to drop a dividend, it makes it seem like the advertising market is back because what does Facebook make the most of its dollars from? Well, selling those advertisements next to your feed and so forth. But then there's the case of Snap and Snap is a smaller social company. I think they call themselves a camera company, but let's just call them a social media company because that's, I think, a bit more fair. And they had a disastrous set of earnings. They lost about 30% of their market cap in a single day. So how to kind of figure out what's going on here?

• 30:50Speaker 00

  I think the way that I think about this is that every tech company eventually starts doing ads in some way or form because they end up with enough scale in terms of consumer or enterprise eyeballs that they can't not because it's too lucrative. This is why Microsoft has an ads business. Amazon is an ads business. Apple makes money off of ads. But Snap might just be too small to catch the same tailwinds of Meta, Kirsten, if that's fair?

• 31:14Kirsten Korosec?

  Yeah, I think it's absolutely fair, but and I also wonder about just demographics.

• 31:18Speaker 01

  Yes, exactly what I was thinking.

• 31:22Kirsten Korosec?

  Well, I'll hand it over to you, Miriam, but I do think demographics might matter here and I'll queue you up by this. Facebook, I think, has an aging demographic compared to Snap and then I'll hand it to you.

• 31:32Speaker 01

  That's a diplomatic way of describing it. I think that Facebook has actually been, I don't know if criticized is the word, but or slammed even for being a social media platform for older people, whatever you want to say. Snap historically has focused its main users are much younger people. So I actually, as a person who is maybe perhaps considered a little older, I'm not like some huge fan of Facebook or Meta, but, but hey, I mean, don't discount older people as users because Meta is coming back, it seems like. And I don't know if it's all ad revenue driving it. It's kind of a comeback story for Meta. I feel sort of bad for Snap. I can't articulate why.

• 32:16Speaker 01

  My, my main experience with Snap is just seeing my children use really funny, hilarious filters and, and we laugh at them.

• 32:23Speaker 00

  Yeah, the advertising market is it's almost too big to discuss with just such an umbrella term because we're talking about television advertising, brand advertising, outdoor advertising, digitally targeted advertising, remainder advertising, programmatic advertising. There's just a bunch of things. But what Facebook as part of the meta world has is an enormous chunk of the world using the services, insanely powerful granular targeting tools, and multiple categories of ads or different types. Because what you see on Instagram is not quite the same thing as you see on Facebook, which is not quite the same thing you see elsewhere in the meta world, if you will. Whereas Snap has more of a single platform, more of a single target demo. And so I guess when you think about recovery and ad spending,

• 33:08Speaker 00

  maybe it's not surprising that the older leaning social network platform is doing better than the more unified child focused service.

• 33:18Speaker 01

  Yeah, I mean, and let's face it, children and teens may want to buy a lot of things, but they don't always have the money to do so.

• 33:24Speaker 00

  Truth. When I was a teenager, I had no money at all. And I lasted into my twenties. And I was by a terrible effort as a candidate because all I could afford was PAST. And that was a sad time in my life. Now, looping this back to the Kirsten's point about economics, Meta's results, and I would say other data points from tech earnings so far are, I would say, net positive for advertising. So Kirsten, does that imply to you an economic recovery that we might be able to consider for the broader tech ecosystem when it comes to spend?

• 33:53Kirsten Korosec?

  So this has been the weirdest economic recovery status I've, I think, been in my adult life. The recession was wild. It was wild as a reporter. But this one is very odd because people feel generally bad, poor forecasting of the economy and do not feel well suited in it. And yet, unemployment's the lowest it's been in decades. Consumer spending is up, and job growth is up, except for the tech sector. So it's hard for me to make a projection because humans are involved in human behavior. But I would say this, it seems as if in the tech sector,

• 34:36Kirsten Korosec?

  you almost have to treat it as a completely separate entity than how the rest of the economy is operating right now. Like, we're still seeing layoffs. I do see, let's say, glimmers and light of positivity on the financial front for the tech sector. But will I go as far as to say that there will not be a stepping back and forth, a little bit of a roller coaster? I'm not, I'm not confident enough to say that. I think that one company's earnings isn't really enough to make that projection. But let's see how everything goes. I would say that the first half of the year is going to be really critically important about how the whole tech sector is doing.

• 35:18Speaker 00

  I agree. And what you outlined there was essentially what people are calling the vibe session, which is that the vibes are bad, even if the economy is kind of okay. We don't have time to dig into kind of pop economic analysis on this show, sadly, because that would be an absolute treat. But I'll just wrap us up by saying this. The advertising picture, like I said, I do think is net positive, even though we did see some weakness at Snap. And I think parts of Google's earnings were quite what kind of the street expected. But when you mix in a net positive advertising forecast, which the positive economic vibes that brings with it, and what we're seeing on the AI front involving price points, demand, and impact on earnings, to me, I do think that we are starting this year on a firmer footing than last year from the technology industry

• 36:00Speaker 00

  perspective, and that bodes well for both tech companies, large and small. So I'm kind of bullish, and I wanted to end on a positive note. So that's where we'll leave it there. If you don't agree with us, well, you know, keep your cynical hat on and keep tweeting about how the GDP numbers are fake, like everyone else is. It's a lot of fun. All right, we have to leave it there. Kirsten and Mary Ann, thank you so much, as always, for being on the show. And if you want even more from the Equity crew, we are EquityPod over on X and Threads. And if you're into short form video, we are doing some experiments over on TikTok under the handle TechCrunch Pods. We're back on Monday. This is Equity. Goodbye.

• 36:33Kirsten Korosec?

  Bye.

• 36:35Speaker 00

  Equity is hosted by myself, Alex Wilhelm, and TechCrunch senior reporter, Mary Ann Azvedo. We are produced by Teresa Locan Solo with editing by Kell. Bryce Durbin is our illustrator. And a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening, and we'll talk to you next time.