Walmart And Google Have joined forces To Take Down Amazon, Plus Trouble For WPP

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“Most of our shrinkage came in the second quarter and we couldn’t adapt fast enough for that.” WPP CEO Martin Sorrell on the ad company’s poor performance. George Costanza quickly came to their defense, yelling: “They were in the pool!!”

Market Snapshot

  • U.S. stocks ended lower following rumors of a government shutdown.
  • Snap shares finished up 3%, capping a 25% run over the last two weeks.
  • The dollar fell ahead of the Jackson Hole Economic Policy Symposium.
  • Oil prices rose as U.S. crude inventories fell for an eighth-straight week.

Calling Don Draper

Yesterday, shares of the world’s biggest advertising company, WPP, fell 12%—the largest drop in more than 18 years.

Since the late 1980’s, WPP has been running ad campaigns for multinationals that have lured the consumer into buying everything from Coca-Cola to Dove soap.

But the trends…they are a changin’. Lower ad spend by consumer goods manufacturers and disruption from technology have hurt large, traditional ad agencies (like WPP, Omnicom Group, and Publicis) that have been slow to adapt.

Let’s take a stroll through the changing market

Unilever (WPP’s biggest customer) recently cut its ad volume by 30% for this fiscal year, while tech titans like Facebook and Google continue to steal market share.

And the trend doesn’t seem to be slowing: a study of 600 agencies that advertise for the Doritos and Tropicanas of the world found that digital marketing has quickly surpassed the likes traditional marketing (think print and TV ads). This new, cost-efficient, and quick-hitting form of advertising is hurting WPP and its peers.

If WPP wants to rebound, it needs to pivot

But how? Should WPP double down on digital marketing?

Maybe not. Despite the mass migration to digital marketing, it’s actually less effective at getting American consumers to spend. Only 10% of shoppers are influenced by an ad they saw online.

In fact, the industry’s real bread-and-butter is the in-store promotion of…things like…bread and butter.

Trade promotion tactics, from in-store displays to customer samplings, work up to 39% of the time. So if companies continue to budget conservatively, the flow of money might find its way towards less profitable, but safer guerilla marketing efforts.

All of this to say: WPP’s core competency in traditional marketing is shrinking, the digital path forward is sending mixed messages and as a result, WPP curbing expectations for growth.

At least for the time being…

Have Your Meat and Eat It Too

2017 has brought us a lot of cool things: floating warehouses, autonomous vehicles, Salt Bae and now, free-range all ribosome-fed filet mignon.

Memphis Meats, a startup that uses cell technology to grow meat from living animal tissue, secured an investment from food processing conglomerate Cargill—the largest privately held company in the U.S. (by revenue).

And the news is bigger than our appetites suggest. Cargill’s investment makes it the first conventional meat producer to place faith in the ‘Clean Meat’ sector, matching bets from all-star investors like Bill Gates and Richard Branson.

It is—no doubt—a huge step forward for the industry (not to mention cows everywhere). But Bessie’s not out of the slaughterhouse just yet. Memphis Meats reports that one pound of its meat costs $2,400 to produce…down from $18,000 last year.

If it ever want’s to make it to market, let alone our dinner plate, it’ll have to bring those costs down.

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Wal-Mart Finds its Voice

If you can’t beat ’em, work with someone to beat ’em. Which is why Wal-Mart and Google have joined forces…and who else to lock horns with but Amazon.

It’s your classic “I’ll scratch your back if you scratch mine” approach. But let’s clarify who’s scratching what.

Google will be adding Wal-Mart’s inventory to Google Express, its online shopping marketplace, in hopes of boosting its 24% market share in home voice assistants. The Amazon Echo owns 70% of the space (in case there was any confusion as to who’s winning)

And there’s Wal-Mart, which is preparing for a future when voice-controlled shopping will be the backbone of retail. Even now, it’s one the Echo’s main functions—30% of users make a purchase at least once a week.

“Alexa, does the partnership scare you?”

“Scared? Of course not. I’m overjoyed. Everything’s going according to plan…”

What’s My Age Again?

Under normal circumstances, it’s not polite to ask. But when that someone is El-Al’s geriatric fleet of airplanes…forget insensitivity: it’s time to get younger.

The Israeli airline is hoping to revitalize its aging roster of planes (averaging 19 years old) with the acquisition of 16 new Boeing 787 Dreamliners, the first of which landed with youthful pizzaz in Tel Aviv yesterday.

The $1.25 billion investment is a necessary step for a struggling El-Al to recapture market share at its home base Ben Gurion Intl., which fell 5% over the past year to 29.5%. Not to mention, the efficient, new planes should help shore up profits (down 53% in Q2) hurt by rising fuel costs.

It’s great news for Boeing, too. The aircraft manufacturer has a 70-year partnership with El-Al, one of the only airlines in the world that features an all-Boeing fleet. Talk about BFFs.

What Else Is Happening…

  • The FTC gave its blessing to Amazon’s takeover of Whole Foods.
  • Nothing blew up when Samsung introduced its Galaxy Note 8.
  • Axios got its hands on Uber’s financials. Juuuiiccyy!
  • Canada and Mexico cast doubt on President Trump’s threat to abandon NAFTA.

Economic Calendar

Water Cooler

The Back Burner: When the Trading Stops

While the markets are humming down here on sunny Wall St., things aren’t looking that smooth in East Asia. The Hong Kong Stock Exchange cancelled Wednesday’s trading session as Typhoon Hato bears down on the city with 100+ mph winds.

Typhoons are not uncommon in Hong Kong, especially during the summer months, but Hato is a whopper—its Hurricane Signal No. 10 rating is the highest on the scale.

So, as traders in Hong Kong catch up on the latest episode of Ballers, we thought it was a good a time to share other moments when the global markets took a pause.

September 20, 1873: The NYSE closed for 10 days after major bank Jay Cooke & Company failed. The collapse was a key catalyst for the global economic downturn known as the Panic of 1873.

April 25, 1974: The National Salvation Junta overthrew the Estado Novo regime in Lisbon, Portugal. Because of the coup, the Lisbon Stock Exchange was shuttered for a few years.

August 3, 1994: The Nasdaq paused for 34 minutes when…get this…a squirrel chewed through a power line of a backup system in Connecticut. It’s the first time since 1987 that a squirrel caused an interruption (not a joke).

October 29-30, 2012: The NYSE hunkered down as Hurricane Sandy pounded the tristate area. It was the first time in 124 years a weather event closed the exchange for a two-day period.

Question of the Day

In the first 1000 natural numbers, how many integers exist such that they leave a remainder 4 when divided by 7, and a remainder 9 when divided by 11?

  1. 11
  2. 14
  3. 12
  4. 13
  5. 10

(Give Up?)

Who Am I?

  1. I worked in the soap business for 20 years.
  2. I arrived in Chicago with $32 in my pocket. That’s equivalent to about $726 in 2017.
  3. In 1909, my company’s spearmint gum was the top selling gum in the United States.
  4. I am the “father of chewing gum.”

(Any guesses?)

Stat of the Day

$55 million

That’s the price of the most expensive watch in the world right now—it’s called the Graff Diamond Hallucination and it’s…pretty weird looking. Check out the top 18 most expensive watches here.