Volume 86: Airlines: Surprisingly hot

1. Airlines: Surprisingly hot.

tl;dr: Almost 100 new airlines planned globally.

If you’re a designer working in the branding field, designing the identity and livery for an airline, any airline, is a bit like playing in the SuperBowl. There’s just something visceral and exciting about standing in a hanger and looking at your work at massive scale plastered along the side of what will soon be up in the sky. So even though I’m not a designer, I totally get it, and working on an airline branding program remains a bucket list item I’d love to tick off professionally.

Unfortunately, for the longest time, there just wasn’t a whole lot of opportunity, as most of the airline branding action was limited to merger consolidation rather than rebrands or new brand creation.

Until now.

One airline’s crisis is another’s opportunity. As the pandemic has crushed air travel globally, we’ve seen a combination of existing players struggling and going out of business, structural change to the market itself, and hundreds of cheap second-hand planes waiting for new owners in the desert in Arizona. Add the fuel of cheap capital to this fire, and we get a raft of new airline startups. As of May this year, 132 new airlines were planning to launch globally, which I’m guessing is probably something of a record.

And it makes sense. The pandemic won’t last forever; there’s massive pent-up demand for travel, growth trends pre-pandemic were solid (especially in Asia), and structural shifts in the market can be leaned into by new operators that don’t bring the baggage of being optimized for the past.

At a cursory level, it looks like most of the action is going toward low-cost carriers focused on tourists and individual travelers as business travel gets structurally smaller. This suggests we’re about to see a bunch of loud, brash, upstart airlines battling for our attention again, which is awesome. I remember the heady days of Go and can’t wait to see how creative people can get in the race to create new airlines for a new age.

As long as they do better than ITA, that is, which grew out of the ashes of bankrupt Alitalia. It’s a mess, with a logo that looks more suited to being on the side of a tanker of Avgas than an aircraft and a livery inspired by the Italian national soccer team (seriously). They tell us it was “solely the work of Italian designers,” which is quite something when you consider that typically the words Italy and design go together like peanut butter and that jelly stuff. Clearly, none of the good ones worked on this.

Ah well. Here’s to the brasher upstarts doing it a little better.

2. A trillion-dollar car company on Fantasy Island.

tl;dr: Inflation sinks and future narratives.

Last week Tesla announced it was selling 100,000 cars to a bankrupt car rental company and its market capitalization spiked to over $1trillion. To put this into perspective, Tesla will only be able to justify this valuation if, in the future, it sells every new car globally.

This isn’t going to happen. First, while global electric vehicle sales are growing strongly, Tesla is losing market share as it grows more slowly than the category as a whole (dropping from 21% to 14% in case you’re curious). Second, the EV category is still young, and the major car manufacturers are about to release a slew of new models that will compete directly and drop that share further. Third, Apple is strongly rumored to be getting into the EV business, and I suspect there’s a natural overlap between Tesla buyers and likely Apple Car buyers. And fourth, Tesla has terrible quality control and builds its interiors as cheaply as possible (cost engineering being the real reason for its minimalist elimination of physical switches and buttons), which might work just fine when you’re the only game in town, but absolutely won’t work when you have competition that has a clue about building a nice interior.

So, what on earth is going on, and what has this got to do with branding?

Well, when central governments engage in $25 trillion worth of quantitative easing to try and get the global economy back on track, first from the financial crisis of 2008 and then the pandemic of 2020, all of that money has to go somewhere. And, in the same way the Amazon Rainforest capturing carbon acts as a carbon sink, the stock market has spent the past thirteen years soaking up capital and acting as an inflation sink.

As a result, we’re left with a very strange-looking market that appears ever more disconnected from the fundamentals of its constituent businesses. This is no longer a stock market recognizable as such. It is now Fantasy Island. And on Fantasy Island, what matters isn’t what is; it’s what might be.

What separates the have’s and have not’s today isn’t how good a business is, how profitable, or how solid the underlying fundamentals are. Instead, it’s the ability to capture attention with a narrative of the future. You see, on Fantasy Island, a track record works against you. It’s a ball and chain that does nothing but demonstrate your limits.

Anyway, in the battle of what might be, Tesla and social media savant/carnival barker CEO Elon Musk are masters of the attention-grabbing narrative. Like selling the idea of a deal with Hertz that we now find out might or might not be a done deal.

But, Tesla is far from alone. Another wrinkle in the mix of Fantasy Island stems from the explosion of free trading apps, which means 20+% of all stock trades are now made by retail investors like you and me. And who is it that’s most likely to be wowed by future narratives for things they’ve already heard of? Yup, you and me. Why do you think the turnaround stories for the likes of Gamestop and AMC took off so hard.

So, while the stock market as a whole is mostly made up of B2B companies (structurally, there are many more B2B companies than B2C), value is flowing to consumer brands that people know and can present a compelling-enough future narrative. (Pretty much the only explanation for Uber, a terrible business with negative unit economics, that’s incinerating cash, being valued at $86bn.)

This means market value is increasingly dependent upon your brand, just not in the way we used to think about it. It’s no longer about your brand’s relative contribution to business performance and more about how well you can market your idea of future potential to investors in order to make it famous among people like you and I. In other words, branding.

What’s truly scary is that if branding a future narrative is what’s driving the stockmarket, who knows the mess that’s coming.

3. Pinterest^QVC x Attention + PayPal = Superapp?

tl;dr: The superapps are coming. And I’m terrible at math.

Last week, rumor had it PayPal was actively considering the purchase of Pinterest (since denied), which seemed…odd. This week, Pinterest announced PinterestTV, which is like QVC with Pinterest creators doing the selling, which makes the potential matchup much less odd. Let me explain.

What Silicon Valley labels the “creator economy” has slowly but surely become a commercial juggernaut, driving massive company valuations, consumer attention, and VC funding in equal measure. And while it remains amorphously defined, including everything from your naked neighbors on OnlyFans to craftspeople on Etsy, newsletter entrepreneurs on Substack, video-game makers on Roblox, and influencers on the OG creator platform, YouTube, it is estimated that the creator economy is worth as much as $100bn and growing fast. Not only that, in recent research, American teens claim they’d rather be a YouTuber than an astronaut. But, while the valuations of creator platforms themselves have been stratospheric, being a part of the creator economy itself has tended to look more like playing sports for a living than a more conventional career. As in sports, only a fraction of the total number of creators earns even the most basic of livings, with an infinitesimally tinier fraction making millions.

As a result, it’s no surprise to see a slew of entrepreneurial attempts to push the monetization of the creator economy down the long tail to help more people make money and attract them from one platform to another.

In that vein, what’s interesting about PinterestTV is that the currency in play is consumer attention, which they’re seeking to monetize in a new way. (As an aside, Faris Yakob has been writing about attention in the context of advertising for years, which makes the 2nd edition of his book a timely read.)

As a result, what connects Pinterest to PayPal is the monetization potential of attention that creators bring to the platform. You see, we live in a world where there’s never been more competition for our attention, so businesses with the ability to capture it organically - like Pinterest - represent an outsize value opportunity to others that have to pay to capture it - like PayPal.

Marrying the two is a bet on creating an innovation engine for the economics of attention that will benefit a new generation of creators, supersize the valuation of the business, and build what might be labeled a superapp.

Superapps are far from a new idea. While Silicon Valley has long been trapped in the box of a surveillance advertising business model, Asian companies have been innovating like crazy to create superapps. WeChat is probably the best-known example, offering as it does a dizzying array of ways for consumers to pay, chat, connect, buy goods, buy services, take out loans. You name it. (As an aside, it’s a sorry sight to see Uber throwing a surveillance advertising Hail Mary Pass in a desperate attempt at profitability rather than pursuing a superapp future).

Anyway, whether PayPal buys Pinterest, Square buys Twitter, or any other deal happens between a highly valued payments business and an attention-rich creator economy company, look for more talk of superapps. For as long as Apple makes the surveillance advertising business model less appealing (unless you’re Apple), and as long as the regulatory environment looks like it might get stricter, there’ll be a lot of focus on vertically integrating the economics of our attention.