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Members: Car Brands Ranked By Privacy Standards

Temporarily unlocked. In a world increasingly driven by data, connectivity, and seamless integration of technologies, it’s no surprise that our vehicles are evolving to become the most intimate products we own. These are not just modes of transportation; they’re an extension of our digital lives, seamlessly integrated with our personal and professional activities.

In the annals of ancient mythology, the Greeks infiltrated the walls of Troy not through force, but with guile and deception in the form of a wooden horse on wheels. This iconic Trojan horse has since become a symbol of subterfuge, a strategy of infiltration under the guise of a gift. Fast forward to our digital age, and we see vehicles evolving into not just machines of transportation but highly complex mobile computing platforms. Beneath the sheen of these sophisticated interfaces lie intricate webs of power, influence, and control that have not just consumers but automakers themselves navigating a modern-day Trojan scenario.

But is this infiltration a benign integration or a strategic takeover? Drawing parallels between ancient myths and modern mobility, this essay delves into the role of Blackberry, the intricacies of automotive software, and the potential implications of having consumer-electronics giants at the wheel of our automotive future.

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When researching this technological revolution, BlackBerry, once primarily known for its secure email services and qwerty smartphones, emerged as a frontrunner in facilitating the infrastructure that makes our cars smarter. According to data from BlackBerry, their QNX system, a high-performance real-time operating system (RTOS), offers automakers a top-tier level of functional safety for automotive applications. It taught me a lot about the complexity of everything from in-car entertainment systems to how we control our vehicle’s traction settings.

Recent advancements in car connectivity, such as Apple CarPlay and Android Auto, have changed the in-car experience. These systems allow drivers to project their smartphone interfaces onto the vehicle’s infotainment screen, offering navigation, media playback, and various other apps in a familiar format. But there’s more to these systems than meets the eye. But despite the rising prominence of consumer electronics giants like Apple and Google in the automotive space, it’s essential to understand that the bulk of a car’s software isn’t controlled by these companies. Advanced systems like ADAS, autonomous driving functions, and various other modules have their distinct software, adding layers of complexity and function to the vehicle’s operating ecosystem.

As vehicles become smarter and more integrated with our daily tech, there’s a sophisticated interplay between different software ecosystems. One of them is now under increasing scrutiny. Mozilla, once known for its eponymous internet browser, is making news for another reason.

The advent of the internet and the subsequent boom of social media platforms led to an entirely new age of advertising. Through targeted ads, companies could tap into a gold mine of personal information, allowing for unprecedented precision in reaching potential customers. However, with the introduction of the General Data Protection Regulation (GDPR) in Europe, this seemingly boundless frontier faced new limitations. The retail industry, heavily dependent on the granular data offered by giants like Facebook, Google, and Snapchat, felt an immediate impact. Yet, surprisingly, while these tech behemoths were forced to change their strategies, car manufacturers emerged as the most flagrant violators of privacy norms.

Let’s take this from the beginning of the privacy movement.

GDPR and Early Implications

The primary objective of GDPR was to give European citizens more control over their personal data. Companies would now need explicit consent from users before harvesting their data. This posed a direct challenge to the advertising models of Facebook, Google, and Snapchat, which were hinged on the ability to collect vast amounts of personal data to deliver tailored ads. In a 2018 2PM report on the ramifications, I explained:

All roads lead to increased ad spend for retailers with Amazon at the behest of Google and Facebook. Amazon has a distinct advantage in so much that the entire commerce workflow can happen within their walls. We anticipate greater efficacy through Amazon’s channels. Especially considering that the United States will pass its own version of Europe’s GDPR Act within the next five years.

It’s been five years and I was wrong. America has yet to enact a federal law that directly parallels Europe’s. But state by state, stringent acts have been passed. And corporations like Apple have taken it upon themselves to enact privacy practices; 2PM has covered Apple’s post iOS 14.5 era extensively (parts (I-III linked here). Prior to this iOS change, retailers, who once enjoyed a rich influx of consumer data, enabled them to pinpoint advertising efforts efficiently. Since then, digital marketing has been a body of murky water. With platforms like Facebook having to limit data collection practices in compliance with Europe’s GDPR and Apple’s institution, the detail and depth of consumer insights available to retailers were diluted. The fine-grain targeting, which allowed companies to deliver ads to highly specific demographic segments, was curtailed, leading to what many in the industry perceived as a decline in advertising efficacy. A product’s ad that would have once seamlessly appeared in the feed of a consumer whose online behavior indicated interest in such products was now less likely to find its mark. The degradation of advertising accuracy was an unintended second-order effect of GDPR, but it was palpable.

Today, retail media has taken the place of the momentum builder that was Facebook and Google advertising. But there was a privacy oversight that I did not foresee.

The Automotive Industry: A Privacy Conundrum

While social media platforms and retailers were grappling with these new regulations, another industry was silently and rapidly morphing into a behemoth of data collection: the automotive industry. According to an investigation by Mozilla and follow-up reports by the Washington Post and Quartz, car manufacturers were collecting more data than ever before. These reports painted a grim picture, where the modern car was likened to a “computer on wheels,” gobbling vast amounts of data about its drivers and potentially all of its occupants.

Cars, with their sophisticated infotainment systems, sensors, and connectivity features, were capturing data ranging from driving patterns and destinations to personal conversations and even, alarmingly, indications of a driver’s sex life. Mozilla’s research found that every one of the 25 car brands they examined was collecting more data than deemed necessary. To add to the consumer’s woes, most car manufacturers were sharing, and in many cases selling, this data to third parties. Such extensive and intrusive data collection far outstripped even the most data-hungry social media platforms pre-GDPR. Here is the report card:

But why were car manufacturers not facing the same scrutiny and backlash as social media platforms? Part of the answer lies in the murkiness and complexity of data collection practices in the automotive industry. Unlike the relatively transparent (though still complex) practices of traditional consumer tech companies, car manufacturers have a more convoluted ecosystem of privacy policies that are challenging to decode. The operating systems are incredibly complex – with controls over a wider range of functions: technical, chemical, and mechanical. Furthermore, consumers often don’t view their vehicles as potential threats to their privacy, unlike their smartphones or computers. Automobiles are the ultimate trojan horse.

The introduction of GDPR, CCPA, and Apple’s privacy innovations have undoubtedly reshaped the digital landscape, particularly in the realms of advertising and data collection. While it forced a pivot for social media giants and retailers, leading to a decline in advertising precision, it also brought to light industries that were previously flying under the radar. The automotive industry, with its current trajectory, stands as a stark reminder that the fight for data privacy is far from over. As technological advancements continue to blur the lines between different sectors, it becomes paramount for regulatory bodies to stay vigilant, ensuring that all industries, irrespective of their nature, respect the privacy rights of consumers.

By Web Smith | Edited by Hilary Milnes with art by Alex Remy and Christina Williams

Follow Up: The Dawn of Streaming Consolidation

In July 2022, we looked at the emerging consumer frustrations of the streaming industry, the rising DTC (direct to consumer) costs, and the unrelated but relevant onset of 1990s nostalgia. A close examination of the media landscape brought to light significant parallels between the entertainment and retail sectors. Today, as we revisit that analysis in the light of new developments in August 2023, we find a noticeable shift toward consolidation. This shift is a response to evolving consumer behaviors and industry pressures. Variety magazine’s Intelligence Platform, a paid industry data service, proclaimed: “Hard Bundles Are The Future of Subscription Video Packaging.”

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Member Brief: The Case For Revenue Per Employee

Meta, Google, Amazon, Salesforce, Twitter, Microsoft – but not Apple. What gives? Each of these companies are vital to the retail ecosystem but one measures key results in a way that is most commonly seen in an altogether different industry.

“You’ll hear revenue per employee again, in tech, no one was looking at these metrics at least in the private world, the VC world for at least five years,” Keith Rabois recently said to Elon Musk’s Twitter management.

Whereas growth and market share were once key performance indicators, profitability and efficiency will be the measures of this next five to 10 years. An OKR (objectives and key results) is a strategic framework and a KPI is a measurement within said framework. Brand and SaaS marketing discusses KPIs with endless zeal, but OKRs are rarely communicated with the same energy. I believe that this will change.

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Objectives and Key Results (OKRs) are closely tied to human resources but by connecting business development with HR OKRs, organizations can create a stronger, more consistent brand image while also fostering a positive and engaging work environment for employees. Of all of the HR metrics, one seems to be emerging as key to American economic recovery. There’s headcount, time to hire, acceptance rate, employee satisfaction, turnover rate, retention rate, training expenses, and revenue per employee (RPE). The latter is the measure of the hour.

RPE is the metric that has come to define big tech’s layoff narrative. RPE, often ignored during bull market growth periods has become the talking point used to justify right-sizing organizations. Fortune Magazine explained:

In addition to curtailing talent acquisition efforts and building up its people practice, Apple is reducing business travel and delaying employee bonuses. CEO Tim Cook will also take a pay cut of about 40% this year, which he reportedly requested. Altogether, the moves make for a true “doing more with less” strategy.

Apple is efficient in a key sense that many others in big tech will adopt. Here’s an example that reads like a big law firm’s measure of success. Founded in 2006 and headquartered in Amsterdam with around 2,000 employees, Adyen is the best direct ‘comp’ to Stripe. The Information recently explained why Stripe’s private valuation to Adyen’s public valuation:

Stripe spent so heavily on staff and new business initiatives in recent years that its 2022 expenses per employee were twice those of Adyen, even though Adyen’s revenue per employee was higher, according to an analysis by The Information. The expense gap is expected to stay the same this year, although Stripe is expected to do better on revenue per employee.

Even Google Trends reflect the growing reference to the phrase “revenue per employee.” Long a practice in other industries: they say that if you are a law firm partner, you need to consider yourself a business and not an employee. According to The Four Week MBA, Amazon’s primary OKR – RPE – grew by $40,000 between 2021 and 2022. But clearly the objectives were not met; Amazon recently laid off another 9,000. Though, I suspect RPE grew again in 2023 as layoffs continued. Meta’s RPE is set to rise to $1.85 million based on the Wall Street Journal’s revenue and headcount projections.

And this is how companies will be judged. A firm well-known to many in big tech, Wilson Sonsini measures success by RPE. According to data by The American Lawyer, the firm’s RPE and headcount have grown precipitously since 2019. Law.com began its March 2023 analysis with:

Wilson Sonsini’s profits per equity partner fell 9.5% as the firm bulked up its lawyer head count to 1,045 lawyers including 266 partners.

In today’s rapidly evolving business landscape, companies are increasingly seeking new ways to evaluate their performance and long-term prospects. Traditional metrics such as revenue, net income, and market capitalization have been widely used for years, but they may not tell the whole story, especially for big tech companies. The comparison between big tech companies and law firms is based on the premise that both types of businesses will be judged by this OKR in the coming years.

The Case For A New Measurement

RPE is a simple yet powerful metric that divides a company’s total revenue by the number of its employees. This ratio indicates how much revenue each employee contributes to the business, offering valuable insights into the company’s efficiency, productivity, and ability to scale. There are several reasons why RPE is becoming an increasingly important metric for big tech companies:

Focus on Efficiency and Productivity

RPE helps measure how effectively a company is utilizing its people, a critical component of any organization. But also, how those people perceive their role in the growth and health of the company. Senior Research Analyst for Yahoo Tom Forte cited the type of role that saw early attrition at Amazon, i.e. ones that didn’t directly impact revenue growth:

So if you look in particular at the March quarter and the June quarter last year, they had about 100,000 attrition between those two quarters, and it was mostly not rehiring someone to replace someone who left at the fulfillment center level.

A higher RPE ratio implies that the company is generating more income with fewer employees, indicating a more efficient and productive business model. As Amazon begins to show, they’re willing to explore whether or not they can accomplish “more” with fewer cost centers.

Attraction and Retention of Talent

Talent is a critical resource in the tech industry and companies need to ensure they can attract and retain top talent to maintain their competitive edge. A higher RPE ratio suggests that the company is utilizing its workforce effectively, which can lead to increased employee satisfaction and loyalty. This, in turn, can help attract new talent and reduce turnover, contributing to the overall health and growth of the company.

Scaling and Growth

As tech companies grow, they often face challenges in scaling their operations efficiently. RPE can help identify whether a company is maintaining or improving its productivity as it expands. A consistent or increasing RPE ratio during periods of growth suggests that the company is successfully scaling its operations, which is essential for long-term success. Barron’s recently published relevant numbers:

Apple generated around $2.4 million in revenue per employee in its latest fiscal year and has averaged around $2.1 million on the same metric over the past five years, according to FactSet. That far outstrips Facebook-owner Meta (META), which generated $1.35 million in revenue per employee in 2022—below its five-year average of $1.5 million.

This gives us a uniform means of comparing companies regardless of their status as a public or private company.

Use in eCommerce and Retail

RPE can serve as a valuable benchmark for comparing companies across the tech industry. The Information framed this public vs. private tech company conversation as such:

An unfavorable comparison to Adyen is a surprising turn for Stripe, a startup brand that became a near-holy name in Silicon Valley. Its early rapid growth and exposure to the fast-expanding e-commerce market helped the payments firm raise more than $2 billion from some of venture capitalists’ biggest names over a dozen years. After it raised money in early 2021 at a $95 billion valuation, it was one of the most highly valued startups in the world.

In comparison, Adyen raised just $200 million as a private company, although it raised hundreds of millions when it went public in its 2018 initial public offering. Its current market capitalization is about $44 billion.

By evaluating this metric, investors, analysts, and other stakeholders can gain a clearer understanding of how well a company is performing relative to its peers, which can help inform strategic decisions and investment opportunities.

Shopify was ahead of the curve in discussing the potency of this measure in retail. RPE is the key metric for assessing the health and prospects of big tech companies, but can be used to assess brands as well.

If you’re looking for real-life examples of how brands calculate RPE, let’s take data from 2PM to calculate the average revenue per employee popular retailers make. Knix: has 127 employees generating an average revenue of $70.5 million per year. That comes out to $555,118 revenue per employee. Boll and Branch: has 116 employees generating an average revenue of $80.8 million per year. That equates to $696,551 revenue per employee. Everlane: has 309 employees generating an average revenue of $361.2 million per year. That equates to $1.68 million revenue per employee.

By focusing on efficiency, productivity, talent attraction and retention, in addition to scaling, RPE provides valuable insights into a company’s performance that traditional measures may not capture. It also emphasizes the importance of efficient profit-seeking. As the tech industry continues to evolve and face new challenges, RPE will play a crucial role in helping companies navigate the competitive landscape and achieve long-term viability.