There’s a funny paradox at the center of commerce. While we work in an age of unprecedented disruption, the fundamental architecture of the internet has not really changed since Google, Amazon and Meta shaped the digital world in their image. Today, much like two decades ago, the vast majority of online commerce happens when we type awkward phrases into rectangles and then add little images of products served up in tiny squares to clipart icons of shopping carts.
For commerce and brand leaders, we’re coming off a 10-15 year wrinkle in time where growth was an arbitrage game, a morass of optimizing keywords and pixels largely void of artistry. This arbitrage era was wildly lucrative, woefully boring and is mercifully coming to a close. Anyone who knows exactly what is coming next is a charlatan with something to sell you.
But we’re now on the precipice of an all-encompassing shift in how brands are both built and monetized on the internet. The Google SERP is anarchy, Amazon’s grand strategy has Temu Jr. vibes and Meta’s user base is in decline. Brian Morrissey-- always a master at tickling the ivories of vernacular-- calls this the twilight of the hegemon.
I call it Tabula Rasa.
Growth is now a blank slate.
This column is the first in a four-part series on the paradigm vibe shift in commerce caused by rising customer acquisition costs, with this edition diving deep on the changed social contract between brands and large tech companies. Future editions will explore the cultural ramifications of retail media’s rise, how commerce changes as Chinese firms learn to build true capital B brands, and whether AI will usher in a golden age of creativity or a rut of redundant brands.
Ending The Faustian Bargain
More than six years ago, Jessica Lessin of The Information penned a column called The End of Growth, reacting to several major platform shifts that, if not reversed, could end the ubiquitous glory days of the internet sector. The prophecy is finally coming true with drunk COVID economics behind us.
Commerce in the 2010s was the ultimate Faustian bargain with Facebook, Amazon and Google. For the computer scientists in the room, Faust’s Bargain is trading morals for morels; material gain at the expense of moral values.
The tripoly offered unprecedented growth opportunities for budding entrepreneurs and FORTUNE 500 enterprises alike… if you built your brand in their form factors. The “medium was the message,” as Future Commerce likes to say—and the medium of brand-building was sponsored squares and rectangles on three platforms.
In a purely utilitarian sense, this will be a tougher decade for commerce operators than the one that came before us. Without the massive tailwind created by a billion new humans coming online, growth will simply be much more expensive. But in a creative sense, the end of arbitrage makes our jobs truly fun again– there is no established playbook.
This is both liberating and existentially scary for the current generation of DTC and commerce growth leaders. Most of us were children when the last vestiges of the truly weird internet—where people wrote blogs from the perspective of a ficus plant—were swallowed up by the centralized web. We made our bones in this business by mastering the nuances of media buying into Filterworld, an increasingly commoditized skill.
This internet, by and large, makes no sense to us. We’re too old to “get” how a frumpy 26-year-old kid from North Carolina currently has a more powerful media brand than MTV, HBO, and Buzzfeed combined, and too young to have spent entire weekends in FUD forums. We’re going to have to learn both these things fast if we want to grow brands in this new world.
From Demand Creation to Demand Capture
During this year’s pinnacle of American capitalism, colloquially known as Prime Day, Amazon made two important, enduring tactical updates across its advertising ecosystem that serve as the perfect microcosm of the changing relationship between platforms and brands.
First, Amazon automatically added brand keyword targeting to sponsored brand campaigns in the runup to Prime. Then, during Prime Day, dynamic bid settings were tweaked so that ad spend could spike for sellers during a period when ROAS was ostensibly highest.
The net result here: more money for Amazon with gaudier performance numbers for brands that sell on the platform, albeit with huge questions around how ‘incremental’ any of the traffic is.
The cynical take here is that this is simple ‘day-two behavior,’ a form of late-platform-capitalism to boost Amazon’s margins that ultimately precedes the decline of digital empires. But I don’t think that’s entirely fair to what Amazon is doing here. I view this more as Amazon being explicitly clear on how it plans to provide value to its seller ecosystem.
Amazon, the proverbial search engine with a warehouse attached, has always essentially been a demand capture platform at its core. In a sense, Amazon’s function in American society is to make the current zeitgeist shoppable. But while you couldn’t ever truly create demand for a new category or product on Amazon, you could create demand for a specific Amazon native brand. If you doubt me here, realize that you’ve heard of Simple Modern, Hero Cosmetics and Anker. But if you’re Amazon, why wait for little upstart entities to become household names? Amazon has no interest in helping you “build a brand”, they want to extract maximum value from brand equity that has been built elsewhere.
Similarly, Facebook’s AI has also been bred for one sole purpose– to optimize conversion events for advertisers on the platform. With apologies to Matt Taibbi, Meta’s goal here is pretty simple. Advantage Shopping Campaigns is meant to be the vampire squid wrapped around commerce, relentlessly jamming its blood funnel into anything that smells like ROAS.
Zuckerberg isn’t even trying to be subtle about this, dropping this banger in a recent earnings call:
"Over the long term, advertisers will just be able to tell us a business objective and a budget, and we're going to go do the rest for them."
He’s not confessing, he’s bragging.
Perhaps realizing they flew too close to the sun, Meta pushed an update on August 14th designed to try and track incremental conversions and help brands that want to use the platform to optimize for goals beyond straight purchases. I expect this to mostly be a nothingburger as it doesn’t solve the fundamental problem at the heart of commerce—CPMs on Meta just cost too much to introduce a new brand to audiences there.
In marketing parlance, Facebook and Instagram ads are moving “down the funnel” to better monetize the demand created off the platform. In layman’s terms, Meta is going to get better and better at monetizing customers who were inches away from buying from you anyway at the expense of serendipitously introducing new brands to users.
This is a fundamental shift in the role the large tech platforms play in commerce—Native built a true brand from nothing off of mastery of Facebook ads and sold it for nine figures,all in the time it would have taken Proctor and Gamble to finish a Powerpoint deck about expansion into natural deodorant. But without meteoric user growth to subsidize awareness spending, Amazon, Meta and Google are no longer well equipped to do the hard work of creating the next Native or Simple Modern. Thus, they’ve primarily designed their algorithms to meticulously siphon off the easier money-converting shoppers who have already heard of your brand.
There will be some obvious short-term winners in this shift, namely entities that have an unfair distribution advantage and can rely on the platforms for strict demand capture. As an example, Amazon-centric creator-led brands with an approachable price point such as John Legend’s Loved 01 are gonna to blow up over the next couple of years as they are exactly what the machine is built to pump. For a former BCG consultant, John is doing alright for himself.
The Business of Monetizing Vibes
So what are those of us who don’t have 10 million Instagram followers and a perfect baritone with multi-octave range to do?
In her outstanding debut novel In This Economy?, 27 year-old economist Kyla Scanlon argues that “vibes” are essentially the pre-eminent macroeconomic indicator. Her argument is heretical to the conventional ways of economic thinking but astutely explains the weirdness that has followed the COVID boom.
It also should be required reading for commerce operators.
In its most basic form, Commerce (big-C) is the practice of monetizing vibes. This, my friends, is the business we’ve chosen. The era of platform dominance obfuscated this fundamental reality– much like economics has been corrupted by dogmatic worship of numbers, the culture of commerce was lost at the altar of almighty ROAS.
In some ways, the new commerce landscape is an uncharted new world. What the hell will buying an ad from Perplexity and SearchGPT look like? Do I launch my new hero product as an exclusive with a Substack or TikTok creator? How many retail media networks do I need to care about? How many of my customer experience queries do I try to automate with Siena or Decagon, companies that didn’t even exist two years ago?
In other ways, our business is simply reverting to the ethos of the early internet when weirdness reigned supreme and the business model for the web was basic affiliate marketing void of any sophisticated targeting parameters. There’s a beautiful irony in the fact that Reddit—an amalgamation of late 90s and early 2000s web forums—is a channel that commerce operators need to suddenly take seriously.
In an Aristotelian sense, there’s “excellence in permanence.”
Through it all, as Nike sewed what its obsession with myopic performance marketing reaped, the only defensible moat is brand. With the platforms no longer pumping out gaudy ROAS metrics, storytelling is once again the most en vogue skill. Welcome to the resurgence of the raconteur.
In his book Advertising for Skeptics, dubbed “a bounty of heretical, unpopular, and aberrant thoughts,” longtime Mad Man Bob Hofman offers the following advice.
"Our industry is drowning in math and starving for ideas. We need people who can dream shit up. We need impractical, illogical people. We have plenty of data. We need more of the opposite."
He was speaking about advertising; the same ethos is sorely needed across all commerce sectors.
It’s time to get weird again.
There’s a funny paradox at the center of commerce. While we work in an age of unprecedented disruption, the fundamental architecture of the internet has not really changed since Google, Amazon and Meta shaped the digital world in their image. Today, much like two decades ago, the vast majority of online commerce happens when we type awkward phrases into rectangles and then add little images of products served up in tiny squares to clipart icons of shopping carts.
For commerce and brand leaders, we’re coming off a 10-15 year wrinkle in time where growth was an arbitrage game, a morass of optimizing keywords and pixels largely void of artistry. This arbitrage era was wildly lucrative, woefully boring and is mercifully coming to a close. Anyone who knows exactly what is coming next is a charlatan with something to sell you.
But we’re now on the precipice of an all-encompassing shift in how brands are both built and monetized on the internet. The Google SERP is anarchy, Amazon’s grand strategy has Temu Jr. vibes and Meta’s user base is in decline. Brian Morrissey-- always a master at tickling the ivories of vernacular-- calls this the twilight of the hegemon.
I call it Tabula Rasa.
Growth is now a blank slate.
This column is the first in a four-part series on the paradigm vibe shift in commerce caused by rising customer acquisition costs, with this edition diving deep on the changed social contract between brands and large tech companies. Future editions will explore the cultural ramifications of retail media’s rise, how commerce changes as Chinese firms learn to build true capital B brands, and whether AI will usher in a golden age of creativity or a rut of redundant brands.
Ending The Faustian Bargain
More than six years ago, Jessica Lessin of The Information penned a column called The End of Growth, reacting to several major platform shifts that, if not reversed, could end the ubiquitous glory days of the internet sector. The prophecy is finally coming true with drunk COVID economics behind us.
Commerce in the 2010s was the ultimate Faustian bargain with Facebook, Amazon and Google. For the computer scientists in the room, Faust’s Bargain is trading morals for morels; material gain at the expense of moral values.
The tripoly offered unprecedented growth opportunities for budding entrepreneurs and FORTUNE 500 enterprises alike… if you built your brand in their form factors. The “medium was the message,” as Future Commerce likes to say—and the medium of brand-building was sponsored squares and rectangles on three platforms.
In a purely utilitarian sense, this will be a tougher decade for commerce operators than the one that came before us. Without the massive tailwind created by a billion new humans coming online, growth will simply be much more expensive. But in a creative sense, the end of arbitrage makes our jobs truly fun again– there is no established playbook.
This is both liberating and existentially scary for the current generation of DTC and commerce growth leaders. Most of us were children when the last vestiges of the truly weird internet—where people wrote blogs from the perspective of a ficus plant—were swallowed up by the centralized web. We made our bones in this business by mastering the nuances of media buying into Filterworld, an increasingly commoditized skill.
This internet, by and large, makes no sense to us. We’re too old to “get” how a frumpy 26-year-old kid from North Carolina currently has a more powerful media brand than MTV, HBO, and Buzzfeed combined, and too young to have spent entire weekends in FUD forums. We’re going to have to learn both these things fast if we want to grow brands in this new world.
From Demand Creation to Demand Capture
During this year’s pinnacle of American capitalism, colloquially known as Prime Day, Amazon made two important, enduring tactical updates across its advertising ecosystem that serve as the perfect microcosm of the changing relationship between platforms and brands.
First, Amazon automatically added brand keyword targeting to sponsored brand campaigns in the runup to Prime. Then, during Prime Day, dynamic bid settings were tweaked so that ad spend could spike for sellers during a period when ROAS was ostensibly highest.
The net result here: more money for Amazon with gaudier performance numbers for brands that sell on the platform, albeit with huge questions around how ‘incremental’ any of the traffic is.
The cynical take here is that this is simple ‘day-two behavior,’ a form of late-platform-capitalism to boost Amazon’s margins that ultimately precedes the decline of digital empires. But I don’t think that’s entirely fair to what Amazon is doing here. I view this more as Amazon being explicitly clear on how it plans to provide value to its seller ecosystem.
Amazon, the proverbial search engine with a warehouse attached, has always essentially been a demand capture platform at its core. In a sense, Amazon’s function in American society is to make the current zeitgeist shoppable. But while you couldn’t ever truly create demand for a new category or product on Amazon, you could create demand for a specific Amazon native brand. If you doubt me here, realize that you’ve heard of Simple Modern, Hero Cosmetics and Anker. But if you’re Amazon, why wait for little upstart entities to become household names? Amazon has no interest in helping you “build a brand”, they want to extract maximum value from brand equity that has been built elsewhere.
Similarly, Facebook’s AI has also been bred for one sole purpose– to optimize conversion events for advertisers on the platform. With apologies to Matt Taibbi, Meta’s goal here is pretty simple. Advantage Shopping Campaigns is meant to be the vampire squid wrapped around commerce, relentlessly jamming its blood funnel into anything that smells like ROAS.
Zuckerberg isn’t even trying to be subtle about this, dropping this banger in a recent earnings call:
"Over the long term, advertisers will just be able to tell us a business objective and a budget, and we're going to go do the rest for them."
He’s not confessing, he’s bragging.
Perhaps realizing they flew too close to the sun, Meta pushed an update on August 14th designed to try and track incremental conversions and help brands that want to use the platform to optimize for goals beyond straight purchases. I expect this to mostly be a nothingburger as it doesn’t solve the fundamental problem at the heart of commerce—CPMs on Meta just cost too much to introduce a new brand to audiences there.
In marketing parlance, Facebook and Instagram ads are moving “down the funnel” to better monetize the demand created off the platform. In layman’s terms, Meta is going to get better and better at monetizing customers who were inches away from buying from you anyway at the expense of serendipitously introducing new brands to users.
This is a fundamental shift in the role the large tech platforms play in commerce—Native built a true brand from nothing off of mastery of Facebook ads and sold it for nine figures,all in the time it would have taken Proctor and Gamble to finish a Powerpoint deck about expansion into natural deodorant. But without meteoric user growth to subsidize awareness spending, Amazon, Meta and Google are no longer well equipped to do the hard work of creating the next Native or Simple Modern. Thus, they’ve primarily designed their algorithms to meticulously siphon off the easier money-converting shoppers who have already heard of your brand.
There will be some obvious short-term winners in this shift, namely entities that have an unfair distribution advantage and can rely on the platforms for strict demand capture. As an example, Amazon-centric creator-led brands with an approachable price point such as John Legend’s Loved 01 are gonna to blow up over the next couple of years as they are exactly what the machine is built to pump. For a former BCG consultant, John is doing alright for himself.
The Business of Monetizing Vibes
So what are those of us who don’t have 10 million Instagram followers and a perfect baritone with multi-octave range to do?
In her outstanding debut novel In This Economy?, 27 year-old economist Kyla Scanlon argues that “vibes” are essentially the pre-eminent macroeconomic indicator. Her argument is heretical to the conventional ways of economic thinking but astutely explains the weirdness that has followed the COVID boom.
It also should be required reading for commerce operators.
In its most basic form, Commerce (big-C) is the practice of monetizing vibes. This, my friends, is the business we’ve chosen. The era of platform dominance obfuscated this fundamental reality– much like economics has been corrupted by dogmatic worship of numbers, the culture of commerce was lost at the altar of almighty ROAS.
In some ways, the new commerce landscape is an uncharted new world. What the hell will buying an ad from Perplexity and SearchGPT look like? Do I launch my new hero product as an exclusive with a Substack or TikTok creator? How many retail media networks do I need to care about? How many of my customer experience queries do I try to automate with Siena or Decagon, companies that didn’t even exist two years ago?
In other ways, our business is simply reverting to the ethos of the early internet when weirdness reigned supreme and the business model for the web was basic affiliate marketing void of any sophisticated targeting parameters. There’s a beautiful irony in the fact that Reddit—an amalgamation of late 90s and early 2000s web forums—is a channel that commerce operators need to suddenly take seriously.
In an Aristotelian sense, there’s “excellence in permanence.”
Through it all, as Nike sewed what its obsession with myopic performance marketing reaped, the only defensible moat is brand. With the platforms no longer pumping out gaudy ROAS metrics, storytelling is once again the most en vogue skill. Welcome to the resurgence of the raconteur.
In his book Advertising for Skeptics, dubbed “a bounty of heretical, unpopular, and aberrant thoughts,” longtime Mad Man Bob Hofman offers the following advice.
"Our industry is drowning in math and starving for ideas. We need people who can dream shit up. We need impractical, illogical people. We have plenty of data. We need more of the opposite."
He was speaking about advertising; the same ethos is sorely needed across all commerce sectors.
It’s time to get weird again.
There’s a funny paradox at the center of commerce. While we work in an age of unprecedented disruption, the fundamental architecture of the internet has not really changed since Google, Amazon and Meta shaped the digital world in their image. Today, much like two decades ago, the vast majority of online commerce happens when we type awkward phrases into rectangles and then add little images of products served up in tiny squares to clipart icons of shopping carts.
For commerce and brand leaders, we’re coming off a 10-15 year wrinkle in time where growth was an arbitrage game, a morass of optimizing keywords and pixels largely void of artistry. This arbitrage era was wildly lucrative, woefully boring and is mercifully coming to a close. Anyone who knows exactly what is coming next is a charlatan with something to sell you.
But we’re now on the precipice of an all-encompassing shift in how brands are both built and monetized on the internet. The Google SERP is anarchy, Amazon’s grand strategy has Temu Jr. vibes and Meta’s user base is in decline. Brian Morrissey-- always a master at tickling the ivories of vernacular-- calls this the twilight of the hegemon.
I call it Tabula Rasa.
Growth is now a blank slate.
This column is the first in a four-part series on the paradigm vibe shift in commerce caused by rising customer acquisition costs, with this edition diving deep on the changed social contract between brands and large tech companies. Future editions will explore the cultural ramifications of retail media’s rise, how commerce changes as Chinese firms learn to build true capital B brands, and whether AI will usher in a golden age of creativity or a rut of redundant brands.
Ending The Faustian Bargain
More than six years ago, Jessica Lessin of The Information penned a column called The End of Growth, reacting to several major platform shifts that, if not reversed, could end the ubiquitous glory days of the internet sector. The prophecy is finally coming true with drunk COVID economics behind us.
Commerce in the 2010s was the ultimate Faustian bargain with Facebook, Amazon and Google. For the computer scientists in the room, Faust’s Bargain is trading morals for morels; material gain at the expense of moral values.
The tripoly offered unprecedented growth opportunities for budding entrepreneurs and FORTUNE 500 enterprises alike… if you built your brand in their form factors. The “medium was the message,” as Future Commerce likes to say—and the medium of brand-building was sponsored squares and rectangles on three platforms.
In a purely utilitarian sense, this will be a tougher decade for commerce operators than the one that came before us. Without the massive tailwind created by a billion new humans coming online, growth will simply be much more expensive. But in a creative sense, the end of arbitrage makes our jobs truly fun again– there is no established playbook.
This is both liberating and existentially scary for the current generation of DTC and commerce growth leaders. Most of us were children when the last vestiges of the truly weird internet—where people wrote blogs from the perspective of a ficus plant—were swallowed up by the centralized web. We made our bones in this business by mastering the nuances of media buying into Filterworld, an increasingly commoditized skill.
This internet, by and large, makes no sense to us. We’re too old to “get” how a frumpy 26-year-old kid from North Carolina currently has a more powerful media brand than MTV, HBO, and Buzzfeed combined, and too young to have spent entire weekends in FUD forums. We’re going to have to learn both these things fast if we want to grow brands in this new world.
From Demand Creation to Demand Capture
During this year’s pinnacle of American capitalism, colloquially known as Prime Day, Amazon made two important, enduring tactical updates across its advertising ecosystem that serve as the perfect microcosm of the changing relationship between platforms and brands.
First, Amazon automatically added brand keyword targeting to sponsored brand campaigns in the runup to Prime. Then, during Prime Day, dynamic bid settings were tweaked so that ad spend could spike for sellers during a period when ROAS was ostensibly highest.
The net result here: more money for Amazon with gaudier performance numbers for brands that sell on the platform, albeit with huge questions around how ‘incremental’ any of the traffic is.
The cynical take here is that this is simple ‘day-two behavior,’ a form of late-platform-capitalism to boost Amazon’s margins that ultimately precedes the decline of digital empires. But I don’t think that’s entirely fair to what Amazon is doing here. I view this more as Amazon being explicitly clear on how it plans to provide value to its seller ecosystem.
Amazon, the proverbial search engine with a warehouse attached, has always essentially been a demand capture platform at its core. In a sense, Amazon’s function in American society is to make the current zeitgeist shoppable. But while you couldn’t ever truly create demand for a new category or product on Amazon, you could create demand for a specific Amazon native brand. If you doubt me here, realize that you’ve heard of Simple Modern, Hero Cosmetics and Anker. But if you’re Amazon, why wait for little upstart entities to become household names? Amazon has no interest in helping you “build a brand”, they want to extract maximum value from brand equity that has been built elsewhere.
Similarly, Facebook’s AI has also been bred for one sole purpose– to optimize conversion events for advertisers on the platform. With apologies to Matt Taibbi, Meta’s goal here is pretty simple. Advantage Shopping Campaigns is meant to be the vampire squid wrapped around commerce, relentlessly jamming its blood funnel into anything that smells like ROAS.
Zuckerberg isn’t even trying to be subtle about this, dropping this banger in a recent earnings call:
"Over the long term, advertisers will just be able to tell us a business objective and a budget, and we're going to go do the rest for them."
He’s not confessing, he’s bragging.
Perhaps realizing they flew too close to the sun, Meta pushed an update on August 14th designed to try and track incremental conversions and help brands that want to use the platform to optimize for goals beyond straight purchases. I expect this to mostly be a nothingburger as it doesn’t solve the fundamental problem at the heart of commerce—CPMs on Meta just cost too much to introduce a new brand to audiences there.
In marketing parlance, Facebook and Instagram ads are moving “down the funnel” to better monetize the demand created off the platform. In layman’s terms, Meta is going to get better and better at monetizing customers who were inches away from buying from you anyway at the expense of serendipitously introducing new brands to users.
This is a fundamental shift in the role the large tech platforms play in commerce—Native built a true brand from nothing off of mastery of Facebook ads and sold it for nine figures,all in the time it would have taken Proctor and Gamble to finish a Powerpoint deck about expansion into natural deodorant. But without meteoric user growth to subsidize awareness spending, Amazon, Meta and Google are no longer well equipped to do the hard work of creating the next Native or Simple Modern. Thus, they’ve primarily designed their algorithms to meticulously siphon off the easier money-converting shoppers who have already heard of your brand.
There will be some obvious short-term winners in this shift, namely entities that have an unfair distribution advantage and can rely on the platforms for strict demand capture. As an example, Amazon-centric creator-led brands with an approachable price point such as John Legend’s Loved 01 are gonna to blow up over the next couple of years as they are exactly what the machine is built to pump. For a former BCG consultant, John is doing alright for himself.
The Business of Monetizing Vibes
So what are those of us who don’t have 10 million Instagram followers and a perfect baritone with multi-octave range to do?
In her outstanding debut novel In This Economy?, 27 year-old economist Kyla Scanlon argues that “vibes” are essentially the pre-eminent macroeconomic indicator. Her argument is heretical to the conventional ways of economic thinking but astutely explains the weirdness that has followed the COVID boom.
It also should be required reading for commerce operators.
In its most basic form, Commerce (big-C) is the practice of monetizing vibes. This, my friends, is the business we’ve chosen. The era of platform dominance obfuscated this fundamental reality– much like economics has been corrupted by dogmatic worship of numbers, the culture of commerce was lost at the altar of almighty ROAS.
In some ways, the new commerce landscape is an uncharted new world. What the hell will buying an ad from Perplexity and SearchGPT look like? Do I launch my new hero product as an exclusive with a Substack or TikTok creator? How many retail media networks do I need to care about? How many of my customer experience queries do I try to automate with Siena or Decagon, companies that didn’t even exist two years ago?
In other ways, our business is simply reverting to the ethos of the early internet when weirdness reigned supreme and the business model for the web was basic affiliate marketing void of any sophisticated targeting parameters. There’s a beautiful irony in the fact that Reddit—an amalgamation of late 90s and early 2000s web forums—is a channel that commerce operators need to suddenly take seriously.
In an Aristotelian sense, there’s “excellence in permanence.”
Through it all, as Nike sewed what its obsession with myopic performance marketing reaped, the only defensible moat is brand. With the platforms no longer pumping out gaudy ROAS metrics, storytelling is once again the most en vogue skill. Welcome to the resurgence of the raconteur.
In his book Advertising for Skeptics, dubbed “a bounty of heretical, unpopular, and aberrant thoughts,” longtime Mad Man Bob Hofman offers the following advice.
"Our industry is drowning in math and starving for ideas. We need people who can dream shit up. We need impractical, illogical people. We have plenty of data. We need more of the opposite."
He was speaking about advertising; the same ethos is sorely needed across all commerce sectors.
It’s time to get weird again.
There’s a funny paradox at the center of commerce. While we work in an age of unprecedented disruption, the fundamental architecture of the internet has not really changed since Google, Amazon and Meta shaped the digital world in their image. Today, much like two decades ago, the vast majority of online commerce happens when we type awkward phrases into rectangles and then add little images of products served up in tiny squares to clipart icons of shopping carts.
For commerce and brand leaders, we’re coming off a 10-15 year wrinkle in time where growth was an arbitrage game, a morass of optimizing keywords and pixels largely void of artistry. This arbitrage era was wildly lucrative, woefully boring and is mercifully coming to a close. Anyone who knows exactly what is coming next is a charlatan with something to sell you.
But we’re now on the precipice of an all-encompassing shift in how brands are both built and monetized on the internet. The Google SERP is anarchy, Amazon’s grand strategy has Temu Jr. vibes and Meta’s user base is in decline. Brian Morrissey-- always a master at tickling the ivories of vernacular-- calls this the twilight of the hegemon.
I call it Tabula Rasa.
Growth is now a blank slate.
This column is the first in a four-part series on the paradigm vibe shift in commerce caused by rising customer acquisition costs, with this edition diving deep on the changed social contract between brands and large tech companies. Future editions will explore the cultural ramifications of retail media’s rise, how commerce changes as Chinese firms learn to build true capital B brands, and whether AI will usher in a golden age of creativity or a rut of redundant brands.
Ending The Faustian Bargain
More than six years ago, Jessica Lessin of The Information penned a column called The End of Growth, reacting to several major platform shifts that, if not reversed, could end the ubiquitous glory days of the internet sector. The prophecy is finally coming true with drunk COVID economics behind us.
Commerce in the 2010s was the ultimate Faustian bargain with Facebook, Amazon and Google. For the computer scientists in the room, Faust’s Bargain is trading morals for morels; material gain at the expense of moral values.
The tripoly offered unprecedented growth opportunities for budding entrepreneurs and FORTUNE 500 enterprises alike… if you built your brand in their form factors. The “medium was the message,” as Future Commerce likes to say—and the medium of brand-building was sponsored squares and rectangles on three platforms.
In a purely utilitarian sense, this will be a tougher decade for commerce operators than the one that came before us. Without the massive tailwind created by a billion new humans coming online, growth will simply be much more expensive. But in a creative sense, the end of arbitrage makes our jobs truly fun again– there is no established playbook.
This is both liberating and existentially scary for the current generation of DTC and commerce growth leaders. Most of us were children when the last vestiges of the truly weird internet—where people wrote blogs from the perspective of a ficus plant—were swallowed up by the centralized web. We made our bones in this business by mastering the nuances of media buying into Filterworld, an increasingly commoditized skill.
This internet, by and large, makes no sense to us. We’re too old to “get” how a frumpy 26-year-old kid from North Carolina currently has a more powerful media brand than MTV, HBO, and Buzzfeed combined, and too young to have spent entire weekends in FUD forums. We’re going to have to learn both these things fast if we want to grow brands in this new world.
From Demand Creation to Demand Capture
During this year’s pinnacle of American capitalism, colloquially known as Prime Day, Amazon made two important, enduring tactical updates across its advertising ecosystem that serve as the perfect microcosm of the changing relationship between platforms and brands.
First, Amazon automatically added brand keyword targeting to sponsored brand campaigns in the runup to Prime. Then, during Prime Day, dynamic bid settings were tweaked so that ad spend could spike for sellers during a period when ROAS was ostensibly highest.
The net result here: more money for Amazon with gaudier performance numbers for brands that sell on the platform, albeit with huge questions around how ‘incremental’ any of the traffic is.
The cynical take here is that this is simple ‘day-two behavior,’ a form of late-platform-capitalism to boost Amazon’s margins that ultimately precedes the decline of digital empires. But I don’t think that’s entirely fair to what Amazon is doing here. I view this more as Amazon being explicitly clear on how it plans to provide value to its seller ecosystem.
Amazon, the proverbial search engine with a warehouse attached, has always essentially been a demand capture platform at its core. In a sense, Amazon’s function in American society is to make the current zeitgeist shoppable. But while you couldn’t ever truly create demand for a new category or product on Amazon, you could create demand for a specific Amazon native brand. If you doubt me here, realize that you’ve heard of Simple Modern, Hero Cosmetics and Anker. But if you’re Amazon, why wait for little upstart entities to become household names? Amazon has no interest in helping you “build a brand”, they want to extract maximum value from brand equity that has been built elsewhere.
Similarly, Facebook’s AI has also been bred for one sole purpose– to optimize conversion events for advertisers on the platform. With apologies to Matt Taibbi, Meta’s goal here is pretty simple. Advantage Shopping Campaigns is meant to be the vampire squid wrapped around commerce, relentlessly jamming its blood funnel into anything that smells like ROAS.
Zuckerberg isn’t even trying to be subtle about this, dropping this banger in a recent earnings call:
"Over the long term, advertisers will just be able to tell us a business objective and a budget, and we're going to go do the rest for them."
He’s not confessing, he’s bragging.
Perhaps realizing they flew too close to the sun, Meta pushed an update on August 14th designed to try and track incremental conversions and help brands that want to use the platform to optimize for goals beyond straight purchases. I expect this to mostly be a nothingburger as it doesn’t solve the fundamental problem at the heart of commerce—CPMs on Meta just cost too much to introduce a new brand to audiences there.
In marketing parlance, Facebook and Instagram ads are moving “down the funnel” to better monetize the demand created off the platform. In layman’s terms, Meta is going to get better and better at monetizing customers who were inches away from buying from you anyway at the expense of serendipitously introducing new brands to users.
This is a fundamental shift in the role the large tech platforms play in commerce—Native built a true brand from nothing off of mastery of Facebook ads and sold it for nine figures,all in the time it would have taken Proctor and Gamble to finish a Powerpoint deck about expansion into natural deodorant. But without meteoric user growth to subsidize awareness spending, Amazon, Meta and Google are no longer well equipped to do the hard work of creating the next Native or Simple Modern. Thus, they’ve primarily designed their algorithms to meticulously siphon off the easier money-converting shoppers who have already heard of your brand.
There will be some obvious short-term winners in this shift, namely entities that have an unfair distribution advantage and can rely on the platforms for strict demand capture. As an example, Amazon-centric creator-led brands with an approachable price point such as John Legend’s Loved 01 are gonna to blow up over the next couple of years as they are exactly what the machine is built to pump. For a former BCG consultant, John is doing alright for himself.
The Business of Monetizing Vibes
So what are those of us who don’t have 10 million Instagram followers and a perfect baritone with multi-octave range to do?
In her outstanding debut novel In This Economy?, 27 year-old economist Kyla Scanlon argues that “vibes” are essentially the pre-eminent macroeconomic indicator. Her argument is heretical to the conventional ways of economic thinking but astutely explains the weirdness that has followed the COVID boom.
It also should be required reading for commerce operators.
In its most basic form, Commerce (big-C) is the practice of monetizing vibes. This, my friends, is the business we’ve chosen. The era of platform dominance obfuscated this fundamental reality– much like economics has been corrupted by dogmatic worship of numbers, the culture of commerce was lost at the altar of almighty ROAS.
In some ways, the new commerce landscape is an uncharted new world. What the hell will buying an ad from Perplexity and SearchGPT look like? Do I launch my new hero product as an exclusive with a Substack or TikTok creator? How many retail media networks do I need to care about? How many of my customer experience queries do I try to automate with Siena or Decagon, companies that didn’t even exist two years ago?
In other ways, our business is simply reverting to the ethos of the early internet when weirdness reigned supreme and the business model for the web was basic affiliate marketing void of any sophisticated targeting parameters. There’s a beautiful irony in the fact that Reddit—an amalgamation of late 90s and early 2000s web forums—is a channel that commerce operators need to suddenly take seriously.
In an Aristotelian sense, there’s “excellence in permanence.”
Through it all, as Nike sewed what its obsession with myopic performance marketing reaped, the only defensible moat is brand. With the platforms no longer pumping out gaudy ROAS metrics, storytelling is once again the most en vogue skill. Welcome to the resurgence of the raconteur.
In his book Advertising for Skeptics, dubbed “a bounty of heretical, unpopular, and aberrant thoughts,” longtime Mad Man Bob Hofman offers the following advice.
"Our industry is drowning in math and starving for ideas. We need people who can dream shit up. We need impractical, illogical people. We have plenty of data. We need more of the opposite."
He was speaking about advertising; the same ethos is sorely needed across all commerce sectors.
It’s time to get weird again.
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