Please enjoy ARK Disrupt Issue 80. 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. Snap Does Not Create Its Innovations… It Acquires Them
The secret behind Snap’sSNAP innovations is an acquisition strategy focused on startups with promising camera technologies that integrate into Snapchat. This week, Snap launched Snap Map, a location based discovery app enabling users to view their friends’ videos around town or around the world. The core technology came from Zenly, a location sharing app that Snap acquired for $250–$350 million.
Zenly is just one of a handful of companies Snap has acquired and integrated into Snapchat. According to TechCrunch, Snap’s other acquisitions include:
“..Looksery for $150 million in cash and bonuses, which went on to power its iconic augmented reality face filters. It bought Bitstrips for $64.2 million, which has flourished as Snapchat’s Bitmoji personalized avatar stickers. Story Search, QR Snapcodes and its Spectacles glasses were all based off its acquisitions of Vurb, Scan.me and Vergence Labs, respectively.”
Like TwitterTWTR and FacebookFB, Snap “buys” instead of “builds” regularly. That said, while Snap drives engagement and growth by integrating newly acquired features into its core app, Facebook’s Instagram – with nearly ten times the users – is quick to copy them. What, then, are Snap’s barriers to entry?
2. Tesla’s News Flow Has Picked Up Significantly Lately
- TeslaTSLA China Factory: Tesla confirmed that it is working with the Shanghai Government on a manufacturing facility in the region. While Tesla has not identified a partner, rumor has it that a Chinese auto manufacturer is unlikely given Tesla’s desire to protect its intellectual property. Tencent’sTCEHY recent decision to buy 5% of Tesla’s stock elevates DidiDIDI, the ridesharing service in which Tencent has an interest, as a possibility.
- Tesla Music Streaming: This week, Recode reported that Tesla was talking to music labels about creating its own streaming service. While seemingly unrelated to Tesla’s base business, music could be an important part of its autonomous ridesharing service longer term. According to ARK’s research, if passengers were to use cellular spectrum to watch NetflixNFLX and surf Facebook for 60% of their time in an autonomous vehicle, telecom industry revenues could double in the next 10-15 years. More likely, Tesla and other autonomous taxi networks could preload their vehicles with entertainment and enjoy revenue streams beyond those for autonomous taxi networks..
- Supercharging Non-Teslas: JB Straubel, Tesla’s head of technology, announced that it is “actively talking” with other automakers about opening up its supercharger network. While Tesla previously had opened up patents to its supercharger technology, no automaker has agreed to join the network to date. Clearly, increased access to charging infrastructure not only would benefit the electric vehicle space in general but also could help Tesla defray the costs it has sunk into the supercharger network by accelerating the shift from gas powered cars to electric vehicles. As supercharger utilization increases, ARK estimates that a supercharge could cost less than the cost to fill a gas powered vehicle in the not too distant future.
- Tesla talent departures: A number of key people have left Tesla’s Autopilot program. First Chris Lattner, head of Autopilot software, departed. Lattner came to Tesla from AppleAAPL and was responsible for developing the Swift programming language and Tesla’s in house replacement for Mobileye. In addition to Lattner, Tesla lost three computer vision engineers, and Google’sGOOG Waymo recently hired an ex-Tesla engineer to head its hardware division. These talent swaps could continue thanks to the hefty salaries that autonomous car engineers are attracting. These sky high payouts demonstrate that firms like Waymo share ARK’s view that autonomous taxis are facing an enormous opportunity. ARK believes that autonomous mobility as a service will be a $10 trillion market by the early 2030s, and that service operators could enjoy a 20% cut of the pie.
3. Formalizing Remittances Could Add Up To $17 Billion To The $585 Billion Remittance Market
Remittances are an important and stable source of income for millions of households in developing countries. The global remittance market has been growing steadily at an annual rate of 15% during the past five years and has topped $585 billion.
A recent study by UNCDF concludes that remittances are critical to financial inclusion and sustainable development. The study examined remittances in the Mekong region and concluded digital remittances could reduce transaction costs by 50%, with mobile wallets and biometrics accelerating the process.
The study also identified informal remittance channels in areas that lack last mile connectivity. While all the countries in the study, including Laos, Myanmar, and Cambodia, had informal remittance markets, Myanmar’s was the largest as measured by flows. According to ARK’s estimates, digitizing these informal channels could add up to $17 billion to the formal global remittance market.
Estimated Total US$ Inflows (In Millions)
4. Sequencing: Long Reads versus Short Reads
In a study published this week in Nature, low-coverage genome long-read sequencing diagnosed a patient with a rare condition known as Carney Complex, in contrast to short-read sequencing and targeted clinical tests which had failed to do the same. Does this breakthrough in long read sequencing signal the end of short-reading sequencing?
While short-reads are used primarily in clinical labs because of their cost-effectiveness and low per-base error rates, they are not able to capture the full range of genomic variation. Areas of the genome with high rates of repeats make DNA assembly difficult. The process of DNA sequencing and assembly can be likened to a jigsaw puzzle. Short-reads have more precision and granularity, but many pieces to assemble. Long-reads are larger pieces of the same jigsaw puzzle, making assembly easier at the expense of granularity.
Given that approximately 4-9% of the human genome has yet to be sequenced, scientists believe that longer-reads could unlock the mysteries in those sequences. In a paper published in 2007, Craig Venter estimated this uncharted area of the genome contains 75% of the genetic variations from one person to the other.
From a clinical standpoint, short-reads are cheaper, faster, and more precise, diagnosing the majority of genetic diseases. Long-reads are complementary, aiding the diagnosis of ultra-rare conditions where short-reads fail.
The information provided is for informational purposes only. It does not constitute any form of advice or recommendation to buy or sell any securities mentioned. It is intended only to provide observations and views of the author(s) at the time of writing, both of which are subject to change at any time without prior notice. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on ARK's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance is no guarantee of future results. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.