第 306 期平台和光晕效应

The commerce platform report. The term “halo effect” was first coined by a psychologist in 1920. Edward Thorndike used the moniker to describe the methods that military officers used to assess the performance of their soldiers. These assessments often revealed little variance across the categories of performance. Either the soldiers were good or bad; few performance evaluations noted “good” performance in one respect and “bad” performance in another. It is said that the halo effect is influenced most by a person’s first impression. If we see them as bad, they can do no good. If we see them as good, they can do no ill. Today, this phrase is most-often applied to brands and their equity.

The halo effect is a type of immediate judgment discrepancy. It is the tendency for an impression that is created in one category to influence the opinions of impressions created in another category.

Shopify is seemingly everywhere. In December, Digiday’s Hilary Milnes reported that Shopify’s ecosystem of 20,000 partner developers generated $800 million in agency business in 2017. It’s estimated that Shopify’s partners (several of whom are mentioned here) will earn north of $2 billion in revenue in 2019.

To build a Shopify-like eCommerce platform is not hard to do. What’s very hard to do is replicate the partnership ecosystem and the value they drive. It’s their moat. It’s not the software — their competitive advantage is the partnerships.

Jay Myers, VP of Growth at Bold Commerce

The halo effect of Shopify’s ecosystem will not be easily combated. With many of the partners becoming standout B2B brands themselves, Shopify’s group of independent eCommerce agencies serves many functions: recruiting, evangelizing, and perhaps a bit of espionage – often relaying word of advancements and initiatives proffered by competing platforms. This brand halo effect is amplified thanks to the era of the direct to consumer (DTC) brand.

2019: top commerce providers that DTC brands are looking to for partnership | Source: Cloudways

The brand appeal and staff architecture of this cohort of internet-first companies are keys to understanding why so many challenger brands instinctively select Shopify. Though not a Shopify Partner, Gin Lane’s “work” page notes the many digitally native brands that they’ve steered to the platform. These names include: Harry’s, hims, hers, Sunday Goods, Ayr, Stadium Goods, Rockets of Awesome, Cadre, Recess, alma, Smile Direct, Dia & Co, Warby Parker, Everlane, Quip, Shinola, Bonobos, and Shake Shack. Similarly, Red Antler’s “work” page boasts partnerships with Burrow, Casper, Allbirds, Brandless, Crooked Media, Snowe, and Boxed. These brands, which skew mightily towards Shopify and Shopify Plus, serve as media darlings and public relations fuel.

Tobi Lütke on Twitter

I usually don’t highlight financial milestones here, but this one is worth mentioning: As Shopify passes the $1 billion-dollar revenue mark it does so with the highest growth rate of any SAAS company ever. 🎉

In this way, Shopify’s halo effect extends beyond the agencies with whom they partner. The challenger brands, themselves, become recruiting vehicles for like-minded companies looking to build brands from zero to one. As such, newer companies like Great Jones follow the same branding methods and staff architecture guidelines

On DTC Brand Architecture

It’s common for digitally native brands (DNVBs) to go to market with over $3 million raised. This pre-revenue war chest affords companies an early branding and public relations prowess that almost guarantees seven figures of revenue in the first year.

Partnering with a Red Antler or a Gin Lane can cost a brand up to $400,000. There are often added developmental costs that these challenger brands will have to incur. In addition to the cost for the brand standards, messaging, and the essence of the brand, the right PR contact can cost a young company another $180,000 to $240,000 per year.

No. 297 The DTC Industrial Complex:

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.

The challenger brand CEO is very well-educated and, at this stage, CEOs tend to start the brands post-business school. Founding teams tend to begin with some combination of a product developer, finance lead, and a customer acquisition lead. Software engineering is an afterthought for many of these young product companies; this competency is often outsourced to a partnering agency. Universally, the priority for challenger brands is two-pronged: (1) making a great product (2) find an efficient way to sell said products. This often reduces the urgency to partner with technical founders or hire early, technical employees. Whereas F = founder, B = early branding, and P = early product development:

F(marketing) + F(finance) + B(outsourced) + P(outsourced) = DTC founding architecture

Shopify’s ecosystem appeals to this particular architecture. The Ottawa-based company’s continued growth depends on their management’s ability to increase the percentage of challenger brands that grow into enterprise clients. And from enterprise clients to Top 1000 online retailers. Shopify’s volume-driven style of business is a mark of its commitment to small business retailers. But it’s not the only method of accelerating enterprise growth. There are several commerce platforms with notable gross merchandise volume (GMV) across their enterprise level of clients.

The Platform Landscape

From BigCommerce to Oracle and Salesforce, the DTC era of retail extends beyond the brands that are the most talked about in design, tech media, and public relations circles. Here is the data on the top nine by gross GMV. While Shopify generates the most media buzz in small business circles: Adobe, Salesforce, and Oracle are quietly leading the enterprise+ business. BigCommerce is often viewed as Shopify’s younger sibling, however their enterprise clients now generate a gross GMV of 2.5x Shopify’s enterprise clients. The following data is derived from a recent Digital Commerce 360 report (2019):

[table id=37 /]

The platform ecosystem is vast. Of the top 1000 retailers, the majority of brands are built in-house and on custom platforms. Nearly 450 retailers have outsourced their technical capabilities to these nine companies. Moving forward, we will likely see platforms like Adobe building tools and an improved halo effect to address Shopify’s key audience and vice versa. Shopify will build tools to address more of the needs of top enterprise plus clients, as well as continuing to support the needs of the DTC brands that are adopting physical retail channels.

Specializing for a particular segment of the SMB to enterprise to enterprise plus spectrum may have dire consequences for platforms in this increasingly competitive space. As Shopify has shown, there is value in building early loyalty. Shopify is counting on a number of their industry-leading number of DTC and SMB retailers moving through the funnel to enterprise services. Additionally, Shopify’s reach grows as brands transition to Shopify from Magento or custom builds. A trend that the Adobe acquisition of Magento has potentially impacted. This continued growth would begin to tip the enterprise / enterprise+ GMV scales in their favor.

Commerce platforms advertise new capabilities with the idea that the technical merits of a platform, alone, will attract new business. To this effect, many of these platforms have deprioritized brand marketing superiority and influential partnership development in favor of technical product development and traditional advertising. Whether or not the improvement of competitor platform capabilities will outlast Shopify’s hard-wired brand loyalty remains to be seen. Objectively speaking, the sheer volume and positive brand association plays in Shopify’s favor. As does their halo effect.

Read the No. 306 curation here.

报告人：Web Smith |大约 2PM

第 305 期：DTC 列表

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.

[table id=35 /]

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.

报告人：Web Smith |大约 2PM

第 304 期：应用内受众

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.

线性商务

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.

报告人：Web Smith |大约 2PM