The $3.7B Livestream Marketplace

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Good morning! It's Friday, March 8th. Today's post looks at the company pioneering livestream shopping in the United States, a business model that's already seen great success in China!


The $3.7B Livestream Marketplace

American consumers are known to love two things: shopping and being entertained.

Livestream marketplace Whatnot directly caters to both of those consumer desires and has become one of the fastest-growing consumer marketplaces.

Three years after the company's founding in 2019, Whatnot has raised $260M at a $3.7B valuation!

What's the Business?

Whatnot was founded in Los Angeles by Grant LaFontaine and Logan Head. LaFontaine previously worked as a Product Manager for Facebook and a Product Marketing Manager at Google. Head was the Senior Product Manager of GOAT, an online market for luxury clothing and sneakers.

Combining their experience, the duo set out to create a "high-end Craigslist-style platform" where anything could be bought or sold. The company found traction in the summer of 2020 when it narrowed its focus on collectibles and introduced its live-streaming element. 

Within a couple of hours of the first livestream sale, LaFontaine sold $5K worth of Funko Pops, collectible pop culture figurines. 

So, they doubled down on live streaming and created what feels like a crossover between eBay and Twitch. In Whatnot's case, the sellers serve as the streamers, and the potential buyers are the subscribers and viewers. Venture capital firm a16z described Whatnot's appeal in the following way

"Livestream shopping is entertaining and full of discovery, and it's far more immersive than your typical eCommerce experience. It's like a group treasure hunt where the hosts curate items and create a lively environment that makes shopping fun again. Similar to Pinterest, shopping becomes a byproduct of entertainment."

Sellers must apply to stream on Whatnot; only 50% of applicants are approved. This ensures a certain level of quality to the platform's streams and lets Whatnot focus on the needs of its successful brands. On average, Whatnot sellers generate $6K+ in monthly sales on the platform.

Currently, Whatnot's sole revenue source is its 8% commission on all items sold and a 2.9% transaction processing fee. However, with all the time users spend on the platform, Whatnot plans to supplement revenue with an advertising model akin to other streaming platforms. 

How They Win: Transferring a Proven Concept

The concept of livestream shopping is new to many Americans, but it's a hundred-billion-dollar industry in China. 

Livestream shopping took off in China after Alibaba's live launch in 2016, and it shows no signs of slowing down. Take a look at the explosive growth of livestream sales in China:

  • 2017- $2.9B

  • 2019- $64.3B

  • 2021- $366B

  • 2022- $520B

For comparison, the US generated only $20B in livestream shopping revenue in 2022. But that doesn't mean the US won't eventually catch up. 

Goldman Sachs expects livestreaming ecommerce to grow 18% annually for the next two years. As it currently stands, Whatnot is the company best positioned to ride that growth wave and reap the rewards. 

Key Observation: Don’t Always Reinvent the Wheel

The Whatnot founders didn't create anything new. Instead, they introduced an established concept to a new consumer demographic.

That strategy resulted in a massive win and proved that entrepreneurs don't need to reinvent the wheel to find success. Sometimes, it's just about tailoring and promoting an existing product to the right people.

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