The Prof G Pod with Scott Galloway - Office Hours: Amazon’s Aggregators, Turning Data into Insights, Career Moves, and Why the Don Draper Era is Dead

Episode Date: November 8, 2021

Scott answers a question about companies that buy up small third-party sellers on Amazon’s marketplace. He then explains why he thinks businesses should take money out of marketing and put it into the product itself. Scott also discusses the importance of analyzing data, and shares why he believes greatness is in the agency of others. Music: https://www.davidcuttermusic.com / @dcuttermusic Learn more about your ad choices. Visit podcastchoices.com/adchoices

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NMLS 1617539. welcome back to the property pods office hours this is the part of the show where we answer your questions about business big tech entrepreneurship and whatever else is on your mind if you'd like to submit a question please visit officehours.propertymedia.com again that's officehours.propertymedia.com. Again, that's officehours.propertymedia.com. First question and another reminder, I do not see these questions until I hear them for the first time. The authentic dog, the odd dog, the A dog, rescue dog. Question number one. Hello, Prof. My name is Mamoun calling in from Paris, France. I'm a management consultant who happens to own a small six-figures e-commerce business as an Amazon seller. Something huge is happening with Amazon 12-party sellers called the rise of aggregators.

These are companies raising hundreds of millions to acquire, consolidate, and scale proven and category-leading Amazon brands via channel diversification and international expansion. The market leader is Trasio, and they are the fastest company to reach the unicorn status in the US and are planning an IPO next year. Literally billions have been raising this space since COVID-19. These aggregators claim to be the digital version of Procter & Gamble. My question to you is, what's your take on these aggregators' business model, given the slim margin of marketplace-dependent brands,

Amazon pushing their own products in the supply chain crisis? Thanks, and keep up the good work. Mahmoud from Paris. That is a really interesting question. I'm immediately kind of drawn, and I want to check out this company, Thrasio. So there are roughly 70 aggregators focused on buying up Amazon sellers. And they're collectively, they've raised, I think, about $10 billion. And that's according to Fast Company. Thrasio, the largest, which you highlight, of the aggregators, just closed a Series D funding round of more than a billion dollars. Thrasio said it's currently buying businesses at a rate of one and a half per week and now has a portfolio of about 200 brands.

For context, Amazon says it has 2 million small and medium-sized businesses that are third-party sellers. So my fear around this stuff is the following. This is the metaphor I would use. In 2007, was it? I went on the board of the New York Times, and we had a property called about.com, which used to aggregate content websites. And then we would put them on, say, Southern Cooking. And then we'd say to them, all right, publish on about.com. And we are really good at optimizing for Google, and we'll drive a ton of traffic to this Southern cooking portion of about.com, of which you are a content creator.

And we'll give you a portion of the advertising revenues we generate based on the traffic that comes to the Southern cooking section of about.com. And we will spend less money on Google than we make from advertising. And we'll split some of that with you. And about.com got valued at about a billion dollars. And I wanted to some of that with you. And the about.com got valued at about a billion dollars. And I wanted to spin it. I'm like, spin this bitch. It has absolutely nothing to do with the core business. It's overvalued. We're using it as digital earrings to accessorize an analog body. I never bought that we should own it.

And they laughed at me because, or they said no, because the CEO and the chairman loved going on earnings calls and saying, 17% of our revenues are digital. It was their chance to sort of pretend that they're younger and hipper on their earnings calls because they included the about.com revenue. So what happens? And this is the danger. This is the fear when you're traveling on someone else's rails. In this case, you're traveling on Amazon's marketplace rails. One night, unbeknownst to us, no warning, Google did what I think is called a panda where they rejigger their algorithm. And overnight, our revenues went from X to 0.4X. Literally the next day, our revenue was off 60%. And we went, what's going on? And someone came back and said, they changed the algorithm. We're not getting as much traffic as we used to.

They have figured out a way to take the funnel of traffic that was coming to our content site, about.com, and they're pushing it elsewhere. Specifically, they're pushing it to other places where they can get more fees from selling keywords or maybe to their own sites. Whatever their rationale was,

all they needed to do was kind of flip a switch and boom, we were no longer worth a billion dollars. We weren't worth what the New York Times paid for. And as a matter of fact, I think the New York Times ended up selling about.com for less than they had purchased it for. Anyway, I think that's the danger here is that these aggregators,

it's all fine and good until Amazon decides they're the aggregator, they're the middleware and they get involved. So I think it's a really interesting idea. I think a lot of smaller players can make a good living. But I would imagine about the point a company gets to a billion in stakeholder value, that the individual that owns the rails looks at that business and says, you know, I can do that, and comes in with a series of press releases about how they want to work with their partners and basically starts to slowly but surely

pull the oxygen out of the room with them because they control the algorithms. They control the traffic. Amazon is the second largest search engine in the world behind Google. And they control the algorithm for what you see and what's recommended to you. So I think it's an exciting place.

I'm super interested in learning more about it. But I think Amazon says, okay, they're great for the ecosystem now. They're getting more people on the platform. Consumers like it. But once I bet they get above $3, $5 billion, Amazon's going to look at it and go, we can do that. Anything you can do, I can do better. Said Amazon a billion times a second. Thanks for the question. Question number two. Hi, Scott. Thanks for a great podcast. I'm Lena and I'm a junior brand strategist. And as you probably know as well, there's so many videos, I mean, marketing books, podcasts that I can listen to, to just like learn even more. And you're obviously one of them.

But another one is also Byron Sharp. And I was interesting in hearing your view on your differences in what you guys preach. Because I saw a YouTube video of you with your section for brand strategy sprint, where you preach post-purchase and advertisers putting their money in the post-purchase phase and that pillar. Whereas Byron Sharp, he preaches user acquisition and getting the light buyers in order to grow as a brand. And I was wondering where you kind of stand in that debate. I was just interested in hearing the differences in what you guys think and believe. Lena from Stockholm, it's good to be you. You're clearly educated, or you sound as if you're educated or grew up in the US, and now you're in Stockholm,

which is the most beautiful city in the world for about 12 or 14 weeks. And then it turns into an okay city. And for about six months a year, it is pretty dark and depressing. Anyways. So Byron Sharp, I don't know a ton about his work other than he's a total gangster. I believe he's out of Australia and he's considered one of the premier thought leaders in the world of CPG and that enduring brands, it's about cost of customer acquisition

and building strong brands and relevance and everyday use. I think he's great. And Australia has produced some really outstanding marketing thought leaders, Mark Ritson, Byron Sharp, and I'm sure there's others I'm forgetting. But yeah, he and I do differ. I think that the traditional CPG kind of mediocre product and then come up with a brand code, pound away at those brand codes using this very efficient, what used to be a very efficient medium called broadcast television or traditional media,

stuff the channel, and then get 60 to 70 points of gross margin and print money. By the way, that was the algorithm that created a ton of shareholder value for the icons of yesterday, the P&G, the General Motors of the world, the Krafts, the General Foods, et cetera.

I think the world has changed. And I think the sun has passed midday on the world of Don Draper and what I'll call traditional marketing. I worry that the curriculums across the majority of the major business schools in America that were essentially training kids to go to work for Kraft or Unilever and be laid off two or three years later, that the capital or the proper capital allocation should move out of pre-purchase into actual distribution, whether it's Apple, whether it's LVMH, or if you go into a Sephora, you just think,

wow, these people get it. I love the product. I love the cast. I love the organic intelligence, the people, and they call them the cast. They don't come with associates or salespeople. And then even more so, I think the greatest ROI has been post-purchase.

And that is figuring out a way to capture data such you can take that signal or those signals and figure out a way to make the product and the retailer more sticky, whether it's a loyalty program, whether it's customer service, whether it's the restoration hardware membership program, where now 95% of gross merchandise volume flows through. So I wonder if we're going to spend a lot more time and money on products, if you will, which sounds very based in typical traditional marketing. I'll give you an example. Typically, pre-Google, what happened was, or traditionally pre-Google, you could have an amazing product. But if you didn't have marketing and awareness, it was like a tree falling in the forest. Didn't anyone even hear it? Now, truly breakthrough products break through.

And that is someone will use it and go, oh my gosh, this is just a superior way to shave your head. This is a superior search engine. And they start talking about it and your social graph explodes. My favorite example is hotels. I think the almond brands, Six Senses,

I think these brands have gained life faster than they could have 30 or 40 years ago because they're such an incredible differentiated product, including the Rosewood, I love hotels, that people go on Trip Advisor, people go on their social graph, and they see that these truly differentiated products get oxygen on their own without having to enter into the advertising industrial complex. So long-winded way of saying, I do think there is fundamentally a shift out of pre-purchase into purchase and post-purchase. And I think product and innovation are kind of the new Don Draper, if you will. And I think Don Draper has been drawn and quartered. Sally Draper,

I think would be 68 now. What do you think her relationship with men was like through her life after Don emotionally abandoned her and her mother died of cancer? By the way, both pretty big spoiler alerts if you haven't seen Mad Men. Fantastic show, even if just for the design. Speaking of which, I saw Dune over the weekend. If you're gonna see it, take an edible and you can appreciate the design

and the cinematography, which are staggering. And that's about it. The kind of movie never gets going. How do I get from Byron Sharp to Dune? It's my fucking podcast. We have one quick break before our final two questions. Stay with us. Hey, it's Scott Galloway.

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Welcome back. Question number three. Hello, Prof G. This is Prof M. My name is Thomas. I teach in the Department of Communication at Appalachian State University in Boone, North Carolina. We recently revised the program of study for our advertising major, and in that have created a new research course. I taught research for many years. It has been in a social science perspective, and I wanted to ask you as a business entrepreneur sitting on many boards, what is it that companies most want to know about their consumer audience? What should we be doing in our research course? What kind of testing and analysis should we teach our students to make them most competitive in the marketplace? Thank you. Thanks, Professor M. I think you

called yourself or Thomas, who teaches in the Department of Communications at Appalachian State University in Boone, North Carolina. That just sounds awesome. Okay, around research. I think what we should be teaching kids about research is new oil wells of research or data. And that is the following. We typically go to consumer surveys, or we go to focus groups, or we go to ethnographies, and those all have a place. But do you know how much data, how much literally billions of gallons of oil, if you think of data as the new oil, is sitting underground in things like Google and LinkedIn, going on LinkedIn. We used to go on an L2 on LinkedIn

and look at the number of open jobs at a company. You know what's going on at Amazon. Amazon's making one of the biggest bets in the history of technology by virtue of the fact that there are more open job positions, which you can glean from LinkedIn, in their voice group, i.e. Alexa,

than there are all of Google. It's the mother of all bets. There's just so many amazing... Go through S1s and do keyword clouds. I think it's F5 or something like that and see what words are used the most and then start doing longitudinal analysis. When did Netflix start talking about margins and stop talking about growth? Very simple. Do that word cloud across three years, right? That's 12 quarterly earnings calls. And look at the ratio and you begin to see

that all of a sudden they start ramping down the number of times they use the term growth and ramping up the number of times they use the term margin, meaning they are going to start pursuing a strategy where they're going to invest more in content and perhaps less in customer acquisition. New innovative means of data sources or new, really interesting data sources. That's number one. Number two, number two, it's just oil. It's useless. You can't put

oil in your gas tank. You got to refine it. You got to turn it into petroleum. So what is the real skill? What is the secret sauce? At L2, we worked with 34 of the 100 biggest consumer companies in the world. We had proprietary data. We had really interesting, different, unconventional sources of data. But what did we have? Why did we get renewal rates?

Why were we able to sell a $20 million company for $160 million? Simple. We turned that oil, we turned that data into petroleum, specifically insights. And that is the secret sauce in all of this, my brother.

And that is the person who can look at this data, develop a narrative, develop a story, and turn it into actionable recommendations and insight. And that is, Nike is awash in data.

They don't want more data. Some mean, some firms do. P&G or Unilever, the ones really fast with data. What they want is they want you to come in and they want you to show them the data until the moment they trust that this data has integrity and veracity. And they say, okay, stop showing me the data. Now tell me, now tell me, what the fuck do I do? That's the key. You want to be in the business of refinery. You want to be in the business of turning oil into petroleum. You want to be in the business of one, highlighting and identifying unconventional sources of oil, but most importantly, figuring out a way, critical thinking, and forcing your students to come up with actionable insights. That is the secret sauce. That is when you go from making 50 or 60 or $80,000 a year as a researcher to making

200, 300, $400,000 a year as a strategist, as a manager, as somebody who knows how to interpret data and give people actionable insight. Nobody wanted our data. They wanted our insight and our advice. Thomas from Boone, North Carolina, Appalachian State University. That's a good wrap. Congratulations on being in such an interesting place at such an interesting time. Next question.

Hi, Prof G. This is Jason from Irvine, California, and I'm a big fan of your show. So you're always talking about putting in the time when you're young and dealing with unfairness to get ahead. My question is, how do you know if you need to just suck it up and push forward or if you're in the wrong field and need to make a pivot? And along those same lines, how late is too late to change careers, especially with those with newborns and young families? Jason from Irvine, California. So everything's

situational and that is, it's easy. There are some best practices, but I wouldn't want to give somebody, you know, definitives because I don't know your situation. A lot of it comes down to how good or bad is your situation at work. A lot of it comes down to your economic flexibility. It's a lot easier to quit and pursue your dreams if you're independently wealthy, right? But if you're the sole breadwinner and you have a little bit of money saved and you have two newborns at home, it just changes your risk assessment. So what I suggest is the following. You need a kitchen cabinet. And that is you need a group of people, two or three is enough. Ideally, it's a few more, but two or three is essentially the key that know you well, know your situation well, but can give you dispassionate advice,

who can tell you hard truths, right? Don't be such a jerk. Suck it up. That's what work looks like. Or yeah, you're demonstrating a certain amount of laziness. You're at a great company. You're making good money. Stick there. You're going to go start a business with new kids. I mean, I just don't know your situation, but what you want is a group of people who you trust enough to give you good advice, but also who care enough about you not to give you platitudes like,

oh, you should definitely start your own business. You're such a winner and you're going to be successful and go for it. You want someone who will say to you, no, you're wrong, or you're too risk averse, you should leave, or they're clearly not treating you well at work and clearly don't appreciate or value you. But you need multiple opinions here because you know what?

I'm telling you, Jason, it is impossible or very difficult to read the label from inside the bottle. And that is you need an outside perspective. Ideally, somebody in your company that you trust and a couple people who are a little bit older than you, a little bit more seasoned. And you want to be transparent with them around your options, your economic security, the support you're getting at home. Is it a two, is it a double income family or is it you? Is it, you know, what's your situation? Are you tied to your region because

you have sick parents? You can't really move to another position or another job. It's all situational. But boss, you don't want to wander through life alone. Greatness is in the agency of others. There is a wisdom of crowds. How have I changed? How have I changed? I used to think that leadership and being a baller and being a man was like, you know, I was so smart coming to a conclusion, making a decision, and then advocating for that decision to others and myself, regardless of how poorly that decision might age. What I realize now, I don't make an important decision

without speaking to a lot of people. I mean, I literally call somebody in my life, probably, it feels like every night, but every other night, and I'm like, this is what's going on with me, or this is what's going on with my company, or this is what's going on with an investment of mine. Your turn, what do you think? And they'll give me their view. Our key, our competitive advantage as a species is cooperation, or simply put, the ability to communicate and learn from others and work together. And what is a great way to work together? To find people you respect, to find people who care about you, to find people who have wisdom, to find people who have experience.

And for God's sakes, benefit from those people. That's all for this episode. Again, if you'd like to submit a question, please visit officehours.propgmedia.com. Our producers are Caroline Chagrin and Drew Burrows. Claire Miller is our assistant producer. If you like what you heard, please follow, download, and subscribe.

Thank you for listening to The Prop G Pod from the Vox Media Podcast Network. We will catch you on Thursday. Support for the show comes from Alex Partners. Did you know that almost 90% of executives see potential for growth from digital disruption, with 37% seeing significant or extremely high positive impact on revenue growth? In Alex Partners' 2024 Digital Disruption Report, you can learn the best path to turning that disruption into growth for your business. With a focus on clarity, direction, and effective implementation, Alex Partners provides essential support when decisive leadership is crucial. You can discover insights like these by reading

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