Less BS, More Facts, Some Opinions
On paper, the OpenAP consortium makes perfect sense: TV networks banded together to stave off growing competition from the walled gardens. In reality, it’s a bit more complicated. Although OpenAP still counts three powerhouse publishers among its ranks – Viacom, NBCU and Fox – a founding member, WarnerMedia, left the group in April to compete… Continue reading »
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Don’t let the relaxed environment and beautiful setting of La Croisette fool you – there have been countless discussions and in-depth debates taking place at Cannes Lions this year, at a time when success is all about collaboration and convergence.
From panel discussions to beachside conversations, Cannes has seen a strong focus on accelerating the addressability of TV advertising to meet brand needs and a firm commitment from different participants across the entire ecosystem to play their part in bringing addressable to fruition.
Emphasis has also been placed on the importance of attribution, how to make measurement meaningful and solving issues around the fragmentation of audiences, inventory and delivery to create truly data-driven TV.
One of the major themes of the event has been recognizing the contribution of women to the industry. Our female panel, ‘Women who are boss,’ revealed the untold stories of women driving our industry forward and made a refreshing change from the all too familiar all-male line-ups so often seen at conferences. It’s vital that the female voice be heard, that women are able to empower and support one another and that they are encouraged to follow their own path with purpose and passion.
One thing is for certain – in this unique and stimulating environment, the advertising industry’s most pressing issues have been addressed. Overcoming industry challenges is dependent on the power of partnerships and collaboration.
The post Video at Cannes: Collaboration, addressability and women leading the way appeared first on Digiday.
Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here. Watch And Learn Facebook really wants those TV ad dollars – but it’s going to take more than simply showing up at the upfronts. The first thing Facebook needs to do is prove that its video service, Watch, is a hit with audiences. Facebook… Continue reading »
The post Quibi Already Has $100 Million In 2020 Ad Commitments; FTC Investigates YouTube Over Child Privacy appeared first on AdExchanger.
In the ad world, some of the biggest entertainers bring a sheen of cool to the many tedious conferences that happen year-round.
“My personal favorite was when Flo Rida played for AOL,” Matt Barash, head of strategy and business development at AdColony recalls. “He had a bunch of middle-aged guys in khakis and sweater vests singing along with every word. It doesn’t get any more cliché than that.”
But for anyone making the conference rounds, there are a select few “ad-famous” celebs who are seemingly the favorites of the ad tech, agency and brand cohort. (Ask any ad professional and they’ll say they’ve seen Snoop Dogg perform at every tech event.)
Below we recall some of the biggest acts that landed at advertising’s events.
Lady Gaga
Following the announcement of a partnership between Lady Gaga and Intel, the “Shallow” singer entertained the tech crowd at MediaLink’s after-party at CES in Las Vegas in 2016. It wasn’t the first time she made the rounds: she previously unveiled her “Polaroid ‘Grey Label’” line at the conference in 2011.
Rick Ross
Last year, CES, which seems to be a tad removed from who’s currently trending in hip-hop, recruited Rick Ross for a performance at The LIGHT nightclub. Sure, they could have gone with Drake, Travis Scott or any other rapper that’s been relevant the past few years, but they chose Ross just in time for him to announce a year-long residency in town. Coincidence? We think not.
The Killers
This year, The Killers seem to be making the advertising event rounds. Most recently, the “Wonderful Wonderful” outfit headlined the 2019 Adobe Summit BASH in Las Vegas playing hits including the thrilling “When We Were Young,” but they also stopped by Cannes Lions last year to headline one of the after-parties.
Lil Wayne
At this year’s CES, Pandora brought out Weezy as its surprise guest in January. For his set, the rapper put on a performance that featured songs like “Mr. Carter,” “Uproar” and “Got Money.”
Diddy
Alongside the announcement of the launch of his music cable platform Revolt TV, Diddy performed alongside Nas at Gotha Night Club during Cannes Lions in 2013.
Snoop Dogg
From his cannabis ventures to partnering with Adidas, Snoop Dogg has constantly been increasing his presence in the tech space; and it’s made him perhaps the most ad-famous celeb out there. After all, the hip-hop legend is now known for being at practically every event (i.e. Pandora’s 2017 CES kick-off party, YouTube’s Brandcast event, the Upfronts, Cannes several times, Bud Light’s Whatever, USA Festival, etc.)
The Chainsmokers
With The Chainsmokers’ rise in the EDM circuit, it wasn’t a surprise that they had memorable performances for iHeartMedia at CES in 2017 and again in January of this year where they appeared with Sony to discuss headsets.
Drake
With ad dollars abound, Adult Swim’s upfront party in 2017 was one not to be missed with Drake headlining the annual concert at Terminal 5. Plus, he enlisted surprise guests like Playboy Carti and Migos.
The post ‘My personal favorite was when Flo Rida played for AOL’: Inside Advertising’s Favorite Live Performers appeared first on Digiday.
Cannes is in the home stretch. Expect to hear scratchy voices, glassy eyes and possible a walking boot or three. So far what’s been notable this week is how the conference overall, at least in public, has decided to focus on big issues of diversity, inclusivity, even climate change. It’s clear that the Cannes Lions organizers are trying to course-correct over the perception that Cannes had become, in the words of Martin Sorrell two years back, “too brash.” Of course, the high-minded and sober talk goes away when the sun goes down and the Carlton Terrace stars heaving with partiers. Can’t be all homework. — Brian Morrissey
Some highlights:
The unanswered questions of Cannes
Yes, Cannes is about the meetings, the quiet conversations and maybe even a partnership that might spring out of them. What follows are tidbits from conversations with media and ad executives the first half of the week.
Where are the interesting digital media companies?
Between course at the Digiday Media Leaders Dinner, one top exec asked a simple question: What’s the most exciting digital media company out there? Others at the table hemmed and hawed. One noted that the difficulty of naming one is indicative of the pivot to reality publishing has gone through. A couple years ago, that question would have been met with talk of Vox, Refinery29 or BuzzFeed. Nowadays, those companies are struggling to meet expectations.
Will Quibi pan out?
Jeffrey Katzenberg and Meg Whitman came in hot on Wednesday, boasting $100 million in upfront ad commitments by brands such as Procter & Gamble and Walmart. But along the Croisette, people aren’t as confident about Quibi’s potential to succeed. Quibi certainly has a lot going for it: big stars, seasoned executives and a ton of investor (and now advertiser) money. Media and advertising industry insiders, however, can only shrug — at best — on whether there is an actual consumer appetite for a mobile-only video subscription service.
Why must marketers make up terrible words?
For those who appreciate the English language and precision, Cannes is not the place for you. So far this week, we have come across everything from “storydoing” to “design feeling” to “woke washing” to “storyliving.” Every industry has its jargon, but marketing sure does seem to have more than most. One tech exec noted that the empty talk and meaningless buzzwords would be so alien to product managers at a tech company to be incomprehensible. That’s a challenge not just for Cannes but the marketing community as a whole as it tries to elevate marketing within organizations that are often skeptical of marketing as just another cost center to be optimized.
Will marketers actually move dollars away from Facebook and Google?
The TV industry has shown up to Cannes in a big way; as one broadcasting executive said, it’s time for “the Empire to strike back.” But for all the talk about how TV offers premium content and more brand-safe environments than social platforms, most marketing executives — even those that shared panel space with TV executives on the beach — were hesitant to boldly blow off the platform giants. Everyone agreed that Facebook, Google and others need to improve their products, and responsibility falls on clients that control the budgets to pressure these platforms. But no one is reaching for the nuclear option just yet.
Where is the creativity?
Cannes Lions proudly bills itself as a “festival of creativity.” This was a designation used to ellide the face that Cannes saw an influx of publishers and tech platforms that changed the conversation from the roots of Cannes in advertising. But an enduring question on the minds of many publishers and marketers: Where is the creativity? One publishing exec to told me that he is very high on Snapchat, not because of big ad shares, but it is at least innovating and rolling out truly creative features. By the same token, a veteran ad agency exec told me of the experience of perusing the work of the Young Lions with the thought it would make him more hopeful for the agency business. He came away disappointed, seeing a lot of vanilla work that was either impossible to actually do — Cannes is notorious for juiced-up case studies that stretch the bounds of reality — or completely overshot the mark by claiming to be about changing the world. Sometimes simpler is better.
Do marketers care about brand safety?
P&G’s Marc Pritchard is everywhere, and he often uses industry gatherings to make clear the priorities of the ad-spending giant. It was notable that Pritchard gave high marks to efforts made by Google and Facebook for the work they’ve done to clean up their platforms. There was a lot of PR around a new industry group dedicated to “responsible media.” Much of the discussion around brand safety has been superficial, however. More jaded publishing execs say don’t expect much to change soon in spending patterns. Google and Facebook have mostly skipped the discussions entirely to push messages around inclusivity and creativity.
Pinterest’s Andréa Mailard on defining Pinterest
All marketing is about solving problems for companies. For Pinterest, the key marketing challenge is getting people to understand a platform that isn’t quite like its tech peers. Andréa Mailard, Pinterest’s first-ever CMO, joined the Digiday Podcast, Cannes Edition. The spin Pinterest has for marketers and consumers: It’s all about “inspiration” and getting people to do things in real life, not stare at a screen.
Here’s a highlight:
Our final two podcasts of the week will feature Twitter vp of global client solutions Sarah Personette and The New York Times head of advertising Sebastian Tomich.
Receipt watch
The prices around @Cannes_Lions – this is a regular brasserie
pic.twitter.com/vna3IQR56P
— Alex Rahaman (@alexrahaman) June 19, 2019
Nowhere in Cannes is safe.
Also, forget about dry cleaning
Newcomer tip
Don’t turn down a chance to visit Antibes or a villa in the hills above Cannes. You might think you don’t want to waste a half hour in an Uber, but it’s well worth the time — and worth the peace that exists outside the madness of Cannes.
What to do
The Wall Street Journal is hosting a conversation with Jeffrey Katzenberg, founder of Quibi, which is using Cannes as its coming-out party. Head to the Journal House by all the yachts in the harbor. 9am.
If you haven’t heard enough of P&G’s ubiquitous marketing chief Marc Pritchard, he will be at Wake Up with The Economist at the Cannes Lions beach. He’ll be joined by the CMOs of Taco Bell and Lego. Expect a lot of brand purpose talk. 10:30am.
Make it a doubleheader. You can go directly to the WSJ House to hear Pritchard again, this time in discussion about “maintaining brand purpose in today’s hostile social media environment.” The name of the discussion alone says a lot about the direction it will go. 11:30am.
The Digiday Making Marketing Podcast is at Twitter Beach at 1pm. Come by. 1pm.
Facebook COO Sheryl Sandberg will speak about equality in advertising at Facebook Beach. 2pm.
Nightcap
6:30pm: The Wall Street Journal is having DJ Mark Ronson at The Journal House, located among all the yachts in the harbor.
7pm: Live Nation has a party and concert at a private villa. Rumors are that it’s going to be either John Legend or Sting performing. Sneak into a shuttle if you can.
9pm: The New York Times is hosting a sunset BBQ on the rooftop of the Martinez.
The post Cannes Briefing: The unanswered questions of Cannes appeared first on Digiday.
Product launches are high-risk for any CPG business, but particularly on social media where months of research and development can be wasted by the wrong promoted post. But that’s not to say it’s impossible.
Kellogg’s believes it has hit on the right formula for using customer feedback on social platforms to inform its product road map and marketing. Seven years ago customer feedback on Twitter was used purely for word of mouth marketing for product launches, whereas now tweets from around the same time are being used as promoted posts.
For the launch of the white chocolate variant of its Coco Pops brand earlier this month, the advertiser decided it didn’t need thousands of website visitors, a relationship with the editors at national newspapers or even an email list to get the product in front of its target audience. All it needed was a tweet from 2016.
To reignite interest in the tweet, which was from someone requesting a white-chocolate version of its popular cereal product, Kellogg’s put some paid social budget behind it so that it resurfaced in more Twitter feeds.
That was the first move made to tease the launch. After the first day, Kellogg’s added the more typical marketing bells and whistles it draws on for product launches: influencers, ads and eventually, PR. “We wanted to have consumers talking about ‘why is Kellogg’s promoting a tweet from 2016 calling out white chocolate Coco Pops and promoting it? Does this mean they’re going to launch it?’” said Amanjit Heer, digital moderator at Kellogg’s.
On the same day as the promoted tweet, Heer retweeted other posts on Twitter that had mentioned the idea of white chocolate Coco Pops, some of which went as far back as 2012. Heer’s retweeting spree became so big that some people asked whether it meant the tease was real, said Heer.
The promoted tweet generated over 16,000 retweets, likes and responses on Twitter since the promoted post ran on June 14, according to Heer. A similar post was placed on Instagram, without the media support, and it was shared, liked and responded to over 2,900 times. Usually, Kellogg’s posts on Instagram get around 200 interactions. The post was also shared via direct messages 3,300 times five days after it ran, said Heer.
The hype also had an inadvertent halo effect on another Kellogg’s brand: Rice Krispies. People debated whether the white chocolate Coco-Pops would be Rice Krispies in disguise due to how similar the two cereals look. It got to a point where Rice Krispies trended on Twitter, said Heer.
Like other advertisers, Kellogg’s is reassessing the type of influencer it works with. Larger social media stars won’t always be the starting point for influencer campaigns at the brand now that reach isn’t the sole purpose of those investments. “We used a different type of influencer you could say, not your typical Instagrammer or someone with thousands of followers, to tease the launch last week,” she added.
Kellogg’s isn’t alone in turning people’s tweets into promoted posts. Carlsberg made a similar move earlier this year when it promoted posts that roasted its own beer in an attempt to subvert perceptions of the brand. The move was in part inspired by KFC’s campaign last November when it promoted tweets that dissed its own fries to promote their replacement.
“Social media intelligence is still underused when it comes to informing brands’ product development,” said Jenny Barthe, strategy director at We Are Social. “The most effective product launches get the influencer and their communities involved early on in product development.”
Launching a product on social media was an easier task six years ago. Social media is now far more cluttered, and running a predominantly organic campaign like this is almost unthinkable, which is why few CPG advertisers attempt it.
Future launches from Kellogg’s could follow a similar template on social media. Aside from being the advertiser’s biggest product launch on social media to date in the U.K. and Ireland, the campaign has also become a guide for how the brand brings its PR and social teams together, particularly when it comes to using insights from social media. Kellogg’s marketers were able to mine hundreds of tweets from people over the years in order to shape the comms plan for the launch.
Twitter and Instagram drove the bulk of the organic and promoted reach for the campaign, not Facebook. Given how hard it is for brands to get organic reach on the social network since a big change to its algorithm reduced the amount of branded content users see, it made more sense to reach a specific segment of the Coco Pops audience on Facebook with targeted ads. “We also wanted to explore promoting consumer Tweets on our channel and therefore invested some paid media on Twitter, which was received pretty well considering it’s the first time we’ve done this,” said Heer.
The post Inside Kellogg’s social-driven strategy to launch new products appeared first on Digiday.
One of the biggest headaches for subscriptions publishers is the underlying fear of the churn spiral. Over-the-top streaming subscriptions services share those same challenges, but deal with them in a different manner.
OTT content services are typically more vulnerable to regular churn than traditional news or magazine publishers because of seasonal viewing cycles for popular series or sports seasons. Relatively low-cost monthly contracts, ample choice in services, plus seasonal viewing fluctuations mean that OTT media services regard churn as par for the course of providing a more flexible service to the annual subscriptions of traditional pay TV operators.
OTT services like Sky’s Now TV, Netflix, Amazon, as well as more niche streaming services, mostly have rolling monthly contracts rather than the more restrictive annual payment terms of pay-TV companies. They also often cost under £10 ($12.64) a month. That means they must be prepared for customers to drop off after, say, a specific season has finished.
“This light touch makes them easier to cancel and theoretically more vulnerable to churn,” said Richard Broughton, research director at Ampere Analysis, as such, the ways of managing a more fluid customer base also needs to flex. “But a particularly niche fan base might churn and can still be re-engaged with the right targeted message.”
To help manage this vulnerability for churning customers, services like Amazon Prime and sports-focused streaming service Dazn use pricing to incentivize annual subscriptions over monthly ones. This March, Dazn doubled the cost of its monthly U.S. subscription to $19.99 (£15.82) and introduced a new annual subscription of $99.99 (£79.12), which equates to less than $8 (£6.33) a month.
Dazn, which owns U.S. boxing rights, introduced the new pricing to cater to two cohorts of its subscriber base: those who watch content regularly and maintain a subscription, and those who use Dazn as a pay-per-view offering, subscribing to watch one event and then canceling. This economics for the latter model wouldn’t stack up at the lower price.
A spokesperson for Dazn said it’s created to be flexible, accessible and affordable, so people feel they can activate and cancel their subscriptions when it suits them to return to the service over the long term.
In sports, where content is highly seasonal, media companies also let people pause subscriptions. To prevent people from canceling in the summer, during the low season, Dazn has added a pause feature during the cancel journey. The company estimates that re-subscribe numbers have risen 140 percent since it introduced the feature last summer.
More choice, plus lower price points, means that audiences have the option to not only stack OTT services but switch more easily between them, making the task of re-engaging them less challenging. At least, that’s the theory.
Research from Ampere Analysis from the beginning of this year in the U.S. and Europe found that people on average pay for three subscription OTT services, and around 7% of households have more than five. Of these subscription bundles, 11% of people have Netflix and Amazon subscriptions with a third streaming service. Although niche services tend to have higher churn rates, annual rates of around 30% compared with 20% for broader-content streaming services like Netflix or Amazon, according to Broughton.
U.K. broadcaster ITV is also responding to the widening in consumer choice by offering different price packages. ITV Hub+, which has around 300,000 people who pay £3.99 ($5.04) a month to not view ads on the broadcaster’s catch-up service, are attracted to this tier for binge-watching box sets, rather than using it as a regular catch-up service.
To try and build on that, Steve Forde, director of digital products and online marketing, previously said that ITV is looking at annual passes for an ad-free ITV Hub+ as well as packages that could be “gifted” to users so they could watch their favorite shows without the ads for a set time period.
While customer acquisition cost is lower for OTT services compared with pay TV, as the market gets more saturated the cost is rising. The marketing cost for signing up a new customer for Netflix internationally is less than $60 (£47.48), whereas in the U.S. where there are more than 200 OTT services and Netflix is already in a lot of homes, the marketing cost for new subscribers is nearly $200 (£158.26). That adds pressure to retain viewers beyond a few months.
On top of that, shorter-term subscribers have an impact on measuring lifetime customer value.
“It changes the trajectory of someone’s perceived value over time,” said Broughton. “In the pay-TV world, the rule of thumb is if you lose someone it’s very difficult to get them back within three years. An alternative [for streaming services] would be to look at their annual contribution over a longer period of time.”
The post How subscription OTT services manage seasonal churn appeared first on Digiday.
Podcasting’s biggest booster in film and TV wants to get even cozier with the medium.
Universal Content Productions, the NBCUniversal-owned production outfit, sees potential in the audio format’s high-quality stories and engaged audiences. And they have quickly become a core source of intellectual property for its television and streaming projects.
Later this summer, Universal Content Productions will announce the cast and writer for a video adaptation of “Dr. Death” being developed by Universal Content Productions.
Originally a hit podcast produced by Wondery, “Dr. Death” is the sixth podcast-based project UCP has announced development plans for, and many of them have had success already: “Homecoming,” an Amazon series starring Julia Roberts, and “Dirty John,” a Bravo series starring Connie Britton, have been nominated for Emmy and Golden Globe awards; “Alice Isn’t Dead,” a podcast distributed by the network Night Vale Presents, will appear on the USA Network.
In total, UCP has development rights to “about 12” podcasts, all of which have been acquired over the past 18 months, UCP President Dawn Olmstead said. Though books remain the top source of intellectual property for UCP’s 13-person development team, podcasts have turned into a top-three source, Olmstead said. Four years ago, UCP had zero podcast-derived projects on its development slate.
But UCP wants to do even more in the audio space, either by working more closely with podcast companies or, possibly, by producing podcasts of its own (though it hasn’t made any moves to start working outside the confines of television).
“We’re excited about the audio space, and the ability to create IP quickly, dramatically, and be able to distribute it in a way that, all in, would cost less than it costs for us to spec a script,” Olmstead said. “We want to learn how to do it well, ourselves.”
Hollywood’s hunger for podcasts is one part of a feeding frenzy among film and production companies hunting for source material they can turn into film, television and premium streaming video, with books, video games, and even magazine articles are all available in a growing bazaar that has, for years, been a seller’s market: The price to option magazine articles, for example, has more than doubled in recent years, according to Bloomberg Businessweek.
Podcast companies have acted accordingly, building up their own motion picture divisions or hiring more producers to help shepherd their shows through the development process. Before it was acquired by iHeartMedia, Stuff Media claimed that 25% of its podcast slate had been optioned for film and television.
Olmstead said podcasts are appealing, in part, because the most popular shows, like “Serial,” have shown they can enter the cultural mainstream. That they can reliably attract highly engaged audiences of millions of people doesn’t hurt, though Olmstead said that the numbers are a secondary appeal.
“The downloads feed hype,” Olmstead said. “But really, when something becomes buzzed-about in the creative community in Los Angeles, that’s the most important thing. Everybody likes to be excited about some new form of storytelling.”
Lots of downloads also make things more expensive. While producing a podcast is cheap compared to film and television, acquiring the development rights for a highly popular show can cost big bucks. “We didn’t get any of them at a great price,” Olmstead said of the podcasts UCP has optioned, without sharing specific dollar figures. “We paid for hot property.”
In hopes of avoiding future bidding wars, Olmstead said she would like to work more closely with podcast companies in earlier stages of their development, be it through first-look deals, or creative partnerships, or other arrangements; shortly after learning about Gimlet several years ago, Olmstead said she looked into acquiring the company, though she never seriously pursued that as an option.
Olmstead said she hopes UCP’s track record will help, though UCP is not the only production company pursuing this strategy.
“They’re all trying to get in on the process earlier than the option phase,” said Jenna Weiss-Berman, the founder of Pineapple Street Media, the podcast company behind shows including “Missing Richard Simmons” and The New York Times’s “Still Processing.” “People want to figure out, ‘How can we own this IP from the very beginning, rather than fighting with others to option it?’”
Weiss-Berman said that, over the past year, she’s had meetings with more than 20 different film and television production companies on the subject. Though no formal relationships have materialized yet, Weiss-Berman notes that these conversations can involve anything from involving writing partners or incorporating talent.
“We have a lot of incoming calls,” Olmstead said. “There’s a trust that we’ll develop them well.”
The post Why podcasts grew into a top source of intellectual property for Universal Content Productions appeared first on Digiday.
Physical retail strategies have become integral to the growth of direct-to-consumer brands, as they seek out customers they can’t reach online. Members of the first generation of DTC, like Warby Parker and Casper now have aggressive store expansion plans — Warby Parker is closing in on 100 stores, while Casper is looking to open 200 stores over the next three years. Real estate firm JLL projected last fall that in the next five years, digitally native brands would open a total of 850 stores.
Home goods brand Parachute is one such brand that’s undergoing a rapid physical expansion. After launching in 2014, last year Parachute raised $30 million in venture capital to open 20 stores by 2020. Right now, the company now has seven stores in Los Angeles, San Francisco, Portland, New York, Chicago and Dallas.
For direct-to-consumer brands, physical stores are important in driving sales as well as brand awareness: A dozen DTC brands told Digiday last year that their online sales were higher in cities where they had physical stores. And as once DTC-friendly channels like Facebook are becoming more expensive, brands are investing in channels that are more expensive upfront, but less volatile, like stores.
CEO and founder Ariel Kaye said that she believes that in a category like home, it’s particularly important for brands to have a physical retail space in order for customers to touch and feel a product in-person. Parachute started in bedding, and now also sells pillows, towels, rugs and tablecloths. In January, the company started selling a mattress. Although the category is filled with plenty of DTC brands, from Casper to Tuft & Needle, Kaye said she thought there was still an opportunity for a premium, eco-friendly mattress. Parachute’s mattress starts at $1,299, while Casper’s starts at $395.
Kaye spoke with Digiday about what she’s learned from Parachute’s physical retail expansion, what opportunity she still sees in the home category, and what advice she has for the newest crop of DTC brands. Answers have been edited for clarity and length.
What was the most challenging part about launching a physical retail strategy?
Just finding the right space certainly is hard, and the amount of variables that happen once you do find the place — whether it’s permitting or construction, or other things that can cause delays. And for a brand like ours that is thinking about marketing and doing large campaigns around store openings — when dates are changing, it can have some pretty meaningful ripple effects. Also realizing that in certain neighborhoods where we want to be in we have to wait a year for a location, that certainly wasn’t something I was expecting.
Would you say it’s gotten harder or easier for today’s DTC brands to get into physical retail?
What I’ve seen over the past few years is that there’s an appetite for pop-ups. Landlords and buildings are more excited now when they realize there is such benefit of bringing in cool emerging brands for a neighborhood and what that does for the value of their building.
Historically, retail spaces have really long lead times and it can be prohibitive for an emerging brand. I think now there’s a lot of opportunity to work around that so you can open up space in a pretty cost-effective way and test for different lengths of time.
Parachute started in bedding. There are quite a few companies in that category now, like Brooklinen and Snowe. Do you think it’s become too crowded for new brands?
No; this is a massive category, and I think there’s an incredible amount of potential for our brand and for others that [respond to customer feedback]. For us, we’re focusing on new fabrications and colors, and really making sure that we’re answering customer requests and fine-tuning our assortment and our palettes. We talk about growing with our customer, and so everything that we do is designed to match with our broader collection.
We continue to have our ears to the ground to make sure that we are listening and responding and iterating. As a digitally native brand, that’s your advantage, because you have that connection. And if you don’t do that you’re missing out on some really valuable data and insight.
How is Parachute thinking about expanding within the home? Are there any product categories or rooms you don’t want to touch?
Our goal is to be in all of the rooms within the home. We want, in many ways, to be a one-stop-shop. It doesn’t mean we have everything for everyone — it’s still very curated.
But we take our time with new categories. Like I said, it’s really important for us to understand what our customers want and where the opportunity is within the market. The mattress is a perfect example of that. We did so much research, we really identified this area within the market for this eco-friendly luxury style mattress. We thought that was where there was white space, and sure enough, it’s been a massive success. So that’s the way we think about expanding in general — [to find] where there is an opportunity to do something that our customers really want and need, and to do it in a way that’s uniquely Parachute.
What do you think is the biggest difference between launching a DTC brand today versus when you started Parachute?
You can launch a brand on Instagram and see a lot of traction and awareness through just that channel. It’s also more expensive on traditional paid social channels, so that can be hard. It is hard to find a category that doesn’t have a DTC brand in it, and so you really have to have a clear point of view and be focused particularly in the way you’re approaching launch.
I don’t know if it’s harder or easier, it’s just different. We didn’t really have Instagram when we launched in the same way that brands do today, so that wasn’t really even an option for us [to launch on there].
How did you think about raising capital for Parachute, and how did you make sure to not get over your skis and raise too much money? What would your advice be for brands in similar situations?
Think about what you need, and add a little bit more because it’s good to have an extra cushion, so that you’re not constantly in a situation where you’re needing to fundraise. It’s definitely easier to raise capital when you are doing it because you want to and it’s advantageous for the business, and you’re not in a state of desperation.
[One advantage] is there are so many investors now that are focused just on brands, so find those people to talk to and find ways in through other brands you might know. The DTC world isn’t always in favor, but it seems to be in favor now because there are so many successful brands. People are starting to notice that the power of a brand is truly valuable, even though it can be hard to quantify.
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The post How Parachute CEO Ariel Kaye plots her brand’s expansions appeared first on Digiday.
Shopify is taking a page out of Amazon’s playbook as it looks to become the all-encompassing platform engineering the growth of direct-to-consumer retail.
On Wednesday, during its annual Shopify Unite conference, the platform announced the Shopify Fulfillment Network, which will hold Shopify merchants’ inventory and handle shipping and delivery to customers within two days. It’s Shopify’s version of Fulfilled by Amazon, the delivery-control center that lets Prime merchants compete on Amazon’s two-day (soon to be one-day) shipping timetable by sending inventory for Amazon to store and then ship to customers. FBA charges a 30% fee to merchants for storage and shipping; a Shopify rep said that “pricing packages for merchants will be based on their individual fulfillment needs.”
This is a big deal for the brands that use Shopify as its retail operations platform and are being squeezed by customer demands around order fulfillment in terms of free and fast shipping and returns. It’s also just one way Shopify is expanding and growing new arms of its business as it stretches to accommodate the rapidly evolving direct-to-consumer brand economy, which is largely powered by Shopify.
From zero to a billion
Other areas Shopify is expanding include offline retail through Shopify POS and Shopify Locations, which handle purchase processing and cross-channel inventory management, respectively; international expansion through built-in global shipping, payment and language capabilities; hands-off workflow automation tools through a program called Shopify Flow; and marketing and customer acquisition integrations through partnerships with platforms like Instagram, Pinterest and Snapchat.
“If you’re growing a DTC brand of any scale, you started on Shopify,” said Loren Padelford, general manager of Shopify Plus. “So we’ve been along for this ride for companies that started at zero and are now up to billions [of dollars] in revenue, and they’ve been showing us this fascinating entrepreneurial journey: As you get bigger how does the complexity of your business change? Our product teams have step-by-step learned and figured out where the pain is and where the market doesn’t have a solution.”
In order to keep up with the pace of growth among direct-to-consumer brands — companies including Allbirds, Bombas and Kylie Cosmetics all run on Shopify — the platform has built out a multifaceted ecosystem of internal capabilities alongside a backbone of Shopify partners that are continuously adding new tools and plug-ins for merchants to use through the Shopify App Store. In 2018, Shopify brought in $1.1 billion in revenue, a 59% increase over 2017. In the first quarter of 2019, the company processed $3.4 billion worth of transactions through Shopify Pay, double the amount in the same quarter the year prior.
To continue riding the momentum it’s created around DTC brands, Shopify is building out capabilities that meet brands where they’re going — particularly, offline stores. According to director of product Arpan Podduturi, Shopify’s offline retail system, Shopify POS now powers retail stores for 100,000 merchants, and while onstage at Unite, he said the company likened the investment in offline retail to “open-heart surgery” as it reoriented priorities for the offline DTC boom. Now it’s enhancing those offline capabilities, including adding a buy online, pick-up in store option for merchants that have physical stores and new POS hardware that allows for easier in-store checkout and other app integrations, like returning customer profiles.
The Amazon of operations
These new tools, combined with the new Shopify Fulfillment Network, are Shopify’s way of cementing its position as an Amazon-style operational platform for brands that want to maintain the independence of their own selling channels. While selling on Amazon’s marketplace means merchants can benefit from Amazon’s advertising network and FBA logistics, it’s a trade-off: These merchants are still forking over a portion of their businesses to Amazon, which hasn’t necessarily earned its reputation as a brand-friendly partner. And Amazon’s prowess is still online-only.
“Companies have had a lot of success growing and scaling on Shopify through its support ecosystem, whereas Amazon and its support channels have been bad-mouthed in some sense, because the support Amazon provides for merchants in the marketplace just isn’t as good,” said Nathan Resnick, the CEO of Sourcify, a product sourcing platform. “What we’re hearing from brands that are focused on Amazon is that they’re scared, because Amazon has shown it will go out and create its own brands internally that compete with third-party sellers. It’s a completely different dynamic — Shopify isn’t competing with brands that are selling on their platform.”
Shopify Fulfillment Network confronts an expensive logistical issue for brands as they grow their businesses. Shopify made it easy for customers to set up online shops. But while the barrier-to-entry for online brands is low, scaling a retail business is complex and expensive.
“We spend time talking to customers and one big thing they’re challenged with is fast shipping. Consumers are trained to expect things to show up immediately. When they don’t, the experience starts to degrade, but global logistics are an extremely hard problem,” said Padelford. “This is a logical next extension. This is a problem no matter how big you are, so how can we make this easier so you can focus and grow at a global level.”
Maintaining relevance
As Shopify grows it’s also adapting for bigger, more complex businesses with Shopify Plus, its operation system for at-scale brands, which includes more mature digitally native brands like Allbirds and Chubbies, as well as more traditionally structured brands like Levi’s, Oreo and Lay’s. According to the company, Shopify Plus accounted for 26% of revenue in the first quarter of 2019. It’s created a two-sided brain inside Shopify that simultaneously caters to the needs of the zero-to-billion-dollar digitally native startups as well as the restructuring strategy of traditional brands.
“We think about brands needs, and there are two roles that exist now: New enterprise and old enterprise. New enterprise consists of companies that started in the last decade. Their value systems are customer-oriented,” said Padelford. “We’ve also had the old enterprise guys thinking, ‘If we don’t change, these new brands are going to eat our lunch.’ These companies are transforming themselves to feel and look like customer-centered, new enterprise companies.”
This week the company also announced a new version of Shopify Plus, which will go live later this year, where brands can manage all stores, staff accounts, analytics and tools like Shopify Flow in the same control center. At this point, digital brands are expanding to more and more storefronts — Podduturi pointed out that the DTC men’s brand Chubbies is now running 12 physical stores alongside its e-commerce site — and Shopify Plus’s goal is to keep those channels from separating into silos as brands grow.
As it is with any platform, dependence on any one partner can prove to bite brands. At the beginning of June, a Google outage cut off Shopify’s payment system, affecting checkout in both online and physical stores. There’s also digital platform in-fighting: Raising data concerns, popular email marketing platform MailChimp pulled its Shopify integration in March and plans to expand its own e-commerce capabilities.
But with its new expansions, Shopify has proved it’s determined to develop its way into maintaining relevance for the new way retail operates, for newly launched brands, digitally native brands as they scale and traditional brands as they evolve. That applies to brands set on building out customized and nuanced customer experiences: ThirdLove, which uses a data and algorithm-based fit finder to help customers pick their right size online and doesn’t operate any online stores, built its own back-end system before later switching to Shopify.
“Our site is fairly complex. We have a lot of features that are important to our customer experience,” said Ra’el Cohen, ThirdLove’s chief creative officer. “So we can’t always find exactly what we need with Shopify. We keep pushing them for certain things we want out of the future of our site, and it’s like a partnership — they want to make sure they can scale with businesses.”
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