Meta and Google Cut DEI Programs & Can TikTok Save Peloton?

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0:27Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, corporate DEI programs are under siege following the resignation of Harvard's president. Then we'll tell you why the guru behind the book Rich Dad Poor Dad might not be someone you should be listening to. It's Friday, January 5th. Let's ride.

0:50So there's this trend going around social media of people making lists of what's in and what's out for 2024. Toby, you are a tastemaker of the highest order. give the people what's in and what's out this year so we don't fall out of step with society okay first i'm gonna start with a little health thing out is having tummy aches in is fixing your gut health so many people complain oh my stomach hurts my stomach hurts eat some kimchi you know fix the gut health let's get that biome going a little better okay out shutting the heck up in is yapping as podcasters yapping's in this year it's gonna be a big year for yappers and then finally, you're going to like this one, out is constantly having external stimuli and in is doing the dishes or doing chores with intention, just being very present in the moment.

1:40So being more present is in this year. Any comments, Neil? I like him. He's in. I'm not going to follow him probably, but I do like the fermented foods trend. I think that's going to be big. All right. That's huge. Before we jump into the show, we have a quick word from our sponsor, Veeam. So as you know, Neil, I like to run. It's something Veeam and I have in common, actually. As in Veeam helps you recover data faster to keep your business running. No, it's more Veeam has multi-layer protection that keeps my data secure to keep my business running. All right, Toby versus Veeam marathon race at the end of the year.

2:14Let's do it. Head to Veeam.com today to discover more. That's V-E-E-A-M.com today.

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3:14Ask your doctor about EBCLIS and visit ebglis.lily.com or call Call 1-800-LILY-RX or 1-800-545-5979. Let's begin with the three most controversial letters in business, DEI. They stand for diversity, equity, and inclusion programs intended to boost minority representation. And critics of these initiatives are on the attack following the resignation of Claudine Gay, Harvard's first black female president who championed those efforts. Corporate DEI programs surged following the murder of George Floyd and the Black Lives Matter protests in 2020 when companies were forced to reckon with their lack of diverse workforces.

3:52Chief diversity and inclusion officers were the fastest growing C-suite position in 2020 and 2021, according to a LinkedIn report with 169 percent growth in hires. But now, DEI is increasingly under fire from conservatives who accuse the programs of discriminating against white people and for promoting the interest of certain minority groups at the expense of others. The debate over DEI and Claudine Gay at Harvard has even led to a nasty war of words between billionaire CEOs. This week, both the hedge fund manager Bill Ackman and Elon Musk have called DEI racist, leading to a defense from Mark Cuban who called them good for business.

4:29Still, the term DEI may be in retreat as emboldened critics sense blood in the water and prepare legal challenges to companies' diversity programs. Nearly a third of people hired in diversity-related roles after George Floyd have already left. Yeah, you now have a group of people working to dismantle DEI at the corporate level. It didn't just stop at these universities. Some lawyers, some investors are potentially looking at corporate law in order to pressure these companies into rolling back their DEI. I mean, the argument is that this preferential hiring may have deprived companies of hiring the best talent, which is under corporate law potentially a breach of the board's duties to shareholders.

5:12So they're taking a shareholder-specific argument to this. So this is not necessarily only a culture war anymore. It is going to boardrooms and using corporate law. A lot of this stems back to last summer when the Supreme Court made this decision to overturn the use of affirmative action in university application policies. They said you cannot use race-based admissions anymore. That was expected to spill over into the corporate world with, like you said, these legal challenges to corporate and business diversity hiring programs. And we're seeing that play out in a big way right now. Yeah, absolutely.

5:48But then you look at someone like Lululemon founder Chip Wilson, who has been very against DI for his pretty much entire tenure with the company and then after he left the company as well. He recently just came out saying that he ripped Lululemon's DI effort saying as a company you quote, don't want certain customers coming in saying that Lululemon shouldn't be for everyone. But then you look at Lulu's performance as a company since kind of embracing a more inclusive ethos. It was up 55 % last year, up over 200 % since 2020. So if you are taking just a specific corporate lens to it, there are companies that succeed under this framework.

6:26And potentially it shouldn't be like this sweeping rollback of DEI efforts. Right. So Mark Cuban has been one of the most forceful defenders of DEI. and on X, Twitter, whatever you want to call it, kind of responded to Elon Musk with this forceful response. And he went line by line with diversity, equity, and inclusion and explained why it's good for business. And I'll just read a few of his responses so people can get a sense of his arguments. He said, on diversity, good businesses look where others don't. Define the employees that will put your business in the best possible position to succeed.

6:58And on inclusion, he wrote, great companies create environments that reduce unnecessary stress on their employees. So he responded to Bill Ackman and Elon Musk saying, you guys don't want DEI programs? Don't have them. I think my businesses will succeed if we implement these kind of programs that create diverse workforces. For decades, companies have followed users across the web, monitoring which sites they navigate to using cookies. But Google is finally killing that practice once and for all. It's moving forward with a plan to phase out cookies for Chrome users in a test that will initially be available to 1 % of global users.

7:33But a lot of people use Chrome, though, so 1 % means 30 million people will be living cookie-free as of yesterday. The change is made as Google is trying to balance increasing consumer privacy without disincentivizing companies from using their advertising products. It's been a tough wire to walk, though, and already people from the digital ad industry are complaining that they weren't prepared for a post-cookie life that strips away their ability to effectively target users. If you're one of the 30 million people initially, you may see some less relevant ads popping up across the web initially, but at least you know that your privacy is still intact.

8:09This is a culmination of a lot of years and a lot of pressure on big tech to clean up its act when it comes to user privacy. Is this about time, Neil? This is a huge deal. This is a$600 billion digital ad industry that's being completely turned on its head. I mean, even Google admitted we are making one of the largest changes to how the Internet works in its history. And that's because cookies have been around since the dawn of the Internet. They help in many ways. They help us. I think people don't realize that cookies are the reason that when you log into a Web site, you don't have to auto fill all of your logins and your credit card information anymore because a cookie essentially identifies your computer along a network.

8:49But there are good cookies and bad cookies. There are first-party cookies, which are the ones owned and operated by the website you go to. And then there are these third-party cookies. That's the one Google's killings. Those are operated by advertisers and analytics companies that want to track you across the website. So that's why if you're on a sock company website buying some socks, and then you go to another website, read a New York Times or Morning Brew article, you'll see an ad for maybe a rival sock company. And those are the things that Google is trying to kill me. but trying to kill, but it's not completely doing away with this, right?

9:24It has its own program that it wants to unleash. Yeah, there's this project called Privacy Sandbox that Google's been working on for a long time now. It involves a bunch of complicated new tools and new tracking methods. So technically, Google is pitching to digital advertisers that we are going to recreate the experience of using three third-party cookies. They have this feature called protected audience, which should potentially give you the same sort of audience data without the third party tracking. So it's kind of reinventing itself. But I do wonder if it's kind of like cutting off its nose to save its face in a way.

10:00Obviously, there's a lot of pressure from the European UK's competition in marketing authority. They always come into the play when it comes to privacy concerns. but they're trying to satisfy these privacy concerns while also not tanking their business. And I don't know if they're going to be able to pull it off, but they need to pull it off in order to kind of keep their business alive. I think this is going to be, Google is going to be fine with this. I think the question is how fine are they going to be and whether they're going to be too fine that the regulators you're talking about will crack down because the ad industry is up in, many of them are up in arms that Google is only doing this to enrich itself and make itself even more powerful.

10:40And I'll just go back to what Apple did, right? So Apple limited tracking by its rivals on people who have iPhones. They said you can opt out of tracking. Meanwhile, Apple's ad business surged. It tripled in market share while its rivals were, you know, Facebook lost$10 billion because of this ad tracking. So I think that's what people are concerned about, that Google is only doing this to enrich itself. And what's important is the UK regulator can shut this program down if it seems like Google is doing some monopolistic practices. Right. And remember, Chrome accounts for 65 % of internet traffic worldwide.

11:20So three times as popular as the next closest browser, Safari. So again, it's going to affect a lot of people. Yep. Okay. Women's college basketball is surging in popularity and it's finally bringing the cash to match. The NCAA and ESPN announced a new TV rights contract for sports championship worth$115 million a year for eight years, three times the previous value of the deal. While the contract encompasses 40 different sports, the big payday is driven by women's ball, which represents 57 % or$65 million worth of the deal's annual value. That's 10 times the sports value in the previous deal.

11:59This is being called a huge win for the NCAA and new commissioner Charlie Baker, who secured a big revenue bump at a time when media companies are reigning in costs all over the board. And it's also a big victory for women's college basketball, which must feel a sense of vindication after it spent years accusing the NCAA of giving it much fewer resources than the men's game, despite its growth. Toby, I'd say one of the main themes on our show over the past year has been women's sports have been one of the fastest growing assets in any area of the media industry and that's showing no signs of stopping man i just think back to the viral video from 2021 that showed the huge difference between the men's and women's weight rooms at the ncaa tournament the women's literally had a corner with like six uh weights one one rack of weights there and the men's had this entire ballroom full of weights you juxtapose those two images and then you compare them to the hype around caitlin clark the hype around angel reese from last year how big that run was and how much attention was focused on it.

12:57And it makes sense that finally they're getting kind of the monetary reward for the eyeballs that they bring to the sport. Right. I mean, that that game between Iowa and LSU brought in 10 million viewers, which is a huge number that was double the previous year. Meanwhile, women's volleyball championship between Texas and Nebraska was also a record high women's softball. So this goes beyond just women's college basketball and extends to a lot of the quote unquote non-revenue generating sports. It's huge for the NCAA because up till now, really, men's college basketball was their main primary moneymaker.

13:31That deal is worth about a billion dollars a year with CBS and Turner. And the fact that Charlie Baker can go in and say and extract a lot of money from these these non-revenue sports, these sports that maybe were in the shadows over the past decades. and people are increasingly watching like women's gymnastics with Livy Dunn. I mean, a bunch of these sports, not just college basketball, are really becoming into the spotlight. Yeah, this is a much better deal for NCA. ESPN got a great deal in 2010. They agreed to pay 500 million to broadcast pretty much most of NCA's championships for 14 years, which comes out to around 35 million bucks a year.

14:08This new deal on average brings in$150 million a year. So even amidst the tightening media landscape, It was great to see this bigger deal. All right, before we jump into our next story, we're going to take a quick break. Does it ever feel like you're a marketing professional just speaking into the void? But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them. In fact, you can even target buyers by job title, industry, company, seniority, skills. And did I say job title? See how you can avoid the void and reach the right buyers with LinkedIn ads.

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15:26It's Stock of the Week, Dog of the Week time, where you get to hear about one stock that stopped the gas pump on triple zero and one that lives in New Jersey and doesn't even get to pump their own gas. As always, we are not financial advisors, so please do not take any of this as investment advice. Neil, I won the pre-show Blitz chess match, so I'm up first, and my stock of the week is Peloton. No, it's not opposite day. Peloton really is our stock of the week because it finally figured out that the way to reach the use isn't through cringy holiday commercials, but on TikTok. Peloton is partnering with TikTok to bring short-form fitness videos to the platform, a move that has investors feeling nostalgic that the pandemic darling might have found its groove again.

16:09the partnership will show up as a totally new hub on tiktok you can find under the hashtag tiktok fitness powered by peloton peloton has been trying to reinvent itself recently as a fitness company for all with a tiered pricing strategy will let that will let you access content on its app that you don't need its pricey stationary bike for this partnership comes on the heels of peloton teaming up with lululemon as well so it's clear new management is trying to get the company back on track. Stock jumped 13 % yesterday alone. Neil, Peloton, is it back? Well, it's undergoing a transformation right now.

16:43Not only is it much smaller than it was, but it used to want to be the Apple of fitness. I think it even said that it wanted to be the Apple of fitness. It wanted to have this exclusive, really pricey hardware and pair that with the media package all in one place. And to access any of that, you needed to buy these bikes, these treadmills for thousands of dollars. That did not work. So now it wants to become, I want to say the Google of spreading its media across various different channels, inking a bunch of partnerships, saying you don't need the bikes or the treads to become a part of the Peloton community.

17:15So it's yeah, it's it has a peril partnership with Lululemon. It's getting its bikes into different hotels and corporations, things like that. And now it's getting on TikTok where, you know, TikTok, it seems a little ephemeral, like you're not going to be a huge hardcore Peloton user because you're constantly scrolling. So it's not maybe this hardcore loyal base, but they're hoping it brings in a few more customers at the margin. Yeah, it's reinventing themselves as a more generalized fitness company. It is interesting, though, because this partnership isn't just going to be workout videos. They want the instructors who are these mini celebrities in their own right to kind of post their behind the scenes or get ready with me videos.

17:50It is interesting, though, because they could just do that without this formal partnership anyway. So I wonder why they needed felt the need to promoted by TikTok. Right. That it's good for Peloton. I'm just wondering why TikTok felt the need to do it because they would come to their platform regardless of that. But anyways, I do think it's smart to lean into the influencer part of their coaches. Peloton has been riding the stationary bike struggle bus, though. In the three months that ended September, Peloton lost 30 ,000 members. Its revenue fell to$595 million, down from$757 million three years ago during the high of the pandemic.

18:24So as you said— It's just tossing Hail Marys right now. Right. It's just looking for something. All right. My dog of the week is Apple, which is apparently doing dry January because it's lost all of the buzz. The most valuable company in the U.S. has fallen 6 percent this week after it got hit with not one but two stock downgrades from analysts. These analysts pointed to a few different concerns keeping Tim Apple up at night. First is the gloomy macro economic outlook in China, which is a huge market for Apple and could dampen its iPhone sales there. Another bad omen, they said, is that Apple's booming and highly profitable services segment will slow down this year.

18:59And then there was this whole Apple Watch patent debacle that's not yet fully resolved and could dent sales over the holiday shopping season. So all in all, a rough start of the year for Apple, which has become the most unloved big tech stock on Wall Street. Yeah, you're going to see that headline a lot. Apple is the least loved tech on Wall Street because there's only 33 buy ratings from analysts right now. Compare that to 68 % from Amazon. And, of course, these analyst ratings aren't everything. And no one truly knows which way the stock is going up or down. And it's coming off a great year, too.

19:32It rallied nearly 50 % last year. But if you look at the broader tech sector, all of a sudden there's some cracks showing. The Nasdaq 100 declined for the fifth straight day. It's the longest losing streak in over a year, which is kind of crazy that only a one-week losing streak is suddenly the longest streak in over a year, but some cracks are showing at the edges of these big tech companies. Black Friday was a few months ago, but chaotic scenes reminiscent of the shopping scramble popped up this week when customers stampeded into Target to get their hands on an item they just needed to have.

20:07What product could possibly inspire such madness? Well, it's a water bottle, specifically a limited edition pink version of the 40-ounce Stanley Quencher that was released at Starbucks stores in Target locations. These water bottles have been a viral sensation in the past few years, becoming just as much a fashion accessory as a vessel for drinking. The Stanley Quencher was the top search product on Amazon this holiday season, and people were filmed literally crying when they opened up their Christmas gifts to see one of these water bottles. The story gets even more bizarre because Stanley is not this hot new startup company.

20:42It's in fact 111 years old, and just a few years ago, it was doing a steady 70 million in annual sales. Now, thanks to its viral water bottle, it did an estimated$750 million in sales last year. Toby, can you please explain the Stanley Cup craze? It's adult beanie babies all over again. It's got Middle American absolute chokehold. It's like Birkin bags for a more accessible Birkin bag, if you will. But this is no accident by any means. There's this guy, Terrence Riley, currently leading Stanley, who was also in charge of turning Crocs around, When he became an exec at Crocs in 2013, nobody wore them.

21:21They were ugly. They were lame. Suddenly, when he left, they were on the feet of every celeb, made a debut at London Fashion Week. He completely turned this brand around. And the same thing is happening with Stanley right now. For the past two years, yeah, revenue has doubled annually. Sales of specifically the quench are up 300 % year over year. I think what he did was really reimagine the brand more as an accessory than a hardcore piece of camping gear. It used to be these green water bottles were literally used by B-17 pilots in World War II. They were extremely, extremely hardy camping accessories.

21:57He brightened the color scheme. He made more of a diverse color palette. It catered it more towards women and their daughters. And suddenly you have this genius marketing product that people are lining up outside of Target to get. It seems like they're borrowing the streetwear, the playbook, with these limited edition drops and collaborations with celebrities. So it seems like that has been the playbook that worked also with Crocs, and it's also working with this water bottle. They also had just one of the greatest organic viral moments that you can ever imagine. There was this video where a woman's car had caught on fire, and she was just going through the charred interior of it.

22:38And in the cup holder was her Stanley water bottle. she pulled it out it still had ice in it that you cannot dream of a more better of a better organic marketing opportunity and obviously stanley jumped on tiktok responded to the video and said we'll replace your car they leveraged the most out of it that's the stuff that marketing dreams are made that's pop tart level i i also just want to say the faces of nhl exist must be so confused because stanley cup is trending everywhere and they're like wait is this us but it's not. It's the real Stanley Cup. How long is Stanley staying around, though?

23:11Because we've seen water bottle fads before. They just seem to be a product where people latch on and kind of fade. We had the Nalgene rise and bust, and then we had Hydro Flask a few years ago. Now it's Stanley. I think the fact that they can do different colorways will kind of keep that hype going. Or maybe there's some innovation. I mean, they put a straw in their cup, which I think people love. I don't know what the next water bottle innovation is, but I'm excited to try that. is that they're big, but they also fit in the cup holder because they're tapered. I think that is really crucial to their success.