Hi friends,
Welcome to The ₿it Economy! I’m Rob, and each week I write a blurb about something I learned that’s broadly Bitcoin related. If you have thoughts, I'd love to hear from you. My goal is to shed a tidbit of info that I believe will get you thinking about the digital world around you. This week is part two of a recent investment thesis where I take a look at Bitcoin rewards company Lolli. If you missed Part 1, check out why Bitcoin is in the pole position for significant growth in the next decade. And per usual, If you know anyone who would be interested, please do forward this along, send them to the archive, or have them subscribe here. 👇
-Rob
Lolli
A Different Way to Bitcoin
Lolli, the bitcoin rewards startup that is arguably in the best position to take advantage in a post coronavirus world amid a looming cloud of an economic downturn. The company functions as a browser extension that allows users to earn a percentage of bitcoin back when they buy online products from select brands. Lolli’s mission is to make bitcoin more accessible to all, by simplifying the way people earn, share, and save bitcoin. By removing the process of logging onto an exchange and aligning their business model with something everyone is familiar with (i.e., online shopping), Lolli has effectively lowered the barrier to entry. Users get the benefit of being exposed to a new form of money (Bitcoin) while not changing any previous shopping habits.
There should be more than one way to get exposure to Bitcoin. Less than 4.5% of day traders who try will be able to make a living from day trading. So, it is safe to say most people should not spend their day checking charts or worrying about the bid-ask spread. Each purchase can net a user anywhere from 1%-30% back in bitcoin rewards. The value is immediately seen as they receive not only their order but exposure to a hardcapped supply digital asset. Lolli has found a way to position itself at the intersection of the consumer and the emerging bitcoin ecosystem. Therefore, Lolli is poised to continue to take the next decade by storm.
COVID-19 Impact on Ecommerce
Not surprisingly, while the world is in quarantine, there was a sharp increase in online sales and an influx of new customers in ecommerce. While online shopping has become a commonplace for millennials, the COVID-19 pandemic pushed the older generation to shop on the Internet too, many of whom took this opportunity for the first time.
In the first quarter of 2020, consumers spent $146.47 billion online with U.S. retailers, up 14.5% from $127.89 billion for the previous year. Since the beginning of the year, ecommerce sales are up 55% year over year, resulting in $434.5 billion in online spending, per Adobe. As an ecommerce focused company, Lolli's separates itself from its competitors by offering a novel rewards system. Rakuten, Honey, Ibotta and more all handle their business in terms of fiat. Once a purchase is made you get a set amount of dollars (or cents) back. That is it. There is no option to earn more. Whereas the bitcoin you receive from Lolli is subject to both positive and negative price fluctuations.
Physical retail is weighing down overall retail in the long term. This year, brick-and-mortar sales are projected to fall more than 14% to $4.184 trillion. More small businesses are turning to online sales to stay afloat. Per Shopify, merchant growth in Q2 year over year in North America was 56%. To establish an online presence, it may be favorable to seek out a partnership with Lolli.
Who is Lolli?
Lolli is a financial services company that has built a brand around fun, lightheartedness and the importance of sound money. They separate themselves from the exchanges of the world for they only make money when you purchase something that you want. Each week they run campaigns to boost awareness for their partners, their company and most importantly Bitcoin.
Founded in March of 2018 by Alex Adelman and Matt Senter, the two former founders of Cosmic (acquired by PopSugar, then Ebates) were intrigued by bitcoin and saw a reward-based business as a solution to its onramp problem. The company launched in August of that same year with over 500 brand partnerships. Since then the company has more than doubled in team size, brand partnerships and has built up a well-respected social media presence.
They currently only serve the U.S. market but have multiple partnerships across all ecommerce verticals (i.e., travel, food delivery, apparel and cosmetics). This gives them the ability to cross promote a wide variety of brands through outlandish marketing campaigns. Their blog is a great example of this. Post titles like "Stay Cool and Stack Sats", "Lolli's Memorial Day Weekend Stacking Sats Guide", "Lolli's Ultimate Mother's Day Gift Guide", "Top 10 Lolli Brands Helping With COVID-19 Relief Efforts" and more all highlight the diverse product offerings from their partners.
What's Next?
Expand Reach
Since it received seed funding from the likes of Ashton Kutcher, Michelle Phan and Jeff Morris Jr.'s Chapter One, Lolli has afforded itself some breathing room. As it stands, the ecommerce industry in the U.S. alone is expected to surpass $1 trillion by 2025. While comparable fiat reward programs Honey and Rakuten Rewards have both been acquired for $4 and $1 billion respectfully. Between the two of them, they saw over $200 million in revenue in 2019. If Lolli were to continue to double partnerships and capture 10% of the budding market, it will surpass $20 million in revenue. Keep in mind that this is just through a browser extension. The team has floated additional channels such as the release of a mobile application to reach users. In the US, 35% of consumers use only their mobile device to buy online. Therefore, expanding to mobile to capture a piece of this market could prove rewarding.
New Revenue Streams
As a financial services company, Lolli has the capabilities to upsell a suite of financial products to its existing userbase. For example, the company could partner with a lending provider such as BlockFi to offer users a percentage boost on interest payouts or discounts on loans. Keeping with the same example, an agreement with BlockFi could see users receive trading fees discounts to promote their nascent exchange. As a third-party provider, Lolli can process bitcoin payments at a higher scale due to being off chain. Therefore, it is not inhibited by technical challenges should they pursue the payments use case. The options presented are all examples that enable a more composable Bitcoin ecosystem that benefits the end user as they travel down the bitcoin customer journey.
Onboard Legacy Retail Business
Lolli also happens to sit at the intersection between traditional retail businesses and Bitcoin. As digital assets alleviate the pain points and bottlenecks of the legacy financial system, Lolli can assist with a business in adopting bitcoin (or layer 2) payments. The company would not only be responsible for driving users to their businesses but also helping them avoid costly credit card and chargeback fees.
M&A
Despite CEO Alex Adelman's intention to run Lolli for 30-plus years, a business that is responsible for onboarding millions of people to the hardest money on earth might garner some interest. With exchanges controlling so much of the industry inflows, they would appear to be the obvious choice. Exchanges like Coinbase, Kraken or BlockFi offer a robust product selection that an acquisition of Lolli would capture the top of the funnel. Other candidates include large conglomerates like Rakuten who dipped its toe into cryptocurrency late 2019 or my personal favorite Square. The Jack Dorsey led financial services not only has received its Industrial Loan Charter (ILC) but has openly supported Bitcoin since 2018. An acquisition of Lolli could see the company operate autonomously but backed by the full capabilities of a globalized brand.
Final Thoughts
Lolli offers users a way to gain exposure to bitcoin without changing any habits. Central banks are doing more than enough to pique the public’s interest in non-sovereign currencies after each round of stimulus. The coronavirus has forced brick-and-mortar businesses to go online in order to stay afloat. This creates an opportunity for Lolli to service these businesses by giving them a novel value proposition. Lolli gives users an opportunity to understand what money is without disrupting their current lifestyle. While Bitcoin provides a path towards financial freedom.
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Until then, have a great week! See you next Sunday.