No. 305: The DTC List

The direct-to-consumer landscape has many faces, professions, and levels of experience. The collective also has many opinions on how the industry is going to develop. 2PM compiled a list of many top people who run, analyze, report, and invest in and around the industry.”DTC Twitter” is a loose moniker for this group of professionals, students, and leaders who are varied in their thinking, approach, and background. Their words and conversation aren’t exclusively commerce or retail-rooted. In fact, the value in following along will be considerably derived from the diversity of their thoughts, topics, and cited sources.

This cohort has influenced online retail. Some are teachers of the math of customer acquisition, some understand how sociology influences demand, and some have taken brands from zero to one. A few of this list’s members are employed by the platforms that these brands use to distribute their products and a few have become masters of investing in what will continue to shape our consumer economy.

The coffee house analogy

Though coffee was originally an Ethiopian staple of the 10th century, the institution of the coffee-house was a continuation of coffee’s influence in Yemen, then-Persia, and Turkey. The first European coffee-house opened to the public in the mid-17th century. And the idea of the coffee house has been credited with driving the movement towards reason, individualism, and deep thought. The coffee-house was a proponent of the Age of Enlightenment, a time known for the contributions of intellectuals like Locke, Francis Bacon, Voltaire, and Descartes.

In the Age of Enlightenment (1715-1789), a European could gain entry into a coffee-house by buying a drink. But the drink was just the price of admission, the conversation was the attraction. It wasn’t solely the conversations on matters of sociology, economics, and law that drove the age forward. Sometimes, patrons would overhear concepts that will fill gaps in their own thinking. Other conversations would solidify pivotal ideas, directly and indirectly.

The coffee houses of the Age of Enlightenment were exclusive to the male upper class and the distinguished intelligentsia. In that way, I’d argue that the great flaw of this age was its socio-economic exclusivity. Rather than relying upon the merits of the thoughts shared, there was a status required to join the conversation. Today, platforms like Twitter and Slack are the closest that we have to the coffee houses of old. On these platforms, a diverse group of people can have a remarkable influence on an idea or an outcome.

The DTC List

Rather than pursuing an exclusive solution, we chose the open source approach to amplifying these DTC conversations. It’s in the above context that we’ve provided a few tools to replicate the cross section of profession and personality in the DTC space. We’ve listed many top contributors below. The list is organized by first-name alphabetical and it includes their current title, professional class, and their profession.

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Follow them, individually, or you can visit an actively updating list by visiting 2PM’s first and only Twitter list. Many of these participants are moving the direct to consumer economy forward. Each of these professionals challenge thoughts, authors unique positions, devise strategies, or actively invest in an evolving ecosystem of: products, services, agencies, and their technical platforms. Whichever direction the industry moves, you’ll find the signals – here – long before those developments materialize.

Read the No. 305 curation here.

Report by Web Smith | About 2PM

No. 304: In-App Audiences

inappaudiences.jpg

If you’ve built a great product, you’ll need an audience. And if you’ve built a captive audience, you’ll need a great product. Spotify has one of the most captive audiences in the entertainment industry. The most recent measure places Spotify’s paid subscriber cohort between 90-95 million. This is an extraordinary number of consumers with a payment method on file. But most importantly, it’s an opportunity for the streaming music company to continue evolving with the digital commerce economy. An unconventional leader in this respect, Epic Games and the metaverse could teach Spotify the most about what’s possible with licensing partnerships and micro-transactions.

Member Brief No. 1: Linear Commerce

The digital economy rewards the companies that work along the line that separates traditional digital media and traditional eCommerce. A great product needs an organic and impassioned audience. Captive audiences need products and services to offer the community. Linear commerce is the understanding that digital media and traditional online retail will eventually meet at the center – along the line – the most efficient path for growth.

Linear Commerce

Spotify’s ability to overcome Apple’s recent and notable growth will hinge on the service aligning their brand with exclusive partnerships. The platform’s defensibility will be closely tied to their faculty to “sell” their product. While this is of little surprise, Spotify’s future may be influenced by how it sells content and physical products.

No. 287: Spotify’s Brand Potential

Audience and then commerce; or commerce to build the audience. Spotify identified an opportunity that – in the short term – will benefit its unpaid and premium consumers alike. And, in the long term, will benefit Spotify if Gimlet Media continues to create content that other platforms want to license for large-scale projects. But perhaps the most significant example of linear commerce, from the past week, was Fortnite’s Marshmello concert (see here).

Pictured: a screenshot of the in-game concert

Fortnite, “The Oasis.” This Saturday, Fortnite teamed with EDM performer Marshmello to debut a new concept for attracting and monetizing digital audiences. An estimated 10 million users were “present” (active in the game) for a live, in-game, digital concert that tested the boundaries of our definition of reality. Millions more watched the streams online. For days, the DJ set had been teased throughout the game by way of signage and in-game posters. Fortnite allowed players to enter the stage area in “Pleasant Park”, a well-known area in the game’s playing field. The game automatically removed all of their weapons so none of the attendees could be removed.

Share of Fortnite players who have ever spent money on in-game purchases (June 2018: LendEDU / Pollfish)

Epic Games was reported to have generated a “sizable sum” in microtransaction revenue from two of Fortnite’s in-game properties: skins (appearance) and emotes (dance skills).

The value of Gimlet Media

The traditional podcast network like PodcastOne, Midroll, and Headgum monetizes groups of podcasts by negotiating advertising rates and / or providing the podcasts with production expertise. There are dozens of podcast networks, but few are built as direct-to-consumer operations. Gimlet Media is one of them; they own and administer the podcasts that they broadcast. This could potentially provide value to Spotify in three ways:

Advertising revenue: podcasting’s main revenue stream is ad sales, but the entire industry generated north of $360 million in sales in 2018. Spotify will be able to count on a new revenue stream. But there is also Gimlet’s innovation in co-branded podcasts. Led by Creative Director Nazanin Rafsanjani, the podcast network has partnered with the likes of eBay, Virgin Atlantic, Microsoft, Gatorade, Reebok, Squarespace, and Lyft. When the deal is finalized, I’d expect this to continue.

Premium listens: speaking of advertising, consumers don’t enjoy listening to the same five ads about meal kits and recruiting. Spotify can now market that their Gimlet podcasts have no ads, potentially driving more listens of the streaming music app. By advertising ad-free podcasts, the content can be used to convert trial and regular subscribers.

Intellectual property and licensing: Spotify isn’t just acquiring a podcast network, they’re bringing a proven creative group in-house. Reply All, one of Gimlet’s properties, is reportedly in the early stages of film development. In 2016, rights to their Homecoming podcast were purchased by Universal Cable Productions. In 2017, Variety magazine reported that director Richard Linklater would lead the adaption of their “Man of the People” episode. It is last slated to star Robert Downey Jr. And in 2018, ABC debuted a sitcom based upon the founder of Gimlet media and their StartUp podcast called Alex, Inc.

Like Wondery and Parcast, Gimlet Media is more than a traditional podcast network. Paired with the streaming giant’s sizable and enthusiastic user base, Gimlet’s properties can become more valuable to potential media buyers. With the added listeners that Spotify would be able to provide, Gimlet could increase the opportunities that it has to license intellectual property or sell the television rights to high paying media partners like Netflix, Hulu, Showtime, and HBO.

The pending acquisition of Gimlet Media is about more than building a direct-to-consumer podcasting powerhouse, it’s about monetizing DTC audio in new ways. Spotify doesn’t own the music that millions of us listen to, they license the rights from three music labels: Universal Music Group, Sony Music Entertainment Group, and Warner Music Group. With Gimlet’s pending acquisition, Spotify is positioning themselves squarely as the Netflix of audio. And Gimlet’s portfolio of audio properties could be another tool that Spotify uses to convert casual subscribers to premium, paid users. And incentivizing users to stay away from Apple Music.

Gaming platforms like Epic Games‘ Fortnite and PUBG have captivated audiences while storing their payment methods for ease of purchase. And services like Netflix and Spotify are learning that they can do the same. The monetization of audiences through innovative, exclusive partnerships will continue to build a foundation for how media companies address a metaverse-driven economy. By reclassifying app downloads as the beginning of a sales funnel (rather than its end), digital content communities can reframe the value of their content.

Read your No. 304 curation here.

Report by Web Smith | About 2PM

No. 303: Newsletter Economics

On newsletter economics. Perhaps, digital media growth was intended to be slow and methodical. It could be said that the best models for media are devoid of venture capital. Without it, publishers would have to grow their audiences reader by reader, transaction by transaction. For many newsletter-driven media companies, this has been the method. Building a moat around a product once involved volume by way of Facebook and Google; today it means building a world without either. Customer acquisition principles in the realms of direct-to-consumer products and independent media are quite similar. Capital efficiency and acquisition independence are the aims of each industry. The races are long and unceremonious but the benefits of organic growth remain the treasure at the end of the rainbow.

In 2016, WIRED published an article entitled The Blissfully Slow World of Internet Newsletters. In the article, it discusses a few of the pivotal email-driven media publications of this era (2015-2019):

This isn’t a new digital gold mine poised to monetize all our eyeballs. Sure, there are some professional-class newsletters. Ben Thompson’s Stratechery costs $100 a year. Lena Dunham’s Lenny Letter has 400,000 subscribers; theSkimm, a news summarizer, has over 1.5 million. But from what I’ve seen, more newsletters are in the long tail—publishing for audiences from the single-digit thousands to the dozens. They’re engineered not for virality but originality: It’s a chance to listen in while someone thinks out loud.

Today, nearly every major digital publication has a newsletter strategy. Condé Nast just announced that they’ll be launching a new vertical called “Vogue Business.” And they aren’t the only ones. The power of the email medium is two-fold, it’s independent of the aggregators and it helps to develop 1:1 relationships with community members. Stratechery’s Ben Thompson is the authority on aggregation theory. In his view, brands and publishers are not truly safe unless they can operate independently. In today’s member letter, he wrote:

What is clear, though, is that the only way to build a thriving business in a space dominated by an Aggregator is to go around them, not to work with them. In the case of publishers, that means subscriptions, or finding ways to monetize, like the Ringer, beyond text. For web properties it means building destination sites that are not completely reliant on Google. 

The Buzzfeed Lesson

For many in the media industry, “going around” an aggregator means that newsletters are a key component for the hedge against the duopoly of Facebook and Google. In a recent blog post by David Perrell wrote: “Powered by organic distribution, “Need Content” publishers are armed with competitive advantages that cannot be bought on Facebook, Instagram, Google, or Amazon. Brand loyalty, trust and credibility can’t be bought. It must be earned over time.” While Amazon is competing against the duopoly in product discovery, the newsletter media industry and its enablers (Mailchimp, Substack, Memberful) are helping media companies compete for readership loyalty. There are essentially three types of newsletter products:

(1) a newsletter that provides a traffic driver to an existing site. A great example of this is Digiday’s recent foray into a thrice-weekly retail newsletter called the Digiday Retail Briefing led by Hilary Milnes. For Digiday, Milnes and team take extra care to present unique perspectives and exclusive editorials within the email product.

(2) a newsletter that operates as testing ground for future digital verticals. Look no further than today’s news that broke in the Financial Times: Vogue Business will start primarily as a newsletter, published twice a week and edited by Lauren Indvik, former editor-in-chief of Fashionista.com. There are 21 employees working on the venture, including six writers. The project is rumored to be a newsletter-driven, B2B media publication for those interested in fashion, beauty, and luxury retail. Like Paul Munford’s Lean Luxe newsletter, the publication hopes to attract the hearts and minds of modern and traditional brand insiders.

(3) The newsletter that is the medium.

Lean Luxe Founder: Paul Munford

While each publication is unique, for media companies like Stratechery, Loose Threads, Lean Luxe, TheSkimm, and 2PM – the primary product is the email. And the economics of these businesses have one similarity – the readers support the product in some way or another. At Lean Luxe, Founder Paul Munford supports his weekly letter by partnering with short-term, audience-focused brand sponsors. These aren’t outside advertisers. Rather, they are businesses that already exist within his ecosystem, amplifying their presence by way of his newsletter feature. Here’s what Munford had to say in a short Q&A with 2PM:

When did you see a need for a newsletter? how do you go about addressing this need?

The newsletter was the priority from day one. I chose this path because I knew that I wanted to own the relationship and have a direct line to the consumer — that that was the most fundamental thing going forward for all companies, media or otherwise.

I think plenty of media co’s are still grappling with this concept, the balance between their true customers and focus being between the end user (and that relationship) versus the advertiser. I never thought that was sustainable and have always viewed that as such a limited business model considering what you can do today as “media” operation, and how your role can now be rethought or rebuilt around that idea of more than just content.

How does your audience support your work?

The audience supports my work by reading, by sponsoring, by spreading the word, by emailing thoughts, tips and ideas. And generally being engaged with the Lean Luxe brand – as limited as it is – in a way that’s meaningful.

Any thoughts on traditional publishers infringing on your space?

No big thoughts really and I mean that.The competition makes me shrug a lot; I like to shrug. They’ll just mostly be focused on content-only products as the big thing, perhaps with some events mixed in. But they won’t bring a distinctive point of view, they won’t be building out an engaged and powerful community, and in many, many places they’ll simply be dropping the ball.

Not remotely worried – especially since I don’t consider media or publishing to be the core competency of Lean Luxe. It’s part of the package, sure, but it’s not the future model and really just serves to spark conversations between folks. For us, media is important, but it’s more of a means to a larger end, not an end goal in and of itself. It’s just a complement to an overall larger thing we’re building.

Lean Luxe also benefits from a few key innovations: a partnership with Lightspeed Venture Capital and a Slack channel that is one of the retail industry’s leading sources of banter and discovery. To receive an invite to the Lean Luxe chat, you must be an active subscriber for several months. And recently, Nike partnered with Lean Luxe to brainstorm new direct to consumer products. Munford’s company has yet to raise any outside capital. In category No. 3 of newsletters, this is in contrast to TheSkimm.

See: The Indie Digital Publisher List

While, TheSkimm has the benefit (and responsibility) of nearly $29 million raised – their profile is still closely aligned with the third type of newsletter product, for now. Founded by Danielle Weisberg and Carly Zakin, the media company has attracted the attention of many of the titans in the industry, to include: Oprah Winfrey, Sarah Blakely, Google Ventures, Homebrew, and RRE. The original newsletter has provided a platform that now includes its own native app, podcast series, and calendar technology that syncs directly to your calendar of choice so that you don’t miss the cultural events that are important to its readers (I am one of them).

The blissfully slow world of 2pM

For newsletter-driven companies like 2PM growth experience has been slow and methodical. I had the idea for the newsletter in December 2015. Initially, it was for a few dozen or so friends who wanted a digital destination for curiosity and research. We all shared a desire for a distraction-free newsletter that tracked the ways that media, branding, logistics, commerce, and data science were intersecting and amplifying one another. At the time, every publication – regardless of its intended focus – was broadcasting the American political discourse. And between the distraction of politics and the heads-down grind of working in hyper-growth industries – there wasn’t a place that helped guide executives and executives-to-be back to the bigger picture.

What is happening now in the context of everything else? What will happen next? How do we prepare? How do we respond?

I was quietly building 2PM while also focused on operations in the real world – building commerce operations for content providers or partnering content providers with commerce solutions. About two years into the slog of building a worthwhile audience, I launched the Executive Membership at 2PM. By then, 2PM became a 60-70 hour per week job between writing original content, curating meaningful and valuable letters, and updating 20-50 database data points per day. A paid membership allowed the top 10-15 percent of our engaged audience to support the whole. When I re-platformed to WordPress in the beginning of 2018, it allowed me to begin building a suite of tools for members to track commerce and commerce-adjacent industries. And it added a community of industry leaders looking to collaborate and build with one another.

In addition to traditional publishing, I felt that maintaining an operational advantage was important. When 2PM publishes, it is necessary that the perspective is that of an operator within the community, not just an observer. The addition of agency executive Meghan Terwilliger solidified this core tenet of 2PM’s product voice. To amplify this perspective to our published data an editorial, 2PM launched invitation-only Growth Partnerships in Q3 of 2018. This allowed 2PM to partner with leaders of the industry throughout logistics, agencies, brands, and financing.

The primary constraints to growth and sustainability are: audience loyalty, revenue, and retention. Each newsletter addresses these needs in their own ways. As Perrell recently wrote, “content and commerce are converging.” For newsletter-driven media companies, quality and effort are differentiators. Platforms like these can rarely withstand days of failure because the communities are small and value and consistency are the priorities to them.

As the digital publishing industry continues to shed jobs and pivot away from aggregators like Facebook and Google, newsletter media’s principles will influence the traditional media’s largest companies: (1) slow and sustainable growth, (2) community, and (3) subscription-based revenue. Teams will be leaner, capital will be more efficient, and platforms will answer to the community – not advertising partners. The blissfully slow world of internet newsletters may produce the blueprint that addresses digital media’s chief concerns. Namely: who is our loyal audience? And how do we achieve a path to profitability?

Read your No. 303 curation here.

Report by Web Smith | About 2PM