In this episode of MarketFoolery, host Chris Hill and Motley Fool analyst Jason Moser discuss Apple's (AAPL +0.41%) announcement that it will build a $1 billion campus in the Raleigh, North Carolina, area. Also, they share their thoughts on Facebook (FB 0.69%) teaming up with Spotify (SPOT 0.39%) as part of the social network's overall investment into audio programming, and Domino's (DPZ +1.45%) new marketing campaign starring the "Noid."
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This video was recorded on April 26, 2021.
Chris Hill: It's Monday, April 26th. Welcome to MarketFoolery. I'm Chris Hill, with me today, the one and only, Jason Moser. Thanks for being here.
Jason Moser: Hey, thanks for having me.
Hill: We have the return of an icon that we're going to talk about. [laughs] We have a new partnership between two of the bigger names in consumer tech. But we're going to start with Apple spending money, not on an acquisition, but on itself. Apple announced plans to open a new campus in Raleigh, North Carolina. The company will spend over $1 billion on the campus, it will employ 3,000 people working on software engineering and machine learning. Jason, this is on top of the billion-dollar campus that Apple is building in Houston, Texas, that they expect to open in 2022.
Moser: Well, it must be nice to be Apple, ready to have that type of money. Not a surprise, obviously, that they have the resources to do this, but I think this is a good thing to see them investing in themselves like this. It's good to me to see this type of headline versus the, "Hey, is Apple going to get into electric cars or solar panel roofs or something?" You're talking about Tesla and Apple and the competition that may develop there. This is a bit more tangible. I think it's a bit more sensible, a bit more understandable, to me at least. Given the shift that we've seen over the past year and the way that we work, I think this is Apple essentially saying, "Hey, we're going to double down on this idea that we're going to have a more distributed workforce here in the coming years, in the coming decades." I think any company should be looking at it from that perspective, then it becomes a matter of how they handle it. I think for Apple, going about it this way, investing this type of money in a big campus, really another HQ, so to speak, it's a smart move. It got me thinking earlier when I was reading about the story. You remember, I don't know, it was years back, and I don't remember who coined the phrase, but we heard that culture eats strategy for breakfast a lot. That always confounded me a little bit because I've always viewed culture as really a part of strategy.
To me, if you're a business, then you should be focused on building a good culture, that should be part of your overall strategy as a business. It's not one or the other. I feel like they work very much together. To me, this is a way for Apple to look at the future of how we work, the future of the workforce and saying, "Hey, you know what? Not only are we going to take advantage of this new hybrid distributed workforce, but we're also going to double down on making sure that we keep our culture intact." One way you do that is by building a physical presence. Virtual is great, it's convenient, but having that physical presence, where people will be able to gather, they'll be able to work together and collaborate, particularly for a business like Apple, when you're talking about focusing on tools like AI and machine learning and whatnot, I think campuses like these are going to be crucial. I think it opens them up to a bigger pool of talent, which makes a lot of sense, so to me, between Apple, the consumer, and the workforce, this is a win-win-win. You've got to feel good about it.
Hill: Look, I don't want to knock Amazon, but there's something refreshing about the fact that Apple did their due diligence and just announced this. [laughs] It wasn't a list of 20 cities that they said, "Hey, we're going to build a billion-dollar campus. You can bid on this." They just went ahead and did it.
Moser: Yeah, I'm not going to lie. The Lebron-ness of Amazon's new HQ was just, it was frustrating. It was insulting. I felt it was unnecessary. Clearly, we had fun with it on our shows because it was something to talk about, but I'm absolutely with you. Leaders are paid to get in there and make decisions like these and move forward. That's what Tim Cook and team are doing there. I think chances are this strategy, particularly when you consider that home base being on the West Coast, now you're expanding. You've got Texas in play here, you've got the East Coast in North Carolina in play here. There are going to be other areas around the country that they continue to expand into over the coming decade and beyond. I think it just makes a lot of sense, it's not a matter of taking one location. I think they're really going to do a lot of research. They're like restaurants. When they look for new places to open those restaurants where they feel like sales are going to be sustainably worth the investment, I think Apple is making it. They are performing a lot of research into these areas to make sure that these campuses, these workplaces that they open are going to be investments that are worthwhile, that are sustainable. I think it's going to work out well.
Hill: Spotify's new partnership with Facebook launches today. This comes in the form of a mini-player that enables people to play music and podcasts through their Spotify membership while staying within Facebook's platform. That was my first thought [laughs] when I saw the story, like, boy, Facebook really wants people just to stay on the platform.
Moser: [laughs] That's exactly it. At the end of the day, the key for Facebook is engagement, period. Whether it's Facebook or WhatsApp or Instagram or whatever property you are talking about, the Facebook owns, it's about keeping users in there, for whatever reason. Those decisions aren't made toward immediate monetization. It looks like this relationship, there's not going to be some big data or ad play, at least in the near term that Facebook is exploiting. This is really about a cooperation between two big dogs in their respective spaces, thinking, hey, we can reach more people, we can create more engagement, this could be a win-win for both platforms. To me, it certainly makes sense. As a user of Spotify, I am absolutely bought into the value of that platform. I enjoy the music side, podcasting, it's a really good platform. For Facebook, you can argue that Facebook prop, the blue app is, headlines would have you believe that that platform is suffering from lackluster engagement maybe, but I mean, the numbers tell a little bit of a different story.
As critical as we can be in regard to Facebook and privacy, and the issues that have dealt with over the past several years, people keep coming back. It's this battle of privacy versus convenience. I think what we're seeing is that convenience is likely going to win. In most cases, consumers love to gripe about privacy, but honestly, [laughs] it really feels like it boils down to just convenience, convenience likely wins. To me, this is a sensible relationship. If you look at the opportunity in this space, when it comes to audio, generally speaking, just podcasting alone. When you look at the eMarketer projections there, podcasting in the U.S. is going to cross the $1 billion mark this year in advertising revenue. That's slated to hit $2 billion by 2023. It's a large and growing market opportunity, not going to be something that's tremendously meaningful to Facebook's bottom-line, but they recognize they're going to be a ton of people utilizing Spotify in the coming years. Why not be a part of that and bring those two together? To me, I think, it makes a lot of sense. It'll be intriguing to see how Facebook tries to exploit this relationship in the future. We talk a lot about acquisitions and who needs who more. It's hard to say which party needs which more in this case. I'm not sure either really needs the other, but they can certainly benefit a lot by working together.
Hill: Well, and it's part of a broader push into audio by Facebook when you think about it, they've got their live audio rooms, which is their answer to Clubhouse. Interesting to see that this is not just a one-off thing with Spotify.
Moser: Yeah. Less you think that size isn't a competitive advantage. It certainly can be. It's not always going to be the case, but in certain cases, it can be. When you think about a company like Facebook or even Spotify really, when you're talking about something with the potential network effects play here, all Facebook has to do, and it seems like this is pretty much what they're doing at this point, they just need to keep back and basically watch competitors do the work, then Facebook just copies or acquires what's working best. I'm not saying that to make fun of Facebook. They've earned that right to be able to do that. Mark Zuckerberg has built this network of billions and billions of users now, where he literally can just sit back, watch as competitors do the work, you just copy or acquire what's working, and you just keep on growing from there.
In all the while, you get to churn a little bit of that extra cash out to other initiatives like virtual and augmented reality, the Oculus work that they're doing there. There's a lot going on behind Facebook's closed doors that we don't know about, we know a lot about this stuff right here because we talk about it all the time. I think what's going to be really interesting to see over the coming decade and beyond. Obviously, I've been very critical of Facebook, I'm not a big fan of the platform myself, but I do get the utility of it. I think we're going to learn a lot more here in the coming decade about what has been going on behind those closed doors in regard to those more advanced ideas like AR, VR, machine learning, AI, and whatnot. It is good to show that real size absolutely can be a competitive advantage and Facebook is absolutely exploiting it.
Hill: Domino's Pizza is bringing back The Noid, and if you know exactly what I'm talking about, then you are revealing something about your own age. If you have no idea what I'm talking about, then you are younger than me and Jason. The Noid. [laughs] The Noid was a cartoonish villain in Domino's TV commercials in the 1980s, and they're bringing back The Noid in a new marketing campaign that includes an appearance in the video game Crash Bandicoot. I've done a 180 on this story [laughs] in my own mind since I first saw it this morning. Because my first thought was, "Oh come on. Why would you do that?" I don't know. Part of it is, I feel like Rich Allison and his team have more than earned the benefit of the doubt from shareholders. Also, I thought, depending on what they do with this, this could be effective. This could move the needle for them.
Moser: I mean, there's a lot to be said for brand awareness and The Noid for a lot of us, there is a direct correlation between The Noid and Domino's. That's something that you and I have known for a long time. I love to see that they are actually bringing this back out to a modern-day distribution channel. I mean, this isn't about a TV advertising campaign. They're bringing it out there toward mobile gaming first and foremost, it sounds like. That makes a lot of sense when you look at the numbers that are being recorded by all of these mobile gamers in any company even related to them. There are a lot of people out there engaging with these games and certainly, the phone, that is where it's at. To see them utilizing that distribution channel, to me, makes a lot of sense. I like to see it. I think there's plenty of fun they can have with something like The Noid.
We live in this age of reboots and revisiting content that's existed forever it seems. I'm certainly not going to hold any ill will toward [laughs] Domino's for going back to the wheel in trying to work with something that's worked before. I think what's going to be more interesting, honestly for me, and this was part of the story here, it's just working on this investment in delivering. Domino's obviously being such a tremendous presence in the delivery space, what they're doing, and we'll see more of this with The Noid, it's this Nuro investment and working with Nuro as far as autonomous delivery. That's going to be something we see more and more of as time goes on. You may see these little Nuro self-driving delivery robots toddling around. You could stick The Noid on all of those things. You put a big fat Noid on top of it. Immediately, people know what it is. It's free marketing. Then if that's not enough, the other thing that's really neat is the relationship here between Chipotle and Domino's. Because when I talk about Nuro, Chipotle actually just made an investment in Nuro. That was that autonomous delivery company that Chipotle just made an investment in. We're going to see this delivery going well beyond pizza. I mean, Chipotle is looking to bring this type of thing into their universe as well. These are two very well-run businesses, Chipotle and Domino's. I think the next question really is, what's the advertising campaign? What's the annoying character that we see coming out of Chipotle's pipeline here? Because they need to do something. I feel like there's a collaboration just begging to be added here.
Hill: Like a crossover episode.
Moser: Yeah, exactly.
Hill: The Noid shows up in a Chipotle ad.
Moser: Exactly. It's like a Disney crossover episode where you get all of these characters on one. It could be a lot of fun. They could go a lot of different ways with it, and everybody loves pizza and burritos, Chris, let's be honest.
Hill: That's true. Thank you for bringing up what is, from a business standpoint, the most meaningful part of the story, which is that The Noid is going to be featured in ads, where the real star of the ad is the driverless vehicle that's going to be bringing hot pizza to your house.
Moser: Yeah, man. Listen, 30 years ago, you and I would have killed to have The Noid deliver a pizza to our home. Today, this is now becoming a reality. I don't feel like I even need to go on.
Hill: It's a perfect place to wrap up. Jason Moser, great talking to you. Thanks for being here.
Moser: Thank you.
Hill: As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of MarketFoolery. The show is mixed by Austin Morgan. I'm Chris Hill, thanks for listening. We'll see you tomorrow.
