Member Brief: The Bionic Woman

Science fiction often serves as a guide for the future. In Silicon Valley, Snow Crash, a 1992 sci-fi novel, has been required reading for technologists for nearly 30 years. Neal Stephenson’s cult classic is one of several highly referenced stories credited with inspiring immersive virtual reality, augmented reality and the metaverse. It laid the groundwork for the layering of the digital world atop our physical one. Similar to Snow Crash, a second obscure book has had a profound impact on a different field of technology.

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Member Brief: Instashop

This Member Exclusive is temporarily unlocked to celebrate our new membership page. On occasion, we make these reports available to the greater audience for topics that are widely important. This content is part of our Executive Membership. I invite you to join.

With countless independent, traditional, and direct-to-consumer brands on its roster, Verishop is focused on delivering what is missing from today’s social media. Millennials and Gen Z want to shop online; they want to window shop. And most importantly, they prefer their ideas shared with their audiences. So imagine a platform with personalized shopping content and a machine-learned curation driven by photos, videos, and social sharing. It’s the most powerful marketplace for modern and traditional brands alike.

Verishop founders Imran and Cait Khan believe social commerce is the future. On November 9, the Snapchat and Amazon veteran duo announced the launch of Verishop’s social platform. Content-driven commerce sales is not a fresh strategy; 2PM has covered linear commerce at length. Verishop’s approach is unique, however. The industry’s typical strategy tends to begin with an extensive period of audience development. As consumers spend more time engaged, monetization follows by way of advertising, commerce, and partnerships. Verishop took an alternative, more difficult approach.

Based on what we’ve seen from others who have tried to combine social and shopping, we thought we needed to nail an amazing commerce experience first, before layering on the social elements.

Verishop is one in a hopeful generation of third-party marketplaces. This new cohort includes competitors like Italic and Verticale. Despite the next generation’s current momentum, the most powerful marketplace isn’t one of them. Audience is the weighted advantage in social commerce, which makes the most powerful eCommerce marketplace Instagram.

The Revenge of Zuckerberg

With nearly 24 million Instagram followers, internet personality and YouTube creator James Charles isn’t a fan of Instagram’s new direction. In a recent response to Facebook’s Head of Instagram Adam Mosseri, Charles wrote:

This update may be your worst one yet. Yes, there has been an explosion in both online shopping and short form content. That is because the respective platforms – Amazon and TikTok – are staying in their lanes and growing with their communities.

Instagram is literally doing the exact opposite. You guys are so focused on competing and ripping off features from other popular apps that you have completely lost focus of your app’s intent in the first place – sharing photos! You have replaced the two most important buttons in the app, upload and notifications.

Instagram today is, in fact, a far cry from the platform that once was. Notifications and uploads are now secondary to short-form content and the shopping tab. The focus has shifted from creativity to capitalism. In Sarah Frier’s “No Filter”, she explains the push and pull between Instagram founder Kevin Systrom and his company’s acquirer, Facebook’s Mark Zuckerberg. While Systrom remained on post-acquisition to manage the appeal of the mobile application, Facebook executives held a growth-at-all-costs mentality.

Listen to our interview with Sarah Frier here.

In the book, Frier covers the evolution of the platform’s business strategy and the second-order effect on its creators. Some of these changes were not driven by good business sense, according to her New York Times best seller. Zuckerberg began to view Instagram as a competitor within its own ranks. Instagram grew in popularity and Zuckerberg’s anxiety rose with it. But just two years after Systrom’s 2018 departure and with nearly 1 billion users, the latest iteration of Instagram is the truest reflection of what Facebook believed that Instagram should be.

Here’s a look at the evolution:

James Charles’ frustration was short-sighted. Facebook’s path from photography application to commerce engine was due partly because of the creative class that Charles belongs. Built with WooCommerce, the YouTube creator’s “Sisters” apparel sells well into the eight-figures in merchandise, annually. Another recent example is Jeffree Star and Shane Dawson’s success in November 2019. The two YouTube creators sold $54 million in cosmetics in under 60 seconds. I explained:

As audience interest shifts from corporate media to individual entities, podcasts and Youtube followings and email lists will grow. With these growing audiences, the probability is that flash sales will continue crashing sites. And those service providers will build fool proof systems to prevent the next mishap. [2PM 1]

With Shopify’s integration and a new technology from Facebook in the form of “Facebook Pay,” Adam Mosseri’s team is presenting a vision of the future where retailers can spend less building their own shopping experiences and devote more to building within Instagram’s ecosystem. With approval, Facebook pay allows users to transact without being forwarded to Shopify or anywhere else. Other payment processors will soon follow.

The balance of creative and commerce

In this way, Instagram, and not Amazon, is building the closest analog to China’s Tmall with a collection of modern and luxury goods that appeal to younger and more affluent audiences. Facebook is building the anti-Amazon. Mosseri and team have developed a resource that serves as a marketing engine and audience development tool. They’ve taken Verishop’s product pipeline and presented it all at once to an existing audience. That audience development is the weighted advantage when building self-contained eCommerce engines. The difference is that while Verishop holds inventory, Instagram does not.

Creativity is, of course, important. And with platforms like Instagram, YouTube, Triller, TikTok, and Snapchat constantly changing to fit its business needs, there will come a time when artists like James Charles or the droves of talented TikTok creatives will reach their zenith. And platform leverage may shift away from the technology companies that are benefiting from their work.

Eventually, the best of them will build their own platforms.

Last week, I sat with the chief executive of Barstool Sports and we discussed linear commerce at length. Erika Nardini is an industry executive with an unparalleled foresight into the push and pull of digital creativity and monetization. For Barstool Sports and its 9.1 million followers, Instagram is a major acquisition tool and media asset. Nardini suggested that the most astute of the creator class will collect their content on their own self-contained media platforms, free from algorithm changes and undesired user experience developments. Her concern stemmed from a persisting worry that the edges of content suitability typically generated the most traction on these digital media platforms. And she’s observed that over the years, more of the content has been censored or minimized. I suggested that Barstool build its own curation platform for viral content as a hedge against Instagram’s shifting rules and strategies.

If Instagram is truly to become a commerce engine, creativity is its life blood. The creative class that Kevin Systrom once-envisioned has become one of the most powerful commerce engines in the world. Unlike platforms like Verishop, the audience and the creativity is already there. But the downside is that while commerce demand can be influenced by a number of inputs, content-driven commerce is its most fickle. “Instashop” is the first platform at scale that can be commerce-driven solely by the power of audience.

Instagram’s linear commerce strategy is the most efficient path to competing with the likes of Amazon, Alibaba, and the new crop of markets like Verishop. But to maintain that path, platforms like Instagram will have to keep its best content creators happy. Mosseri may have to redefine his platform’s rules and engineering strategies to do so. The irony of Instagram leaning so heavily into eCommerce is that it will be more reliant on good content and big personalities than ever before. Charles may have the power to sway design decisions after all.

By Web Smith | Editor: Hilary Milnes | Art: Alex Remy | About 2PM

Memo: The New Digital Electorate

Three factors democratize society: technology, legislation, and periods of duress. This year, we have witnessed the effects of each.

In August of 1965, Section 2 of the Voting Rights Act prohibited the infringement, denial, or delay of the right to vote in American elections nationwide. No longer would African-American voters in the South be tasked with literacy tests, puzzles, or memory exams. When President Johnson signed the legislation, it came to the rescue of women like my grandmother. A well-educated woman, she could read and write and calculate. And yet my grandmother cast her first vote for President in 1968 at the age of 44. Until Section 2 was passed in 1965, her own state’s laws and practices prevented her liberty. By then, she’d had all six of her children; two were in college. The Voting Rights Act made it possible for her to safely travel to her local polling station and cast her vote. The simple act of electing one’s government emboldened my grandmother, Dorothy Smith. Legislation democratized citizenship in the American South.

In April of 2003, Jack Ma’s fledgling Alibaba was faced with a crisis. China’s annual Canton Fair was severely hindered thanks to a dangerous SARS epidemic. The year prior, the Canton Fair featured 135,000 exhibitors and $19.7 billion in business-to-business goods traded. This particular year, the fair saw an 85% drop in attendance with just $3.8 billion traded. Ma determined that it was in Alibaba’s interest to attend the event but it did not meet the management’s revenue expectations.

Ma used the pandemic to directly address two concerns. Ebay was beginning to encroach on Alibaba’s growth. Through the frustrations of that year’s Canton Fair, Ma understood that too much of commerce was dependent on traditional retail channels. In that eight days of quarantine, the Alibaba team engineered the solution. Alibaba launched Taobao, its peer-to-peer marketplace, and Alipay. The two systems remain pivotal to the corporation’s growth to this day. This moved Ma’s original vision for Alibaba away from a traditional B2B company and towards the marketplace of today.[1]

In just two years, China’s eCommerce ecosystem outflanked America’s. Ma is to thank for this. A period of duress democratized commerce in the Guangzhou region of China and then its entire nation.

In January of 2020, Hal Lawton decided to take on a unique challenge. When Lawton left Macy’s to lead Tractor Supply, it was to snide remarks and laughter. But what Lawton has accomplished since January of 2020 has been nothing short of remarkable. The nation’s largest rural lifestyle retailer increased third quarter revenue from $122.1 million in 2019 to $190.6 million in 2020.

Tractor Supply made fast delivery to rural customers a priority by working with Roadie, a same-day delivery service. With the partnership, Lawton scaled same-day delivery from 20% to 100% of Tractor Supply’s stores. In doing so, Tractor Supply gained an advantage over Amazon, Home Depot, Lowe’s, and Walmart. Last-mile availability proved that online retail wasn’t for urban America alone. Rural citizens now have access to many of the supplies and practices that urban and suburban homeowners take for granted. Technology democratized retail in the rural United States.

The New Digital Electorate

At the core of democratization is the work of making difficult tasks simpler. The act of democratization turns the impossible into the ordinary and the undesirable into the customary. Technology, catastrophe, and (often-divisive) legislation have long played a role in the progress that arises out of moments like the ones we’re in. With each passing year, we see more of these examples. In 2020, all three converged at once. And in each case, a direct-to-consumer philosophy was at its core.

2022: The beginnings of a migration.

With a pandemic raging on, citizens voted by mail from the comforts of their homes. For a number of reasons that will not be covered here, this translated into a shifting electorate. More Americans voted than ever, thanks in part to this cycle’s emphasis on mail-in ballots to promote safety, voter participation, and ease. Forward-thinking legislation produced a solution for a period of duress.

These disparate worlds intersect.

At the same time, digital-first technologies like Zoom, Amazon, Netflix, OpenDoor, Instacart, Carvana, and Shopify expanded their roles in daily American life. Like voting rights legislation, these technologies produced a solution during a period of duress. These disparate worlds intersect.

We are beginning to see the early signs of a shifting electorate that will be influenced by digital real estate more than its physical counterpart. According to a report in July 2020 that referenced the response to the COVID-19 outbreak, Pew Research Center noted that 22% of US adults have changed their residence or personally know of someone who did.[2]

As students continue to distance learn and adults shift to remote work, the household becomes a secondary location for education and occupation rather than a respite from it. The largest technology companies in America have built employment strategies around this new normal. Meanwhile, the largest entertainment companies are building direct-to-consumer strategies to reach customers where they are: in the home. Local governments are already competing for new citizens while working to retain the existing ones.

To attract a new generation of Tulsans, the city launched a  philanthropy-funded incentive scheme in November 2018. The program, Tulsa Remote, awards $10,000 grants to digital nomads who land in Tulsa and stay for at least a year. Along with the cash, the George Kaiser Family Foundation provides amenities like co-working space, and a connection to a thriving (and growing) domestic ex-pat community. [4]

The shift to online education, remote work, gaming, live conferencing, and leisure is a new form of agglomeration. A leading indicator, consumers have contributed to the first period of inflation for electronic products in over a decade. Over quarantine, these purchases provided gateways to work, socialization, and play. But if these behaviors become more permanent, cities will struggle to account for them. [3]

What may we observe over the next five to 10 years as a result? The United States may see a complete reconfiguration of states that were once reliably “blue” or “red” as urbanites migrate upstate or out of state. Or retirees will take advantage of incentivized urban living. Americans have become less reliant on their physical surroundings for community, work, education, and entertainment. And our post-vaccination future will still reflect the lingering changes caused by this year-long season of democratization. One thing is for certain: agglomeration is no longer a physical manifest of human resources, housing, and retail. Agglomeration is digital now. And that means that where we live follows our virtual loyalties and not our physical ones.

The second-order effect of the mass adoption of streaming and remote technologies is a digital electorate that may be unpredictable for quite some time. The American political industrial complex will have new behaviors to account for.

By Web Smith | Art: Alex Remy | About 2PM