2PM - Letter 913: First-Party Balloon

Key Memo: There’s one balloon that can’t and won’t be shot down; we are far too reliant on it. [...] By the measure explored in this report, Amazon (and Apple) know more about its consumers than any domestic corporation, but Americans tend to trust Amazon enough to avoid revolt and public demonstration. And by the measure explored here, China knows more about Americans than any sovereign nation, perhaps including our our own. 

Editor's Note: noted for its relevance and because of the ongoing national conversation on data and national security, this essay was re-published in Newsweek. 

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Where NATSEC meets commerce

2PM Original / Newsweek Excerpt: At the core of China's commerce industry is its focus on the value of the data it collects. In short, China has been vigilant about the collection of first party data far longer than America. The South China Morning Post, an English-first publication that is part-owned by the Alibaba Group, began emphasizing first-party data collection in 2019.

Chinese eCommerce flourishes on U.S. soil

China / WSJ: Worsening U.S.-China relations are another potential risk. Even though selling cheap clothes and gadgets online normally wouldn’t catch the attention of politicians barring operational issues such as product-safety problems or fraud, it’s hard to say in the current political environment. 

eCommerce winners and losers in 2022

China / Marketplace Pulse: Shein and Shopify were the biggest e-commerce winners in 2022. Their sales are still significantly above pre-pandemic levels too. Etsy was strong, Walmart with Amazon did okay, and eBay struggled the most. U.S. e-commerce grew 8% in 2022 - the slowest growth in over a decade.

How Temu topped the U.S. app charts

China / Rest of The World: Temu, the U.S.-based subsidiary of PDD Holdings, which operates a sister site in China as Pinduoduo, has topped app store charts since its launch last September. In less than six months, the app has achieved 24 million downloads, thanks to aggressive advertising, cheap pricing, and addictive referral campaigns in the form of mobile games.

Meta's AI-driven advertising system splits marketers

Data / Financial Times: Meta's efforts to overhaul its advertising technology in response to Apple's privacy changes are leading to bumper results for brands but also fears from marketers they are being forced to relinquish too much control to the social media platform. The $440bn company has been pouring investment into applying machine learning and artificial intelligence to its advertising systems in recent months.

Etsy and eBay pin their turnaround hopes on advertising

Advertising / AdExchanger: The retail media boom isn't just for Amazon and brick-and-mortar chains. Online marketplaces are also investing heavily in ad platform businesses, albeit for different reasons. Etsy and eBay, two of the most prominent non-Amazon online marketplaces, both reported 2022 year-end earnings on Wednesday - and both framed advertising as a fast-growing revenue pillar with important implications for their respective core retail businesses.

Bored Ape creator Yuga Labs to launch Bitcoin NFTs

Web3 / Fortune: After dominating the market for NFTs on Ethereum, Yuga Labs is taking on the Bitcoin blockchain. The $4 billion company said it plans to launch a new collection of Bitcoin NFTs called TwelveFold, which is based on a 12×12 grid that the company describes as "a visual allegory for the cartography of data on the Bitcoin blockchain."

Updated For Feb 27: 793 brands covered. For the first time, two brands owned by the same founder have entered the top ten. We’ve cleaned up a number of errors published last week, apologies for that shortcoming. All categories of the list have been updated with major movement throughout the list. Newly ranked “top” brands include: BloomChic, Beis Travel, Petlab Co, Monos, Little Sleepies, Born Primitive, Papier, and Trinny London. We’ve updated the “previous” column to better illustrate positive (+) and negative (-) movement. A “0” means no movement at all.

The SPAC fad is ending in a pile of bankruptcies

eCommerce / Bloomberg: As the hype grew, more and more money piled in. Famous money managers, former politicians and celebrities lined up to start new blank-check vehicles. Over the course of 2020 and 2021, more than 850 SPACs raised roughly $245 billion to use in the hunt for deals. The quality of new offerings declined in a hurry. 

From the archives (June 2022): As the volume of SPAC formations increased over the previous two years, deals were always at risk of not following the curve. A SPAC has just a two-year time limit from the moment it successfully raises money from investors to find and complete an acquisition.

Want to go from direct-to-consumer to retail?

Platform / TechCrunch: Here’s how it works: Crstl has created an AI-driven network of trading partners and integrations and offers a no-code EDI workflow for businesses to quickly connect and begin transacting with the network. It also provides transparent pricing along with compliance, testing and certification, including generating compliant shipping labels and packing slips.

Target sees 'explosive' growth of private label

Bricks and Mortar / PYMNTS: Target has observed that its investments in private-label sweets keep customers coming back. On a call with analysts Tuesday (Feb. 28) discussing its Q4 financial results, the retailer observed that, in addition to seeing its third consecutive year of double-digit comparable sales increases in food and beverage, it also benefitted from high demand for novel, affordable indulgences.

Member Brief (🔐): Heavily influenced by the omni-channel evolution, retail media is entering its 2.0 phase. New marketplace entrants are gaining steam and retailers are re-prioritizing, shifting priorities towards clawing share away from Meta and Google. The arbitrage opportunity for platforms and brands is shifting into its second or third gear, depending on who you ask. I have taken the following position:

2023 is to retail media networks what 2011 was to Facebook advertising.

We are at the beginning of the arbitrage cycle. On February 22, Etsy and Ebay reported 2022 earnings and both highlighted their advertising businesses, framing it as a “fast-growing revenue pillar” according to AdExchanger’s James Hercher. Etsy launched its advertising platform in 2019. Called Etsy Ads, it allows sellers to create and display ads to Etsy shoppers. What’s clear now is that most every major marketplace will launch an advertising business, meaning the lines between media and commerce may be blurred for good. This presents a new era of arbitrage for the retailers and consumer goods willing to scale with the opportunity ahead.

A recent report by Wakefield Research featured a deep dive on how retail media networks will have to expand its reach while improving its specificity at scale. Key findings are below; the “how” RMNs will go about accomplishing this will be explained below.

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