On Bundles And ESPs

Jim Barksdale, co-founder of Netscape, is credited with saying ‘there are only two ways to make money in business. One is by bundling. The other is by unbundling.’  That casual-sounding insight is like a high-powered X-ray view for the changing fortunes of businesses — especially, it seems, digital businesses. 

You could argue that Apple’s strategy has been bundle-centric, controlling the whole experience top-to-bottom. From the first Mac (hardware + software, bundled), to the iPhone, which eventually “bundles” all the way down to Apple chips. 

By contrast, Apple’s old nemesis/benefactor Microsoft was ‘unbundled” (or “part of the bundle”) starting with the OS for the IBM PC. Today — still unbundled. If you use ChatGPT, they’re paying Microsoft for the Azure data centers running things.

Ben Thompson of Stratechery has used the bundle/unbundle X-ray repeatedly and insightfully to make sense of myriad sectors, from content to chips to networks.

Focusing that X-ray on the world of email and email marketing is kind of thought-provoking.

I recently had a long and interesting conversation with Melanie Balke, CEO of The Email Marketers agency, on The Future Of Email podcast.  Among other things, we talked about personalization and segmentation quite a bit. I was a bit puzzled by how at-ease and non-stressed she was about those topics. Then the light went on when Melanie mentioned that most of her customers operate in the Shopify-plus-Klaviyo ecosystem.

I’m no expert in that ecosystem, but in a nutshell…Shopify (turnkey ecommerce) plays very, very nicely with Klaviyo (Email Service Provider aka ESP).  In fact, Shopify likes Klaviyo so much that they made a $100M strategic investment in the company!  The real point here is that customers using that ecosystem are basically using “a bundle.” Customer records, purchase data and other digital stuff flows from Shopify to Klaviyo and back.

I had another Future Of Email guest earlier, a great guy named Tyler “Sully” Sullivan, founder of DTC innovator BombTech Golf.  BombTech makes and sells golf clubs.  Sully’s take was that email was absolutely pivotal in his success growing the company.  BombTech happens to use Shopify and Klaviyo — and I (by strange coincidence) have/use/like/buy BombTech golf clubs. 

Last week, I got a BombTech email — subject line “Matthew, Father’s Day Sale Is Here!”.  It pitched a sale on their hybrid clubs.  I don’t have any hybrid clubs.  Coincidence — or a tight integration between Shopify and Klaviyo driving a nicely targeted message?

In a moment of digital weakness, I clicked the button and put the hybrids in the shopping cart.  I didn’t click “Buy” — it was just digital window shopping.  But I wasn’t entirely surprised to get another BombTech message the next day - subject line “How about this Matthew??”.  The message pitched their 60-day try-the-clubs policy — just the thing to push that momentary digital weakness into a purchase, right?

This is the kind of high-touch personalization and segmentation that Melanie Balke does with/for her clients, and the tight links between Shopify and Klaviyo are key to making it all work. Shopify+Klaviyo customers get the benefits of that effective bundle. Melanie startled me because she assumed that ESPs generally have visibility into transactions and browsing. The reason for my puzzlement: this level of bundle-like interaction (in this case, ecomm/email) isn’t as common in the world of email as you might expect.

I’ll go out on a limb and say that most of the email marketers and companies I’ve interacted with in the past few years don’t have anywhere close to this level of tight interplay between their email systems and their other key systems, like ecommerce and websites. 

I’ll hang off the end of that limb and say, the bigger the company, the more likely they are to be fighting never-ending “data Balkanization” skirmishes because System A and System B and ESP X don’t really play that nicely together.

Some of this lies in the market dynamics for email systems.  When I rejoined the email market, I was pretty stunned by the number and diversity of ESPs — at least 160 of them in the initial tally!  I understand it better now; email is the great equalizer channel for companies large to small in any vertical yada yada please open your email hymnal to #101.  It’s a big market built on a relatively open set of standards.  New ESPs are still a thing.

But while there is much to like about that open playing field, it is perhaps too open and too fragmented. In terms of the bundling/unbundling thesis, there’s less “bundling” than marketers need.  Far too many email marketing platforms aim to do everything, as if the email channel is a complete marketing end unto itself.  Evidence? Why is the interplay between Shopify and Klaviyo “unusual and cool” — shouldn’t commerce and marketing always work together seamlessly?

There are many smart folks involved in these many ESPs. They’re doing the job a technology vendor has to do — solving customer needs in a scalable way.  But the ‘customer base’ of marketers, email marketers and email senders is — how do I put this nicely — a very, very diverse lot.  You have millions of SMBs who believe (rightly) that email marketing should be part of their business.  They want the easy button — email name goes HERE, emails go out THERE and THEN.  If you listen to them, you put a relational database in for a foundation, bolt an MTA (message transfer agent) on the side, craft a gorgeous UI with a template editor and start listening to the complaints feature requests that roll in.

That’s a bit flip, on purpose, to make that point that starting down that looks-obvious road looks a whole lot like building an all-in-one bundle.  While I haven’t dissected 160 ESPs top-to-bottom, having perused the docs, UI and websites of at least 100 my takeaway is that ESPs — for the most part — try to do all of the jobs (in a bundle) that the market thinks it wants.

It’s really tough to start down that road and end up in the land of Unbundled Functions, where your platform does not hold customer records, where customer transaction data isn’t a foreign-key mess, and so on.

Email doesn’t actually work best for business as a whole in-isolation (see BombTech story above), but because email marketing is so darn effective (cough free to send cough cough), the vendor landscape is rife with tries-to-do-it-all bundles. The peculiar market dynamics of email as a technology have trapped both sides, marketers and vendors alike. 

From the sidelines, it looks to me that the vendors who build/evolve/acquire their way out of the all-in bundle are starting to get market advantage.  I’ve been intrigued with MessageGears’ bold bet on a datastore-agnostic approach, which seems to be working for them.  Zeta Global’s rebuild around their Boomtown acquisition has been pushing them into the Forrester upper-right corner at a terrific clip, too. 

My secret email decoder ring will probably be revoked for this closing statement, but I find myself thinking that the mental model built into “ESP” is making less and less sense in a multi-channel, multi-touch, multi-AI, multi-darn-near-everything world.  I still think email is the most interesting digital channel going, for many reasons, but putting it at the front of the acronym suggests a bundle that you might not want to carry.