Please enjoy ARK Disrupt Issue 130. This blog series is based on ARK Brainstorming, a weekly discussion between our CEO, Director of Research, thematic analysts, ARK’s theme developers, thought leaders, and investors. It is designed to present you with the most recent innovation takeaways and to keep you engaged in an ongoing discussion on investing in disruptive innovation. To read the previous issue, click here.
1. Instagram Goes After Long Form Video With ‘IGTV’
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The internet is eating video and InstagramFB just launched a new menu item. Instagram’s new IGTV app will allow influencers to post videos that are one-hour long, compared to the one-minute limit for average users. With IGTV, celebrities will be able to create their own channels as they do on YouTubeGOOG and TwitchAMZN. With more than a billion monthly users, Instagram will connect celebrities directly with their fan bases.
Both IGTV and Facebook Watch are efforts to increase engagement with online video. Currently, Google and Amazon dominate non-subscription video online with YouTube and Twitch, respectively. Netflix has distinguished itself with a paid service that provides compelling original content.
Until now, Facebook has had no notable video service, relying instead on short form videos as part of its newsfeed. Facebook Watch and IGTV both aim to plug this hole. Should its new services succeed, users will be spending even more time with Facebook apps, perhaps taking significant share from global TV advertising, a $200 billion market.
2. Venmo is Popular Among Young People, But Will Their Parents and Grandparents Follow?
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Paying friends for lunch is simple these days thanks to a number of peer-to-peer (P2P) apps. Among the most popular are VenmoPYPL and SquareSQ Cash despite other options like Facebook Messenger payments. Venmo is the most social, making it fun as well as convenient.
In a survey, Morning Consult validates Venmo’s popularity with the 18-29 age group relative to other demographics. While 43% of the young use Venmo, only 6% of those in the 55-65 age group and 2% of those 65+ do. If Facebook is any guide, the network effect could sustain Venmo’s growth for years as parents and grandparents follow their children and grandchildren into the new world.
But could this trend change? Facebook started off as a college social networking site that has since grown to represent the broader population. Venmo has similar potential and the possibility of becoming popular with other age groups. This is all the more true considering PayPal’s efforts in building additional features such as “Pay with Venmo” and its on-boarding of vibrant merchants such as Poshmark, Munchery and LululemonLULU that accept Venmo Payments.
3. New Data Suggests That Both Electric Vehicles and Industrial Robots Are Outpacing Forecasts
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In January, Reuters reported that automakers had committed $90 billion in capital spending to electric vehicles. This past week, the Wall Street Journal updated that number to $105 billion, giving us some clues about the ramp in EV production during the next five years.
Analyzing the capital efficiency of the U.S. auto industry, ARK concluded that it had invested more than $14,000 in fixed assets for every gas-powered car produced in 2016. With a fraction of the moving parts, EVs should be manufactured much more efficiently than gas-powered cars, perhaps two times more efficiently according to FordF. If so, then $105 billion in capital spending could produce 15 million EVs, well above consensus forecasts of roughly 4 million, and closer to ARK’s forecast of 17 million in 2022.
The International Federation of Robotics (IFR) just reported industrial robot sales increased 29% to 380,550 in 2017, exceeding its forecast of 346,800 by more than 10% and ARK’s forecast of 365,000 by more than 5%. China’s demand increased 58%, accounting for a disproportionate amount of the growth. Industrial robots seem to be hitting the sweet spot of their S-curve, as shown in the chart below.
Within the broader category of industrial robots, collaborative robot sales are leading the charge, increasing by more than 50% at an annual rate. While collaborative robots may look niche today, “cobots” could supplant “robots” in the long run as software and AI improvements allow all robots to work safely beside and with humans.
4. Could DNA Disrupt the Storage Space?
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Thanks to new chemistries in DNA synthesis, researchers from the Wyss Institute and Harvard Medical School have been able to lower the cost of DNA-based storage systems dramatically. DNA is the most stable and durable structure in nature, with vast storage capacity. One gram of DNA can hold up to 455 exabytes – or 455 billion gigabytes – of data!
The progress of DNA storage systems has been hampered by the prohibitive cost of phosphoramidite in DNA synthesis. Storing a movie in today’s DNA storage solution would cost roughly $200 million.
With enzymatic chemistry, researchers have cut the cost of DNA storage by ten-fold. Introducing principles of error correction, they have enabled accurate data retrieval with error-tolerance of up to 30% during the DNA synthesis process. This methodology is the biggest breakthrough in DNA storage systems to date. While $20 million to store a movie still is cost prohibitive, enzymatic chemistry increases the odds that DNA will disrupt the storage space at some point in time.
Unlike the traditional approach to DNA synthesis, in which each of the four nucleotides “A”, “T”, “G”, “C” is coded as “00”, “11,” “01”, or “10”, the enzymatic approach focuses on the transition of one nucleotide to another, coding each with either a “1” or a “0”. While the information density drops, the need for additional storage capacity is offset by the lower cost of the chemistry used in DNA synthesis in the short-term and the speed of data retrieval in the long run.
When DNA storage is ready for prime time, large data centers will gravitate to it given a step function decline in electricity and other energy costs. Early use cases will be for highly valued data that is accessed infrequently, surveillance and regulatory data important among them.
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