#284: Are Social Media Apps the New ‘Everything Stores’?, & More

This week, social media giant TikTok announced a partnership with Shopify to introduce in-app shopping and a host of other e-commerce features to its popular short-form video platform. This announcement marks the latest in a long list of social media sites dabbling in e-commerce. As a result, we are wondering if TikTok, Instagram, and other social media platforms will threaten the “Amazons” of the world.

In our view, social commerce offers a rare “win-win-win” for consumers, platforms, and retailers. For consumers, the top priority is convenience. What once defined Amazon’s moat – one-click checkout and fast shipping – now is ubiquitous thanks to third party solutions like Shopify. Moreover, like it or not, social media sites can use troves of data to personalize our shopping experiences.

As the combination of convenience and personalization enhances engagement, social platforms are likely to win either directly, through sales commissions, or indirectly, through advertising. Based on ARK’s research, during the next five years, social commerce is likely to grow 50% at a compound annual rate from approximately $390 billion to nearly $3 trillion.

For retailers, never has it been easier to set up shop and sell to a global customer base. With the reach of platforms like Facebook, Instagram, TikTok, Snapchat, and Pinterest, retailers have access to millions, potentially billions, of customers, a reach limited historically to the largest companies in the world.

In summary, social commerce combines the convenience of online shopping with the network effects of social media, powerful growth drivers that are likely to put pressure on traditional e-commerce sites. For more on this topic, please stay tuned for our upcoming social commerce blog this week.

This month, David Marcus, PayPal veteran who joined Facebook in 2014 to spearhead the company’s payments platform, announced that Novi wallet is “ready to come to market”. Novi is the new name for Calibra, the digital wallet Facebook announced in conjunction with Libra, its stablecoin blockchain infrastructure in 2019. Diem is the new name for Libra.

During the past two years, both efforts have struggled. As Facebook confronted political backlash over privacy, censorship, and other data related issues, major partners including Visa and Stripe withdrew from its stablecoin project. In addition, the Diem Foundation relocated from Switzerland to the US.

Powered by Diem, Novi now plans to go-to-market with “free person-to-person payments domestically and internationally” and, upon reaching scale, to offer other financial products and services – plans perhaps easier in theory than in practice. Throughout the 2010s, for example, Facebook Messenger offered free person-to-person payments without much success in the US and elsewhere. Informed by that experience, we believe Novi probably should launch Diem not in well-developed payments markets but instead in the cost-prohibitive remittances markets between developed and emerging currency corridors.

Nuro, the robot delivery startup, is building a new manufacturing facility in Nevada to produce “tens of thousands of robots”. To gather real-world data, train its fleet, and lower its cost of delivery, Nuro will have to scale its fleet dramatically. ARK estimates that, at scale, a rolling robot could lower the cost of grocery delivery by more than 80% to 40 cents per trip compared to the $2.40 on average that consumers “pay” to drive their personal cars to and from stores as they shop for groceries.

In other words, much like other autonomous vehicles, we believe rolling robots will turn non-market labor into real economic activity which, in turn, could cause a cascade of other economic changes. In response to dramatically lower costs and the increased convenience of deliveries, for example, consumers are likely to order groceries more often, reducing the space necessary to “inventory” them and hurting the demand potentially for massive walk-in pantries and oversized refrigerator/freezers.

If US households were to shift from 1.6 grocery trips on average to 5 deliveries per week, ARK estimates the grocery delivery market alone could be a $12 billion opportunity. That said, having partnered with Fedex for short-haul delivery, Nuro seems focused on more than groceries and a much higher total available market (TAM). Perhaps the last-mile warehouses of the future will shift toward autonomous trucks, aided by smaller rolling robots that will deliver packages to consumer doorsteps.

As discussed last week, molecular diagnostics companies and research scientists are racing to discover and validate new disease signals called biomarkers. We believe biomarkers for the earlier detection of cancer will be vitally important. Early-stage tumors shed few molecules into the bloodstream, requiring scientists to squeeze information out of each molecule. Some liquid biopsy approaches analyze hundreds of cancer-associated DNA mutations. Other approaches analyze thousands of methylation sites—places where DNA has been chemically modified. Delfi Diagnostics, a private cancer screening spinout from Johns Hopkins University, has published a new approach that synthesizes information from millions of DNA fragments. In our view, this approach, called fragmentomics, could be one of the most sensitive and inexpensive techniques for early cancer detection.

Though not unique, Delfi’s recent study showed the power of fragmentomics as a standalone biomarker for early-stage lung cancer. In a prospective cohort (n=431), Delfi’s test detected 90% of lung cancers at 80% specificity with a simple blood draw. Importantly, it detected 76% of cancers in Stage 1. The study’s authors also offered some thoughtful ideas about implementing the test upstream of the current lung cancer screening standard of care which involves low-dose CT scanning (LD-CT). Delfi’s pragmatic approach works with the current screening paradigm, not against it, suggesting that clinical demand for the test will increase much more rapidly than otherwise would be the case. In our view, Delfi’s test will improve the health economics and lessen the risk of overtreatment associated with LD-CT scanning.