Chris Grouchy (00:05):

Hey everyone. Welcome to season two of the Legends of Retail podcast, brought to you by Convictional. We talk to leaders in retail and eCommerce so you can learn from them about retail strategy, leadership, tactics, and team management, and take their insights back to your company. I'm your host Chris Grouchy, co-founder and president of Convictional. So what is Convictional? Well, in short, retailers use Convictional to connect vendors for dropship and curated marketplace.

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(00:37):

My guest today is a serial startup executive who co-founded one of the fastest growing startups in eCommerce technology, OpenStore. Michael Rubenstein is OpenStore's president and co-founder. He previously served as president and board member at AppNexus, rebranded to Xandr before and after the company's acquisition by AT&T. Prior to AppNexus, Michael founded and served as general manager of Google's DoubleClick Ad Exchange, AdX.

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(01:07):

In this conversation, we talk about what Michael has learned from his stints at successful ad tech startups like DoubleClick and AppNexus, and how he's applying those lessons to OpenStore. We also discuss OpenStore's positioning in eCommerce right now and how it's differentiating itself in the eCommerce aggregator ecosystem. I also get Michael's take on retail media since his experience is at the perfect nexus of advertising and eCommerce. Here's my conversation with Michael Rubenstein, president and co-founder of OpenStore. Michael, thanks for coming on Legends of Retail. Really, really glad to have you here.

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Michael Rubenstein (01:44):

Oh, great to be here.

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Chris Grouchy (01:46):

Awesome. I want to begin our conversation by starting actually at the very beginning of your career. I believe you started a marketing and advertising company where you connected brands with college campuses back when you were a student at McGill University in the 90s. I went to Queens University in Kingston, Ontario, myself, so we weren't too far away. What was this business that you started and curious about some of the lessons you learned back then that maybe still hold true today?

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Michael Rubenstein (02:17):

Yeah, absolutely. I started a campus promotions business with some other students. A fellow student walked up to me, who I knew, came up to me on campus and said, "Hey, what are you doing tonight?", "Not much." "Do you want to start a business?" "Sure." And that's how it all got started in my second year. And I didn't realize it at the time, but we were starting a marketing and advertising business where we would essentially do free campus giveaways, like whiteboard calendars and sell sponsorship. And it was my introduction to the marketing and advertising world. And so I learned a lot about marketing and advertising. I didn't study business, I studied international relations. And so it was my introduction to that subject.

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Chris Grouchy (02:57):

Amazing. And certainly probably more fruitful than many business programs out there when kind of getting that practical hands on experience. And so after McGill, you later joined an email marketing company in Toronto, FloNetworks that was eventually acquired by DoubleClick. I'm curious what you learned from that first startup experience and how have those lessons carried with you since?

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Michael Rubenstein (03:27):

Yeah, well that was a foundational experience for me, and it was one of the first internet companies built in Canada and certainly one of the original pioneers in the space. We were really the first successful email service provider, which obviously today is a huge category. People know companies like MailChimp. But in the late 90s, people were just starting to adopt email and use email. And the idea of a B2B email service provider was totally brand new. For me, I'd obviously had a little bit of exposure to marketing and advertising and so this idea that the founder Paul Chen had had was that brands will communicate with their customers via email and it will be more cost effective than sending direct mail pieces was a really compelling idea. And so we built that company from a startup to become an industry leader over the course of a couple years and ultimately sold it to DoubleClick.

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(04:30):

I mean, I think at that stage, it was the 90s, we weren't just truing to figure out how to build that company. We were trying to figure out how to build an internet company. And it was one of the first internet success stories to come out of Canada. Obviously we built a market leader. It was a great experience. I think I just learned so much about how to build a internet company, whether that's hiring, and how to architect a system for scale, and how to determine if you have product-market fit. I mean, there's so many foundational things that I learned in my colleagues and I learned, I think through that experience. It was really cool.

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Chris Grouchy (05:12):

And when you were at DoubleClick after FloNetworks was acquired, you earned a special nickname from your colleagues. What's the origin story behind AOL Ruby?

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Michael Rubenstein (05:26):

After DoubleClick acquired FloNetwork, I moved to New York. That was part of the arrangement that we made. And I moved into a role where I was doing sales and account management and basically selling DoubleClicks products. And at the time, that was marketing automation, email marketing, digital advertising, things of that nature. And AOL at the time was one of the internet leaders. I mean, this was early two 2000s, and I developed a number of really close business relationships there. I spent a lot of time in Virginia where AOL's headquarters were, and ultimately AOL adopted wholesale most of the DoubleClick suite, which was huge for DoubleClick. I mean, it would be in a B2B instance today landing a company like Facebook or Google or Amazon to be your customer. And so internally I kind of got the nickname AOL Ruby because I had a lot of success getting AOL to adopt our platforms.

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Chris Grouchy (06:33):

Selfishly I want to ask about how you landed those deals and those larger customers, but maybe we'll put that to the side and go fast forward a little bit further into the DoubleClick story where you reached a point where you wanted to go and eventually start your own company, probably taking some of those memories away from McGill, and DoubleClick CEO at the time convinced you to stay and build a startup within the company, which eventually led to DoubleClick's now famous ad exchange product. I mean, very curious about how that all went down. And then I'll save my question once you chime in on that.

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Michael Rubenstein (07:13):

Yeah, well this was I think 2003, 2004 and DoubleClick had a great CEO, David Rosenblatt. And yeah, I mean we were talking about my career development and I said, "Look, I think I've reached the point where I want to go build my own internet company. I want to be an entrepreneur again." And he said, "Well, I've got an idea. Why don't you build an internet company here and I will give you an opportunity to basically build a division of the company and it will be a win-win. The company will get to benefit from the innovation that you bring and you'll get the experience of building a business. And then if you want afterwards you can go do your own thing again." And I really liked DoubleClick and I really liked working with David. And so it made a lot of sense to me. And then, I don't know, it was probably a few weeks later, he came up to me and said, "Hey, do you have a minute? An idea came up at a board meeting and would love to get your take on it?"

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(08:09):

And there was an internal skunkwork sort of project called Project Wolf. There's a lot that's been written about this at the time, and it was like a code name project and ultimately it was a couple engineers and a product manager, and we partnered up together and sort of fleshed out prototype and a business plan, and ultimately launched DoubleClick Ad Exchange. Yeah, today, I mean that's a business with tens of billions in revenue, and it's owned by Google obviously, and sort of the leader in the world of programmatic advertising. But the whole thing started with this Project Wolf, very scrappy internal skunkworks and obviously, I think DoubleClick at the time had something like 200 million in revenue. So it was a really cool experience just to see how if you leverage the assets of some of these companies, you can create something much, much bigger inside of them. And corporations are notoriously difficult to innovate inside of. But I think that David did a really good job of helping set me up for success and ultimately the results were there.

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Chris Grouchy (09:13):

That is, I mean, a wonderful experience that clearly led to an incredibly legendary product. I want to go back to the last point and kind of think about how CEO should foster entrepreneurship within their own companies. And there are other famous examples of this that have gone really well. One example that comes to mind is Jeff Bezos and the Kindle team of taking existing product managers and business development folks from within Amazon's marketplace product and basically telling them, "Hey, go build the thing that's going to kill our ability to sell physical books." Which again, another legendary story. Across these stories there are successes and failures. How should CEOs foster entrepreneurship or startups within their own organizations?

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Michael Rubenstein (10:07):

I think the key is that you need to be able to provide people with some level of autonomy. I think that autonomy and independence is really, really key. Because startups need flexibility. They need the ability to try things and fail. They need some space to innovate that's different than the space that the more mature company is occupying. At the same time, if you're leading one of these initiatives, you obviously want to be able to leverage the assets of the larger company. Otherwise, why do it inside Amazon? Why do it inside DoubleClick? And so you need kind of that intersection. You need to be able to, as a CEO, I think provide your team with autonomy and independence, but as an intrapreneur, you also need to find ways to build relationships, build connections, and ultimately leverage the assets of the original company as well.

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(11:01):

And so it's tricky to do and I think you see a lot of problems like I've seen in some other companies that I've been in over time. It's not intentional that big companies kill innovation. It's oftentimes like people think they're doing the right thing and they want to... Usually it's people who are sitting on the outside of the new innovation, they're trying to help, they're trying to participate, or maybe they feel threatened honestly by this new thing and maybe they're trying to kill it. I mean, I've certainly seen some of that too, but it's just very, very difficult I think to pull it off if you don't have the autonomy built in. And so I think ultimately that is a big part of it.

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Chris Grouchy (11:42):

And another key ingredient would just be talent. Having the right sort of generalists inside of the company who can zero to one that next idea.

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Michael Rubenstein (11:50):

Yeah, that's a great point. I mean, I think what David recognized with me was that I'd had experience as an entrepreneur and I had a very entrepreneurial ownership mentality, but at the same time I demonstrated that I could function inside a large enterprise. And so I think he looked at me and said, "Well, this person has the potential to be an intrapreneur." I don't think we use that term at the time, but I think about that now when I look at people who can be innovation leaders inside companies that I've grown. Ultimately are these people who could do what we just mentioned before. Can they lead and build something really innovative while also being skillful enough to build the connections inside the organization that are needed and ultimately to leverage the full half of the original organization? And so yeah, I think it's really key.

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Chris Grouchy (12:48):

And the process that ends up sort of calcifying inside of large organizations is never intended to slow down progress, but it can be. And so you need the right kind of person or founder or team to be able to shake things up and get things done where needed. I think that can be daunting for an intrapreneur.

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Michael Rubenstein (13:08):

Yeah, it can be really tough.

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Chris Grouchy (13:09):

So fast forwarding a little bit in DoubleClick and AppNexus where I believe you went to following the DoubleClick journey, you spent a lot of time in ad tech created to highly successful ad tech businesses. What did you see in eCommerce that led you to help found OpenStore kind of shifting away from ad tech?

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Michael Rubenstein (13:33):

I've always been drawn to eCommerce. Even in the earliest days at FloNetwork, who are my customers? Who are the ones experimenting with email marketing in the early days? It was J.Crew and L.L.Bean and online retailers. And so I think I've had a heavy intersection with eCommerce companies since the very beginning of my career. Certainly at DoubleClick and AppNexus, obviously a lot of what I did around programmatic advertising was essentially making advertising online a direct response or performance medium. And eCommerce companies, many of them were very large and important customers. And so it's just something I've always been drawn to. But I've been on the vendor side, I've been on the B2B side, not on the operating side. And so as I thought to your point about where to go next, after we sold AppNexus to AT&T and then I managed the integration of AppNexus into AT&T and was one of the people who launched Xandr, which of course is now owned by Microsoft, I thought, well, it'd be great to be on the other side.

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(14:41):

I mean, as you know, it's one thing to be kind of building platforms and selling into a customer base. I think you gain a whole new appreciation for that customer base and the problems and challenges of that customer when you're in the seat as well. And so I was really drawn to the idea of being an operator on the eCommerce side. I also was really drawn to the idea of defragmenting, the fragmentation in the long tail of eCommerce, that essentially what I think we've seen over the last decade or so is this huge proliferation of eCommerce merchants in the Shopify ecosystem, certainly in the Amazon marketplace ecosystem. And I think the idea of coming in and doing defragmentation and finding synergies and building something unique and cool there was very compelling to me.

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(15:34):

I think when I met Keith Rabois and Jack Abraham and Matt Lanter, Jeremy Wood, my co-founders at OpenStore, I think everyone was really passionate about this idea that there was a big market opportunity here. And recognizing that especially in the Shopify ecosystem, there was a gap. There are all these aggregators that had arisen like 50, 100 maybe aggregators that had arisen in the Amazon marketplace. And so there were starting to emerge this very liquid market for selling your Amazon shop, basically your Amazon marketplace store. But we saw no marketplace at all for selling your Shopify DTC business. And when we started to look into why I think a lot of the aggregators felt it was just a more complicated world than the Amazon world, but I mean we think that these are better businesses in many respects, and there are huge benefits to what makes those businesses complex. It gives us more opportunity to create value ourselves.

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(16:34):

And so I think we jumped in and we tested that value proposition and it's been well received in the market. I mean, Shopify sellers need liquidity. Not every one of the 1.7 million Shopify merchants out there in the world want to continue running their business forever and ever. And I think for us to be able to come in and offer a quick and compelling exit for those founders when they're ready to sell is a really, really cool value proposition. And so I think all of those things together just made me feel like this is an opportunity I want to pursue.

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Chris Grouchy (17:10):

And one of my favorite tweets from Keith Rabois, here's a bunch, but one of the top ones that comes to mind is the formula for startup success tweet where he says, "Find large, highly fragmented industries with low NPS, vertically integrate a solution to simplify the value of the product." And the fragmented industry that you talked about with eCommerce is prevalent in so many different applications. From acquisitions to B2B commerce where we at Convictional play, you just see it all the time. There's different platforms and systems and EDI and the NPS scores across all of these system providers tends to be incredibly low. And so there's just an opportunity everywhere you look within the sort of massive industry that is now.

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(18:01):

But kind of going back to OpenStore, in a past interview you mentioned that you've identified 15 different dimensions by which you can operate an eCommerce brand you acquire more efficiently. So for example, you mentioned capital is typically a constraint many entrepreneurs have, but OpenStore doesn't have. Could you talk about a couple of other dimensions and how you're planning to make them more efficient in the context of OpenStore?

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Michael Rubenstein (18:31):

Absolutely. I mean, one that's close to my heart obviously is marketing. If you look at the typical Shopify merchant that we acquire, they are getting by on a very, very scrappy set of marketing resources. They typically will work with a marketing consultant or agency or maybe a handful of them. They're probably not working with world class technology capabilities. And if they are, they might not be optimized. And so I think for us, the opportunity to bring a product first, data science first, engineering heavy approach to how do we ultimately build best in class marketing capabilities that could scale across all of our brands and how can we build a single marketing organization that can support all of it with world class expertise? I mean, it's just a good example I think where we can drive superior results and do it more efficiently than any one individual brand could be.

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(19:34):

I mean, most of the merchants that we acquire are quite small, and I think that they don't have a full in-house marketing team as one example. Another's customer support. I mean, we've built an entire customer support organization with, again, like world class ticketing and issue resolution software and fast turnarounds and SLAs and things of that nature. I think when we find these merchants, they're typically working on a fractional basis with someone. And it's just another good example I think for we can bring a lot of value to the table.

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Chris Grouchy (20:09):

Makes a lot of sense. One of the other potentially dimensions is supply chains and every sort of successful eCommerce business may have a network of suppliers and vendors that enable them to manufacture and distribute products to their customers. And so once you've acquired a business at OpenStore, how are you managing your relationships with the brand suppliers? Are there any general challenges that might come up with working with suppliers who may have different systems or different supply chains? I suspect this is probably one of the other areas that you could potentially gain more efficiencies in sort bringing them together in a single portfolio.

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Michael Rubenstein (20:49):

Definitely. And we are actively working to consolidate vendors and build deeper relationships with some partners. So for example, in the world of 3PLs, we've standardized on a handful of relationships and we're working actively today to deepen those relationships, not just from a communication perspective, operations perspective, but also from a systems perspective too, to make working together more seamless and these migrations really easy. So I'd say it's a work in progress. It's something that we're continuing to learn a lot about and we're clearly going to invest in. Going back to the point before about how Shopify businesses are different than FBA businesses, I think this is an area that is really important for us to get right, but if we do get it right, becomes a real source of competitive advantage. So definitely a focus area.

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Chris Grouchy (21:44):

One of the trends that we're seeing and saw this a little bit when I was at Shopify two is like brands would get to a few million bucks a year in revenue and then begin to plateau. And at that moment many of them begin to think, how can I explore new channels, retail relationships, wholesale to continue to acquire customers and grow GMV? Are you of the mindset that like D2C is a religion in many ways? Or how do you think about the brands that OpenStore acquires going multichannel, going into perhaps other retailers? How should they think about that and is sort of D2C just an example of a channel or should they be more, I guess, restrictive about it?

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Michael Rubenstein (22:34):

Well, I think for us right now we're very focused on D2C. I think we're building our operations and our business to maximize that. It holds for us, I think, the greatest potential. Certainly we care a lot about direct consumer relationships. It's part of the reason why we are building a D2C business and not a business through let's say the Amazon marketplace. So it's pretty core to our business plan. I would never say never to monetizing these merchants through other means and other channels as it relates to other merchants out there in the market. I think increasingly what we're encountering is people are taking an omnichannel mentality, omnichannel approach, where they are seeing different channels as just different paths to the consumer. I think ultimately if you own the consumer relationship that's best, but certainly these demand aggregators like the Amazons of the world, Walmarts of the world, are great at doing what they do too. So I don't think it's one or the other, but I think for OpenStore at the moment, we're very D2C focused.

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Chris Grouchy (23:43):

And there's a lot of economies of scale that can be developed when focusing on a single channel like D2C to the point around unlocking efficiencies across brands through whether it's customer support or marketing as well. It's sort of concentrating your efforts there. There's a lot of value to be unlocked before jumping into new channels. I want to jump into retail media. One recent development in retail advertising is the proliferation of retail media, which are self-service ad networks on a retailer site. In 2021, it looks like companies spent around 31.5 billion on retail media ad spend. And so I'm curious about this as an expert in the ad tech space and with 20 years of experience here, do you see retail media as a trend that retailers are likely to adopt or do you see it as a niche sort of ad experiment?

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Michael Rubenstein (24:42):

I see it as a major new channel for advertising and major new channel for retailers to monetize their audience. So it is growing very quickly and I think it has years of strong growth ahead of it. I think Amazon really has led the way here and demonstrated that a dual revenue stream model of advertising and transactions is really powerful. And I think others are going to try to follow suit and clearly are following suit. I think there are other reasons that make it particularly compelling in this environment as well. For example, with Apple's changes to its privacy framework, it's becoming increasingly difficult to target consumers online. Retailers have a lot of first party data and obviously consumers on retail websites are really expressing clear intent, which makes it an ideal advertising medium. And so I think it's a very durable trend. I think we're going to see a lot more of it and I think it's here to stay.

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Chris Grouchy (25:51):

Makes a lot of sense. And jumping back to OpenStore, maybe a two part question here, now that you've been in business for a little while, I'm curious about the sort of general learnings that as you reflect on your OpenStore journey that you've come to take away, and then what's next for OpenStore, the company as you kind of chart the future?

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Michael Rubenstein (26:13):

Well, I think for OpenStore, Keith has talked a lot about this. He really wants to just continue to be the number one acquirer of businesses in the Shopify DTC sector. And I think we are the owner of dozens of brands today. We'd like to be the owners of hundreds of brands. And so we're going to continue to push in that direction to acquire more businesses and to get better and better at operating them. I think that's really the core focus of the company today is do more and do it faster and better. And in terms of where things go down the road, we'll see. I think if we can really establish ourselves and establish a strong business in this area, then sky's the limit.

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Chris Grouchy (27:03):

So based on what OpenStore does, my understanding of the company and a look back on your career, you're sort of the perfect person to be running this kind of company based on the number of acquisitions you were involved in prior to starting OpenStore. And so people look at your background and see that you've been part of three companies that were eventually acquired. You've done a couple of startups that have been acquired by other organizations. Were these acquisition experiences easier or harder each time you went through it earlier in your career?

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Michael Rubenstein (27:36):

I would say easier and harder. Sorry, I know non-answer. The easier part was, you start to develop a sense of all the different things that you need to do in order to successfully integrate an acquisition. And there's a lot. I mean, acquisitions go wrong all the time, and so I think it's a real discipline, learning about all the pitfalls and the places where these things can get tripped up. And also seeing the others. I mean obviously a number of the acquisitions that I've been involved with have succeeded beyond the wildest dreams of the folks who put them together. I would say in that respect, with experience, it becomes easier. I think the thing that becomes a little harder is that you put a lot of time and energy into building these companies, as you know with Convictional, at some point down the road sometimes you sell these companies and that can just be a bittersweet moment. I mean obviously at some point in time maybe the right thing, might be the right moment, but it can be difficult to say goodbye to things that you've developed intense emotional attachment to.

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Chris Grouchy (28:51):

That intense emotional attachment, I feel like rarely gets discussed in the concept of an acquisition. I mean, partially because outsiders might say, "Oh, well, you had a fantastic exit and outcome that people would dream about." But I think perhaps another maybe downside is being able to turn off. Right. You're sort of running at hyper speed operating a startup. It's go, go, go for potentially many years, and then all of a sudden it's being able to turn off that I think people find challenging. So no one can just go kind of a hundred miles an hour and then go and just sit on a beach for the rest of their lives. So you need some sort of productive outlet post acquisition to keep doing the things that you love, which is the work hopefully, and keep pursuing whatever your personal mission is. I don't know if that made any sense, but it seems like something that people would struggle with.

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Michael Rubenstein (29:49):

It makes a ton of sense. I think those are really wise words and powerful insights, and I think we try to think about that as well and keep that in mind when we're acquiring these business from Shopify merchants. It's not just another business. I mean, this is someone's work that they've put their heart and soul into for many years and they want to know that we're going to continue to do a great job building and investing and taking the work that they started and really getting it to the next level. And so it's a great perspective and something we try to keep in mind and really important.

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Chris Grouchy (30:23):

And as we wrap up here, Michael, I want to move into our rapid fire round where we ask a couple of questions and you give us your immediate thoughts. How does that sound?

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Michael Rubenstein (30:34):

Sure, sounds great. Perfect.

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Chris Grouchy (30:36):

What is the most exciting opportunity in retail and eCommerce today?

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Michael Rubenstein (30:41):

Well, I mean obviously I'm really excited about what we're doing with aggregation and the long tail of eCommerce and building something really innovative out of these thousands and thousands of incredible businesses that are out there that are just under-monetized. But I will also say I'm also very enthusiastic about the opportunity to more fully integrate eCommerce into social platforms. I think there's a lot being discussed right now about social commerce and leveraging influencers, and I do think that we're going to see enormous growth and innovation in that area in the next five to 10 years. And I think people who really master that are going to build really exciting DTC businesses online.

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Chris Grouchy (31:30):

Amazing. And a brand you love and why?

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Michael Rubenstein (31:34):

Apple. It's a brand I love, brand a lot of people love. I think the why, interestingly, I mean the user experience people talk about. One of our values at OpenStore is own end to end, and it does take some inspiration from Apple. The idea that if you take control of all the different nodes and the value chain, that you can have really strong control over the quality and the experience. So I think that's a brand I love and I think it's a company that at OpenStore we're taking inspiration from as well.

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Chris Grouchy (32:10):

What is the kindest thing someone has done for you?

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Michael Rubenstein (32:14):

Well, I've benefited as I have many people from mentorship from others over the course of my career. And I really think that is a very kind thing to do. It's something I try to pay forward as well. I mean, mentorship ultimately is about helping someone else. I mean, there generally is a win-win there especially if you're in the same company. But oftentimes I think there are people who I don't even work in the same company who have offered me advice and mentorship, and I think that's an incredibly kind thing. It's something I try to pay forward.

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Chris Grouchy (32:46):

Amazing. Michael, we'll wrap there, but it's been an absolute pleasure to have you on the Legends of Retail podcast. Anything else you'd like to share with the audience before we jump off?

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Michael Rubenstein (32:58):

No, thank you for having me. It's always great to meet a fellow Canadian technology and entrepreneur and I will be looking forward to hearing about much success for Convictional over the years ahead.

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Chris Grouchy (33:09):

Thank you. And same goes with OpenStore. It's been an absolute pleasure, Michael, thank you so much.

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Michael Rubenstein (33:15):

Okay, take care Chris.

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Chris Grouchy (33:22):

Thanks again to Michael for coming on the show. And thank you for listening. To catch the latest episodes of Legends of Retail, please subscribe to the show on Spotify, Apple Podcasts, or wherever you get your podcasts. You can also stay updated by following Convictional on LinkedIn or Twitter. Finally, if you want to share some feedback on the show, DM me on Twitter @ChrisGrouchy or you can email me directly at chris@convictional.com. Thanks again for listening.