Rishabh Jain:

Welcome back to The Intelligent Marketer. Today, we're excited to have Sean Frank, the CEO of Ridge, here with us, who's a huge supporter of the eCom industry in general, and recently has been talking a bunch about agentic commerce, what he thinks the ecosystem is going to evolve into. So excited to have you, man. Thanks for coming.

Sean Frank:

Thank you. Yeah, I never get called a supporter of eCommerce, but yeah, I spend thousands of dollars a day on eCommerce products, so I'm excited to be here in support for it.

Rishabh Jain:

That's amazing. I know some of your recent tweets, people are showing a lot of evolution in your thinking or changes in your thinking around software for eCommerce and how agentic commerce is evolving. Maybe we can just start with very high level, what are the things that you are seeing change in the space that have shifted some of your thinking on SaaS and agentic commerce, and we'll just go from there?

Sean Frank:

Yeah, I think we're going through a revolution of some sorts, right? Everyone talks about AI in broad strokes. AI is going to change everything. I don't know about everything. What I know about is eCommerce, and I think it's going to change a lot of eCommerce. I have a friend, Katy, she has a company called Caden Lane. They were only wholesale in 2003 to 2008, and then she added a shopping cart through her website. That's her words. She figured out how to add a shopping cart to her website. There was still eCommerce going on in 2008. Amazon existed. It was marketplaces and it was dropshippers. That was the first instance of a brand adding a checkout function on their website and that was the birth from 2008 or 2009, Magento through Shopify in 2011 and 2012. Until now, I have a multi-hundred million-dollar a year direct to consumer website. People go to Ridge.com, check out, and buy things.

The evolution I see happening is I think the shopping cart on websites is just 15 years old at this point or 20 years old at this point, and will be replaced by something easier. I think more and more shopping will happen in chat, will happen agentically, and you'll just say, "Hey, go buy me the thing I saw on Instagram." It'll have perfect knowledge of what you see, what you like, what you've bought previously, your sizes, holidays coming up, gifts coming up. I equate your website being more like a print catalog. It's like a nice to have thing or a mobile shopping app. There's a big boom of everyone wanting their own mobile shopping app. I think your website will be more like that, a niche kooky thing that people remember and they like, and some people go there and use it, but more and more shopping will just happen agentically. That's what I think is going to happen within 10 years, most likely within five.

Rishabh Jain:

What are some of the early signals that make you feel this way? Other than just, "Hey, because my other interactions are moving to chat," what are some of the early things that either you're seeing here or in other parts of the world that make you feel like this is eventually where we're going to get to?

Sean Frank:

There's always going to be a place for shopping as therapy. That's what the mall was. But more or less, shopping's become more and more frictionless over time. So from dragging your kids to a department store, to checking out at your house with a catalog, that happened first, and then it was checking out on Amazon or direct to consumer websites, and then we have in-platform shopping, if it's a TikTok shop or whatever else. I think it's a natural progression for shopping to become more and more frictionless, where you're doing less work to get the things that you want. So that's my feelings about it. The fact is people are using ChatGPT and other AI chat tools for product recommendations today. There was an image floating around Twitter and I think it was from OpenAI, they released how people use ChatGPT today.

We think about coding being a huge use case. It's, like, less than 4% of all users have ever tried to code something, but 15% have asked for product recommendations. Obviously that's going to eat more and more of the stack. And we see this in our recommendation data. People ask for, "What's the best gift for men?" Ridge Wallet comes up, people buy it inside of ChatGPT. Right now, it deep links out. We all have done this in our life, I needed a power cord, so I took a photo of the one that broke and said, "Where can I buy this?" And it just bam, sent it to me, because shopping for power cords sucks. It's like I don't know the watts or anything. I'm like, "Hey, I need this exact thing. Buy it for me," and it just does it.

I've bought Chinese food. We have a company stand up, everyone had to come on. I made them watch while the robot... I said, "Order me Chinese food for lunch." 45 minutes, it took forever. It's trying to figure out where I live. It's trying to figure out what kind of food I would like, and it goes through, it made a purchase it, and it showed up. So I think there's the data showing that this is coming. I think you can look at the history of man, that this is going to happen, and then just your feelings, your personal life, anecdotally, we all see that.

Mike Duboe:

So Sean, let's stay on this Ridge example. It's hard to refute for most brands that ChatGPT referral traffic is becoming top of funnel for most brands. It sounds like that's been the case for Ridge. When you see this, what do you do? How do you actually either make more of that happen? How do you convert that traffic? How is this changing the way you do marketing when you see these trends?

Sean Frank:

It's a good question, because there's something happening and everyone wants to be ahead of it. We're not even at the dot-com bubble version of this. We're not at the pets.com version of this yet. We're like in 1994, when people just realized that there was an internet, so we're super early on the whole thing. I can tell you what we're doing, but I don't think it'll be good advice in three months, six months. Definitely not in five years, or however long this podcast is going to live out there. This is the SEO moment. Everyone's like, "Okay, how can I build SEO tools for AI?" Everyone's working on this. So we're working with two or three different either agencies or software vendors, and what they're doing is they have 10,000 instances of ChatGPT on a bunch of different avatars. So female shoppers, totally blank ones, and they're trying to figure out how ChatGPT figures out how to recommend something, and then is going back and building those pages on ridge.com.

A website is cited very heavily in ChatGPT, it means those backlinks and that mention is probably very valuable, so we're looking to get more of those. Now, I don't know if that's going to be good advice in three, six, nine months or whatever. The best advice I could boil it down to is be as famous as possible. This is a technology where I think the incumbents will start to win. The more YouTube videos about you, the more reviews you have, the more purchases, the more commerce data flowing through, the more social proof and comments you have, it's a self-reinforcing system.

When mobile came out, it let Facebook take over $100 billion in advertising away from TV because TV didn't figure out how to go to mobile. This is not like that. This is where the bigger the brand, the more search volume you already have, I think it's a high signal. I can tell you what I mean, tactically, we're just trying to rank better for these things. As soon as they launch ads, I'm going to be all over those things, but if you take a step back, be as big as humanly possible, be as popular, that's what we're trying to do.

Mike Duboe:

And just to stay on this, and this is consistent across many brands that we've talked to, but you're basically describing an SEO function, right? I don't know if you had an SEO team before, and maybe you're spinning it up right now, but what is different than what you were doing before tactically to rank on other engines?

Sean Frank:

It seems to be more targeted and it has to be more persona driven. So if any user types in, "Best wallet for men," they're going to get whatever the highest authority page is and whatever magic they did to get there, so, "Wirecutter, best gifts for men." That's going to be number one, number two, and number three. At no point in there is it thinking, "Is this a daughter shopping for her dad?" You can get there with more long tail search terms, but this will have context built into it. Long tail SEO, I think is going to get boiled down to just generic question asking, so you have to cover your bases more aggressively. Best gifts for men is going to be incredibly competitive and it's competitive today. Try to go out and try to rank for that. But "best gifts for Midwestern dads giving to a 27-seven-year-old stepson," nobody's typing that into search, right? Nobody's going to rank for that, but ChatGPT is essentially asking that question based on the information it has of you. So that's, I think, the fundamental difference.

Rishabh Jain:

And when something gets that nuanced, there was part of the debate that we were having with a couple other folks about whether or not it should be on your domain, on other domains, something that's that nuanced. This might be way too tactical, but how do you start to think about the sources of authority that are third party versus the sources of authority that are first party? Are you actually seeing impact from those sorts of pages being generated, at least in the moment? And again, who knows what happens in three months?

Sean Frank:

Yeah. Well, also it's so hard to tell because ChatGPT adoption is going through the roof. So am I doing something or is the tool just growing naturally? So it's like that's really hard to say. Now, the other thing is I can't even stress, people always talk about early innings, we are not even in the parking lot to the game yet. We're still on the freeway driving to the game for the game to start, so it's that early. The reason why I say that is we don't know if ChatGPT is going to de-prioritize the New York Times. They're in an active lawsuit right now. So things that Google treated as high authority could end up being negative authority in 6 months, 12 months, whatever. So you should try to build out everything like an SEO portfolio, but it actually probably makes more sense to invest more heavily on what's happening on your website.

Also, I have to bring up this as a stop gap, because right now we're saying, "How does ChatGPT surface this answer to the user?" "Best gifts for men? We think you'd like this stuff." In nine months, it could be, "Hey, just buy me a gift for my dad," and then that agent goes out there. That's where Shopify has a chance to shine, or a Shopify competitor has a chance to break in. I'm going to build the agent that recommends the best products to ChatGPT, and I have the best plugins to it, and it's always going to trust me or whatever. Someone could build that. I'm sitting here, you asked originally or I made a lot of comments about software and SaaS, it's like, yeah, I don't see how Shopify doesn't just become a product feed and a checkout function. How long until OpenAI is just like, "We want to do the checkouts"? I don't know, it is so uncertain what's going to happen, we just got to try a bunch of stuff right now.

Rishabh Jain:

So is that how you think organizations should react, is, like, "Hey, here's a bunch of tests essentially that we can run with partners, with vendors"? And then what are some of the early alphas or betas that you're seeing that are showing you, "Hey, here's what could happen," based on these tools, or an early alpha from Google, or whatever it may be? What are you starting to see based on those early tests and do you think that's the right way to approach it?

Sean Frank:

The caveat is you should try a hundred things right now, understanding that in 12 months, a hundred of those things are going to be deprecated. It's just making sure you're taking shots on goal and trying to be as AI native as possible for your organization, at least if you believe in this thesis. The thesis I believe is that we've watched shopping go from department stores and catalogs to dropshipping websites, to marketplaces, to your own website, and I think it just gets condensed more. So if you believe in that thesis, the world's going to change a lot very quickly. I have no idea what's going to be good or what will actually drive results, but the fact that you're actually just on the cutting edge, trying these things and learning, and just start sensing out what is total bullshit. It's like, dude, I think we're in 1995, like I said, we haven't even had the dot-com bubble yet.

So in the dot-com bubble, Amazon hit a market cap peak in 1999 that it did not catch up to until 2009. So it's like we still have all of that ahead of us when it comes to agentic commerce, so what are we seeing and what are we trying? Well, the number one piece of advice I have is just to be as popular as possible. You should be measuring branded search terms over time, right? It's kind of hard to get this out of Google, but you want to be making sure you're growing your share of branded search terms over time. You want to be talking to Meta, because Meta has a thing called Share of Voice, and it shows how many impressions you're getting in your category.

I think this is a time to be increasing market budgets as much as possible. There's tariffs and everything else going on. But if this information of this time period is going to be entering the lexicon and database a ChatGPT or whatever chat takes over forever, it's a great time to be popular. Stanley peaked too early. Stanley was this phenomenon in 2021, the number one water bottle, whatever. Dude, if that was happening right now, I think that reinforces the cycle. I think chat's like, "Oh, people love Stanleys. I should recommend Stanleys more," because it's just a word guesser at the end of the day. Shopify has an agentic commerce plug-in with ChatGPT. It's too early to say if that's driving more or less traffic.

Mike Duboe:

Let's stay on that one for a sec. You made an interesting comment that Shopify might just compress down to a product feed and kind of check out, and I think all of us here are very bullish on what Shopify has done over the last decade-plus for e-commerce. If that happens, does that make Shopify more or less valuable? Then maybe talk to us about what are some of the things they've launched so far around this that you've taken note of?

Sean Frank:

Yeah, I think Shopify is at the cutting edge of trying to be AI first. So they have technical leadership and founders still in the business. I think that's critical. Amazon has basically won e-commerce. Now, Shopify is an amazing business. They've won the other side of e-commerce, but GMB is four times bigger than all of Shopify and it's owned and controlled, their website, those sales going through. What that means, they don't actually really care that much about e-commerce anymore. I think they're very much in value extraction days over there. They're just cranking up fees, cranking up whatever, so they can pay for all the other stuff they want to do. Now, I don't know what else they want to do because that future hasn't been explained to me very clearly, but that's where I think Amazon is. So Shopify still has technical prowess at the very top and they're trying stuff.

Sidekick got a big buzz. That is a business-first business-focused chat function where it's plugged into your business for free, that you can ask questions of. They also have a partnership with OpenAI to roll out agentic commerce. So they're going to start being the product feed recommendation, so say, "Hey, give me cool new brands that just dropped." Shopify has the database of what everyone is selling and what's popular, and they'll be like, "Oh, this new thing just came out. People really like it. And their customers, because we see all the traffic and it's all hosted on Shopify, look and act a lot like you. This is the thing for you." That could be an amazing ads business. It could be an amazing affiliate commerce business.

The challenge for Shopify is right now, they build... They don't build, but Shopify is known for big, beautiful, unique websites, and I just don't know how much time, attention, and traffic will be going to big, beautiful, unique websites in the future. I think we'd all agree on here, we're past peak mobile app. I don't think anyone's getting excited about launching a mobile app and I'm worried that we might be past peak brand-owned website. That's what I'm saying.

Mike Duboe:

This is kind of the point I'm trying to get at here, is a lot of what Shopify seems to have done for merchants is it's taken all the friction of creating a great conversion-optimized web presence and everything that it takes to actually run this surrounding e-commerce business around that, it's removed all friction from that. I don't know how many people you had when Ridge was at 10, 20 million of revenue, but I would imagine you were much leaner than that e-commerce business would've been 5, 10 years before Shopify. Maybe the way to get at this question is you as an operator, say the value of the website goes away and most of the transactions are happening within these engines, how do you think about what is a fair take for Shopify to get and do your loyalties there start to change?

Sean Frank:

Shopify is an amazing business. I can't even express how much value I extract from the partnership. I have four technical people on my team, so that's across web development, EcommOps, everything, maintaining every aspect of my five different websites that you go and see that do hundreds of millions of dollars a year. I got four people in charge of it. The counter is that Glossier had a team of a hundred engineers building and maintaining a custom website, then they switch over to Shopify, but they got four people on the team like me. So there's so much value I get out of it. The other thing is how much of a good deal it is. My payment processing rates are somewhere... I'm going to call it 2.5%. That's, I think the rate that they're trying to charge new merchants coming in, 2.5%.

Now, if I go directly with Stripe, it's going to be 2% anyway, so there's barely any take right there and it's just powered by Stripe, as we all know. But the other thing is the monthly fee's pretty low. They have a cap. The most Shopify will ever charge you is $40,000 a month and that's because it's a variable percentage of revenue. So if you do, I think it's $8 million a month, they'll take 40 grand out of you. I got a lawyer on my team who makes more than 40 grand a month. So my entire business is being operated and run on Shopify, so there's a ton of value in Shopify. Now, your question was what happens when my website becomes a trophy or my mantle, just a nice thing to have? What value can they extract? It can't be just be 2.5%. I'm not going to give them $40,000. Who's going to be making 40 grand in there? Also, they'll have to split it with OpenAI and whatever else. The real loser to look at would be Meta, because the biggest winner in e-commerce has been Meta.

Taylor Holiday debates me on this, another famous Twitter user, I think it's something like a fourth of all Meta's revenue directly comes from Shopify merchants. So it's like a quarter of revenue, tens of billions of dollars, just comes from Shopify merchants spent to try to grow their Shopify stores, and that's just straight net income for them, you know what I mean? Let's call it $25 billion a year. It's a lot bigger than Shopify's business and that's just the advertising piece. So the attention, someone has to solve that problem. If ChatGPT is solving that problem in a way branded search does, then OpenAI will take a lot of that revenue, and then it's something that OpenAI and Shopify will have to work out together because they could point that product feed at Amazon or anybody else. When I say we're in 1995, the big dot-com bust is going to be who gets the product feed and how are they sharing that revenue? But it wouldn't surprise me if the affiliate commission goes to 30%. Amazon already takes 15 in their affiliate commission.

Rishabh Jain:

So Sean, one thing that I struggle with in this sort of realm of thinking is I think that it actually starts to feel more like they take share from Amazon. Help me reconcile the shopping behaviors. So one shopping behavior is I do a search and I do that either on Google or on Amazon. Lots of products searches start on Amazon. Your ChatGPT interaction, at least today, and we'll see how human behavior evolves, looks more like a search and then Meta looks more like entertainment. I like watching reels or I like scrolling through my feed because I want to be entertained, and then I'm interrupted during that entertainment and I get inspired to buy something, right?

As a consequence of more frictionless, it becomes cheaper effectively to find these products. Does it just actually mean that the share of purchasing, you start to see a shift in this balance? So you said Amazon won, right? And something I wonder is does this actually all of a sudden, shift the dynamic such that actually these other products that are today purchased through Amazon are going to tomorrow be purchased in this way from what is today called the independent Shopify store, which in today's world is mostly driven through entertainment-based purchasing? Help me reconcile the different ways people shop and where share will come from and go to in this new world.

Sean Frank:

And look, this is one poor man predicting what the future might look like. I think the ultimate winner is whoever has the attention. We talk about attention economy, I believe that to the utmost extreme, okay? So you are already in reels for let's call it two hours a day. Meta released glasses. You're going to be wearing the glasses with a screen. I went to Meta HQ, I used the Orion ones, the ones they're not selling, but these ones are very close. That's, I think the future we're going towards, and you'll be entertained, and when you see a product you might like...

The dystopian future is like they see your irises get a little bit bigger or whatever and your heart rate goes up, so it just saves it in your cart. But it'll be like, "Oh, hey, I should send it to my dad," and you just one click, whatever, saved to your cart. And then when you're done being entertained, that same app will have the chat function, will have the shopping function. They're like, "Oh, hey, you really saw those things. You love those. Hey, I found those on sale at the store, I'm going to get them for you," and you can say, "Thank you, chat."

This idea of shopping starts as searches, I think is the first thing that will end up going away. The shopping is entertainment, the discovery shopping. I think all of that just gets baked more and more and together. People have already tried to solve this with live shopping. Flip is like, "We're just going to be a totally live shopping app all the time." They went bankrupt. Whatnot's doing great, doing the same thing, but TikTok is like, "We're going to have entertainment and then we're going to have shopping. It's just going to jump in your face every three seconds," or whatever. I think that's actually a bad way to do it. What it's going to be is it's all entertainment, it's all ads like you're used to, and then they're just going to save, bookmark, add to your cart, and then the checkout will happen right there after you're done being entertained or when you're prompted later on.

I think Meta wins, is what I'm trying to say. They have the most addictive product on Earth. They have billions of users already, hours every single day. They've successfully got TikTok to be hamstrung for at least the next six months. People have said they should buy Shopify forever for the past 16 years or whatever, 10 years. They weren't able to because of antitrust. I think Meta is going to get so big that they will do whatever it takes to pick up Shopify in that product feed. Meta is going to be a $5 trillion company, you know what I mean? What's a small little $100 billion tuck in acquisition at that?

Mike Duboe:

All right, so there's so much to dive into here, but I want to stay, you're one of the most, I think, sophisticated media buyers in e-commerce. One of the topics we've been digging into on this pod is what do AI-native ad networks look like, both with ChatGPT building their own ad products as well as what will the app love and cross AI apps look like as well? And there's a few players working on this at early stages now. Maybe the right way to dig into this is you've alluded to OpenAI has the attention within ChatGPT and will find different ways to monetize that either via affiliate or ad revenue. What ad products do you think they should launch and what would make you excited to go and start experimenting there?

Sean Frank:

Yeah, look, the most obvious thing ever, they're just going to launch a branded search competitor. Branded search is the greatest business on Earth and the greatest tax ever. This podcast is called Intelligent Marketers, so everyone knows what branded search is, but if you don't, when people type in Ridge Wallet, I have to bid on that ad there and my competitors bid on ads there just to get people to click and go to my website. The person already knows what they want. They typed in the noun of what they're looking for. It's different than non-branded search. If you're like, "Hey, who's the best lawyer for DUIs in L.A.? That's information I need. Those searches are also sold, and ChatGPT could totally do that. This is why Google is so scared and why it's so hard to say OpenAI is going to win, is branded search is a $60 billion a year business and it's just all profit. Once you have the users, you monetize that completely.

What I would be interested in and excited by, I want to be able to prompt users, so send the message to users, ads and messaging is what it's called. Snapchat released this about six months ago where if people watched one of your ads, you can set a DM follow up. So that'd be what I'm excited about. They're not going to build that. What they're going to build is just the branded search thing and then take an affiliate commission on top of that too, and more power to them.

Mike Duboe:

One of the lines you're walking here is consumer trust, and in some ways I trust ChatGPT's recommendations because they're personalized to me and I know they're not being heavily influenced or manipulated by brands. Obviously, there are ways to do this where it's very clear what's paid, what's sponsored versus organic. Maybe it just looks close to Google, it sounds like that's your answer, but are there other formats that you could think of that would be able to walk that line the way they need to to maintain that consumer trust, or do you think that that's just a nonissue?

Sean Frank:

Yes, search purists brought this up 20 years ago when they were like, "You're monetizing information, what's going on here?" But dude, I'll be like, "Hey, I need to get a gift for my dad." It would be like, "Well, today we have a special offer from Ridge. It's going to be blue. It's going to come across. And because you've watched some of their ads, they really want to get you in the ecosystem. They think it's a great product for your dad. Here's a mock-up of a Ridge Wallet with your dad's name on it because they offer personalization. Do you want that? But then if you don't like that, here's their organic rankings." It's going to be so much more effective than branded search because it knows you, you know what I mean?

We've been calling it, internally, the me store. It's like if really rich people have people who shop for them, and you can go to any luxury boutique in Beverly Hills, they'll have a roll of clients, they'll know their names, they'll know what they're like, they'll call them up, and they'll make these offers. They get commission on the sales and brands like us will offer them a spiff, be like, "Hey, we're trying to make more intros in here. We'll do a trunk show. If you said it brings people to a trunk show, I'll give you $100," or whatever. What technology's done forever is whatever rich people have, it brings it to the masses. So rich people have private chefs, I got Uber Eats, you know what I mean? And I'd probably take Uber Eats over the private chef because Uber Eats could bring me everything I want whenever all the time, right? Uber did the same thing with drivers. ChatGPT is going to do it with personal shopping.

Mike Duboe:

A point you made there, which I think underpins this whole thesis around why these are such valuable ad engines is the semantic context they have is actually just so much greater than even what Meta had on our purchasing behaviors or what Google had on our search page. This gets much deeper and actually as a result, also gives them the opportunity to break trust by getting too creepy. And I think our tolerance for creepiness tends to go up as consumers over time as well, I will say. So maybe the way to take this question is Perplexity is in an interesting spot because they also have the browser and there is a whole different dataset there that they could work with. Yet when we had Dmitry on the show, he kind of said that they were not as excited about leaning into ads and instead were kind of go down personalized offers in an affiliate format, which by the way, are also ads. What's your reaction to that? Have you spent time thinking about Perplexity? What's your thinking on what they launch here for marketers?

Sean Frank:

I think Perplexity gets bought by Apple or whatever. We talked about BG², great podcast. They call this "the game of kings." It's like you have these massive players spending tens of billions of dollars. But look, I could be totally wrong, because what chat has showed us for the first time ever is that consumers will pay for software. Nobody ever paid for software before. Netflix would be the first one where people would actually bust out credit cards or paying for software at scale. Outside of businesses, it never really happened, but now I got Claude, I got Gemini, I got Lovable. The stuff I'm paying for is $1,200 a month or whatever across all these different things. So maybe they can have a paid supported system to keep ads as limited as possible, Twitter's doing that right now, and then move up the funnel to affiliate offers.

I also would've said two years ago, affiliate's dead, but TikTok Shop proved that, yeah, people are totally fine with affiliate. It's a generational thing. We are scarred as marketers because to us, affiliate means credit card offers and dick pills. You could mute that out if you want to. You have a very upstanding show. But that's what affiliate offers were for so long and now affiliate offers are just whatever, everything on TikTok Shop. I know Sam Altman's listening, you got everybody listening to this, whatever tools they run out, they will have brand adoption because right now, brands are just drunk on AI. They're willing to take any demo, they're willing to try anything. Any ad, take rate, or affiliate deal they roll out, there'll be a ton of adoption. I don't know what happens in five years though, what actually ends up winning.

Rishabh Jain:

Different companies have different approaches and you need to respond to either the seeking of an offer, how do you think about what needs to be true about your stack in order to get there? Other people have shared with me that, for example, Google is thinking about sharing more context with the merchant about what it is that the searcher is looking for in that chat before referring the traffic, whereas OpenAI is going to be more reserved with the information. All of these things lead to there's a certain way in which you need to be able to let your information be accessed or present the information. How do you think about what needs to be true about the setup for your stack in order to be responsive to that level of nuance in the search?

Sean Frank:

I would love for it to be nuance focused, trying to serve the user as much as possible. But the biggest opportunity here for Shopify is to just make an ad auction engine on the back, you know what I mean? Where ChatGPT is like, "Hey, imagine every product on Shopify just gets 50 product tags," and it's accessories, wallets, gear, dads. Me and my competitors would have 50 tags on them and ChatGPT, inside that search, would be like, "Hey, they're looking for 6 of these 50 tags," and actually it's going to be 5 million tags or whatever it ends up being. But it's like, "Hey, we need the products that match these six, who's going to pay the highest rate?" And then it's an ad auction where I'm like, I'll give $35, $40, or $80 to show up there and be the recommended product because we know that the take rate on that offer is going to be 95% or something, you know what I mean?

So anyway, I know your question is about what do I want out of the contacts? I just think I get skipped there completely, and I think whoever the product feed is makes an amazing ad auction business, and that's why Meta should buy them. Somebody ends up buying Shopify because they have all the merchants, they have all the data. They can tag everybody. Because you know Amazon's going to do this, right? Amazon, instead of the pay-per-click search at the very top, it's going to be like, "Hey, I have somebody who's guaranteed to buy a wallet. What's that worth for you, big guy?" And that's why the highest price is going to win.

Rishabh Jain:

What's interesting is I was talking to somebody about this who is international, and they were saying that actually in China and in these closed ecosystem applications, this kind of adoption is already happening. Now, I don't know anything about ruthless adoption in Amazon, but in WeChat and things like this, in these closed ecosystems, that type of auctioning is already happening. And I guess for you as a merchant, are you starting to seek information from your international peers where these larger aggregators and technology tends to bleed earlier actually than in the U.S. for these types of things? And if so, what are some of the learnings that you're getting from outside the U.S.?

Sean Frank:

Well, dude, I'm going to China tomorrow, so I'll do some research and I'll report back. I'll be a multi-time guest on here. Adoption happening earlier in other markets, live shopping in China is the example people use. It is a real thing over there. People spend billions of dollars in live shopping. That has just had fits and starts over here for a lot of different reasons. We still don't really have live shopping in America. We have affiliate videos that are shot and then sometimes those people go live. Most of it's happening in-feed. So I'm curious to see what WeChat is doing with that and what the ad auction is in the background.

They also just have a way more competitive ecosystem. We're talking about the most competitive digital functions of all time, where WeChat, you can buy everything from luxury to $1 things. It's like Amazon, Walmart, Temu on steroids. And they have all content happening at the same time. I haven't really talked to Chinese merchants about it, but it wouldn't surprise me if they're at the cutting edge of what's going to happen in America, or at least more people are going to try in America.

Mike Duboe:

I want to shift gears and talk about your product supply chain. We're talking about marketing. Let's go into the ops of Ridge and building the product to the rest of your supply chain. How is that being transformed by AI today?

Sean Frank:

I don't know if marketers are going to care about ops, man. You might lose half your audience right here. So we, I think are being pretty aggressive with adopting it. We have a goal of $5 million per W-2 employee per year. My goal used to be $2 million and I think through AI, you can get to that $5 million number. If you would go back 20 years, 10 years, even 6 years, pre-COVID, they'd be struggling to hit a million. So I think there's a lot of efficiency gains there. Almost all data and reporting in our businesses being done with AI right now. We are setting up tons of functions internally. A good example is we call it the ads factory, and you're taking all of your assets and you're building a custom GPT. You're showing it good examples of what ads are, so you're prompting it a ton, "This is a good ad. This is what we're looking for." All the custom instructions in there, and then you just set up n8n to just pump out ads every 25 seconds.

All those ads using n8n get auto-downloaded and auto-uploaded into a Google Drive where once a day, I have somebody look in there and, look, most of them are junky. We're doing the same thing with Nano Banana. It's going to be a lot better inside of Nano Banana. If literally hands off, I'm getting 500 static ads a day, 5 of them are great, 10 of them are pretty okay, 30 of them I can run, and that's just happening automatically in the back. So I know that's not an ops thing for you, but inventory planning to data, to... We can talk about inventory management real quick. At the beginning of the year, I had four people doing inventory management. I have one person doing inventory management now. That person can manage five Shopify stores, wholesale, Amazon, all of these different product lines. I have wallets, rings, backpacks, luggage, and all these different types of stuff, they can manage all of that now because of AI. You're just plugging in what are your sales? What's on order? What are projections? And AI is great at that.

Mike Duboe:

And this is relevant for the podcast because it's also AI in commerce and what's happening at the intersection there as well. And I think an area that we haven't really explored is in talking with merchants, the capabilities of your partners, whether it be manufacturers to third party logistics partners or others, as they ramp to AI, how is that changing how you run the business? Are you seeing impacts from their own adoption as well?

Sean Frank:

Yeah, look, that's going to be a lot slower. Getting people to pick packages is still going to be a manual thing, right? Amazon's got robots running around, I'm sure they're optimizing the hell out of that. But your 3PL's still dealing with immigration issues because there's ice crackdowns and that's just a lot of the workforce across a lot of 3PLs, is going to be people who are worried about that. I think they got some other shit they're dealing with. On the manufacturing side, the more trend is going to be more and more localized manufacturing with automation help. Now, that is still five years away. We have to have robots walking around, but we see the robot companies raising billions of dollars. You see robots sometimes it's like, "Yeah, this is definitely happening." We see Waymo. So that's going to be the reindustrialization to bring more manufacturing to be quicker, nimbler, more onshore.

This went viral on Twitter a couple days ago, but on Alibaba, you can one-click buy a solar panel factory. It's $150,000, but they'll deliver and set up a solar panel factory for you, so you could just start making solar panels. It's like, yeah, dude, that's more of the future. I think 3D printing will get more real and everything else. What AI has been really helpful for in the manufacturing stack today is the design and engineering phase. A lot of the design engineering phase is very manual and it's so helpful to have AI to be able to be like, "Hey, is this thing going to work when I try to make it?" And it's like, now you got to change all this stuff, because the design for manufacturing and the physical space takes a very long time.

Rishabh Jain:

Sorry, just to make sure I understand, your ad rate increasing because you could just put it on autopilot, does that increase the iteration speed, even without the robots, of new product launches? Did you have a previous calendar of expected new product launches that you can now speed up the iteration cycles on?

Sean Frank:

Well, one, Ridge is already very fast making products. There's a great luggage called Peak Design. They make awesome bags, whatever else. They've worked on their carry-on for at least six years. They have videos going back to pre-COVID working on this carry-on. We decided to launch a carry-on and it was nine months, so we're just a little faster when it comes to that stuff. But no, right now we have a designer make something, and then we 3D print it, and then the designer's out of it. They're like, "Oh, we're putting in an AI and asking it to make a bunch of changes, more 3D printing, make changes, more 3D printing."

So we can have products made from idea to first prototype, to land at the warehouse six to nine months now, so it's happening way, way faster. Now, it still has to cross the ocean, so that's always going to take a long time, but when we start making it here, it won't have to cross an ocean. When I buy one of those solar panel factories, one click.

Rishabh Jain:

The level of impact is very dramatic for you across the rest of your business. And one of the things that you've commented on that we've talked about a little bit is the impact that it has then on SaaS software. So you extend this same logic to SaaS vendors in the e-comm... Let's talk about the e-comm space since that's what you're used to buying. Is it the case that just the expectation from every one of your SaaS vendors goes up tremendously relative to the cost, and so it's just the cost of value changes? Do you think that people are going to be building things internally? How are you guys experiencing it play out?

Sean Frank:

So I think SaaS is being attacked from a bunch of different angles. So the number one impact of AI at Ridge is we're doing more work with less people. So my head count now is below where it was in 2023. Okay, revenues doubled since 2023, head counts below, so I'm doing more with way less people. That attacks SaaS because most SaaS is sold on seats, or at least half of all SaaS is sold on seats. So the less people in my organization, less SaaS I'm going to need. So if you're Asana and you're a project management tool, well there's just way less people to charge for, so how do you solve that revenue gap? It's like you have to either get more clients or you have to charge more for those users.

At the same time, with AI, we are just supercharging the shit we already have. So instead of using Asana, we already have Notion as a database. We just build that in Notion. And now I've got a guy using AI inside of Notion to make sure that it works exactly how we want it to. So my team is now replacing tools with other tools we have. That's not even going to talk about custom building anything, which you could also do. We were paying for a DAM software. DAM is digital asset management. They charge $15,000 a month. You don't think we can just build an awesome AI tagger? Because that's what we did. It's a Google Drive that gets automatically tagged with every image that comes in because that's what AI is really good at. So we are replacing those tools.

And then the last point that they're getting attacked by... Well, actually I guess there's two. One is we're building the tools, other people are now cheaper building those tools. So unless you have an amazing lock-in function, I bring up ERPs as being pretty safe because it's very hard to build an ERP. You have an incredible lock-in to your client because you plug into everything that they plug into. But if you're a reviews widget, well, you're competing against every vibe coder on Earth who's just trying to make $5 a month. And then you're going to have agent vibe coders who someone says, "Hey, go make me money," and they're like, "I guess I'm going to make a review widget," then you have infinite review widgets being built. So that's SaaS pricing pressure.

And then the last thing is as my website gets less important, if my thesis comes true, it's like why the fuck am I going to have a $20,000 a month Shopify app bill? It's like my website traffic will naturally go down as websites become less important. Change is hard for everybody. We talk about the threat to Google, we talk about the threat to all the legacy players. This is also a threat to every company that's ever tried to service e-commerce merchants. The one people who seem to be protected, e-commerce merchants, people are still going to buy the weird shit I want to sell, so I'm back on top.

Rishabh Jain:

Yeah, good thing you have a logo of a mountain to be on top of, so exactly. There are two ways that you can naturally limit this sort of evolution. One is actually, weirdly, what Yotpo originally tried to do, which is like, "Hey, we're going to just try to build way more surface area and serve it for a lower cost." Now, whether or not that surface area stays relevant is a separate problem, but, "We're going to build way more surface area and serve it for a lower cost," which is sort of what you expect to happen in one natural limit. And then the other natural limit is custom software everywhere. Each of them has their traits. And I guess when you take your framing, which one of those limits do you feel like we will more likely embark on?

Sean Frank:

Yeah. Well, that also assumes a world where the website stays important. We had 10 or 15 years of brands masquerading as tech companies. If you're a brand, you're not a tech company. It's like we have to use tech enablement because more and more of the world is tech enabled. If you're a Glossier, you had a whole web team. Go to Shopify, you don't need that. If we just go to chat as the main way people buy stuff, I just need way, way less software. The only thing I need is an ERP to route orders from the chat to my warehouse to have a chip. Now, if websites stay important, I could see both of those ways winning, where you either have a million little softwares you give 3 to $5 a month each two, or you have one player who comes in and is like, "I've commoditized the entire stack. You just need to pay me and I'll take care of everything."

And I would guess that the more mature a business is, it goes through a cycle where it's like, "I want the cheapest stuff ever." And then it's like, "I want to stack it all up to one vendor," but then as soon as you get too big, you end up distributing it out again. There's a good history of this with 3PLs. When you're very, very small, you do your own fulfillment. When you get bigger, you go to a 3PL. But then if you're Nordstroms, you're doing your own fulfillment. Again, there's a curve, around 500 to $1 billion in revenue, you just do your own fulfillment again. Same thing for software.

Mike Duboe:

Sean, we've covered a lot of ground here and we're almost at time. I think the question that I think will wrap this all up nicely is what does Ridge look like in three years? And you've kind of answered bits and pieces of this throughout the pod. If we kind of come back to what really rises to the surface, how do we articulate what Ridge is in three years?

Sean Frank:

One, I'm going to address that credit cards are going away. I've heard that for 10 years. And people are like, "Well, in China, they have mobile payment for everything." Well, I've actually spent a lot of time in China, there's still some credit cards. Maybe they're not using to them, but somebody has a wallet someplace. And in America, we have a thing called Amex, which is worth about $300 billion, who really wants you to have a credit card. So I think there's still going to be wallets, so you can call me a Luddite on that. But no, Ridge is a business. Look, it's going to be in three years, we probably have five employees. That's the reality, is very stagnant headcount. Maybe it goes to 10 employees.

But in that time in three years, I probably double, if not triple my revenue again. It's probably more like doubling the next three years. So more revenue, way more revenue, way less people, and we continue to just try to be as famous as possible, so we're going to make more products. Right now, wallets are 40% of my revenue. Three years ago, it was 100% of my revenue. So I've slowly built up all these small little eight figure businesses, and you use the brand name and brand breath to just get them in more places. So selling luggage in Best Buy, and in Scheels, and on Amazon, that is more of the... I think brands will have sharper elbows. They're going to take over more and more space. That's what we're trying to do right now, because once you have the customer, you have to find more stuff to sell them. Customer acquisition will continue to go up. So that is what I think brands are going to look more like in the future.

And the buzzword was omnichannel, I think that's even old school thinking. It's like brands need to be channel agnostic. So it's like you have to sell everywhere because you don't know who's going to win the chat race. So it's like I got to have fucking my rings on Temu. Basically, I have to have my rings everywhere because I don't know who's going to win this race, and the more service area, the better. So small headcount, bigger revenue, more products, more surface area. That's what we're shooting for.

Rishabh Jain:

Awesome. Sean, this was incredible, man. Thank you for spending the time and yeah, wild future ahead of us.

Sean Frank:

Yeah, dude, I hope you guys keep rocking in the free world. I would love to hear your guys' thoughts on it sometime.

Mike Duboe:

I mean, kind of.

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