TV, merchant media and the unbundling of advertising — Benedict Evans

Shein shows one way this can go - it’s built a smartphone-only fast fashion brand that appears to be bigger than H&M and Zara combined in the USA. Part of the Shein story is the pace of inventory and the use of data (it claims to add 8-10k new SKUs every single day) but the other is that it has built this business with cheap shipping and (like ... See more

Amazon’s ad business is bigger than YouTube and more profitable than AWS. Shein is the biggest fast-fashion retailer in the US, with no stores. US pay TV subscribers have fallen by a third. Where do ad budgets go, where does rent go, and how many brands will there be?

Digital store fronts and apps can be ad inventory. There’s no a priori reason why you can only show ads next to ‘content’ - an ad in a physical store is not the same as an ad in magazine, but apps are apps.

But even if they don't (eg Uber) they still have all sorts of first party data that comes with some form of privacy consent, which makes it valuable in itself, but much more valuable as we go through the ‘cookie apocalypse’ and remake how online targeting is going to work.

US advertising has shrunk by a third as a share of GDP. This is some combination of internet advertising being vastly cheaper and vastly more efficient on one hand, and on the other a lot of recategorisation. If a car dealer used to buy a 20 page ad insert in their local paper, but now pays for one Google search ad (and how many people bid against ... See more

In 1995, if you had said “should we open stores in that state or just run TV ads there?” that would not have been a meaningful question, but now all of those budgets are merging into one TAM. Do you get a better ROI on Instagram ads or faster shipping? If you open a store in that city, do your returns go down? 

Many of these brands (eg Instacart) sit far down the purchasing funnel and so can sell very specific ads directly to brands…

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:

And, of course, the margin differential means that ad revenue that’s a small percentage of the top line might have much larger impact on the bottom line. At least, until everyone else tries the same…

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