Daily Consumer #24 - Summarizing Q4 2021 Advertising Performance for the Internet Giants
Plus the B2B commerce wave is fully underway.
Summarizing Q4 2021 Advertising Performance for the Internet Giants
Last week, most of the large internet companies shared their Q4 2021 earnings report. I like to read these reports to see how these businesses may be thinking about ecommerce specifically and to internalize how quickly they are growing and what that might mean for their customers, like ecommerce businesses, who are looking to grow their businesses via these channels.
What are the observations?
Google Search continues to grow very quickly despite its scale. It’s impressive when you compare the respective growth rates of these businesses. I would guess that Google is benefitting tremendously from the Apple privacy changes. Google Search is “pull-based”, meaning someone shares some intent and then ads are show around that specific intent. For example, if I search shoes, an ad for Nike shoes may appear. This is different than Facebook which has a “push-based” ad model. You go to Facebook to consume content shared by friends, family, and creators. Facebook has to guess what kinds of ads they should put in between that you might find appealing. The more they know about you, the better a job they can do. Especially when they know what ads you’ve clicked on and purchased from in the past. But it’s specifically this that has been disabled by Apple’s changes which is a big headwind to ad performance on Facebook.
Facebook saw decent growth this quarter but guided to muted growth of 3-11% in Q1 2022. Facebook cites a few trends as headwinds to grow its advertising business:
Increasing competition for users time and a shift of engagement towards video surfaces like Reels, which monetize at lower rates than Feed and Stories. (I inferred from this that Facebook sees TikTok as an ever growing threat.)
Ad targeting and measurement headwinds from platform and regulatory changes.
Macroeconomic challenges like cost inflation and supply chain disruptions may impact advertiser budgets.
Amazon broke out advertising as a separate business unit for the first time. It’s impressive scale for a business line that is only a few years old. It’s no surprise though given how prominent sponsored results have become on Amazon. The results to just about every query show sponsored items before organically ranked ones. This ad model is very similar to Google’s in that it is “pull-based”. It’s amazing to me that this ad rollout isn’t degrading the Amazon customer experience. It shows to me that Amazon’s core value proposition to customers is cost, speed, and reliability of delivery, not the ease of discovery and quality of product recommendations. This may be an open opportunity for a new commerce experience.
YouTube advertising continues to grow nicely for Google. However, YouTube also called out the trend towards shorter-form video as something that they need to adapt to, likely due to the threat posed by TikTok. YouTube is also focused on enabling commerce:
“We’re making it easier for viewers to buy what they see - and simpler for advertisers to drive action with innovative solutions like product feeds in Video Action Campaigns and emerging formats like live commerce.”
Snap had a record quarter in that it generated >$1B revenue for the first time and also posted a profit. Snap’s ad revenue is “push-based” and should theoretically see similar challenges to Facebook. The Snap management team put a lot of emphasis on continuing to work around the Apple privacy changes but admitted that it affects them less as Snap monetizes users at a much lower rate than Facebook and is much earlier on in its monetization journey. Similar to Facebook and YouTube, the Snap team called out the looming threat from TikTok and shared this specific note:
“TikTok is a unique challenge in that they have a privileged and protected position in the Chinese market that Instagram or Facebook or Google or us aren’t allowed to access. So, they’re able to take that protected position in the market and generate an excess return, because they don’t have to compete with us over there, and then reinvest that in the United States and Europe.”
Pinterest grew revenue modestly despite seeing a declining user base. The company commented on shifting its platform towards being video-first. I feel like Pinterest’s position is weakening over time though as its relatively small and declining user base will make it hard to grow the business.
I was quoted in a WSJ article about the 15-minute delivery space. I shared my candid view that it’s a challenging space to build a startup in.
BigCommerce, a Shopify-like ecommerce platform, is increasingly focusing on facilitating B2B commerce. “BigCommerce predicts B2B ecommerce will reach $1.8T by 2023, accounting for 17% of all B2B sales in the US.”
McKinsey shares some great perspectives on the state of B2B ecommerce. “For the first time, B2B sellers are more likely to offer ecommerce channel than in-person selling.” The B2B commerce wave is coming.
Provi is partnering with SevenFifty to build a unified marketplace for B2B alcohol commerce. “In 2021, Provi announced that 10% of licensed alcohol retailers in the US are now utilizing its e-commerce marketplace.”
Affirm launches SuperApp, a consolidated app for shopping, payments and financial services including savings. Affirm also launches a Chrome Extension that lets consumers use Affirm’s payment solution at almost any retailer’s website.
Online retail sales of physical goods is approaching $2T in China and now comprises 24.5% of total retail sales.
Visa saw $2.5B of payment volume last quarter from its recently launched crypto-linked cards. “Signals that consumers see utility in having a Visa card linked to an account at a crypto platform. There’s value in being able to access that liquidity, to fund purchases and manage expenses, and to do so instantly and seamlessly.”
Luxury brands are working to appeal to a new generation of crypto-rich consumers. “Fendi just teamed with Ledger, a maker of hardware wallets for securely storing crypto assets, on branded accessories. Philipp Plein announced last year that it would begin accepting cryptocurrency as payment. Brands such as Gucci and Dolce & Gabbana are releasing NFTs.”
Mondelez, the food conglomerate, shares that digital commerce now accounts for 6% of total revenue, up from 3% in 2019.
UPS saw Q4 2021 revenue grow 11.5% YoY to $27.8B which beat expectations. Cited express shipping for online shopping as the driver of the performance.
LVMH saw 2021 revenue grow 44% YoY to $71.5B. “The significant growth points to the enduring appeal of LVMH’s rarified products, as well as the unwavering demand for them. Fashion and leather goods, in particular, performed exceptionally well last year.”
US online grocery sales reached $98B in 2021 with >70% of US households receiving 1 or more orders during the year per Brick Meets Click’s survey.
Savage x Fenty launches live shopping on its ecommerce store. “Online viewers were able to shop the performers’ looks as the show went on, including the brand’s newest Valentine’s Day collection and its collaborative collection with the artists.”
There is a huge “gold rush” for warehouse space. “There is limited inventory of industrial space. It is almost evaporating before your eyes, if you are even lucky enough to know about it. Companies are grabbing warehouses with 50% more space than they need. They are lowering operating margins just to increase infrastructure so they have it.”
Fedex is partnering with Microsoft to improve the customer experience for package recipients and returners.
The Federal Reserve did not increase interest rates in their recent meeting but guides towards doing so in March. The key question is how enduring inflation is as supply chains adjust to the latest state of the pandemic.
Consumer sentiment in January fell 4.8%, sinking to the lowest level since November 2011, according to The University of Michigan’s consumer sentiment survey.
A recap of US ecommerce performance in 2021 broken out by category.
Amazon is increasing the price of Prime membership from $119 to $139 per year, the first hike since 2018.
GoPuff launches its own line of private label products. Delivering something in 15 minutes is hard to do profitably, so GoPuff is turning to its own products to make more profit per order (a tactic that all major retailers similarly incorporate).
A great profile on the emerging global trend of conversational commerce. In many countries, stores don’t have websites instead relying on Whatsapp to interface with customers.
Bytedance, the parent company of TikTok, launches a metaverse social app called Party Island. Allows users to create avatars, join virtual events like concerts, and chat with other participants.
Sneakers and Streetwear.
Uniqlo is launching clothing repair in select stores.
Instacart is enhancing its advertising capabilities in-app with the roll out of brand pages and display ads.
Trust and Safety.
Wish.com, a large global marketplace for goods, is switching to being invite-only for new sellers. Wants to improve the quality of products.
Amazon kicked a lot of disingenuous Chinese sellers off its marketplace last year. Now they are flocking to Walmart’s marketplace.
Ebay is now authenticating trading cards when they are sold on the platform. Reported $2B in trading card sales in the first half of 2021.
Roku is experimenting layering ads on top of live TV streams. Digital TV, versus cable, will allow for many new ad formats to emerge and will allow consumers to buy products in a few clicks.
Funding and Exits
SheIn is rumored to be going public.
Win Brands Group acquires Love Your Melon, a mission-driven lifestyle brand focused on beanies.
Skims raises $240M from Lone Pine Capital at a $3.2B valuation for its bodywear and loungewear brand created by Kim Kardashian. Shapewear is now less than 20% of revenue while underwear is the largest product category for the brand. “Sales grew 90% to about $275M last year and are expected to hit $400M in 2022.”
Savage x Fenty raises $125M from Neuberger Berman for its lingerie brand created by Rihanna. “The latest funding will support the fashion company’s foray into brick-and-mortar retail, plans to expand overseas and the launch of new product lines. Since its inception as a direct-to-consumer business in 2018, Savage X Fenty has seen a revenue CAGR of 150% each year.”
Famille C, which owns Clarins, acquires Ilia Beauty, a clean makeup brand. Ilia Beauty generated $100M revenue in 2021, up from $30M in 2019. Ecommerce accounts for 50% of revenue.
Peloton is rumored to be exploring a sale with potential bidders including Nike and Amazon.
Food and Beverage.
Redefine Meat raises $135M from Hanaco Ventures and Synthesis Capital for its 3D-printed plant-based steaks.
Athletic Greens raises $115M from Alpha Wave Global at a $1.2B valuation for its nutrition-focused powdered beverage product. The company was previously bootstrapped to $150M in revenue run-rate and is a leading subscription commerce brand.
Chomps raises $80M from Stride Consumer Partners for its better-for-you beef jerky brand. “The brand generated more than $100M in retail revenue over the past year.”
Waterdrop raises $70M from Temasek for its water flavoring tabs.
Purely Elizabeth raises $50M from Semcap for its nutrition-focused breakfast foods. “Over the last five years, Purely Elizabeth has grown significantly with a 55% CAGR.”
Zero Acre Farms raises $37M from Lowercarbon Capital and Fifty Years for its eco-friendly vegetable oil made from fermentation.
Olipop raises $30M from Monogram Capital Partners for its functional soda products. “Olipop anticipates achieving a $100M run-rate by the end of 2022.”
La Vie raises $28M from Seventures for its vegan bacon product line.
Kencko raises $10M from Siddhi Capital for its plant-based, blender-free smoothie products. Has nearly 360K members.
Black Sheep Foods raises $5M from AgFunder, Bessemer Venture Partners, and others for its plant-based lamb products.
Cowboy raises $80M from Exor, HCVC and Siam Capital for its electric bike brand. “Is on track to reach 100K riders by 2023.”
Moglix raises $250M from Alpha Wave Global at a $2.6B valuation for its India-based B2B marketplace matching industrial manufacturers with customers. Counts manufacturing giants such as Hero MotoCorp, Vedanta, Tata Steel, and Unilever among its customers. Has 16K suppliers, over 40 warehouse, and 700K+ SKUs on its platform.
Renorun raises $142M from Tiger Global for its ecommerce platform for construction and building materials. GoPuff for construction materials. “Has grown at least 3x each year since its inception in 2017 and has served more than 10K customers.”
Cheetah raises $60M from Manna Tree for its restaurant supply delivery service serving independent restaurants in the US. “Has developed working relationships with over 10% of all Bay Area restaurants.”
GrowSari raises $45M from KKR for its Philippines-based B2B marketplace that connects 100K+ SMBs with all the suppliers they need including wholesalers, working capital providers, and more.
Novi raises $40M from Tiger Global for its B2B marketplace for sustainable, innovative ingredients and packaging, helping its thousands of customers bring products to market with more sustainable materials. Customers include Croda, Grove Collaborative, Sephora, and Target.
Retailo raises $36M from Graphene Ventures for its Middle-East focused B2B marketplace allowing SMB retailers to order all their products at better margins, instead of making multiple calls and visits to wholesale markets. Also offers credit lines and BNPL services.
Order.co raises $30M from Stage 2 Capital for its guided B2B marketplace with embedded fintech. Is facilitating $500M+ of commerce annually.
Inventa raises $20M from A16Z and Monashees for its Brazil-focused B2B marketplace connecting SMBs with inventory suppliers and offering working capital financing. “Offers >7K products from 400 brands and has amassed more than 20K customers.”
Sooper raises $6M from Kaszek and Canary for its Brazil-focused B2B marketplace that matches construction material suppliers with retailers. Has 15K+ items on its marketplace. Resembles Faire in that Sooper also provides working capital financing.
Farfetch acquires Violet Grey, a prestige beauty-focused marketplace that is estimated to do $20M revenue annually.
Bokksu raises $22M from Valor Siren Ventures at a $100M valuation for its Japanese snack subscription service that has delivered >1M boxes in >100 countries.
Zero Grocery raises $12M from Sway Ventures for its sustainable online grocery store offering eco-friendly free deliveries in less than two hours.
TRLab raises $4M from Pace Gallery and others for its curated NFT art platform for discovering, collecting and interacting with the world's leading artists.
Swiggy raises $700M from Invesco at a $10.7B valuation for it’s Doordash-like marketplace in India. “The startup nearly doubled its food delivery business’ gross order value. Instamart, Swiggy’s instant delivery service, is set to reach an annual GMV run rate of $1B in the next three quarters.”
Zapp raises $200M from Lightspeed Venture Partners, 468 Capital and BroadLight Capital for its 20-minute delivery service that relies on a network of dark stores. Currently operates in 7 European cities.
Gorillas acquires Frichti, a 15-minute grocery delivery service in France and Belgium that has 450K+ customers and 25 fulfillment centers.
Dealshare raises $165M from Tiger Global and Alpha Wave Global at a $1.6B valuation for its India-based, grocery-focused social commerce marketplace. “Our revenues and customer base have grown 13x in the last year. With a strong customer base of >10M, we have expanded our geographical presence to over 100 cities across 10 states.”
Brimore raises $25M from International Finance Corp. and Endure Capital for its Egypt-focused social commerce platform that resembles Meesho. “Has created a network of nearly 75K resellers in 27 Egyptian cities, many in rural and remote sections of the country.”
MNTN raises $119M from BlackRock and Fidelity for its self-serve ad marketplace that allows brands to easily buy, launch, and measure connected TV ad campaigns across 150 streaming networks.
Channable raises $63M from Partech for its multi-channel management software that is serving 6K customers and processing 55B items per day across 2.5K channels.
Soona raises $35M from Bain Capital Ventures for its virtual content creation platform that is used by ecommerce brands to quickly and easily obtain marketing assets for their products. “Currently serves more than 8K brands like Lola Tampons, The Sill and Wild Earth. The company grew more than 300% in 2021.”
Lula raises $5.5M from Ripple Ventures, Outlander VC, and others for its ecommerce platform that enables convenience stores to sell their products on digital marketplaces like Uber Eats, Doordash, etc. Convenience stores == dark stores?
Cart.com raises $240M in equity and debt from Legacy Knight Capital Partners for its vertically-integrated ecommerce platform that offers everything from the online storefront to the logistics services needed to operate an online ecommerce business. “Cart.com has processed more than $3B in GMV over the last 12 months.”
Elastic Path raises $60M from Sageview Capital for its suite of ecommerce APIs allowing customers to build more customized online stores. Works with enterprise customers including Konica Minolta, Harper Collins, Orgill, and DMSI.
Salesforce acquires Atonit, a marketplace management solution designed to enable brands to build and scale an online marketplace and provide infrastructure (such as reviews, payments, or messaging) to facilitate a transaction.
Nfinite raises $15M from USVP for its software for retailers to create, display, and manage unlimited product visuals through one interface.
Woflow raises $7M from Base10 Partners and Construct Capital for its menu management software for restaurants. Allows menus to be standardized as restaurants put their inventory on many different marketplaces.
Pattern acquires Amplifi.io, a leading product information management platform used by Roland, Toshiba, Targus, KÜHL, and Skullcandy.
Archive raises $8M from Lightspeed Venture Partners and Bain Capital Ventures for its software to help retailers create their own resale marketplaces. Is used by The North Face (Canada only), Oscar de la Renta, and 3 other brands today.
Deliverect raises $150M from Coatue and Alkeon Capital at a $1.4B valuation for its online ordering software for restaurants. Has processed >100M orders to date. Is used by large global chains such as KFC, Chipotle, Le Pain Quotidien and Outback Steakhouse.
Lunchbox raises $50M from Coatue for its online ordering software for restaurants. Currently works with more than 100 mid-sized brands including Bareburger and Fuku.
Leap raises $50M from BAM Elevate for its retail-as-a-service platform that spins up and operates retail stores on behalf of brand customers like Naadam, Something Navy, ThirdLove, Mack Weldon, Lunya, and others. Has 50 stores across 30 brands.
Wonderment raises $6M from CRV for its intelligent shipment tracking and notification software for Shopify merchants.
Voyage raises $10M from RiverPark Ventures and York IE for its SMS marketing platform. Is used by D2C brands including Dragun Beauty, Homecourt, FLO Vitamins, Lokai, and more. Also announces the acquisition of LiveRecover, a human-in-the-loop messaging platform.
Chargebee raises $250M from Tiger Global and Sequoia Global at a $3.5B valuation for its B2B and B2C-focused subscription management software. Counts Goop as a customer.
The.com raises $4M from NFX for its website-building software that is built around “blocks”, which are components that are contributed by the community and can be easily adopted and re-used. Wants to enable ecommerce stores as well as other kinds of websites.
Zip is in discussion to acquire Sezzle.
Wayflyer raises $150M from DST and QED Investors at a $1.6B valuation for its data-driven lending platform focused on serving ecommerce merchants to help them finance inventory, etc. Is seeing average monthly capital deployments on the platform of $100M, up nearly 1,000% YoY.
Qlub raises $17M from Cherry Ventures and Point Nine Capital for its QR code-based restaurant payments product that is currently available in the UAE, KSA and India.
Starship raises $57M from European Investment Bank for its autonomous delivery service operated by proprietary robots largely on college campuses.
Passport raises $39M from TCV for its cross-border shipping services that includes door-to-door international parcel shipping with competitive rates and transit times to more than 150 countries, international regulatory, duty and tax compliance; international returns, and accurate door-to-door milestones on a branded tracking page. Is used by Kylie Beauty, Bombas, Native, and Ritual.
Melonn raises $20M from QED Investors for its Latam-based tech and fulfillment infrastructure to enable SMB ecommerce merchants to easily sell and grow across multiple channels such as Shopify, Instagram and Amazon.
Paack raises $225M from Softbank for its Europe-focused last-mile delivery service that is delivering several million orders per month and processing 10K parcels per hour.
Reliance Industries acquires a majority stake in Addverb, a maker of robotics to make warehouse operations more efficient, for $132M. Deploys robotic conveyors, semi-automated systems and pick-by-voice software.
Vecna Robotics raises $65M from Tiger Global for its autonomous forklifts for warehouses.
Product of the Week
The sustainability wave is just kicking off, and we’re starting to see some notable brands really focus on it. Fenty just launched a lipstick that has refillable packaging. Buy it here.