00:00:00:00 - 00:00:26:05

So in many ways, community is the closest thing that brands get to creating network effects and often community unlocks distribution. So in many ways, I would say if I was an investor right now, it'd be a pretty critical part of my thesis when investing in consumer brands in very crowded categories, just because I think it's a much better signal for success then than not.

00:00:26:07 - 00:00:47:20

The topics today. You've been writing a lot. You know, the the Substack has been great. I think some of the content you've been putting out is awesome. And what I want to focus specifically on today is community. And like, it's been such a buzzword, in commerce since I think it's almost like a token for LTV and like just being a good brand.

00:00:47:22 - 00:01:02:12

And I think it's relevant for a lot of businesses. So I want to talk about what that means to you, how you measure it. And then we can go into some of your your recent material as far as fashion is concerned. Yeah. But let's, let's, let's start out like, you know, why did you start writing about community just in general?

00:01:02:17 - 00:01:26:02

Yeah, I think since back to my days on the venture capital side, community was the sort of intangible asset that everybody would speak about but didn't necessarily know how to measure. You know, very real. You could look at a brand and you recognize one that had a real community and how that was creating real enterprise value for the company, but actually measuring the quality and the goodness of community, I found, was pretty underexplored.

00:01:26:04 - 00:01:49:09

When you think about the sort of evolution of consumer brands from the value chain perspective. It's never been easier to start a brand, right? Never been easier to stream up to manufacturer, whip up the website on Shopify, acquire customers with Facebook marketing and last point of defense ability. And last mode is is actually like brand equity. And it seemed like community was like the product for brands.

00:01:49:11 - 00:02:10:12

And it was a way that you can actually create significant defense ability, as a consumer brand and in many ways seems to be like the direction many brands are trying to head towards. It's like come with a product safe for the community. Yeah, well, a lot of people that's been most businesses that are are scaling right now, they're talking about how they have community.

00:02:10:12 - 00:02:35:03

And when you dive into it, it's like, what what what actually does that even mean? Or you have certain brands who have been like, you know, very paid, reliant, not have community. And it's like this really desirable thing for them. And you're like, well, what is community in it? It means something different to each of these businesses. But I think you're right in that just like brand affinity, brand loyalty and the fact that you're going to come back, consume the content and ultimately buy more products.

00:02:35:05 - 00:02:56:01

Yeah. And like, what is every consumer brand selling? You know, every like discretionary purchase consumer brand. They're not selling products. They're selling a transformation. Right. I'm not buying Glossier for necessarily the product. I'm buying it for the version of myself that I can become by using Glossier. I want to become more confident. I want to become more comfortable.

00:02:56:01 - 00:03:29:12

My my skin. I want to become, more beautiful. And the ways that people can become that, you know, has historically just been buying the product, right? And hoping that it works. But what the community offers is all these new ways to manifest that journey of transformation. You know, if I want to become more confident and I want to become more, comfortable, my skin another way I can do that is by responding to somebody's request in the Glossier Reddit community and giving them helpful feedback, and then being rewarded by the community with a ton of likes.

00:03:29:14 - 00:03:49:23

That's making me feel confident in this group of like minded people who I may not necessarily know on a personal level, but I know that we share similar interests because they also like Glossier, and so that community allows Glossier to increase that LTV surface area of that, that transformation, if you will, which is really what every brand is trying to do.

00:03:50:03 - 00:04:13:05

How do you think about measuring the effectiveness of a community? I asked, I was on a panel recently with Kevin from Emmy Eats, and, you know, they're leveraging their community to buy products when they launch it into a Whole Foods and to test new products out. But there's not a lot of structure in the same way that people traditionally think about performance marketing.

00:04:13:07 - 00:04:42:22

But to your point, earlier community in this sense of it is actually driving people to to rebuy and want to spend more time interfacing with the brand, which is, I would say, really impactful to performance. Yeah, community is this really tricky thing because it has a sort of inverse relationship with scale. And brands leverage community from everything from like new product development and research, from campaign activations, from content generation.

00:04:42:22 - 00:05:10:20

So the best communities really are peer to peer. And if I was to measure community, I would look at it as like community product, market fit. It would be some sort of like NPS exercise, which would be like, how do you feel this community no longer existed or to provide, you know, if I want to do some test, do some sort of gate gated paywall where it costs a dollar to stay access to this community, you know, obviously, you can clearly measure the engagement strength of the community with the number of posts and likes and comments.

00:05:10:23 - 00:05:37:05

So like to get really specific about that. That would be like figuring out where the brand has the highest density of community. And that's usually on social networks, right? Like Reddit, Facebook, Instagram and then determining how much engagement they have like as like yeah. So now so I've done is like, I would say the main platforms for community are, Reddit, a Facebook groups, discord.

00:05:37:07 - 00:05:54:01

And I would literally just go into these communities and measure the past called 200 posts, the measure, the amount of likes and comments each of those posts got, and then look at that as a function of the total size of the community. And so like what is the average and then how many posts were being posted a day.

00:05:54:01 - 00:06:21:11

So like what is the frequency that this community was posting on a daily basis? What is the engagement rate as a percentage of the total community size? What is the like rate? You can see how important that community is. One, how much they're rewarding each other for providing and sharing information and maintaining that healthy liquidity. And then to how much people are coming to this community on a daily basis, as it's providing them with some value.

00:06:21:14 - 00:06:43:19

That would be like the first order way I would go about it. The second order would be, you know, doing some sort of survey with the members of the community to basically try to figure out, I think the classic like determining product market fit survey question is, you know, how would you feel if you could never use this product again and you want to be at like sort of 60% very disappointed.

00:06:44:00 - 00:07:00:08

It's like to show that your product market fit. So I would have some sort of similar exercise with how would you feel if you can ever be part of this community again and seeing what point of very different disappointed the population is what brands are doing this really well right now? Yeah. I think, drones are a beauty.

00:07:00:10 - 00:07:21:01

Is doing community really well. So I think there's two sort of approaches that brands that I noticed. One is like sort of being hands on. So drones are a beauty. They have a Facebook community that is managed in admin by their sort of head of community, who's an employee of Johns Road, and it helps humanize the brand.

00:07:21:01 - 00:07:49:02

All the members of the community feel like they have this personal relationship with this woman who works at Johns Road, and then they have this shared community where they're like sharing pictures. You know, you have these women who are dealing with aging, dealing with loss of confidence, sharing these pictures of themselves, being very vulnerable and getting that sort of self-esteem and support from strangers because they're part of this mutual, sort of community, for lack of a better word, based off of this shared interest in this brand.

00:07:49:02 - 00:08:11:16

I think the other end of it is something like Glossier on Reddit, where it's not affiliated with the brand at all, and it's really, you know, shopper community run. And they're you have similar types of behavior existing. You have really honest conversations about the brand, things they like, things they don't like. And, you know, you allow for more of this decentralized ownership of the community.

00:08:11:18 - 00:08:34:07

I think the, the best ones tend to be in the beauty space. I think you see brands like Overnight Oats as well, which is like a breakfast staples company that has like a super engaged Facebook community. You have a brand like Beauty Pie, which is the beauty cosmetic company. So I think, you know, there are a number of, of brands are doing it quite well.

00:08:34:11 - 00:09:03:03

And basically all these brands it because it's, it's like their community is facilitated in the exact same ways. It's just forums where people can discuss and talk about the products. Yeah, I think there's different nuances to each community in terms of like the architecture, but for the most part it is essentially a exchange of people sharing experiences and and fresh information relating to the brand or unrelated to the brand.

00:09:03:03 - 00:09:28:00

But the common overlap everybody has is this mutual interest to the brand and to talk us through. So the post that I'm specifically referencing on your Substack, like what is the general thesis, which posts exactly the community online communities, what makes them tick? Yeah, I think the general thesis to that post is essentially we spending more time online, right?

00:09:28:02 - 00:09:58:20

As we are spending more time online, we are also finding less sense of community in these traditional sources that were historically analog think religious institutions, think alumni networks, think boys and Girls Scout or Girl Scouts, Boy Scouts. And so people are yearning for community. They're yearning for a sense of belonging. And, you know, brands are taking, you know, filling this new void.

00:09:59:00 - 00:10:32:09

I wouldn't say filling a completely, but or entering more prominence in this sense of identity. Right. Like you have the stereotypical like finance bro starter pack or a tech bro starter pack, like that starter pack is composed of brands, right? Like you can describe somebody's identity based off of what brands they shop. And so if you think of like the internet and online experience as this sort of just like endless territory where we try to find addresses of people of similar interest to us is more and more brands, right.

00:10:32:09 - 00:10:59:13

If I'm going to find somebody super interested in a high intensity interval training, I I'll go to 10,000 community. Or if I want to find somebody who's if I'm an older woman, you know, trying to upgrade my beauty routine and like trying to feel more to my life, like I'll go to Ginger beauty. And so the thesis there was, you know, recognizing that position brands are taking and then understanding the actual tech taxonomy of the community and the different use cases people are using for.

00:10:59:13 - 00:11:23:11

It's not just like, hey, I got this product and it's not working. A lot of it is sharing these posts that are highly social nature, whether it's like a selfie or a picture of your haul that doesn't really have anything to do in a purchasing decision, but gives somebody status and sense of belonging. Because they're looking for that online and they're looking for that in their life, would be talk about some of the different types of content that people post.

00:11:23:15 - 00:11:47:17

What's the general gist in terms of the different types? Yeah, I think like you can there's roughly like six different types I think you could look at on a spectrum from social nature to commercial nature. And the ones that are social nature are about sharing the ones that are commercial nature, about fasting. And so the ones that are highly social nature is, for example, I go into Jones Road Beauty and I share a selfie of me.

00:11:47:19 - 00:12:07:24

It has nothing to do with Jones. Her beauty has nothing to do with my buying of a product or helping me buy a product. For me, I'm just sharing the social post with this feed of people that has been filtered in a way that gives me more trust, and what I want in return is likes and comments, because that is a form of social capital that makes me feel good about myself.

00:12:08:04 - 00:12:26:14

Right. And the and to that person, what they're getting at value out of. It's sharing this work this time and energy and getting that social capital in return on the opposite end, and that those are the posts when you look at it. Get the most likes and get the, most amount of comments. So they're creating a lot of value for the community.

00:12:26:16 - 00:12:51:18

And the community recognizes this sort of vernacular that you reward these types of posts with likes. On the other hand, you have these highly commercial posts which have really nothing to do with social capital or status. But it's like, hey, I have dry skin. Should I get the vitamin C serum or the exfoliator? There's no sort of status or sense of belonging tied to the person.

00:12:51:23 - 00:13:15:13

The value creations from requesting information from the community, not sharing information. People respond with comments. You don't see a lot of likes, and that's requesting work from the community. That's helping, that's directly helping that purchasing experience. And so I think in between, you have sort of a variance of sort of social and commercial nature. But I would say it exists on that spectrum.

00:13:15:15 - 00:13:41:02

Is it natural to assume, like people who come to the kit come into the community, they come into it for those transactional posts, like trying to understand what products to buy or if the products are any good, and then the more that they interact with the community, they lean towards the other spectrum where it's very social based and they're generating some other sort of utility from the community that you would get from a social setting, although I'm not sure about.

00:13:41:02 - 00:13:59:17

So when you think of like the commercial nature, the the value is consuming information, right? And a lot of people can find information that, you know, I have a question about this product formulation. There's a good chance somebody else had that question and it was already answered. And so all I have to do is just consume that information.

00:13:59:19 - 00:14:22:14

So I'm not sharing anything. But on the social side, the values from sharing and producing information, I only get value from sharing a photo of myself or of my haul that is unique and tied to my identity. There's no way I can consume somebody else's and get that same value. So I think what you see is people coming to these communities, they're consuming the content, they're gaining more trust.

00:14:22:16 - 00:14:50:05

They're, you know, breaking down these stigmas that may have existed on other social platforms. And then, you know, the vast you know, when you look at the distribution, a lot of these are posts are much more highly social nature. So I think people are coming here for those social types of posts because they only exist here, you know, you can find information regarding that helps in your purchasing decision anywhere, but you can really only share those types of social posts in this specific community.

00:14:50:07 - 00:15:12:06

That's like really where the product market fit for it exists. And so is this just like a natural progression, like both Jones Road and Glossier, for instance, they have this exact same spectrum at first. Yeah, I think like and I analyze this across a handful of communities. I think it's sort of a, mutually exclusive, completely exhaustive way to look at the different use cases of community.

00:15:12:11 - 00:15:35:22

I think different communities have different distributions of those. They roughly are what I found to be more transactional and more social, whatever. Yeah. But I would say roughly, it's by and large what I've seen is like relatively consistent depending on the community. And I think you can look you can measure the health of the community by the proportion of social and non transactional content shared.

00:15:35:24 - 00:16:01:10

Let's say the most healthy communities are not commercial and transactional nature, but create trust and create the sense of belonging that people feel safe to, to share vulnerable photos of themselves or vulnerable stories or moments of their life that are not related to, you know, buying a product. And so for when you think of yourself as an investor, like how important and critical do you feel community is to like the value of a company, especially now?

00:16:01:14 - 00:16:35:20

I would say the, you know, when you're investing in a consumer brand, as I mentioned before, it's very hard to find defense ability, you know, great technology companies, their products necessarily might not be defensible, but their network effects are so many ways. Community is the closest thing that brands get to creating network effects. Right. And if I am putting myself in the position of a acquirer, you know, very rarely are you acquiring a product formulation or a manufacturing supply chain.

00:16:35:20 - 00:17:02:14

Often you're either acquiring, distribute often, or you're buying the community as the asset. And often community unlocks distribution. So many ways, I would say if I was an investor right now, it'd be a pretty critical part of my thesis. When investing in consumer brands and in very crowded categories, just because I think it has a higher it's a much better signal for success than than not.

00:17:02:20 - 00:17:29:10

Basically a signal for how much of a brand moat and a brand moat that you have. I think especially when you look at how consumers just basically switching costs are near zero right now, especially like when you look at marketplaces, for me to switch to another product that competes, it's just incredibly easy. It's the reasons that I buy that product is, you know, psychological, cerebral.

00:17:29:10 - 00:17:49:21

And a lot of it comes down to, the, the community to at least why people repurchase, which is, you know, where there's a ton of profit and CLV driven for businesses. Yeah. And if that makes sense, part of the reason I like buying Glossier is not just to like, use and wear the product, but share me using and weighing a product is community.

00:17:49:23 - 00:18:09:02

And then there's this alternative brand that is the exact same product formulation, or even better, but doesn't have that community. It's really difficult for me to switch that, because I'm not going to be able to share that alternative brand in this community, and there's not going to be anywhere for me to gain that value that I've come to expect and to really value, in that set of behavior.

00:18:09:07 - 00:18:32:05

Yeah. And that it's, it's self-reinforcing. Something that you touched on earlier and that I thought was really interesting is buying and wearing products as like social signaling. And that reinforces the reason why you buy certain products. Can you talk a little bit more about that? Yeah, I think, you know, I'll, I will focus there specifically to, to help this discussion on fashion.

00:18:32:07 - 00:19:02:05

When you think about fashion, we are fashion is essentially the expression of taste through clothing. Right. And every person wears clothing right. In the real world, it is a universal behavior and which means that there's zero friction or production costs, like doing this behavior doesn't cost anything for me to wear clothing. And then you have this like built in distribution of me going to work, walking around, showing off what I'm wearing.

00:19:02:07 - 00:19:26:03

And so when you think about fashion in the real world, it provides this sense of status of, hey, I am choosing which clothing I wear because that is an expression of my taste and a high value, a high status attribute of somebody's characters have good taste, right? Especially months fashionable circles. The the real form of wealth is to be esteemed with good taste.

00:19:26:07 - 00:19:52:06

And so you have a lot of social signaling when it comes to the clothing you wear. And brands become really important of that because brands sort of capture taste. Right. It is sort of, in my opinion, low taste to wear a Gucci belt. It might be high taste in a different circle, but there's reasons why that's low taste and there's reasons why that allows me to make a judgment of essentially who you are as a person in some, some facet.

00:19:52:08 - 00:20:27:09

What's interesting is when you think about, you know, our behavior online, we don't spend any time wearing clothes, right? We do not have this universal behavior that every single time we open up our digital identity, we are wearing clothing and getting dressed. And so when you think of like the time spent expressing our tastes through clothing in the offline world, we spend very little time, you know, digging through the racks of this store and, you know, filtering what we like and then a bit more time buying the products and then the most amount of time wearing the clothing, it's sort of the inverse online.

00:20:27:09 - 00:20:58:20

We spend a ton of time digging across the internet to figure out what we like to spend a little bit of time of buying the item, and then we spend very little time actually wearing clothing online. Maybe we express our clothing through an Instagram post or an Instagram story, or by sharing links to friends. And so, you know, there is this very weird dichotomy of how we are gaining status and social capital through our fashion tastes online.

00:20:58:20 - 00:21:27:14

And there's sort of this is really opened opportunity to figure out what you're wearing in a digitally legible way. The way that you project that, though, is it's basically on social channels, Instagram, TikTok, like, that's that's how you know what you're talking about. And judgments are made right now. Yeah. Right now, because those are the places like what is important for you to express your fashion.

00:21:27:16 - 00:21:50:20

One is like, you need to be seen, right? Like you need to actually somebody needs to know that Sam's wearing those clothing and you need to be seen by people you care about. So really, like the only places that we are being seen online are on Instagram and TikTok. Those are the only places on Facebook that we're, like, actually sharing photos of ourselves or videos of ourselves.

00:21:50:22 - 00:22:16:06

And because of their distribution in their reach by and large, they have, you know, a lot of people we care about. But the express intent of those places aren't necessarily fashion or to like, express taste through clothing. In many ways it's invert. People find it very cringe to like, tag a brand or like post what you're wearing. And because it feels very like contrived and like you're trying to be an influencer and it's not candid.

00:22:16:08 - 00:22:40:21

So there's not that same sort of like digital behavior or universal behavior, you know, often I may post an Instagram story. I may post Instagram once every three months in a story, you know, three times a week where I'm wearing clothing 24 seven. And so the actual maximum social capital I can get online is significantly lower than what I can get offline.

00:22:40:23 - 00:23:05:19

Question is, is there a new type of behavior that can allow you to express your taste through clothing, similar in a way that wearing clothes does offline? That is universal, right? Like everybody's doing it and it's zero production costs. He doesn't take any time and effort that like a photo or video does. A lot of people can't separate what I look like from what I'm wearing on Instagram.

00:23:05:21 - 00:23:42:20

Instagram's all about making the best version of yourself, looking the prettiest, making your life seem the most idealistic. So I might not post a photo of what I'm wearing because I don't look that good. In the real world, you can't help but what you look like right? You can't fake it. And so is there a way that you can have separate what you're wearing from what you're looking like, which lowers the production costs and, create a new digital behavior, a new digital norm that starts to have some of the features that, like wearing clothing in the real world, looks like so you brought what, not into the equation.

00:23:42:20 - 00:24:10:22

I'm just curious how you view whatnot. And then also with what you're talking about, like, distribution needs to be, like pretty, pretty large, right? To have that action be reinforcing in the same way that it is when you're kind of wearing clothes and interfacing in real life. I'm just curious how you're thinking about that. Yeah. So I think whatnot when you look at like a network or a marketplace, they have like an atomic value swap or like a value exchange, right?

00:24:10:22 - 00:24:41:00

So like I am producing, I am spending time and energy producing some sort of work that another person finds valuable or reward me with, with whatnot. But you're seeing these sellers, you know, spend time and energy producing these live streams. And the reward for whatnot is financial capital. If I do a really good job producing a live stream of me opening up a new, you know, trading card pack, people will buy it and I'll be rewarded with financial capital.

00:24:41:02 - 00:25:06:12

Instagram on the opposite end is like the reward of social capital. If I do a really good job producing an Instagram video, I'll get rewarded with likes and followers. I think fundamentally the value of change is is different with what not. It is finance, capital, nature, not social capital. And so it's not a place when you think about like wanting to express taste through clothing and running through depressed fashion, that is, you're trying to get social capital and status.

00:25:06:14 - 00:25:36:20

You're not trying to get paid for doing that. And I think what whatnot has done is they're distribution mechanisms, basically what I'm showing and why it's based off of, for the most part, like an interest graph, it's not showing me based off of my friends that are on it. And in many ways, the value proposition is based off of, you know, I think you can look on the spectrum of speculation, the sort of spectrum of online shopping networks.

00:25:36:22 - 00:25:56:08

Right? You have that social capital versus financial capital spectrum. We also have this sort of source of what I call like the entertainment unit. It's like, what is the actual entertainment value somebody is getting from consuming that content on that network? And on one end you have that's one, and on the other end you have tastes like whatnot.

00:25:56:10 - 00:26:25:20

I am consuming content and getting value because I am speculating many times on like what the item will be in the price card. And I am in many ways gambling and I'm getting value from like that gaming mechanics of that content type. On the other end is, you know, the entertainment unit being tastes where I am following somebody on Substack because I really value their tastes and like I want to see what links and clothing pics they're, they're getting.

00:26:25:20 - 00:26:45:21

And that is the entertainment value. I'm arriving from them. And in many ways, the value proposition there is discovery is not actually a sales channel where I'm buying the item or the value proposition of whatnot is that sales channel where I'm getting to speculate and then buy, directly in the app? The, the sort of item that I'm speculating on.

00:26:46:01 - 00:27:21:23

Yeah, that makes sense to me. So in terms of like what you're envisioning, where where's the opportunity and where does it make most sense for fashion? I feel like it's obviously taste. And that's where you're that's where you're building social capital. Right. The more tasteful you are. Yeah. Perceive taste. Yeah. I think like the fundamental issue with fashion and online shopping is has to do a lot with discovery and, you know, we have this sort of unstructured, disparate flow of information across many sources when we like, try to shop online tightly unorganized.

00:27:22:02 - 00:27:57:10

There's a ton of information overload. And at the same time, we don't really have a place where we can express our taste through clothing and gain social capital from and then discover a new clothing based off of our friends and and social graph while also blending in, you know, our preferences and interests. So if you can somehow figure out how to make what you're wearing or where you like to shop digitally legible and create a core behavior where people are expressing that and then you can build around that.

00:27:57:12 - 00:28:20:08

A ecosystem that is focusing on social capital, rewards and connections based off of people expressing their tastes and connecting with other people based off their similar taste. I think you thereby can solve the discovery problem, right? If everybody's showing what they like to wear, where they're shopping, then you have this supply of content that I can show to the next person.

00:28:20:10 - 00:28:41:20

Be like, hey, these are things I think you would really like to shop because you and Lucas are friends who you and Lucas are very interesting. Similar and similar to how social media feeds are constructed. I think that is the opportunity space when it comes to clothing and in fashion, online shopping. There have been other attempts, though, to make like shopping more of a social experience.

00:28:41:22 - 00:29:16:12

Have you kind of research these? Yeah, I think there's been attempts to they're startups are incredibly difficult. There are a thousand points of failure. And so being successful requires tremendous precision and thoughtfulness and luck. I think there have been attempts. I think the attempts have either been focusing on the wrong core action. Right. Like what is that thing that people are using to create value through the the network or the platform, or express their taste or discover new content?

00:29:16:14 - 00:29:52:21

I think there have been failures of the distribution feats, like how are people discovering new things? What is the mechanism that is driving that discovery? I think there's been failures of go to market, focusing on the wrong vertical. When I look at a lot of the sort of social commerce space today, the value proposition seems to be some sort of more interactive format of content, whether that's live streaming or video, and then relying on creators to then be affiliates to sell you things through these content formats.

00:29:52:23 - 00:30:13:14

Problem with that is it has like really low trust because people aren't stupid. They recognize that these are affiliates. These people don't actually maybe love these products. They want to diligence them more. And it's not personalized in a way that one. If I'm not following or being followed by my friends, I'm not actually gaining any social capital or status from it.

00:30:13:16 - 00:30:39:06

I don't care if any random people are following me and to I'm not actually finding things that are unique and I wouldn't be able to find anywhere else. So I think it's the the truth has been that like a lot of social commerce platforms are just these sort of like marketplaces that are wrapped in new content formats and are just sales channels where the value proposition has to be, in my opinion, in discovery.

00:30:39:10 - 00:31:11:16

Yeah. How do you facilitate those interactions? That would it and I'm sure this is like a thesis for a platform. Right. Obviously that's why we're talking about it. Like where does that go down in a similar whatnot type environment like a two sided marketplace like that. So like when you think of any like network or any network, it is a marketplace of content, like what is causing me to see the content in my feed and think of it like you have this universe of planets, right?

00:31:11:16 - 00:31:32:24

And like you have this force that causes them to come together, give gravity right that are bringing these plans together. And sometimes networks construct those forces that cause content types to come together based off of your social graph, which is basically like, you're my friends and here's who I follow. This is what the old Instagram was. I will only see content based off of the people that I follow.

00:31:32:24 - 00:31:59:16

I only see content on my Facebook feed based off of my friends. That does a good approximation of like showing you content you are. They have a high approximation that you're like, that's the job of any network. It's, hey, I want to show you content that we think you'll like. With the advances in machine learning and AI, you've seen the progression into more interest graphs like TikTok, which is like I can learn a lot about what we think you like based off of your behavior on our platform.

00:31:59:18 - 00:32:19:17

And I'm showing you some random content, and then you telling us through your gesture of liking it, not liking it, commenting at how much time you spent watching it so that we could put you into these personas, be like, okay, Lucas is persona X, Sam is also persona X. Sam. Watch this video and really liked it. We think Lucas will like it.

00:32:19:19 - 00:32:40:05

So that is that interest graph based feed. And then you have sort of a chronological feed, which is like we're just going to show you the most recent shit, I think for the fashion specifically, it needs to be a hybrid of the social and interest graph. You want to show people new fashion items based off of their style graph, right?

00:32:40:05 - 00:33:14:08

I have a specific sense of style. There are other people in the world with my sense of style. There's a good chance that whatever they are wearing, liking, shopping, what have you, I will also like and I will gain value from discovering. But you also want to have that social graph, because I want to express my style and this ancient human behavior of gaining status from what we're wearing and expressing our tastes through clothing that needs to be done within a confine of people that I care about, and whose likes and comments I actually find valuable.

00:33:14:10 - 00:33:50:09

Right? Yeah, I think that for me, the challenge has been like getting discovery right. I think that's what TikTok does so well is like discovery has been, has been exceptional. And it's like finding the balance between both of those graphs. How do you tie this sort of discovery like back to to community. And and if this is like it, would this be like an affiliate platform for a brand or do they actively facilitate, you know, these sort of transactions between their consumers in the same way that they're facilitating communities?

00:33:50:13 - 00:34:16:07

Yeah, I think so. Starting with your second, second part of your question, I think any affiliate model inherently dilutes that value proposition. It hurts trust. It makes a thing. But that's at scale, though. Like, is it it's almost like inevitable that people are going to take advantage of it. Depends discovery. Yeah. I mean, it depends on the sort of culture in the same way that it's happening with TikTok right now, too.

00:34:16:09 - 00:34:41:10

Okay. Right. And that is a function of the business model of the platform. Right. Like TikTok. So to begin with, like what makes good discovery, there are a few things. One is you need to have a consistent way through. And this is the job of the algorithm to figure out what somebody is most likely going to like, right?

00:34:41:12 - 00:35:05:15

You need to have a feed or an interface that you can show them that thing. So TikToks interface in their sort of innovation was their interface. And their feed is a single, full size, full screen inventory of content that forces that user to engage with that, which is providing information that TikTok can use to better learn what you may or may not like right?

00:35:05:20 - 00:35:29:11

And then thirdly, you need an abundance of content that I can then as TikTok crawl and say, okay, Lucas likes is this type of person. He will like this video. So you need that abundance to offer great recommendations. Just like Netflix needs abundance of movies to offer you great recommendations. And Spotify and the constrain is the scarcity of that.

00:35:29:13 - 00:35:51:11

And so when it comes to affiliates, and if you just focus on affiliates, you're inherently creating scarcity, constraining your supply, because not every brand has an affiliate model. Not everybody wants to create affiliate content for things. And so you're limiting the actual ability for you to show people things that they like, because there's just less things to show, which means that there's less things to learn.

00:35:51:11 - 00:36:17:13

What somebody likes. When you look at TikTok, no, TikTok's business model is advertising, and I think this is actually something Instagram got right and TikTok's getting wrong. When you look at like, commerce, it's really hard to package commerce into a, you know, you plug in a feed and brands are not natively creating content that will be discovered in your feed.

00:36:17:13 - 00:36:40:03

It's coming from other individuals and Instagram. What they realized when they rolled out Commerce and pulled it back is they're actually a unit of commerce comes at a cost of either a unit of content that is going to create consumer surplus for people, or a unit of advertising that is, people are willing to engage with because they're getting this other content for free.

00:36:40:09 - 00:37:01:11

And then Instagram is making money from that advertisment. So Instagram wanted to push commerce because nobody was actually going to the shop. Tab essentially had to advertise commerce in the feed. That means that they're either creating less value for their users or making less money from advertising. So they did the smart thing. They were like, you know what, let's not do this.

00:37:01:11 - 00:37:28:06

Let's focus. Keep the main thing, the main thing. Let's double down on advertising, driving discovery through organic and through paid advertising and maintaining the integrity of the feed. TikTok has less of a robust advertising network right they are once a part of, which is because they have less surface areas than Instagram. Instagram has reels, they have the native feed, they have stories of ads.

00:37:28:08 - 00:37:54:05

And TikTok instead is trying to focus on creating commerce. And then they're trying to focus on since AI the is not pushing brands as much, they're pushing creators the affiliate model to get more points of commerce in my feed, by having creators, you know, be these points of distribution, these points of sale, and it's basically just hard to like merge those two things organically because people are they're not going on to TikTok to discover products.

00:37:54:07 - 00:38:14:22

They're just going for entertainment and discovery knowledge. And when people do discover products, and this is what has caused a lot of issues to Facebook, they're not buying that instant right? They're discovering that product is not a point of consumer intent. They're like, oh, that's a cool shirt. Maybe I'll check it out later. And so they're not going back to TikTok to buy that thing.

00:38:14:22 - 00:38:37:14

They'll probably go to the brand site. So TikTok's not monetizing that. They could have monetized that. If that point of, you know, instant was a ad rather than a point of commerce where the monetization becomes based off of CPM and reach rather than transaction. So it's fundamentally just an issue of business model fit, which I don't think TikTok has figured out much to their their their dismay.

00:38:37:14 - 00:38:54:06

And I think Instagram wisely figured it out. What do you think? So what's your take on on tick tock, tick tock shops? You know, that they're rolling out and pushing for native commerce in the platform. Yeah, I think all of that surmises, or, you know, I think they you think they're going to have difficulty in future from management.

00:38:54:06 - 00:39:22:10

And I read recent articles that like, there's only 100 active TikTok shops. I think what TikTok shops, they're trying to create the theory like makes sense though. They're trying to create more signal like through advertising. So you can have more direct attribution in these closed loop ecosystems. But you're saying the premise that people would want to shop at a place where they haven't been trained or are expected to is, you know, inherently going to make it difficult?

00:39:22:12 - 00:40:09:21

I think getting it right, it makes sense from a ability to map attribution to then. Yeah, my better information on grow as and pricing. But I think as we have learned, that's fundamentally not how people shop or engage with shopping is on on social media, which inherently is going to cause the opportunity cost of shopping commerce to be very high and I think the the fundamentals leads me to believe that it's not going to be successful and have a similar type of, result, as you saw with Instagram, I think Instagram, you know, the the Instagram wisely like recognize that local maxima stop burning all that money on pushing commerce.

00:40:09:21 - 00:40:37:09

TikTok's doing the opposite. They're investing filament. They're testing all these different things, which in many ways I think is to their long term detriment. And what we're we're talking about is basically like the premise of the platform needs to be like shopping. So if you want to have something that is discovery based and entertaining, but you're going to to shop and trends are like that, that could be something in and of itself a bit.

00:40:37:09 - 00:41:02:24

But like when you think of all these platforms, when you think of Instagram, right? Instagram is essentially a bundle of different content types, right? You have, you know, again, using the spectrum on one end, you have highly social and entertaining. That's like showing me content from creators. I follow it from my friends. I like create the most utility for me because I either get to stay up in touch with Lucas and see what he's up to, which is like what I really gain value from Instagram for.

00:41:03:01 - 00:41:28:07

Or I get to follow this really cool, you know, new meme account. And they posted a video that I thought was really funny. Right? And then on the other end, you have highly commercial inventory types which are like that. I don't gain any value from seeing ads. In fact, it worsens the experience for me. But the the aggregate of them is a consumer surplus where I'm willing to see these ads and subsidize these ads because I gain a lot of value from the other ones.

00:41:28:09 - 00:41:50:17

What has happened with these new algorithm changes is actually 80% of. And then in between you have posts from like brand new car which are these forms organic marketing where brands posting natively in your feed and you see it because you follow them, or you have like a creator that's trying to like sell directly to you. And what you see is like 80% of your feed is is one of those popular card types, either from creators you follow, not your friends.

00:41:50:17 - 00:42:16:05

Creators have no relationship with you or its ads. Right? And so really, that's like the the bundled content type where I'm willing to engage with it. Shopping because it allows me to see this entertaining stuff for free. Right. And it provides the economics for Instagram to do so. But I don't know if consumers would just be on Instagram as of all shopping content.

00:42:16:07 - 00:42:40:20

I don't think that creates that much value for people. I think you need to bundle it with other types of content that people gain a lot of entertainment utility from, and in aggregate creates a, you know, pleasant experience where people thereby can discover new shopping. Thereby you can sell ads on that attention. But the sort of main thing and the core use case has to be the the entertainment of the users.

00:42:40:24 - 00:43:06:18

Yeah. Insightful stuff. I want to ask you really quickly on, like, have you been following Amazon and just like kind of the developments with Prime Video and CTV and tying that back to just what they're doing on the branded side to make that just like a powerhouse advertising channel? Yeah, I think like, video advertising has been talked about for, you know, almost like a decade now with like streamers.

00:43:06:23 - 00:43:39:09

I think what you're seeing is more hours of attention go towards streamers like Amazon, like YouTube TV, like Netflix, and also different types of attention, right? You're seeing news and sports go to these platforms, which inherently like have more points of disruption because they're sort of baked into those programing, like you sell a sports event and it comes with slots for ads, not like a Netflix show per se.

00:43:39:12 - 00:44:18:02

So I do think like there is a good business there for them to sell brand advertising. I would be way more skeptical for like direct response advertising when it comes from TV. Yes, because I don't think people are disrupting their, you know, entertainment consumption to go buy a product or tell Alexa to buy a product. I think what you could do is as you spend more time, essentially the goal of Amazon is like, we want to get more of your attention and where based off of where people show ads i.e. like sports, TV, movies, and then we want to get more of your consumption where people buy the things that they discover on ads.

00:44:18:04 - 00:44:34:09

So if Amazon could be in a position of showing me an ad for razor Blade while I watch Thursday Night Football, then I go to Amazon on Friday to buy said razor blade, then they can match execution, right? Yeah, I think that's like the goal. The question is how good are they? And showing me things and I'll like to buy.

00:44:34:11 - 00:45:06:03

And then am I going to go to Amazon to buy those things? Yeah. Awesome insightful stuff. Thanks so much for joining the pod. And yeah, it sounds like you're making a bit of a of a switch. And the answer that we should discuss there. Excited to hear more about that. But thanks for joining. Yeah, yeah, we, we have some really exciting stuff, coming down the pipeline that, we think are going to really reimagine your shopping.