#208: Space, Autonomous Delivery, Chatbots, Apps, & E-Sports

Starlink is the satellite constellation SpaceX is deploying for global internet access. This week President and COO Gwynne Shotwell announced that SpaceX is thinking about taking Starlink public in the next few years. Doing so would allow SpaceX to raise funds and remain private as it works on transporting humans to Mars.

Just this week, BroadbandNow Research reported that 42 million Americans do not have access to broadband. If that number is correct, then offering broadband service to the underserved in the US could represent an addressable market of roughly $10 billion per year.

The Federal Communication Commission recently voted to approve a $20 billion fund designed to ensure that rural America has access to broadband. SpaceX estimates that the Starlink constellation will cost $10 billion to deploy. A key question for SpaceX is how much its customers will have to pay for the antennae.

This week Nuro, an autonomous delivery startup, received the first exemption from US Federal Motor Vehicle Safety Standards to test vehicles without steering wheels, pedals, or side mirrors, as shown below. Partnering with Kroger, Walmart, and Domino’s, Nuro plans to launch 5,000 of its robot cars in and around Houston during the next two years.

Based on research suggesting that they will be able to deliver food for 5% the cost of human delivery, ARK believes that rolling robots and drones could reshape consumption patterns. Consumers are likely to opt for “just in time” deliveries instead of daily or weekly trips to grocery stores. As a result, food delivery as a percent of total food spending could increase from 1% last year to roughly 40% in 2030. While our research has focused on aerial drones, ARK envisions many different autonomous vehicle form factors emerging in the logistics space.

During the last two years, conversational artificial intelligence (AI) has enjoyed several breakthroughs. OpenAI’s GPT neural network has generated coherent, long-form text while Google’s BERT has reached human levels of comprehension and question-answering.

Google’s latest breakthrough is Meena, a conversational bot that can conduct an open-ended conversation with human-like behavior. Unlike previous chatbots that tricked human interlocutors by evading questions or admitting that “I don’t know,” Meena appears to follow conversations, debate abstract concepts, and create puns.

Google created Meena by training a large neural net with unprecedented amounts of data and compute, a tried and true AI technique. It fed more than 341 GB of public online conversations – 40 billion words – into Meena’s neural network, training a Google v3 Tensor Processing Unit Pod for 30 days. Meena scored 79% on the quality of its speech compared to the 56% scored by the previous state of the art AI and the 86% human baseline score.

While too computationally demanding for Siri or Alexa today, Meena hints at the promise of a production-grade AI chatbot at some point in the next few years.

Snap Kit, the developer toolkit for Snapchat, has created its second viral app after YOLO. With a user interface/experience that draws from dating services like Tinder, Hoop allows users to discover new friends on Snapchat. Hoop now has more than 2.5 million downloads and is #10 on the Social section of the App Store.

While Snap Kit has been around since June of 2018, it now is gaining popularity among developers looking to target a younger demographic. In its fourth-quarter earnings call this week, management noted that Snap now reaches more than 90% of 13 to 24-year-olds in the U.S.

We believe that Snap Kit could differentiate Snapchat as developers create new use cases for the platform, staying a step ahead of rivals like Instagram that have been copying its most popular features for the last few years.

In another example of Cash App’s innovative marketing strategy, last Sunday Square sponsored a Twitch stream of e-sports team ‘100 Thieves’ which received 100 million impressions and catapulted the Cash App to the number two spot on the Apple App Store across all categories. ‘100 Thieves’ is not only a group of video gamers but also a fast-growing lifestyle brand with $60 million in venture backing from investors like Sequoia, Group Arnold (the company behind Louis Vuitton), and Drake.

The partnership with ‘100 Thieves’ is another example of Cash App’s savvy marketing strategy which, unlike many competitors, is penetrating highly engaged communities and creating lasting network effects. Cash App’s approach differs from more traditional marketing strategies at fintech startups like Chime and SoFi. Chime recently signed a partnership to display its logo on the jerseys of the NBA’s Dallas Mavericks, a deal that could cost up to $20 million, while lending startup SoFi secured the naming rights to the Rams’ and Chargers’ stadium in LA for an estimated $400 million.

Partly because of unconventional marketing, Cash App enjoyed 3 million downloads in both December 2019 and January 2020, compared to the roughly 2 million that its larger fintech competitor, PayPal’s Venmo, attracted.^[1] For more perspective, Chime attracts approximately 500,000 new users per month, while SoFI has registered 7.5 million users since its inception in 2011.^[2]

[1] Source for Venmo sign-ups: ARK Investment Management LLC estimate derived from Venmo API.

[2] Chime had 5 million users in early September 2019 and 6.5 million in early December 2019, bringing the average of monthly added users to 500,000 for the three-month period between September and December 2019. SoFi registered users as of May 2019.