Ep 31: MailChimp selling for $10b?, 1-800-Contacts sues Warby Parker over Adwords, Will Yahoo rise again?

Part 1 Video Starts 0:13 - Rumors of Intuit buying MailChimp for $10 Billion validate thier SMB / Agency strategy

Part 2 Video- Starts 7:26 - Will 1-800-Contacts suing Warby Parker over trade name use in Adwords upend the rules?

Part 3 Video- Starts 13:58  - PE firm Apollo Completes Yahoo Acquisition, Yahoo could succeed but will they succeed?

Reference Articles

1. Intuit in talks to buy Mailchimp for more than $10 billion
2. 1-800 Contacts lawsuit takes aim at Warby Parker's ad search strategy
3. 1-800-contacts district Court Complaint Filing
4. PE Firm Apollo Completes Yahoo Acquisition

Transcript:

Greg: [00:00:00] All right. Hello. Here we are. Again, everybody. Mike, David and me, Greg. And we're talking about, uh, the weekend search, social and local calmer. Uh, episode 31, my first haircut in about eight months, although it doesn't look like a haircut. Exactly.

David: But for those of you listening and not watching on YouTube, you are really missing out Greg's that's right.

Greg: It looks, it looks better than it did. It was really ragged. So I finally got a haircut and, um, here it is in all its glory. Uh, anyway, so there's there's as

Mike: always, yeah, it wasn't a $10 one either. I can't imagine.

Greg: Yeah. I spent, I spent the haircut was so I had been paying a hundred and then the person that I was going to raise it to 120, so I wanted to find an alternative.

And so I went to somebody. And how did you find

David: that alternative?

Greg: Uh, [00:00:59] word of mouth. My wife went to this person, so she's charged me for it. And then I gave her a $20 tip cause I paid her with a credit card. So there you go. That's

David: the whole thing. Amex has a 50% processing fee though. That's a pretty

nice

Greg: tip.

Yeah, well, it was, it was 50% of what I was going to pay so I could figure it out. It could be pretty generous with, I see. I see. Okay. All right. And that's the news this week. So thanks everybody for joining us. All right. Anyway, so we've got, we've got a lot of as usual. There's a lot of interesting things to talk about.

We are only going to talk about three things and David, you're going to lead us off with MailChimp.

David: Yeah. As a story, uh, earlier this week, that Intuit is in talks to buy MailChimp for 10 billion, with a B dollars. Um, which is. An eye-popping number among other things. Uh, the Bloomberg article that I read, uh, indicate this is all sort of anonymously sourced, internal, you know, potentially internal [00:01:58] sources to the deal saying that MailChimp is doing $300 million annually, uh, in EBITDA, which is also a huge eye-popping number.

So not typically a, uh, A profit level seen. And in many startups, uh, I, in our private slack conversation, Greg, I was sharing that, uh, you know, Yelp's market value is something like two and a half billion. Um, and they would love a $300 million EBITDA or their investors would. Um, so it's just, it's pretty staggering.

Like how much bigger, uh, if this deal actually goes through, like how much bigger of a company MailChimp is than some of the best. Names in this space. I'm obviously a huge MailChimp fan. I've used MailChimp for my own newsletter. Uh, we integrate with the first integration that we did with tidings. Um, it seems to be a very forward-looking company.

They have added features faster than just about anyone in the email marketing space to the point that it's hard to even [00:02:57] consider them a purely email marketing platform. Now they build websites. You can do e-commerce, you can run social ads. You can. Uh, customer journey automations. I mean, it's a really full, full, uh, fully featured suite and, um, just a really impressive, um, you know, pro uh, execution of their product.

Their API APIs are tremendously reliable. Um, and I think it's, to me, it's great. It's a huge validation of a couple things. Number one. Small businesses are their customers. The fact that a small business, a SAS company is, is doing so well with an exit and in particular, a small business SAS company that is so product led.

They have a very, uh, generous freemium model. They've had a freemium model, um, their entire existence. Uh, it's just really like encouraging to entrepreneurs who think similarly like myself. And I think Mike, like you do as well. Um, in terms of the, the, [00:03:56] the value in building a product that serves a small business audience, and that isn't reliant on some of the traditional, uh, harder sell strategies that so many other companies use.

So that's number one, number two, they also have a really strong agency channel. And for those of you listening, I know we have a lot of agencies, subscribers. Um, I think that it's validation for agencies as a market as well. Um, which is, which is really cool. So I, um, I, I'm not sure how I feel about a company like Intuit being the acquire, but I couldn't be happier for the MailChimp team and, and founders, if this actually goes through so

Mike: good product fit for Intuit in the sense that it's very complimentary, more comprehensive, more sticky, but you Greg earlier noted.

And I think David did too, that Intuit hasn't successfully leverage these previous acquisitions.

Greg: Well, Intuit has been, has tried multiple times to acquire ad-on marketing [00:04:55] services for it's pretty massive, you know, a small business audience that uses TurboTax and, and, uh, uh, what's the accounting software, QuickBooks QuickBooks, right?

Exactly. So, I mean, for literally a decade or more. Um, you know, they originally acquired step up commerce years ago. That was ultimately killed after a couple of years of trying to integrate that with QuickBooks. Um, they acquired demand force, uh, within the last five years, I think. And then ultimately it

David: wasn't quite that recent.

I was longer than that. I think it's

Greg: been seven or eight at this point. Okay. And at any rate they acquired demand for us and they spun it out again. Or they got rid of, um, they have been for a long time looking for some compliment to their core services that would, you know, for marketing for their audience.

And, um, and you know, I, I don't have a lot of confidence in the company based on what I've seen. They, if they. [00:05:54] MailChimp more or less intact as a standalone business that they could just refer their customers to with whatever deals or incentives. I think that's going to be the best approach rather than trying to integrate the company into their, into their culture.

I

David: couldn't agree more. I mean, if the Intuit folks are listening to this podcast, you should just have an, a sync button with sync customer sync, QuickBooks customer list with your MailChimp audience and leave it at that. Don't try to do anything deeper on the integration.

Greg: Couple of couple of quick, additional facts that I picked up before the call.

Um, you know, I don't know how accurate they are, but I assume they're fairly accurate. Um, as of 2019, uh, MailChimp had something like 11 million customers and, uh, and an extended audience of recipients of in the billions 4 billion was, was a number that I sent. Um, and then revenue, top line revenue, something like 700 million in 2019.

So really massive. And they're bootstrapped. I don't think that they [00:06:53] took, you know, th the amount of money that they're taking there, if any, is just minimal or non-existent, they've been around for two decades, essentially. So this is, I agree. This is a great story. It's, it's a really strong product and it's, uh, it's a, it's a good buy for Intuit provided that they don't mess it up as they have in the past.

David: So nothing else to add? Well, well summarized.

Greg: Okay. All right. And then, um, uh, moving into a completely different realm, uh, search marketing, um, and legal, uh, this week, there was a, a story that's really been, been around for a couple of decades in one form or another, a one 800, a hundred contacts, um, trademark, uh, keywords and Warby Parker.

Mike: Yeah. So I was just struck by it. I mean, obviously if one that it's still a question that one is in inner context, thinks they [00:07:52] have enough legal basis to stop or re Parker from advertising on 1-800-CONTEXT name on the likes of Google. They contend that Warby Parker is leveraging 1-800-COUNTRIES.

Intellectual property and deceiving consumers, where that I looked at the ads, they look like ads to me and yeah. And historically Google, this case law has generally fallen in Google's favor that allow businesses to advertise on competitors' names. It's kind of an annoying feature.

David: I was gonna say, having been on the receiving end of this, it does suck as, yeah,

Mike: it does suck.

Right? So on the one hand and sort of support 1-800-CONTACTS effort here, I just, you know, I just questioned the logic of it. It doesn't, I know that 1-800-CONTEXTS has historically been very aggressive with this. They went after a bunch of companies with their lawyers and those companies all agreed to not do it.

And [00:08:51] then the FTC went after. 1-800-CONTACTS and they, for trying to constrain trade with these agreements and

Greg: which is for which is precisely what they were doing in a certain way of looking at it.

Mike: Yes, absolutely. But those were again, agreements. This is not an agreement they're going into open court to demand that Warby Parker stop advertising, using their name to trigger the ad.

And historically that's been, there's never been a clear cut case that a business that has. Even when the courts came down in favor of saying that wasn't quite right, they never awarded monetary damages. So it never was sort of worth it. Um, I mean, 180 9 contexts, particularly aggressive, obviously PE money.

It's fascinating to me that the money is that this is the best expenditure of the money, but it could apply. As the am totally

Greg: be a it's problematic about it is the, the [00:09:50] uncertainty that it creates. Right? I mean, for the longest time, it was clear that you could bid on trademark terms as keywords. You couldn't use trademarks in the ad copy itself, unless

Mike: you are going to do a direct comparison.

When you got to the site, then you could, so you could say. Uh, gather up versus great us comparison if you actually took them to a comparison page. That was a legitimate.

Greg: Okay. Yeah. But in general, you couldn't use trademark terms in the, in the, in the ad copy itself, but you could use them in the underlying keywords.

And that was pretty much settled law for well over, I don't know, 15 years or something like that. And now this creates a certain level of ambiguity and uncertainty that, um, one, a hundred contacts can potentially exploit to monopolize its own brand. Uh, terms, which is what it's trying to do. I mean, the wa Warby Parker thing, they're saying, uh, you arrived at a landing page that looked like the 1-800-CONTACTS page, and there's an element of consumer deception.

But as you point out that doesn't, maybe they changed it, but it doesn't really seem to [00:10:49] be the case, but this is, this is a problematic, um, this is a problematic decision by the second circuit court of appeal, which is a New York based in New York, kind of telling you. Uh, 1-800-CONTEXTS that these settlement agreements, which block the use of their keywords were, were okay.

And not in restraint of competition or trade or whatever. So we're going to see, well, you know, I don't know how it affects the rest of the industry, but I was

David: going to say, what, what are the implications for using trademark terms and title tags moving forward? I mean, if, if advertising is illegal, what's

Greg: potentially where,

David: where does this go?

So it definitely seems like a problematic, uh, precedent. If it ends up holding up.

Greg: I mean, I think that, you know, typically cases get to the Supreme court sort of nonpolitical cases get to the Supreme court when there's a conflict in the, in the, uh, in the law of the different circuits, right? The federal, the federal appellate courts have different decisions on the same topics.

Then the Supreme court will [00:11:48] ultimately try and resolve those in favor of clarity for everybody. But somebody has to, you know, that there has to be an active case. You know, it's, it's, it'll ultimately probably go there, but it's in the, in the interim, it could be years of like confusion and weird lawsuits and other litigants could step in and try and do similar things, you know?

And then when you have a conflict in the laws, in different jurisdictions, it's a big problem on the internet because there is no geography on the internet, you know, essentially. Right. So you mean you get the law of one jurisdiction, people trying to invoke the love, the second story. When it's outside of, you know, the physical region that, that appellate court typically governs, but that's a,

Mike: it seems like a big case to me.

And I agree. I'm just curious about it and it's

David: definitely worth highlighting.

Mike: Okay. I will follow it as we go forward, but I find it fascinating that they'd waste so much money on it, but obviously they have a lot of money to

Greg: waste. So, I mean, I think what they're trying to do [00:12:47] is they're trying to, they're trying specifically to prevent competitors from selling.

We're offering a similar product for less money, you know, and, and they want to lock out competitors from using their brand and other keywords that they think they own or control. And I wonder if it will like create this rush to trademark all these terms by all these trends. Exactly. Right.

David: You know, I'm trademarking SEO, right.

Somebody tried that years ago,

Greg: was it? It was that remember, uh, re

David: readdress deals successfully fought. Yeah, on behalf of the industry, so

Greg: well, kudos to her. Yeah. Um,

Mike: all right. So trademarking here though, is, is their brand name 1-800-CONTACTS? Well

Greg: that's yeah, but then, then, then, then people will get into other areas where they're sort of dubious, you know, their tagline.

Yeah. Example. Yeah. Or, or just, um, you know, I mean, uh, [00:13:46] The people, people have all kinds of crazy ideas about trademark trademarks and what they think they're entitled to control. But, um, so, so there was a lot of, there was a lot, there's a lot of small businesses yeah. That we put in the newsletter over the last couple of weeks, about bit ad spending and small businesses.

And I was interested in potentially talking about that, but I'm not going to, because we've talked about it recently, go, go look at the news. Um, we'll come back to that issue about small businesses and whether they understand their audiences and where they're spending their money, the, the, the, the kind of fun item is, is, uh, that we'll end with is Yahoo.

So yeah, so Apollo possibly

Mike: being upbeat, right?

Greg: Yes, it will be upbeat totally up to you. All right. Just checking it's completely. It's just a happy story. Nothing. No, nothing negative about it. So, um, so, uh, private equity bought Verizon media from Verizon, the telco, and it's now been rebranded [00:14:45] Yahoo and the AOL brand is dead and Yahoo now.

According to the press release that the transaction has been concluded this week. And now it's, everybody can seize the great opportunities that lies ahead. And, you know, it's just, Yahoo has been through so many things over the years. Um, they still have brand equity. I mean, you know, how many brands can you name on the internet?

You could probably, you know, you guys could probably name a whole bunch of them, but the average consumer can't name that many brand. And Yahoo is probably one of those brands and they still have a lot of traffic. Um, they may not be the number three site on the internet, but they're still top 10. Um, and there's, and you know, if you get outside of, uh, New York, Chicago, San Francisco, LA Seattle, these, these urban centers, you know, people still know Yahoo, still use Yahoo.

There's a cynicism about Yahoo. So what do you think about the outlook for Yahoo now?

David: I also think there's a whole new set. Netizens that, you know, [00:15:44] in gen Z that weren't around when Yahoo was a thing. So there, to me, there's a possibility that Yahoo becomes sort of the first retro internet brand. That's cool.

And the younger demographic, I mean, that's, you know, maybe has the same phone. Well, exactly. So I think that they have strong play in one of, uh, you know, in Yahoo sports is actually quite a strict. Contents site, one of the best beat writers in the NBA, Chris Haynes was their lead lead writer. He's like, you know, one of the top guys, and they've tried this play with news with Katie Kirk and that sort of thing historically.

But I actually think there's a real, obviously they have a ton of domain equity because they're one of the first domain names on the internet and they got all these links, you know, back in the directory days. So they have a ton of potential to still bring in search traffic. There's a lot of value in first party data.

I think, I mean, I have no idea on the financials if it's worth it. But I think from a, from a, a concept standpoint, it seems like a bet worth making to someone with deep pockets. [00:16:43] So

Mike: it's about the same amount of money that they're paying for MailChimp, right? Just under 10 billion.

Greg: Well, they, I think they bought the Verizon media for 5 billion and some of that was stock.

Yeah. Yeah. It was, it was, it was less. You know, I, I, I agree, David, that, there's a kind of interesting provocative opportunity here. I mean, the question in my mind is, is the private equity firm going to invest in Yahoo? Are they just gonna try and extract cash? They will. They will ultimately, I

Mike: think the latter, I mean, what private equity, most private equity attorneys have a five-year horizon.

You need a much longer horizon to build a business and they're in it for the. Extraction

Greg: well, but I mean what's, so the end game is like another IPO, right? Spin it back out into the public market and cash out. But if you, if you do that, you have to have some sort of story that you can tell the market.

The brand is on the upswing. We're seeing growth. And to some degree that will require investment. I think, you know, in [00:17:42] certain businesses. So it's

David: possible that the next buyer of Yahoo is the one that actually makes money.

Greg: I mean, I think, I think that Yahoo small business, which at one time, years, and years and years ago was the big player still has an opportunity.

But as we've seen in previous discussions of what small businesses want and don't want. I, I don't think you can be another SAS tools business in a box, you know, not withstanding what we said about MailChimp. I think they're in a different position. You can't just say here, here's your DIY product. Now go do it.

I think they would need to do something quite different than what they've been doing in order to reinvigorate that, that it seems like the hardest thing

Mike: for

David: them to do. It seems to, I was going to say their consumer place seems like a much easier path to probably success and revenue. Yeah.

Greg: Um, although they're, they're, you know, they're, they've rolled out all these subscription products that sort [00:18:41] of are designed to supplement their, their traditional ad revenue.

I don't know how those. But, um, you know, it's, it's, it's um, I saw this, I saw this with the thing that prompted me to write about it was that faith Murphy who's in charge of small business. Uh, I think ads, sales or small business sales. Um, who's been at Yahoo forever. I mean, she's, uh, I would love to interview her because she's just a total survivor and she's been there years and years and years,

David: she was there during the OAuth.

Oh, I mean, oath,

Greg: is that correct? Yeah. Oh yeah. Before. I mean, I think she. I think she's a one dot O person. I mean, I don't know. I don't know if she predates Marissa Meyer. She may, uh, I don't know if she goes back to Terry Semel, but, um, she's been anyway, so she pro she promoted this on LinkedIn, you know, like now we're back and, um, you know, and I'm, I'm sort of rooting for, for her and for, for Yahoo, because, [00:19:40] um, as I said before, there's not correct.

No in the wake of all the crap that since search some curated set of recommendations in particular areas, I think that would be an interesting thing if they were to do it again,

David: for sure. Well, let's see if we can get faith on a future near memo.

Greg: I think, I think so. I think so. Yeah. I think she'll, she would do it.

I mean, I don't know how much. Dyshawn Yahoo in an honest way, she might be stick to talking points, you know,

David: everything, even under like the extent that she wants to share their strategy, as she knows it, I think would be like, yeah. Yeah,

Greg: it would be totally interesting. And she can talk about a lot of the small business stuff as well.

Yeah. Um, all right. On that happy note, we've come to the early conclusion of, uh, of this near your memo. Any final thoughts or reflections? That you want to,

David: I hope everybody has a terrific labor day weekend. Uh, I am really looking forward to it. Uh, I've got three days of golf in a row [00:20:39] lined up and possibly even with a new couple of new golf clubs, uh, if they arrive in time.

So hope everyone has an equally relaxing labor day.

Mike: Absolutely. If golf is relaxing for you, I have a little trouble envisioning you relaxing at golf. So.

David: Uh, intense. You'll have to come. You'll have to come out and play a few holes at with me. You know, you'll believe seeing is believing I'm a three club

Mike: golf, right?

Three wood off the tee, like five or seven iron and a putter. That's about all I can handle. And I can't handle those very well. So,

Greg: and I, and I played tennis. So you won't, you won't, you won't see me out there.

David: Well, enjoy, enjoy watching the us open that I hope, I hope they're able to finish all the flight.

Greg: Yeah. Yeah, exactly. Um, okay. That was a downer, David.

Mike: Yeah. Yeah. You really,

Greg: we were, we were, we were saying

Mike: doing good

David: shoot. Well, uh, it's always a great, a great tournament. I'm sure they will finish [00:21:38] just maybe not on time. So there you go. There we

Greg: go. Okay. All right, everybody have a, have a great weekend.

We'll see you next week.