It it is 11 00 a. M. On wall street and squawk alley is live snap what a happy sound snap is the happiest sound ive found tap slap but snap makes the world go round snap crackle pop rice crackle makes the world go round i insist that pop is the sound well get to snaps pop in a moment, but first welcome to squawk alley. Im Caro Quintanilla with john for the and kristen boorstin snap is exceeding its first day of trade, 38 and change. Netflix going the opposite direction. Were going to discuss netflix first. Good morning good to see you. Good morning, carl. You said investors who are looking at this print are going to struggle to find negatives. Yeah, there really wasnt anything to dislike. Weve had advertising pullback during covid and now were seeing the snap back across the board. We think this is going to help facebook, twitter, a number of the advertising related names, the User Engagement was high you can do anecdotal surveys of all of our kids around the community here and theyre spending a lot of time on zoom school and then theyre on snap to figure out where all their friends are on the map we think that, again, advertisers are drawn to this because of this genz population is highly engaged right now. They are not playing sports. Theyre effectively sitting in school all day and they want to get out and do other things. So we think ultimately this is a dream for advertisers right now, given the lockdown, and theyre continuing to benefit. Theres a lot of momentum and the gaming side of the business, the content side, we think the snap map, which i use to monitor my kids, the ability to place ads on the map so as the kids are walking down the street and theres a halfoff ice cream sale, theres a great way for advertisers and Small Businesses to reach this younger audience so overall encouraging and we think its going to be good for facebook all the dynamics make sense and theyre not new. Its the migration of digital dollars, the efforts when a stock moves by a third, why is the street seemingly surprised and how much could be given back if in fact those same kids youre talking about do get to play soccer in six months i think inside tech a lot of investors were sitting inside software and the massive outperformance i think there was some debate where ad dollars going to come back this year or next year. So we think that ultimately that you saw this portfolio shift over where were seeing, we think, lower multiple in internet versus software so i think youre seeing sector rotation, secondarily, again, i think many believed the bounce back was going to come in 21 and not 20. And i think ultimately there was a lot of bears on snap, could they actually monetize this platform david talked about this morning our kids just use it to communicate and are the younger audience actually going to engage with these ads and we think that ultimately as they age up, they are, and theyre effectively using the Parents Money to actually buy some of these products that they see on the platform brent, bigger picture, what happened to the industry crushing monopolies of facebook and google in these results . I mean, google tried to compete with facebook and failed now you have snap, which some people had given up on, that appears to be doing okay should that shift the Way Investors view this narrative of antitrust at all i think the younger audience still is on instagram and facebook, but i think that theyve effectively spent more time in some of the survey work weve seen on snap i dont think theyre spending theyre spending time on youtube, theyre spending time across, but i think ultimately what snap has done has garnered a little more share among the younger audience and we expect that youtube and facebook numbers will follow through. And i think youve seen a number of other of my peers upgrade some of the advertising names in the industry, so i think effectively digital ads are going to continue to build scheme its not necessarily some game, we think all of them are benefiting, but, again, snap i think was perceived to be one that was lagging, wasnt considered the darling of advertising, and they really have done a nice job theyve brought in a in you mon Management Team across the board. Brent, we certainly have seen the other social names move higher pinterest shares up and facebook and twitter as well. I have to go back to your comment earlier about facebook im wondering if you think that snap benefitted from the facebook ad boycott that we saw this summer. They alluded to it in the comments in the Earnings Call, but kept it very vague i dont think so. I think what were benefitting from is just this ongoing surge to digital the advertising boycott, again, we dont believe had a Material Impact it was really the small and midsized businesses that kept facebook afloat. We dont think these big brands suddenly just showed up on snaps doorstep and said we were giving this to facebook and were giving it to you now we think the overall momentum around digital is helping right now. I do think there has been a wane from the younger audience a little bit off instagram towards snap, especially in this pandemic i think that dynamic has happened, but i dont think its necessarily hurt facebooks opportunity and were seeing time spent across youtube, instagram, and snap continuing to be very strong among the younger audience every parent knows exactly what youre talking about. Brent, appreciate it good to see you. Well talk soon. Lets include netflix in this conversation. Down sharply after Quarterly Earnings and subscriber growth both came in short of expectations our next guest raising his price target on the stock, saying hes still in it for the decade mark, you also had a note out on snap, so give us the perspective on whats happening here in internet overall, because, you know, im surprised, given the dominance of facebook and google in the Advertising Market that snap was able to do so well and given the pandemic, that netflix disappointed were you surprised yes, we were surprised by the netflix results. We had expected it had come in strong stronger last quarter they warned in the march quarter about the june quarter and it didnt happen, they bloew out subs that corner. So we shared they should be able to beat it this quarter. The guidance they gave for subs for the december quarter was kind of in line with the market bogeys that were out there and you have a correction on a stock thats gone 60 , 70 up this year it tells you the market became confident in the longterm sub growth and also there were three cash flow inflection points in this quarter so i think that the core thesis is still there and we would take advantage of this kind of correction its not a huge correction its not a back up the truck price. But we would take advantage of this correction and buy shares of netflix. Kind of bold to double down and raise the price target to 630, given that there was so much lack of clarity going into this report. Why did you . Well, the numbers, the bottom line numbers came in better than expected so well have about 18 operating margins this year. Last five years theyve been rising about 3 each year. This year theyre jumping up 5 . Here is whats interesting, jon. This company has kept marketing expenses flat. They havent increased them for three years in a row, despite adding 75, 80 million subscribers. You cannot name another company that has been able to grow with a paid Subscriber Base like that without having to increase marketing spend. That should give you greater confidence in the future that they can keep raising margins, because the subs are going to keep growing but they dont need to grow marketing spences. The other thing that was key from the print was that theres no production halt here. So production is back on theyre going to have a full slate in 2021 when we still have theatres that are months away from bringing those movies, the bond franchise back into the theatres so were still going to have a huge content advantage over anybody else and thats going to help with sub growth this year and next year. Mark, they may not have higher marketing expenses, but those content costs are meaningful and growing, which makes me wonder how much theyre going to need to raise prices. How much of your outlook and your optimism about this stock is based on netflixs Pricing Power and when do you anticipate some other major price increases . We saw a couple this past quarter. Yeah, youre right, julia lets see, this is a company that is not going to back off from spending more on content each and every year. This year its going to come in low, its only going to be about 13 billion that theyre going to spend cash out the door on content. I think thats jumping to 17 billion next year and expect it to ramp up by 1 billion each year in three or four years theyll be spending 20 billion a year cash out the door on content but theyll be able to afford to do that because theyve got so many subscribers that are paying them 10, 11, 12 a month. Thats the formula, more subs, more revenue, more content span, et cetera. And then when are we going to see the next price increase . My guess is in the u. S. Youre going to see one sometime in 21, maybe in the back half of the year when they roll out Stranger Things. You want to put the price increase when youve got something great and extra to offer consumers. The next season of Stranger Things is probably that next great thing. Thats how the price increases work but not necessarily how the price targets work thank you for explaining your perspective. Thank you after the break, former oath and aol ceo mark a armstrong were back in two minutes. Dont go away. Joirks in of the market. D view its smarter Trading Technology for smarter trading decisions. Fidelity. And sweetie can coloryou just be. Gentle with the pens. Okey. Okey. I know. Gentle. Gentle new projects means new project managers. You need to hire. I need indeed. Indeed you do. The moment you sponsor a job on indeed you get a short list of quality candidates from our resume database so you can start hiring right away. Claim your seventy five dollar credit, when you post your first job at indeed. Com home. Still lots of buzz surrounding the justice departments antitrust lawsuit against google the suit focusing on the alphabet units alleged monopoly over the Online Search industry. Joining us is tim armstrong, founder and ceo of the dtx company and the former president of the americas for google tim, thank you so much for joining us today i want to hear about your new company, but first i am very interested to get your take on this google lawsuit, because not only did you work there, but you also competed against google and perhaps had a sense of what kind of market power google could exert when you were competing against them what is your take on this doj and attorneys general action julia, ill probably give you an answer mostpeople arent going to give about this, but i read the doj filing end to end and i was at google when we were at 13 out of 13 Search Engines and the first building outside of Mountain View as hi apartment in new york city on 86th and columbus so when i read that document, the first ten years of it i look at a company that basically had almost perfect execution on one side, and on the other side was competing against some of the Largest Companies in the world and some of those companies probably didnt make all the right decisions in terms of the focus. And theres one line in that document that i think most Business People should Pay Attention to, and its the focus on user quality and making user quality part of the Business Model, which is really what separated google both in search and advertising and other businesses google built a de facto enhancement for consumers right into the core Business Model so i look at the beginning of google as that the second half of that document i was out of google and working at aol and we sold to verizon, so i was on the outside during that time period but my summary is google is an incredible asset for the United States google did an amazing job coming from nothing to being a world leader in what they do the government is always playing catchup with technology, so i think this is another example of the government trying to catch up i wont comment on what the right thing to do with google is thats up to the government. But i would say theres a lot of business lessons in there with a lot of companies that could have changed kind of their Business Models to adapt, like google did. And i think its really no one else is going to say this, but i think its a testament to a lot of perfect execution on googles part and i have a lot of respect for the business theyve built and have continued to build overall. So you think its perfect execution and not anticompetitive and exclusionary market practices, which is what the doj complaint alleges. But i have to say, tim, your company has competed often unsuccessfully to compete with google well, ill leave it up to your interpretation. I think at aol we did an amazing job of doubling the value of the company and taking something that was one of the worst mergers in history and turning it around in the face of google and all the other competition. But i would just say this, julia, my job is to Grow Companies and the company im running right now, dtx, which well talk about, were really a pioneer in the next generation of consumer access and direct to consumer so i dont look at anything else in the free market Playing Field and i cant rely on the government to come save me i have to save ourselves and i think the work we did at aol did that and we proved it with the outcome at aol, and what im doing now, we launched our company on cnbc a year and a half ago and it was really around three words, direct to consumer and dtx is direct to everything. So im here today to talk about the launch of flow ko tv and the comeback economy with dtc. But i think google is an Incredible Company and theyre probably going to have incredible challenges with the government but its not because i think theyre doing evil things. I think they had really good execution and they ended up in a position to be able to win deals that theyve done a great job of winning. Good morning. Its jon fortt are you saying the facts assembled in the dojs report you disagree with, or are you saying that despite those facts, your interpretation is that they shouldnt lead to some remedy that views google as a monopoly abusing its power . Im going to tell you something right now, i have zero opinion on what the government should do with google. Im not asking you really what they should do. Im asking you if youve looked at the report and the facts that they lay out of googles behavior and you say well, i dont think thats true, or are you saying thats true, i just dont think its a problem i think i dont know whether its not a problem the government can decide that its void of the larger context of what was happening in those industries google wasnt competing against Small Businesses, it was competing against the largest businesses in the world and the bestfunded businesses so look, google can stand on their own record about how they behaved and what they did and the government can have an opinion about that im just trying to zoom out a little bit, which was when you read the document its a onesided version of that document and, you know, should google change, should the government change . I dont know but i also know that having been there really early and watched the competitive set, google just did a really, really good job, which any business, by the way, that has done that good of a job of execution to some degree, having the doj come after you means youve been successful i always say people dont shoot arrows at things that dont have value. Its not because theyre a bad company and theyve done a really great job over time you can debate how they do it, but i just think the fact that the doj showed up means theyve been successful. The same thing that happened to microsoft. Thats my opinion on it. It might not be popular, but im going to tell you what i think tim, i want to get the latest on your company. Youre renaming dtx to be flow code explain to us what this technology is that youre deploying, how its being used and what the Business Model is. Sure, so julia, theres kind of a few things that were going to talk about today. One is just the direct to consumer economy, which is dtx really focused on, theyre investors, and dtx is our behindthescenes brand. The real brand that were bringing to the forefront and coming out with is flowcode. And flowcode simply is the tesla of qr codes. We have built a new platform for connecting instantly for consumers or people who want to directly connect that is super highly designed, private, it has a lot of privacy built into it and a lot of data Science Behind it were the First Company in the u. S. And we were before covid hit to get behind this covid has just been a really big tailwind for us. We were on cnbc in april talking about how we took flowedcode and helped mount sinai grow new direct users and then we went over and we helped them go from 10 million meals to 50 million meals at feeding america and that taught us how impactful our technology could be and now weve run on 66 tv networks, weve partnered with people like Tracy Anderson and bode miller and lance armstrong. And we have a bunch of Large Network partners weve worked with people like Turner Sports and good morning, america, and people like that with our codes i dont know if you guys are going to put a code up on the screen, julia, but i dont have to explain our product you can just use it. If you put it up on the screen, you open up your camera, you zoom in and scan it without taking a photo a link will pop up on your browser on your phone. You just click it and magically y