The CQ | Our Source of Truth on Marketplaces
Plus the Forerunner Team's Top Reads of the Week
The CQ is Forerunner’s weekly newsletter rounding up the most pressing consumer news and analysis, plus some bonus musings from our investment team. Subscribe now to get the latest edition in your inbox every weekend.
Last week, we published a research report on marketplaces, a business model that admittedly might not seem like the center of the action in Silicon Valley today. The model has fallen out of favor with investors in recent years, with the number of marketplace startups that went on to raise a Series A down ~85% since the 2015 peak (the “Uber for X” era). But the business model has undeniably stood the test of time. Some of the largest public consumer tech companies are marketplaces, and with over $190B in total revenue and $570B in total valuation, marketplaces have produced a breadth and depth of small- and large-cap outcomes that rival software.
We analyzed data for 30+ public and 80+ private marketplaces to put the market sentiment to the test. We found that:
💰 Marketplaces are rewarded in the public markets even when they are not capital-efficient pre-IPO
🏆 Service and product-based companies can both be successful, though the latter is often challenged when holding inventory
🤝 Medium to high degree of management typically strikes the right balance of value creation and value capture
💫 Marketplaces with supply variety as a feature are more common and typically have more compelling financials
See our full report for all the findings: Our Source of Truth on Marketplaces.
What We’re Talking About on Slack:
The Atlantic explores the longevity revolution and how we need to radically rethink what it means to be old. Increased life expectancy has upended the view of old age defined by retirement and the safety net of Social Security and Medicare, with one author arguing the need for a new life stage, “late adulthood,” between middle age and old age to reflect this new reality. “With millions of people living vigorously into their 80s and beyond, the very idea of ‘retirement’—the expectation that people will leave the workforce at an arbitrary age—makes no sense. Jobs need to be made more friendly to older workers (through measures as elaborate as shifting physical tasks to robots and as simple as providing different footwear and chairs); employers need to exploit age diversity (which improves team productivity by blending older workers’ experience and skill with younger workers’ creativity and drive); education and training need to be available and encouraged throughout life. The key is to see aging as a state of flux involving us all and not an event or a state segregating one group from another.”
From the Wall Street Journal: Why the coolest job in tech might actually be in the bank. Unlike tech firms, which have seen numerous rounds of layoffs in recent years and have been scaling back on perks, banks are enhancing their appeal by promoting AI initiatives, investing in research, and hosting events like hackathons. The number of computer science graduates from prestigious colleges who went into financial services has increased 16% in the last year. Now, banks like JP Morgan Chase and Morgan Stanley are offering comparable early career salaries to the tech industry to up the draw for grads.
Gen Z leads holiday spending surge. Despite 60% of Gen Z reporting stress over holiday-related debt, a new Harris poll reveals Gen Z is expected to spend an average of $1,638 on holiday gifts, more than double the Boomer average of $681. “What we’re witnessing is Gen Z’s determination to create meaningful holiday experiences, despite financial pressures. Their willingness to spend more than other generations reflects both their emotional investment in gift-giving and the financial strain it can create.” The survey also highlights how 69% of Gen Z and Millennials are using AI to help them find better deals, and surprisingly, 68% of young shoppers consider in-person holiday mall shopping a cherished tradition, with 65% saying it reduces holiday stress and saves time.
The Cut calls it the ‘Year of the Underconsumer.’ The TikTok trend, “underconsumption core,” promotes the practice of mindful purchases, frugal habits of reducing consumption of material goods, and embracing a minimalist lifestyle, often with the goal of being more sustainable or cutting back on frivolous spending — the latter of which is a big concern for younger generations. A recent study showed nearly half of Gen-Z and millennial respondents said they felt financially irresponsible, and about one-third said they believed they have a shopping addiction. “At its best, embracing underconsumption is a more palatable way to grow up, save more, and want less. At other times, it’s just an opportunity for clout chasing” and many claim they’re growing tired of the “holier-than-thou self-righteousness of some underconsumers.”
Early adopters are ditching Google search for AI chatbots, reports Bloomberg. “Early adopters often anticipate which tech habits will become mainstream, and they can shape that behavior by setting an example for other consumers and helping determine how companies design their products. That helps explain why the two largest search engine operators, Alphabet Inc.’s Google, and Microsoft Corp., are making AI a more prominent part of their products.”
TikTok says a ban would cost U.S. small businesses and creators $1.3 billion in the first month. Blake Chandlee, president of global business solutions at TikTok, said that if the shutdown happens on January 19, “almost 2 million creators in the United States would suffer almost $300 million in lost earnings, and TikTok itself would lose 29% of our targeted global advertising revenue for 2025.” He pointed out that 69% of the 7 million U.S. businesses that use TikTok increased sales in the last year, and 39% said that access to TikTok is “critical to their business’s existence.” These small businesses contributed $24.2 billion to U.S. gross domestic product in 2023 and TikTok’s operations added $8.5 billion.
In defense of being ‘extremely online:’ The creator economy by the numbers. The first of its kind, a multiyear study surveying roughly 10,000 creators across 20 countries found there are over 360 million creators globally (with 39 million in the U.S.) generating an economic impact of $368 billion. A professor who led the study highlighted the positive side of social media, noting there are two types of creators: the small batch of celebrity-level creators raking in high revenues and likes and the vast majority who are not seeking fame or fortune, but rather are motivated by showcasing their talent, having fun, entertaining others, connecting with people, and sharing content with others. (Earning money ranked sixth on their list of motivations.) Says political activist and model Deja Foxx: “Social media pushed me from a sort of very hyperlocal level into a global and national space almost overnight. I think for too long, there have been gatekeepers of whose story gets to be told. Social media has changed that.”
The U.S. economy is doing what few others are: getting more productive. Many American businesses have been able to produce more and increase revenue without raising prices. This productivity growth over the past two years has allowed the U.S. to outperform similar economies, such as the EU’s and Canada’s. This year, the quarterly productivity of U.S. workers has grown by at least 2% compared with a year earlier, and over the last five years, quarterly YOY productivity growth has averaged 2.1%, a big increase from the 10 years prior. The pandemic played a role in this productivity boost due to government stimulus increasing demand, low interest rates encouraging investment, and a tight labor market pushing companies to operate more efficiently with fewer employees and adopt new technology like self-serve checkout. A rise in new businesses—often a sign that an entrepreneur has created a new way to do business more efficiently—is another factor. Since 2021, the weekly number of high-propensity new-business applications has averaged about a third greater than during the four years before the pandemic.
Ozempic killed diet and exercise. Historically, lifestyle changes like diet and exercise have been the main strategy doctors recommend in combating obesity and chronic illnesses in the U.S. However, new research has raised doubts about their effectiveness, particularly for individuals with severe obesity. While diet and exercise can help prevent or control conditions like type 2 diabetes, they will not lead to enough weight loss to reverse sleep apnea or prevent heart attacks or strokes like GLP-1 drugs can. Researchers say that the use of GLP-1 drugs can “free up patients ‘to focus on lifestyle intervention in a more refined way,’ by clearing out cravings and tabling the need for counting calories. People on Ozempic and their doctors, too, can start to think about switching to a wholesome diet, being more active, getting more sleep.”
Retail returns: An $890 billion problem. Returns are projected to make up 17% of total retail sales, amounting to $890 billion in returned goods—up from 15% in 2023. And holiday returns are expected to be 17% higher. The rise in returns is mostly driven by online shopping, with two-thirds of consumers "bracketing" (buying multiple sizes or colors and returning some) and 69% "wardrobing" (buying items for a specific event and returning them afterward). With these numbers, it’s no surprise that 46% of consumers say they return goods multiple times a month, up 29% from last year. Processing returns costs retailers an average of 30% of an item’s original price, but many returned items cannot be restocked and in 2023, returns generated 8.4 billion pounds of landfill waste. In response, many retailers are tightening return policies, implementing "keep it" refunds, or introducing buyback programs to sell them as secondhand goods. It’s a tricky balance because 76% of consumers prioritize free returns when making shopping decisions, and 67% say a negative return experience can deter them from shopping with a retailer again.
Portfolio Highlights:
Glossier and Dutch are honored as one of Fast Company’s Brands That Matter.
Pie founder Andy Dunn visits the TechCrunch Found podcast to talk about how he is rethinking social media.
Marc Lore, CEO and founder of Wonder, discusses his regrets about Jet.com in a video from Inc.
WWD reports on the launch of Oura’s feature that detects early signs of illness.
Today Show lists Duckbill as one of the best holiday tech gifts.
There are ~608 jobs currently available at portfolio companies, check ‘em out.