Well Made

Web Smith: Converting Influence – Well Made E48

June 13, 2018 · RSS · Apple Podcasts

In his hyper curated newsletter, 2PM, Web Smith covers the latest ecommerce news, trends, and data insights happening in media and retail.

It’s been eight months since Web was last on the podcast and a lot has changed with 2PM. He launched a paid executive membership, hired a new editor, and is releasing their first series of original content. With the ecommerce landscape shifting beyond DNVBs, it’s the perfect time to loop back and answer some questions.

On this episode, Web predicts how brands will advertise amidst Google’s shrinking reach and Safari’s expected disruption of Facebook tracking (3:57). He shares the digital and physical content strategies brands will use to acquire new customers (7:25), and his own approach to finding a formula for success (8:03). He answers who will be the biggest advertising company by 2025 (10:35) and why platforms that control conversion and commerce will win (14:20). Web talks trends we’re seeing in content and commerce, and how the New York Times is getting it right (18:19). Stephan and Web discuss Patreon (19:55), affiliate marketing strategies that are and aren’t working (24:08), and the tension for creators to operate as a business without losing their perceived status (26:14). Web shares what he’s learned adding a paid subscription model to his free newsletter (30:22), and lastly, why for DNVBs, brand matters (33:37). Full transcript below. 

Give Web a follow on Twitter and subscribe to 2PM.

Also mentioned on the show:

Stephan Ango: You're listening to Well Made, a podcast from Lumi about the people and ideas behind your favorite online brands. I'm your host, Stephan Ango. Web Smith, welcome back to the show.

Web Smith: It's a pleasure.

Stephan: You're our second, second time guest. The other one is Jesse who is my co-founder. So, I feel like that barely accounts. So, that's pretty cool.

Web: I'm honored. This is a big deal to me. I love what you guys do. I talk about you guys all the time. Jesse's a hero to me, obviously to a lot of people, as are you. And so this is really, really special for me.

Stephan: And I just found out it's your birthday. So, happy birthday. I'm doing my best here, getting you on the show. I don't know if that's, that's not exactly the gift I would have made if I knew that it was your birthday, but it's great. Great to have you on.

Web: Thank you. It's my 35th today and I feel like I'm looking more and more like James Earl Jones every day.

Stephan: I've never made that comparison before, but now I see it. You just have to develop the deep voice.

Web: I'm working on that, I'll try it.

Stephan: So, if people don't know, you are the founder of 2PM. People might know 2PM links, your great email newsletter about the ecommerce world, which has now developed into a little bit of an empire. You've made it a paid subscription that has access to a few new resources. You've hired someone. Tell me a little bit about what's going on with 2PM these days?

Web: Sure, I have high hopes for my former hobby. I guess it's no longer a hobby. We are doing some pretty special things. We are constantly trying to build out the tools and refine them and add to them we're maintaining consistency from a curation standpoint and from an editorial standpoint. Meghan's been onboard for about three months. Someone I trust Dearly. Her and her husband are dear friends of mine and my wife and we have parallel careers and we just thought: Hey, this could be a really good fit. And it's turned out to be. She's very, very smart and she's very organized, which is helpful for me because I'm doing a lot at once and she's really good about telling me what I'm doing wrong and what I could be doing better. She is the director of marketing for an agency called Prestige Media and they handle several things that they do. They also handle Logan Paul's pay traffic and conversion. Although Logan Paul isn't the most cherished figure right now in the YouTube space, from a purely ecommerce standpoint, he's an eight figure player.

Stephan: Yeah.

Web: Annually. He's doing everything right when it comes to how creators are supposed to execute ecommerce. Anyways, I digress. 2PM is going really well with their help. We will be launching our first original content within the next three weeks. We're releasing a book by chapters over the next 12-weeks, starting July 6th and she is co-writing it with me.

Stephan: Wow. So, if anyone listens to this, 2PM makes a lot of sense for you to go read. It's just a great newsletter and now it's a resource. We've actually sourced a few questions from your readers and we're going to jump into that just like last time kind of doing a little bit of a roundup. This week we had WWDC and Safari has been updated with a big thing which is trying to curb a little bit of Google and Facebook's reach online with some new privacy features. What are you seeing there, Web?

Web: That's a good question. Nothing in the super short term, but the pendulum is swinging before you know it, in my opinion, the efficacy of those Facebook ads of Facebook's reach, of Google DFP and their ad server. It's going to drop off a little bit and vertical brands and in marketplaces are going to have to find a new way to reach top-funnel customers. We are being proactive on our end. We are working with individual vertical brands. Can't really name them yet, but we are working with a Common Thread Collective to establish a new form of top-funnel advertising to sort of offset what Facebook and Google does for these brands. And I'm really excited to get that up and running. I could talk about that if you'd like, but it's exciting to me. Might not be exciting to everyone else.

Stephan: Well, speaking of online brands in general, I think Facebook in particular has been a huge channel for growth. This thing that Apple is introducing is trying to make it harder for people for these tracking services to get a good picture of what you're up to online. But it still seems like there's not that much control over what you're going to do on mobile or what you're going to see on mobile. I wonder if how it's all going to come together. Plus a lot of these companies already have that data about you and probably can still sort of track you. I'm very curious about how effective that will really be. But it does seem like the pendulum is swinging in that direction.

Web: Yeah, you have to consider a few things. There's what's going on with the GDPR in Europe, right? Right now if you're advertising- Let's say you want to reach all female consumers between the age of 25 and 34, your reach has dropped tremendously in the past few weeks because Google is essentially not operating that ad server in Europe right now until they have the bugs fixed. You're seeing it from that perspective, obviously with the new OS and what Safari is capable of doing. A lot of people are going to opt-out of it. It's going to be sort of a mirror of what happened with advertising a few years ago where you were allowed to begin blocking ads within your browser. Same thing. You're going to see an influx of that tracking being blocked on the consumer side and that's going to affect the way that you spend on ads and the way that you expect your return. And so one of the things that we're doing to stymie that is we're developing a new, sort of traditional advertising mechanism based on some data that is pretty useful but will be served in real life through co-branded mailers and I can explain that later. But, we think it's going to be a really, really great experiment and we have two brands on board with a tremendous reach and we think they're going to do something that will begin to trickle down to other brands that want to reach new customers.

Stephan: Outside of advertising you have content marketing, you have a lot of brands who are experimenting with retail stores. What's the gamut of other possibilities if that starts to shrink or the other option is just, it's getting way too expensive for a lot of companies to do it that way.

Web: Yes. So I'll give you our example: Obviously you're going to see more and more retailers, more online retailers going to pop up route in the physical retail route. You're going to see a lot of traditional advertising, more more spend in magazines, maybe billboards, especially the digital variety. But what we're working on is, imagine you take a segment of brand A and you advertise brand B to that segment through in-package mailers. This is sort of right up your alley. We have two brands, one brand ships 50,000 packages a month, the other brands ships about 15 to 20,000 and the bigger brand is allowing the smaller brand to insert, let's say 15,000 mailers in their outgoing packages with call to action to interact with the brand online within 24-hours of receiving that package. We are formulating what we think the CTA is going to be and what the potential conversions going to be once that's up and running. And I think that's going to be really exciting for both of those brands.

Stephan: Yeah. Anecdotally, what I've heard from a variety of sources is that direct mail is making a comeback, which is kind of a crazy idea. I have been seeing them in my mailbox. You know, these DNVB notecard type of format things coming into my real physical inbox with photos of mattresses and things that I can buy on the Internet.

Web: Yeah. So imagine taking that one step further and you have another brand's promo within a brand's package that you trust. Right. So you're an ecommerce shopper. You like a brand that's adjacent but not competitive to the brand that will be featured in that package. We think that that is a formula for success. If 15-20,000 packages go out we expect action on anywhere between 500 and 2,000 of them.

Stephan: I'll be very curious to see how that works out. It will be really interesting to see in a few months. That sounds great. I think that we've been involved in a little bit of that with some of the companies that use Lumi and actually marketing their brand on the outside of the packaging or doing co-marketing on the outside of the packaging, which is interesting. We don't have a ton of data into how well that's working yet, but it's something. I'm trying to think of an analog in the non digital world, but one of the other questions that came through from the 2PM listeners was: Who do you think will be the biggest advertising company in 2025? And I actually did a little bit of a research on this one just to kind of refresh my memory on what the numbers are right now. If you look at the top 10, basically like Google and Facebook are way ahead of everyone with Google being around 37% of all digital spend in the US than Facebook at 20%. And then you have like Microsoft, Verizon/AOL, Amazon, all around 3% and then you've got Snapchat and Twitter. Twitter down at 1%. But the only ones who are actually going up right now are actually Amazon and Snapchat, which is kind of interesting.

Web: Correct. If I had to be audacious, I would say Amazon is going to be the number one.

Stephan: Wow. By 2025. You think

Web: By 2025, I think the safer bet is probably Google. I think that Facebook's gonna suffer a lot more than Google will over the next few years when it comes to privacy issues, but I do expect Amazon to be number one or number two. They are growing so fast in the advertising department year over year. Again, as Amazon continues to monetize their search, which they're not really doing quite yet. It's going to be real boon for growth right now. If you're searching for something online, 60% plus of those searches are on Amazon.com and they have yet to really monetize that. Time will tell, but that's not too audacious of decision.

Stephan: Yeah. I tend to agree with you that Facebook is going to be hurt a lot more than Google. I'm on the other hand, I think that Facebook might be able to stem a little bit of that through Instagram. That's been the biggest area of growth for them. Amazon, I think this sort of dark-horse like what's going on there is what are they going to do about monetizing Alexa, because that's a huge area where there's already some rumblings of paid placement on Alexa. Have you seen anything there?

Web: I haven't, but just to add onto what you were just saying, here's the difference between Amazon's data and let's say Instagram slash Facebook data. Obviously, Facebook is using cookies to track you across the web, whereas Amazon is focusing on what you're purchasing. They're building a profile on you based upon what you actually convert on. I think that moving forward over the next three to five years, that information is going to be far more valuable than what you're searching or what you're looking at across the internet. As the traditional data that we're experiencing now or that we're giving up, two companies now begin to be cracked down upon. It's Amazon's data that we'll have the premium and that will be less invasive and more acceptable moving forward and Instagram doesn't have a cart. Facebook doesn't have a cart, they don't control commerce at all. I think that's the advantage and I think that's what you're going to see playing out moving forward, but obviously Alexa's a huge opportunity for Amazon. It's black box. I'd be a fool to make an assumption based on what I think Alexa's going to do quite yet when it comes to advertising.

Stephan: I think the idea that people have been prognosticating out there is that you will say to Alexa: Hey, I want some toilet paper and it will go and look at your previous purchases and say, do you want this or do you want brand B which will be fifty cents cheaper and like insert that ad at that point in time. Which, I don't know how people will feel about that experience, but it seems like it could be effective.

Web: It could be effective. Also, once Amazon moves further into podcasting and tying in audible to commerce operations, there's going to be a lot of opportunity where you're hearing about a product in a podcast through your Alexa or through your Echo, excuse me, and you have the option to buy that product in line with what the actual podcast. Things like that, that no other platform can really do because again, few platforms if any actually control conversion. They don't control commerce. I'm really anxious to see how Amazon ties in audio with actual commerce from that perspective.

Stephan: Amazon also has ads on the Kindle. There's that cheaper kindle you can get that has ads on the front of it. Do you think that they would ever not require a Prime subscription to be able to have access to their TV shows or the music and do something like what Spotify does and monetize that through ads?

Web: I really don't. Prime is just so valuable to Amazon as a tool to offset costs and as a tool to sort of determine whether a consumer is valued by their own metrics. Everything that they do is driven to add to the Prime roles. So, I don't see them essentially making a lighter version of their existing content for non-Prime subscribers. I think they're going to go even harder into it, especially as they've justified the price more and more.

Stephan: Yeah. I tend to agree with you. There's so much with everything that Amazon is doing, there's so much placement opportunity in every different vertical that they're in. I'd be curious to see where they decide to put their efforts when it comes to advertising. Snapchat, what do you think? They've been through a lot of rough times. Where do you think there'll be in 2025?

Web: Oh man, I don't count them out. I never do whenever I think about counting Snapchat out. They do something really smart on the commerce front. I'm anxious to see what the next year is gonna look like. And I might be wrong, I heard about a recent development that will allow them to integrate more ecommerce into their day-to-day-actions. I think it's a ticketing service, whether it's Seat Geek or something. I think that's the kind of stuff that with Snapchat, being able to use that service and then swipe up or whatever, to buy the ticket that you're seeing in line your advertising. That's the stuff that's really, really valuable that Instagram hasn't really been able to execute quite yet and if they can hold onto their existing audience while giving them the tools to actually convert them what they want to do, then yeah. I think they'll stick around. I don't think they're going to become the business that we thought they were going to, but they'll stick around.

Stephan: Is there a company that doesn't exist yet that you think could make it on that list by 2025? It seems kind of hard.

Web: I don't. I mean all of those companies are platforms and those platforms are all decades old at this point. With the exception of Snapchat, but Snapchat, it's still put in their time. I will be very surprised if someone comes up and bites them. I just don't see it.

Stephan: Yeah. Especially trying to get to the number one spot in the next seven years. That would be pretty incredible if that could happen. So, we'll see what we'll have you back in 2025 and see where we're at in the production. Okay. Here's another question, somewhat related that came in. What overall trends are you seeing in content versus commerce or content plus commerce?

Web: Wow, so I think that the number one thing that I'm seeing: There are a few ways to look at content and commerce. In my opinion, no one's really doing it better than the New York Times. I think you're starting to hear it on a few of their podcasts. How do you support this podcast? You support this podcast by subscribing to the New York Times. Every outward impression, every piece of content that they're making is being faithfully digested by the public, because they do such a great job at it. And it's all funneling back to subscriptions and I think that is a huge win for the New York Times. I don't think that anyone is doing it as well as they are from a more traditional standpoint, meaning digital publishers that are selling physical products. I'm still anxious to see what the Goops do. I know that they've just moved into physical retail, sponsored physical retail, meaning they have a large brand paying for each physical retail location that they're going to have. That can be something that's cool, but I still think that New York Times is the temple that we should be looking at. It may have every facet down, whether it's direct to consumer commerce, affiliate marketing through their wire-cutter acquisition or through paid subscriptions. They're doing a really good job of all three.

Stephan: This is somewhat related, but you also got a question in about Patreon in their acquisition of Kit recently. They're going more in that direction of affiliate. Maybe it's worth mentioning what Patreon is. Do you want to walk people through that?

Web: Sure. Patreon is a way to subscribe to the creators that you are consuming, that you love. It's essentially a membership to their content, to their offering. You are a patron of the arts. Patreon's done a wonderful job making themselves anonymous to that action, much like Kickstarter's made themselves anonymous with crowdfunding. To grow the ability for those 150,000, 200,000 creators to make more money, naturally, they have to find more ways to authentically appeal to those creators audiences. That that next move is affiliate marketing and probably right after that it's direct to consumer commerce. They've acquired Kit who's done a good job of packaging affiliate sales in a new and inventive way. And apparently Kit is also moving to be able to handle the merchandising logistics that Patreon will need to allow those creators to sell their own merch. Now, that's easier said than done, but it's really exciting to see that Patreon cares enough about their creators to move in that direction. It's a win if Kit can execute. That's bigger.

Stephan: Yeah. Patreon has done a really good job overall of staying agnostic of where the creators are. Whether that's YouTube or podcast or a blog. It can really be anything and that's good to have that neutral party. I would start to get concerned if they start developing too many of their own first party solutions to that. If the place to go for your music or your video or your content is Patreon. And I wonder if this sort of nudges them a little bit in that direction of not having that objectivity. What do you think about that?

Web: That's a really good question. I think where you're creating the content and where you're cashing in on that content that you're creating, I think that's two different things. I don't think that Patreon's ever going to say let's build a youtube competitor or let's build a competitor to audible or our own podcast at work. I don't see them doing that, but they do need to develop the tools for their creators to make money. So, this is a natural progression. I think they have a lot of opportunity to forge relationships with the right partners to actually achieve those objectives. I'm not a real big fan of Kit being the acquisition, but you know, again, objectively, I can see, why they went that direction for an affiliate marketing for a move towards affiliate marketing operations.

Stephan: Yeah. I think the idea of the digital tip jar that you can pay your favorite content creators has been around for 20-years. People have been theorizing about that for a really long time and now there's some newfangled ideas around blockchains and how that could change that whole idea. Patreon's probably the most successful company I've ever seen attempt to solve that problem and they've come at it from that very creator centric perspective and I think they've done a good job. It'll be really interesting to see if this affiliate approach ends up working well. It's not a business model that I personally know very well. It seemed like it was very successful early on as a method. People would do Amazon affiliates and that kind of stuff. But over time just the value of that wasn't worth the effort. It seemed like people who relied on that as a method of generating income for their blog, let's say, the value of that seems to have gone down quite a bit. So is that something that can change in the future?

Web: That's a really good question. To be successful at generating revenue for your affiliate business, you have to have a pretty sizable audience. If you're Marques Brownlee or Casey Neistat or whomever in that category would. Sure, yeah. You can probably drive a thousand conversions a week, you know, four thousand, five thousand conversions a month. That's going to net you $25, $30, $40,000 per month. But unless you have an audience that big affiliate marketing is really not the way to go, which is why traditional merchandising shirts, hats, pants, things of this such. It would be a much smarter move because the margins are higher for you. Instead of making $5 on that product, that cost $100. You're making $15 in the product that costs $30.

Stephan: My first interaction ever with Kit was actually through Marques Brownlee who, for people who don't know has a channel on YouTube called MKBHD, which is just an incredible YouTube gadget and tech channel that has millions of subscribers. That's how I discovered Kit for the first time through his page. But when you think about him as a person, what is he able to authentically sort of pitch as a products. It's, you know, maybe tech products and mostly camera gear and those are all things that costs thousands of dollars and where the conversion rate is going to be probably extremely, extremely small for someone who's just sort of a drive by: Oh, I wonder what Marques likes. So, I saw you tweeting about this the other day and I can't find the tweet, but you were saying something to the effect of it's really fascinating to see who is able to get their audience to convert. It's really an interesting thing and maybe it's moving people from one medium to another or it's just having a lot of reach or a lot of followers doesn't necessarily equate to having a very engaged audience. What have you learned about that? I don't know in the past couple of years?

Web: So, that's the question of the hour. We've talked about this previously. I'm trying to figure it out. Some of it is the lack of interest by their communities, but another part of it really is that I don't think that a lot of creators really want to sell things. If you think about it, a lot of folks that are in that position, they're trying to grow a tangible number, a subscriber base rather. You're growing an audience, you're actively trying to become a celebrity. You're actively trying to become cooler than you were the day before. You know, by all metrics of media and can you be cool and sell things at the same time in your opinion? Can you can you hawk things or can you promote things without losing your effortless appeal to be cool? I'm growing to think that the answer for most people that are still scaling that mountain, that answer's no.

Stephan: Well, I think the similar thing applies to every brand as well. You know, if you're a company and your email newsletter comes out twice a day and it's just promotions for your products the conversion rate is going to go down pretty quickly and I think maybe that's the fear among creators or it's the fear among brands that value themselves as being a more premium offering. Finding that balance seems like one of the most tricky things in marketing.

Web: Sure. So, that's the thing. That's what I've been racking my head over trying to figure out the solution for. And one of the ways that brands, the vertical brands that you know and love that I know, they don't rely solely on that type of push promotion, that type of email, tweet, facebooking promotion, they rely on inbound, right? They pay for paid traffic, they retarget previous visitors. So, one thing I feel that we need to figure out with creators is: Dear creator, how much are you willing to invest in your own passive promotion? Are you willing to say that, hey, here's a $10,000 budget over the next two weeks to buy the traffic so that I'm not having to push it myself or that I'm balancing paid traffic with organic traffic because that's where, that's where the money's made. That's what the Logan Paul's are doing. That's what Gary Vaynerchuck's are doing on their own platforms. And I think that's really important to consider. That type of promotion doesn't tarnish their perceived celebrity like pushing tarnishes their perceived celebrity.

Stephan: I'm guessing if you ask most of the creator, the tension is that they're trying to go through something like Patreon because they're artists or creators and they're trying to make the thing most of the time. So, operating more like a business is difficult because it takes time and knowledge to get good at doing that kind of retargeting or getting better at developing that inbound interest. I wonder if there's a thing there for Cotton Bureau or for Patreon or for some platform to help automate a little bit of that stuff or make it less demanding on the creator.

Web: The answer is yes. I'm thinking about that on the hour and I believe that I have a solution for that. But again, it's going to come down to okay, creator, you'd rather not spend all day being a salesperson. Are you willing to invest from your own passive promotion? If the answer's yes, then we can do business.

Stephan: I mean, I think maybe the best example of that to mention is, 2PM itself, because you've gone from essentially a free product to now having this paid subscription sometime in the last six months. I forget exactly when that happened, but what have you learned about it now? Kind of doing it firsthand with your business?

Web: So, I'm in a tricky, tricky position. I'm not doing anything paid. Everything is organic and everything is organic because I'm trying to achieve a certain number of paid subscribers organically. That's important to me because I know that if I'm achieving them organically I'm earning a particular executive. A particular type of person within the industry. They already know someone that's already subscribed. They know someone, they trust that person. I'm building a coalition of people that are at the top of their craft. Once I start advertising to reach those people, then I feel like I will begin to degrade the coalition that I'm building. I don't ever really talk about this, but if you saw the people that were on the list, sometimes it astonishes me. I know that they wouldn't talk to me in person if they weren't a part of the list. There are some amazing executives and leaders within this space and so you don't get those people by targeting them on LinkedIn or Facebook, quite yet. When I'm trying to move from tier A to tier B, then then that's a different conversation.

Stephan: So, is Twitter your way to get to them? How do people even find out about you?

Web: The way that I've focused on it thus far is I've established my free newsletter as the top of the funnel. Everything that I do is focused on growing that top number because I believe that if you experienced that letter enough, eventually you'll see the value in paying for it. And so let's say that I'm trying to grow that number to x-thousands than I suspect that between five and 10 percent of the overall aggregate number of free subscribers will become paid subscribers. So that's my funnel. It goes essentially from Twitter or a parallel relationship with that person in the office to free subscription, to eventually converting to a paid subscription and it's happening organically so far. It's gonna level off eventually. And then that's when I'll worry about determining the cost of acquisition for every customer.

Stephan: Well, I'm a subscriber, but I feel like it's just an investment in making sure that I can get you as a guest on the podcast again.

Web: Well, thank you. I appreciate that.

Stephan: No, I'm just kidding. I read it. I read it every, every time it comes out. It's been, it's been really great. You had a great article about the recent shut down of a Raiden. I don't actually don't know how to pronounce that. I think it's Raiden.

Web: Is it Raiden like the character from mortal combat?

Stephan: Well, either way, what, what was there to learn from that particular closure of that company they were making direct to consumer suitcases.

Web: Oh Wow. There's so much to learn. If you read any media quote that Raiden's founder ever gave, he was so anti-brand. He was so focused on here is the tech of the luggage. The product speaks for itself. I don't need to do anything else. The brand will sell itself for product will sell itself, whereas Jen and Steph on the way-side, very early, if not before the product even launched, said: Here's the lifestyle of the person that we want to use our luggage. So, when you start with that palette, the sky is the limit. That canvas allows you to say, okay, not only are we going to focus on this particular piece of luggage, we're going to build the magazine around your lifestyle and these other adjacent products and hey, we might even go into a travel jacket that we want you to use some day. Whereas Raiden was completely focused on the variance of that one skew. And, I think that came back to bite them.

Stephan: Well, we should mention that a couple other startups in that space had to shut down and there was a big change in regulation that happened earlier this year, that caused all of the electric powered suitcases that have like a built in battery to be no longer legal and they have to have a replaceable battery. That had some impact on that I'm assuming

Web: It did. Let's be clear here, there isn't a brand in that space that raised less than $5 million. Okay. So, one of the common refrains that I've heard on Twitter was, a way raised so much money, so and so only raised $5, million dollars, $5 million is a lot of money. You know, that's a pretty sizable investment. Even if you're building a product like that. I know this from experience, so it's not as much of a handicap as people like to think it is. On that note, about 50% of those companies had the technology to remove the battery. In Raiden's case, their second generation that was supposed to come out this year also wasn't going to have a removable battery. It was a situation where one founder was so focused on tech, tech, tech, tech, tech. That's all that matters, tech, that they were almost blinded by Porter's five forces and what was going on in the industry. Whereas Jen and Steph were focused on brand and then tech. Hey, it makes sense to have a removable battery or to develop a system with a removable battery. That's sort of the dichotomy that we're looking at, because again a way is building two products at once. The brand itself and the tech. Whereas other companies were just focused on the tech and I know that this is insensitive and I never root against anyone, but I think it's a valuable lesson that a lot of brands have had to learn.

Stephan: Yeah, I'm totally in agreement that there's a lot of value to building a brand and to having your customers trust that overall mission, that broader idea. On the point of the $5 million that they raised just doing some quick back of the envelope math, assuming they put all of that into product as opposed to, I'm sure they put a certain percentage of that into hiring and ads and that kind of stuff. But their product was probably around $200, $300 on average if you just back of the envelope it, it's probably $100 bill of materials. So, that means they could make in the range of 30 to 50,000 suitcases and that's not including like the different styles, sizes, colors, etc. It is, I think, for that type of company, pretty devastating when you have a year's worth of inventory that you have to invest in suddenly become obsolete. So I don't want to sweep that under the rug completely and there must have been something about- I don't know why that second generation wasn't designed with that in mind. It seems like maybe there was a way that they could have seen that coming around the bend, but even through those numbers. ComIng from a bootstrapped world, I've had that kind of pain myself where investing in an inventory that becomes obsolete. It can be really, really hard on your cash flow, even if you have raised money. So I want to balance it out a little bit.

Web: Sure. But the one thing that I'm saying is product load is never enough. Winning on the merits of the product alone is never enough. And so one company was focused on destroying the other company based upon the merits of the product. By what I've heard Raiden had superior technical products. That's what I've heard. But if you look at tennis shoes or any other category, it's not always the most well done technical product that wins the race. That's just the reality of branding.

Stephan: Yeah. We had a great episode a few weeks ago that was with the founder of Fuzzco, which is a design agency. She had some really great points on that, so if anyone wants to dive more into like the importance of brand. Obviously they're a branding agency so they have a somewhat of a bias, but we're entering in this world now where there's so many new brands launching everyday that differentiating yourself purely as you know, we have this business model of being a vertical commerce brand is not enough. You have to go beyond that. You have to tell a story. You have to bring a whole cohort of customers with you and that's becoming harder and harder. I don't know. It's a big topic to open as we're wrapping up, but have you seen anything there that has a- Who's doing it right, I guess is the question?

Web: Well, I'm going to use this opportunity to talk about my colleague at 2PM, Megan. Her DNBB launches later tonight. She's developed leggings that will last a lifetime and if by chance they don't, you can receive a new pair within 14-days. So, she's done a wonderful job of developing the customer acquisition system with her team but also emphasizing on brand differentiation and product differentiation. So, it's like a three pronged operation and she's done a wonderful job of emphasizing all three equally, which I think is really, really important early on. I think that once it launches I think you're going to hear a lot about it and I'm excited to see how she's using a lot of the lessons and how her team is using a lot of the lessons that other brands are teaching them and executing on them in fruitful ways.

Stephan: Well, we'll make sure to get a link in there to that if a vendor names a secret. It will be probably launched by the time this comes out.

Web: Yeah, it's not a secret. The leggings brand is called Mellow and I think the url is just wearmellow.com.

Stephan: Cool. All right. We'll put that in the show notes. Web, hey, thank you so much for joining on your birthday of all days. Last time we talked you had some, some major health situation. How the legs going?

Web: The right leg is still gimpy, but I'm getting there. I think I look normal walking. Luckily, you can't see my grandpa on this podcast, so I feel really confident right now.

Stephan: Well, I'm so happy you could join us today and we'll have you again in 2025 to review top advertisers. Thanks again. And we'll put all those links in the show notes. If people want to find out more about you, read all your insightful tweets. You've the best twitter handle in the business at webtwitter.com/web. And then 2PM get subscribed to 2pm.com. That's coming out. What's the rate these days of updates people can see?

Web: So, Monday and Friday. We're gonna maintain consistency. You can count on us. We'll be there. 2:00 pm on Monday, 2:00 PM on Friday.

Stephan: Anything else I should plug?

Web: Happy birthday to me and I'm going to go have some fun with some whiskey.

Stephan: All right, enjoy.

Web: Thank you so much.

Stephan: Thanks for listening. If you enjoyed the show, if you got something useful out of it, I would love to hear what that was. Consider writing a short review. Could be just a sentence long by going to iTunes and searching for Well Made. I want to hear it all. I want to hear good, bad. I want to hear your constructive criticisms. I am just trying to make this show as useful as possible for you. So tell us what you think that is the very best way that you can support the show. Thanks and see you next time.

You can find this and all future episodes on iTunes, Google Play, and here on the Lumi blog. This episode was edited by Evan Goodchild.

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