I've got a thought provoking edition for you this week. Several of the stories lean towards social media and AI as opposed to directly e-commerce, but as you'll see, there's clearly overlap.
So if you're brand new to Shopifreaks (welcome to our 287 new subscribers this week!), and you're thinking, “I thought this was an e-commerce newsletter?” — it is. That's just the way the cookie crumbles with news some weeks. However please note that all stories I curate in this newsletter week to week are chosen through the lens of an e-commerce professional. These stories have a big impact on our industry.
This week I cover Shopify's new web marketplace, the EU's bombshell order against Meta, a major platform rebrand, and a new marketplace for X handles.
Plus, wait until you see what Big Tech has to say about AI copyright law!
All this and more in this week's 146th Edition of Shopifreaks. Thanks for subscribing and sharing.
PS: Forgive any typos or grammatical errors this week. My wife and I have been running over a 102°F during the past 4 days. It's been intense! Baby Mia is sick too, but luckily didn't get that terrible fever. We're all getting better now, but I'm still nowhere near 100% when writing this week's edition…
Since its launch in 1995, Amazon has laid off just over 40,000 employees. Over 27,000 of those layoffs were in the past twelve months. – According to Business Insider
Prior to 2023, Amazon had laid off just under 500 workers per year at a time during which the company's workforce was blowing up. In 2013, they broke 100k employees for the first time. By 2019, they had just under 800k. And by 2022, they had over 1.5M workers!
1. Shopify launches shop.app
Since its launch in April 2020, Shop App has only been available as a mobile app. It allowed customers to shop and discover products across multiple stores, earn cashback, and track delivery of their Shopify orders in one central place. (Some of those features came later.)
Now Shopify announced that these features are available on desktop browsers via https://shop.app
Shopify said in an e-mail to merchants, “By launching Shop on the web, we can enable more buyers to discover and purchase from Shop merchants without having to download an app.”
The move also takes them further down the rabbit hole of becoming a full-fledged online marketplace, not unsimilar to Amazon, Walmart, Bonanza, Etsy, and others.
“It's different though because Shop App is powered by independent merchants who run Shopify stores. It's more of a product discovery platform than a marketplace.”
Yes and no. While it's true that all products in Shop App begin with an independent merchant website, there are a lot of other similarities to traditional marketplaces.
Shop App DOES:
- let you search products at once from all sellers
- algorithmically rank products in a results page
- handle the payments through Shop Pay
- offer a platform-wide cashback rewards program
- display reviews across the product grid
- track the delivery of all your purchases across multiple sellers
- offer deals on shipping to sellers
Shop App DOES NOT:
- Index their product results pages on Google. (Otherwise they'd probably outrank most of their merchant stores for their own products.)
- Right now it's TBD how Shopify will drive NEW product search traffic to shop.app. That'll be the billion dollar question.
All that sounds nice, right? Another channel for merchants to get their products discovered. Plus their AI search works great! The chatbot is fast and effective at product discovery. So why does it matter if they're moving towards being a marketplace?
Mostly because Shopify has stated multiple times in the past that they DO NOT plan on building a marketplace.
➡️ Business Insider – July 2022:
“What makes Shop’s search feature different is that it prioritizes existing customer–merchant relationships. When a shopper searches for a product on Shop, they’ll see their loyalty results at the top of their list… That’s why we call Shop search a brand-first discovery tool…. If a customer doesn’t find what they’re looking for in their loyalty results, they can toggle over to their discovery results.”
“There's a lot of scrutiny in place to make sure we're staying true to our values and building something that helps merchants. We don't want to build another Etsy or Amazon.”
➡️ The Verge – April 2021:
“There’s an absolutely obvious playbook for Shop that I think everyone can see,” said Tobi Lütke, CEO of Shopify, during the 4th-quarter earnings call. The obvious playbook Tobi referenced is most likely a marketplace. He went on to say that Shopify doesn’t want to follow it.
In the past few years, Shopify has also dabbled in marketplaces for wholesale, buying / selling Shopify stores, and of course its main differentiator of its theme and app marketplaces.
So, Shopify is a marketplace now. There's really no side-stepping it anymore. And so far, it's looking like the start to a good one.
2. EU says cease and desist
Privacy officials in Europe ordered Meta to stop serving behaviorally targeted ads to EU residents, as well as Iceland, Liechtenstein, and Norway, without their consent.
The order, issued Friday and made public Tuesday, extends and broadens a short-term order issued earlier this year by the Norwegian Data Protection Authority, which required Meta to either:
- Obtain Norwegian users' consent to behavioral advertising
- Pause serving ads to Norway residents based on their online activity or general locations.
The order does, however, allow Meta to continue using behavioral tracking, as long as the user consents.
Last week I reported that Meta began offering users in the region the choice to pay a monthly subscription to use Facebook and Instagram without any ads or continue to use the services for free with ads.
It's not yet clear whether Meta's planned subscription option will comply with European privacy standards.
In other words, the EU may decide that privacy is a universal right for everyone, not just for those who can afford to pay for it.
Technically they've already decided that on paper with GDPR and other regulations, but the real decision is in the execution.
Denmark privacy agency said last week that it “strongly doubts” that Meta's proposed solution of charging users to not be tracked will be legal.
Meta says its subscription solution meets the requirements set out by Europe's highest court, which recently said that companies can charge “an appropriate fee” to consumers to opt out of having their behavioral data used for ad targeting purposes.
Meta said in a statement that EDPB members had “been aware of this plan for weeks and we were already fully engaged with them to arrive at a satisfactory outcome for all parties,” and that the ban “unjustifiably ignores that careful and robust regulatory process.”
We're going to have to watch this one play out live.
What are your thoughts? Should all users in EU be able to opt-out of behavioral data tracking even if they don't pay? Or is it fair for Meta to charge users to opt-out since it restricts their only revenue model? Hit reply and let me know.
3. Here's what Big Tech has to say about copyright law as it relates to AI
The US Copyright Office is taking public comment on potential new rules around generative AI’s use of copyrighted materials. The comment period opened on August 30th with an October 18th due date for written comments regarding changes it was considering.
The Verge collected the arguments from Meta, Google, Microsoft, Adobe, Hugging Face, StabilityAI, Anthropic, Apple, and other tech companies.
I'll recap some of the arguments below and provide a devil's advocate commentary underneath each one.
Meta says that imposing a “first-of-its-kind licensing regime” now, after they've already used the copyrighted work, would “cause chaos” trying to identify which works were used. And at the end of the day, the benefit to rightsholders would be very small “in light of the insignificance of any one work among an Al training set.”
That argument leaves a bad taste in my mouth, Meta. Robbing pennies from millions of rightsholders adds up. Maybe not as payments for them, but as savings for you. And regardless, the issue isn't about how much shareholders would get, it's about whether you could take it in the first place. Otherwise are we setting a precedent that it's okay to rob from everyone a little as long as it doesn't add up to a lot per person? Or have you already set that precedent with our user data? (Burn!)
Google says that AI training is like reading a book and that the act of “knowledge harvesting” they use is not only non-infringing, but furthers the very purposes of copyright law. The only issue is that copies need to be made of the works to do it, but that's just a technical matter.
Well, did you buy those copies, Google?
Microsoft says that changing copyright law could hurt small AI developers and kill innovation because it's not feasible to achieve the scale of data necessary to develop AI models even when the identity of a work and its owner is known. They claim that licensing schemes would impede innovation from startups and entrances.
Come on, Microsoft! Don't play the small startup card here. I can't stand when Big Tech pretends to care about small businesses. Plus, these “poor small AI startups”, which are backed by Andreessen Horowitz and other mega VC funds mind you, have only been around for like 10 minutes anyway. They'll adapt. If AI can only accelerate at a pace of which AI startups and Big Tech can afford to properly license copyrighted works to use in their training models, then so be it.
Anthropic says the training process makes copies of information only as an intermediate step for the purposes of performing a statistical analysis of the data. The use of the original copyrighted work is “non-expressive; that is, it is not re-using the copyrighted expression to communicate to users.”
Does that mean I can download a movie illegally as an intermediate step solely for the purpose of watching it? And as long as I don't show it to other people, I've not done anything illegal?
Andreesseen Horowitz says that investors have spent “billions and billions” of dollars over the last decade in the development of AI, with an understanding that copying content was allowed under current copyright law, and that a change in this regime will “significantly disrupt settled expectations in this area.”
Did anyone ever ask if was alright though? Or is this clearly one of those “ask for forgiveness, not permission” scenarios?
Please note that I'm no copyright law expert, and I'm not 100% against Big Tech here. I think AI is a game-changer and will overall benefit humanity. I was just providing a counter viewpoint to their arguments from the eyes of a layman tech enthusiast.
I'm also, however, a published author in both print and digital, so I see things from both perspectives and am currently trying to determine how I feel on the subject.
What do you think? Should AI companies have to pay for using copyrighted works in their training models?
4. X gon' sell it to ya!
Emails obtained by Forbes reveal X is getting ready to launch a handle marketplace, allowing users to purchase popular usernames for up to $50,000.
Elon Musk first hinted at this initiative in Nov 2022 when he announced plans to free up a significant number of dormant handles.
The emails, which Forbes agreed not to publish to protect the anonymity of their recipients, came from active X employees and noted that X recently made updates to its handle guidelines, process and fees in preparation for the marketplace.
It's not yet clear whether X will be the only seller of usernames, or if users will be able to sell handles to one another (with X taking a cut).
Many were quick to criticize Musk for the decision, calling it a cash grab. Which maybe it is.
However fundamentally, I don't hate the idea of having a usernames marketplace.
There's been a black market for usernames across all platforms (Twitter, Instagram, Facebook) for years with name squatters holding onto popular handles and flipping them on 3rd party sites — which has technically gone against the TOS of those platforms.
Obviously there are legitimate times to sell a handle, like when the social presence is included with the sale of a business. But then there are the squatters.
If a market is going to exist anyway, why not have it exist transparently on the platform itself?
Plus, if Google can come up with new Top Level Domains out of thin air and sell them for $1M each, why can't X sell handles? More on that story below…
5. Introducing “Grok” AI bot
One more X and AI story for you this week…
xAI, Elon Musk’s new AI venture, launched its first AI chatbot technology named “Grok”, which is positioned to compete with OpenAI, Google Bard, Meta Llama, Inflection, Anthropic, and others.
Grok is a term coined by Robert A. Heinlein in his 1961 novel “Stranger in a Strange Land”, where “Grok” is a Martian term with no direct Earthling translation.
The company says that Grok is modeled on “The Hitchhiker's Guide to the Galaxy” and is supposed to have “a bit of wit,” a “rebellious streak,” and answer the types of questions that other AI might dodge.
(Just say, “Anti Woke GPT”, Elon. We know that's what you're alluding to.)
The part that's most interesting and different about Grok is its access to Twitter as a source of real-time info.
Check out this example of how Grok vs other GPT handles a topical question. The rival bots are asked, “When was Elon's last interview with Joe Rogan? What was Rogan wearing?”
The prototype is in its early beta phase and only available to a select number of users to test out before the X releases it more widely.
You can sign up for a waitlist to be one of the first to use the bot if you're a Verified X user.
Eventually, Musk says that Grok will be a feature of X Premium+, which costs $16 per month.
6. WooCommerce is now just Woo.
Woo.com is now the home for all things Woo, including their e-commerce platform, marketplace, agency program, and partnerships.
Woo, which is owned by Automattic (creators of WordPress) since 2015, wrote in their announcement:
“Woo is how many loyal customers have referred to us for years. And now we’re leaning into that name for our company and brand. It’s a fun, punchy name that shows how excited we are to empower success for merchants and developers. Switching to Woo.com is part of this larger strategy.”
That's super true. I regularly refer to them as Woo.
The shorter brand name also lets them attach it more easily to other arms of their business — such as Woo Experts and Woo Payments (which they most recently changed the name to from WooCommerce Payments).
They specified about the name change:
- Woo is how we refer to the brand/company.
- WooCommerce is the open-source ecommerce platform for WordPress — Woo’s core product.
Other than the slight name change, it'll be business as woo-sual for the company.
7. Google is launch.ing a new TLD
Google Registry launched a new top-level domain: .ing.
During the Early Access Period in November and December, customers can pay a one-time fee of more than $1 million for the privilege of being one of the first to register these new domains, and then they'll get progressively less expensive from there.
A few examples of companies that have already sipped the Kool-Aid:
- Canva bought design.ing and draw.ing domains for their tools.
- Adobe Acrobat acquired edit.ing and sign.ing.
- Giving Tuesday snatched up giv.ing for its site.
- Going appropriately bought go.ing.
The Verge plugged different words into GoDaddy’s domain search to see which .ing domains were up for grabs and discovered that some common words are really expensive!
- think.ing costs $38,999.99
- buy.ing costs $129,999.99
Google Registry is also working on a .meme TLD, which is currently in a limited registration period.
There are too many TLDs are this point. What started out as seven original TLDs (com, org, net, edu, mil, int, gov) has grown to over 1,500 TLDs!
You'd think that with that many TLDs, the price of domain ownership would have dwindled down to pennies per year, but instead the opposite has happened. The price of domains has skyrocketed.
Are the new domains even necessary for established companies with existing domains like Canva and Adobe? Will anyone ever find these domains unless the companies send visitors to them? Of which at that point, a simple page on their .com website would suffice.
This feels like Google is cash grabb.ing.
8. Venture Capital isn't in love with DTC anymore
Crunchbase data revealed that VC's love affair with DTC may have come to an end.
So far in 2023, U.S. investors have put just over $130M into DTC brands, which is a 97% decline from 2021, when over $5B was invested in this category.
To be fair though, 2021 was a peak outlier. 2018, 2019, 2020, and 2022 all showed around $1B investment in DTC brands. However even so, $130M is a big fall from that average.
Crunchbase shared a few theories on what caused the decline:
- Much of the 2021 bump was due to investments in e-commerce aggregators, of which that space has largely dried up.
- Consumer products is an out-of-favor area.
- Many venture-backed DTC brands that made it to public markets have flailed.
- Online-exclusive brands are losing their allure in an omni-channel world.
I remember when Warby Parker had its IPO in 2021 and everyone got a look into its books. As a darling example for years of what success could look like as a DTC company, people were surprised to see how little money they actually made and how much it cost them to acquire customers.
It sounds like the DTC industry might need a rebrand to attract new VC money. How about… “DTC-AI”?
9. Other e-commerce news of interest
Faire, the wholesale marketplace, which last month I reported deepened its relationship with Shopify after a sizable investment, laid off around 250 employees across engineering, product, design, and data science. Faire most recently laid off about 7% of its workforce last October when it had approximately 1,200 employees at the time.
GoodRx, a website that helps users find discounts on prescription drugs, is facing a class action lawsuit in Florida claiming that the company allowed Google, Meta and Criteo to spy on its customers by installing their tracking pixels on the users' browsers — which is apparently a no, no in the health care world. The company is facing a similar class action suit filed in California in May this year.
Amazon is shutting down its two physical clothing stores after 17 months of operation. Amazon Style stores were very tech heavy, allowing customers to scan an item's QR code to view more info like customer ratings, or use their Amazon Shopping app to have additional items brought to their fitting room. Amazon says it's closing them down to focus on its online shopping, but I think the plan all along was never to keep them open long, and simply run a live test of its retail tech that it'll eventually license to other companies like PacSun.
Amazon added BNPL to its Amazon Business platform via its partnership with Affirm, which also handles the payment option for its consumer marketplaces. Approved customers will be able to extend payments between three and 48 months. The payment option will be available to all eligible businesses by Black Friday.
Speaking of BNPL, Walmart Canada introduced BNPL as a payment option for customers shopping online on Walmart.ca. The program is powered by Klarna, whereas Walmart US utilizes Affirm for its installment solution.
Intuit QuickBooks introduced new e-commerce features to help merchants manage their inventory across multiple sales channels. The new automations include the ability to sync inventory across sales channels, spot opportunities for growth, maintain accurate inventory quantity, receive low stock notifications, and track costs of goods to understand profitability.
TikTok announced a new integration with Salesforce Marketing Cloud that will enable TikTok advertisers to transfer leads generated by their marketing campaigns directly to Salesforce. The integration will bring TikTok insights directly into the CRM, streamlining the process of managing and maximizing ad campaigns.
The NFT marketplace OpenSea is planning to layoff half of its workforce, an estimated 115 employees, after having already reduced its headcount by 20% in July 2022. At the same time, the company announced that they are working on “OpenSea 2.0”, which they claim is a major upgrade to their product.
PayPal named Jamie Miller as Executive VP and CFO of the company, effective Nov 6, 2023. Miller, who most recently served as Global CFO of EY, will be responsible for PayPal's financial strategies and will lead the company with planning, treasury, tax, reporting, and investor relations.
Klarna employees were planning to strike next week in Sweden over the lack of a Collective Bargaining Agreement, a written legal contract between an employer and a union, of which over 90% of employees in Sweden are covered by one. However after a week of negotiations, the company reached an agreement to join the Banks Employer Organisation by Jan 1, 2024 and to sign a CBA that includes members of all unions belonging to the one central organization Saco.
10. Seed rounds, IPOs, & acquisitions
Tabby, a Saudi Arabia-based BNPL platform, raised $200M in a Series D round led by Wellington Management, at a $1.5B valuation, making it the first fintech unicorn in the region. The firm reports 10M users and more than 30k brands on its platform.
QI Tech, a Brazil-based fintech that specializes in offering banking services and digital infrastructure solutions to businesses, raised $200M in a Series B round led by General Atlantic. The funds will be used to expand the company's commercial and product development initiatives, as well as finance acquisitions.
Zilch, a UK-based BNPL company, secured an undisclosed investment from eBay, at a £1.65B valuation. The company surpassed 3.5M customers in August, with the average customer using the service 100 times a year, according to the CEO.
Omnicom, the world's second largest marketing holding company, is acquiring Flywheel Digital, the digital commerce business of Ascential, for $835M. Flywheel will operate as a Practice Area within Omnicom and will be led by Duncan Painter who currently serves as CEO of Ascential.
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See you next Monday,
PS: An SEO specialist walks into a bar… bars near me, tavern, saloon, pub, alcohol, beer, drink…