Our 2025 Predictions

🧠 Takeaways: Major ‘24 predictions

Making my 3 big bold predictions for 2025.

1. AppLovin eats everyone’s ad budget that doesn’t go to Meta.

2. Ecom rips in 2025 on the back of good Macro.

3. The first great AI embarrassment happens as everyone gets mega-bullish on AI.

+ Keeping myself honest on my 2024 predictions.

LBAB Community: Let’s Revisit My 2024 Predictions

I strongly believe that if you’re going to talk as much as I do, you have to hold yourself accountable. 

So let’s keep me honest on what I got right and wrong in 2024.

1) The “Haves vs. Have-Nots” Valley will widen. ✅

The biggest stocks/brands got bigger. Everyone else clawed to survive.

2) Funding will return, but not in droves. ✅

3) M&A, Bankruptcies, & Shutdowns will Rise ✅

If you want a good rundown of all the deals that have happened in consumer this year check out Fan Bi’s Twitter. It’s a great running list of all the deals as they are happening.

What I got right:

✅ Tupperware finally went bankrupt.

✅ Shopify crossed $1B in Payday loans.

✅ Klaviyo rolling out managed services didn’t impact agencies.

✅ Facebook/TT shops boosted Shopify’s Stock not killing it.

✅ GA doesn’t matter anymore.

✅ Loop acquired an Order Tracking provider (Wonderment).

What I got wrong:

❌ Allbirds still isn’t bankrupt.

❌ Consumer Credit never broke and the recession never really hit consumers hard.

❌ TikTok got banned.

Jury’s Still out:

- Sleep Number, Wayfair and Overstock to go Bankrupt.

- Clarity will be the 2nd over Shopify Plus app in this year’s report.

Let’s Predict 2025

Here are my 3 big predictions for 2025 and where that takes us.

1) AppLovin becomes DTC Ad platform #2

Disclosure: Because of the beliefs shared below I’ve decided to invest in AppLovin before writing this article. This isn’t financial or business advice. Do your own research and test new channels as it makes sense for your biz.

AppLovin will eat all of DTC’s advertising budget that doesn’t go to Meta.

• The desire to be less dependent on Meta is REAL. 

• TikTok is banned.

• Reddit is popular but has the same targeting difficulties as YouTube.

• Google is extracting cash while battling ChatGPT.

• No one has nailed prospecting on Direct Mail.

• TV requires too much creative work to launch.

The ecosystem is ripe for a new channel, and AppLovin is giving me Meta 2016 vibes:

• Bad ad buying platform with limited inventory 

• Most serious advertisers don’t take it seriously

• Immense scale + crazy active user base.

Once the case studies for 1-2 big brands come out, everyone will test it more. Everyone will talk about it more, and the avalanche will begin.

I don't believe that it's right for everyone's biz. Like any marketing channel, you need to test it and think about how it fits into your Marketing strategy.

It’ll be interesting to see what works and how the channel evolves once the floodgates open next year, but with everyone talking about it, everyone will want to try it.

Takeaway: AppLovin is the NEW DTC Marketing channel.

2)  eCom is going to rip in 2025

The economy is going to boom again in 2025. The past 2-3 years, we’ve been clawing at growth, and consumer spending was hard earned. When you look at the current economic outlook, people are feeling much better.

There are 3 major factors driving the boom in the eCom-onomy next year.

#1: The Fed will keep cutting rates.

We'll come into the year with Federal interest rates ~4.25%-4.5%. The math is simple. The lower the rates, the more credit everyone will have access to.

Fed interest rates are Banks/Financial institutions “COGS” equivalent. The lower their COGS are, the lower their standards will become to loan out money.

This will manifest in:

• Bigger credit amounts

• Approving riskier customers

• More consumers getting access to more credit

We can argue the overall good vs. bad for society, but for our industry, that’s a great thing.

People will go back to buying more discretionary items. 

They’ll still want deals. They won’t be flush with cash, but they will feel like they have more breathing room. It’ll still need to feel like they’re getting a great deal, but the act of buying won’t be as painful as it’s been.

#2: Consumers feel rich on Stocks & Crypto Highs

When Stocks and Cryptos are at all time highs, people feel like they have more money in their pockets, even though they don't.

Purchasing heavily increased during the Meme stock craze, and we’ll see that repeat with a fresh batch of Crypto millionaires and wealthier stock owners.

This will fluctuate with the market, so we’ll see bounces throughout the year, but the average American thinks “Market Good = Economy Good.” 

#3: Anti-Chinese Operating Biz Politics

TikTok bans, Tariffs and the closing of Section 321. 

The good or bad is TBD, but the next 2 years will most likely be marked by a reversal of cheap, addictive Chinese consumers' bizs.

It’ll start with the TikTok ban, but I’m guessing we’ll see Section 321 (goods <$800 shipped in from developing nations don’t get taxed) swept in with the proposed Tariffs. 

This will have 2nd and 3rd order effects, e.g., many products sold on Amazon and marketplaces will get more expensive. Race-to-the-bottom brands will need to raise prices or leave the market.

If TikTok, Teemu, and SHEIN leave the ecosystem, that will take billions in advertising out of the market, reduce CPMs for the rest of us, and increase consumer wallet share to more expensive items.

Then, prices will naturally inflate. Tariff costs will mostly pass along the cost to the consumer as they shift their spending to higher priced items. They’ll probably buy fewer expensive goods. 

The economists will have to counterbalance this policy against inflation increasing again, or we’ll have to repeat the interest rate cycle, but assuming there is enough demand at higher prices, we shouldn’t have runaway inflation again.

Takeaway: Macro looks promising.

3) The Great AI Embarrassment

There will be 1 great AI embarrassment this year that sets adoption back a couple years, but it will be necessary for the space to evolve. 

All I’m hearing from entrepreneurs is how useful and excited they are about AI. 2025 is the year it gets meaningfully rolled out in their bizs.

I do believe AI is getting to the point where it can be productive and useful. Kind of like a jr. employee that learns quickly with a lot of training.

That confidence will translate to bigger brands using it, which always ends up in some sort of gaffe for that brand. The AI will hallucinate or do something that significantly harms perception.

The media will pick it up and have a field day with it. (They need something to talk about after the Jaguar rebrand.) And it will shame every team into being incredibly cautious about using “AI” in anything.

These happen once every tech wave. 

The best practice: don’t adopt the new technology in a critical/slow-moving area of your biz (Finance, Supply Chain, Security etc.) and constantly test and iterate in small areas that won’t kill your biz if something does go wrong.

Takeaway: Someone will get embarrassed by their AI this year.

____________________________________________________________________________

Final Thought

I think we’re on the other side. It seems like we really did hit the soft landing that was promised. I could be completely eating my words by March, but the economy didn’t break. 

People are still employed + consumers are confident about the future. We never hit the gnarly point where bizs shut down in masse, people lose their homes etc.

For bizs that didn’t survive this, I completely understand. The past 3.5 years in this game were so much tougher than my previous 6.5.

The number 1 reason I’ve heard why brand owners are exiting this year is they’re mentally exhausted and done. They want to get out of eCom. They’ve built successful bizs, but the toll it’s taken on them across the board has been enough, and they’re ready for something new.

While it’s always sad to see people leave the industry, this is good. It’s a natural market correction cycle we want to see. It’s what prevents a crash.

My last prediction is that this will continue: more founders will give up their eCom bizs in 2025. 

Now that Founders expectations have normalized to market conditions (significantly lower multiples, not a lot of deals actually getting done), we’re going to see more stores wind down next year.

Not a ton, but a decent amount who realize they’d be earning more if they worked for someone else or in another industry.

While this isn’t the rosy outlook I’m sure most of you were hoping for, I love it. When people leave the ecosystem it means 1 certain thing. 

The resilient bizs who survived will thrive.

The brands that spend big on advertising and go into attack mode during recessions come out as category leaders for the next 10+ years.

After operating through this recession first hand, I believe the real golden nugget powering that insight is “What doesn’t kill you makes you stronger”.

You have just fortified your brand against 3 once-in-a-lifetime events that happened in back-to-back-to-back years.

If you can survive all of that, your biz is a Gladiator. 

I don't want to jinx us, but it's pretty hard to believe we’ll have a 4th once-in-a-lifetime event in a row.

So if we get hopeful for a moment and believe the economic data we’re heading into boom times. If the economy is stronger, consumers are more confident, and if you’ve optimized your brand to a tee, you should boom.