Unless you’re an ecommerce operator and early-stage investor, you probably haven’t noticed the underwater tsunami speeding toward Google and Facebook’s $500B ad business. There are rumblings where ecommerce meets advertising, and the wave's going to hit sometime in the next 5 years.
Here's what I’ve noticed over the past two years:
At the product-level, ecommerce tools around reviews, referrals, and loyalty have been converging to harness the authenticity and influence of every customer. Viral word of mouth is the philosopher’s stone of DTC marketing, and every month I’ve seen more startups launch trying to discover the magic formula.
Many of these startups are pure social commerce plays: “shop with friends!”, “search what your friends have bought!”, “refer your friends to earn rewards!” that succumb to cold start problems. Building networks is hard – especially when they rely on a two-sided marketplaces between consumers and merchants to create value:
The Heard: consumer endorsements of beauty and self-care businesses in Miami. Starting with an interest niche or geography is a good way to jump-start a network - but expanding from that niche is tricky.
Chums: YC-backed Honey alums built a “shop what your friends recommend” startup. Network didn’t gain traction, pivoted to “Craigslist for used electronics in NYC”.
Drum: “Uber for MLM sellers”. Raised $10M, didn’t attract many brand partners, pivoted to monetizing “link in bio” pages for influencers.
The common wisdom among VCs is there aren’t any unicorn-scale ideas left in advertising because surely Google’s captured them all by now.
It makes sense. The fundamental business model of the internet is monetizing attention through ads, and the majority of browsing time is spent on the big search and social media platforms.
But attention is priced differently depending on the viewer and their intentions. The attention of someone searching Google for “best luxury watch” is worth a lot more than an anonymous TikTok impression.
To understand a system, “follow the money”. To understand the future of advertising, follow the attention.
Right now some of the most valuable attention on the internet is going unmonetized as ecommerce shoppers search Reddit, post requests for advice on Facebook, or browse page after page of conflicting product reviews.
There’s precedent for this. June 18, 2003 was the single biggest moment in the history of the attention economy – the date Google Adsense went live and let every website start passively monetizing their content. In the words of Google founder Sergey Brin, “By providing website publishers with an effective way to monetize content pages on their sites, Google AdSense strengthens the long-term business viability of content creation on the web.”
This quote’s aged beautifully, with “website publishers” being replaced by “influencers”, “micro-influencers” – and soon with “every consumer”.
If you’re thinking, “this sounds very web3”, you’re absolutely right – but without crypto.
Decentralized ownership of the internet’s profits is coming. The web2 media platforms aren’t waiting for crypto to compete over the new business model. (YouTube Shorts are trying to undercut TikTok's rev-share model today!)
The trend #6 founders know there’s gold in these hills. I predict Google/Facebook/TikTok will make either a $1B+ acquisition in the social commerce space in the next 5 years (and that unicorn will probably gobble up its competitors $20M-$50M at a time) – or if one of these upstarts breaks through the clouds to achieve its own network effect, we’ll need to squeeze a new letter into the FAANG pantheon by 2030.
