TMW #076 | Linktree the third gatekeeper, Web3 after the hype, and Google’s changing of the analytics guard.

Mar 20, 2022

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✍ Commentary

Linktree, the third gatekeeper? This week Linktree, what’s colloquially known as a “link in bio” startup made news announcing a $110m raise at a valuation of $1.2 billion. This is important for a couple of reasons, the first one is that Linktree is a startup that was founded in my hometown of Melbourne Australia, and we don’t usually see these kinds of tech unicorns very often! The second is that the reaction from the people who wanted to let me know about this news was accompanied by disbelief that a link in bio startup could attract a valuation this large.

But there’s an important reason for the valuation and the funding. Beyond adding more than 40,000 users a day, and growing a userbase beyond 20 million, Linktree exists in the grey space between social networks and websites, its greatest advantage.

Between the two historical gatekeepers of attention and monetization, It’s here that Linktree could be what I’m calling the third gatekeeper, solving problems for a new generation of internet users that both social media and traditional website and commerce platforms cannot in isolation.

Because companies like Linktree exist in this grey space, it’s a little difficult to pin down a definition. What they are is a very simple one-page website builder with a bunch of integrations that anyone can sign up for in about 10 clicks (I tried this). Think about Linktree and other companies like Beacons and Lightricks as scaled-down and simplified versions of website builders like Squarespace, WordPress or Wix. These types of apps are targeted towards a certain type of customer, typically those who are new to the internet or people whose needs don’t align with having a fully setup website like influencers or online content creators.

It's in the gap left between website builders and social media platforms where link in bio startups thrive. And I think this is where most of the critics can’t see the value proposition of Linktree. Even TechCrunch is speculating on the value of the product – “That’s a lot for what’s essentially a lightweight mini-website builder.” Seasoned marketers and people in tech look at link in bio apps and think to themselves (As I did at one stage) “why would I want to put another barrier between my audience and my website?” And the question here implies that everyone has a website, and to be a successful online brand you need one.

This assumption is increasingly becoming invalidated. As social networks have grown so too have the economies they have created for people to monetise their content, engage with things like social shopping or retailtainment. Substack is not a traditional website, but a social tool with a built-in webpage and email system, and there are thousands of writers making a living there, Twitter recently enabled Super Followers and Tip Jar features to directly monetise on platform, Reddit is actively building a commerce function (see more below), Meta allows merchants to directly list and sell product on platform and there are many other examples of social platforms vying to become the destination for commerce and audience building. Because of this, the influencer industry alone is now worth more than $13 billion.

There’s also an opportunity in the incentives of social media that creates the right environment for companies like Linktree to exist, despite the constant critique of “what if Meta does this.” Social media apps have goals to maximize user attention on their platform, which means that features that support links out to other social apps run counter to this. Making it easy for others to discover an influencer’s Instagram handle on TikTok or their YouTube channel on LinkedIn is clearly not the intention of major social networks. Some platforms, however, are experimenting with making it easier to direct users to other social networks, and because of this, they are benefitting from the network effects of content republishing. Offering an Instagram button on your TikTok account is one example of this, and it works because TikTok videos are highly differentiated from other types of online content.

This means link in bio apps make it easier for people to bundle their social apps in one spot, which solves one side of the problem. The other side is that these apps give people a way to spin up a website and manage their content in a timely way, without all the other complexities that come along with it. When you setup a Squarespace website, you’ll need to register a domain, pay for that domain, then pay a monthly annual fee to host the website, then setup search indexing, maybe connect an email service to collect information. Then you have to design the thing and create content that lives there. If you’re an 18-year-old Twitch streamer who’s making $1,000 per month with sponsorships, would you really want to mess around with all of that, just so you can host some contact information and links to where you’re actually making money?

The answer, for the millions of 16-year-olds coming online every year, is clearly no. In 2021 alone 316 million people used the internet for the first time, and Unicef suggests that even today 2.2 billion people aged under 25 do not have internet access at home. There’s an endless supply of young people going online globally, and when the vast majority of them are using social media, companies like Linktree have one of the most accessible tools for creating an online presence.

This is why Linktree has a paper valuation of $1.2 billion. It’s about the problem it's solving for the next generation of entrepreneurs, influencers, and creators in the grey space which is increasingly diminishing the value proposition of having a website. But it does come at a cost.

I mentioned at the top of this commentary that apps like Linktree act as the “third gatekeeper” of the internet, and I want to explain what that means. Linktree is not really a website, it’s not a social app. It’s something else. Social media gates audience and content distribution, and websites historically gate commerce and content production.

If you build an audience of 1 million people on Instagram, you can’t transfer those followers elsewhere. If you’re someone selling products online, you’re probably on Shopify, which takes a cut for every transaction, or if you’re selling digital content, you might be on Gumroad or Substack, which both take a cut. Despite these platforms positioning themselves as creator and entrepreneur-friendly platforms, it’s easy to see that the underlying business model is highly extractive.

This is the direction that Linktree is also headed in as well. The company has mentioned that at the moment they are not taking a cut of revenue generated directly from Linktree, through Shopify plugins or the tip function, but it soon will introduce fees ranging from 10% to 0.5% of sales based on the monthly plan offerings. You could probably call this a link tax. Unless you’re willing to build your own website, integrate commerce with it, and manage all the admin ongoing, there’s always going to be a platform to seek rent for using their services.

If Linktree plays its cards right, they could end up representing the emergence of the third gatekeeper. The value proposition of abstracted website services that are extremely easy to setup and manage while the network effects of free audience sharing by association with social media apps, people who use it also are promoting it, creating a compounding flywheel.

As more social media apps reach critical scale faster, like TikTok reaching 1 billion users in half the time of Instagram the flywheel only becomes more important. In the coming years, there will be new social apps launched, and they are likely to grow faster than the ones that precede them. Linktree only benefits from the scale and diversity of social media apps because its value proposition is focused on bundling these platforms into a single point of experience.

But can Linktree reach the kind of scale we see with companies like Shopify? Is the value proposition strong enough to add another 100 million users? As other website builder companies have gone public, there’s a clear divide between the replacers and the innovators. Squarespace, Wix, and Shopify are all publicly traded companies. Squarespace and Wix’s market cap reflects a significantly lower value and size between $4 – 6 billion compared to Shopify’s $98 billion.

The reason is that Wix and Squarespace are companies that made it easier for people to create something that already existed on the web - a static website. Shopify changed how people do commerce online. This is a big difference, Shopify introduced a new model for transacting online and continues to do so with features like Shop Pay and by building an ecosystem of apps that drive innovation and incentivize builders to make the entire platform better.

Linktree’s valuation is about a quarter of Squarespace and Wix now. But in the same way, Shopify rethought what people needed from the internet when it came to commerce, it’s likely that for a demographic that’s wanting to come online quickly and easily, Linktree could do the same for content distribution and monetization.

In a similar way to how WeWork leveraged funds from Softbank, Linktree's ambition is to rapidly grow the brand into a household name in the category it created. To stay at the top, and to grow, it’s going to be a battle for the next generation of internet newbies, and that’s going to take a huge investment in brand, marketing, and partnerships.

After all, what’s the first email marketing system that you remember? For most of us, it’s probably Mailchimp, and there’s a reason for that. It’s probably not wise to discount the value of being the first brand that comes to mind, especially for the billions of young people who are new to this stuff.

There’s Martech for the enterprise business, and there’s Martech for the 16-year-old kid with some guitar skills and the ability to create content on TikTok. And as we’ve seen with Shopify, it’s these types of marketing technologies that get to set the agenda for everyone else, due to their sheer size and consumer influence.

Like so many apps built for beginners, Shopify changed the landscape of eCommerce, and as Linktree continues to play in the grey space between social and monetization it has an opportunity to lead a new generation of gatekeepers. Link: Linktree announcement. Analysis. Social media 2.0. Unicef report.Influencer marketing benchmark report.

📈Chart Of The Week  

Web3 after the hype. The interesting thing about blockchain projects is that all the data is highly visible and public. This means anyone can see how various platforms are gaining traction. Looking at one area of Web3 indicates that both Google Searches for NFT and Monthly NFT buyers on OpenSea (by far the largest NFT trading platform) is in a state of decline in both interest and transaction. The hype behind the movement has mostly subsided, due to a large amount of pushback from mainstream media, the increasing amount of fraudulent behavior and the question that NFT owners are asking themselves after they spend thousands on a receipt of a JPEG – can I do anything with this thing? Links: Dune Analytics, Google Trends.FT analysis.

📰 Latest Developments

Kiss Google Analytics goodbye. Google has announced that the Universal Analytics tags will stop processing data on July 1st 2023. This means that users of Google Analytics 3 (basically every company that is not an enterprise) will need to make the migration over to GA4, which does not rely on cookies. Google Analytics has always been a robust and deeply customizable web analytics solution and quickly became the foundation for digital marketing as it was free to use. So far there's been a lot of complaints about GA4, which makes low-cost alternatives in the web analytics space all the more attractive. When you force millions of businesses to re-platform onto a new instance, there are going to be many analytics managers rethinking if they want to continue with Google . Link

Crypto consolidation. Yuga Labs, the startup behind the wildly popular Bored Ape Yacht Club NFT project has acquired CryptoPunks, one of the most successful and early NFT projects, and also launched ApeCoin, a (fungible) token that’s designed to be used with upcoming video games and within the community of NFT owners. Yuga Labs is creating its own blockchain ecosystem, which throws into question the promise of “decentralization” that proponents of the movement cite as the defining value proposition of NFTs and crypto by and large. Yuga Labs has found an extremely high-margin business model, yielding about 95% of profit from NFT sale proceeds. Link

Reddit is moving into commerce with WPP. Reddit is looking at new monetization models, and to “better-align product development and advertiser interest.” The social media app will be leaning on WPP’s network of advertisers and technology consultants to integrate commerce into the platform. This is a rare type of partnership for an ad-driven social media company to pursue given that it might block interests from other holding groups like Omnicom and Publicis. Link

📚 Reading

Russia’s advertiser exodus. An analysis of how the Ukraine invasion is affecting the ad market. Link

The limitations of CDPs. There’s a growing point of view on the CDP industry category, which says that the technology is not really solving the problems associated with creating a single customer view. I would posit that while many of the claims of CDP vendors are yet to be realized, the category has progressed data orchestration in ways that many other platforms have not. Link

Facebook’s failed crypto projects. Libra, then Diem, and now abandoned. An interesting analysis of Facebook’s attempt to launch its own cryptocurrency and how its own brand got in the way and spooked financial regulators. Link

🔢 Data & Insights

The decline of in-app gaming purchases. Appsflyer is reporting that revenue from in-app purchases from games (the vast majority of Apple app store revenue) declined by 35% in 2021. Some of this has to do with Apple’s ATT changes made last year, but also the impact of COVID-19 restrictions easing. Link

TikTok’s role in the music industry. Only 430 songs last year reached a billion streams on TikTok, and about 70 artists received major record deals as a direct result of their popularity on the app. Like almost every other social network, the distribution of big winners is tiny compared to everyone else. Link

Agencies: Metaverse or Web3? A research paper from Digiday talks about what the major creative agencies are planning for in emerging tech trends. The metaverse was voted six times more likely to be the next transformative technology over blockchain and crypto. Link

💡 Ideas

#MartechDay. Scott Brinker from Chiefmartec and Frans Riemersma of MartechTribe has declared May the 3rd annual Martech day. There will be a webinar presenting the latest marketing technology landscape diagram (there wasn’t one last year) and the Martech stack awards along with other pieces of research. Link

Substack’s ideology. An interesting look at how Substack is attempting to change media consumption behaviors and expectations around paying for content. Link

Data sonification. This is how to make data and insights meaningful through audio. There’s a reason why no one is doing it and an equally compelling reason for why people should do it. Link

✨ Weird and Wonderful

Virgil Abloh’s guide to building a brand. Designed for newcomers to eCommerce, Virgil created a definitive guide to designing and launching a brand before passing away. Link

Email in 1992. An old article from the NYTs talks about the disruption of email and its impact on Hollywood. Link

South Korean election graphics.Link

Stay Curious,

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Juan Mendoza

Juan Mendoza is an expert in researching global media, marketing, data, and technology trends. He is the CEO of The Martech Weekly, a media and research brand with subscribers in over 65 countries.

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