CALLGOOGL
Alphabet: cohort quality is improving, which almost never happens
Recent user cohorts reach the same revenue per user in roughly half the time earlier cohorts took. Improving cohort quality at this scale is rare and it compounds.
The mechanism is payback period. Faster monetisation of a new cohort shortens payback, which raises the amount of acquisition spend that clears the hurdle, which compounds into the growth rate.
The cohort table is in the supplemental. Users acquired in the last four quarters reach the same revenue per user roughly twice as fast as the cohorts from three years ago.
The position: long on Alphabet, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit.
Regulatory outcomes can be reversed or diluted in implementation, and an implementation that lands softer than the decision would remove the ceiling this argument depends on.
Discussion · 4
Yael BrennerJUN 15
Good piece. The contract structure matters more than the headline rate. What is the level where you would walk away?
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Yael BrennerJUN 14
Been long since the last one. I had not appreciated how much of this is already in consensus. Would you underwrite this without the catalyst date?
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Yael BrennerJUN 14
I came in sceptical. The installed base argument is stronger than the cycle argument here. How much does this depend on the macro cooperating?
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Arjun MehtaAuthorJUN 14
Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (1066)
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