No. 301: Influencers and Transactional Authenticity

Just when we believed that we reached peak influencer, we are surprised yet again. We’ve favorably covered the “first family of influence”, in the past. And quantifiably, there isn’t a media conglomerate that comes close to the influence of the Jenner / Kardashian family. This week, one of them reached a new level by “bravely” discussing acne – the presentation and build up left a fractured audience in the wake of the brand partnership announcement when it was revealed to be a paid deal.

A day before the reveal, Kris Jenner, the model and entrepreneur’s mother, teased the reveal of her “deeply personal” issue on Twitter. Tabloid speculation run its course. The roll out was optimized for social media but many were left asking: is this really what’s become of influencer-driven advertising? Vox Media covered the advertising “bait and switch” in depth here

2PM Contributor and Founder of Doris Sleep: Tracey Wallace

Proactiv’s recent partnership with Kendall Jenner was a test of authenticity. It also may have been a watershed moment for influencer culture. Yes, it’s the most recent example of the status being used to present a vulnerable issue. In this case, adolescent acne. But authenticity is a currency all its own and volume of audience doesn’t always equal magnitude of impact.The controversy around Proactiv’s newest advertising campaign is an early sign that consumers may be beginning to discount command of advertising’s most influential family. Consumer skepticism is the antidote to influencer culture and it seems to be growing.

The focus on influencer authenticity comes as brands have begun to use more “real people” over models and entertainers. Brands are beginning to highlight people just like us but without the modelesque lighting, the photoshopping, or the narrative embellishment. Just scroll through the feeds of Andie Swimwear, Flamingo, or Chubbies for quality examples of this type of visual marketing.

These brands are succeeding because of, not in spite of, their focus on authenticity.

  • Andie Swimwear: Swimsuits made by women, for women.
  • Flamingo: We make body care, starting with hair.
  • Chubbies: The Weekend Has Arrived.

For influencers, the understanding of how partnerships like Proactiv and Kendall Jenner’s come to life diminishes empathy and therefore trust in an ad’s authenticity. This is especially the case in the era of Netflix and YouTube, where star power (influencer marketing) is used to efficiently monetize audiences. Consumers want authenticity.

The successes of influencer marketing is saturating the market. From celebrity influencers to micro influencers, consumers are being inundated by influence. Some influencers are faking brand deals to gain credibility:

Transitioning from an average Instagram or YouTube user to a professional ‘influencer’—that is, someone who leverages a social-media following to influence others and make money—is not easy,” writes Taylor Lorenz for The Atlantic. “After archiving old photos, redefining your aesthetic, and growing your follower base to at least the quadruple digits, you’ll want to approach brands. But the hardest deal to land is your first, several influencers say; companies want to see your promotional abilities and past campaign work. So many have adopted a new strategy: Fake it until you make it.

There are sincere and authentic influencers who are not embellishing their lifestyles or influence. Often enough, these are the media personalities who are slowest to launch merchandise or product lines. Figures like Youtube’s Casey Neistat or pro surfing legend Kelly Slater are having to contend with a very cumbersome question:

How do you build an authentic advertising or commerce model? And how do you do it without ostracizing long time fans and newcomers?

As 2PM has previously covered, there are businesses that focus specifically on partnering with influencers and digital publishers to create, market, sell, and distribute merchandise. We’ve compiled a list of notable commerce partners:

CompanyEstimated Rev. RankLocationFocusLead FoundersEmployeesTop PartnerFully vertical?
Teespring1CaliforniaCreatorsWalker Williams652Lucas The SpiderYes
Amazon 2WashingtonMedia Jeff Bezos 267,723BuzzFeedYes
Red Bubble
3AustraliaCreatorsMartin Hosking777N/AYes
Spreadshirt4Liepzig Creators Phillip Rooke296N/ANo
Rivals / Merchline5FloridaCreatorsNathan Murray17Dude PerfectYes
Merch Table

6Kansas Indie Bands Sean Ingram 42Rufus Wainwright
Yes
Homage7Ohio LicensingRyan Vesler122The NBAYes
BreakingT's

8North CarolinaSportsJamie Mottram 7Donovan Mitchell
Yes
Design By Humans9CaliforniaLicensingJeffery Sierra48Star WarsYes
500Level 10TexasLicensingBrett Williamson20Kevin DurantYes
Amplifier 11TexasCreatorsJoel Bush65Glennz TeesNo
Represent

12CaliforniaInfluencersBryan Baum46Pewdiepie
No
Bonfire13VirginiaCauses / Justice Kevin Penney55Together We CanYes
Rage On14Ohio
CreatorsMike Krilivsky 41Hello KittyYes
Moby Dick Unlimited

15Ohio InfluencersBrandon Fuss-Cheatham10Logan Paul
No
Everybody.World16CaliforniaConcert GoersCarolina Crespo12Gurls TalkYes
Memberful17FloridaMedia GroupsDrew Strojny4StratecheryNo
The Loyalist

18New York AthletesMaxwell Ritz10Alexander Rossi
No
Merchbar19California CreatorsEdward Aten9Donald GloverNo
FanFiber

20HollandCreatorsAlbert van den Broek20Dashie XP
No
Cotton Bureau

21PennsylvaniaCreators Nate Peretic / Jay Fanelli9MKBHD
Yes
FanJoy

22CaliforniaCelebrities Chris Vaccarino17Jake Paul
Yes
Manhead Merch23TennesseeBandsChris Cornell17Fall Out Boy
Yes
Merchcamp24CaliforniaMedia GroupsKenneth Borg4Tinder

No

There is such a demand for appealing to influencers and influential moments that an entire industry has address demand.

Taking a page from the eCommerce playbook

As DTC analysts David Perell and Nik Sharma have often cited, the most resilient brands are audiences. And for influencers to maintain their audience, there must be an evolution from the existing structure of often-gimmicky merchandising and advertising via third-party transactors. And to a method that achieves an authentic experience bolsters user experience and belonging.

The technology seems to be mature enough to address this new standard. Headless Commerce services are offered by BigCommerce, Shopify, Adobe, and ElasticPath. These services are helping to define the possibilities of fully-integrated, content-driven commerce.

Alecia, an early headless commerce pioneer, has taken a first step in this direction with their proprietary video platform. From 2PM Member Brief – Headless Commerce:

Alecia is a company that films and streams original content, letting you shop what you see. The app and the site offer a seamless content and commerce presentation for the viewer. As the product appears on the screen, it is offered (in limited quantities) along the right side of the broadcast. If you’re logged in, purchasing is essentially a two click process. Consumers aren’t clicking to an eCommerce site or an external cart. Instead, the shopping cart is a component of a headless operation, an API call to the cloud-based shopping platform that is external to the featured content.

To date, no such solution exists for influencers on major platforms like YouTube, a place where it could have the most value. way content and commerce in media has begun to alter our understanding of which publications have the most loyal audiences. From 2PM No. 280:

The digital landscape is changing beneath our feet. For publishers to continue building organic readership, they must become brands. Operating as a source of content is no longer enough. To do that, efforts can no longer be siloed, the traditional factions of legacy-styled newsrooms must fall.

It’s no longer just about eyeballs and what influencers can charge for their collection of them. Optimizing for transactional engagement could have a positive effect on the influence ecosystem. In order to earn actual transactions, consumers – more often than not – must sense sincerity, community, and loyalty. By improving bottom-of-funnel operations, influencers can address the needs of community members (potential consumers) without disrupting their experiences.

Ready for increased interactivity?

Millennial audiences are ready for built-in video interactions as evidenced by Netflix’s recent success with Bandersnatch, the “choose-your-own-adventure” augmented film powered by remote or mousepad. These types of media experiences shorten the length between watching and interacting.

But Bandersnatch is more than just a blurring of games and TV. Such interactive adventures could easily become a new revenue source, too, through super-powered product placement and eCommerce. With interactivity comes a new slew of data, and the ability to layer in products, product information and ways to buy. You can bet Amazon is figuring out how to ties its billions of dollars worth of programming into its vast e-commerce operation. And just maybe so are Disney, Apple, Warner Media and Walmart.

David Bloom for Forbes

One company that went unmentioned in Bloom’s rundown was Google. Google has the most to benefit from engineering a headless commerce solution for YouTube. Consumers and creators would both benefit from an experience that allows consumers purchase from the screen without an external redirection.There is one thing that YouTube has built into its platform that Netflix, Disney, Warner Media and Walmart do not: intuitive user control.

Expect to see a continued shift towards interactive formats; while headless commerce opportunities are further down the line – consumers are already being molded to welcome them. But the media engine of this age is the widely beloved influencer. We’re suggesting that we should reconsider how they’re influence is measured. No, influencers shifting to a headless commerce operation won’t immediately prevent media moments like the Proactive “bait and switch.”

Moving influencers away from optimizing for media impressions, social mention volume, and traditional publicity could alter things if and when creators see what can be accomplished when commerce transactions are closer to the starting line. Commerce relationships develop an authenticity that advertising doesn’t quite need. As interactive video technology continues along its adoption cycle, influencer-creatives would stand to gain a lot from building stronger relationships with their audiences.

By moving transactions closer to the top of the top of the funnel, fans and potential consumers won’t be left wondering: what’s the gimmick? Headless commerce can present that solution in a subtle but effective way by leaving the opportunity to transact to the viewer. Consumers demand authenticity from their influencers. This, especially as the lines between genuine interest and earned media continues to blur. 

Read your No. 301 curation here.

Report by Tracey Wallace and Web Smith | About 2PM

Tracey is a 2PM Executive Member and Contributor, the founder of Doris Sleep, and the Editor-in-Chief at BigCommerce. 

No. 299: Open Letter – Physical Retail 2.0

Dear DNVB CEO,

This year began with a letter to you. It was the very first letter written on 2PM’s new platform and one of the most meaningful of the year. The original “open letter” from January wasn’t communicated as an analyst or a writer, it was published as a peer. It was an expression of empathy and encouragement. But most importantly it was recognition of your task at hand, building steadily throughout perpetual change. It was a nod at your endurance and resilience. The successful DNVBs of the many that are out there, succeeded in making something out of nothing. And frankly, observers only really understand what that’s like if you’ve been through it. So this one is meant to close out the year with a few observations and some acknowledgment of some impactful, forward thinking. The most shared paragraph in that January letter:

You started your company in an age that required your retail independence. On day one, your brand couldn’t depend on wholesale purchases from Nordstrom or Target or Whole Foods or Wal-Mart. And that independence made you more practical in the long run. And now, those retail powerhouses are now knocking at your headquarters.

I went on to write that DNVBs will make the foundation of which the future of retail is built. Over the past year, we’ve gained a bit of clarity on what that could mean. Direct to consumer brands killed mall retail. Direct to consumer brands reinvigorated the mall. 

Riding on the efforts of your collective innovations – from Andy Dunn to Steph Korey, Tyler Haney to Kristin Hildebrand, Aman Advani to Emily Weiss, and Michael Dubin to Blake and Patrick – retail has taken a new shape. And in the process, we’ve defined and redefined the word direct in the DTC acronym.

More than ever, consumers demand fluid purchase experiences. Online-only retail was supposed to accomplish that but for the majority of retailers, that hasn’t been the case. In the most recent Member Brief: a neighborhood of goods, I argued that the sunk costs attributed to operating within the confines of online-only retail (eCommerce software, logistics costs, and acquisition costs) could motivate further investment into the same systems. But more and more of your peers are realizing that operating a technical, data-driven, physical storefront can accelerate growth, increase LTV/CAC ratio, bolster AOVs, and even fortify speedier shipping and returns.

The irony of the conversations around physical retail weren’t lost upon any of the industry leaders at the [2PM Executive Member table, that evening]. We were in the heart of Soho, Manhattan. If you walked a tenth of the mile in any direction, you’d see the physical manifestation of nearly every top 30 DNVB in the market: Casper, Glossier, Warby Parker, Bonobos, M. Gemi, Rowing Blazers, Aesop, Aether, Birchbox, Harry’s, Theory, and the list goes on. It seems as though every DNVB executive with a war chest (or profitability) is all-in on maximizing profitability through physical retail. Not just the quaint pop-up stores, full 13,000 sq. ft. acquisition and conversion machines. 

Member Brief: a neighborhood of goods

Revisiting Retail independence

Over the years, consumers have shifted from shopping to buying – we’re beginning to witness a shift backwards; American online retail never quite figured out how to duplicate the sensation of stumbling upon a must have while walking through a shopping center. Over the course of the year, we’ve seen the beginning of a tide towards the return to physical retail – a method of acquisition that most of us very vocally dismissed over the years. Sure, we have all seen our fair share of “guide shops”, showrooms, pop-ups, and stores-within-a-store. But while many brands tested the waters with physical footprints, we are now seeing a new level of commitment to a tech-enhanced, traditional way of acquiring customers.

The renaissance of brick and mortar retail could be representative of a few key macroeconomic trends: (1) the saturation of and wavering trust in social media platforms (2) and the inundation of online advertising. Both key tools in the growth of early vertical brands from 2007-2017, online brands have saturated every channel that attracts our attention.

A funny thing happened on the way to the retail apocalypse. Stiffening competition, surging online advertising costs and cheap mall space have prompted these so-called digital natives to embrace what they call “offline” in a big way. In their push to become retail’s next household names they’re venturing beyond the coasts and major cities into suburban America. It’s also an acknowledgement that 90 cents of every retail dollar in the U.S. is still spent at a physical location, and industry watchers don’t expect it to fall below 75 cents until the middle of next decade.

Why DNVBs continue to open physical stores

With every passing year, early brands must raise more to compete less effectively than the brands that launched just a year earlier. Facebook and Google’s cost data suggests that DNVBs have begun to max out these acquisition channels. As a result, shopping has become less leisurely. And solely transactional. Consumers want leisure. Physical retail embodies a social and tangible experience that America’s Amazon-driven format of online retail has yet to duplicate. And digital-first retailers are re-prioritizing those moments of consumer delight by investing in extending their DTC relationships by owning permanent storefronts in worthwhile locations.

Physical Retail 2.0

One of the most challenging tasks ahead, for the DNVB C-suite, is the mandate to build a product and sales funnel atop of a constantly evolving industry. One of the chief roles in the DTC c-suite is the leader charged with discerning between short-term trends and long-term shifts. There have been numerous instances over the last 5-7 years where brands underestimated new technologies or over-estimated the stability of precedent. To that end, physical retail is in its own renaissance. With the right technologies and logistics partnerships, DNVB peers are building more than consumer touch points. They are also building platforms for improved return logistics and quicker shipping mechanics.

Brands that own their own independent storefronts are capable of accomplishing several key goals without outright dismissing their previous investments into technology, advertising, and logistics. To that effect, those tools will only help brands become pioneers in physical retail 2.0. Whereas mall brands of old depended on analog advertising-alone and the unpredictability of foot traffic, physical retail 2.0 are benefiting from six categories of customer acquisition funneling:

  • online to offline
  • traditional to online
  • offline to geo-fenced retargeting to online
  • traditional to offline
  • online to retargeting to offline
  • online to physical returns to offline

For retailers, 2019 is shaping up to be a resurgence of the old. More of your peers will follow in the likes of Allbirds, Casper, Warby Parker, and Glossier. The data-driven physical store will allow mature DTC brands to reduce their dependencies on existing acquisition channels, while now-fully engaging with existing customers. Over the past decade, DTC brands did quite a bit of damage to traditional mall retailers by building direct relationships with potential customers.

Now, those same challenger brands are growing to compete in retail’s traditional environments. The successors of physical retail 2.0 will be: (1) the cloud-based systems that enable DTC brands to connected their experiences and (2) the brands that move first to supplant the traditional brands of old. Cloud commerce platforms (Shopify, BigCommerce, Adobe), a near-universal focus on monetizing consumer data, and the spirit of DTC innovation has provided an advantage over traditional retailers. Higher end shopping centers and malls are beginning to reflect this shift.

Read the No. 299 curation here.

Report by Web Smith | About 2PM

No. 297: The DtC industrial complex

Untitled-2-Recovered

There is an entire eCommerce branding industry that fosters the ideation, launch, and early growth of direct to consumer (DtC) brands. When you notice a new digitally vertical native brand in 2018, there’s a platform aura around many of them. First you’ll notice the early PR sensationalism that they can only garner if they graduate from the right school or leave the right corporation. Then, the founders must live in the right city, have the right investors, and pay the right $25,000 per month public relations retainer.

Savvy consumers first notice that the brands are using Shopify or BigCommerce. Then these savvy target customers ask: Red Antler? Brand Value Accelerator? Partners & Spade? Gin Lane? And then on to the excellent packaging presence. Lumi? That other one? In many (but not all) cases, the table stakes aren’t the physical products anymore. You can argue that in the world of DtC 2.0, the actual product is prologue.

After working with Warby Parker, Partners & Spade struck up a relationship with DTC razor brand Harry’s (before it had launched), Shinola, Hims and Peloton. For an already established brand like Peloton, Partners & Spade worked on their first national advertising campaign, but for a brand like Harry’s, the firm got in early on and helped debut the brand to the world (and has since launched Harry’s secondary brand for women, Flamingo).

Adweek, November 19, 2018

The DtC industrial complex enveloping challenger brands has, thus far, insulated many of them from the reality of attrition-by-market forces. Venture funding is the lifewater of the industrial complex. When brands launch today, many of them are hitting the ground running with $3.5 million to $17.5 million in funding. This means that the days of organic social proof (proving the efficacy of the actual product) are – for the most part – behind us. Our opinions are told to us, en masse, by the best molders of minds in the marketing today. This is not to say that new brand products aren’t great. Or that there isn’t opportunity ahead. Below is the estimated compound annual growth rate through 2022.


2PM Data

Screen Shot 2018-12-03 at 11.37.52 AM
US: DTC compound annual growth rate (2016-2022)

You’ll notice that consumer packaged goods, beauty, and food & personal care are each expected to grow tremendously. This coupled with the abundance of capital and the relative ease founding a DNVB in 2019 means that it’s likely that we haven’t yet observed peak volume of challenger brands competing in stale categories.

From No. 290: brand defensibility:

  • brand: the reputation of the product manufacturer. But also, the impression made upon consumers by the most visible brand evangelists.
  • product: the value created by the product. But also, the value created by the ease of purchase, the fulfillment process, and the customer follow-up – post purchase.
  • new distribution: how is it sold? The better the product, the more likely that a consumer has a 1:1 relationship with the brand.
  • acquisition model: how does the brand achieve meaningful foot traffic? And what is the right combination of paid and organic growth? Is organic growth sustainable?
  • the hive: who is the product’s first 100? Has the brand experienced organic growth on the foundation of this digital community? Will the “100” defend the brand when skeptics criticize the product and brand?

If there is a concern, it’s that the practice of launching a DNVB has ambitious founders shifting resources from within the company walls to outside of them. Brands can outsource product engineering, the brand message, the media relationships, and the customer acquisition. All while ignoring the benefits of the “product’s first 100” for day one, hockey stick-like growth: a strategy that has worked for Warby Parker, Harry’s, Away but very few others. A strategy that is often fueled by that pesky abundance of early stage capital. An amount of capital that’s often justified by the costs of the industrial complex. As we the cycle? Founders are raising to address an amalgam of costs that were once viewed as optional and eventual. But today, they are essentially table stakes to play the game on day one.

The winners will surely include a small handful of consumer brands that overturn the market dominance of their categories’ legacy brands. But if you’re looking for volume, the real winners of the DTC era are the agencies surrounding the products. They are crafting the narratives of the products that we are told by every editorial tastemaker and affiliate-driven publisher to never live without. Those deskside founder interviews aren’t cheap, I know. These are the products that expertly target us on every platform. And when we convert, we get the lovely welcome to the family email. This optimizes for LTV / CAC ratio. And then we receive it; the well-designed box takes our breath away and the nestled card with the well-tested social media CTA that gets us to bite.

This is the experience wished upon us by every challenger brand that adorns the publications that cover consumerism. And only then do we realize that every experience has hints of another. Not because the agencies aren’t expertly executing, they are. But because there are only so many ways to make categories – that weren’t exciting in the aisles of Target stores – revolutionary across the consumer web. There have been tremendous products launched into the stratosphere of consumer America. Few products have impressed me more than the agencies that build them.

Read your latest curation here: No. 297.

Report by Web Smith | Executive Membership