Ecommerce

AI Will Let Brands Know Everything About Their Customers

Very soon, AI will let brands know all publicly available info about their customers. This is going to revolutionize ecommerce.

There Are No Good or Bad Ecommerce Categories

Ever since I began acquiring DTC e-commerce businesses, people have asked me which business categories are ’the best.’ But I’ve concluded there’s no such thing as a universally good or bad category.

The Fed Isn't Going to Save Ecommerce

I often talk with friends in the ecom space who acknowledge that valuations are low today but expect them to recover to 2016-2021 levels soon. Hate to burst your bubble, but the Fed isn’t going to save us.

Ecommerce Is Easy. That's What Makes It Hard.

One of the best things about ecommerce entrepreneurship is that it doesn’t require much technical skill. Paradoxically, this is what makes it incredibly difficult.

DTC Data Is Valuable, But Only to the Brand

A DTC ecommerce brand’s data is valuable, but only to the brand–not an external acquirer.

The GM Incentive Puzzle

What is the best way for ecom business owners to incentivize the CEOs / general managers of their businesses? This is genuinely a puzzle.

Public DTC Performance: 2024 Update

With some key exceptions, it's worse than last year

I wrote last year about how poorly DTC companies were performing in the public markets. Unfortunately now, with some key exceptions, it’s worse.

Here’s a representative sample of public DTC brands, the same as last year.

• Allbirds (Footwear). Down 98% from peak. Market cap: $100mm
• Blue Apron (Food). Acquired for 95% less than peak. Market cap: $100mm
• Smile Direct Club (Teeth aligners). Down 100% (bankrupt). MC: $0
• Warby Parker (Eyewear). Down 76%. MC: $1.6B
• Bark (Pets). Down 93%. MC: $220mm
• Honest Co (Eco-products). Down 83%. MC: $378mm.
• FIGS (Scrubs). Down 90%. MC: $824mm
• Stitchfix (Clothing). Down 98%. MC: $318mm
• Purple (Mattresses). Down 95%. MC: $197mm
• Rent the Runway (Clothing rental). Down 98%. MC: $26mm
• HelloFresh (Food): Down 93%. MC: $1.2B
• Hims (telemedicine). Down 36% from peak but 56% up(!) from De-SPAC price. MC: $3.3B

As of this time last year, most DTC stocks were down 85-90% from peak. Now, if anything, it’s closer to 90-95%.

Lower Barriers to Entry Make DTC Harder, Not Easier

It's never been easier to start a DTC business—and that's the problem

It’s never been easier to start a DTC business. Paradoxically, that’s made it much harder to run a profitable DTC business. Why? Lower barriers to entry has led to stifling competition.

I got my start in DTC in 2014 at Harry’s, the men’s shaving company. Harry’s, launched in 2012, had a custom-built site which required a full team of developers to maintain and update.

When I co-founded Hubble in 2016, we chose to launch on Shopify and only needed 1 developer. Now at Agora, the DTC sites we’re operating have 0 dedicated devs. Shopify has largely replaced the dev team.

DTC Adjusted EBITDA

Like WeWork's Community Adjusted EBITDA, it's not real

Wework infamously reported “Community Adjusted EBITDA” as an ultimately fake measure of profitability. Unfortunately, I’ve noticed that many ecom brands report what I’ve taken to call “DTC Adjusted EBITDA.”

It’s also not real.

DTC Adjusted EBITDA is a collective set of accounting choices that allow brand owners to lie to themselves about how profitable their business really is. After almost 3 years of diligencing and acquiring DTC brands, here are some of the most common issues I’ve seen:.

The Future of DTC Might Be a Tiktoker

Is the future of DTC a bootstrapped swimwear company run by a 26-year-old Tiktoker?

Is the future of DTC a bootstrapped swimwear company run by a 26-year-old Tiktoker who calls herself Strawberry Milk Mob? Quite possibly.

One of the cliches about DTC ecommerce is that it allows a company to “cut out the middleman.” Because the company is selling directly to consumers without having to pay retail store markups, it can pass on the savings to you, the consumer. This pitch is part of the reason I started Hubble Contacts.

Why VC-Backed Ecommerce Scale Kills Profitability

Their size makes them unprofitable

VC-backed ecommerce businesses often generate a ton of revenue. But somehow few have reached consistent profitability. It’s not an accident: their size makes them unprofitable.

I’ve previously written about how few VC-backed ecom businesses have reached profitability. For example, in the last 12 months:

• Allbirds: $266mm revenue, -$121mm profit
• Warby Parker: $654mm revenue, -$64mm profit
• Bark: $504mm revenue, -$58mm profit

This is just a sample. The average public VC-backed ecom business does $100mm+ in revenue but loses $50mm+ a year. Why?

Ecom Brands That Can Only Exist Online

Some exceptional brands can only exist online—and that's their advantage

Most consumer shopping happens in physical stores, not online. But some exceptional brands can only exist online. These exceptions highlight a neglected strategy for ecom brands to succeed.

While I’ve made my career in ecommerce, I need to be honest about its shortcomings. In many ways, buying products in stores is better:

1. For in-store purchases, there are no shipping costs; consumers are their own fulfillment and delivery. This should be passed on to consumers in the form of lower prices.

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Ecom 3.0

VC-backed ecommerce isn't dead—but how VCs invest will change

VC-backed ecommerce has struggled recently. I don’t think it’s dead, though. How VCs invest in ecom will change, but the invested companies will be much stronger for it.

The modern ecom VC cycle kicked off around 2010 when Warby Parker was founded. Warby sold directly to consumers and was a huge hit with investors. Pretty soon, dozens of companies sprang up with similar models like Casper, Dollar Shave Club, and Harry’s, raising hundreds of millions each. They largely used the capital to buy inventory, build teams and, most of all, spend on marketing, especially Facebook ads. This era lasted from 2010 to around 2018; let’s call it Ecom 1.0.

DTC Acquisitions Have Gone Poorly

The acquired businesses have if anything done worse than the public ones

VC-backed DTC companies can exit in two ways: go public, or get acquired. The public brands have performed poorly. Unfortunately, the acquired businesses have if anything done worse.

I’ve written about how most public DTC brands like Allbirds or Smile Direct Club are down 85%+ from their peak value. The performance of brands which have been acquired is much trickier to gauge as their financials are rolled up into the buyers’. Still, it’s possible to piece it together.

Ecom Aggregators Are Collapsing

They collectively raised more than $15B—now they're starting to collapse

Ecom aggregators, companies that purchase small profitable ecom brands, collectively raised more than $15B in ‘20/‘21. Now, less than two years after peaking in value, they’re starting to collapse.

Last month, it was reported that Thrasio, the original aggregator which raised over $3.4B, had engaged restructuring advisors, likely indicating a bankruptcy announcement soon. Benitago, which raised $325mm, went bankrupt last month. Many others are teetering.

I’ve been somewhat reluctant to write on this topic because I myself co-founded an ecom aggregator, Agora, in 2021. I’m friends with many in the industry.

DTC Bankruptcies Are Just Beginning

Two major public DTC companies just declared bankruptcy or sold for pennies—and it's not hard to predict who's next

It’s finally happening–2 major public DTC companies just declared bankruptcy or sold for pennies on the dollar, respectively. And it’s not hard to predict who’s likely to be next.

On Friday, Smile Direct Club filed for bankruptcy. It was valued at almost $9B in its IPO in 2019. It’s currently worth nearly $0. Also on Friday, Blue Apron announced that it is selling itself for $103mm. While this is a premium to its pre-acquisition valuation, at peak Blue Apron was worth over $3B, so the sale price represents a drop of 97%.

AI Tools Will Make DTC Harder, Not Easier

Lower costs for you means lower costs for everyone else

There has been a lot of excitement around new AI tools that are supposedly going to make it much easier to start and operate DTC businesses. Unfortunately, I think these tools are eventually going to make it harder to run a profitable DTC business.

Since ChatGPT exploded onto the scene, everyone and their mother has launched their own new generative AI tools. DTC software providers are no exception. Last month, Shopify launched Shopify Magic, which they describe as “a suite of free AI-enabled features … to make it easier for you to start, run, and grow your business.” Basically, it’s AI tools that allow you to do things like automatically write site content or generate email copy. These tools seem helpful and I definitely see how they could lower the costs of running a DTC site.

DTC Businesses Have Negative Cash Flow

They're not just unprofitable—they have an even bigger issue

Public direct-to-consumer businesses not only are nearly universally unprofitable, they have an even bigger issue: negative cash flow.

First, let’s recap some Accounting 101 concepts. Profitability is the amount of money left over after deducting all of a company’s expenses from its revenue. If a company makes capital investments like opening new stores or warehouses, those investments do not count as a cost against profit (other than the initial amount depreciated).

Can Any Large Ecommerce Brand Be Profitable?

I've started to think it's basically impossible

I’m going to get a lot of pushback on this one but I’ve started to think it’s basically impossible for any large ($20mm+), 100% ecommerce brand to be meaningfully profitable.

By the way, I don’t just mean DTC ecom–I mean any brand selling online including through Amazon or other online retailers. And I’m not referring to VC-backed businesses only. Here’s my thought process:

Let’s start by surveying the ecommerce landscape. I’ve written about how there are basically no profitable public DTC ecom businesses. Allbirds, Warby Parker, Bark and many others all lose money (though those are not 100% ecom). HelloFresh and FIGS are barely profitable but were unprofitable last quarter.

You Don't Have to Be 100% DTC

A significant enough sample of direct sales captures most of the benefits

Selling direct-to-consumer can be incredibly powerful. I’ve come to believe, though, that businesses can realize most of the benefits of DTC if a significant enough sample of sales is direct–it doesn’t have to be the entire business.

First, DTC of course gives brands access to a treasure trove of first-party data on their customers. While I think the value of data like this is frankly overrated, it does have practical importance. First, it’s much easier to remarket someone when you have their email address, so DTC in theory should have higher reorder rates than other channels. Second, having the ability to survey or talk to individual customers allows businesses to get direct feedback. But even if a business is omnichannel, you just need a sizable enough DTC channel to find enough customers to survey.

VC-Backed DTC Will Likely Never Be Profitable

By their very nature, most VC-backed DTC businesses can't get there

This may be a tough read but I’m starting to think that most venture capital-backed DTC businesses will likely never be, by their very nature, profitable.

Let’s start with the facts before getting to the theory. As I’ve written about before, there are almost no examples of public DTC businesses which are profitable. Allbirds, Warby Parker, Bark, Smile Direct Club, Honest Co, and nearly all others lose money. Oddity, IPOing soon, could be a very rare exception.

Adjusted EBITDA Is Not Profit

DTC companies are distorting their true profitability

For years, public companies have been distorting their true profitability by emphasizing their “Adjusted EBITDA”, not their true Net Income profit. Unfortunately, newly-public DTC companies are getting in on the game.

I was at a conference last week where someone working at HelloFresh, the DTC meal kit company, told me the company made €66mm in Q1 of this year. This surprised me, as I knew the company actually lost €25mm this past quarter. Why the discrepancy? He was talking about HelloFresh’s Adjusted EBITDA, not Net Income.

DTC Growth Rates Declined 5x

Public DTC ecommerce growth rates declined ~5x in 2022 vs. 2021

Public DTC ecommerce growth rates declined ~5x in 2022 vs. 2021. Profitability worsened. Unfortunately, 2023 does not look better.

Here’s a representative sample of public DTC companies revenue growth rates for the last two years:

• Allbirds (Footwear): ‘20-‘21 Growth Rate: 26% → ‘21-‘22 Growth Rate: 8%
• Honest Co. (Eco-friendly): 6% → -2%
• Warby Parker (Eyewear): 37% → 11%
• FIGS (Scrubs): 60% → 20%
• HelloFresh (Meals): 60% → 27%
• Purple (Mattresses): 12% → -21%
• Hims (Telemedicine): 83% → 94%
• Bark (Pets): 69% → 34%
• Smile Direct Club (Aligners): -3% → -26%
• Grove Collaborative (Bathroom): 5% → -16%
• AKA Brands (Fashion): 160% → 9%
• Solo Brands (Outdoor): 206% → 27%
• Brilliant Earth (Jewelry): 51% → 16%

For the above companies, the median growth rate from 2020 to 2021 was 51% and for 2021 to 2022 it was 11%. That’s down nearly 5x.

DTC Companies Are Now Trading at 1x Revenue

Public DTC ecommerce companies are down about 80% from peak

Public DTC ecommerce companies are now trading at ~1x revenue, down about 80% from peak. Growing businesses get a small premium. Shrinking businesses are closing in on 0.

Here’s a representative list of public DTC companies:

Growing:

• HelloFresh (Food). 2022 Revenue: $7.6B. Growth Rate: 27%. Market Cap: $4.3B. Revenue Multiple: 0.57x
• Brilliant Earth (Jewelry): ‘22 R: $440mm. GR: 16%. MC: $378mm. RM: 0.86x
• FIGS (Fashionable scrubs): ‘22 R: $506mm. GR: 20%. MC: $1.4B. RM: 2.73x
• Rent the Runway (Clothing rental): ‘22 R: $203mm. GR: 28%. MC: $158mm. RM: 0.78x
• Allbirds (Shoes): ‘22 R: $298mm. GR: 8%. MC: $188mm. RM: 0.63x
• Warby Parker (Glasses): ‘22 R: $598mm. GR: 11%. MC: $1.3B. RM: 2.24x
• Hims (Telemedicine): ‘22 R: $527mm. GR: 94%. MC: $2.2B. RM: 4.25x
• Bark (Pets):‘22 R: $507mm. GR: 34%. MC: $197mm. RM: 0.39x

Shrinking:

Most DTC Businesses Are Now Worth Less Than They Raised

DTC has been a very bad investment for equity investors

The vast majority of VC-backed public DTC e-commerce businesses are now worth less than they have raised. In general, DTC has been a very bad investment for equity investors.

Here’s just a sample of the public DTC businesses who have raised more in equity capital (including at their IPOs) than they are currently worth:

• Rent the Runway (Clothing rental). Raised: $683mm. Market Cap: $173mm. 0.25x Market Cap/Raised
• Smile Direct Club (Teeth aligners): Raised: $1.739B. Market Cap: $155mm. 0.09x Market Cap/Raised
• Allbirds (Footwear): R: $506mm. MC: $187mm. 0.37x MC/R
• Blue Apron (Food): R: $692mm. MC: $38mm. 0.05x MC/R
• Honest Co (Eco-friendly products): R: $916mm. MC: $155mm. 0.17x MC/R
• Grove Collaborative (Bathroom products): R: $969mm. MC: $87mm. 0.09x MC/R
• Boxed (Wholesale club): R: $700mm. MC: $1mm. 0.00x MC/R

Some businesses are still worth about ~2x what they raised:

How Badly Public DTC Companies Have Performed

DTC stocks are down 85-90%, worse than the dot-com bubble

I don’t think most people working in DTC understand how badly public DTC companies have performed in the stock market. It’s bad–really bad.

Almost no one has been spared. Here’s a rundown of the performance of some representative brands:

• Allbirds (Footwear). Down 96% from peak. Market cap: $176mm
• Blue Apron (Food). Down 99% from peak. Market cap: $48mm
• Smile Direct Club (Teeth aligners). Down 98%. MC: $157mm
• Warby Parker (Eyewear). Down 82%. MC: $1.22B
• Bark (Pets). Down 93%. MC: $256mm
• Honest Co. (Eco-friendly products). Down 92%. MC: $174mm.
• FIGS (Fashionable scrubs). Down 85%. MC: $1.08B
• Stitchfix (Clothing). Down 95%. MC: $565mm
• Rent the Runway (Clothing rental). Down 95%. MC: $189mm
• HelloFresh (Food): Down 78%. MC: $4.12B
• Wayfair (Furniture): Down 89%. MC: $3.96B
• Hims (telemedicine). Down 63% from peak but slightly up(!) from De-SPAC price. MC: $2.15B

In general, DTC stocks are down 85-90%. For context, during the dot-com bubble, NASDAQ fell about 75%.

The Underrated Benefit of Marketing Agencies

It's much easier to align incentives and pay for performance

One of the underrated benefits of working with a marketing agency is it’s much easier to align incentives and pay for perfomance.

There’s a never ending debate about whether it’s better for brands to in-house marketing expertise or work with external agency partners. I’m not going to try to engage with that here. But I do think the fact that it’s easier to incentivize agency partners is under-discussed.

Effective marketing is the lifeblood of any consumer company. If there is a person or group responsible for marketing your company effectively, they should be paid a large fraction of the incremental profit they are generating for the brand. For larger companies, this fraction could potentially be hundreds of thousands of dollars a year–or more.

Marketing Agency Fee Structures

What's worked best from the brand's perspective

I’ve worked with dozens of marketing agencies over the years. Their fee structures have varied widely. Here’s my two cents on what’s worked best from my–the brand’s–perspective.

There are many ways to skin a cat, as they say, but below are four agency fee structures I’ve actually used along with their pluses and minuses. I declare a winner at the end.

1. Percentage of Marketing Spend

Pros: Good Ol’ Faithful, almost certainly the most common fee structure. Paying higher fees with greater spend both compensates the agency for having to manage a more complex account and rewards them for growing the account.

Retargeting ROAS Targets Should Be Lower

Up to 50% lower than prospecting campaign targets

Retargeting campaign ROAS or CPA targets should be significantly lower than prospecting campaign targets. Up to 50% lower. Unfortunately, I see brands failing to set differentiated ROAS targets all the time.

As usual, I’m going to return to my favorite hobby horse: emphasizing that you need to be thinking about everything in your business on a marginal, or incremental, basis.

Incrementality explains why prospecting and retargeting return on ad spend targets should be different. For prospecting campaigns, as the user by definition has not visited your site, it’s pretty likely that the conversions you get from these campaigns are incremental–customers you wouldn’t have converted otherwise.

Don't Forget Remarketing Campaigns

There's a third campaign type that many companies surprisingly forget

You’re probably running prospecting and retargeting campaigns on Facebook. But there’s a third campaign type that many companies surprisingly forget: remarketing.

First of all, what is remarketing? It’s marketing to former customers. Here’s the taxonomy for the three types of campaigns.

Prospecting: marketing to consumers who have never visited your site, at least according to the platform. Retargeting: marketing to consumers who have visited your site but have not purchased Remarketing: marketing to former customers.

Marketing Channel Customer Value Ranking

Customers from different marketing channels are not equally valuable

The customers you acquire from different marketing channels are not equally valuable. Certain channels have customers with consistently high or low LTV. Ranking is below:

First, for credibility, the DTC e-commerce businesses I’ve co-founded or acquired have spent well over $100mm on paid marketing. And I’ve seen the detailed marketing stats for dozens of businesses.

And, for clarity, by more valuable customers I mean customers who have higher AOV, better retention / greater order frequency, purchase higher margin products, and refer a greater number of other customers.

Include Referral Value in LTV

Businesses usually forget that part of their customers' LTV is their referral of other customers

When calculating lifetime value, businesses usually forget that part of their customers’ LTV is their referral of other customers. Missing this makes businesses underspend on marketing.

The golden ratio for an e-commerce business is customer acquisition cost (CAC) to lifetime value (LTV) ratio. Of course, the LTV of your customers matters a lot. And if your customers are more valuable, you can afford to spend more to acquire them.

How should you think about the LTV of the customers you acquire through paid marketing?

The 3 Types of CAC

Most founders confuse these three customer acquisition cost metrics

There are 3 types of Customer Acquisition Cost metrics–and most founders I know confuse them and hurt their business.

First, there’s overall blended CAC. This is your overall customer acquisition cost and is calculated by summing the amount you’re spending to acquire customers–including variable agency fees and creative costs–over the total number of new customers acquired in any given time period.

You’ll note that this includes all customers acquired, including customers you got organically through word of mouth and so didn’t pay anything to acquire. This number doesn’t exactly tell you how much it’s costing you to acquire a customer on your paid marketing spend. But it’s still a very important acquisition metric to track because the overall health of your business is determined by your LTV / (overall blended CAC) ratio.

Include All Costs in LTV

When calculating lifetime value, you need to include all relevant costs

Don’t lie to yourself about the value of your customers. When calculating your customer’s lifetime value, you need to include all relevant costs–including ones you’ve likely missed.

When evaluating direct-to-consumer e-commerce businesses to acquire, one of the metrics we of course look at is LTV to CAC ratio, or the ratio of the lifetime value of a customer in profit dollars to the cost of acquiring a customer. A brand’s incremental CAC or ROAS can sometimes be difficult to calculate but the LTV part is supposed to be fairly straightforward.

Branded Search Is a Waste of Money

In many cases, the customers you acquire through branded search aren't truly incremental

OK, I’ll say it. In many cases, branded search is a waste of money.

To recap, branded search ads are the ads you see when you bid on your own brand’s name on Google. If I’m Toyota and I bid on “Toyota Camry” that’s branded search. If I bid on “best crossover SUV,” that’s non-brand search.

Non-brand search is great and, if you bid correctly, should get you incremental customers profitably. Branded search, though, has a major flaw.

Agency Spend Rules to Align Incentives

Marketing agencies get paid when they spend more—here's how we solved the conflict of interest

When you hire a marketing agency there’s a big conflict of interest. They get paid when they spend more–even if it’s bad for your business. Here’s how we solved it.

Most, though not all, marketing agencies have a spend-based fee structure. They get paid as a percentage of marketing spend so if you spend more they get paid more. Putting aside the question of whether this makes sense, why is this a problem for you? Because it’s not in your interest to spend as much as possible on marketing. You should spend up to the incremental point of profitability and no further. Marketing agencies have an incentive to get you to spend beyond that point–in theory, way beyond.

Returning Customer Rate Doesn't Matter

What matters is customer lifetime value, not Shopify's returning customer rate

Your store’s “returning customer rate” doesn’t matter at all. Instead, what matters is customer lifetime value.

These statements sound contradictory so let me explain.

When I’m diligencing businesses to acquire for Agora, founders often talk about their “returning customer rate.” I believe they do this because Shopify has, inexplicably, placed this metric at the very top of every store’s Analytics tab.

Shopify defines the returning customer rate as “the percentage of customers that have placed more than one order from your store, out of customers that placed an order within the selected date range.” Basically this means it’s the percentage of returning customer orders out of all orders at any particular time.

Check the Stock Market for Marketing Platforms

Market cap tells you whether a marketing platform actually works

Want to know if a marketing platform will work for your brand? Check the stock market.

The insight here is pretty simple. If a marketing platform is generally effective, many businesses will use it. If many businesses use it, the company will make a lot of money. If the company makes a lot of money, its stock will go up.

Stock price times share count will get you market capitalization, which is what investors think a business is worth overall. And you can use a company’s market capitalization as a quick reference point on whether ads work on its platform.

NPS Is Overrated

NPS is actually a pretty bad and overhyped metric

I think NPS is actually a pretty bad and overhyped metric. Don’t use it to make important decisions about your business.

NPS stands for “Net Promoter Score” and it was invented by a management consultant in 2003. It’s derived by asking customers “How likely is it that you would recommend this company to a friend or colleague?” on a scale of 0-10 and subtracting the percentage of people who say 0-6 from those who say 9 or 10.

Don't Lie About Your All-In Acquisition Costs

You need to include all costs, not just marketing platform spend

Don’t lie to yourself about your all-in acquisition costs. You need to include all costs, not just how much you’re spending on marketing platforms.

The golden metric in any e-commerce business–arguably any business–is LTV / CAC, or lifetime value to customer acquisition cost. I constantly see, however, that brands are failing to include all relevant costs in their CAC.

Everyone knows you should include marketing platforms costs, like Facebook and Google ad costs.

Paid Referral Programs Are Often a Waste of Money

You could be paying customers to make referrals they would have made anyway

I’m going to be honest. In many cases, paid referral programs are a waste of money.

What’s a paid referral program? It’s a program where you incentivize customers to refer other customers to your company. You can incentivize the customer who refers, the customer who is referred, or both. The incentive can come in the form of a free product, a discount on the next order, or even cash.

What’s not to like? Usually referral incentives are smaller than your normal acquisition cost so it seems like you’re getting customers inexpensively. And if you’re giving a discount to the referrer, you’re incentivizing another purchase.

ROAS Too High Is a Problem

If your ROAS is too high, you are likely leaving a lot of money on the table

It’s a big problem if your ROAS is too high. You are likely leaving a lot of money on the table.

A lot of marketing analysis is trying to figure out how to improve return on ad spend (ROAS) when it’s too low. This makes sense–if ROAS is low, by definition, your advertising isn’t profitable.

But ROAS being too high is a problem too. This sounds like an obvious point but you’d be surprised how many ad accounts I’ve seen where it’s happening.

Credit Card Decline and Passive Churn

Credit card decline is one of the main reasons for subscription business churn

Credit card decline is one of the main reasons for subscription business churn.

The vast majority of businesses I’ve talked to are doing way too little to fix it.

Fundamentally, there’s two types of churn. The first is active churn, which is customers intentionally canceling. The second is passive churn, which is customers canceling because their credit card declines when you attempt to rebill them.

Passive churn can be, in my experience, up to 40% of cancellation. It’s also especially frustrating because these are usually people who want to continue to be your customers!

Organic vs. Paid Acquisition

Most founders don't know how many customers come through paid vs. organic channels

Most founders I talk to don’t know how many of their customers are coming through paid marketing channels vs. organic. This can really damage your business. Here’s how to figure it out.

Fundamentally, there’s two ways e-commerce businesses can acquire customers. Through paid channels like Facebook, Google, etc. Or organically–which is basically customers telling their friends about your business and then they become customers.

In most ways, organic acquisition is just better. You don’t have to pay Mark Zuckerburg anything to get more customers.

How to Set Your ROAS Target

Choosing the correct return on ad spend target is critical to maximizing profitability

Choosing the correct return on ad spend target is critical to maximizing your brand’s profitability.

Most of the brands I talk to are doing it wrong.

When chatting about marketing, I often meet with founders who don’t really have a reason for why their return on ad spend or cost per acquisition target is what it is. Sometimes they arrived at their target by gut feeling or by using rough heuristics. But in my view, there’s actually a right way to do this for each brand.