# S1 E11 - Nike - Teads_Outbrain - Walmart Non-Endemic

Episode 11 - Nike - Teads/Outbrain - Walmart Non-Endemic 

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[00:00:05] Elgato Wave Neo-24: welcome to the middlemen. I'm Tom Limongello, and I'm here with Todd Sawicki. We, as middlemen, live at the intersection of media and e commerce, and we would like for you to join us in our discussions where we turn that chaotic intersection into your comfort zone  

[00:00:21] Tom: Okay, let's get into it. The first topic we wanted to tackle from this week was Nike. I think Probably half of the internet saw Massimo Giunco former Nike employee do a seething takedown.  

[00:00:36] Tom: He talks about how detrimental the pivot toward nike. com and toward performance marketing 

[00:00:43] Todd: Now, to clear, performance marketing was like item nine on a 10 item list on his rant. So I some people right in the LinkedIn marketing sphere, definitely some people jumped on the performance marketing discussion, but honestly reading his piece [00:01:00] myself, it was like, not. His major point of emphasis. 

[00:01:04] Tom: Yeah, that's true. And I think probably the biggest thing was the reorganization. So like my biggest takeaway from it was that you have a situation where Nike in a lot of the coverage that you saw, like ad week and rebooting was that Nike is a retailer. And to me, I've always thought of Nike as a brand. 

[00:01:26] Todd: I certainly think of them as a brand, 

[00:01:27] Tom: yeah. And if you look at their site. It does look like a retailer site. It's very much like you need to filter for what you want. There are crazy designs all over the place from, baggy basketball shorts to very, slim, types of athletic wear getting from, place to place is re it requires you based on their reorg. 

[00:01:48] Tom: It's men's women's children and Jordan, which. doesn't really make a lot of sense. And then also just from my perspective on the brand, I feel like it's lost its focus because, like we, [00:02:00] we buy our daughter Jordans. And I think that I don't think I would wear Jordans. I think a lot of the people in the agency world might think I'm silly, but I see it as a kid's brand. 

[00:02:08] Tom: I think that this brand, move toward trying to make Nike. com half of their sales might've just exacerbated a lot of the product issues they might've, that they were seeing. 

[00:02:19] Todd: right? So in, in the piece that what they talk about is Nike does a is it a new CEO or new president or something comes in and comes 

[00:02:28] Tom: Yeah. Like in 2017, Donahoe or Donahue or yeah, something like that is his name. He came in and did a big reorg. 

[00:02:36] Todd: He does a big reorg and the reorg fundamentally shifts the business towards what you described in terms of like product lines or men, women, children, Jordan, and they come out with this goal of trying to , move 50 percent of sales to be direct to consumer right through Nike. com. What I find fascinating is people say, Oh, they're a retailer. 

[00:02:56] Todd: What's do you call it Apple? Is the Apple store retailer? No, [00:03:00] right? Nobody does. And it's silly to think of Nike that way. They sell a ton of product, a ton of variety. And yes, when they're selling through their store or through their storefront online, of course, they're going to look like a retailer and their site should look like a retailer. 

[00:03:12] Todd: So do your, I find that I'm amused by your comment. Yeah, they sell products. They're going to look like the best practices of retail online are pretty well established. So they're going to look like every other retail store but they did a big, a lot of layoffs around this reorg. So they lost a lot of experienced people, especially in the product design side, supposedly. 

[00:03:32] Todd: And by moving to nike. com and trying to drive sales through that, it meant more performance marketing and direct to consumer marketing, what have you. So to me, the biggest thing they did is this reorg was so risky. Like they, they fundamentally decided to change their approach. Like they basically, by moving 50 percent of sales to their own online store or Nike stores, they effectively abandoned a lot of retail. And. That's a risky strategy. Like you've been [00:04:00] working with these retailers, they were your partners for 50 years and suddenly you're like, yeah, screw you and kick them to the curb. And I think that underestimates the role of retail in fashion, clothes, put shoes in that clothing bucket. And I think honestly what it did is it opened the door to other new emergence like Hoka to backfill. 

[00:04:24] Todd: So when Nike abandons the channel still has shelf space. They still gotta put shoes in that shelf slot. Got to go to somebody. Nike doesn't want it. Then they'll go to the next person. 

[00:04:33] Tom: Yeah. And there was a friend of mine founder of clove, which is a company that started with selling shoes to doctors waterproof capabilities, things like that. They were starting to see a competition from Hoka. And so I started to talk to him and I said, what do you see going on here? 

[00:04:49] Tom: He read. The post on LinkedIn. He said, look, I think this is like a cautionary tale. If you think about the math running and Hoka, so they sell [00:05:00] two thirds of their product through wholesale. And what that means because the price is lower. So they're selling two thirds of their sales are wholesale. That means four out of every five pair of shoes is actually sold in person. 

[00:05:14] Tom: And so if you use that, like, why did Nike want half to go through e commerce if all their competitors are selling four out of five or 80 percent in stores, 

[00:05:26] Todd: It is, it'll be an interesting case study, right? So it has really nothing to do with a emphasis on performance marketing. When again, you're an online retailer and you're driving traffic to a store, of course, that's going to be marketing. And and if you're selling in retail, in a channel environment, That's where brand dollars show up because you're not driving to a transaction, you're trying to generate awareness when someone walks in the store, they pick you. 

[00:05:49] Todd: And Nike's always been great at branding, right? The Mars Jordan campaigns back in the 80s that launched Air Jordan are, Mars Blackman. [00:06:00] From Spike Lee, that whole thing is great. And Nike hasn't necessarily had those notes more recently. Is it a part of they need better storytelling? Is it a part of, right? And also the thing is performance, you don't have the right product, performance isn't going to work anyway. You have to have things that people want to buy. Driving traffic to a site, you don't have what they want, they're not going to buy. 

[00:06:20] Todd: So performance marketing, it doesn't solve a bad product assortment issue. 

[00:06:24] Tom: It's fun watching a very 

[00:06:26] Todd: approach, right? It's Holy crap. 

[00:06:27] Todd: They laid off a bunch of talented people, man. I'm sure Hoka and other brands pick them up. Holy crap. That's just  

[00:06:33] Tom: Other than new Coke, have you ever seen a company or brand do 

[00:06:37] Todd: we saw this with, we were talking about this before, and mentioning Apple store, Ron Johnson goes from Apple running the Apple store and huge success there had been a target previously, and then goes to run JC penny and tries to fundamentally change. Their experience. From, discounts and sales to a low price all the time environment without discounts. 

[00:06:57] Todd: And the shoppers who [00:07:00] shop at JCPenney didn't care about that and it hurt sales. And so I think, they, he made a big bet. Ron Johnson made a big bet on up. We can do the things the way we did at Target and the Apple store. J. C. Penney's audience isn't that. And so it failed and he was fired within 18 months or something like that because it was just an abject disaster. 

[00:07:17] Todd: So I think, it's not quite the level of new coke, but I think this is people are gonna look back and go, my goodness, what made them think that betting the farm like that would be such a great idea? What data pointed to that decision? And it sounds like it was a bit of a bet on the come, which is again when you're a company that size. 

[00:07:37] Tom: Yeah, it'll be interesting to see how they come back because the competition is so much stiffer now in the running section you've got Hoka on running and You know the track smiths of the world and the women's side, you've got Lululemon and Athleta, so from all sides, they are seeing real pressure. 

[00:07:58] Tom: So What actually gets [00:08:00] them back in the game? Do they have to buy somebody? Do they have to, is it, is it just turning everything back on the wholesale side? Is  

[00:08:06] Tom: that enough  

[00:08:07] Todd: I think ignoring wholesale was, or walking away from that, looks like a mistake. it did create air supply for new emergence. Again, like That just exploded. Now I understand why Hoka exploded. Suddenly they had access to shelf space never have had access to before. Which, to anyone out there in retail media selling shelf space in your JBP, here's your case study that shows how valuable it is. 

[00:08:31] Todd: There you go. To bring it back to our 

[00:08:34] Tom: applied knowledge? You're talking JBP stuff. I love it. 

[00:08:37] Todd: I'm learning the lingo and and I think that's and are they going to put, will they push Hoka and others back out? Will they reclaim that shell space? I think that's going to be one of the things to watch. And so it's not a performance marketing story. 

[00:08:48] Todd: Performance marketing can't sell products that people don't want to me. It's a channel. It's a product, like they need better products. They need the right mix of products and they have to get back to. Generating things that people [00:09:00] want and, my two teenagers and the shoes they want are Hoka, not Nike. 

[00:09:05] Tom: Cool. All right. I guess we can close the door on that one and see how it plays out. Second thing we want to talk about this week was some news that you have a unique perspective on, which is teads and outbrain merging. 

[00:09:19] Todd: So this is big news. For those not aware I sold a company to Outbrain and then ran it within Outbrain for five years from 2017 through 2022. So I was an exec in Outbrain. I have no inside information about this deal. And but as an outsider, a couple of things, so I'm not sure how aware of what. Teads does everyone is. And I think that's important because 

[00:09:42] Tom: I personally was not at all.  

[00:09:44] Todd: And you're an ad, you've got in the ad business, so surprising. So for those not aware, Teads closest analogy is TripleLift. We're all remember that TripleLift in inside the middle of the article ad slot, that was [00:10:00] TripleLift pioneered that as a native ad. 

[00:10:01] Todd: And then Teads did a lot of that. And so Teads and TripleLift, like tool list, Outbrain is. Triple lift was to Teads. And so as a result the other thing about Teads is they're based in France. And they're very big internationally. Triple lift was big in the U S Teads was big elsewhere around the world. 

[00:10:20] Todd: That's a lot of thing. I don't think people realize, but Outbrain is really X U S and 80, 70, 80 percent of their business comes outside the U S or in the terms of Outbrain, their biggest offices in Tel Aviv, second biggest offices in Slovenia which Based on the company where that they had acquired that I ran and they have sales offices all around the world and they have a great business outside the U S operating does. 

[00:10:44] Todd: And so it's interesting because you put, they have complimentary ad products, right in content. Versus end of article brand units versus performance units, the content recommendations, the form of outbringing they're compatible in terms of organizations, both largely outside the U S and honestly, I [00:11:00] think you're a brain's biggest region is Europe. 

[00:11:02] Todd: And so it was teats. So compatible in terms of business culture wise and company. They're both about a thousand people And so there's a lot of compatibility between the two businesses. The other thing about outbrain is The people who bought my company are still there and the guy who's going to run the team Post merger integration for Outbrain, Ghanim Asaf is a pro's pro at running integrations. 

[00:11:28] Todd: He is, really knows what he's doing. So you add a, I'm really bullish on the deal in terms of putting two complementary ad partners together, compatible markets, compatible teams I, in terms of my interactions with Teed staff around the globe. Very analogous in terms of team structure and approach and strategy to what Outbrain was. 

[00:11:46] Todd: And so I think there's a lot there that those two can do, but the most important thing here is that it's about damn time we're seeing M& A in the open web ad space, because scale is so critical. Part of the reason Facebook and, [00:12:00] or Meta and Google get 80 percent of every new ad dollar is because they have more scale than everybody else. 

[00:12:05] Todd: So it's easy to spend money with them. They can deliver any number of results you need. And so we need scale built out to compete with Meta and Google. And now with Amazon and the retail side, like that's, we need more of that scale. So what's interesting is I'm not sure people realize the combined companies are going to do something like two or 3 billion in media spend. 

[00:12:30] Todd: They're going to do 600 million in X TAC, which is net paying out publishers, right? That's the stat that people use. Like they're closed. They'll close in on a billion dollars in X TAC. It's a, it's going to be a big company. 

[00:12:42] Tom: Yeah, it was the ex TAC number makes sense. Does this so you're saying this is all about scale. This is not to try to 

[00:12:50] Todd: It's not about it's, when I would say it's all about scale, it's all about complimentary scale. Like some people brought, Oh, they're just buying, more of the same. I'm like no, that their ad products are different. One's more branding. One's more performance, [00:13:00] different slots on the page. 

[00:13:01] Todd: It's you and I were talking, you brought up,  

[00:13:03] Tom: I guess my question was more of this is not a, Oh, we need to bolster our position against tabula.  

[00:13:09] Todd: No. It and you and I talked about that too, as we were prepping for this, which is people compared to an outbrain all the time, and the reality is. This has nothing to do with the rule. This is about how do you compete better with meta and Google and Amazon? That's what this is about and nothing else matters, right? 

[00:13:28] Todd: They're getting 80 to 95 percent of every new ad dollar. If you want to compete with the big boys, that's gotta be your focus. And so that's what I think is the, what this is about is I have to compete with meta and Google. 

[00:13:41] Tom: okay. Onto our third topic. This was an interesting one ad week reported on a leaked presentation from Walmart connect where they now have a couple of new ad units one of them being their TV wall in stores and then another in store ad [00:14:00] unit. At self checkout. But the reason that was interesting and I think why it was leaked rather than just being part of normal business was that they were focused on non endemic advertisers. 

[00:14:10] Tom: So 

[00:14:11] Todd: And my, what I thought, would you we'll show you that slide here, everyone, but I saw that I'm like, who the hell is not endemic to Walmart? Everybody sells through Walmart. As a non retail guy, my gut reaction was isn't And you actually had a good kind of take on it. 

[00:14:23] Tom: Yeah. I think the idea is that, travel, insurance, finance are industries where they would love to be in front of a consumer who's at a Walmart. And I think that makes a lot of sense. You can imagine on one of these TV walls a QR code where, you could get a travel itinerary, you could, learn about switching, your bank provider, things like that. 

[00:14:46] Tom: But yeah, like those are the easy ideas, but those are services really not products. So yeah, I think in their slide where they're talking about how you can introduce your product, I doubt there's going to be tons of, physical products that are going to be showing up there. 

[00:14:59] Todd: Because [00:15:00] you would just be in the store and you'd be endemic then, right? I think what's interesting here is that we just talked to great Xavier from Nelson IQ And he was talking about how the retailers really want to get non endemic dollars like they're really trying to get the broader marketing budgets, not just the shopper media budget or the JBP budget and you've also brought up before that one of the things you're really excited about for retail media is in store, right? 

[00:15:24] Todd: Is a frontier, a new frontier. It's going to be targetable. There's going to be some really some innovation around placements and what have you. And so I think this is an 

[00:15:32] Tom: Yeah, it, it gives a better and more measurable home to digital out of home tech that's been around for a while, but that's sometimes hard to measure and, it's hard to get exactly what you want. And this is a captive place where these screens and the technology can really shine. 

[00:15:49] Tom: And in this case, you've got, close to 5, 000 stores, 20 screens per store. That's a pretty interesting set of screens to be able to advertise on. So I [00:16:00] that's a great place where the sort of very store focused media can get a lot better. But, to that point, how big is it, and, does it really I think we have to go through the numbers, but does that, is that sort of a sprinkling on top in terms of the media budgets that are being spent or is it, does it actually move the needle? 

[00:16:21] Todd: I, it's, I think if these retailers have to try lots of new products and lots of things, so I like that, that it's innovation. And credit to Walmart, right? Costco is announced more in store. Walmart's doing it. That's also a better way. They compete against Amazon because Amazon doesn't have the storefronts. 

[00:16:37] Todd: They have whole foods, but that's small compared to Walmart and others. And so I think that's where this gets really interesting as it, as an area of growth and opportunity. And again, retailers are trying to get beyond that 0. 25 or 0. 5 percent of GMV. They get stuck at, so they're gonna have to come up with new ideas and new products to go do that. 

[00:16:54] Tom: It's also interesting. You bring up Amazon because I think Amazon, Amazon does have some big box stores outside of [00:17:00] the whole foods footprint. But I think their question is going to be what the hell do we serve there? Is this going to be a programmatic buy that, shows, they have so many potential brands and, I think they don't have the same Sort of JBP process with these brands in, in that, it's okay here's the a hundred brands that we're actually going to do these deals with 

[00:17:22] Tom: so I think that, a Walmart can probably connect on this and make that happen way faster than an Amazon would, because Amazon would be like let's let everybody do it. So it could be a mess. 

[00:17:37] Todd: I think what's also interesting is obviously Walmart has loyalty data. And Walmart has, you will have online profiles of shopping. So there's, I'm going to be, I think it's really an interesting strategy. And again, as you finally pointed out to me, what non endemic could be and could work there, right? 

[00:17:53] Todd: Credit card offers, travel offers, other home services, insurance, et cetera, make a ton of sense and [00:18:00] could really open up some pathways to revenue. So I think, our conclusion today is. As we look back at Nike, Outbrain and Walmart, cool boy, Nike's in for a world of pain and turnaround. 

[00:18:14] Todd: We're bullish on Outbrain and Teeds, and I think we're gonna, by the way, and I think this is gonna kick off a huge wave of M& A across the open web ad tech ecosystem. We've been waiting for this, for those of us who are deep and deep in the weeds of ad tech, like myself, for a number of years. 

[00:18:27] Todd: We've been waiting for this consolidation wave to happen, and so I think we're kicking it off, and this is the type of bigger deals we should see. Does the world really need three or four, brand verification companies? Probably not, right? I think there, we're going to see some consolidation. 

[00:18:41] Todd: And so I think this is an interesting wave. And then I'm, we were a lot of things we've been talking about in terms of retail media, in terms of innovation and things like in store to have this pop up from Walmart speaks to, we're bullish on that trend and where that could go. And I think that really speaks to Why we're excited about retail media, and it's not [00:19:00] about a new format online. 

[00:19:01] Todd: That's really gonna be exciting. It's about how do I extend this sort of this ad tech ecosystem into other areas and connecting that off that online ad tech ecosystem to this on offline world or environment? It's pretty interesting. And so I'm 

[00:19:14] Tom: Yeah, I'm just thinking actually to your point on the in store opportunity, that might be a way to get some of these types of non endemic advertisers who are not ready to build into programmatic APIs to just try something that's, that's going to be, it might be a little smaller, it might be more manual but it gets a big bang because it's video and it's not, just programmatic ads. 

[00:19:37] Tom: So that, that actually I'm starting to, I think I'm actually learning something from our discussion. The name of the game. So cool. Thanks. And we'll see you again next time.  

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