Happy Passover/Easter!

TLDR:

Happy Passover/Easter!
Shopify’s Thumb on the Scale
Tool: Weblfow

Happy Passover/Easter

For all who celebrate hope you are enjoying. I’ve been down at the Jersey Shore this week catching up with family and planning for an incredibly busy summer. If you are celebrating Easter today hope this is a nice break from your day if you need one.

For the 950 of you sticking with me, I appreciate you. Today I want to dive into a topic I’ve been thinking about for a while. How fair is the Shopify App ecosystem?

Shopify’s Thumb on the scale

Shopify has always talked up how much they invest in their partner ecosystem and how they are an ecosystem-driven business. I’m not disputing that. From the 7k+ Shopify apps, to thousands of agencies that support Shopify businesses it’s definitely a net positive for eCommerce and the economy as a whole. But there are a couple practices I’m conflicted about as a builder in the space and investor in the stock.

1. Launching their own apps as market leaders.

2. Favoring their App store rankings.

3. Investing in specific apps.

1) Launching Competitive Apps

Shopify has always been releasing native features that started as 3rd party (3P) apps to help increase the rate of adoption for core experiences. Apps like Reviews, Email/SMS, Ad feeds. It’s always been a part of their Product MO.

This is part of the ‘platform game’ and something all players sign up for when they build on top of a platform. The core platform exposes APIs that allow developers to build custom experiences or fill feature gaps for the platforms customer base and charge a service for it.

Shopify’s line has always been that they are building these competitive native features for all Shopify Merchants and mostly focused on enabling the long-tail entrepreneurs who are just getting started. The brands the 3P developers didn’t want to focus on.

But something has shifted as Shopify has evolved.

As we shared in the Top 100 Shopify Plus report, Shopify Reviews, Collabs (Influencer), and Inbox (Support) are all Top 3 apps in their respective category for SHOPIFY PLUS stores. As the core audience focus becomes more and more on Plus stores, Shopify has continued to place greater emphasis on features and apps for Plus stores.

This is where the rubber meets the road. 3P app developers haven’t really cared in the past when Shopify launched a native app addressing a core shopping area and giving it away for free. The narrative has always been that Shopify builds the features for the small long-tail brands that the 3P apps don’t focus on anyway.

But what happens when that changes?

• Reviews has 6 major 3P players, but Shopify is the #1 provider in the category.

• Support has 4 and Shopify Inbox (only 1 year old) already is taking 3% Plus Market share (a meaningful amount).

Shopify has set its sights on the Plus segment and gaining as much brand adoption here as possible. It’ll be interesting to see how many more “core use cases” Shopify determines it must own to be successful in this next phase of its growth. And how much that impacts 3Ps.

2) Questionable App Store Results

I don’t have a big problem with Shopify launching it’s own Apps. Obviously I hope it never happens to one of my projects, but I believe it’s the game everyone signs up for building on a platform’s marketplace.

As an investor I’m all for it because it allows the core business to either capture more revenue at a higher margin, or provide a better/more robust feature offering to grow its market share.

What I can’t support is the platform leveraging its distribution power to favor its own tools.

Here’s an example from a screenshot I took today.

I’d love for someone at Shopify to explain to me how their native Email app with 3.8 stars on 961 reviews is the #1 organic search ranking for “email”, and is beating out Klaviyo (#6) which has a 3.9 star on 1,677 reviews, and Omnisend (#8) with a 4.8 stars 4,977 reviews.

Before we talk about # of installs, years live, and other algorithm factors: Klaviyo has 220k+ brands using their platform and the Mailchimp app has been live <2 years and has the worst rating & reviews of the players listed above but is outranking Omnisend.

There’s definitely something Shopify is doing on the backend to adjust the rankings past the run of the mill Search ranking algorithm. While the “Reviews” category isn’t obvious it’s still pretty bad.

Judge .me is at least the #1 organic ranking with ~10x the reviews of the Shopify native app and 5.0 rating vs. Shopify’s 3.6, but Shopify’s app still ranks above Loox with a 4.9 rating with ~10x the reviews as well. While the native Shopify app does have a good amount of store adoption, that’s still an extreme difference in the ratings to outrank a tool that has significantly more positive feedback.

I don’t know exactly what‘s going on with the Shopify app store algorithm, but my spidey senses are tingling. I don’t have enough evidence to accuse them of the same type of anti-competitive behavior as the Apple App store, but I don’t think Shopify adjusted the 3P developer commission threshold to $1m for Shopify apps out of the goodness of their heart last year.

Tool that needs to be on your radar

Weblfow. What? Why would you recommend another website builder on a Shopify newsletter? The most innovative brands are actually using it along side Shopify.

One of the core pieces missing from Shopify is easy to design fast loading landing pages. All the paid media experts know what I’m talking about.

Weblfow allows you to build beautiful, templated, super fast, mobile optimized LPs to send traffic to from emails, ads you name it. The real conversion winner. Yes they have eCom functionality as well, but that doesn’t come within a mile of Shopify.

3) Making investments/Acquisitions in Specific Players

This one I actually don’t have much of a problem with since it’s a normal business practice. My only point of feedback would be that they lean in more here.

Shopify has made 15 Acquisitions (most notably Deliverr, Kit, Oberlo) and 20 investments (most notably Affirm, Yotpo, Klaviyo). The reality is there are core shopping use cases where apps are going to be runaway winners and Shopify needs to ensure incentives across their top partners are aligned for the best use cases for brands. We’ve seen some of those examples play out already (Cough cough: Mailchimp breakup).

My rub is that they aren’t forthcoming about it. They make claims that it’s open and fair for all, but the anointment from Shopify is the clear advantage.

I’m not saying that Shopify treats investments differently from an operational perspective. I’ve worked for a company that Shopify has invested in (currently at Gorgias) and one they haven’t (Daasity, a Plus parter where Shopify invested in 2 competitors Yaguara and Triplewhale).

The partner programs an app participates in determines the level of treatment the apps get from Shopify. From what I’ve seen investment doesn’t change that. I also haven’t noticed any favoritism for investments getting into these programs.

But on the brand side knowing Shopify invested in a specific provider definitely has an impact on the final purchasing decision.

I actually want Shopify to lean in more here. As an investor I want to see them leverage the 80/20 rule and go all in with their top app partners. Invest in companies, enter them into special programs, open up the hood for them, give them the firehose.

I know it will temporarily cause some waves because it isn’t a very ‘Arm the Rebels’ type of move, but Shopify isn’t a ‘Rebel’ kind of company anymore. They’re $57B enterprise with 10k employees who want to land more Ent accounts.

Would Shopify still be the inclusive ecosystem anyone can build a big business on? I believe so. It’s just going to be tougher and more competitive. It’ll seem like they are playing favorites and the winners will win bigger.

I know it seems like a future not many are happy about, but it’s the market we’re already in. Competition is at all time high from the sheer volume of providers at this point, and the largest players raising war chests of money. The difference would be there wouldn’t be as much fragmentation with 10 providers all providing the same service.

🧠 The Takeaway

Shopify has built an incredible partner ecosystem, but how hard are they pushing their thumb on the scale?

1. They’re launching more native apps that are taking Top 3 positions in their categories. Event among Plus stores.

2. There’s something fishey going on with App store rankings.

3. Shopify invests in certain apps. Let’s not pretend like that doesn’t change things.

👷 What can you do about this?

1. Take a second look when on the app store. It’s not as reliable as it once was.

2. Push Shopify for more transparency on how the App store algorithm works.

3. Look to other sites like here for independent vendor reviews and honest opinions.

As always. Stay confident, connect with your customers, and keep crushing it.

Jeremy Horowitz

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