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.

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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 ...