November 2022
Article
6 minutes
Perspectives on Progress #1
Claire Shaw – Portfolio Director
From exciting company developments and portfolio activity to challenging regulatory requirements and industry headlines, Perspectives on Progress offers you the Scottish Mortgage Team’s view on the landscape we see around us...
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Roblox
Immersive advertising in the metaverse – a new opportunity
When founder Dave Baszucki set up Roblox 18 years ago, his vision was “to create a virtual space where people play, work, learn and create together”. That vision has not changed. The company is now leading the charge ushering in a new category that it dubs “3D human co-experience”, otherwise known as ‘the metaverse’ – the term du jour.
Boasting a rapidly-expanding active user base of about 58 million users, Roblox thinks now is the right time to test out ‘immersive advertising’ on the platform. This a visionary type of advertising, one that does not get in the way or interrupt the user, similar to the way we see billboard ads in the ‘real world’.
Roblox already has partnerships with over 90 of the world’s most well-known brands, everything from Gucci and Burberry to the NFL, Warner Bros and NASCAR. Because there are many younger players on the platform, ones that will become the next generation of consumers, it makes sense that brands are trying to connect offline products to online worlds.
Brand marketing in the metaverse is in its infancy. But with the more established players in the online ad market experiencing some turbulence – in part due to the emergence of a ferocious new competitor in TikTok – we may see more brands deploying immersive advertising on platforms such as Roblox.
Advertising could also diversify Roblox’s revenue stream beyond virtual goods within games by giving the company another monetisation stream in what is the trillion-dollar online ad market.
Bolt Threads /Ginkgo Bioworks
Fungi fashion
Mushroom-inspired fashion? Maybe not as strange as you might think, given this year, fashion designer Stella McCartney released the first luxury bag made from ’mushroom leather’. That is Bolt Threads’s Mylo™ material — an animal-free, sustainable leather alternative, made from mycelium, the underground root-like system of fungi.
Bolt has recently enlisted the help of another Scottish Mortgage holding, Ginkgo Bioworks, to help optimise the production efficiency of Mylo™ material. Through this partnership, Ginkgo aims to increase the growth rate of Bolt's mycelium, thereby lowering the overall production costs of Mylo™.
Bolt Threads is being backed by pioneering brands, such as adidas, lululemon and Kering. This demonstrates a collective recognition by those in both the fashion and textiles industry to use more sustainable, more environmentally friendly alternatives to leather.
The more brands experiment with mycelium, the faster producers will be able to solve the challenges and make the material more accessible. Bolt is at the forefront of this shift in embracing new possibilities with lower environmental impact.
Joby Aviation
Pioneering partnership with Delta Airlines to provide city-to-airport service by air
Joby Aviation is one of the companies revolutionising the personal transportation industry with its electric, vertical take-off-and-landing (eVTOL) aircraft, ie a ‘flying taxi’.
The company has recently announced a partnership with Delta Airlines to provide home-to-airport transportation services, a first of its kind. Delta passengers travelling through two of America’s busiest cities, New York and Los Angeles, can skip the road traffic by taking a Joby eVTOL to and from the airport. And it is this potential for Joby to become the ‘Uber of the Air’ that excites us.
Founder JoeBen Bevirt aims to save “one billion people, one hour per day” by providing faster, quieter and sustainable modes of transport. If the company succeeds, it has a chance of becoming one of the most valuable and interesting companies emerging from the green transition.
Joby has had a rough ride since it went public last year. The stock market has very little patience currently for pre-revenue companies and technologies that may not commercialise in the very short term.
Undoubtedly, there will be setbacks as airport certification is notoriously slow and hard. The Delta partnership gives the company a much-needed vote of confidence at a time when others are sceptical about the long-term potential that this technology offers for the future of transport.
Netflix
In New Territory
Netflix has had a challenging year. The decline in subscriber numbers earlier this year triggered questions about increased competition from Disney and others, worries that the US market is saturated, and with content spending at an all-time high, doubts about future growth potential.
Netflix has sought to address this by introducing a cheaper, ad-driven, subscription service, ‘Basic with Ads’. It targets the price-sensitive customers who either do not currently use the service or that borrow someone else's password.
The response from advertisers has been “extremely positive”, to the extent that Netflix has had to turn some potential customers away because it doesn’t yet have the capacity to serve them. Demand is also helped, as Disney CEO Bob Iger has said, because traditional TV and satellite is heading for a precipice.
Netflix has a successful record in making big strategic changes, partly due to the culture and vision that Reed Hastings propels.
There are signs of encouragement, particularly with the speed Netflix has executed this initiative. But the introduction of an advertising tier is new territory for the company. It is an area we will monitor closely in case we need to recalibrate our probability-adjusted upside scenarios for long-term growth potential.
Horizon Robotics
In China, For China
Volkswagen’s (VW) mantra has always been “in China, for China”. This is perhaps why it has recently announced a joint venture with China-based Horizon Robotics which provides computing solutions for smart vehicles.
Together, the companies will develop technology that can integrate numerous functions for autonomous driving onto a single chip that will only be customised specifically for automated driving solutions in the Chinese market.
VW believes that by localising its business in China with good domestic partners, it will accelerate the pace of innovation and crucially strengthen its presence in one of the most important and dynamic automotive markets in the world.
Horizon, whose mission is “to make human life safer and better”, is a leading provider of energy-efficient computing solutions for advanced driver assistance systems (ADAS) and autonomous driving (AD) for smart vehicles.
Its goal is to help its customers own intelligent vehicles that make real-time decisions based on the information it gathers from internal systems and the external environment.
The company hopes that by closely collaborating with a community of partners, it can offer products and services in an open ecosystem that advances the next generation of smart vehicle driving experiences. By accelerating the development, commercialisation and mass production of software and hardware technologies in the automotive sector in China, Horizon is striving to make automated driving for Chinese customers a reality faster.
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About the author - Claire Shaw
Portfolio Director
Claire Shaw is a portfolio director and plays a prominent role in servicing Scottish Mortgage’s UK shareholder base. Before joining in 2019, she spent over a decade as a fund manager with a focus on managing European equity portfolios for a global client base. With a background in analysing companies and communicating investment ideas, Claire is also responsible for creating engaging content that makes the Scottish Mortgage portfolio accessible to all its shareholders. Beyond that, she works closely with the managers, meeting with portfolio companies and conducting in-depth portfolio discussions with shareholders.
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