Datadog is a new name in the Stock Market Nerd coverage network. I wanted to spell out the various pieces of its niche to set the table for future coverage. The firm is a dominant player in the data observability space. Observability simply refers to the practice of monitoring an entire software ecosystem to track issues, vulnerabilities and performance. Other players within this niche include the hyper-scalers, Splunk, Elastic, CrowdStrike (through its Humio acquisition) and many more. Datadog splits its observability niche into 3 smaller buckets: infrastructure monitoring, log management and Application Performance Monitoring (APM).

Because Datadog already handles network viability, security is a wonderfully relevant growth adjacency. Products like Cloud Infrastructure Entitlement Management (CIEM) for example, ensure identity controls are strict and minimum access permissibility is in place. It diminishes risk of identity attacks in a cloud environment. Its Security Information and Event Management (SIEM) product allows for “long term data log visualization for security investigations.”

Datadog beat revenue estimate by 3.7% & beat its guidance by 4.2%. Its 49.2% 3-year revenue compounded annual growth rate (CAGR) compares to 52.4% as of last quarter and 53.8% as of two quarters ago. This is the first time in 6 quarters that Datadog’s net new annual recurring revenue (NNARR) rose Q/Q. Billings rose by 35% Y/Y to $723 million, which analysts praised throughout the Q&A.

Datadog comfortably beat EBIT (operating income) estimates by 26.0% & beat its EBIT guidance by 27.3%. It met earnings per share (EPS) estimates and its identical guide. Finally, it beat free cash flow (FCF) estimates by 53%.

Datadog’s 2024 annual guidance was 0.8% light on revenue, 2.0% light on EBIT and $0.37 light vs. $1.78 EPS expectations. It candidly surprised me a bit that the company bounced so quickly following this report. The guide was not what we’ve come to expect from this execution machine, but it does love to under-promise (like every public company should) and the billings result was strong. Furthermore, the miss also reflects a newly shared intention for Datadog to accelerate OpEx growth in 2024. This will lead to margin contraction from 2023 to 2024.

First quarter guidance was slightly ahead on revenue and slightly behind on profitability. CFO David Obstler called January usage results “solid” and better than the rebound the company saw from December to January last year.

Datadog trades for 74x 2024 EBIT and 64x 2024 FCF. EBIT is expected to grow by 15% Y/Y while FCF is expected to grow by 4.2% Y/Y. This slow profit growth is related to the aforementioned intention to lean into OpEx.

Datadog continues to successfully cross-sell new products to its existing client base. In addition to continued 6+ product traction cited above, its 4+ product customers now represent 47% of total vs. 42% Y/Y; its 8+ product customers represent 9% of total vs. 6% Y/Y. It now has 396 customers with over $1 million in annual recurring revenue (ARR) vs. 317 Y/Y while its customers with over $100,000 in ARR make up 86% of its total business. It calls 42% of the Fortune 500 users, yet only enjoys around $500,000 annually on average from each of them. It sees a large opportunity to briskly boost that number. A big part of that will be Datadog’s continued expansion beyond observability. Encouragingly, its non-observability products enjoyed 75% Y/Y growth (still a small base).

Product usage was stable Q/Q and “played out roughly as expected.” The period of intense cloud optimization from the last 18 months “appears to have dissipated.” It’s seeing these optimizing customers now growing their Datadog usage more quickly than its overall client base. This is a great sign. There’s still some budget scrutiny and sales cycle elongation in the selling market, but it sees “fewer headwinds.” 

For more encouraging signs, appetite for signing large, multi-year deals is now coming back as customers re-embrace their cloud and data modernization. All of this has manifested in a stable gross revenue retention (GRR) rate in the “mid to high 90s” (good) and a very strong bookings quarter. As a reminder, bookings are a reliable indicator of forward-looking demand. Finally, churn was also “low and declined sequentially.”

“Last quarter, we mentioned that the larger and more intense optimizers had begun to show signs of stabilization. In Q4, we saw those trends continue and the large optimizers begin to grow again.” – CFO David Obstler

Datadog now has 700 integrations within what it calls the “AI stack.” This simply refers to the layers of GenAI, which include model creation, infrastructure powering model training and inference, consumer-facing applications and pre-existing sub-sections like data storage. Datadog integrates with the model, infrastructure and app players and brings its typical data storage niche to the fold. More integrations drive better interoperability within Datadog’s ecosystem, give customers more flexibility and choice of product and foster enhanced usage. More usage means more revenue for Datadog; AI-based integrations rose 75% sequentially.

It also added a new tool called Bits AI this year. This is its assistant to automate insight gleaning from customer behavior and usage patterns. This gives customers the confidence to securely deploy models within Datadog’s surveillance to expedite model innovation. All in all, 3% of its total revenue comes from AI native customers vs. 2.5% Q/Q. It sees this steadily rising over time.

Within the APM (defined above) piece of observability, it launched “Data Streams Monitoring.” This adds APM coverage to streaming and event-driven use cases, which the team told us is a “technically challenging type of workload to cover” for others. It also expedited APM onboarding to allow an engineer to initiate it “across complex apps in minutes.” “Dynamic Instrumentation” was also added to allow engineers to “infuse new logs and metrics” into an app on Datadog’s ecosystem without code changes or redeployments.” All of the real-time malleability; none of the app downtime.

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In log management, “Flex Logs” was a big release. This provides a more cost effective means of storing and retaining large batches of data logs. These are priced at just $0.60 per 1 million logs annually and allow for the separation of storage and query costs. This makes the product ideal for long term data storage regulation compliance. Flex Logs easily scales storage and computing in a parallel, independent manner. It’s a similar concept to headless commerce for Shopify and other web builders, which separates front and back-end maintenance. This separation for Datadog unleashes far more data scalability, customization and cost optimization for clients. Conversely, querying from a flex log is slower than for Datadog’s standard log tier. That makes Flex Logs better suited for less frequently needed, lower priority data. Finally, it debuted “Error Tracking Logs,” which can summarize countless coding errors into “actionable reports” with easy steps to debug.

The firm introduced software composition analysis to uncover software vulnerabilities in development. This more deeply entrenches Datadog further “left” in the software development, security and operations (DevSecOps) lifecycle. Further left means closer to actual source code creation. Further right, means closer to software package deployment. Its CIEM and SIEM products (already defined above) debuted, which pushed Datadog’s cloud security customer count to 6,000. It also added a new tool to scan for sensitive data within Real User Monitoring (RUM) events in addition to data logs.

The quarter was good. The guide was slightly underwhelming for the second time in three quarters. Not terrible, but not great. The platform cross-selling is working, its entrance into cloud security is off to a good start and it continues to rapidly roll-out new innovation. Still, growth is slowing quickly for these types of firms like Snowflake and CrowdStrike, which are also both set to continue delivering more leverage in 2024. Those are basically Datadog’s two most difficult software competitors, but its multiple is in the same ballpark as both. The quarter isn’t a red flag or something to be amazed by.

This event walked investors through the structural advantages that Uber has leveraged to distance itself from the competitive pack. Consistent readers have been hearing many of these ideas from me for the last year, but it’s always nice to hear the bullishness reiterated by a candid leadership team. Let’s dig in.

Uber’s founder, Travis Kalaniak, was a bit of a crazy person. His mentality was to essentially to “buy growth” at any cost to achieve scale. He ignored profitability, relied heavily on a low interest funding environment and built a massive book of business. He also built a cash incinerator.  Three years ago, Dara Khosrowshahi was brought in to turn this sky-high potential business into a lean, mean, fighting machine. Travis built the scale, driver supply, and verb-fueled ubiquity that made Uber special. Khosrowshahi took that massive book of business, streamlined costs, accelerated market share gains and delivered the current margin explosion. Under Khosrowshahi, Uber is growing up.

The two operators are perhaps polar opposites in their approaches to running a business; both have been vitally instrumental (in highly different ways) in getting Uber to this point. The mad man jump started the growth engine; the operator perfected it.

Uber’s ability to cross-sell more products than its customers means its customer acquisition cost (CAC) is lower than everyone else’s. Adding a second product to a consumer’s monthly routine, for example, lowers its average CAC by 50%. 34% of its monthly active users (MAUs) now consume multiple Uber products vs. 21% as of its 2021 investor day. These consumers spend 240% more on average than single product users. Notably 31% of its new delivery customers come from mobility (i.e. ride sharing) and 22% of first time mobility users from its delivery app. This promising trend makes Uber’s growth very efficient.

Higher lifetime value (LTV) paired with lower CAC leaves us with a book of business at better margins and with more margin upside than any competitor. 

Summary of the playbook:

UberOne members deliver an even larger spend advantage vs. multi-product users and the subscriber base crossed 19 million in total this quarter. The subscription now represents 30% of its total volume, and as that grows, engagement rises and revenue quality rises with it. Data scale also increases as it collects data from more highly engaged members. That sharpens Uber’s discovery algorithms. The sharpening allows it to surface the right promotion/advertisement and to optimize incentives.

The structural advantage of Uber’s business offering also extends to its driver supply. Retention and engagement both get large boosts for drivers fulfilling mobility and delivery requests. Maybe that’s why the majority of workers prefer to drive for Uber vs. others. Or maybe it just comes down to more demand and less down time.

Uber has 150 million MAUs for a massive base of built-in traffic. This is why it seamlessly launches new products basically every quarter and sees most of them race to $1 billion+ in volume so quickly. Importantly, about 75% of the infrastructure needed to stand-up a new product comes from shared, existing engineering resources and products. This is a powerful  infrastructure network effect that mimics its driver and consumer network effects. It significantly cuts product launch cost and time and allows new offerings to utilize all of the data and learnings that the existing, scaled products have available to offer. 

All of its microservices (like fraud or payments or customer service) making up its tech stack were also built on the shared infrastructure. This means each piece borrows value from the others in a “better together” fashion. Unsurprisingly, this pulls from Uber’s work and partnerships within AI models. Its leading first party data scale allows these models to be more effectively seasoned while Uber’s backend allows this seasoning to foster value creation across all use cases.

30% of Uber’s mobility trips are non-UberX trips vs. 15% as of 2021. It’s effectively rounding out the mobility suite to cater to all communities from frugal to affluent. Its Moto service, for example, is 50% cheaper per mile than UberX and is gaining rapid momentum in India and Brazil. On the other end, its Reserve product is allowing it to finally penetrate affluent suburban areas where 75% of those requests originate. Uber has a leading category position in all 10 of its largest markets and almost every one of its top 70. Tools like upfront fares, earnings heatmaps and safety features continue to push more drivers to Uber than anyone else. Again, Uber’s product suite, paired with best-in-class service, keeps that supply lead growing. 

Uber now has a top share position in 7 of its 10 largest markets and took market share in all ten of them in 2023. Since 2021, this business has gone from -$600 million in EBITDA to $1.5 billion in EBITDA while compounding at a rapid clip. The biggest growth opportunity for delivery (aside from being only 15% penetrated in its SAM) is to transition annual users to monthly users. Just 35% of annual users order from delivery at least monthly. The other opportunity is better custom service as it looks to build on its 25% Y/Y reduction in incomplete delivery trip rate.

Notably, 14% of its delivery customers are now using grocery and retail vs. 8% in 2021. Users of both spend 3x what users of one product spend as Uber seamlessly upsells a bottle of wine with dinner, for example. This cross-selling, along with better efficiency, AI investments and more scale, led to the profit explosion for the segment. Consumer incentives are down; cost per trip is down; consumer fees as a percent of basket size are down; all costs are down.

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Now… onto what we were all waiting for… robust multi-year financial targets. These targets simply reiterate how special Uber is. There are not many that can compound the top line at a near 20% at this scale and with this margin trajectory.

First and foremost, Uber announced the buyback it has been teasing for almost a year. Its balance sheet is quickly entering investment grade credit status and its cash flow printer is fully turned on. Furthermore, it has $6 billion in investments that it will look to partially liquidate over time to build the cash pile further. So? It announced a $7 billion buyback. CFO Prashanth Mahendra-Rajah told us the buyback would initially offset dilution as it ramps to a point of consistently shrinking share count.

For the next three years, Uber guided to a  "mid-to-high teens" volume CAGR vs. 14.8% CAGR expectations. It guided to a “high 30% to 40%" EBITDA CAGR vs. 36.5% CAGR expectations. Finally, it conservatively guided to $9.6 billion in 2026 FCF vs. $8.2 billion consensus. This FCF estimate assumes 90%+ EBITDA to FCF conversion means 90% and that the EBITDA CAGR assumption means 38%. These targets put a large smile on my face.

One more interesting note. In the presentation, Uber proudly proclaimed that it has “met or exceeded bookings and EBITDA expectations for 8 straight quarters.” This tells me how closely they watch consensus estimates and how intentionally they only set targets they can beat. They know exactly what the street wants from them.

In conclusion, this was a great showing. Enough said.

Coinbase is a dominant, leading crypto exchange. Its results are violently cyclical as retail volume is highly volatile and drives a large portion of their results.

Coinbase beat revenue estimates by 16.5%. For the full year, revenue fell by 3% Y/Y due to transaction revenue declines. Subscription and services revenue rose by 78% Y/Y.

For 2023 as a whole, total operating expenses fell by 45% Y/Y. Sales & marketing fell by about 35% Y/Y, R&D fell by almost 50% Y/Y, G&A fell by almost 40% Y/Y and stock comp fell by roughly 50% Y/Y to $864 million. It has 3,416 employees vs. 4,510 Y/Y.

Coinbase generated $320 million in transaction revenue so far this quarter vs. $120 million Y/Y. It expects $445 million in subscription and services revenue for Q1.

It told us that stock comp will rise in 2024 vs. 2023 mainly due to a higher share price leading to more comp vesting. It changed the timing process of equity grants to reduce timing of vesting volatility, which will also lead to higher comp in 2024. Finally, it continues to commit to positive adjusted EBITDA in any environment.

It trades for 26x 2024 EBITDA, 17x FCF and 123x GAAP EBIT. As of now, EBITDA is expected to grow by 57% Y/Y and EBIT by 291% Y/Y while FCF turns positive.

Transaction revenue was boosted mightily by higher crypto volatility, higher crypto prices, and improving macro leading to enhanced risk appetite and excitement surrounding Bitcoin Spot ETF approval anticipation. As a reminder, Coinbase was named as the primary custodian for 8 of the 10 approved ETFs in January.

User growth was another small tailwind. Within consumer trading volume, Coinbase delivered 164% Q/Q growth to greatly lead the market’s 90% Q/Q growth. On the institutional side, its 92% Q/Q growth was about in line with the market. It now has 33% of the largest 100 hedge funds on the Coinbase platform. Onboarding levels in Q4 were strong as were institutional re-activations.

Coinbase Prime, its prime broker service for institutions, was helped by the Bitcoin spot ETF approval anticipation as well. Prime’s liquidity, ancillary services, secure storage and support are all standing out as Coinbase markets itself to the big boys. That, along with more subscription revenue, should ease volume volatility over time. Volatility is understandably lower for institutions vs. the average retail trader.

This segment continues to explode as a portion of total revenue. Stablecoin revenue growth was a contributor to this success. In August 2023, Coinbase and Circle changed their agreement. The old contract entailed the creation of the “Centre Consortium” to govern issuance of the USD Coin (USDC). The two firms split stakes in the new entity. In August, Circle was given control of all USDC issuance while Coinbase took a small equity stake in the company. Going forward, Coinbase will enjoy a portion of income collected from USDC reserves.

More balance staking (allocating a portion of balances) helped Coinbase grow delegation and institutional service fees (among others) within that bucket while blockchain rewards rose 28% Q/Q to also positively contribute to the segment’s success. Staked assets came in at $9.4 billion for the quarter with growth helped a lot by crypto price appreciation.

Leadership sees USDC as a “crucial bridge” to more accessible services stemming from crypto.

Coinbase continued to cultivate the Coinbase International Exchange this past year to offer derivatives/futures contracts to more international retail investors. It launched the full service in Canada and Brazil last year while streamlining the customer onboarding process, which “doubled onboarding success rates.” Furthermore, Coinbase secured needed registrations in France and Spain to tee it up for future expansion in Europe. It also continues to slowly localize product market fit in each market to drive adoption. In the USA, Coinbase Financial Markets (CFM) (which is essentially a domestic version of Coinbase International Exchange) was approved to offer futures to U.S. investors by the National Futures Association. Coinbase launched this product in November.

Derivatives represented 75% of total 2023 crypto volume. Most of that volume was transacted via unregulated exchanges. These products provide a highly compelling opportunity for Coinbase to shift black market volume (making up the majority of total volume) to its own exchange.

Per the firm’s investor materials, Base is Coinbase’s Layer 2 “Ethereum Scaling Solution” to enhance adoption and transaction affordability of Ethereum. Layer 2 simply refers to a transaction scale driver built on top of a blockchain like Ethereum. The layer of separation aims to drive better efficiency, cost and speed by processing the transitions outside of the Ethereum blockchain. As of Q4, Base was among the “largest and fastest growing ecosystems with $600 million in assets on the platform.

Along similar yet separate ease of transaction lines, Coinbase updated its wallet recently to make sending crypto “as easy as sending a text.”

In the past, Coinbase has only marked-to-market the fair value of its crypto assets when those assets were sold. Per new regulation, it will mark most of these assets to market on a quarterly basis, regardless of any sales. This is similar to how equity investments or loans within fair value accounting are treated. This quarterly marking to market will directly impact net income and the change will start in Q1.

The Pursuit of “Regulatory Clarity” for Coinbase:

DraftKings is the largest player in online sports gambling and has a growing online casino presence as well.

Draftkings missed revenue estimate by 0.8% & missed its guidance by 2.4%. Its 56.3% 3-year CAGR compares to 81.2% as of last quarter and 131% 2 quarters ago.

While the quarter wasn’t great, the 2024 guidance was. It raised its original revenue guide by 2.7%, which is 2.3% ahead of expectations. It also raised its original EBITDA guide by 15%, which beat estimates by 6%. More parley options and flexibility are leading to an expectation of rising hold rates (basically a take rate), which resulted in $35 million and $25 million of the revenue and EBITDA raises, respectively. Stronger engagement, risk management and retention contributed to the rest of the raise. Sales and marketing will fall Y/Y, stock comp will fall from 11% of sales to 8% of sales and it expects to generate $360 million in FCF.

It also reiterated 2028 targets calling for $7.1 billion in revenue and $2.1 billion in EBITDA just from existing states.

“Superior LTV and CAC is the ultimate competitive advantage, and we have initiatives planned to enhance both in 2024 and beyond.” – CFO Jason Park 

Based on the 2024 guidance and estimates, DraftKings trades for 46x 2024 EBITDA. EBITDA is expected to sharply and positively inflect. It is not expected to turn GAAP EBIT positive until 2025 and trades for 62x 2025 expected GAAP EBIT.

DraftKings total sales and marketing expense rose by just 1% Y/Y for 2023. It cut back greatly on spend in 2023 to trim its cost base bloat, yet saw no impact on demand. It credits this to the heightened sense of urgency tied to each dollar of investment leading to better capital allocation.

There are no apparent switching costs between one sportsbook vs. another and this is arguably a commodity. Yes, different books can create a slicker interface and offer unique parleys, but the bulk of the product offering is identical across vendors. For this reason, it continues to amaze me that its market share gains remain so steadily strong. Specifically, CAC fell by 27% Y/Y in 2023 after falling by 21% Y/Y in 2022 while its retention rate is at 90%, which is far higher than I would expect. Marketing spend is declining in older states; newer states are reaching profits more quickly; its increasingly national footprint is allowing it to shift regional marketing activity to more efficient national channels. It remains the top player in online sports and casino betting for another quarter. CEO Jason Robins called 2023 the “year of prove it” 12 months ago. They’re proving it.

Where Draftkings can separate from other products, it does. It’s the clear leader in parley (multiple combined bets) structure innovation, which again is boosting its take rate.

One may wonder how the Q4 results were materially weak, yet the team has confidence in raising its 2024 outlook. Good question; I had the same one, and the explanation actually makes sense. Historically customer-friendly event outcomes (gamblers won a lot of money) hit EBITDA by $126 million and revenue by $175 million, respectively. It would have crushed expectations without this abnormality which reverted back to typical trends in December. Revenue per payer growth of 6% Y/Y would have also been 22% Y/Y without this hit. Based on all of this and the market share commentary above, weakness is not at all related to competition or new entrants like ESPN Bet. 

DraftKings is in 24 states for sports gambling and 5 states for iGaming. There are 7 states that recently introduced legislation to legalize sports gambling or put legalization to a referendum vote. 5 states are working on iGaming reform.

DraftKings will acquire Jackpocket for $750 million. 55% of the purchase will be funded via cash on its balance sheet with the other 45% funded via stock. Online lottery revenue is expected to compound at a 5% clip through 2028 and this is the #1 app in the category. It’s expecting to grow sales by 70% Y/Y to reach $135 million in 2024. This is not in the company’s 2024 guidance as the purchase has not yet closed.

Jackpocket brings another means of cross-selling customers to enhance retention and LTV. It also has an 80% lower CAC than DraftKings on average and boasts 50% customer overlap with it too. The opportunity for cross-selling and improving revenue quality is compelling. It has 700,000 monthly payers across its footprint, which only spans 1/3 of the states where this is legal. It also has a homegrown app and backend.

Some will pick on the Q4 misses as a reason to be negative. The misses were well explained and did not bother me at all. The 2024 guidance raise is really what investors should be focusing on in my non-shareholder opinion. 

This company continues to impress me. It reminds me of Uber a few years ago with margins exploding higher and trending better than anyone thought they could. There’s much more competition here than Uber faces, but there are similarities. A pristine brand may be blossoming before our eyes in this large and growing market. I’ve added Draftkings to my watchlist and will follow it more closely going forward.

As many of you know, I exited JFrog late last year due to geopolitical chaos in the Middle East. It had nothing to do with the fundamental quality or price tag of the company. I continue to love everything about this investment case – except the geopolitical risk that I’m not willing to stomach at this time. Regardless, this quarter was excellent and shareholders should be pleased.

Slow growth paired with negative GAAP operating profit is not an ideal combination, to say the least.

Annual EBITDA guidance was 4.3% ahead of expectations (a bit light for Q1, but not concerning given annual beat). It missed annual volume estimates by 0.7%.

Do you love Twitter (sorry, not X) as much as I do? Do you only want investing-related content on that app? Do you get frustrated by all of the noisy content you scroll through to find the nuggets you actually care about? Same! Blossom is here to fix that. This is focused FinTwit meets serious investors meets portfolio tracking. It’s a thriving social media platform for us nerds and it just launched in the USA. It’s entirely free to use and something that I now post on daily. Check it out here and sign up. See ya there.

Nelson Peltz again sent a critical letter to Disney based on its planned ESPN streaming product and Epic Games investment. The more I learn about his opinion on Disney, the more confident I grow that Peltz is out of his lane. Maybe he should take a look at rapidly recovering profitability and expanding streaming margins before he says Disney can’t turn things around. Maybe he should back his opinions up with evidence rather than being the loudest (and least qualified board applicant) in the room. It was one thing to lash out before they showed signs of making better decisions… but now those better decisions are clearly being made. The company is clearly turning things around; leave them alone, Nelson.

Disney signed a 6 year, $7.8 billion extension to be the home of the 12 team College Football Playoff through 2032. Two things are true: First, these are necessary expenses to win the hearts and budgets of streamers in an increasingly competitive world. College football is second to only the NFL in terms of fandom in the U.S. We love our football (Go Blue). Secondly, the price tag tells us exactly why it needs to partner with the NFL, Warner Brothers and others for ESPN. These partnerships will help with distribution, diminish bidding competition and allow Disney to sustainably win more of these contracts over the long haul. Still, I’d love for them to partner with Amazon, Google, Apple or Verizon to offer more distribution fire power.

In 2023, it was popular to point out the planned insider sales that Meta’s Mark Zuckerberg had been making. In 2024, it’s now popular to post about the Bezos sales. Insiders have many, many reasons to sell. Amazon has made Bezos among the richest men in the world. What do wildly rich and ambitious people like to do? Invest in rockets and donate billions upon billions to charity. I truly don’t care that he’s selling a small fraction of his stake to diversify and focus on other things. He has earned it… and then some… and then some more. Go play with rockets; go save the world; go enjoy your life; feel free to use a small portion of the company you painstakingly built to do so. This is a nothingburger to me just like Zuck’s sales were. I’m focused on Amazon’s results and investment case, which both remain stellar in my view.

Zuckerberg released a video this week. It was somewhat critical of Apple’s Vision Pro and called Quest better for pretty much every use case that exists right now – despite being a small fraction of the cost. For now, there will remain heavy debate on how the two are positioning themselves to lead in this potential next computing wave. I’ve explained in detail why I don’t think it will be a winner take all and why I see a giant duopoly forming (like iOS closed ecosystem vs. Android open source). Aside from that, I don’t care who is leading today. The hardware is still clunky, uncomfortable and years away from being miniaturized to a point of adoption ubiquity. That may never even happen. So today, the argument of who has the small edge doesn’t matter to me. This won’t be a needle-mover for financial results; it won’t be clear who is leading in innovation for a long time. For now, all we can do is experiment with the nascent products and be entertained by the banter.

SoFi was announced as the official bank of the NBA. Many speculated that this was based on who was willing to pay the most, but, per leadership, that wasn’t the case. This was about brand fit and two organizations looking to thrive together. There’s probably some truth to both points of view. As part of the multi-year agreement, SoFi will be the title sponsor for the NBA’s new play-in tournament. It will also kick off the “SoFi Zero Giveaway” to award $10,000 to a lucky winner every week. All fans have to do is create a checking and savings account. Finally, SoFi is partnering with the league’s core media partners (like Disney) to organize more in-season events and on-court advertising.

The firm also announced Jayson Tatum as a new brand partner to join Chargers quarterback Justin Herbert. As part of this, Tatum and SoFi will create a co-branded Generational Wealth Fund to promote financial literacy within the basketball star’s Jayson Tatum Foundation. SoFi will contribute $1 million to the new fund via grants. Tatum’s foundation aims to help parents navigate education and financial wellness, making it quite relevant to SoFi’s overall mission.

Sports fans are passionate; these kinds of relationships and its high yield savings APY are often deciding factors for passionate viewers picking one similar bank or another. I was highly skeptical about purchasing the naming rights for SoFi Stadium, but they’ve shown that to be a great decision in brand building and eyeballs per dollar spent. I’ll give them the benefit of the doubt here. I don’t see this news as monumental, but I do see it as a positive for building brand awareness as it becomes more front and center for the NBA’s 200 million fans. Brand awareness for the still young bank is one of the most important growth levers that SoFi can pull and the NBA and NFL are two of the best organizations to do it through. As a reminder, these leagues dominate the list of the most watched shows in the USA.

Noto gave an interview with Yahoo Finance about this news. In it, he called the 2024 guidance “a conservative outlook and below macroeconomic consensus.” I think he’s gearing this company up for another year of outperformance.

I made no transactions this week.

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