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Former Stitch Fix COO Julie Bornstein just took the wraps off her app-only e-commerce startup, The Yes
After teasing the launch of their new startup last year, e-commerce veteran Julie Bornstein and her technical co-founder, Amit Aggarwal, are today launching The Yes, a women’s shopping platform that they’ve been quietly building for 18 months and they say will create tailor-made experiences for each user, courtesy of its sophisticated algorithms.
Bornstein’s experience and vision alone attracted $30 million in funding to the venture last year from Forerunner Ventures, New Enterprise Associates and True Ventures, among others. To learn more about how it breaks through in a world rife with e-commerce companies, we talked with Bornstein, who previously spent four years as COO of the styling service Stitch Fix and before that spent years as a C-level executive at Sephora. We wondered specifically how The Yes differs from Stitch Fix, given that both companies use data science to discover clothing for shoppers based on their size, budget and style.
Aside from the fact that The Yes is taking an app-only approach (unlike Stitch Fix), and doesn’t have a subscription model, Bornstein says that The Yes is very much focused on people “who want to shop” versus those who want their shopping done for them. Yet that’s just the start of what makes The Yes different than its other predecessors, said Bornstein in a conversation that follows below, edited lightly for length.
TC: You’re building what you call a store around each user, who downloads the app, answers questions that provide a lot of “signal” about that person’s style and brand preferences and size and budget, and that’s adaptive, meaning the algorithm is always re-ranking products as it learns better what a person likes. What demographic are you targeting?
JB: It’s women of a very broad age range, from 25 to 75, who care about fashion, whether they’re an in-the-know-on-everything fashionista or they just want to look great. And you can shop high/low, which is how most women shop these days. So it depends what you’re looking for.
TC: It sounds like you’re selling women’s apparel exclusively to start. Are you also selling handbags? Jewelry? Accessories?
JB: We’re focused on fashion and footwear, and we have accessories and handbags. A lot of our brands have great handbags. Then we will be expanding more to jewelry and other accessory categories over time.
TC: What brands can shoppers find on the platform?
JB: We have 145 brands at launch, ranging from Gucci, Prada and Erdem to contemporary brands like Vince and Theory to direct-to-consumer brands like Everlane and La Ligne to everyday brands like Levis. When a brand integrates with The Yes, the platform sells each brand’s full digital catalog.
TC: Why go app only?
Most of the e-commerce sites that have mobile presence really feel like a website converted to a small screen. We [thought if we] challenged ourselves to leverage the technology of the native app environment, [we] could build a much slicker experience for the user. We also know that mobile is growing. It’s about 50% of total purchases now in fashion and growing faster, so while we know that web will be important to add, we really felt like mobile and iOS were the places to start.
TC: Stitch Fix uses machine learning to analyze customer tastes, but it ultimately relies on human stylists to choose items. What new advances have been made in AI that can allow The Yes to actually pick products using artificial intelligence? Isn’t fashion, like music, a “noisy” problem, with consumers often not knowing what they want?
JB: It’s such a nuanced area and really hard to do in the form of recommendations, but there are a number of reasons that enable us to do it. One is we had to build the most extensive taxonomy that exists in fashion. We did think a lot about the music genome project that Pandora did and all the work that Spotify has done. Music is definitely one of our inspirations. And if you look at what they did, they had some human expertise in the beginning, creating these categories, and then the machine learned on top of it, and we have done the same in fashion. So we had fashion expertise build our initial taxonomy.
Then we leveraged both machine learning and computer vision to train models to understand how to absorb all pieces of data related to a product, as well as the image itself and how to read images. And it gave us a really strong understanding of 500 dimensions for every single item. [Meanwhile] to understand what the consumer cares about, we spent a lot of time testing and learning which questions [to ask] when it comes to brand and price and things like color and style and size and fit…
TC: Because of your background, comparisons are probably going to be made between The Yes and Stitch Fix. What was the impetus for this new business? Was it a matter of eliminating that personal touch?
JB: I had such a great experience at Stitch Fix, and I’m still a shareholder and a big fan of the company and the team. And I think what they’re doing, what they continue to do, is terrific in really pushing the boundary on this concept of shopping-as-a-service.
What I am working on, and our team is really focused on, is the actual consumer shopping experience for consumers who want to shop. There’s a strong percent of the population who really loves to shop and wants agency in their own selection, and that is really the consumer we’re going after.
TC: You’re launching with roughly 150 brands. What is your relationship with them? Are you taking a cut of a transaction? Are you ever taking possession of their products? Do you have a warehouse or warehouses?
There were two things coming into this business that I wanted to avoid based on my personal experience, which was one, owning inventory, and two, reshooting every item for its own new photographs on the site. Pinterest and Instagram and all these other visual sites have shown us that the brands spend a lot of money shooting images to look a certain way to help communicate what their brand is all about. So leveraging those assets has been terrific.
[Regarding inventory], there’s no reason to ship the product from the brand to another warehouse and then to the consumer. We’re cutting out that stuff and shipping it direct from the brand. From a consumer standpoint, you order on our app, and everything is one-click, and you are charged by [us]. But then the order is placed through the brand and is shipped from the brand to you. Then we will communicate to you when it’s shipped, when it’s arriving, and if you have any customer service issues, we take care of it.
And we take a flat commission [on sales].
TC: Returns are free. But isn’t that a huge cost center, and might it deter people from returning items if you charged something for returns?
JB: My feeling is that free shipping and free returns is a baseline requirement to offer a great service. And it’s our job to help match [shoppers] to product that you’re not going to return. We have an enormous goal to have the lowest return rate in the industry. It will obviously take us some time to get there. But we believe that by making sure that we understand what works for you and what doesn’t, we can get [there].
TC: You raised $30 million last year. Are you in the market for a Series B? What will you have to show investors toward that end?
JB: The logic behind the dollar amount that we raised was: how much do we need to build what we want to build, and then bring it to market and get traction? And so that is our goal that starts tomorrow. . .
TC: How has this current reality altered your plans? Launching during a pandemic isn’t what you were imagining, obviously.
JB: No, it is not. [Laughs.] I don’t know that any of us could have possibly. We did delay our launch; we were originally launching in March, and once COVID hit, we needed to make sure we could see straight and understand the impact. I think as time has passed, we have felt more and more compelled to get out there to help our brands, all of whom are feeling the impact of the retail stores closing, or orders being canceled by their retail partners. They’re all businesses and many of them small businesses, so we want to help them.
It’s also an interesting time because we all need a little bit of levity and escape. And the app really is a fun escape.
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Xs:code launches subscription platform to monetize open-source projects
Open source is a great source of free tools for developers, but as these projects proliferate, and some gain in popularity, the creators sometimes look for ways to monetize successful ones. The problem is that it’s hard to run a subscription-based, dual-license approach, and most developers don’t even know where to start. Enter Israeli startup xs:code, which has created a platform to help developers solve this problem.
“Xs:code is a monetization platform for open-source projects. Unlike donation platforms which are pretty popular today, xs:code allows open-source developers to provide added value in exchange for payments. That comes on top of what they offer for free. This added value can be a different license, more features, support services or anything they can think of,” Netanel Mohoni, co-founder and CEO of xs:code told TechCrunch.
This does not mean the open-source part of this goes away, only that the company is providing a platform for those developers who want to monetize their work, Mohoni said. “Companies pay for accessing the code, and they enjoy better software created by motivated developers who are now compensated for their work. Because our solution makes sure that the code remains open source, developers can continue accepting contributions so the community enjoys better code than ever before,” he explained.
Photo: xs:code
What’s more, project owners can even distribute to community contributors funds earned from subscriptions, if they wish to do so, giving them a way to pay contributors, who help make the project better.
The way it generally works is that the open-source developers create a dual license model. One has the raw open-source code, and one is the commercial version, which could have additional functionality or support that customers would be willing to pay for via a subscription.
The developers create a private repository on GitHub, and connect to xs:code, where they can share a link to the paid version. Users hit the paywall and can subscribe. Xs:code collects the money and distributes it in whichever way the developers have indicated. The company takes 25% as a commission for maintaining the platform and collecting the revenue.
The platform is available for the first time starting today in beta. You can sign up for free. Xs:code has raised $500,000 in pre-seed money to date.
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Ten years after Adobe bought Omniture, the deal comes into clearer focus
Ten years ago this week, Adobe acquired Omniture for $1.8 billion. At the time, Adobe was a software company selling boxed software like Dreamweaver, Flash and Photoshop to creatives. Many people were baffled by the move, not realizing that purchasing a web analytics company was really the first volley in a full company transformation to the cloud and a shift in focus from consumer to enterprise.
It would take many years for the full vision to unfold, so you can forgive people for not recognizing the implications of the acquisition at the time, but CEO Shantanu Narayen seemed to give an inkling of what he had in mind. “This is a game-changer for both Adobe and our customers. We will enable advertisers, media companies and e-tailers to realize the full value of their digital assets,” he said in a statement after the acquisition became public.
While most people thought that perhaps this move involved some sort of link between design and data, it would turn out to be more complex than that. Tony Byrne, founder and principal analyst at Real Story Group, tried to figure out the thinking behind the deal in an EContent column published a couple of months after it was announced.
“Going forward, I think the real action will continue to revolve around integrating management and metrics, less so than integrating design and metrics. And that’s why I also think that Adobe isn’t done acquiring yet,” It was pure speculation on Byrne’s part, but it proved prescient.
There’s something happening here
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Why IGTV should go premium
It’s been four months since Facebook launched IGTV, with the goal of creating a destination for longer-form Instagram videos. Is it shaping up to be a high-profile flop, or could this be the company’s next multi-billion-dollar business?
IGTV, which features videos up to 60 minutes versus Instagram’s normal 60-second limit, hasn’t made much of a splash yet. Since there are no ads yet, it hasn’t made a dollar, either. But, it offers Facebook the opportunity to dominate a new category of premium video, and to develop a subscription business that better aligns with high-quality content.
Facebook worked with numerous media brands and celebrities to shoot high-quality, vertical videos for IGTV’s launch on June 20, as both a dedicated app and a section within the main Instagram app. But IGTV has been quiet since. I’ve heard repeatedly in conversations with media executives that almost no one is creating content specifically for IGTV and that the audience on IGTV remains small relative to the distribution of videos on Snapchat or Facebook. Most videos on it are repurposed from a brand’s or influencer’s Snapchat account (at best) or YouTube channel (more common). Digiday heard the same feedback.
Instagram announced IGTV on June 20 as a way for users to post videos up to 1 hour long in a dedicated section of the app (and separate app)
Facebook’s goal should be to make IGTV a major property in its own right, distinct from the Instagram feed. To do that, the company should follow the concept embodied in the “IGTV” name and re-envision what television shows native to the format of an Instagram user would look like.
Its team should leverage the playbook of top TV streaming services like Netflix and Hulu in developing original series with top talent in Hollywood to anchor their own subscription service, but in it a new format of shows produced specifically for the vertically oriented, distraction-filled screen of a smartphone.
Mobile video is going premium
Of the 6+ hours per day that Americans spend on digital media, the majority on that is now on their phone (most of it on social and entertainment activities) and video viewing has grown with it. In addition to the decline in linear television viewing and rise of “over-the-top” streaming services like Netflix and Hulu, we’ve seen the creation of a whole new category of video: mobile native video.
Starting at its most basic iteration with everyday users’ recordings for Snapchat Stories, Instagram Stories and YouTube vlogs, mobile video is a very different viewing environment with a lot more competition for attention. Mobile video is watched as people are going about their day. They might commit a few minutes at a time, but not hour-long blocks, and there are distracting text messages and push notifications overlaid on the screen as they watch.
“Stories” on the major social apps have advanced vertically oriented, mobile native videos as their own content format
When I spoke recently with Jesús Chavez, CEO of the mobile-focused production company Vertical Networks in Los Angeles, he emphasized that successful episodic videos on mobile aren’t just normal TV clips with changes to the “packaging” (cropped for vertical, thumbnails selected to get clicks, etc.). The way episodes are written and shot has to be completely different to succeed. Chavez put it in terms of the higher “density” of mobile-native videos: packing more activity into a short time window, with faster dialogue, fewer setup shots, split screens and other tactics.
With the growing amount of time people spend watching videos on their social apps each day — and the flood of subpar videos chasing view counts — it makes sense that they would desire a premium content option. We have seen this scenario before as ad-dependent radio gave rise to subscription satellite radio like Sirius XM and ad-dependent network TV gave rise to pay-TV channels like HBO. What that looks like in this context is a trusted service with the same high bar for riveting storytelling of popular films and TV series — and often featuring famous talent from those — but native to the vertical, smartphone environment.
If IGTV pursues this path, it would compete most directly with Quibi, the new venture that Jeffrey Katzenberg and Meg Whitman are raising $2 billion to launch (and was temporarily called NewTV until their announcement at Vanity Fair’s New Establishment Summit last Wednesday). They are developing a big library of exclusive shows by iconic directors like Guillermo del Toro and Jason Blum crafted specifically for smartphones through their upcoming subscription-based app.
Quibi’s funding is coming from the world’s largest studios (Disney, Fox, Sony, Lionsgate, MGM, NBCU, Viacom, Alibaba, etc.) whose executives see substantial enough opportunity in such a platform — which they could then produce content for — to write nine-figure checks.
TechCrunch’s Josh Constine argued last year Snapchat should go in a similar “HBO of mobile” direction as well, albeit ad-supported rather than a subscription model. The company indeed seems to be stepping further in this direction with last week’s announcement of Snapchat Originals, although it has announced and then canceled original content plans before.
Snapchat announced its Snap Originals last week
Facebook is the best positioned to win
Facebook is the best positioned to seize this opportunity, and IGTV is the vehicle for doing so. Without even considering integrations with the Facebook, Messenger or WhatsApp apps, Facebook is starting with a base of more than 1 billion monthly active users on Instagram alone. That’s an enormous audience to expose these original shows to, and an audience who don’t need to create or sign into a separate account to explore what’s playing on IGTV. Broader distribution is also a selling point for creative talent: They want their shows to be seen by large audiences.
The user data that makes Facebook rivaled only by Google in targeted advertising would give IGTV’s recommendation algorithms a distinct advantage in pushing users to the IGTV shows most relevant to their interests and most popular among their friends.
The social nature of Instagram is an advantage in driving awareness and engagement around IGTV shows: Instagram users could see when someone they follow watches or “likes” a show (pending their privacy settings). An obvious feature would be to allow users to discuss or review a show by sharing it to their main Instagram feed with a comment; their followers would see a clip or trailer, then be able to click-through to the full show in IGTV with one tap.
Developing and acquiring a library of must-see, high-quality original productions is massively capital-intensive — just ask Netflix about the $13 billion it’s spending this year. Targeting premium-quality mobile video will be no different. That’s why Katzenberg and Whitman are raising a $2 billion war chest for Quibi and budgeting production costs of $100,000-150,000 per minute on par with top TV shows. Facebook has $42 billion in cash and equivalents on its balance sheet. It can easily outspend Quibi and Snap in financing and marketing original shows by a mix of newcomers and Hollywood icons.
Snap can’t afford (financially) to compete head-on and doesn’t have the same scale of distribution. It is at 188 million daily active users and no longer growing rapidly (up 8 percent over the last year, but DAUs actually shrunk by 3 million last quarter). Snapchat is also a much more private interface: it doesn’t enable users to see each others’ activity like Facebook, Instagram, LinkedIn, YouTube, Spotify and others do to encourage content discovery. Snap is more likely to create a hub for ad-supported mobile-first shows for teens and early-twentysomethings rather than rival Quibi or IGTV in creating a more broadly popular Netflix or Hulu of mobile-native shows.
It’s time to go freemium
Investing substantial capital upfront is especially necessary for a company launching a subscription tier: consumers must see enough compelling content behind the paywall from the start, and enough new content regularly added, to find an ongoing subscription worthwhile.
There is currently no monetization of IGTV. It is sitting in experimentation mode as Facebook watches how people use it. If any company can drive enough ad revenue solely from short commercials to still profit on high-cost, high-quality episodic shows on mobile, it’s Facebook. But a freemium subscription model makes more sense for IGTV. From a financial standpoint, building IGTV into its own profitable P&L while making substantial content investments likely demands more revenue than ads alone will generate.
Of equal importance is incentive alignment. Subscriptions are defined by “time well spent” rather time spent and clicks made: quality over quantity. This is the environment in which premium content of other formats has thrived too; Sirius XM as the breakout on radio, HBO on linear TV, Netflix in OTT originals. The type of content IGTV will incentivize, and the creative talent they’ll attract, will be much higher quality when the incentives are to create must-see shows that drive new subscribers than when the incentives are to create videos that optimize for views.
Could there be a “Netflix for mobile native video” with shows shot in vertical format specifically for viewing on smartphone?
The optimization for views (to drive ad revenue) have been the model that media companies creating content for Facebook have operated on for the last decade. The toxicity of this has been a top news story over the last year with Facebook acknowledging many of the issues with clickbait and sensationalism and vowing changes.
Over the years, Facebook has dragged media companies up and down with changes to its newsfeed algorithm that forced them to make dramatic changes to their content strategies (often with layoffs and restructuring). It has burned bridges with media companies in the process; especially after last January, how to reduce dependence on Facebook platforms has become a common discussion point among digital content executives. If Facebook wants to get top producers, directors and production companies investing their time and resources in developing a new format of high-quality video series for IGTV, it needs an incentives-aligned business model they can trust to stay consistent.
Imagine a free, ad-supported tier for videos by influencers and media partners (plus select “IGTV Originals”) to draw in Instagram users, then a $3-8/month subscription tier for access to all IGTV Originals and an ad-free viewing experience. (By comparison, Quibi plans to charge a $5/month subscription with ads with the option of $8/month for its ad-free tier.)
Looking at the growth of Netflix in traditional TV streaming, a subscription-based business should be a welcome addition to Facebook’s portfolio of leading content-sharing platforms. This wouldn’t be its first expansion beyond ad revenue: the newest major division of Facebook, Oculus, generates revenue from hardware sales and a 30 percent cut of the revenue to VR apps in the Oculus app store (similar to Apple’s cut of iOS app revenue). Facebook is also testing a dating app which — based on the freemium business model Tinder, Bumble, Hinge, and other leading dating apps have proven to work — would be natural to add a subscription tier to.
Facebook is facing more public scrutiny (and government regulation) on data privacy and its ad targeting than ever before. Incorporating subscriptions and transaction fees as revenue streams benefits the company financially, creates a healthier alignment of incentives with users and eases the public criticism of how Facebook is using people’s data. Facebook is already testing subscriptions to Facebook Groups and has even explored offering a subscription alternative to advertising across its core social platforms. It is quite unlikely to do the latter, but developing revenue streams beyond ads is clearly something the company’s leadership is contemplating.
The path forward
IGTV needs to make product changes if it heads in this direction. Right now videos can’t link together to form a series (i.e. one show with multiple episodes) and discoverability is very weak. Beyond seeing recent videos by those you follow, videos that are trending and a selection of recommendations, you can only search for channels to follow (based on name). There’s no way to search for specific videos or shows, no way to browse channels or videos by topic and no way to see what people you follow are watching.
It would be a missed opportunity not to vie for this. The upside is enormous — owning the Netflix of a new content category — while the downside is fairly minimal for a company with such a large balance sheet.
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Adobe could be the next $10 billion software company
Adobe reported its Q2 FY’18 earnings yesterday and the news was quite good. The company announced $2.2 billion in revenue for the quarter up 24 percent year over year. That puts them on an impressive $8.8 billion run rate, within reach of becoming the next $10 billion software company (or at least on a run rate).
Revenue was up across all major business lines, but as has been the norm, the vast majority comes from the company’s bread and butter, Creative Cloud, which houses the likes of Photoshop, InDesign and Dreamweaver, among others. In fact digital media, which includes Creative Cloud and Document Cloud accounted for $1.55 billion of the $2.2 billion in total revenue. The vast majority of that, $1.30 billion was from the creative side of the house with Document Cloud pulling in $243 million.
Adobe has been mostly known as a creative tools company until recent years when it also moved into marketing, analytics and advertising. Recently it purchased Magento for $1.6 billion, giving it a commerce component to go with those other pieces. Clearly Adobe has set its sights on Salesforce, which also has a strong marketing component and is not coincidentally perhaps, the most recently crowned $10 billion software company.
Moving into commerce
Adobe CEO Shantanu Narayen speaking to analysts on the post-reporting earnings call sees Magento as filling in a key piece across understanding the customer from shopping to purchase. “The acquisition of Magento will make Adobe the only company with leadership in content creation, marketing, advertising, analytics and now commerce, enabling real-time personalized experiences across the entire customer journey, whether on the web, mobile, social, in-product or in-store. We believe the addition of Magento expands our available market opportunity, builds out our product portfolio, and addresses a key underserved customer need,” Narayen told analysts.
If Adobe could find a way to expand that marketing and commerce revenue, it could easily surpass that $10 billion revenue run rate threshold, but so far while it has been growing, it remains less than half of the Creative revenue at $586 million. Yes, it grew at an 18 percent year over year clip, but it seems as though there is potential for so much more there and clearly Narayen hopes that the money spent on Magento will help drive that growth.
Battling with Salesforce
Even while it was announcing its revenue, rival Salesforce was meeting with Marketing Cloud customers in Chicago at the Salesforce Connections conference, a move that presented an interesting juxtaposition between the two competitors. Both have a similar approach to the marketing side, while Salesforce concentrates on the customer including CRM and service components. Adobe differentiates itself with content, which shows up on the balance sheet as the majority of its revenue .
Both companies have growth in common too. Salesforce has been on quite a run over the last five years reaching $3 billion in revenue for the first time last quarter. Adobe hit $2 billion for the first time in November. Consider that prior to moving to a subscription model in 2013, Adobe had revenue of $995 billion. Since it moved to that subscription model, it has reaped the benefits of recurring revenue and grown steadily ever since.
Each has used strategic acquisitions to help fuel that growth with Salesforce acquiring 27 companies since 2013 and Adobe 13, according to Crunchbase data. Each has bought a commerce company with Adobe buying Magento this year and Salesforce grabbing Demandware two years ago.
Adobe has the toolset to keep the marketing side of its business growing. It might never reach the revenue of the creative side, but it could help push the company further than it’s ever been. Ten billion dollars seems well within reach if things continue along the current trajectory.
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Cloud computing has demanded a kinder, gentler Oracle
Oracle has always had a swagger that reflects the public persona of its bombastic leader, Larry Ellison, but over the last several years, as the company has transitioned to the cloud, it has required a transformation to one that is softer and more customer-centric. Mind you, this was a company that was the poster child for vendor lock-in the 90s and early 2000s. They knew you were looking for… Read More
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Keith Block talks life at Salesforce and being a Boston sports fan in San Francisco
The day I met Keith Block at the Salesforce World Tour in Boston he was relaxing in a suite at the Hynes Convention Center, a man at ease with his considerable responsibilities as vice chairman, president and COO at Salesforce. His Twitter bio, like mine, also lists him as a Boston sports fan. We had a lot to talk about. The day we chatted, Block had been front and center at the… Read More
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Easily Measure The Profitability Of Your Consumer Subscription Business
We are currently witnessing a shift in business models, as many consumer tech companies move from transactional models in favor of subscription-based ones. YouTube is launching an ad-free, subscription-based service. Apple recently launched a streaming music service for $10/month. Microsoft just bundled its popular consumer products into a $199/month offering as cloud services have become a… Read More
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