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Mobile Dev Memo Podcast
Season 7, Episode 20: Shopify as a marketing operating system (with Venkat Prabhu)
00:37:58
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- [00:01]
A
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B
The problem is that the distinction needs to be drawn between the competence of the e commerce economists and the correctness of their analysis.
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C
Welcome to the Mobile Dev Memo podcast. I'm your host, Eric Suefert, and I'm joined today by Venkat Prabhu. Venkat. Welcome to the podcast.
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B
Thank you so much for having me, Eric. Super excited to be here.
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C
So we're recording this on Tuesday the 16th, but this will go live Wednesday the 17th, when Shopify's Spring edition has launched. And so there's a lot to unpack and what's been announced and what's been discussed and what's been clarified. And so I'm really grateful to have you on the show to do that. But before we dive into those topics, can you please introduce yourself to the audience?
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B
Yeah. So I am a director of Product of Shop campaigns at Shopify. I've been here at Shopify for close to a year. Before Shopify, I was at Amazon for nine years. Five out of those nine years, I co founded a product called Buy with Prime. And then prior to that, I used to lead Amazon social advertising initiatives. So all the ads that Amazon ran across, Meta, Snap, Pinterest, and so on. As a part of Buy with Prime, I got to work super closely with Shopify, got to know the Shopify exec team really well, fell in love with the company culture, the way Toby runs the company, and decided to join Shopify to lead parts of the advertising initiative. And I feel there's a big opportunity ahead of us for Shopify to help our merchants grow their business on Shopify.
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C
I want to say you're the fourth Shopifyer I've had on the podcast. I most recently had Amanda Engelman. Yes, that was right before New Year's, if I remember correctly.
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B
I was December.
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C
Yeah, I was. I recorded that in Prague. I was on a trip. But yeah, so I've been following Shopify's advertising journey for a long time. Shopify is a company that I admire quite a bit. It's cool to have you on to talk about spring editions. I think I had. I can't remember, it was last year, spring edition or the Year before that when I had Andreas on. I can't. It's. Maybe we'll turn it into a yearly tradition.
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B
Yeah, I think Andres was here. I think it was December of 2024. And then you had Jess Jacobs, who wasn't at Shopify when she, when she spoke with you, but now she's back, right?
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C
Yeah.
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B
And then that was I think maybe like Q1 of last year. And then Amanda was there December, I think, last year.
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C
Okay, so spring editions has just dropped. It's, you know, I'll link to it in the show notes. People should go read that. But parsing spring editions and looking at Shopify's advertising initiatives broadly, what's the state of the platform today and where's it headed? Maybe just give us a kind of a big lay of the land, broad based overview of what Shopify is doing with advertising.
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B
Yeah. As a part of spring Editions more broadly, we are seeing the state of shopping change quite rapidly, especially with a lot of net new aggregated experiences getting built via agentic commerce. And so Shopify, through our capabilities like the UCP protocol that we have co developed with other companies like Google, as well as the catalog API, we're actually making it super easy for a lot of developers out there to actually build net new commerce experiences. And all of this helps merchants that are a part of Shopify because whatever net new experience gets built out there and wherever commerce goes next, we make sure that Shopify merchants are there first. So that's a big part of our overarching story as a part of Spring Editions coming specifically to advertising. I wanted to just sort of talk a little bit about the state of the platform, maybe giving a little bit of historical context before we jump into the specific announcements that we are making. So Shopify, we've always had channel apps as a part of Shopify. These are apps that are built by all of the ad companies, you know, Google, Meta, TikTok, Pinterest, Snap App Loving. The list goes on. And within those apps, you know, those apps continue to exist. We build platform capabilities that make it super easy for merchants to get started with commerce or advertising on any of those surfaces. And we have historically identified value sort of differentiating capabilities that we as Shopify can build. Shopify audiences being a great example on how we could help merchants get a better return on the ad spend on each of these existing surfaces. About a couple of years back, we started out with shop campaigns, which was a way that merchants could actually drive more sales through the Shop app, which is Shopify's first Party experience. And we got some really good feedback from merchants. And the most important thing that merchants love is the fact that shop campaigns is a risk free advertising offering. Merchants come in and say, this is how much I want to pay for customers. And you can create different tiers of customers. You can say if it's a new customer, I'll pay X dollars more. If it's a returning customer, I'll pay Y dollars and so on. And so that value proposition has really appealed to merchants. But the feedback from merchants was, hey, we want this to scale more, right? The orders that we are seeing through shop campaigns, we want to see a lot more orders come out of it. And over the past year we have been accelerating our journey in expanding this program across a large range of third party ad networks. And so at this editions we are announcing the extension of shop campaigns onto advertising on OpenAI, specifically ChatGPT, Pinterest. And then we are also going to start advertising on the open web through our integration with Microsoft Monetize, which is an ssp. And so all of this, you know, it's merchants come into shop campaigns, they tell us what outcomes they want to pay for. And these integrations just allow us to drive significantly more outcomes and help merchants scale their shop campaigns trajectory. So that's a big part of our Spring Editions announcement. And then the other thing that we're announcing at Spring Editions, which we are all super excited about, is a product called Campaign Autopilot. And so most merchants on Shopify don't have access to a marketing co founder or like a digital marketing, like an agency. And so it takes a lot of money to like get an agency to do marketing for you. And so we are sort of expanding Sidekick, which is kind of our, the agent that sits within Shopify's admin that allows you to do a bunch of tasks. We sort of leaned in that same construct and we are launching a campaign autopilot that basically builds the capabilities of a digital marketing agency straight into the Shopify admin. And so we're getting started with three launch partners which I can talk more about in detail. But this allows any merchant to come in and talk to Shopify and tell them what their campaign objectives are. And then Shopify comes up with recommendations and merchants have, they can set their budgets, they can define their guardrails and they're in complete control. You know, Shopify selling them the recommendations, merchants are in control and you know, the actual campaigns and you know, they can go and change any of the campaign setup that Shopify recommends to them. And we're starting with meta, shop campaigns and messaging as the first three surfaces. So it's a combination of paid and organic surfaces. But you know, over a period of time we will expand to more channels with Campaign Autopilot as well.
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C
I want to start at Campaign Autopilot. It's really interesting. So it's abstracted above the individual channels and it's like kind of a coordination layer. I think the personification of it as like an agency is probably apps, right? And why is that valuable to retailers? Why is that cross channel coordination valuable? And what becomes possible when Shopify can manage that optimization across channels instead of. Historically, these optimization engines had just been channel specific, right. And we could list examples, there's a lot. But Advantage plus, pmax, Smart plus, on and on. Why is it important to have an optimization layer for your retailers that sits kind of above those and coordinates across channels?
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B
Well, I think the cross channel optimization is a component of the benefit of Campaign Autopilot. I think the foremost benefit, at least from our perspective, is just like the ability to access. This is an experience that sits right within the admin. And I'll give you simple examples of how this experience is different from a merchant going and kind of running campaigns on their own. So if I'm a new merchant, you know, if I'm just getting started with my ads on meta, I have to make a bunch of decisions. I need to make decisions like, you know, what should my budget be, what should my grow as targets be? And you know, these aren't like easy decisions for merchants to figure out. One of the ways that we add value as Shopify through Campaign Autopilot is by helping merchants come up with out of the box suggestions. And we as Shopify sit on tons of transactions that happen across the Shopify network. I think till date we have processed about 1.7 trillion of GMV through the Shopify platform. And so all of that has given us intelligence into really understanding what are the right sort of campaign settings that actually help a merchant get started with the maximum probability of being successful. And so I would say that is one of the foremost things in terms of just getting started. Because, Eric, the reality is the majority of merchants on Shopify never run paid advertising. And so like, just the ability for them to get started with paid advertising in a very easy manner I think is like one of the most foremost benefits of Campaign Autopilot. But then imagine somebody who's now gotten started and they have activated a range of different channels and that's where the cross channel coordination piece becomes important. And so, for example, if you feel like we have a high probability of getting an existing user re engaged through an email marketing program, right, then that would be a more preferable path than actually paying money on paid advertising for that specific user. So that's an example of an organic versus a paid channel coordination piece. In the same way, if you think about attribution today, we end up passing basically all signals back to all platforms. And for the same order, we may have three different platforms that might be claiming credit for that same order. And by virtue of Shopify being the sort of the operating system for the merchant, we can very easily figure out which channel should get that attribution. And in a future state, we may realize that there were three different transits that happened from three channels that resulted in an order. And so we could do weighted attribution as well. And I think all of these things will just help us help merchants figure out what's the best next place to put their next hundred dollars of marketing spend. So I think there's like a targeting component, there is an attribution and then like a signals component. And I think campaign autopilot and the cross channel coordination piece helps across all of that.
- [10:23]
C
I want to kind of hover there for a second. There's two points there that I think are really profound. One is what you said about the ability for a merchant to spend their first ever dollar on marketing. I've been hammering this point for a while. I did this podcast episode more than a year ago called Commerce at the Limit. And I talked about the two axes of growth, like how AI is going to sort of push the frontier out on the digital economy across these two axes, right? One is efficiency conversion, right? That's obvious. Everyone gets that, right? We're going to get more conversions per dollar. It's going to get better at targeting, it's going to get better at matching everything that every big company is investing in here, especially with AI, in terms of automation, in terms of frontier model development in some cases, like with Facebook with Jim. But okay, everyone gets that. No one argues with that. That's sort of accepted, right? That's not controversial. But the other is the onboarding new advertisers to the economy. So every dollar that it's being spent now gets spent more efficiently. But there's this whole second axis, which is the increased participation from advertisers that never could have spent that first dollar getting that person onboarded, that tiny SMB shopify retailer, having them spend their first dollar of marketing and Then ramping that up as they see success. Because that's how digital advertising works. It compounds over time as you see roas and then you kind of reinvest and then you spend more because you're getting more from it. That that's the second axis and like that's what people don't appreciate. Like when you read these research reports that say, well okay, it's a couple percentage points of conversion optimization every quarter. But that's not the real value. The real value is these new dollars, the incrementally new dollars that are coming into the advertising ecosystem. That's really profound and that gets missed, I think in this conversation 100%.
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B
And just to add to that, we have largest majority of Shopify merchants never run paid advertising. We do see the ones that do run paid advertising obviously have correlation with better outcomes over a period of time. And I think there is something to be said around like, you know, just sometimes the anxiety. Like honestly, I know advertising reasonably well and for my own store spending money on advertising, there's a degree of anxiety in oh, okay, I'm putting a budget of $1,000 on Meta and I see those dollars getting spent, but I'm not seeing any conversions that causes me at some point to stop or just not lean into it. It's one of the things that, you know, with shop campaigns we landed. This is again the concept of shop campaigns of you pay only when you get a conversion. It is so like anxiety freeing for so many merchants that are out there because they're like great. This is like a set and forget it thing. Even if I said something, it doesn't drive me anything. Like I don't. There's no anxiety, I'm not worried about anything. And I don't think that paradigm necessarily exists across digital advertising at large. And I think just access, which is why keeping everything else like there are so many other differentiators and other things that can be baked in. But access in itself is extremely like, I think it's undervalued. And that's one of the things that we think campaign autopilot will really help with, make it really easy and comfortable for every single Shopify merchant to get started with paid advertising.
- [13:32]
C
The other point I just wanted to hover on for a second was the coordination piece allowing for that sort of budget optimization. Right. That's a capability. I mean, I think I overestimated the degree to which like people would adopt these kind of probabilistic attribution frameworks, kind of like post att. I mean, I Thought like, you just see a lot more companies spinning up media. Mixed models are doing incrementality measurement. And the reality is you just don't see that. And even across very large advertisers, it's pretty rare. So forget about it for like an SMB. Right. And so then what you see is total channel dependency, like just anchoring their shop or their, you know, their business to a single channel. Because, like, well, I have no idea how to measure the effects right. Across channels. Right. It's impossible for me to do that sort of coordination. And like, you can't do that at the platform layer because there's just an incentive misalignment. But you can do it at like a retail enablement layer, which is Shopify. Right. And I think that is genuinely something that leads to more spend. It's not like, oh, well, that just. That just changes the mix for these advertisers. No, it's actually going to increase their spend because they couldn't spend on multiple channels before because they couldn't measure it and there's going to be too much uncertainty now they can. They're probably just going to spend more.
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B
Totally, yeah. This goes back to like, really sort of fixing the underlying economics in a way where, you know, you create as little of a deadweight loss as possible. And I think when people take a constrained view of it across like just one platform, for example, or a channel, you sort of can, you can imagine, you, you may come to the conclusion that it's actually going to reduce spend, but it's not in the grand scheme of things, this is just like building better economics right across the entire ecosystem. And that just allows more spend to happen, you know, more outcomes to happen. One of the good things about Shopify is our incentives are fully aligned with merchants GMV and more incremental GMV that merchants make. Shopify's fortunes are fully intertwined with merchants gmv. We operate with the exact same incentives that our merchants have across the board.
- [15:26]
C
So I do think the degree to which any given platform would be like, motivated to overstate performance is exaggerated. Like, a platform doesn't want to do that because at some point the money's going to run out. If you're actually getting less than what they're telling you you're getting, you're going to realize you're going to wake up to it at some point because you might just go broke or you might go out of business. Right?
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B
Yeah.
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C
But nonetheless, I mean, there's like a question there, especially when you think about, like, attribution dynamics and claiming credit. But like you really can't make that argument for Shopify. Like there's just no way to make the argument that Shopify is exaggerating the impact, A, because you're being billed on the performance basis, but B, it's because you want what they want, which is increased sales. And if you sit on top of all the channels, you don't have to really question incentive misalignment totally.
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B
If you really think about this a little more broadly, if you, a merchant has a fair amount of budget and they kind of break down this budget into there's a marketing budget, there's a promotions budget, you obviously have your money tied up in inventory and a bunch of these things. But in some ways, like the promotion budget that most merchants have, if you just like add the dollars that merchants end up paying buyers on, like a first time sale, it's a substantial amount of that dollars as well. And so if you kind of think about all of this as a combined budget pool that the merchants have in order to kind of drive the maximum free cash flow for their business, I think as Shopify, like over a period of time, we can help merchants sort of optimize the pools of these dollars that currently may appear separate. But the end of it, the whole goal is how can I make the highest profits, how can I maximize my free cash flow? And I can definitely see a world as an evolution of campaign autopilot for us to get there.
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C
Yeah, I think maybe the other benefit that Shopify has here is you are not dependent on a capi flow to understand the revenue stream. You, the revenue stream, you process the entirety of the revenue stream. So you see all that. So like, there's no question that you have access to like all the relevant data because that's what Shopify does, it processes the transaction. So you have access to all of the revenue. Right. So like A, you don't have to worry about the incentive misalignment problem that I was talking about, but B, like you don't have to worry about like data blind spots because you are the source of all the data.
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B
Yeah, yeah. And that's the reason, you know, even with like, for example, you know, we have attribution capabilities that our merchants use that allow them to understand which channel got attributed to which conversion. And campaign autopilot basically sits on that same underlying attribution layer. And merchants can change their attribution logic and different attribution models, all as a part of the Shopify platform itself.
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C
Right. Essentially it's just like closest to the metal, you sit closest to the data, but also you sit at an elevation that is higher altitude than any single channel.
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B
Yeah, yeah. Which is why I think, you know, that's the, that's a cross channel orchestration piece overall, you know, from a campaign autopilot perspective.
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A
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- [18:53]
C
I'm going to talk about the expansion of shop campaigns in this context. So it feels like Shopify, like you actually said, this is becoming a marketing operating system rather than just like an E comm platform. Is that a fair characterization? And then if so, what are we trending towards here? Like what does the end state look like?
- [19:07]
B
Well, I mean, I think about Shopify as the commerce operating system for our merchants. And so like we obviously there's E commerce, there's retail through POS and so on. It's sort of the overall commerce operating system and marketing is a component of that. I think most merchants were managing their marketing through a bunch of these channel apps even prior to kind of the campaign autopilot announcement. And so I agree with that characterization on kind of this becoming the marketing operating system for merchants. And I, I think with Campaign Autopilot it's sort of this like the uber level that kind of operates across a range of different platforms that just allows better orchestration across these different platforms. And for example, Shop Campaigns is one of the platforms that's now a part of Campaign Autopilot. And one of the things that, you know, I'm really curious to see is, for example, merchants could run their own ads on meta and a merchant could opt into shop Campaigns and could opt into having shop campaigns operate on meta. And I'm eager to see with some of these dynamics. I think it's a combination of a product mix, a buyer mix, where maybe for some buyers it ends up being the Shop campaigns version that ends up driving the order because maybe the buyer already has a Shop Campaigns app enabled. And so the conversion experience is A lot more smoother for many other buyers. It actually ends up going through the direct meta integration. So I think like I do agree with the overall marketing operating system characterization.
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C
You made the point that like the majority of retailers don't spend money on marketing, which again like that's just think about the enormous opportunity then that's just all upside. Right. Like I always point to this from the quarterly census data dump, just the proportion of retail sales in the US that are E comm is 13 point something percent. So okay, you got 86 point something percent to go. And digital advertising is the most efficient way to do demand routing.
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B
Right.
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C
So all of that 86% is upside and all of that revenue that is captured by the 86% can be optimized and made far more efficient. Right. But like I always think about like E commerce especially but like D2C is like these are the marketing cowboys traditionally. I mean they're at the very sort of frontier of adopting new approaches and adopting new techniques, being willing to experiment, being like open to trying new new things with creative, with measurement. And so you've got this especially at the S and B scale. So like you've got like probably the group of retailers that are like the most open minded about this kind of stuff and then also everybody else. So like you got a really good mix of people to like. You've got some that don't need any convincing. They're going to onboard to this and they're happy to like let the machine do as it wants. And then maybe some that are like more tentative, that need to see it proven out but like presumably over time they will.
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B
Yeah. And you know, like one of the, one of our operating principles with Campaign Autopilot is, and this is the case with all things at Shopify, this is it's all in the merchant's control. Right. And so with any recommendation that comes through Campaign Autopilot, merchants can approve those recommendations. They can change any of the parameters, they can change the budget, they can change for example if there's a Target hero as they can change it. They can also pause any of these tactics at any point in time. And so all of these are recommendations. We may have some merchants who might say I just like trust your recommendations and want to move forward. But again that's a merchant control thing. But yeah, I do see this becoming kind of the uber layer. You know, going back to your question on the marketing operating system, Campaign Autopilot is sort of designed to be the overall marketing operating system, which is also one of the Reasons why we as a part of the additions announcement, we within the experience that our merchants see within what we call as admin, we are creating a new tab that's called growth and campaign. Autopilot basically sits within that tab. It's one of the primary levers. It's sort of like a growth or a marketing co founder for the merchant in some ways.
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C
Yeah, I feel like I was kind of rambling a little bit. Like my kind of, my broader point was like my sense is within the Shopify universe of retailers, you've got every profile there. And so like some platforms face the issue with introducing automation. I'm talking about like advertising platforms now because they skew one way or the other. They may skew too far to the DDC side or like just a very, very direct response side. They have a hard time expanding from there and they've got to just service this kind of like very kind of like near time like immediate conversion process. And then some have the opposite problem. Like they've got like the much larger brand oriented advertiser and they can't really introduce sort of like end to end automation because the bigger brands might be a little bit more reluctant to do it. But you've got like this kind of, this sort of very diversified group I think where you kind of have representation at every part of the spectrum. And so my sense is like you got the people willing to test out at the very frontier and then you've got the people that maybe need more convincing over time but nonetheless, I mean you can kind of reach everybody.
- [23:53]
B
Yeah, that's the goal.
- [23:55]
A
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- [24:31]
C
I want to switch gears a little bit to Shop Campaign. So now you see this was announced in the spring edition. You're operating across shop social platforms. ChatGPT was new Pinterest and the Open Web. The Open Web one is interesting, I want to come back to that. But can you walk through that expansion and explain the role that Shop Campaign plays in the broader advertising ecosystem now?
- [24:51]
B
Yeah, Shop Campaign continues the the promise of the premise of Being a risk free advertising product and all of the expansion is, is a way for us to help merchants drive more incremental orders, drive more incremental GMV through shop as the surface area. As a part of this expansion, all of these surfaces, for the most part that we have expanded onto, most of our merchants don't advertise on these surfaces. And so if you think about Microsoft, the integration through Microsoft monetize advertising on the open web, you spoke about DTC advertisers as really being at the forefront as it pertains to digital advertising. But it's still, if you really like, think about the number of DTC advertisers that are reaching the inventory that is on the open web through some sort of an ssp, it's going to be very, very few. And so this is effectively a capability that is now going to make every shop campaign advertiser be able to surface their products in the form of ads across the open web. Our launch encompasses a lot of premium websites and apps, different news outlets, lifestyle blogs, review articles and so on. Basically places where shoppers already are browsing for relevant recommendations. And in fact on a lot of these surfaces, the cost for us to reach net new customers is actually much lesser. And so one of the things with all of the third party expansion of shop campaigns, Shopify ends up taking the risk from an advertising perspective, right? And so the way all of our third party advertising programs work is Shopify sort of acting as this Uber advertiser. And Shopify is putting sort of its ad dollars on each of these channels with the goal of driving these outcomes for merchants. And so Shopify ends up taking this risk to drive outcomes for merchants. And our whole goal here is we sort of operate in some ways like an infrastructure in some ways. Our goal here is with most DSPs and so on, there's like a markup and, you know, solid world. Our goal here is to not make any money in this whole third party advertising business. But we want to basically scale this program in a way that can drive the highest amount of incremental GMV for merchants. We've been advertising on ChatGPT for a while. Since the time ChatGPT announced the pilot, we have had some really good learnings and Pinterest and Microsoft Monetize have been more recent announcements.
- [27:06]
C
I want to hover on the Microsoft Monetize piece. So that's particularly interesting to me because first of all, it's extending it into the open web. But how should merchants think of that? Does that mean it's Like a shop campaigns with that sort of capability is evolving into a commerce focused dsp. Is that the wrong mental model? Because you kind of view this as like another surface area and just the fact that it's open web is not really that that significant or meaningful.
- [27:31]
B
Our whole goal is to actually remove the complexity from these third party platforms and so on, remove all of that complexity off of merchants. And so for merchants, they're still setting up a simple campaign, they're telling us what outcomes they want. And we as Shopify are then like figuring out the best way to drive those outcomes for merchants. So in some ways the merchant doesn't really need to like know the specifics of how some of these pipes are getting built and so on. And from their perspective, the more of these pipes that Shopify builds as extensions either for shop campaigns or for campaign autopilot, it just allows them to show up in the most relevant surfaces across the Internet. And so merchants still pay the same if we drive a conversion for the merchant, they still pay the same cost per acquisition that they told us that they value a user on their side. And so in some ways this is exciting for merchants because it just increases the surface area where their ads show up, but they still pay the same risk free advertising model that they signed up for.
- [28:27]
C
So, so in a sense it's just like it's the Shopify shop campaigns traffic monolith really. Like the underlying provenance is totally abstracted away. I mean would they know, did they see like where the, the source of the conversions?
- [28:41]
B
A lot of the third party expansion has happened over the past six to nine months. So we are still catching up in some terms of some of our analytics capabilities. The ability for merchants to like really understand where specifically did a conversion come from. Currently this all gets bucketed as a shop campaigns conversion within the merchants attribution reports. But better analytics, better incrementality measurement capabilities for our merchants are two of the most important things from our forward looking roadmap standpoint.
- [29:07]
C
Okay, good. Well, because that was going to be my next question is so with doing the orchestration across multiple channels, how should merchants think about performance? How should they evaluate it? What kind of measurement attribution incrementality tools are you providing to validate results?
- [29:19]
B
Yeah. And this is specifically to the context of shop campaigns, right Eric? Yeah, yeah. So within shop campaigns at this point in time, whenever there's an order that a merchant ends up seeing, first of all of the shop campaign orders primarily happen on shop. There are a few of these orders that a Merchant may come on shop, they might link out and go to the merchant storefront and make a purchase over there, which we attribute to shop campaigns as well. But that's a very small minority of orders. But any order that is driven through shop campaigns gets attributed and tagged as shop campaigns for merchants. So that's the visibility layer that they have. And we are working on building more visibility layers around which specific third party was responsible for driving an order if it actually came as a part of the third party program. For shop campaigns and merchants, they can opt out of third party advertising. Like, for example, we have a few merchants who feel like they run ads on all of these. These are typically like some of the larger merchants who have dedicated marketing teams. And these are merchants who are running ads across the surface area of the Internet. They might have like a 10 membered marketing team, somebody responsible for Google, somebody for meta, somebody for TikTok, Pinterest and so on. And so some of these merchants, they decide to opt out of third party advertising, but for the most part actually see smaller merchants. Like they actually, in general, with our expansion into third party advertising, smaller merchants on the platform now see a disproportionate portion of their orders come through shop via shop campaigns as a percentage of their overall DTC orders and gmv. This is definitely helping the smaller merchants on the platform just get started in a much better manner.
- [30:53]
C
Got it.
- [30:53]
B
But a bunch of incrementality capabilities and so on. On our roadmap, we do have merchants that have tried to do incrementality testing themselves, like turn on and off shop campaigns for a period of time, do a measurement, turn third party advertising on and off. And so merchants have figured ways to like try to understand their own incrementality. But we are yet to build, I would say, much more sophisticated tooling to the desire that we have around incrementality measurement.
- [31:18]
C
Could you just implement like a fairly simple GEO test and have shop campaigns running in some geo, not in others, and just test?
- [31:24]
B
Yes, but not, not yet built? That's just what I'm saying. Yeah, totally right. Very easy way to do it. And then merchants could like use many of their existing tooling. Like merchants use a bunch of third parties like Houzz and so on to like measure incrementality. And so what you're talking about is basically how we'll execute on this.
- [31:42]
C
Okay. Extending from what we were talking about earlier. So Shopify sits closer to the transaction than any advertising platform. I mean it, it is the transaction layer. So as campaign autopilot and shop campaigns expand. What unique advantages does Shopify's commerce data provide relative to the optimization systems that are channel specific?
- [32:03]
B
Yeah, I think that's a really good question. I think the most important one, and I kind of touched upon this a little bit around campaign autopilot as well, is just helping somebody get started and what should be the right set of settings that help get a merchant started with advertising across a range of third party ad networks that are out there. And I think we underestimate sometimes the complexity that's involved in getting started. Not just from like a campaign settings perspective, but even just getting the merchants catalog set up for advertising. And just to give you an example on Google for example, or Google paying for you to get started with advertising, you need to have shipping costs that need to be baked into your entire catalog. And that tends to be like it's something that ends up taking quite a bit of time for most merchants to really figure out the right way to plumb across shipping costs across a large number of geographies as a part of the Google catalog feed. And so I think there's a whole like access component. There's an ability for somebody to just get started with the right set of settings, which I think is maybe the predominant kind of differentiator as someone gets started. There's the second aspect and this is something that we leverage with audiences. You know, when merchants opt in and kind of contribute to a pooled data set, that pooled data allows like everyone in the network to become better. And so with Shopify audiences more specifically, we have broadly two audiences that are a part of Shopify audiences. There's a retargeting audience and then there's a prospecting audience. And we see merchants benefit from both of these audiences and the retargeting audiences. We see a significant increase in the match rate even on platforms like Meta that have pretty good identity graphs themselves. And so that's the other layer around kind of pool data and the ability to power intelligence using that pool data. Whether it comes to better identity resolution layers, whether it comes to better machine learning models to help predict who are going to be the customers who might have the highest propensity to buy a certain brand or a certain product. And then I think the third layer is given the fact that we actually we know when a customer ends up purchasing and not just do we know when a customer ends up purchasing, but we actually then know the behavior of that customer over a period of time, not just for that merchant, but across the entire network. And so if you think about this from an ability to just understand not just the attribution at the point of purchase, but as you think about this in terms of helping platforms understand what is the right value of that user to that brand and the ability to actually map out lifetime value measurement capabilities for the merchant using the power of the network data that Shopify has. That just helps with better attribution capabilities, better value signals that can be passed back to the ad platforms. And all of this I think will help not just drive more incremental gme, but also more incremental ad spend on each of these ad platforms. That's sort of the way I would characterize the core differentiators.
- [34:49]
C
Yeah, I would imagine like signal engineering is the kind of the topic that is driving a lot of research and I would say like proprietary tool development now for kind of like the mid sized advertisers that can do this kind of thing. But it's a data science exercise. There's some infrastructure involved. I mean, I feel like Shopify would probably be really good at knowing. Okay, well obviously conversion is a signal, but like, like what to send and how to interpret it in order to like predict. Propensity to buy, propensity to, to engage. And that seems like a huge benefit. Just again, just being close to that, just essentially existing at the data layer and not being reliant on what you get from capi. Because you are the one sending via capi, essentially, you're not the one receiving it via capi.
- [35:32]
B
Right.
- [35:33]
C
So you've got access to all the data. And then again like you said, across all merchants that seems like it's really, it's like a really valuable asset.
- [35:39]
B
Yeah, 100%. I think there's a bunch that we need to do on this front. But like these are all like, I think we have the foundations in place to actually be able to build on these things and there's a huge network effect that's responsible for the foundation there that we have.
- [35:54]
C
Well, and I think another aspect of the dynamic here is that you're not a threat to any of these ad networks. In fact, they should love to integrate with you because you've closer to the data than they are and you've got these capabilities that those advertisers on their own wouldn't have. So you'd rather like have Shopify act on behalf of these retailers than them just trying to do it themselves. Like if you think about the capability for any retailer to do like signal engineering and prediction from that, it's probably pretty low for the most part. But having Shopify do that on their behalf just makes everybody better off.
- [36:24]
B
100 and I couldn't emphasize this point more. In fact, if you just think about the three things that I just mentioned, these are all an and to the platform capabilities that are provided. Neither of these are an or. These all are. In addition, for example, all the goodness that comes from machine learning, optimization, better roi, all of that is going to be further enhanced if the signals that are being passed are more closer to the true value that the merchants end up getting. So this is like completely an and like none of this is an or. And that's the reason, you know, why partners are incredibly happy willing to work with us as we build a bunch of these capabilities.
- [37:04]
C
Venkat, this was fantastic. Thank you for coming on the podcast. Thank you for walking me through the Spring Editions disclosures. Talk to me more about how people can engage with all the stuff that you announced at Spring Editions, how they can get onboarded, how they can start using these tools.
- [37:18]
B
Yeah. To access everything that we just spoke about, Eric, anybody can go to shopify.com editions and they can view the full brochure of all of the announcements. You know, we spoke quite a lot about the advertising side of it, but you know, we have a huge suite of features that we have announced even outside of advertising. All of it available on shopify.com editions.
- [37:35]
C
Great. And fourth Shopify on the podcast, maybe Toby's fifth. We'll see. Let's keep our fingers crossed. But Vincod nonetheless, it was great to have you on and I really appreciate your time today.
- [37:45]
B
Thank you so much, Eric. It was great, great chatting with you.