Vile Rumour & Gossip

• Salesforce are rearming - Always interesting to see who SF acquires as AI business models take shape. The SF walled garden now has M3ter (a very good usage billing platform), TIN (a behemoth AI agent for CS) and more as they take advantage of the lowering of prices in SaaS. Still - $3.6bn for TIN is a whole heap of cash. At least the US govt can’t turn it off when they feel like it right?

• Shopify’s international fudge - I’m often told I’m too harsh on vendors, but the Commerce Futures group is rife with no small frustration regarding “markets” v single storefronts. I get it - Shopify’s home market is so vast that the ROW is a distraction of sorts, but with so much developer talent it should be able to re-architect for international merchants properly without needing many instances. The European enterprise isn’t an option if this is where we stay, and for those who think me too harsh, the Shopify disciples would have you believe it’s capable of running a global business. Yes - if you have 36 storefronts :(

• The haggle is real - Renewals are getting very interesting. We’re hearing of Search businesses agreeing to 1yr extensions with huge discounts (and sighing with relief). Meanwhile Rezolve.ai is out there trying to acquire these businesses on the cheap. We’re hearing rumours that they’re trying to buy Athos... which would be sad given that out of the many mergers around the Athos org has integrated pretty well.

• The LLM cute name contest - I realise we’re all going to become conspiracy theorists as we age, but it’s not just me I promise. LLM’s are all being given “benign” names... taking words from the Tolkien and Greek myths to make them feel super-approachable. The irony that something called “Fable” is the subject global grumpiness is sad, but I do wish the vendors would stop making their models sound cute. They’re not cute, right?

Anti-Loyalty

I’ve tried saying it quietly, but nobody seems to listen. So - a little bit louder.

There are no loyalty programs, there are no loyalty vendors, there are only incentives.

Of course, we all have brand affinities. I’m loyal to Aston Villa, McNair shirts, Petite Peonies. I don’t have to be told that... I just am.

But the economics of incentives - there’s a thing of beautiful complexity, a thing of interest. That’s where “earn and burn” is weakest - tearing apart any affinity with the brand whilst pretending the opposite is in fact happening.

If AI gives us anything it’s the ability to personalise incentives at scale. Copywriting for each individual based upon their behaviour and purchases, discounts that feel random and “gifty” but are actually evenly spread across the customer base.

Come on people - let’s try harder... and stop calling them loyalty programs, they’re just not.

Sovereignty

Where to start. As I design the next MACH Agenda this has to be present. European businesses will not adopt the AI that the vendors need them to if the models risk being turned off.

Global politics are front and centre here, and there’s just no way a global LLM is going to offer any guarantee of availability in the current climate. In Canada a few weeks ago we heard lots of chatter about “Sovereign GPU’s”, which seems like an obvious priority, but the reality is every market will need a sovereign model selection, the world is simply too uncertain right now.

In the UK we’ve got nothing, we’ve sold our soul. the French alone have an LLM - Mistral (not ripe for use though). Nothing in any other sovereign European state, and no sign either.

The vision Tim Berners Lee purports of us each having our OWN sovereign wallet is a very long way away, and whilst the word “Sovereign” has all sorts of awful connotations to do with “Empire” and worse, in the new world it really does mean “mine own”.

We should all think much harder about this subject. Before jumping in to every new model for fun... just hold that thought for a second. Count to 10 - have a ponder.

The LLM Feed - customers in the dark

We are used to things moving faster now... and given the focus on LLM’s across vendors and clients we had expected that in 3 weeks between our last issue and now, we’d have found someone who really understands the product feed for AEO.

Not so... vendors do not seem to grasp the opportunity, and clients are standing around confused. Somebody, anybody, help :)

And finally - our insult of the week. Please feel free to use freely. Don’t forget to find us on substack... A great piece about AI careers there and more to come we promise.

Jamie

The image above has been freewheeling around my head for months now.

Is this where we’ll end up as “agents” remove our critical thinking? And Claude has told us we’re amazing once too often?

I don’t want to lose the little true cognition I have. And yes, thinking and chatting is the lifeblood of our working lives....

So - let’s get into it - my opinions follow...

Vile Rumour & Gossip

• Recharge bought Skio on the cheap - Skio were doing $33m ARR, and got bought for 3x revenue. 2 years ago they’d have gone for 10x at least. Recharge has become largely dominant in their sector (except for Shopify’s own limited subs service), and Skio were better at lots of the elements of the Recharge toolkit. Customers are a bit sad of course, they know how this ends (more on that later). SaaS valuations are really screwed right now, and what that means for pricing, salaries, all of it - we really don’t know yet.

• The murky beginnings of Rezolve.ai - If you’re in the right community groups (or on reddit) you’ll have read about the dark arts of Dan Wagner’s not so new startup. The beginnings are largely unimportant now though. Out of a SPAC they’ve acquired Crownpeak & Advanced Commerce among others, including three search tools and a bunch of customers. And - $750m burning a hole in their pocket to be spent quickly.
  Murky or not, these are real customers with SaaS that is deeply embedded (some have had Fredhopper for 15 years)... so keep a close eye people, the agentic promise is clearly fluff for now. Oh and yes i asked them for a chat - I am being ghosted.

• Klaviyo’s CRM carcrash - A few weeks ago the CF community witnessed a new AE at Klaviyo sending a “hello, can we catch up” email to 50 accounts who had mostly left their businesses. Oh, and it came out of Salesforce... :) Still funny 10 days later.

Adyen & Talon one - what does it say about SaaS?

This transaction was very early in the cycle that SaaS has known. Talon One has had real momentum for a while now, and hadn’t actually raised that much cash... so really were in control of their own destiny.

I wonder if this has happened now because the thinking is that valuations will only get worse? I can’t see that sales momentum is an issue, the team are excellent and the product positioning has been strong.

The deal presents opportunities for others though. This is Adyen’s biggest acquisition, and they won’t be able to resist fiddling with their new toy. Inevitably, Talon One’s momentum will slow, great staff will move on, and Adyen’s conservative/cautious culture will take over.

Who will benefit? the established “loyalty” players for sure... but there are some bootstrapped and clever types out there. I suspect there will be far more of these deals this year, leading back to suites of SaaS which may never really be bought again....

Are we witnessing the demise of pureplay D2C?

As I wrote a few weeks ago, many D2C companies are spending 20-35% of their total revenues on customer advertising. All with three channels.

In 2005 Heinz (one of the biggest spenders) were lashing out 4.5% of sales revenues on marketing. This has since grown to about 8%, but D2C will never be profitable if they continue to spend at 20%+.

But continue to spend they must for now, because whilst growth is hard to come by, pureplay D2C has to spend big just to stand still. Squeezed by rising ad costs, supply chains, geopolitics and product ranges that do not have repeat purchase built-in - we worry for the sector itself.

Anyone up for opening some shops?

How we love the lion’s den

I got to witness a delicious 10 minute f2f sales pitch & interrogation last week. A senior architect from The Gap and the founder of a server-side tagging business had a really intense chat where deep knowledge was tested, eye contact maintained, subject-matter expertise displayed by both - and ultimately the test was passed, and a next step agreed.

It’s sad in so many ways that all these relationships now start with a zoom call. Face to face is ultimately faster and much more effective, and I know both salespeople and clients would rather start do it in person.

Perhaps in an AI world buying and selling will be the last bastion of critical thinking before we all turn into blobs on lilos :)

Anyway - more focus on these for the rest of the year from me, and more events in the Autumn. Happy Q2 to all and we hope you get the commercial outcomes you deserve (and not a penny more). And - a shout out to Tomo for the support with insults... Temu is a doozy.

Jamie

You’ll have seen by now we’ve added a podcast to the #norocketships offering, and we reckon episode 2 is a doozy. The slightly reluctant interviewee Ditlev Bredahl (founder of Hosted AI, his 7th startup) talks about why he can’t stop doing startups, and what true entrepreneurship takes out of you. He’s also a man with high EQ, unusual for a high achiever..

Let’s go shall we?

Vile Rumour & Gossip

• The race for an AEO feed is on… and it’s not fair. OpenAI has published the form for brands (or anyone) to complete so that GPT can find your products, but they’ve not opened it up yet. In the background ALL of the eCom platforms have done deals with the LLM’s to feed them - without clients being in the know.

• Beware the bill for your AI-created content - We have a few brands in our community who have adopted a pretty advanced landing pages strategy - creating 1000’s of landing pages using OpenAI. They are all being slightly screwed by the Search bill that’s coming their way - API calls maxed out and an escalated invoice. Much to unpick in the new world.

• Code quality of LLM’s (discussion points) - For all the SI’s who read this email, a very interesting trend is appearing in LLM’s writing code. Front end? Perfect - fine - excellent. But - the further you go down the stack the LLM’s are less effective, bloated even. Code isn’t fixed… it’s rewritten in order to bug fix. Customers are not interested in this.

Is Demand gen finally growing up?

To BDR or NOT to BDR, that’s the question. In the end everyone does, it’s too tempting and too baked in to funding models, but we’re seeing an explosion of newsletters, podcasts, owned conference series and EGC (employee generated content). The quality threshold is currently quite low, but like all things the hard yards will reap rewards… By issue 100 they’ll have some traction (they’ll all be binned by then right?)

Weirdly, at the same time as this is happening the quality of contact data in CRM’s across the SaaS market is declining as folks become reliant on the ABM machines like 6Sense. Highly dubious for GDPR btw but that ship has sailed now.

The last mile is the challenge still, that first meaningful conversation with a target account. We’re currently running a super-Bougie dinner series for several clients, with liberal amounts of restaurant temptation involved. We’re going back to the 80’s everyone!

The AI Solutions hunting a Problem

Of course it started with IBM Watson, great tech but no market fit. In the end clients couldn’t find a problem that it solved. Now we have 000’s of AI services launching into a market in which the customer is totally conflicted - let me explain.

The board sees “more with less”, cost savings and efficiency, but they don’t understand ANY of the tech. General staff are terrified of losing their role and so resist at every turn if possible. Engineering? Well they’re being told to automate, and internally are mostly a department under pressure for failing to deliver what the business wants 🙁 - so they’re under pressure to lose staff.

We are bound to see a whole ton of examples like Artifact, Ghost Autonomy and more who never get traction, but to the sales leaders out there tempted by the big VC cheque to go AI side… we’d be careful about anything before scaleup stage.

For clients - we’re hearing much more “wait and see”... unless the engineers are doing skunkworks to validate the tools and build trust internally.

eCom is fading

Is it just me, or is eCom on a sort of life support currently. While we wait for the LLM’s and google to decide how the transaction will change, physical encounters are increasing and stores in Europe are taking the investment once destined for digital.

Why? Well - when I speak to those operating retail brands, the revenue in store is currently more certain (and predicted to rise as people return to full days in an office), and tech projects typically do not fail, neither do they change mid-flight.

But the biggest factor right now is…. Tumbleweed : There’s real little advancement in eCom; attribution and tracking is all over the shop; the platforms aren’t innovating quickly in real terms, and so digital is being called out for being an unpredictable luxury channel in some brands.

Then of course there’s the specialists… BÆrskin, Swissklip, Snag, Pott’d and others are killing it because their focus is a super-tight coupling of product, creative and media choices… true test and learn with AI making everything faster and cheaper. But there are very very few of these.

Go where there is appetite… it’s tough to see much of it here.