Advertising versus Commerce based business models

If you look at the top 10 Forbes tech companies you can see several interesting things. Here’s the list below. See what you can spot:

Top 10 Forbes tech companies
Source: Top 10 Forbes tech companies

The first obvious thing is that most of them are from the US. Second – in the US, most are relatively young companies, with the likes of Alphabet (Google) and Facebook being very young. The youngest companies also have something else in common: their business model is based on advertising. Simply put – they capture their users’ attention and profile and then show ads.

The other companies – not so much, outside of Tencent.

Advertising has been the go-to business model for tech companies for quite some time

Now – no one can say that advertising based models are bad – it seems that two companies managed to get most of the advertising budgets in less than two decades, displacing large media and advertising conglomerates.

The picture, however, is a whole lot different if you look at the top 10 companies, independent of whether they are a tech company or not.


There’s not one single advertising based company in the top 10.

The anomalies that stand out are Berkshire Hathaway (investment) and AT&T(telecom). The other companies are all retailers of something. Their own products, drugs, oil you name it. Even the two anomalies are related to commerce. If you look at Berkshire Hathaway’s portfolio you will notice that it resembles the list above quite a lot. AT&T is technically a retailer of telecom services with a quasi-monopoly on the US market.

Commerce based business models are the future of tech companies

I’ve noticed this idea in two key areas:

  • most of the new business models that are emerging in China are not advertising but commerce based. This is due to the fact that China’s VC scene is more grounded in a historic perspective of trade rather than advertising.
  • Shopify’s growth has been largely ignored by Sillicon Valley due to them not being related to the crowd consensus. Its stock trades at 40 times the list price 3 years ago
Shopify not fitting in with the cool tech crowd.

My guess is that the future of tech businesses is more commerce related than advertising, payment or any other niche model. Commerce is at the basis of our society and as long as we’ll have a functioning global society (not guaranteed, btw), commerce will make our world better.

Shopify Raises $100 million. Targets online and offline shopping.


Shopify, the company that now powers over 80 000 online shops, with almost $1.5 billion in sales generated on it platform, announced it has raised $100 million. Existing investors, as well as new ones, such as OMERS Ventures and Insight Venture Partners, chose to extend the initial $22 million investment.

Target: Clicks as well as Bricks.

Shopify is, as CEO Tobias Lutke mentions in its most recent blog post, the “fastest growing ecommerce platform in the world” but it seems this is not enough. The company plans to bridge the gap existing in small to mid companies’ approach to multichannel shopping.

shopify-posThe future, it seems, lies not only online or in an online vs offline struggle but rather in a 360% approach to customer care and sales.

Earlier this year Shopify announced Shopify POS, a point-of-sale solution designed for stores already running on Shopify’s platform. These stores can now easily use the software and hardware provided by the company to ensure a better care for their customers, independent of channel.

Rags to riches

The company was founded in 2004, when CEO Tobias Lutke and co-founders were trying to find a way to sell snowboards online, legend has it. Because they were not able to find an affordable application to help them do that, they built it themselves. Later on they thought it would be better to rent the software as a SaaS solution rather than try and sell snowboards. “That was the best decision of my life” says Lutke.

It took the company 6 years of bootstrapping until they finally got their big brake. Th first investment came in 2010 ($7million) and than 2011 ($15 million).

Now they sit on $122 million in investments and the company is probably the most interesting Canadian tech company of the moment. As the market’s demand for affordable, flexible solutions to multichannel retailing increases, so will Shopify’s market value.