The Livestream Commerce market in the US continues its rapid expansion. Whatnot just raised a $150 million Series C, valuing it at $1.5 billion and its third fundraise of 2021. And NTWRK raised a $50 million Series C (we estimate valuation at $300 - 400 million).
Chris and Andrew discuss each platform's different programming strategies (UGC scale VS premium O&O), niche to adjacent vertical growth strategies, cap table alignment, expected market consolidation, and what role Twitter can play in social commerce.
Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up link
Learn more about our market research and executive advisory: RockWater website
Email us: rounduppod@wearerockwater.com
--
EPISODE TRANSCRIPT:
Chris Erwin:
So Andrew, a few weeks ago, there was two big announcements about livestream commerce fundraises. Were you tracking this?
Andrew Cohen:
Yeah. Of course. Livestream commerce finally broke into the unicorn status. We've got a billion dollar valuation. And I love to say, "I told you so," so I was very happy to see that.
Chris Erwin:
So there's two big fundraises that caught our eye. We've been tracking this space over the last couple years ever since we saw some of the initial growth figures in China, which were in the hundreds of billions forecast over the next few years. And we're like, "This is something we got to pay attention to in the US." So building off of our research and some of our other reporting, here's two big deals. So Whatnot raised $150 million series C at a $1.5 billion valuation. It's its third round of fundraising just in 2021 alone. Some key figures, GMV is up 30x since March, and there's a couple thousand active livestream sellers on the platform. Use of funds - they plan to launch an NFT vertical, expand into thousands of potential new commerce categories.
Chris Erwin:
That's up from the hundreds that the founder had said I think just a few months ago in the last round of funding, they're going to rebuild their mobile apps for iOS and Android. And they're going to launch a pre-bidding feature. The second big capital raise is for NTWRK. They raised a $50 million series C. So the valuation was undisclosed, but our guess is assuming that they're giving up 10 to 20% of their cap table, valuation's probably in a $300 to 400 million-ish range. So some key figures, Andrew. To date, they've had two and a half million app installs. From a conversion rate perspective of how many of their viewers convert to paying customers - I think that's our assumption of definition, but they're saying it's 10 to 15% in the low end and 70% on the high end. I find that very high, I'm a little bit skeptical, but think it all depends on the definition.
Chris Erwin:
Also of note 250,000 attendees from one of its virtual shopping festivals called Transfer, right,
this is NTWRK's flagship festival that celebrates culture and design. Not a surprise here since their founder and CEO comes from a very strong events background. So use of funds - they're going to expand into NFTs like Whatnot. They're going to expand their marketplaces, including sneaker resale, trading cards and vintage items. They're going to be ramping up their marketing and also expanding their premium, original content and quote on quote shopping festivals. Then of note, there's a rumor that Twitter is going to be launching a livestream shopping product as well. So Andrew let's break down Whatnot versus NTWRK. And I think you have some thoughts here.
Andrew Cohen:
Yes, Let's get into it. So some differences, some similarities. Let's start with the differences. To me, the biggest difference between NTWRK and Whatnot is Whatnot is much more similar to the major Chinese livestream shopping platforms that we've seen like Taobao Live, Pinduoduo, which are basically UGC marketplaces.
Andrew Cohen:
Whatnot does have, you have to be a verified seller and you have to apply to be able to sell on their platform. But it's a model that is more made for scale. So think about like eBay, but if you are enabled with all of the tools and capabilities of a live streamer. So you can go on, if you are a collector of trading cards and you want to buy or sell and you can get on and on either side of this marketplace, engage. On the other end of the spectrum is NTWRK, which I would say what it lacks in scale, it makes up for in conversion rate, Chris, as you mentioned too at the top because it's not a UGC platform.
Andrew Cohen:
It's actually, they take a much more highly curated and premium and selective approach to their content and their programming. They have original content franchises and formats around. They have one around the comic books. They have one around trading cards and each one has a host. I think the host for their training card show is Scott from HQ Trivia. And apparently for some of these shows that have production statuses of up to 35 people. So it's kind of, I would say they go less wide than Whatnot, but definitely go a lot deeper. And then on the other end, they also have these festivals that you spoke to, which are also big in China.
Andrew Cohen:
We've talked a lot about Alibaba Singles Day. So what NTWRK does here is, they theme the shopping festivals around certain categories. So they've done ones around sports. The one you mentioned is around design. And so they're really good at rallying around talent and premium content to draw in audiences and drive conversions versus Whatnot, which is more about just like training ecosystem and letting the buyers and sellers do their thing.
Chris Erwin:
So it raises some questions, Andrew. And so what I am wondering about is what is the business model advantage of each? And so I think about NTWRK and if they're going after more premium, original and curated content, is it because do they perceive that there's going to be a market for them to syndicate some of their original livestream commerce programming. For example, are these new FAST platforms going to start to integrate shoppable commerce into their linear streams? And is that going to be a really lucrative market? And if NTWRK is pre-creating best in class livestream commerce content, then they're going to be the go-to player for that. I also wonder about for some of the social platforms that are going to be licensing content in the future as TikTok is making a lot of very rapid advances into social commerce, right?
Chris Erwin:
We've seen their Shopify partnership and more. Are they going to be interested in potentially licensing like high quality livestream commerce content? I think that NTWRK has done a partnership with Snap. I'm not sure about TikTok, something may have happened, but maybe there's a bigger market there that NTWRK knows more about than we do. I also think about NTWRK with its higher quality programming, is it trying to go after the biggest and most premium talent and designer collaborators that are going to say, "Hey, NTWRK is our destination and partner platform for who we want to be in business with. The longer tail UGC non-premium creators and sellers, they'll go to the Whatnots of the world, but we want to go to NTWRK." And that's the business model that the NTWRK platform gets excited about. That's what I'm riffing on.
Andrew Cohen:
Totally. And I think it's a bit of a fork in the road moment for livestream commerce in the US from a content perspective, as all these other platforms are getting into it as Facebook and Instagram, YouTube, TikTok, are all figuring out what livestream shopping is going to be on their platform. What's it going to look and feel like. These are really two distinct models. Is it going to go the kind of high-end premium programming route, or is it going to be more of the UGC marketplace route? I think it's interesting to see how that plays out right now. Whatnot has the higher valuation, but like you said, NTWRK’s model is able to attract much more high-end premium partners and promote the creator and brand side to the max. So it's going to be interesting to see how it all unfolds.
Chris Erwin:
Maybe it's like the HBOMax versus Netflix parallel.
Andrew Cohen:
Exactly.
Chris Erwin:
All right. So Andrew and I think you noted that there's some key similarities as well. What does those include?
Andrew Cohen:
Yes, for sure. There's a few. So one is that we're seeing both of them do is starting from kind of a core niche in terms of its category focus and then expanding into adjacent verticals over time. And we've talked about this with our clients in the space that that's really the best pathway to grow and scale in livestream shopping is to own your niche. For NTWRK, it was kind of the streetwear crowd. For Whatnot, it was the collectibles crowd in the toy space. And then how do you kind of find these organic adjacencies that were, it can still be kind of organic to your brand and to your fan base, but also allow you to broaden the tent and expand out. So, we're seeing Whatnot and NTWRK both do that. Whatnot is expanding from collectibles. Right now their top categories are sports cards, Pokemon cards, and Funko toys. To now, as you mentioned the founder saying he sees potential to expand into thousands of new commerce categories.
Andrew Cohen:
For NTWRK, they start off with just limited edition pop culture-inspired product drops, things like merge, apparel memorabilia. Now they said after this round, they're going to expand into sneaker resale, trading cards and vintage. So it's definitely interesting to see that they're taking this similar model. And I'm curious how this is going to affect the other more niche emerging upstarts in this space because there's companies that focus on books. There's ones that focus on beauty and fashion like PopShop and ShopShops. And are they going to be kind of owning their niche and then expanding out into Whatnot and NTWRK’s territory? Is there going to be consolidation and acquisition? I think it's going to be really interesting to see how this kind of selection of product category and creator focus trickles down to user acquisition strategy because that's really going to be what fuels scale.
Chris Erwin:
I think a mantra that we've seen in the media space is that it's going to be grow or die, right? I think some of the biggest media companies started out with a certain niche and then they best understand their customers. What else do their audiences want? And then service them in different waves with different content. Look at Bill Simmons with The Ringer and The Boston Sports Guy. He started out as just a sports personality and then moved into pop culture and film and food and more, right? Same thing with Barstool Sports. Same thing with Complex started out as hip-hop and street wear and then had a major moves into food media and food commerce. And so I think for these platforms, they're going to need to expand into different verticals. And those who don't are either going to die on the vine or they're going to be gobbled up in a consolidation play.
Andrew Cohen:
Yep. Much like media. It's all about how can you expand, broaden your tent while still remaining true to that kind of core brand identity.
Chris Erwin:
Andrew, what else are you seeing?
Andrew Cohen:
Another similarity between NTWRK and Whatnot is that both companies during this round have brought on some pretty noteworthy strategic investors. So for NTWRK, one of their lead investors is Kering, a major global owner of luxury brands like Gucci, YSL, Balenciaga, and many others, Main Street Advisors whose LPs include Jimmy Iovine, Drake, LeBron James, and other big celebrities, Live Nation and Foot Locker. For Whatnot, they brought on a16z, who is really big in the creator economy space, CapitalG, which is Google's venture fund. YouTube is really getting into livestream shopping as well, a Google subsidiary, and then plus influencers and celebrities like Logan Paul, and NBA players Andre Iguodala and Zion Williamson. So, I think that this is really interesting from both ends kind of the synergistic opportunities here.
Andrew Cohen:
I think companies like Kering, looking at how NTWRK can possibly be an incubation play for a social commerce sales channel for a lot of their brands. Similar to other investors like Critic, LeBron, and Live Nation - NTWRK has already worked with them on some limited edition tour merch for Drake and Live Nation, a16z, Foot Locker on the cap table, as they mentioned that they want to get into the sneaker and sneaker resale market. So for all of these, as they're trying to modernize their core businesses and move towards digital transformation NTWRK is a really interesting bet for them that couldn't really work. On the other end with Whatnot, as I said, a16z and Google are both getting into creator economy and live selling space. So this is really synergistic for them, but also seeing the big celebrities getting involved again, that was one of the big differentiators between Whatnot and NTWRK is that NTWRK had more premium personalities, whereas Whatnot was more like user sellers.
Andrew Cohen:
Now with people like Logan Paul getting into the mix, maybe that changes and much like Big KOL is like buy on Taobao, this becomes the platform where big traders go to engage with and sell their audience in a live format.
Chris Erwin:
Yeah. Couple of notes here, Andrew, I think it's really smart of NTWRK where they are matching their cap table and investors to their business model. Right? Whereas we just discussed earlier, their business model is development of premium, original livestream, commerce programming, going deeper with their core fans. And so then having retailers and brand owners as their investors like Foot Locker and like Kering, which owns a whole portfolio of luxury brands that have proven to be. I was just riffing on this with our in-house fashion expert, Mike Booth this morning, it includes Balenciaga. And a lot of these luxury fashion brands have been very early movers and experimenting in social commerce to reach those younger audiences as I think they've seen that their customers have aged up over the years and they really want to start catering to millennials and Gen Z. So Balenciaga, which just announced, I think a big Fortnite partnership to create both digital and physical goods over the past month that wasn't their first move into the metaverse.
Chris Erwin:
They actually used the Unreal engine that powers Fortnite to launch, I think their own metaverse environment. I think about a year, year and a half ago. I really liked them as leading this investment round for NTWRK. Yeah, and for Whatnot, I think look with Logan Paul and Jake Paul, and speaking of like moment driven zeitgeist content and commerce, those two brothers have done incredible things in creator competitions and driven incredible scale revenues, which we've talked about in other roundups. So I like seeing them on the cap table for Whatnot as well.
Andrew Cohen:
One last similarity, and then we can touch quickly on the Twitter rumors, between NTWRK and Whatnot is that both announced that with this round, they're going to be getting more into NFTs and NTWRK's already done some work in NFTs, they plan to expand. Whatnot wants to a launch an NFT vertical. This really just caught my eye. I didn't get many details from it, but we've seen before that there's a huge overlap between live content and NFTs. Kind of the power of the moment of that, "I was there," has real social currency to it and now NFTs, there's kind of a way to monetize and cement that value around that social currency of “I was there when that moment happened.” And so I think it's going to be really interesting to see that combined with actual physical products and what can be the confluence of live selling of physical and virtual products and where NFTs will fit into this experience. What do you think, Chris?
Chris Erwin:
I want to be sensitive to the time for our listeners, Andrew. So let's transition to this final beats about Twitter rumors. Like we were talking about just before we started recording, there's really no details out yet on this. We saw people talking about it in the Twittersphere and in some of our executive circles that Twitter is going to get into livestream shopping, unclear what that exactly looks like, but it signals how big a market opportunity that this is viewed by where Twitter, one of the largest tech and social platforms that's out there, is realizing it doesn't want to miss out on what can be a major revenue opportunity. Now I think it raises some questions of, does it make sense for Twitter and what is their angle? Right? I think Twitter is very much known for having these really unique interest graphs around different topics and different personalities.
Chris Erwin:
The thing is, if you want to understand user behavior on Twitter with livestream commerce, is it going to better function as entertainment, which maybe we see on some of these other platforms or is it maybe a place where from these trusted interest graft and personalities that people follow, getting recommendations about products, getting some trusted input and reviews and advice about how to use the products and what is high quality and what is not? I think it raises the point of what is the angle that Twitter's going to take, that's going to be different from what we're seeing other platforms do, based on its core user experience?
Andrew Cohen:
I'm interested to see where they're going with this. We haven't gotten many details at all. Shopping definitely doesn't really seem native to the Twitter user experience, but live does, it's definitely a very always on platform. So curious to see how they can kind of start to incent, and incubate, maybe a bit more of a shopping mindset from all their personalities that are kind of always on in that live medium of Twitter and combine those elements. They were early on live streaming with Periscope, seems to be late on commerce. So let's see if they can put it all together because it's definitely a competitive space at the top with Amazon, Twitch, YouTube, Instagram, Facebook, all getting into it.
Chris Erwin:
All right, Andrew, I think we are beyond time. So till next time.
Andrew Cohen:
Sounds good. See you then.