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#114 – Block vs Short Sellers, Instagram Ads & Dark Patterns

by | Mar 27, 2023 | Recent Newsletters

You know how once a year Wikipedia asks you to donate $2.75 to keep their foundation alive, and a few times a year PBS does a pledge drive to support its programming?

Well, I'm not going to ask you for money (BigCommerce pays for my content for you), however, a few times a year I'm going to ask you for two important favors to keep this newsletter alive: 

1) Write a Google review. Your kind words encourage others to subscribe, and they keep me motivated to continue working hard each week to bring you the best curation of e-commerce news on the web.

2) Share this newsletter. Since launching in Jan 2021, word-of-mouth and your referrals have been my number one source of new subscribers. Sharing the URL to Shopifreaks.com with your colleagues and network, or sharing the web archives of my editions just take a minute, and it goes a long way in helping me reach more industry professionals like yourself. 

Thanks for all your support with Shopifreaks!

And now onto this week's news… I've got stories for you about new shopping features at Pinterest, YouTube hitting big e-commerce milestones, and an overview of dark patterns in our industry.

I also cover DoorDash's new features, consumer grocery preferences, new ad types at Instagram, and trouble at Block.

All this and more in this week's 114th Edition of Shopifreaks. Thanks for subscribing and sharing!

Poll of the Week 🗳️

💬 Is ChatGPT going to change the face of product search and discovery online?

🗳️ Take the Twitter poll.


Last Weeks Poll Results: In response to the rumors that Amazon was developing a desktop web browser, I asked if you'd use an Amazon Web Browser over Chrome, Firefox, Safari, or others on the market. Only 8.9% of you indicated YES that you would use an Amazon browser, while 26.6% said MAYBE if it was good. A whopping 64.5% said NO they'd never use it.  [View Poll]

Stat of the Week 📈

The percentage of online BNPL transactions involving groceries grew 40% during the first two months of 2023. – According to Adobe Analytics

This isn't a good sign of things to come. The problem with using BNPL for groceries is that when the “later” comes, you're still “buying” the groceries you ate two weeks ago, and the cycle starts all over again.

This industry is going to absolutely implode, and before the year ends, we'll see our first BNPL Debt Consolidation company hit the scene.

Share this week's stat on Twitter & LinkedIn.

1. Pinterest testing new ways to shop

Last year around this time, I reported that Pinterest began allowing users in the U.S. to complete transactions within the app — a feature they said had been long requested.

Later that year, Pinterest’s co-founder, Ben Silbermann, stepped down from his role as CEO, and was replaced by Bill Ready, a former Google commerce executive who hit the ground running with e-commerce on the platform. 

Now Pinterest is bringing more to the e-commerce table with the integration of shopping capabilities into its Shuffles collage-making app.

Shuffles launched to the public last November, allowing users to create aesthetic collages set to music, which they could share on TikTok or with friends on the app. It quickly became the #1 lifestyle app on the U.S. App Store in August, but just as quickly declined in popularity, now ranking #228 in the same category.

However that's not stopping Pinterest from doubling down on the app with the integration of shopping capabilities — identical to those found on regular Pins. 

Users are able tap product cutouts used in collages and see the brand, price, and other metadata, as well as similar products to shop.

Pinterest is also exploring a new takeover feature for advertisers called “Pinterest Premiere Spotlight” that prominently showcases a brand on search.

97% of searches on Pinterest are unbranded, so this new feature gives brands an opportunity to be discovered early in the research / buying process. 

2. YouTube hits 100k shops milestone

YouTube revealed that more than 100,000 channels on its platform are linked to external e-commerce stores. Like Pinterest, YouTube has been making bold moves into e-commerce this past year. 

Here's a quick look back at three recent milestones: 

  • July 2022 – YouTube and Shopify teamed up to allow creators and merchants to feature products across their YouTube channels and content.
  • October 2022 – YouTube expanded its access to social shopping tools, which was previously in beta with just 1000 creators, so that more creators can make their videos shoppable.
  • November 2022 – YouTube announced new features coming to YouTube Shorts, including affiliate marketing and the ability to tag and purchase items through Shorts.

In a recent blog post where YouTube confirmed the 100k milestone, they shared four YouTube e-commerce success stories: 

  1. The Boys – a U.S. / Australian comedy sketch group with over 4M subscribers who launched a hoodie collection after hitting 1M subscriber milestones.
  2. Darcy & Jer – a Vancouver-based couple known for making humorous videos about their relationship who launched a line of merch for their “Busy Donkey” song.
  3. Colizet – a South Korea-based creator who started a channel to share fashion advice and discover lesser known Korean designers who later found success with live shopping on YouTube.
  4. Cassey Ho – CEO of the active fashion brand POPFLEX who shared behind the scenes looks into her design process and later gave her fans a direct say on her future products.

3. BigCommerce News (Sponsored)

Join BigCommerce at Shoptalk in Vegas this week where thousands of retail changemakers come together every year, both in-person and virtually, to create the future of retail.

BigCommerce kicked off this morning with Breakfast Tacos followed by Martini O'clock at their Booth #722.

If you missed them today, they're slinging Bloody Marys and mimosas with Netlify from 10am to 12pm tomorrow, followed by a Build Your Own Charcuterie event from 3-5pm. 

If you're attending Shoptalk this year and would like some one-on-one with the BigCommerce team, click here to schedule a consultation during the event or stop on by Booth #722.

4. E-commerce's Dark Patterns

It's no secret that big tech has been / is guilty of utilizing dark patterns to get what they want out of you. 

  • Amazon had to make it easier for Prime members to cancel their subscriptions last July, following complaints from consumer groups about the numerous hurdles it took to cancel the service.
  • Epic Games was fined $520M in December in part for using dark patterns to coerce players into making unwanted in-game purchases.
  • Block recently came under heat for making it difficult to opt-out of marketing e-mails from brands you've never shopped with before by employing dark pattern designs to bury the opt-out link.
  • There's even a dark pattern named after Mark Zuckerberg called “Zuckering” which fools users into thinking that they need to share certain private information, even if it is not necessary to use the service.

Digital Information World put together a guide showcasing the 12 different types of dark patterns which I'll summarize below.

  1. Trick Questions like “Are you sure you don't want to maintain membership?” LOL, what? I don't not no want no cancel maintain, blah!
  2. Sneak Into Basket where a store makes it too easy to miss an opt-out button or a combo deal which adds unwanted products to your cart.
  3. Roach Motel, a situation that is easy to get into and hard to get out, such as a one-click subscription that requires a phone call to cancel.
  4. Privacy Zucking when a site or app lures you into sharing more private info than you're comfortable with to use their service, even if it's not all required.
  5. Price Comparison Prevention, when a store makes it difficult to directly compare similar products by concealing single-unit prices like cost per ounce.
  6. Misdirection, an attention-grabbing image or special offer to distract you from important details you need to make an informed purchase.
  7. Hidden Costs where your product becomes more expensive at checkout due to a last-minute addition of erroneous charges. (*Cough* Contact Lens King)
  8. Bait & Switch, using tricky wording or button colors designed to make you click fast and take the opposite action you desire.
  9. Confirmshaming such as “No thanks, I prefer full price” to guilt or panic you into agreeing to a subscription or prevent you from canceling a service.
  10. Disguised Ads, graphics that look like regular content or action buttons like “Download Now”, but are actually hyperlinked ads.
  11. Forced Continuity, when a service requires you to provide your CC up front and then continues to charge you when your trial comes to an end.
  12. Friend Spam, when a company requests permission to access your data for a good reason and then uses the info to spam your friends with e-mails like, “Your friend Paul invited you to join him on Hats For Big Heads. 🎩”

Digital Information World studied brands with dark patterns and found that Amazon is guilty of having the most dark patterns (eleven in total) for things like canceling Prime, auto-ticking subscription options, and misdirecting attention towards more expensive options.

Instacart, Walmart, Reebok, Hotels.com, Vrbo, and Expedia also made their list of websites with a high amount of dark patterns.

5. DoorDash adds new partners & shopping features

DoorDash is adding three new retail partners and updating its shopping features.

  • New Partners – Users can now place orders for items at Lush Cosmetics, Victoria's Secret, and Party City (which still exists).
  • Search & Discover Optimization – DoorDash is making it easier to search within a retail store and attempting to bring more relevant in-stock options that users can quickly add to their cart.
  • Scheduling Ahead options are now available to more consumers, and now with more options for delivery time.
  • Substitutions – when the store is out of an item, there's now a built-in messaging automation to make communicating between the customer and delivery person easier.
  • Cash on Delivery – customers can now pay with cash for their online orders within DoorDash's white-label delivery solution of restaurants

Early this month I reported that Uber released similar features to the above as part of their goal to compete with Instacart.

6. Consumer preference for grocery e-commerce

The e-commerce acceleration platform MikMak released their “2023 Grocery eCommerce Benchmarks and Insights Report” which took a look at the top-performing grocery retailers. Here's a recap of what they discovered:

  • YouTube has the highest purchase intent rate for grocery brands at 5.2%
  • Pinterest had the second-highest purchase intent rate at 4.2%
  • Walmart drives the most in-market traffic for grocery brands among the top five retailers, representing 41.2% of purchase intent clicks.
  • Followed by Target (22.1%), Amazon (18.6%), Instacart (11.9%), and Kroger (6.1%).
  • Grocery shoppers are most likely to buy online Thursday at 1pm EST.
  • Top online grocery purchases include snack mix, sliced cheese, and single-serve coffees.
  • The average cart size is 12.4 items.

MikMak's report concludes that advertising on a mix of channels, especially YouTube, and being available at a variety of retailers (ie: offering an omnichannel experience), can help brands win market share with grocery shoppers.

7. Instagram putting ads in search results

Instagram has begun testing ads in search results, which will show up in the feed that people can scroll when they tap into a post from search results.

The company says that the change is just a test for now, but that it plans on launching the new placement globally in the coming months.

IG spokesperson Shenny Barboza confirmed to The Verge that “ads will show up for search terms that fall within our community and recommendation guidelines” — which means that users could potentially see ads on all the searches that meet those criteria.

IG is also rolling out a new ad type called “Reminder Ads” which send push notifications to remind you of an upcoming event or important date — if, and only if, you opt in to receive them. For example, an ad for a season premiere of a show may include a “Remind Me” button that the user can click to receive a notification reminder one day before it airs, 15 minutes before it airs, and at the start time.

Wow, thanks Instagram — you invented Google Calendar! It'd be a heck of a lot more convenient if Instagram offered the ability for the reminder ad to create an event in my phone's default calendar app, but Meta will be Meta.

8. Did Dorsey overstate Block's numbers?

Short seller Hindenburg Research alleged that Block, under the leadership of Jack Dorsey, widely overstated its genuine user counts and understated its customer acquisition cost, and that its “Wild West” approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams.

Hindenburg said in its report that former Block employees estimated that 40% to 75% of accounts they reviewed were fake, involved in fraud, or were multiple accounts tied to a single person.

Hindenburg said in a note published on its website, “Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping.”

The short seller also criticized co-founders Dorsey and James McKelvey for collectively selling over $1B of stock during the pandemic as the company's share price soared, as well as other executives including finance chief Amrita Ahuja and the lead manager for Cash App Brian Grassadonia, who each dumped millions of dollars in stock.

In response to the news, Block's share price dropped over 15% to $60.18 on Friday, but has since rebounded around 4% at the time of writing this newsletter. 

Block responded to the news by vowing to fight back, saying it would explore legal action against the short seller for its “factually inaccurate and misleading report” that was “designed to deceive and confuse investors”.

The company added, “Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price.”

Whether the acquisitions against Block are true or not, it's important to note that Hindenburg, founded in 2017 by Nathan Anderson, invests its own capital and takes short positions against companies after finding potential wrongdoings. The company usually publishes a report explaining its case against the target company, hoping to make a profit.

After releasing the report, financial analytics firm Ortex estimated that short sellers made over $400M in paper profit on 27.96M short interest shares.

9. Other e-commerce news of interest

Walmart laid off hundreds of workers at e-commerce facilities in Pedricktown NJ, Fort Worth TX, Chino CA, Davenport FL, and Bethlehem PA. Walmart did not comment on whether it is downsizing its fulfillment center capacity because it plans to fulfill more orders from stores or because it anticipates fewer online orders from customers.


Packsize unveiled a new machine designed to build on-demand, perfect-sized boxes exclusively for Walmart to help ship faster, produce less waste, and create a better unboxing experience for customers. The Ultra5 can produce up to 600 boxes/hour, negates the need for filler like plastic air pillows, and allows retailers to fit up to 33% more boxes in freight and delivery carriers.


Amazon shot down a petition signed by 30,000 workers begging CEO Andy Jassy to cancel his return-to-office plan. In the petition, Amazon workers argued that they are more productive and enjoy a better work-life balance in a remote work environment.


Adobe introduced a new cloud service called Adobe Product Analytics that helps companies find opportunities to improve their applications and websites. At the annual Adobe Summit conference, the company also debuted several other new offerings including a suite of generative AI models called Firefly which enables customers to generate images and stylized fonts based on text prompts.


Did you see the TikTok video of the Amazon driver in Cary NC who delivered a package during a police standoff with an armed hostage-taker? He even took a picture of the package to confirm its delivery before heading back out on his route!


Klarna announced its integration with ChatGPT to roll out a personalized shopping experience that provides product recommendations when users ask for shopping advice, inspiration, and product links via their search and compare tool. Users can ask things like, “I have $150, which headphones can I afford?” and receive a selection of items relevant to that request.

Did Microsoft just become the biggest player in e-commerce search and discovery? Talk about a slow play…

Don't forget to take this week's Twitter Poll and let me know if you think ChatGPT is about to take over e-commerce search and discovery.


Google suspended the Pinduoduo app after malware was found in versions of the software which exploited a zero-day vulnerability in Android. E-commerce expert Liu Huafang posted on Weibo that Pinduoduo’s app was using security vulnerabilities to gain market share by stealing user data from its competitors.


Employers in the EU will be to soon be legally obligated to publish the salary ranges of jobs in their listing descriptions as part of efforts to reduce the gender pay gap. Roderic O’Gorman, the Minister for Children and Equality, confirmed that he intends to implement the pay transparency rules within the EU’s three-year deadline.


Levi Strauss & Co. announced a new partnership with LaLaLand.ai to supplement human models later this year with AI-generated models. Lalaland utilizes AI to enable fashion brands to use realistic models of every body type, age, size, and skin tone to create a more “inclusive, personal, and sustainable shopping experience.”


Automattic announced the discovery and patch of a critical vulnerability in the WooCommerce Payments plugin that allows for a full-site takeover by unauthenticated attackers. The vulnerability was discovered on March 22, 2023 by a third party security researcher and affects more than 500k WordPress installs.


Unzer, a Germany-based payment processor, launched a new BNPL product called upaylater, where it is integrating invoice and installment payment methods and direct debit into its product portfolio via a single interface. Meanwhile another Germany-based firm, Mondu, is opening an office in London after seeing growing demand from U.K. businesses for its B2B BNPL service. 


JFK8, the first Amazon warehouse to successfully vote to form a union last year, has yet to secure a contract or get Amazon to the bargaining table, blaming internal disagreements between union president Christian Smalls and some of the union's legacy organizers. Insiders accuse Smalls of failing to devote enough time to JFK8 efforts because he has been busy traveling to other Amazon warehouses, making public appearances at labor protests, and speaking at events. 


YouTube is shutting down its live social commerce app, Simsim, less than two years after acquiring the Indian startup for around $70M. A spokesperson said Thursday that the company will be “working with creators to introduce more monetization opportunities for creators through an affiliate program and more shopping features across long-form videos, Shorts and livestreams on YouTube in 2023.”


In May, Amazon will launch test versions of their Kuiper satellites to take on SpaceX's Starlink. Amazon recently revealed that it had essentially bought all the spare rocket launch capacity in the world to rival SpaceX, and plans to launch a total of 3,236 satellites by 2029.


Zumi, a B2B e-commerce startup, is shutting down and laid off its team of 150 people, after failing to raise the funding necessary to sustain its operations. The company was on a mission to revolutionize Africa's $36B apparel market, but will now have to bow out of the scene to competitors like MarketForce and Sabi. 


Australia Post is unveiling a changing room concept for customers to try on their online purchases before deciding to keep items or return them. The new concept will be installed at the Australia Post office in Orange, NSW in July, where the post office will also allocate space to local retailers to showcase their products.


Rewind, a backup and recovery platform for Shopify, BigCommerce, and other e-commerce platforms, laid off about 27% of its staff, or around 37 employees, after seeing lower-than-anticipated growth. (Those Reddit ads not working as well as they had hoped? Mine neither.) The company announced a $19M CAD Series A round in January 2021, acquired BackHub a month later, and then had an $83M Series B round in September that same year, but now says that their growth has slowed inline with Shopify's slowed growth.


Amazon is shutting down DPReview, a 25-year-old photography community website that it purchased in 2007. The website's millions of articles will not be kept by Amazon, but should be available on the Internet Archive. The site will be locked with no further updates after April 10th. 


Panera is partnering with Amazon One to use its palm swipe technology for buying food and earning rewards for its loyalty program. The partnership will allow MyPanera members to leave their cash, cards, and mobile devices at home and simply swipe their palm to pay for their meals with saved payment info. 


Peloton owners in Australia who paid in installments with Affirm will get to keep their equipment but no longer have to pay after Affirm ceases operations in the country. Peloton was Affirm's only business partner in Australia, and a spokesperson said that forgiving the loans would have a nominal impact on the business. 


Meta announced a new WhatsApp desktop application for Windows that will enable end-to-end encrypted group video calls with up to 8 people and calls with up to 32 people. They also claim that the app offers faster device linking and better syncing across devices, as well as new features such as link previews and stickers.

10. Seed rounds, IPOs, & acquisitions

Snap quietly acquired Th3rd, an Amsterdam-based 3D-scanning studio, in Q2 of last year for an undisclosed amount, when the company was looking to bolster its AR-powered commerce ambitions. The four team members who are based in the Netherlands joined Snap as part of the acquisition. The startup’s tech has since been used to enhance Snap’s AR projects, including its newly launched offering for enterprise brands.


Vue Storefront, a Poland-based startup building a platform for front-end developers to build composable e-commerce sites, raised $20M in a Series A extension round led by Felix Capital. The company will use the funds for R&D, to develop more tools targeting B2B e-commerce businesses, and for business development after seeing revenues grow 300% in the last 18 months. 


Kream, a secondhand clothing marketplace that allows users to buy and sell secondhand luxury goods like vintage clothing and designer bags, raised $168M in a Series C round led by Altos Ventures, at a $742M valuation, more than double its previous valuation of $306M in October 2021. The company has doubled its monthly active users between last October and March and will use the funds to make more investments in Asia in line with its long-term goal of connecting Asia-based reselling platforms with its resale affiliates.


Appbrew, a no-code platform that enables brands to quickly create native mobile apps for iOS and Android devices, raised $2M in a round led by Accel. The company will use the funds to scale its mobile app platform.


OP3N, web3 AI-powered platform that develops a chat-based product called Superapp, which aims to bring a web 2.0 interface to the blockchain, raised $28M in a Series A round led by Animoca Brands, valuing the company at $100M. The funds will be used to grow its leadership team and further develop its application, which is currently in beta.


Kredivo, a fintech company in SEA formerly known as FinAccel, raised $270M in a Series D round led by Mizuho Bank, bringing its total amount raised to $400M with an additional $1B in debt facilities. Kredivo targets underbanked consumers who have access to bank accounts but little credit access due to poor credit bureau infrastructure.


Two, a global B2B payments solution that manages credit and fraud underwriting, pays sellers upfront, and handles the receivables and collections processes, raised €18M in a round led by Shine Capital and Antler to join a previously unannounced €10M round, bringing its total amount raised to €28M. Two’s platform now serves 175 merchants and captures 58% of their B2B payment volume.

What'd I miss?

Shopifreaks is a community effort and I appreciate your contributions to help keep the rest of our readers in the know with the latest happenings in e-commerce. Whenever you have news to share, you can e-mail [email protected] or hit reply to any of my newsletters.

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See you next Monday,

PAUL

Paul E. Drecksler
www.shopifreaks.com
[email protected]

PS: What gets wetter the more it dries? … A towel!

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