Empires tend to overextend themselves. Nike is a massive company that has expanded so far beyond its roots to create internal complexity and the need to be all things to all people. It has defined its customer base as all of humanity since, apparently, we are all athletes. A reorganization for Nike to be less focused on specific sports and instead mimic typical broad-brush retailer categories was a bid for efficiency.

In Rogers’ analysis, this is a classic example of a company serving shareholders rather than staying true to its roots to serve athletes. Nike has left itself open to upstarts in these sports, even in running, which is where Phil Knight and Bob Bowerman started the company. As Rogers points out, a running brand like Tracksmith speaks more to runners as Nike looks to appeal far more broadly to people who will wear running shoes to go on errands. The latter is a bigger TAM, but you gotta dance with the one you brung.

Competition is everywhere. Empires also tend to fall based on external pressures. The defining external pressure on Nike that Rogers details is the democratization of the modern economy. Nike is not just competing with Adidas, it is competing with all kinds of upstarts that can tap into similar supply chains that were once one of Nike’s core competitive advantages. Its high-end marketing is now in competition with anyone with an iPhone. And culturally, we are in an era when authenticity is highly valued rather than high production values.

DTC can be a trap. There was a period when the idea of being a wholesale business was seen as a dinosaur strategy. Everyone wanted to go direct. The pandemic gave all kinds of false signals to companies – where are all those exercise mirror companies? – and the normalization of habits, and the end of zero interest-rate policy, has turned these bets bad. For Nike the abandonment of wholesale partners meant competitors could fill the void and literally take the shelf space Nike abandoned.

What’s more a DTC strategy can often commoditize brands as the shift to “demand creation” means pouring tons of money into getting distribution. This led Nike to shift from its iconic storytelling to the digital marketing game, which is mostly direct marketing rather than brand building. The internet is built for price comparison. Jeff Bezos rules internet retail with a maniacal focus on price and convenience, while Bernard Arnault plays an entirely different and mostly offline game.

Brands aren’t built off performance marketing. Most DTC companies are really performance marketing companies. The big flaw of their models was an overreliance on the “customer vending machines” provided by platforms. Many of these businesses didn’t work as their CAC went up. As Joe Marchese said on PvA last week, culture is on sale, as companies pivot to performance and ignore the brand building that has always built durable brands. A DTC strategy is meaningless without distribution, and even a brand like Nike needs to pay for shelf space. That means getting hooked on performance marketing from giant platforms.

“The brand team shifted from brand marketing to digital marketing and from brand enhancing to sales activation,” wrote Giunco, adding that “Nike invested a material amount of dollars (billions) into something that was less effective but easier to be measured vs something that was more effective but less easy to be measured. In conclusion: an impressive waste of money.”

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How AI will impact publishing

This week, we are wrapping up a series on The Rebooting Show that examines the role of product at a time of distribution and monetization shifts. The twin themes that emerged are that publishers are increasingly focused on direct relationships with audiences and are in a back-to-basics mode of focusing product resources on critical business objectives, which often rely on loyalty. And the looming question: How will AI be used to make these businesses more effective while not losing their distinctiveness in a sea of artificial slop.

Brian Alvey, CTO of WordPress VIP, discussed with me how AI’s impact on publishers’ day-to-day operations will be felt first and foremost on mundane tasks that end up eating up a lot of resources. The early efforts to embed AI within the publishing process were predictably ham-handed. Using ChatGPT to create AI slop is hardly innovative – and unlikely to be very effective. I’m very skeptical of creating much value out of using AI to churn out tons of aggregation newsletters, for instance.

The most immediate opportunities in the content process lie in areas like tagging, inserting links to related articles, testing headlines and the like. As Brian warns, there’s no point in using AI in a way that eliminates the competitive advantage of having a distinct voice.

Some highlights from our conversation:

On the site as a requisite for an independent path: "If you want to be around in five years, I think so. Don't you like why would you has nobody ever learned that building up and like no offense to any of these, you know, what I call bastard gatekeepers that take your audience away from you."
On where AI’s impact will be felt: "People probably overestimate the amount of things that AI is going to help them automate of what they do today. They underestimate how many things they're just not doing because it's so hard that AI is going to let them do."
On AI’s use within the content creation process rather than creating content: "Some parts of that [process] can absolutely be handled by modern generative chat, GPT-style, LLM AI."
On distinctiveness in an AI era: "Be remarkable, No. 1. That's how you'll stand out from a sea of junk."
On being product-minded vs a tech company: Publishers “should be product minded. They are creating a product for people to consume. They should have product talent. If you are the New York Times, you have a thousand product people. If you are somebody else, you have 10. But no, they shouldn't be a technology company."

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The cautionary tale of Nike

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