iBuyer’s Remorse

Plus: TikTok’s owner wants to help you be more productive. Really. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

February 17, 2023

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TOGETHER WITH

Good morning and happy Friday.

They just can’t die.

After the last Blockbuster video store, located in Bend, Oregon, released an ad on social media during the Super Bowl, manager Sandi Harding said she saw a 200% boost in sales in the following days. “I think it’s great that people are nostalgic for it. It’s certainly helping us stay alive,” she said on Fox & Friends Thursday. The ad features a cockroach — a bug capable of surviving a nuclear explosion, at least in the disaster movies popular in Blockbuster’s heyday — roaming through a barren, post-apocalyptic wasteland before arriving at the Blockbuster, still up and running, looking to rent some videos. If Armageddon does strike, don’t expect Netflix to keep you entertained.

Morning Brief

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What’s the future hold for iBuyers?

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A whistleblower lawsuit gets into medtech’s innards.

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TikTok’s parent company wants to help you be… productive?

Real Estate

iBuyers Struggle with Low Stock and Fewer Customers

(Photo Credit: Breno Assis/Unsplash)

It’s not an iBuyer’s market anymore.

Not only have US housing starts declined for the fifth month in a row — a trend not seen since 2009 — but nationwide home buying fell 40% year-over-year in 2022’s fourth quarter, The Wall Street Journal reported. This all spells bad news for the iBuyers who depend on a constant flow of buying and selling homes.

Home Buying Made Simple-ish

iBuyers like Opendoor and Offerpad are the tech disruptors of the housing market, using algorithms to snap up supply with the aim of cutting out the real estate middlemen and reducing the lengthy processes when they sell the homes back to actual people. No more listings, photoshoots, or open houses. And if you’re a human trying to sell your home, all it takes is a few clicks and an iBuyer will give you cash, generally at market rate.

While the iBuyer business model sounds simple — buying homes that require little renovation, and then flipping them for a bigger payout — it’s not exactly easy business. Zillow and Redfin rode the iBuying train for a little while, but ditched the operation altogether when it became too hard to accurately forecast the market. Plus, it just requires so much capital, especially with rising interest rates. Despite having cash to throw around, iBuyers aren’t as established as traditional real estate firms and banks, accounting for less than 2% of all home sales in the US. “Profitable or not, an iBuyer must buy homes to generate revenue and remain relevant,” real estate strategist Mike DelPrete said.

With fewer people buying homes, groups like Opendoor are buying less, which means they’re making less:

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In last year’s third quarter, Opendoor acquired more than 8,000 homes, according to DelPrete. But by the next quarter, it had purchased fewer than 4,000.

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Worst of all, DelPrete also found, via YipitData, that buy-to-sell premiums haven’t meaningfully recovered since turning negative last year — essentially negating the entire iBuyer business model.

Market Manipulator: When iBuyers were rolling, the big concern was market manipulation. Let’s say an iBuyer purchases 100 homes in a zip code for $300,000 a piece. Then they buy another 20 homes in the same area and overpay at $350,000 each. They could potentially now manipulate the local market and sell all 120 homes at $350k or more.

Today iBuyers are the ones getting shafted. Laurie Tayrien told Bloomberg she and her husband bought a home in Phoenix for $485,000 in November. Only five months earlier, Opendoor had purchased it for $646,800. That’s a 25% loss for the iBuyer.

-Griffin Kelly

Healthcare

Whistleblower Lawsuit Accuses Medtech Giant of Kickbacks

The healing gods at whom the Hippocratic Oath is aimed won’t be pleased.

A new report from ProPublica shined a harsh new light on the old problem of medtech companies cozying up to doctors to squeeze as many of their devices into patients as possible — whether they need them or not. It’s a tale as old as… well, the private healthcare sector.

An Arm and a Leg, Or Just a Leg

Propublica’s report centers on the relationship between Medtronic, the world’s largest medical device company, and a veterans hospital in Wichita, Kansas, which is the subject of a whistleblower lawsuit. The case revolves around devices such as stents and small medical balloons produced by Medtronic to treat peripheral artery disease, i.e. when the blood vessels in your legs get clogged. The whistleblower lawsuit alleges the hospital used (and purchased) far more of these devices than was medically necessary.

One former hospital boss testified that he started to investigate the situation after looking at the hospital’s books. “We were more expensive than, I believe it was, the top 10 hospitals in the [Veterans Affairs] combined.” The potential consequences of overusing these medical devices are pretty grim; any kind of invasive treatment carries the risk of complications up to and including amputation, and data released as part of the lawsuit showed the rate of amputations due to vascular disease at the hospital increased 530% over five years.

The documents and testimonies that have come out as part of the case highlight how medtech company representatives can cultivate influence with doctors:

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Healthcare workers at the hospital were reportedly treated to steakhouse dinners running upwards of $120 per person, as well as Apple devices and NASCAR tickets. Asked about the whistleblower suit, a Medtronic spokesperson told ProPublica: “These allegations are false and Medtronic is defending against these claims in court.”

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This isn’t Medtronic’s first rodeo; in 2011 it reached a $23.5 million settlement with the US Department of Justice over alleged kickbacks, and it’s notched at least three more multimillion-dollar settlements since then. One legal expert told ProPublica the DOJ fines may not be a harsh enough deterrent to stop shady practices in the industry.

Watching Your Weight-Loss Drugs: Besides rethinking how it punishes large misbehaving medtech companies, the DOJ might also do well to put startups under the regulatory microscope. The Wall Street Journal reported this week that health startups are peddling diabetes treatments for weight loss to people who have no medical need for them. “Some people are using them just to drop 5 pounds,” an obesity-medicine physician told the WSJ, adding: “The get-skinny-quick messaging on social media, that’s not what they’re meant to be used for.” So next time you get a strangely aggressive weight-loss ad on Instagram, please just shut the app.

– Isobel Asher Hamilton

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Tech

TikTok Parent Company Finds Success With Workplace-Collaboration Service

There’s a parallel universe in which TikTok’s parent company actually enhances productivity. In America, ByteDance, via TikTok, prevents people from getting any work done by way of an endless stream of impossibly distracting short-form videos. But in its homeland of China, ByteDance facilitates work via its Slack-like service called Feishu.

And it may soon be a great business. The platform saw a massive spike in revenue last year, according to a new report from The Wall Street Journal, helping its parent company find new revenue streams.

TikTok Goes the 9-to-5 Clock

Even for a company owning a paradigm-shifting social media platform, it’s nice to have multiple revenue streams and various services under the corporate umbrella. Just ask Meta, Google, Amazon, or, well, any other tech giant whose tendrils reach into all sorts of seemingly unrelated pockets of the digital world. ByteDance is no different.

The company first developed Feishu for internal use in 2017, before offering it to domestic customers in 2019 (and launching again in 2020 to international clients under the name Lark). And while it’s yet to make a significant dent in both a global market dominated by Slack, Microsoft, and Google or a Chinese market controlled by Alibaba’s DingTalk and Tencent’s WeCom, it’s already generating the type of annual recurring revenue that software-as-a-service companies labor so hard for:

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In 2022, Feishu subscription revenue notched $100 million, platform chief executive Xie Xin reportedly told staff during a virtual meeting on Thursday. That marks a 270% increase over the service’s revenue the year prior, sources told the WSJ.

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In November, Feishu had some 9.3 million monthly active users, though, in the great tradition of tech services, it’s yet to turn a profit in large part due to the costs of its massive 7,000-member staff.

Security Check: Lark, however, may be hard put to replicate Feishu’s China success across the Pacific. US federal employees are already restricted from using TikTok on their devices due to security concerns, and 26 states have followed suit with their own employees. Private sector companies, particularly those in cybersecurity, finance, defense, and energy, have been weighing similar bans, according to another WSJ report — so they probably won’t be quick to switch their internal office messaging systems over to ByteDance.

– Brian Boyle

Extra Upside

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Dog Spa Days Are Over: Luxury spending on pets is easing off.

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Cryptic move: Tesla fired over 30 workers one day after they launched a union drive.

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Just For Fun

In the nick of time.

Surprise prize.

Have a great weekend!

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