Brad Moran: People aren't searching for you, people are searching for a search term. And if you're not there and someone else is there with an equivalent product to the equivalent price, they are very changeable. That was a very prickly conversation to have. You can train a horse. Unicorns. They're called unicorns for a reason. Because they wanted a. Well, they don't exist.
[Voiceover]: Welcome to Add to Cart, Australia's leading e commerce podcast that express delivers all you need to know in the fast moving world of online retail. Every week Nathan Bush from E Suite and an e commerce industry expert will share the news, research and insights that you need to know to keep you at the top of your game and of course, keep your customers Adding to
Nathan Bush: Cart hello and welcome to Add to Cart. My name is Nathan Bush, host of Add to Cart and director at e commerce talent agency E Suite. Today's guest used to play in Wayne Carey's number 18 jersey at the North Melbourne Kangaroos, but he's more well known for having recently sold his retail media business Citrus Ad to publicists for a very cool $200 million. It's more than any AFL contract going around. Brad Moran is the CEO and the founder of Citrus Ad. They monetize the digital shelf of e commerce retailing sites or to put it simply, they take the old school grocery shelf buying and they make it accessible for online retailers so they can make additional revenue from the eyeballs that they attract. And no doubt they were a healthy acquisition target. Citrus Ad powers media sales and ad serving for more than half of the top 20 retailers around the world. This includes Tesco, Sainsbury's, Argos, Bed, Bath and Beyond and here in Australia, the iconic Woolworths and Coles. Couple little names there and as you'll hear from Brad, retailers can earn anywhere from an additional 5k a month to $10 million a month in revenue to by making their website real estate available for bidding. Who wouldn't like a little bit of
Nathan Bush: extra on the side?
Nathan Bush: Now, apart from getting a great view on how Citrus Ad works, we go into depth on the emergence of Amazon in Australia. Why category terms are more powerful than brand terms. In search we talk about the chasm of death when it comes to selling the businesses you have founded.
Nathan Bush: Sounds delightful, doesn't it?
Nathan Bush: Now before we get to that, I have two little announcements.
Nathan Bush: Bear with me.
Nathan Bush: At E Suite we are excited to be leading a team in MI Academy's hack games and they're going to be happening this week. The theme is mental health in the modern workforce. Something we're super passionate about. So if you want to join the virtual stream and come to the Grand Final to see all the team solutions and of course vote for Team E Suite. You can register to join and attend the Grand Final for free on Thursday, March 3rd at 1:30pm Just Google miacademyhackgames and you'll be able to do your registration and come along and join in on the Grand Final Fun. And the second thing, our e Commerce Accelerator course is open for enrollments and commences March 21. If you are a junior in E Commerce and looking to take your career to the next level, or if you come from other parts of retail like merchandising or project management and looking to get the foundations of E commerce, this
Brad Moran: is the course for you.
Nathan Bush: Head on over to espeaktalent.com that's esweettalent.com au accelerator and we've got heaps more info there.
Nathan Bush: Better still, send this link to your boss.
Nathan Bush: It's the perfect personal development. All right, let's get into it. Thanks to our partners Shopify plus and Signet. Here's our conversation with Brad Moran, founder of Citrus Ad. Brad, welcome to ADD to Cart.
Brad Moran: Yeah, thanks for having me, Nathan.
Nathan Bush: No worries. Where do we find you today?
Brad Moran: I'm at home as I've been for the past three years. I like how you had to give me a watch for that. Forgot what day it is, what time it is and what month it is. Since COVID it's all kind of blended into one. So it's been good because it's helped rocketed the business and being behind your desk saves you from jumping on a plane every five seconds. But you know, you occasionally get sick of looking at the same four walls every now and then. Change the paint color and you know, wallpaper and the new desk, a new screen every now and then is always nice. Yeah, exactly.
Nathan Bush: No, well we caught up would have
Nathan Bush: been three or four years ago now, obviously pre Covid and your world has just exploded since then. So I'm really keen to hear more around what that looks like. But for those who don't know Citrus Ad, tell us what Citrus Ad is and how you came up with the idea.
Brad Moran: Citrus Ad is basically Google AdWords for retailers retail e commerce. So what we've done is basically monetize the digital shelf of E commerce retailing sites. So retailers have been very, very good for many decades now at monetizing their in store shelf space. So eyeline end caps. They know that the visual placement of a product in the store is linear to the sales that it generates. And the brands know that too. So the brands pay a significant amount of money for middle shelf, if you like, in grocery is a good example. And then where we identified a gap in the market is that when e commerce started to become more prevalent and much larger in sort of saturation, retailers weren't quite prepared to monetize their online shelf space as well as their in store. A lot more dynamic, a lot more technology needed. And so as these retailers were building out these retail technology teams, they weren't quite there yet in terms of being able to monetize their online assets. So in short, what we do is we allow Pepsi Coke to bid and compete for top spots on Woolies.com when someone types in soft drink. So very similar to Google AdWords in terms of buying sponsored links at the top of the page according to search terms. And then obviously the product goes into much more depth than that. But at a high level, that's ultimately what we do. That gives retailers a nice source of revenue and in particular for the grocery clients where we started and cut our teeth. And I'll talk about my previous business in a minute. Grocery retailers hemorrhage cash when it comes to online because they've spent the last 10 years optimizing the in store checkout process where they've basically eroded 5,000 people from the checkouts and made it all self checkout where you basically go in, fill your own basket, check out your own, scan your own products, grab your own bags, do your own fulfillment. So now with online e commerce it's the total opposite. So they've got to pay someone now to go and pick your order for you. Then they've got to pay some refrigerated truck driver to rent his truck and then deliver it to your door. So it becomes a very, very unprofitable exercise, which only exacerbated the need to try and monetize online and get some of that revenue back. So you know, a lot of problem sort of solving there in terms of the overall market. And then we just saw a gap where we were, we were obviously from an e commerce background. So we built an e comm platform before Citrus, in another life. And we saw firsthand the pain points that retailers had with cost and we saw the pain points that brands had with having no visibility or control over where their product placements were online. So yeah, makes sense. That's kind of how we came up with the idea.
Nathan Bush: So we're talking like if we really dumb the product down, I know there's a lot more depth to it. But we're talking about say your Woolworths or Dan Murphy's and you've got a category or a subcategory page. Being able to push up results based on revenue or ad spend from your suppliers or put promotional banners on those pages?
Brad Moran: Yeah, pretty much. The algorithm is very tweaked towards what the retailer wants. So for the past five years we've learned what we thought retailers needed and what they actually wanted. Two very different things. But it, but typically it was created as an auction where we would choose the most relevant products to go to the top of the page. So there'd be 15 brands competing with over 100 products, all competing for the word bottled water, for example. And then we would calculate, okay, who's got the highest cost per click and who's got the most amount of organic sales, who's most likely to get clicked on, give them a relevancy score and then we would present them in relevancy order back to the retailer that would then present them online. People click on them as their clicks are generated. The retailers then make money from the clicks. So gotcha.
Nathan Bush: And these retailers, I'm assuming very good retailers, but probably not don't have the skills or the technology. From media organizational or media platform point of view, do they have to set the pricing and manage kind of the ad spend and ad schedule?
Brad Moran: Yeah, that's been one of the evolutions of the product over the past four years was starting off with very much a buoyant, auction based, very dynamic. And that was a shock to a lot of retailers. And we thought that we were going in and just recreating Google. And Google had the model perfected, as did Facebook, as LinkedIn and Instagram. But retail was not sold like that. It was sold on a tenancy basis. You buy this spot, particularly banner ads, because sponsored products weren't really around four years ago. But they would buy banner ads for this particular subcategory, whether it be red wine, and they would buy it for a week or two weeks, rough estimated impressions, but there would be a very, very set price. And so we kind of started off in that very, very dynamic bleeding edge technology where Amazon was, and then slowly worked our way back to actually this is where retailers are really at now. And they would probably rather sell these spots on a, what we call a fixed tenancy basis, while still obviously incorporating all the relevancy and the algorithm and the costings and stuff. But ultimately what that does is it puts more control back in the retailer's hands as opposed to having this very dynamic, very fluid auction that they have no control over. Or if at least they do want to have control, they've got to be very, very technical in how they do it. So we offered a very niche product. And even though retailers were very savvy at selling media and have been for years on print and email and banner ads to a lesser degree, even though most of them still operate in spreadsheets, when trying to work on those kind of calendars, but even our new inventory management tool is basically a glorified cycle. It's a very sexy calendar view that lets you break down per ad spot, per search term, like all your inventory and it just lets you book it out basically for the whole year. But yeah, it's been an interesting ride. We've learned a tremendous amount from retailers and then we've just tried to adapt our product to what they want. So we've tried to look at it from their point of view as opposed to trying to shove our product down their throat. And we sort of said, okay, well why aren't you buying it to start with? That was the first challenge. And then why aren't you using it as much as we thought you would? And then, you know, once you get past those two questions, you start to realize that, hey, a lot of the clients resisted early days because of our pricing model. We took a rev share and then we realized that even though the rev share was competitive, we thought it was, it was coming off the bottom line of the merch teams. So that was a very prickly conversation to have. It doesn't matter how much value you're adding, when you're seen as a cost of their revenues, it's not, it's not a very well like scenario. And so when we turned to a SaaS model where we were just a technology cost, it was a different P and L altogether. We went to the technology P and L merch team don't even care about us anymore. So those little things and then just the way that we've changed the way that we work with retailers. So, you know, we know that retailers like to sell things with forecasted predictability. They don't want to do too much manual work, but they also don't want to give too much control over to their suppliers. So it's finding that nice balance between what suppliers want is real time reporting, hands on keyboards and the ability to see like a single pane of glass where they can actually view that the media they spend actually went somewhere, you know, and they can See which products are performing, which ones aren't, you know, what incremental market share they've got. So that's their primary goal and the retailer's primary goal is to generate an income, not lose complete control over their site and make sure that the, the relevancy of the products and the banners that are being surfaced are complementary to the consumer experience. Right. So if you achieve both of those at the same time, then you've kind of got a winning model.
Nathan Bush: And have you seen some of the retailers that you work with starting to generate significant revenue channels from this media and advertising channel that it's really getting taken notice of by boards and leadership teams?
Brad Moran: Definitely. We have a lot of different clients though. So we'll have clients that are happy generating 5, 10k a month in ad revenue because that's just about the size that they are. And then we have some clients that are generating 5 to 10 million a month in ad revenue. So there is a quite a disparate difference, but it all depends on the magnitude of the retailer. So you look at someone like a Target who's doing close to 30 billion AUD in online sales a year versus even the local giants here, which are around 4 to 5 billion. So there's still a, you know, it's horses for courses, but I think that the common rule of thumb is that the product can still be used by smaller retailers, it's just on a smaller scale. So when we change from a Rev share to a SaaS model, we catered for small retailers as well as the enterprise level retailers and try to make the integration that much easier so that they could all, you know, kind of all use the platform at various levels of size. So yeah, I think that there's, there's still a lot more to be made in retail and I think that the on the on site piece, what we call retail media is basically just the on site so on, on website or on digital touch points. Retail media as a whole is much bigger than what we just provide. It's, it's off site, you know, it's, you know, offline channeling, install screens, print still very prevalent in Australia and around the world. So there's a lot of channels that are still yet to be touched by our platform that a retailer's got to handle. So yeah, still, yeah, it makes a
Nathan Bush: lot of sense, especially for those omnichannel retailers who have a website and they have huge amounts of traffic because they might have 100, 200, 1,000 stores and they had a lot of traffic onto the site. Who are never intending to buy online. And if you can carve some revenue out of those customers who use online without intending to shop online, then that's a brilliant opportunity for additional revenue.
Brad Moran: Right? Yeah, that's definitely one angle. I mean, one client that we work with is very open about the impact of online clicks to in store sales. So I mean, I mean Woolies are fine because they publish this stuff with their cartology case studies. So I'm not talking out of school when I talk about Woolworths, but they know their data very, very well and they know that the majority of the clicks online, I'm talking like three quarters of the clicks online that don't convert into online customers, convert into in store customers within four days. So that's pretty powerful. So even when you think about this is more for brands to think about their investments because the brands automatically just look at, okay, impressions, clicks, sales, what's my equation on return on investment that then determines how much they spend and what value they see that they're getting out of it. But some of the statistics that we're seeing out of retail now is what impact this has on in store sales. So you know when someone buys anything in store, the first thing they do is look online first, right. So they're doing their research there and maybe they convert there. But the majority of the decision making is done while browsing the Internet, while browsing the website. So yeah, I think that is definitely one thing that we've learned over the past four years is that whilst retailers are very, not very forthcoming with their, with their data, we've sort of dragged a bit out of them over the past two or three years on, okay, what sort of impact is this happening in store? And then when they run their own retail media programs now and we more act as the facilitator and the technology company, they're the ones who are out pitching to the browse to say this is what impact it's having. So this is why you should spend, which is why you see click prices on a lot of these retailers now exceed the price of the product. So you'll see like a product that's worth 3 or $4 and the click price will be $5 because they know that it's actually an acquisition, it's not just a one click conversion, it's an acquisition of that customer that then comes back and buys a product continuously then for the next year or so. Yeah, lots of interesting hidden stats that we've started to unravel over the past five years that we never thought would be there. Early days, we imagine they would be there, but they weren't easy to come by. A lot of these corporate entities don't want to give away any of their statistics. But we hear from brands and we hear the impact that it's had and some of them have been super surprising on the impact that these sponsored products have had.
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Nathan Bush: Is there a use case that you've come across that has surprised you in the way that they've approached or used Citrus ad?
Brad Moran: Yeah, look, I think from a, from a retailer perspective you kind of always intend for your product to be used a certain way, but then every now and then you get retailers that, that use it as a sort of like a cms, you know, so not really as an ad platform as we would intend for it to be used, but more of a, an effective easy to use. Because what we pride ourselves on is the ui. So it's very, very intuitive, easy to use. So anyone could sort of click and you know, create an ad and launch it. And then what we pride ourselves on is the dynamic real time results. So every second your results are there. So if you place an add on bullies.com, you'll see the results instantaneously online. That wasn't just solving a problem for brands, that was solving a problem for retailers too. So you know, we found that they would push a lot of their private label products. So significant amount of revenue were generated from own brand, putting them to the top of the page, even though it was kind of detrimental to the overall paying brands. So that was something that we saw happen a lot. And then from a banner perspective, you know, we, we would make it a little bit easier for them to load banners into the system and have, you know, market share allocation. So I want this brand to have this amount of impressions on this particular search term for this month and then we would just provide a system that would allow them to do that in a very easy scalable fashion. So it almost become like an internal tool. So what it was intended for was actually just being used by the internal teams at the retailers, which is fine, which is, which is great. So that's what we probably didn't really expect on the retailer side. But it's great because it's enabled us to learn more with them about how to make their life more efficient. And then also on the brand side, you know, we've had some awesome case studies where sponsored products alone are very, very effective. You know, even one of our very first customers, Dan Murphy's, when we first launched them for four years ago, we launched with Mo Hennessy, you know, with their vodka brands and even a premium vodka, Belvedere, you know, you'd think, okay, pushing that to the top of the page. In some cases, not everyone's going to buy a $65 bottle of vodka, right, because it says it's premium. But in one month they took 6% market share. Because we could see that, we had the stats like we could see their sales and then we could see, okay, is it just an increase in their sales or is it a decrease in other people's sales? And we saw that all the other brands decrease. And we built a case study off, obviously we left it very much. We didn't say who the other brands were or what products they were, but all in the same category, all in the same kind of price range. And we were not that we did not expect it, but was that when one of our first big launches and first big brands to work with, we were very surprised on how much that first row infiltrates or influences the purchase. So most retailers would tell you that that first spot represents about 29% of clicks, that first row 50 to 70% of clicks depending on the industry. And that first page of Results is about 85 to 90% of all sales come from the first page. So it's not hard to believe anything about Google. And no one really scans past the fifth sponsored link. Right. But that's the kind of audience that you're dealing with. You're dealing with a convenience based audience. And one of the other fascinating things that people couldn't get their head around because we'd have this argument a lot with the big brands early days about you need sponsored products. And they would say, no, we don't. We have X brand, we have market share bigger than anybody else and everyone just goes to the website to search for us. So we said, okay, no worries, so we'll get all your competitors on. And then slowly but surely we ground. I won't say who it is, but everyone can probably guess who it is. It's in you Know soft drink? No, it's soft drink company and liquor. And slowly, over 12 months, their market share just got eaten away about 15% over the course of a year. And then all of a sudden a year turned like, oh, actually we probably need to use this sponsored product thing. And the point I was getting to is when we looked at the top 100 search terms, if we just take Grocery, for example, out of the top 100, there were only two search terms that were brand names. And the first one ranked at 93 and it's Coke, obviously you think Coke would be in there. And the second one was Gatorade, actually, which I was quite surprised by. But yeah. So out of the top 100, people assume that consumers go to their websites and start typing in brand names. And brands assume that too. I think, oh, people are searching for my product. But we work in the industry and I guarantee if I put you on the spot and said name 15 grocery brands, you'd struggle after about the first three, you have to start really thinking. So when you're on a website, the first thing that comes to mind is water, milk, bread, eggs, soft drink, lemonade. So you don't start thinking, what brands Do I know Schweppes? Do I know how to spell Schweppes? So people's habits actually very much surprised us. It's great. Cause it matched the business model. And what we told investors was really pleasing to sort of see. I know, yeah, it was convenient for the business model, but it just reiterated to the brands that people aren't searching for you. People are searching for a search term. And if you're not there and someone else is there with an equivalent product to the equivalent price, they are very changeable.
Nathan Bush: I think it's a great lesson, especially some of those stats that you shared around just paying attention to how you're ordering your product on those pages. Because it is so critical. So even if you're not not using advertising to making sure that you're putting high margin product, high availability product right up top. Because there's nothing worse than wasting that space.
Brad Moran: Oh, exactly. I mean, I'm Talking in a B2B environment, right, where people, where brands are fighting for that top spot. But it's no different to B2C, you know, B2C if you're selling, if it's nike.com selling Nike products or you know, the local version of Nike selling their own products, it's really important to know that the online shopper very rarely scans past the first page. Now, with the exception of Say fashion, we know with fashion, unlike FMCG with fashion, people will generally make 28 different clicks in a session. Wow. Because we were thinking, okay, everyone's going to have a click through rate of like 2 to 2.5%, conversion rate of around 50 to 60, get into fashion. It's like conversion rate of one and a half percent. You know what they do is they're basically analyzing 28 different pairs of shoes before selecting one. So you know, all it did was just change the economics. So the click prices went from being a dollar, so the click prices went to be 10 cents because of, you know, it just wasn't getting the return on investment. But overall, you know, there's a general rule of thumb that if you're, if you're not putting your high margin, high selling products at the top, you're going to run into out of stock issues. As a B2B and B2C retailer, you're going to run into profit issues. Simple science really when you think about it. Spot on.
Nathan Bush: And tell us, how is Citrus ad integrated with platforms? You mentioned that some people are using it as a cms, but I'm assuming most are integrating it into existing E commerce platforms.
Brad Moran: Yeah, so we'll always integrate into the E commerce platform. When I talk about us replacing the cms, it's really just instead of a company using like Magento to upload their content and just going, actually we'll just make this banner content here a call to Citrus. Because the Citrus platform is easier to use than the Magento platform. Right. For uploading content. Typically though, it's a server side integration which is the way that we designed it so that it's nice and quick. Speed is obviously paramount to these retailers. They want ads in milliseconds as opposed to seconds, as you don't want that page load and then a second later the ads load. It's a very poor experience. So that was our kind of number one technical tick off when we first built the product. But it's a very straightforward API, you know, just like they would use search engines, Threadhopper, you know, all that type of stuff. It's a web page loads front end, the website talks to the back end, the back end makes a call to Citrus, we return product codes and then basically the retailer chooses in which order they want to put those product codes. So lots and lots of rules that they can generate and create on their side. And a lot of retailers what we find these days request more ads than they need. So they'll request 20 ads even though they might use five, and then they'll choose which five they want to show. Gotcha. But we're okay with that. You know, we know that every retailer wants to have influence in the way that they do it. So we're really just there to try and help retailers with the core infrastructure of ad serving. And as ad serving becomes more and more prevalent over the next five years, we're just the building blocks to help them kind of get in the game, get on par with Amazon and ebay, and then give yourself a fighting chance to work with your suppliers and actually generate a decent amount of profit, because this is profitable revenue. This isn't sales revenue operating at a 1% profit margin. This is all cream. That's effectively that business model now.
Nathan Bush: Yeah. And I think what we've seen in the US we've obviously seen that huge move for retailers moving to ad serving you mentioned there, Amazon, ebay, but we've also had like, Walmart, Best Buy, putting a lot of investment into this as a revenue channel. How do you compare where Australia is at to what you've seen overseas?
Brad Moran: So there's two things to that. Like, if you look at the US market is a very outsourced market, whereas Australia is not so much. And what I mean by an outsourced market is every one of our clients outside of the U.S. just buy our technology and then they run it themselves. In the US we have over 100 retail media sales and operations stuff where we basically take on the whole retail media program for them. We run it end to end. So we go and talk to the brands, we sell to them, we load the ads in, and at the end of the day, all we do is just cut the retailer a check. So where I was going with that point is that one of our major competitors had been in that market five years prior to us. And that's probably why the US is five years ahead. Because Amazon obviously was the catalyst. Amazon's a big beast in the U.S. obviously, they're a bit further ahead there than they are here. But the catalysts for change happened in the US far quicker than they did here. So BookLogic, which was our original competitor over in the US, they used JavaScript technology to paste ads on a site normally at the bottom, and then they kind of moved their way up to the top once they realized that the relevancy aspect was so important. But that market was just educated far quicker than the market here. In the market here, we were doing the educating when we started, it was very much an educational thing. Five years on, I would say that the retailers that have done it, well, the Coles, the Woolworths, the Officeworks, the Iconics, the guys that are really invested in retail media programs, are on par with the US guys. Pound for pound, probably bigger, better, I think, because they control it themselves. So the retailer always owns the power in the relationship. Now, they shouldn't abuse that power, but they definitely own it in the us. The problem is when you have an outsourced team looking after everything, we lose a bit of that power because we're not the retailer. So we're having to send off, fill, sell on, like, features and benefits, which is the way you should be selling. But often here a retailer will say, well, that's the price and you don't know whether you like it or not. So, I mean, kudos to the retailers for building that level of authority. But. But that's also an advantage for the Australian retailers too, because a lot of the industries here are duopolies, whereas in America and overseas, a lot more competition, a lot more fragmentation in the marketplace. So I would say that, yes, the US is ahead, but only because the technology was readily available to them five years ago and they've been doing it a bit longer. And Amazon and ebay have been educating these brands and so the brands go, well, I do that over there on Amazon, I might as well just do it on Target. Yeah, it's really not. It's really not that hard. So Australia's getting there, though. I think that Covid definitely helped shift a focus back to E commerce. I think there was a bit of a. I wouldn't say complacency and I won't name the retailer, but there were retailers in Australia where just before COVID they were. I mean, you can talk to this too, because you've been on the retail side. E commerce was sort of this section of the business where wasn't profitable. And you know what, we're going to downsize, try and outsource as much as we can. And then Covid hit and then all of a sudden it was actually, we can't throw enough money at this area about business. So. So it was really a tale of two sides in 2020. It was at the start of 2020, a lot of retailers, a lot of tech teams and retailers facing an uphill battle, layoffs and outsourcing, and then come midway through 2020, and it was, hey, chief of E Commerce, kind of need your help. How much money do you need? Here's an open checkbook. And it was a bit like that. And globally it was a little bit the same but people look at our business and go, oh, you know, Covid really helped you guys and you kind of skyrocketed. And like, to be honest, if we'd have had all of our 95 clients onboarded before COVID happened, I would agree with that statement. But we're a, we're a B2B sales operation. And so most of our clients were signed in the back quarter of 2020 and in the first quarter of 2021. And when Covid hit, you know, even Woolies and Coles had their staff from Woolies Ex out in the fulfillment centers picking orders. Like everyone was right. They were just hands on deck. Massive. Whatever it takes to. Yeah. Just to keep up. So we had not only. We had a huge influx in within the first two weeks and then every website just crashed. So then we went like three weeks without any revenue and then we had this six month lull of retailers. Just didn't have time to talk to you because they were so focused on what does this mean for our business? Are we ever going to be able to open stores again? I've got no time to think about this monetization product. Towards the end of the year when things started to settle then I think we had about 25 RFPs in one month hit us. It was kind of a bit of a catapult. Yeah.
Nathan Bush: And you talked about the last couple
Nathan Bush: of years, but going forward, I saw a quote from you that said Australian retailers have a 12 month window to deliver retail media platforms.
Nathan Bush: What do you mean by that and
Nathan Bush: why the urgency over the next 12 months, do you think?
Brad Moran: We knew that that was definitely going to be a question. And unpack that statement. That should try to light a fire in Australian retailers. It's no benefit to us, of course. You got to give us clickbait, don't you?
Nathan Bush: Give the people something to write about.
Brad Moran: Exactly. But the reality is if you. And stay with me because I'm going to go on a bit of a journey here. But what we've talked about is brands gravitating towards. You know, they're way more sophisticated these days than they were five years ago and they think about retail media globally now. So you've got these global teams, P and G, Unilever, all the agencies are now thinking about this on a macro level. And so retail media is the first place that, that a lot of brands think about spending their money. So it's the lowest funnel. So it's the most effective place that they can put money once they've exhausted it because it's not a big channel. And in the reality of things, we like to think that we're Google and Facebook and we're super relevant, but we're super small. Like when you think about it. But it's the first place that brands put their money. So importance tick, right? So what they want though is they also want the transparency. So it's not just about the spend, it's also about the results. It's the connectivity to the outside web. And these are the things that Amazon and ebay do really well. So they've got the on site advertising going and they've got the audience extension going. So when they leave the site, they're very clued up about their audience and who they are and the lookalike audience. So you can see the importance of retail media on site is not just about having sponsored products on your site and you're done. It's about, it's just the focal point for the entire ecosystem to build from. Because ultimately your website is your piece of real estate and then you want to control everything while people are on there, but then you also want to make sure you're keeping track of people when they leave your site. And so you have to build now this fairly comprehensive ecosystem of technology in order to compete with these bigger guys. Okay? So that said, so we've established that Amazon and ebay are the market leaders. And spoiler alert, if you haven't already realized this, Amazon is an ads business, you know, not a retailer. You know, they were a retailer once upon a time. The retail aspect is the Trojan horse. So Amazon is building fulfillment centers that are the size of cities out in the western suburbs of Sydney. This is all public knowledge, but they're going about it nice and quietly. They're not disturbing too much. They're making real big inroads yet. Because everyone's like, oh well, there's still only a small percent of the online market share for now. So what we're predicting and what the analysts are really predicting is that Amazon are going to own roughly 30% of the domestic retail market within five years, you know, give or take. But what that means is that because of their sophistication in the ads side, they're probably going to own at least 30 to 50% of all the ad revenue. Because they're very good at explaining the value of the ads that they produce and the ads that end up kind of branching off Amazon to bring people back onto Amazon. So the value that they provide to brands is significantly better than most Retailers around the world because of the amount of data that they have. Right.
Nathan Bush: And is that for stocked products as well as non stocked products? Is that general advertising or is it only product based advertising?
Brad Moran: Yeah, it's probably advertising across the whole. So once Amazon generates that critical mass of traffic, it will start to become the discovery point like it is in the us. So first point is Amazon's using discovery tool and that's discovery is the first place where you influence and if Amazon can convert because they've got better shipping or Amazon prime, which is obviously a very, very big business as well. So the thing with Amazon is they have so many different touch points in your life now that they're building an ecosystem much like Apple did. So if it wasn't just the Apple device that got you, it was the itunes, it was in the iPad, the Mac, all the different touch points that Apple had in your life, it was very, very hard to get out of their network. Once you're in it, Amazon's no different. And so when we put that timeline on, we were working back and if we say one more statement before I get into the timelines, like once Amazon has that magnitude of ad spend which is basically pure profit, what that's going to do is just continue to fuel its explosive growth. So they're going to continue to lower their prices and cut Australian retailers off one by one by offering faster shipping, better value add and lower prices because it's going to be subsidized by the ads business which is so successful.
Nathan Bush: Can I just remind you that we're here to inspire people to create their e commerce business.
Brad Moran: Look, I'm just. That's why I said hang with me for a minute, all right? No, no, it's all making sense.
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Nathan Bush: tasters, discretion was key.
Nathan Bush: During COVID their orders increased tenfold and made their delivery items hot property for hot hands. This is why they switch from padded mailer bags to Signet's own bubble mailer bags. And along the way, way reduce their packaging costs by 30%. It allowed Leakaloot to keep up with orders, save costs and stop the looting. Visit signet.netaublog to find out more.
Brad Moran: So if we think about what we've covered is Amazon's an ad business much like ebay, they're growing the Trojan horse over the next five years they will represent 30% of retail whether you like it or not. Maybe more, hopefully not more though. And they're going to capture a significant amount of that digital ad spend. So there's some of the facts which I got toe to toe with anyone argue with, right? I mean, I don't like it as much as the next guy because I don't like these international conglomerates coming into Australia and basically dominating the Australian market. I'd love to see the government put in as they do because government backed us, but I'd love to see the government giving subsidies to, you know, retailers like Woolies and Coles to adopt local technology like ours or dac, Amazon equivalents, you know, like they do in China. Right. It's, it's a whilst everyone looks at China and goes, you know, they're separate to the rest of the world. What China has done is they've, they've protected themselves from capitalistic massive conglomerates coming in and taking over their country, you know, so, so you gotta, you gotta respect that. And what they've done, difficult to do, but they've done it. So okay, so going back to the 12 month, right, so if we work backwards and say okay, 20, 27 is the, is D day, you know, without making it too dramatic. So if you want to compete with Amazon when it gets to D day, you've probably got to be competing with them for about two years prior to that. So now we're looking at a three year window and if you look at okay by year three, you've got to be, you've got to have a good technological retail media platform that touches both on site off data. You know, maybe they're getting into your in store merchandising as well because we see retail media is just, we're at like the 5% end of the big, big iceberg that is, that is retail media dollars. Like it takes about 18 months to grow a good digital program like ours. That's after you've signed the contract, right? So let's forget the 6 to 27 months, sign a contract.
Nathan Bush: The courting period.
Brad Moran: Yep, the courting period. It does take about 18 months and that's a good retailer. So I know that sounds like a long time, particularly for us. When I'm trying to sell our product here, if I'm trying to sell you, I'm trying to say, hey, we'll get you up and running in five days, we can. But the reality is it takes a while for your merchandising team, your management team and Your suppliers to all get in sync about how this is changing the core fabric of the business. So when you distill it down then, so you've gone, okay, you need two years of solid competing. It takes about 18 months to actually build this program. Really only leaves you with sort of 6 to 12 months to formulate your strategy. So what I meant by kind of calling the Australians in their 12 month window is not how you got to go out and compete with Amazon by the 12 month mark. You need to start thinking about how you're going to compete with what is primarily a tech company with an ads business that is just selling product like yours. Yeah. So unless you're at least thinking like them and thinking about how to combat them, you are going to be in strife. And even though five years sounds like a long time, it will come around like that. Like it'd be here tomorrow and you'd be like, oh, what happened? You know, 30% of my sales are gone. And maybe that's not a big number, but 30% is enough to erode all of your profit. So you're basically out of business again. Not to mention the headwinds that we're going to run into this year. Interest rates going up, product sales probably going down. We won't go there because we're trying to remain positive.
Nathan Bush: What a time to be alive.
Brad Moran: Yeah, it's a great time. So it's a great time to sell a business too because you can't travel, we can't buy a car and can't buy a house. So it's like awesome. So I've picked my timing really well. So a lot of retailers have the choice to do, right. They build something themselves, they buy something or they partner with someone because it's very, very difficult to do themselves. You know, and if the likes of the Woolies and Coles and Target and Tesco and Sainsbury's and Argos and Bed Bath beyond, like the biggest retailers in the world, work with us. It's no shame in saying actually we need to partner with someone rather than try and do it ourselves because at the end of the day, there are about 50 different tech platforms you've got to worry about in the next five years. And this is just one of them. So you can't build them all. The reality is no one's left to buy and build. Well, that's very dangerous. I wouldn't advise that because you're already five years behind and if you are
Nathan Bush: establishing it as a retail channel, you've got to invest somewhere because there's no product, there's nothing else. So you've got to, if you get the technology right and you get that up and running quickly, then that seems to be the natural place. So you've obviously painted a really compelling picture for what the future of retail media looks like over the next five years. And great success. Mention some of those clients that you're working with.
Nathan Bush: You cashed in last year with Publicist
Nathan Bush: group for over $200 million is what I read. What made you cash in at that point?
Brad Moran: Wouldn't you realize that money isn't everything in life? A lot of our investors certainly wanted the unicorn. Everyone does. When investors look at you in tech, they think you could just be like Canva or you could be like Afterpay or like everybody else. But the reality is when you realize that you're a B2B enterprise level software, it's a slow growth. You know, you kind of have. We had explosive growth for a while, but then it's a slow burn because the B2B enterprise level market is quite small. So our total addressable market is small
Nathan Bush: deals. I could imagine.
Brad Moran: Oh yeah. I mean it took two, two and a half years to get the Australian guys on board, so, you know, but that's what it takes. But once you get them, the next ones become quicker. But like health and family have to become priority again at some point. And you know, we think of the acquisition more of like a relay race where we've just handed the baton on to Usain Bolt. Now it's like, you know, obviously every, every founder wants to build a legacy and build a great company that becomes bigger and better, but at some point you have to go, well, are we the best jockeys? You know, are we the best guys to continue to ride this business? And you know, there's more around the sort of founder, sort of education. But what we realized about starting a business when you're a founder is timing is critical. You know, statistically, Silicon Valley say it's about 55% of your success. Success metrics, timing. So if you get a great product too early, not going to make it, too late, not going to make it. But what they don't talk about is the exit also being about timing and what I would call the chasm of death, which they talk about a lot in the first two years of our startup. There's a chasm of death when it comes to being acquired. So, you know, we kind of reached that. What women? This is just me talking. I'm happy to be corrected. But what you find is that a lot of founders don't build their business going, who's going to buy it? You know, they just go, we'll just build revenue, build customers, and someone will buy it. Right? Or will. Ipo. Ipo. Good luck with that. Two years of your life gone. Hopefully. Hopefully your stocks are still worthwhile by the time you sold because you're going to get escrowed anyway and you're going to get locked in. So what people don't talk about is the chasm of death when it comes to actually selling your business. And what we quickly worked out was that kind of that 0 to 250 million AUD mark, which is around a couple hundred million American. There are a lot of business that will take a risk on buying you and a punt, right? Obviously those with big balance sheets. And then once you get over 200 million, there's this sort of chasm of death or no man's land, where you're not quite big enough for Google to buy you or Microsoft or Amazon or any of these big guys. Because what they want to buy, and again, I'm not their corporate development teams, but what I can assume is they want to buy established businesses that they don't have to babysit because they're too big and too important and they would rather cut a $5 billion check for a magento, that's a working, established business
Nathan Bush: and put a sticker over the top of it.
Brad Moran: Correct. Then rather than spend 300 to $500 million on a business that still in its maybe fifth, sixth, seventh year, still got a bit of risk associated with it because all it does is distract them. So it's not worth the distraction. So when you think about, forget the money, it's all about distraction for a business. Because the first thing you do when you get acquired is you get integrated into their business. So how many resources do they need to put around your business to focus on making it a success? So you end up with this, okay, do we keep going? And one answer is, okay, if you keep going, cool. Our revenues kept growing the way we said they would, and our revenues are much more valuable now than when we got acquired. But revenue isn't always linear to the value of your business, because what happens is you have these windows where acquirers come and then those windows close. Because in retail media, we had a very cool product. We've got saturation of a market in a very short period of time. And we built kind of the flavor of the month, right? We were the flavor of the month. Retail media Coming out of the back of COVID it was like cream on top of the cake. It was like the place to be. But what we also realized from previous experiences is that buyers come and they go, okay, we need to buy something. Now if they don't buy you, they'll buy something else, or they'll build something else, or they'll partner with someone else. But either way their strategy keeps going. And so, you know, there's a lot of reasons why we sold, but when you distill it down into kind of three core components, one is we really like the buyer. We thought that that would do great by our business and great by our clients and our staff. And we've had 100% retention of staff and clients since we got bought. So that's a pretty good sign, I guess. Yeah. So we were pretty happy with the decision that we made. And kudos to publicists for making our lives easy. The second thing is, you know, don't be greedy. For us, that was enough. It was more than enough. And the third reason which I touched on is that there was simply no guarantee is that if we made our revenue a multiple that was worth 400 or 500 or 600 million, that someone was going to come and pay that money. Because not many businesses have a balance sheet where they can just go, here's $500 million for a business or 600 or 700. There are very, very few businesses that can actually pay that sort of cash. And so, you know, so we made an educated decision to go, you know what, we can be selfish and try and double down and go for another five years trying to build this thing into a unicorn at the risk of blowing all of it because we're competing against Google now, competing against Microsoft. You know, you might have heard of these companies a little bit bigger than us, just a little trillion in front of their marketplace.
Nathan Bush: They don't roll off the tongue like Citrus Ad does.
Brad Moran: Exactly, exactly. Homegrown talent, mate. Brisbane Place. Aussie, Aussie, Aussie. Come on, like support the Aussie tech community. So, you know, if nothing else, I'm going to go down the patriotic line. But it is. We looked at the headwinds of what could be. We're in the middle of COVID too. So we saw that Covid helped us a bit, but it also hindered us a bit. So we weren't willing to put investors money on the line here and take a self risk on what could be.
Nathan Bush: Yeah, it makes total sense.
Brad Moran: So that's why we do it.
Nathan Bush: You've given great Insight there. Thank you for taking us on that journey because it's fascinating to see the decision making process for a situation that many of us will never be in.
Nathan Bush: So I think that's a very timely question.
Nathan Bush: You mentioned there that money is, you know, you can be too greedy. That money's not the answer to all problems. So my question to you is what's next for yourself and for Citrus ad?
Brad Moran: So Citrus will continue to keep growing and we'll keep obviously expanding as quickly as we possibly can because we still know it's a race. We like to think we have not the best product, we have a great product, but we also have a good ethos around how we go about treating our retailers. So a lot of ad tech companies that came into our space still operate on this publisher, advertiser kind of mentality. Whether you retailers is just publishers, you know, you just one place where we can place our ads. But ultimately we work for the brand because they're the ones that give us the money. So we kind of like our kudos is like we put the retail in retail media so we focus on the retail out, which is a lot better, a lot stickier. But the company is obviously going to grow with a muscle of publicists. So it's a nice place to work. Like you've got the sort of startup mentality and flexibility and nimbleness and attitude, but you've got the balance sheet of a multinational public company that's probably one of the most successful businesses of the last 20 years. So it's a nice place to be right now. Good place to work, good partner to have. So the business will keep going. For me, my passion now is to distill the last 12 years in particular the failures, a significant amount of those, and start to work with the startup community a bit more about educating, being a coach, helping them, you know, sort of putting together a. I've already got a book with 10 chapters and 100 bullet points in it about what not to do and if you come at each stage of the life of why you would need to raise capital and how you recruit and how you get your first customer and amazing what smoke and mirrors you need, all that sort of stuff. So for me, my passion now is to sort of go back and see if I can help the founder community. And I was even sort of thinking about like what I would call a business or what slogan I'd use. But it's a, you know, it's something came to me this morning, funnily enough, about turning unicorns into horses. You can train a horse. Unicorns, you know, they're called unicorns for a reason because they're one in a. Well, they don't exist technically.
Nathan Bush: Oh, look, I think you'll bring incredible value to the, the founder and the startup ecosystem. And it's like, you know, we're so lucky to have you sharing with us today. That hour was just amazing. Hour to hear the story of what you've built and also the lessons you've learned along the way. So I can't imagine what it's like when it's packed into a book or a course or a coaching program. So really looking forward to bringing that.
Nathan Bush: Brad, if we've got retailers or brands
Nathan Bush: listening to this today and wanting to know more about Citrus Ad, what's the biggest best way for them to get in touch and find out more?
Brad Moran: Well, I guess you've always got Google. We do borrow a name, don't click
Nathan Bush: on the sponsored links.
Brad Moran: Yeah, yeah, yeah, yeah. We're, we're pretty well known in Australia now. A lot of retailers would know of us. I think the best thing for me to say now is to like, we've dealt with a lot of retailers in Australia probably a little bit ahead of them being ready and us being ready. To be fair, like, I don't think we were ready for where they needed us to be. I think that we've come a long way in five years. So I'd say the conversation we would have now would be very different to the one we would have sort of three or four years ago. But look, I mean, just have a conversation like we're more than happy to, I'm more than happy to come visit every retailer and talk to them about retail media and if nothing else, just talk to them about what we've seen from 95 other successful enterprise businesses across the globe, you know, and if retail media is not right for them right now, then that's fine. If they decide to go down a different technology path, that's also fine. Like the good thing about me now, Well, I shouldn't say this working for publicist, but I'm a little unbiased. Right. So obviously I want to see my company succeed, but I don't have to. Like, I don't go into every single meeting now as a, this is life or death. Yeah. But as a founder you definitely do when you're on the sort of, you know, pre acquisition stage. But now I'm happy to tell a retailer if we're the right solution for them or, you know, with the right people. For them. But I can tell them it's so much more than just a tech tech partnership. A lot of our clients now we end up building software development teams for. Yeah. So, you know, we will have a, a tech contract which is ad serving and then we'll have a services contract which has basically helped us solve a lot of our technical problems by building software for us. So look, Citrus Ad, you know, go online, type it in. I'm sure you'll find me or it somewhere. Hit me up on LinkedIn. Happy to chat to anybody anytime. Founder. Starting your first business, whether you're a retailer with $10 a month worth of sales a month or it's a very
Nathan Bush: generous but dangerous proposition.
Brad Moran: It is, it is. But I'm happy to, I'm happy to, to do it. You know, of course, jb, hi Fi and the rest of them, they say when I talk to. I'm happy to talk to those guys as well. Yeah.
Nathan Bush: Great stuff.
Nathan Bush: Brad, thank you for joining us.
Brad Moran: Thanks for having us.
Nathan Bush: Like I said, I was lucky enough to meet Brad a few years ago, but obviously the world and the opportunity of media in retail, retail has moved so quickly since then and it was really great to hear where Citrus Ad and Brad are at now. Here are the three biggest takeaways that
Nathan Bush: I took from that conversation.
Nathan Bush: Number one, the power of that first row. I think we all inherently know it, but when Brad says that they see the first row of product on a category or a subcategory page result in 50 to 70% of the clicks and 80% up to 90% of all sales come from the first page. That's a huge proportion when you hear it in those numbers. So even if you are not monetizing it through ad networks, you want to make sure that these rows are populated with product that is one, available and two, profitable. Amazon creep. Brad painted a detailed, if not a little grim picture of Amazon in Australia. His prediction, Amazon is going to own 30% of the Australian retail market within five years. Now, whether they are a direct competitor to you or not, this will have an impact from where customers start their search to the shifting fulfillment expectations. So really great idea to get ahead of the game by differentiating your product and your brand right now. And the third one, exit timing. Brad spoke about the chasm of death for planning an exit from your business. And it sounds like he had this point mapped out a long time before he got to it. Not too small, not too big enough to be able to hand it over to someone who can boost the growth and the part I really loved. He knew when it was time to
Nathan Bush: reprioritize health and family.
Nathan Bush: Your business doesn't have to be you forever. If you don't have an exit strategy in your business, now's the time to
Nathan Bush: start thinking about it.
Nathan Bush: To get the highlights of today's Episode episode, head on over to addtocart.com and sign up for our free newsletter each Tuesday. We will send Monday's episode summary links and discount codes for you to go next level on. And if you're looking to explore your next e commerce opportunity, come and visit us at E Suite. We're a dedicated e Commerce talent agency connecting the best e commerce talent with the fastest growing brands in Australia. Australia. Head on over to esweettalent.com where you can download the free e Commerce Salary Guide and sign up to our weekly e Commerce job emails. Thanks for listening and until next time, keep those customers adding to cart all right, all right. I know you're probably sick of me banging on about it, but a really quick message to say that the 10 week E commerce accelerator program kicks off on the 14th of March. So soon. Registrations are still open. And don't forget the discount code for Add to cart. Listeners use the coupon code Add to cart all one word to get $200 off your registration. Head on over to learn esweettalent.com that's learn esweettalent.Com to secure your place today. All right, I'm off to practice my teacher voice. I'll see you in there.
