Member Brief: When In Home


This report is supported by 2PM’s Executive Membership and is temporarily unlocked. We publish seven reports, each week: five in short form and two long-form pieces. This is in addition to curating and maintaining a dozen databases on site. To be a part of what we’re building, you can join here: The Executive Membership

For decades, media monetized by way of display advertising, native advertising, branded media, affiliate marketing, and eventually direct commerce. Like a technological progression, the funnel widened and shortened over the years. The definition of media broadened with time. Today, click through rate (CTR) means less to a publisher than the revenue that one visitor accounts for. Accounting for revenue per customer means that customer acquisition cost (CAC) is as much a media metric as it is a commerce one. A publisher now assesses her readership with a measure of lifetime value (LTV); this is especially the case for subscription-based operations. A “like” or other forms of engagement used to matter. Today, the measurement of conversion rate and transaction value are prioritized. Media is a competition for audience ownership; it’s a 360 degree battle for your attention.

Media, today, is a defined as a digital form of entertainment, education, or social connection. If you are in front of a screen, its contents are fighting for your attention. Netflix vs. Slack, Facebook vs. TikTok, Disney+ vs. Fortnite, Animal Crossing vs. Snapchat: the battle for attention is an asymmetrical one. But there is one commonality across all modal domains: commerce.

In the trailing 30 days, the following companies have announced the intent for a permanently remote workforce: Twitter, Facebook, Square, Spotify, Visa, Mastercard and Alphabet. On Twitter, phrases like “remote-first company” and “work from home” are being muted. It’s taken over the conversation. And surely, private enterprise, smaller companies, and freelance-based businesses will follow suit. Box founder and CEO Aaron Levie recently stated as such:

Just as Intel, HP, and others originally defined how we operated for decades in tech, we’ll see a redefinition for the 21st century by new digital companies.

The Atlantic’s Derek Thompson was right. In my recent conversation with him, I argued that a growing eCommerce market’s negative impact on commercial real estate would diminish middle-to-upper middle class retail markets. This would, in turn, drive citizens towards city centers or rural areas. And eventually, the lack of foot traffic would finish off whatever was left of the consumer-base that suburban retail developments were designed for. (There was a demand variable that I did not consider – more on that in a moment.) Thompson’s response was as such:

I see a reverse migration in ways [from suburbs to cities]. If you can afford to be around places that look nice and places that have physical amenities, then you will. But if you can’t then you’ll move out [of the suburbs]. […] I think a lot of people are going to leave cities in the next year or two maybe three. Sort of the imagine the accordion bellows sort of going out. I think that the very phenomenon is gonna make cities cheaper and, so, the accordion is gonna come in again. [1, 2PM]

The cities with reasonable housing economics and ample space are like active cellular membranes; city-to-city migration resembles the scientific definition of passive transport: “The movement of substances across the membrane without the expenditure of energy.” Attracting new remote workers will be effortless for cities like Nashville, Charlotte, Columbus, Pittsburgh, and others of the like. Consider this excerpt from Descartes’ Principles of Philosophy:

Glass is nevertheless extremely fragile, because the surfaces which its particles touch one another are few and very narrow. […] It is also more fragile when it is cooled quickly than when it is cooled slowly, for its pores are fairly open while it is glowing with heat. [2]

The fragility of certain mid-tier cities has been overstated. Unlike San Francisco or New York, they are porous. People are moving in as quickly as others move out. These changes to population density and an evolving demand for housing can be influenced by macroeconomic shifts like remote employment exodus and influx. This is a proverbial “heating” that reduces the relative fragility of cities. With the continued growth of online retail, cities will evolve. Supply and demand will rise and fall in the intra and the inter definitions of migration. And certain cities will evolve more than others. The catalyst for this “heating” is the shift to digital agglomeration.

Agglomeration is now digital. Consider Slack, Zoom, Instacart, Amazon, the shift to working from home and the shift to distance learning. [3]

We are meeting, working, playing, and consuming online more than ever. And this is just the beginning.

When In Home

According to a 2018 survey by American Community Service, just 3.6% of Americans worked from home at a rate of 50% or more. And according to a 2019 State of Remote Work survey by Owl Labs, 80% of employees want to work from home “at least some of the time.” If the COVID-19 pandemic has been a dry run, behaviors will change in the short-term. It’s just a matter of how greatly.

Communities, content, and subtle forms of commerce.

Today’s major tech companies are signaling that people don’t need offices to maintain operational effectiveness. If this sentiment maintains, these tech companies may no longer need Los Angeles, San Francisco, New York, or Boston as talent-generating headquarters. Instead, they can move to cheaper suburban or rural areas of the same city or another one altogether.

In a recent tweet by Common Thread Collective founder Taylor Holiday on remote work, he provided the following insights for how he’d prefer to manage his company of 50 or so employees:

Work from anywhere ideas we are playing with: Each team gets one week “work together sprint” anywhere in the world, co-working stipend, buying homes in rad locations for employees to rotate between, house cleaner benefit, our headquarters as studio-first layout. It’s exciting.

This is an extraordinary shift from thinking along the lines of office perks to thinking about optimizing the home. If this is any indication of how other small business owners will react to these macroeconomic changes, we can expect second and third-order effects.

Companies will be focused on internal culture the way that retailers are focused on external brand messaging. Employers will invest in the financing of home desks, improved wi-fi connectivity, designated fitness implements, incentives to reduce vehicle usage (to encourage physical activity), and acts of virtual camaraderie. But it’s important to remember that work is but one of the shifts in question; education and religion are also facing their own judgment days.

In the most sweeping sign yet of the long-term impact of the coronavirus on American higher education, California State University, the nation’s largest four-year public university system, said on Tuesday that classes at its 23 campuses would be canceled for the fall semester, with instruction taking place almost exclusively online. [4]

Much like small business leaders will follow the best practices of FAANG, grade school educators will consider the implications of entire college systems shifting to distance learning for the fall of 2020. And as the home becomes the sanctuary for activities once distributed across cities, regions, or other states (for business travelers): our practices will evolve. What I failed to consider in my conversation with Thompson? The effects of one major city on the dynamics of smaller ones. “Americans like space,” is a thought of Thompson’s that remains.

When in Home is the basis for a renewed demand in suburban and rural regions for top tier cities (New York, Los Angeles, Boston, Dallas, San Francisco, Chicago) and the second tier of American cities that will increase in appeal over the coming months. But within the home, there may be a meaningful shift in how we consume. The definitions of screen time will evolve.

To casual observers, the eCommerce boom is an indication of a decreasing (retail GMV) denominator. Rather, the industry’s recent growth is a leading indicator for how our new consumption habits will influence commerce over the coming years.

Just like our definition of media has expanded to include periphery platforms like TikTok, it will expand further for the platforms to come. And this may have lasting implications for the traditional retailers that remain. Sure, there will always be a place for the top regional malls or the beloved neighborhood stores. But as I wrote in On J-Curves and Agglomeration: “Density precedes agglomeration, which influences consumer behaviors.” [3] Consumers will spend more time in their sanctuaries, working, socializing, and playing before their screens. This further widens and shortens the funnel. At its core, we are eschewing physical customs for ones that resemble media consumption.

The impending J-Curve will be heavily influenced by where we do our living. Yes, we are at home. But our lives are increasingly reliant upon the digital worlds that we are connected to within those dorms, apartments, or houses. Where there is a media funnel, there is traffic. Where there is traffic, commerce awaits.

Report by Web Smith | Edited by Hilary Milnes | Art by Andrew Haynes | About 2PM

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.