The Great Unbundling

The difference in margin between e-commerce and advertising has become a much bigger story than Amazon: everyone from Uber to Walmart to Instacart is pushing into ‘merchant media’, and hiring at scale  

The difference in margin between e-commerce and advertising has become a much bigger story than Amazon: everyone from Uber to Walmart to Instacart is pushing into ‘merchant media’, and hiring at scale:

Said differently, if your business is standalone e-commerce selling third-party brands, good luck. You can’t generate enough operating profit to scale beyond getting noticed, counter-attacked, and at best acquired.

About five years ago, a revenue line buried in the back of Amazon's accounts started to get quite big. ‘Other revenue’ was over $4bn by the end of 2017, and if you looked at the notes to the notes, you discovered that this was ‘primarily’ advertising. By 2019 this had grown to $14bn, and I wrote about it here, pointing out that ‘Amazon’ was no long... See more

These companies follow a playbook originally written by Amazon: serve the needs of users within a single high-frequency purchase category, and use that category as a beachhead from which to expand vertically (brands) and horizontally (categories).

With the exception of a few larger volume sellers, Amazon is shifting away from the retailer model by limiting their wholesale partnerships to the most impactful partners. The rules of the consumer economy are changing faster than ever. Some of these changes have had dire consequences, especially for independent retailers and challenger brands. Thi... See more