Why Etsy does the right things

Where else can you buy embroidered Lady Gaga toilet paper?

Where else can you buy embroidered Lady Gaga toilet paper?

Etsy IPOed this week to much well-deserved fanfare. Their original share price of $16 doubled in value almost immediately after going on the market, valuing the company of about 700 employees at over $3 billion. This was probably, in part, a calculated move – though it may have also been an indirect result of capping retail investors’ stock access to $2,500 apiece, in an effort to increase the number of subscribers. Whatever it was, it speaks to the tremendous value the market sees in Etsy’s unique two-sided marketplace business model for people to find “authentic,” hand-crafted goods from individual “makers.”

One of the most interesting aspects of Etsy’s emergence to me is its identity as a newly public “B-Corp.” In case you’re not familiar with the concept, B-Corps are companies that have chosen to undergo certification by the nonprofit organization B-Lab for adherence to a list of environmental and social accountability measures. Etsy is only the second B-Corp ever to go public, and by far the most important (the first was a tiny Canadian vertical farming company in Vancouver).

Etsy’s mission-driven identity, however, is going to be fundamentally challenged as a public company. While I love many of the ideas behind the B-Corp certification – and Etsy itself – I’m pretty skeptical as to how they truly affect policy at a public technology company. The social and environmental policies it supports might, in the end, be mostly a marketing effort that are at odds with the growth opportunities Etsy now faces. Here’s why.

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Technology and the future of “banking”

bankingI’ve been thinking a lot lately about the consumer banking industry.

Consumer banking remains the single biggest operating segment for big American banks like Bank of America, Wells Fargo and Citigroup in terms of both revenue and net income. Generally speaking, other operating segments like investment services, brokerages, wealth management or real estate services come no where close. Yet in myriad ways, these mainstays of consumer banking are being eroded – both by financial services-focused disruptors and by those from outside the industry.

As I discussed in my newsletter last week, the rise of “FinTech” firms is already having a significant impact on the wealth management market. Wealthfront, just as one example, recently announced that it now has $2 billion in assets under management – all in just a little over three years in business. The actively managed mutual fund market is now grappling with how to answer automated services like theirs in a way that preserves their operating margins – and finding that that answer isn’t yet clear.

I think that Wealthfront’s challenge to the mutual fund market is a great example of what’s about to happen in consumer banking. The changes coming to how people will keep and manage their money will have major consequences for the banking industry, obviously, but also for the merchants that consumers do business with. Fortunately, merchants and consumers could be the big winners in the democratization of banking.

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Facebook expanding in all directions

If you’re a subscriber to Ben Thompson’s Stratechery blog, then you may have seen his daily update this morning discussing Facebook’s announcement that it will begin hosting news sites’ content. As usual, Ben’s analysis is spot-on, as is his observation that BuzzFeed is way out ahead. From the NYT:

With 1.4 billion users, the social media site has become a vital source of traffic for publishers looking to reach an increasingly fragmented audience glued to smartphones. In recent months, Facebook has been quietly holding talks with at least half a dozen media companies about hosting their content inside Facebook rather than making users tap a link to go to an external site…

Facebook intends to begin testing the new format in the next several months, according to two people with knowledge of the discussions. The initial partners are expected to be The New York Times, BuzzFeed and National Geographic, although others may be added since discussions are continuing. The Times and Facebook are moving closer to a firm deal, one person said.

Considered in context with my post yesterday about what Facebook could – and perhaps is – doing with its payments service, I find this particularly interesting.

 

Some thoughts on payments

coinsI’ve written about payments quite a bit lately – in both my newsletter last night as well as in one two weeks ago. Between the rapid expansion of Apple Pay and announcements by its would-be competitors (if you want to call them that), Android Pay and Samsung Pay, all of the major platform providers are attempting to hone in on this lucrative market. Further up the stack, software-defined services are attempting to do the same, offering cross-platform universality: PayPal/Venmo, of course, and now Snap Cash (which is really Square Cash), and (finally) Facebook payments.

Unless you’ve been paying close attention, it’s easy to get confused by all of these new payment methods. Which are peer-to-peer? What do I use in a store? How do I just pay the damned dog sitter?

It seems to me that too many people think of payments in a strictly traditional sense: like writing someone else a check, which is how many of us have long used PayPal. That was probably fine for a time, but I think that era is over. It’s time to broaden how we think of payments to fit the age of social.

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Three charts that explain “omnichannel”

If you’re a retail industry executive, these are the kinds of charts that keep you up at night.

Screen Shot 2015-02-26 at 1.04.27 PM

U.S. consumers, particularly younger ones, are spending much less time in malls and in physical stores. Store foot traffic has been dropping for years, which is subsequently putting pressure on merchandise productivity and comparable store sales – which have generally been pretty dreary in the physical retail sector.

For retailers, though, the bad news doesn’t stop there. The decline in store traffic accompanies a slow but steady long-term shift in consumer tastes away from retail staples like apparel and towards other consumables like food, digital media (ex. music, games/apps) and personal electronics:

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Rise of the Unicorns

unicornIt’s been something of a running theme over the last ten years, particularly in the blogosphere and social media, to declare that blogging is doomed. With the closure of Andrew Sullivan’s iconic blog, this debate has been spun up once again: Ezra Klein bemoaning the decline of the blog in the era of the social web, and Ben Thompson pointing out that his own recent success with Stratechery is a counterexample of “Blogging’s Bright Future.”

I think the rise of Stratechery actually provides some interesting lessons to anyone paying attention to the future of business models in journalism, blogging and the web generally. But as so often with new media, the medium is often confused with the product. Talking about the success or failure of blogging itself is a little like arguing about whether the smartphone “works” for whatever one wants to use it for. Blogging actually works pretty well for some goals, and less so for others.

Rather, a more interesting question might be – what will blogging be used for in the future, and importantly, who (if anyone) will pay for it? These are the kinds of questions that cleave blogging away from the future of journalism, I believe, and more towards… whatever you want to call what Ben is doing. Indeed, I’m inclined to agree with Klein: blogging is still a pretty crappy business model, and it’s certainly not a viable future for journalism.

But then, who ever said blogging has to be about journalism?

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The state of digital analytics in 2015

Thinking through the recent Andreessen-Horowitz investment in Mixpanel has got me thinking about the overall economics of the digital analytics industry over the past few days. (Plus, my wife and I finished all of The Americans, so unless I get back to re-watching Battlestar Galactica over the holiday before season 4 of GoT hits iTunes, there’s nothing good on TV.)

As I’ve said before, I believe that digital analytics is a foundational business tool for any modern enterprise, and what we’re seeing in almost every industry today is a divergence between those companies that have evolved to embed this technology into their strategy and execute on it, and those that have not. Digital analytics – web, mobile, and the like – enables and complements all sorts of marketing and ecommerce technologies that are now table stakes for a competitive business, which puts the analytics vendor itself in an incredibly valuable strategic position. No wonder, then, that competition is so heated.

survey

I’m going to take stock of the digital analytics vendor landscape as it stands at the beginning of 2015, make a few predictions about where it’s heading, and then circle back to the a16z-Mixpanel thing, because it’s a real head-scratcher. And it makes sense to start by talking about the two biggest names in enterprise digital marketing – Adobe and Google. In that order.

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Demandware

demandwareI resigned from IBM last week. My last day as a Big Blue employee will be in the next week or so, and in the new year, I’ll be moving into a senior role at Demandware leading the company’s large enterprise accounts initiative.

coreAs I told my colleagues internally this week, I’ve been very proud to be an IBMer, and to work on Coremetrics. My resignation was a little surreal, actually – I was in the Bay Area for a team meeting, and had “the talk” with my manager in the very same conference room where John Squire hired me years ago. So things have really come full circle.

I’ve been collecting my thoughts about IBM and its future, which I’ll probably wrap into a blog post at some point here soon. But for now, I don’t anticipate any big shift in the focus area for this blog – marketing tech, ecommerce, and how people buy stuff on the interwebs remains my interest area.

I’ll be staying here in North Carolina, but coming up to Boston fairly frequently. If you’re in the area, let’s hang out!

 

Marketing to normals

My wife and I held our annual holiday party last weekend for a few dozen close friends. As usual, it was awesome: Southern cocktails, homemade treats, a nice fire going, two dogs and a decked-out tree. Good times. Over some drinks, I took the opportunity to conduct a totally unscientific poll about something I was curious about – the mobile commerce behavior of our friends. Specifically, I wanted to know: do you actually buy stuff on your phone?

phoneThe reason I asked was because of a weird pattern I’d seen while trawling through the annual ecommerce reporting data from the Black Friday/Cyber Monday weekend. According to IBM, on Cyber Monday, roughly 1 in 10 online sales was on a smartphone, with an average order value of approximately $100. ($100!) Nor was this an outlier – similar figures were cited by Adobe Digital Index and comScore.

The idea that some people are not only actually shopping for stuff on their iPhones (the percentage of sales on Android devices is far lower), but also spending quite a bit of money on them, honestly mystifies me. I don’t understand the use case at all. Yet – the data is there, and I’m not one to argue with hard evidence. This paradox has gotten me thinking quite a bit about the ongoing fragmentation of paths to purchase, and what it means for 2014’s emerging marketing buzzword: customer journeys.

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