2026 Ecommerce Finance Predictions

We're going to do our 2026 predictions together, because we're trying to figure out what's going to happen in the future. And hopefully our discussion will enlighten you as you're predicting your future.

How's it going, Preston?

0:25 Preston Alder

Good, thanks for getting this together. Stephen and I talk on a weekly basis, but this is fun too. I feel like all the time we're saying, we need to record that. We have really good discussions.

0:37 Stephen Brown

Yeah. I started discussing my predictions and Preston started asking all sorts of good questions. I was like, we should just record our discussion, because this is two guys owning a business, a brand. I also work with a lot of other brands, and we're thinking about ecommerce all the time.

Shameless plug, when I started the podcast a year ago I started with a predictions episode, inspired by Ecommerce Fuel.

1:05 Stephen Brown

But unlike them, who are really stretching, what I'm trying to do is grasp realities and apply them to how we're going to approach the business in the next year.

I'm focusing on macro predictions. Obviously every business, you've got to think about some specifics. So things we're not going to get into, thoughts on the skincare market, which is specific to the business that we own here. But we're going to talk about general trends and how we feel like they apply. And Preston's going to tell me what an idiot he thinks I am. Or we're going to debate ourselves to better predictions.

1:35 Stephen Brown

All right, I've got 10 predictions here. Let's go.

What was the favorite word of 2025? Not the favorite word, probably the least favorite word of 2025 for all sellers, Preston.

1:39 Preston Alder

Oh man. Tariffs. The T word.

1:42 Tariffs, interest rates, and inflation

Stephen Brown

Tariffs. So let's start off with the T word.

I'm going to make an argument that I think we are experiencing peak tariffs, with some exceptions. Let me tell you why.

I feel like right now what the economy and what businesses are going to experience is largely negative. And I feel like in general, they're only going to go down. Unless somebody ticks off Trump and he decides to go nuclear on them and jack them up to like a hundred percent.

2:10 Stephen Brown

So I think that we're at peak tariffs. You could see some spikes if somebody ticks him off. And I don't think they're going to go back to 2024 levels, I definitely think they're all baselined higher. But I could see them come down here or there as negotiations happen, or if we see some bad economic things.

What do you think, Preston? Am I smoking weed?

2:27 Preston Alder

No, I think I agree with that. On the opposite end, do you see there's a huge light at the end of the tunnel where something crazy happens with the Supreme Court case? That's a hopeful thing, but as far as budgeting and forecasting, we can't count on that.

2:40 Stephen Brown

That's a good question.

I think there's a decent chance that the Supreme Court rules that the legal authority that the Trump administration used was not legitimate. But what I'm reading is that they're already working on their backup plan. They're looking at other laws.

It could be a lawsuit nightmare, I could see a lot of people suing. But I feel like they're just going to pivot and say, okay, we'll use a different legal authority to do tariffs.

3:10 Stephen Brown

So I was optimistic a couple of months ago, yeah, Supreme Court's going to knock it out. Now I'm like, well, they might rule that it was unconstitutional, but they'll find a way to make it legal. Tariffs are here.

3:21 Preston Alder

Yeah. And I think as a small seller, we have so little power, and we just have to plan on the tariffs being there for the long term for now.

3:29 Stephen Brown

It's just, we're in the new era.

Here's where I'm hopeful. People start to struggle, it becomes clear in the economy. One thing I feel like Trump does is he's reactive to markets. So I'm hopeful that if there are market indications that these are hurtful, that he will adjust. But I don't think he's going to go any higher. I would probably plan against where they're at now, and cross your fingers that maybe there's some relief. But not holding my breath.

4:00 Stephen Brown

Okay, next prediction. Interest rates.

Interest rates are very important, because a lot of us are having to lend on inventory purchases. Let me clarify, there are multiple interest rates. I've dug in.

When we think interest rates, we think about the Federal Reserve. The federal funds rate is what they set, which is overnight lending to banks. The prime rate is based off of that. The prime rate usually establishes certain types of lending.

4:30 Stephen Brown

I do think interest rates are going to go down, but I don't think it's going to have a material effect.

The federal funds rate, which drives the prime rate, is going to affect things like bank lines of credit, credit cards, SBA variable rate loans. The problem is when you look at other lending, the other things that affect consumers, mortgages, fixed rate loans. I would say we see a lot of ecommerce loans are more tied to the 10-year treasury bill, five-year and 10-year treasury bills.

5:00 Stephen Brown

And while those have come down some, those are really based on investors' confidence in the US government. And I think on a 10-year horizon, I'm not terribly confident in the future of the financial structure of the United States, because of the spending.

So I have a feeling that 10-year T-notes are going to stay high even if the short-term interest rates go lower. And so it's a mixed bag.

5:20 Stephen Brown

There's a lot of political pressure to drop rates, and we have seen it. You and I have a couple of different loans. One is tied to the prime rate, we've seen the cost of that loan go down. The other loan has not budged. As interest rates have gone down, it has not changed.

And a lot of the ecommerce specialized lenders, what I've been seeing is they're not dropping their rates, even though the federal funds rate and the prime rate have been going down.

So that's my prediction on interest rates. What are your thoughts?

5:44 Preston Alder

Yeah, I think, you understand the macro level better than I do. But at the end of the day, the cost for us, it doesn't have a significant impact with small rate changes.

Where I do think, and I think we're going to get into this with inflation, is how's it impacting the general economy and our consumers? Because I think the bigger impact on us is just inflation, and our customers' ability to buy right now and to continue to buy into 2026.

6:10 Preston Alder

That's obviously correlated to rates and other things going on in the economy. But I feel like the direct cost impact on us is nice, not huge.

6:18 Stephen Brown

That's a good point. I think I'm with you to a certain degree. I'm more concerned about what it does to the consumer.

Housing costs, especially if you're buying a house, mortgage rates, credit card rates. I'm a little worried about how stretched the consumer is.

There was a lot more BNPL this year. Have you noticed more BNPL in our business?

6:46 Preston Alder

Yeah, I've seen those headlines. I need to dig into the numbers and see exactly what's happened there with our consumers.

But it seems like the orders that I've seen and dealt with, little customer service that I've had to jump in and help on, it seems like there's been quite a bit of BNPL with our customer base. But I don't know how it's changed over time.

7:05 Stephen Brown

Which is scary. Because is the whole economy just a big house of cards? We build it up and then it topples down.

That might be a bonus prediction. I have a thesis. This is where I'm going to take a stretch of where I think the economy could crash. We'll do that at the very end.

7:21 Stephen Brown

Well, this kind of ties into the next prediction, which is around inflation.

My prediction is inflation is going to continue to be sticky, and it could rise. The reason I think it could go up is spending.

7:40 Stephen Brown

We saw the inflationary effects in the Biden administration. And I think it was just because the government poured a ton of money into programs. There was so much money going in.

There's some basic economics, that with money supply, inflation increases. When you decrease money supply, it decreases. And what we saw last year with the big beautiful bill was a lot of spending.

8:00 Stephen Brown

I also think that tariffs could have an impact. And I think there are some housing and energy constraints that could drive up costs of housing, costs of energy.

Again, I'm not an economist, but I do think we'll see some inflation. And the thing that scares me there, I'm more worried about the consumer than I am the business. Not that I'm not worried about our costs negatively impacting, I think we've all gotten squeezed. But if the consumers are heavily squeezed, they're not going to buy our stuff.

What are your thoughts?

8:28 Preston Alder

I agree. And that just makes, our consumer has continued to buy this year. It's crazy, they just keep buying.

8:34 Stephen Brown

Yeah, God bless the American consumer. That was my big takeaway about Black Friday Cyber Monday. I was like, wow, Americans will spend. You've got to be in a really bad place to not spend. I was worried that we were going to have a soft BFCM. Nope, they kept spending.

8:50 Preston Alder

And December has continued to be really good for us.

8:54 Stephen Brown

Yeah, and that's what I'm reading. Consumers are still spending, even though things are murky and kind of yucky.

8:58 Preston Alder

As you're getting into this third point, yes, it's a concern, inflation. Small concerns, but they're all adding up together.

We have these tariffs, we had to do some price testing, increase our prices. Everything went well in that process, but we're still kind of seeing the lag cost impact on the business.

9:20 Preston Alder

And then as you're talking about interest rates, another small factor. Then you get into inflation and the consumer, another small concern. But they're just all coming together, almost like some sort of perfect storm. We don't know what's going to happen, but they're all building.

9:30 Stephen Brown

My plan is to bring it all together and say, what do I think this means for the overall economy?

But I do think the theme that you pointed out is something that I worry about. I feel like we're in this foggy economic future. There are some things that are good, but there are a multitude of, mm, this isn't good, and mm, this isn't good. How does it all add up and not cause problems?

10:04 AI and commerce

Stephen Brown

Okay, well let's change the tone. Let's talk about a trend that I think is going to be positive. In fact, I am probably most bullish about this trend, which is AI.

My prediction is AI is going to create measurable revenue and profit opportunities.

10:30 Stephen Brown

I am feeling really bullish about AI checkouts. We haven't really seen them fully materialize, I know they're being tested on ChatGPT. But there are so many eyeballs on AI, I think it's going to be a good opportunity.

I'd be shocked if we don't see advertising on these AI platforms, ChatGPT being the key one. They're losing so much money and there's so much attention there. It's not like Google, where you search, click and move on. People are spending a lot of time on there. So I feel like it's more like a Facebook in terms of attention.

11:00 Stephen Brown

And then the third one, and this is what I want to ask you a little bit about, is I feel like AI tool efficiency, I was bullish going into 2024, but where we are now versus a year ago, it's incredible.

You've been moving more and more to AI tools. Do you feel like you're finding efficiencies you didn't have 12 months ago?

11:23 Preston Alder

Yeah. So I'll answer this question, and then I want to jump back to some of those first two buckets.

As far as just efficiency as an operator, business owner, the progress of these tools and the way I've been able to utilize them is unbelievable. I feel like I'd have to have a team of like three to five people. Right now it's basically me.

11:50 Stephen Brown

Well, we've cut some of our consultants over the last year, because you're like, hey, I can do this with AI tools for cheaper.

11:57 Preston Alder

Yeah, we've cut consultants. My sister-in-law helps with the business on customer service and a little bit of marketing. But other than that, I feel like I'd have to have a team of like three to five people, and or one or two agencies helping with different things, or freelancers.

12:13 Stephen Brown

Yeah, the creative is incredible. Was it you that got me onto Nano Banana? I'm trying to remember.

12:20 Preston Alder

Yeah, I think so. And Nano Banana Pro. It's amazing.

12:21 Stephen Brown

Dude, it's unbelievable.

And even ChatGPT, they just upgraded their image creation. I still don't think it's like Nano Banana, Nano Banana is truly amazing. But the new ChatGPT update took a really big step. And obviously there's the copy, the word creation, that's super efficient.

12:34 Preston Alder

There's a next level now where, okay, I'm using it for this, this and this. I'm pulling data from different areas. The more I can connect all of that, it could almost automate everything that I'm doing right now, if I do it the right way.

12:55 Stephen Brown

Agents, yeah. We're playing around with agents at LedgerGurus, or custom GPTs in ChatGPT. It's just shrinking the time of creative generation. Or things where you need to take some creative and do this, or take some copy. It really is.

13:21 Stephen Brown

Let's come back to the revenue side of things, because I want to tease out a question you asked me before we recorded this. You said, do I think this is going to create net new revenue, or just move revenue around?

13:37 Preston Alder

Yeah. If our consumer has only so much to spend, how will AI shopping, is it going to increase the number of people who are buying online, engaging with ecommerce stores like us? Are we going to be able to be a player against other big brands that have more credibility out on the internet and with AI tools?

So yeah, I have a lot of questions there.

14:03 Stephen Brown

Let's start with the first one.

On a macroeconomic standpoint, it's not like people's wallets expand. There's a certain amount of GDP growth. So I do think it reshifts some spending.

Now, ideally, the great thesis of AI is it's going to be super productive. There's also the doomers that are like, it's going to kill jobs. Does that have a net zero or even negative effect on GDP? I don't know.

14:30 Stephen Brown

But let's assume just some basic GDP, a few points of growth. I don't think this creates new consumers. I do think it readjusts consumption some, and there'll be winners and losers. Anytime you see a technology shift, there are winners and losers.

And I've been trying to think, where would that consumer, what is it cannibalizing? Is it cannibalizing Google?

15:00 Stephen Brown

Well, AI mode's really interesting. I've really leaned into Gemini more the second half of 2025, I think it's come a long way. And I find myself, there's the mental habit. All the tech super nerds are like, I don't use Google anymore. I can't help it. But I do AI mode a lot more, or I look at the AI results. Obviously I'm using a lot of ChatGPT.

15:20 Stephen Brown

I do think, take a chat AI like ChatGPT, it probably takes away from Google more than Meta. Google tells us what we're looking for, gives us what we're looking for. Facebook gives us what we didn't know we were looking for.

That's the other thing about ChatGPT, especially when you lean into that second part of my prediction around AI ads. What it knows about us, when you ask it to profile yourself, it's scary. There are some scary prompts.

15:55 Stephen Brown

So I think on the Facebook side, an ad platform done right on ChatGPT could be very competitive to Meta. So I think it goes after Meta and Google.

And in some ways, you could have the interactive, I need a new hat, or whatever, beard oil. And that probably cannibalizes some of the Google experience. But an ad platform done right would probably cannibalize the Facebook experience, and we would see products we didn't realize we needed that it surfaces even better than Facebook can.

16:22 Preston Alder

Yeah. I think a big difference between Meta and AI, why I see AI more along the lines of Google, is people are on Meta for entertainment, for just endless scrolling. They don't really mind getting those ads to some degree.

Whereas when you are in an AI, at least right now in my experience, people go to AI more to ask questions, to do research, to think through something. They need help with something.

16:59 Preston Alder

I think AI kind of knows our psychology better, in some ways, than Meta and Google. Although Meta's Andromeda update, supposedly the way it's much more AI fueled, and I don't know exactly what's behind all of that, we'll get into this in advertising, I think it's made a big difference for us.

It's like this weird mix of Meta and Google, where AI knows us super well, but the user is there more for a Google purpose.

17:20 Stephen Brown

It's more like a Google. It's a more robust Google experience where you're interacting with an engine, but you're not going to be doom-scrolling.

We ask it a question. We may go back and forth more than we do a traditional search, but at some point you're like, boom. Whereas you can get into doom-scrolling and an hour later you've seen who knows how many ads. I feel like on reels it's like every five or so it's an ad.

17:55 Preston Alder

Yeah. So it'll be really interesting to see how they implement the ads in AI. I don't know what that's going to look like.

But if they do it right and it doesn't bug the consumer, like when I go to do my Christmas shopping, it may be able to give me a present for every person. I give it a little context and boom, with links, I've got my, and it buys all the stuff, my Christmas shopping is done.

18:15 Stephen Brown

Wouldn't that be awesome? Dude, that would be so awesome.

18:18 Preston Alder

Or it sends a list to my wife. I can have it create a list for everyone who's buying me gifts.

18:27 Stephen Brown

But I want to pull on the other thread that you had. How is this going to affect small brands?

18:34 Preston Alder

Yeah, that's my concern. I have a concern there, because we don't have the same type of credibility as these bigger brands out there on the internet. So I don't know how to compete.

18:42 Stephen Brown

That's true. Well, if you think about it, everybody's claiming they can optimize towards the LLMs. And then other people are like, it's a big black box.

I think some of the same elements of reputation go in. Domain authority, will it, we don't know, but does domain authority carry weight? Web presence definitely does, and bigger brands are going to more likely be in more places. To me, maybe it's a wash compared to SEO.

19:20 Stephen Brown

I think the area that you and I have talked about a lot is the instrumentation of the product pages and the ability to put attributes. So I think that is the new SEO, the deep attribute qualities of product listings.

And then I do feel like this revives reviews. Reviews can be gamed, we've seen that over the years where people will go and do fake reviews. So how do you create authority? Is AI going to be able to cut through the fake reviews better than ever? I don't know.

19:55 Stephen Brown

I do think whenever there's a trend, anybody can win at it in the short term. So I feel like small brands who execute well against AI, do the right instrumentation of product listings, could have some advantages, at least temporary, over those who don't.

But it's going to be interesting to see how it plays out. This is the thing I'm most bullish about in ecommerce though, is the impact of AI related commerce. I'm really intrigued by this.

20:21 Preston Alder

Shopify is coming out, you sent me that message the other day, they're launching a product where they help brands with setting up their AI. But then that just begs another question of, if Shopify is doing this for everyone, then how do you win?

20:35 Stephen Brown

Yeah, how do you win?

20:39 Preston Alder

And maybe it's just that there's going to be a small percentage of people who don't do it or don't figure it out. You do it, but does your product match the way people are going to be buying, or the products that are going to be purchased in AI? Does your brand and product fit AI shopping?

21:01 Stephen Brown

Does it fit the AI shopping? And if you're super niche and don't have a big reputation, is that going to penalize you?

21:18 Preston Alder

Yeah. And I think maybe to some degree the super niche may help, because people will get super specific in AI of what they want.

21:24 Stephen Brown

Yeah, I want the perfect thing.

Are you as bullish as I am? Maybe that's the question to conclude this prediction.

21:33 Preston Alder

I have a lot of question marks. Overall I'm very bullish for the general ecommerce industry. I think for us as a small seller, I have a lot of question marks of where it's going to go.

21:44 Stephen Brown

Okay. I hope I'm right, that it's good for us too.

21:48 Preston Alder

One quick thing for our brand. We do a lot of demand generation instead of demand capture. Google is more of that demand capture, and I feel like AI is still more on that side of demand capture.

22:08 Stephen Brown

Well, that's where I'm hopeful for the ad platform. And I hope this pushes Meta.

There were the glory days of Meta before iOS 14.5. Could AI create an uber-efficient ad market and push Meta? This is another hope. Let's say the ad platform is awesome.

22:31 Stephen Brown

Now, we can see Meta's working really hard. But improved ad efficiency is only going to be net positive if that is what is the outcome of an ad platform on top of ChatGPT and these other AI chatbots.

22:49 Preston Alder

Yeah. And I think Meta's gotten ahead of the game with Andromeda. That was their move to make sure these AI platforms don't take over when it comes to the ads game.

23:03 Stephen Brown

Well, maybe it's because I click on too many ecommerce stores and don't go incognito and get their pixel on my profile. But I still don't feel like I'm getting targeted very effectively in Meta, as effectively as I'd like to be. So I would only be happy to see better targeting of advertising. I want to look at things that are interesting.

23:33 Stephen Brown

We work with a lot of women's apparel. So I feel like Facebook thinks I'm a woman, because I'm always getting ads for women's apparel. And I'm like, dang it, why did I go look at that customer's website without going incognito? Now my Facebook pixel is all messed up.

Lesson learned though, if you're working in ecommerce, always go incognito. Your ads are not going to be targeted effectively to you.

23:50 Preston Alder

Yeah. We've played into Andromeda as much as possible, tried to do everything that people are saying you should do. And our ad performance, especially this last half of the year, year over year it's up a lot, with increased ad spend.

24:00 Preston Alder

So it's one brand, it's hard to know if that's, there are other factors. And I know some people are still struggling. But I've heard a lot of people say that their ads have gotten better as they've played into the Andromeda updates.

24:18 Stephen Brown

Well, I think competition is good. It's going to push brands to where there's the most effective outcome.

To your point, Google is a demand capture platform. So it's been better for resellers, or for unique products. But if you're a direct-to-consumer like we are, where you're trying to create awareness, that's where Meta's been better, because you're trying to target people who want your product.

25:00 Stephen Brown

And maybe to conclude this prediction, will 2025 be the year where ChatGPT, and maybe Google trying to respond to it, will we get the best of both worlds? The ability to do better demand capture as well as demand creation, unlike anything we've seen on Meta?

It's a big hurdle, because Meta's really done a great job, because they know so much about us. But I am startled by how well ChatGPT, after just using it for a year or two, if you ask it about myself, it's like, whoa, it is spooky and smart about me. Scary.

25:40 Preston Alder

Yeah. I love that point to competition though. If it's going to drive Meta to get better, which I think it's already doing, it just helps all the ad platforms.

25:48 The value economy

Stephen Brown

We all win. Lifts the whole industry.

All right, next prediction. I am going to make a strong argument that we are squarely, if we haven't been already, in a value economy.

Are you familiar with the concept of a K-shaped economy?

26:06 Preston Alder

Yeah, it's impacting people with lower incomes.

26:09 Stephen Brown

Basically it splits into two. You get one segment of the economy that struggles and one that doesn't. And this is all the conversation right now, that we're in a K-shaped economy.

The lower end consumer's getting killed with inflation. They don't have equities, they may not own homes. If you own a home your cost of housing doesn't go up but your asset does. If you're renting, rent will go up.

26:50 Stephen Brown

I would argue both legs of the economy though, there's a value need.

On the lower end it's obvious. The inflation has been brutal. Housing, energy, groceries. If you're selling into that lower segment of the consumer side, you definitely need to be value focused.

27:10 Stephen Brown

But I would argue there are some interesting dynamics going on in the upper K.

We're not going to talk about the tip of the K, the Jeff Bezos, Elon Musk, those guys have unlimited money. But let's just say the average professional. There's a lot of squeezing going on by AI, and I think there's a lot of fear about, am I going to lose my job to AI?

27:25 Stephen Brown

And so I do think there is a bit of a value mindset on both legs, even though one might be doing better than the other. I feel like there's a lot of pressure from some of the things we talked about earlier, inflation being the key one.

And so I think value is going to be more important. How does that translate in my mind? How do I give more bang for my buck? How do I message value? How do I realize that consumers are trading down, they're going to go from brand names to generics?

28:00 Stephen Brown

I just think it's going to be more important than ever that brands communicate the value, that they speak to value more than ever, because of the mindset.

What's your thought on a micro example here?

28:08 Preston Alder

Yeah, I agree with that. I think brands should know where their main customer base is on the K shape.

And I think something to watch is, okay, we had to increase prices as a brand. We didn't see an impact, people are still buying almost just as much, and that increased through BFCM. But I think the question is, does that bottom K move up this next year? Does it start to capture higher incomes?

28:45 Stephen Brown

Yeah, so the lower leg starts to eat into some of those that are on the bottom of the rising leg.

28:54 Preston Alder

Yeah. Because I think for us, our customer base is maybe somewhere in the middle there. And so I have this concern, it hasn't seemed to impact them yet. But if inflation goes up the income ladder this year, I think our customer base does start to get squeezed more.

29:15 Preston Alder

And on the upper K, to your point, I'm thinking of people in professional services that I know. It's almost like they're not super concerned yet, but they're starting to think about it. They're like, yeah, maybe AI could take my job. But they're probably thinking three to five years down the road, most of them.

But at what point is there a tipping point where it becomes a legit fear, that the time horizon is more in the next one to two years? And then I think you see a huge shift in their purchasing behavior.

29:44 Stephen Brown

Yeah. And I'm hearing more about people having AI concern and nervousness. It's a little bit different when you own a business.

How nervous are you about employment with AI? I see some real smart AI researchers who are like, we're all screwed in two years, six years. What are your thoughts?

30:07 Preston Alder

Yeah. As a small business owner, like you said, I'm not as concerned, because we could let AI run our business and we'd be fine. But for other people, I think it's more that two to six year horizon. It brings a fear, but I don't know if it's impacting purchasing behavior yet.

30:36 Stephen Brown

That's true, it's this uncertainty. And I think there's a whole lot of YOLO. It's like, yeah, I might lose my job, but hey, I've got a job right now, let's go crazy.

When I look at AI, I'm mostly positive, because I feel like every technology revolution has talked about job destruction. And I just feel like there's still a lot of work to do in this world. I can't get enough AI personally. Anything I can do to help me get my job done easier, I am all about.

30:40 Stephen Brown

But it is interesting, you get some really smart people that are like, we're going to have catastrophic impacts.

One thing I say is it's going to change things. We're going to see jobs destroyed, and hopefully we'll see an equal amount of jobs created. But in that transition, well, there'll be again winners and losers.

30:50 Emerging channels

Stephen Brown

All right, next prediction. This one is a little bit of a recycle. I think we're going to see continued growth in emerging channels.

We've gone somewhat exhaustively on AI. But I still think TikTok Shop. I read this morning, we're recording this here at the end of December, that there was an agreement for TikTok to be spun out and bought by a US entity.

31:35 Stephen Brown

And we've seen huge growth in TikTok Shop this last year. One of the big takeaways was that it's about the size of eBay. The question is, how much bigger can it get?

And then you've got things like AppLovin. I got pneumonia a few weeks ago and I went down the mobile game rabbit hole, because I was tired and needed to do something mindless. And the ads on there are terrible.

32:10 Stephen Brown

Mostly it's other game ads, or gambling, pseudo gambling apps. And I'm just like, clearly there's an opportunity for that attention to have better ads and ad experiences.

Are there other channels you're thinking about that I haven't? New channels that are being discussed?

32:43 Preston Alder

No, I think those are the main ones. And then just the question marks around AI. I don't have much to say on TikTok because we haven't gone down that road with our brand and customer base.

AppLovin has been really interesting. We've been playing around, and to your point, there's a lot of improvement to be had there.

33:00 Preston Alder

They've gated who can run ads on AppLovin. First it was like you had to have a huge amount of ad spend. I can't remember what it was, it was way past our threshold, so we couldn't get on AppLovin. Then agencies have been able to have private invites to brands. That's how we got in, was from [unclear] inviting us in.

33:31 Preston Alder

So I think they've limited the supply of ads on AppLovin. And I think that's maybe part of why a lot of people have seen success.

For us, it messed with our Meta ads. Every time I ran a lot of AppLovin ads, the cost per click is so dang low that I would get a crazy amount of traffic. And so then I think our Meta ads were retargeting these people. And so every time I ran AppLovin ads our Meta performance would drop, which is crucial to our business.

33:59 Preston Alder

But I've heard a lot of people have had huge success there. So I think there's a lot of opportunity for growth on AppLovin and TikTok.

34:09 Stephen Brown

Do you think anybody dethrones Meta in 2026 as the premier champ?

34:15 Preston Alder

I don't think so.

34:18 Stephen Brown

I agree. I think they could take a chunk out of it, especially if AI advertising platforms are effective. It could take a big chunk.

But even if TikTok Shop grows significantly, it's still got a ways to go to meet Meta in my mind. Or Amazon. Amazon's just a Goliath compared to everything else.

34:38 Preston Alder

Yeah, agree. And they all have these little nuances and differences that you have to think about.

And I think Meta just unlocked this new beast of matching ads with people, and it's only getting better.

35:04 Stephen Brown

And it took a while. Think about it, Meta was around for years before their ad platform really got into gear.

One could argue that was the renaissance of, or kind of the second wave of ecommerce. The first wave was the early internet where you had to build everything from scratch. But I think Meta was part of, there were a couple of legs of that second wave. You had Amazon third party sellers, you had Shopify, you had Meta, and to a certain degree Google. But especially for direct to consumer, it was Meta advertising that unlocked that. It's just huge.

35:44 Preston Alder

I think they were kind of this first mover into social advertising, where people are just binging there for entertainment. And for a big company like that, I think they've been able to move with the new technologies over time and effectively use them.

36:00 Stephen Brown

Are there any channels we're not thinking about that we should? I'm just trying to think of anything I've heard of that's emerging beyond some of those.

AI isn't here yet, but everybody is expecting it to come, and I would agree. I'm just trying to think where else there might be opportunity. And I think there's a lot of streaming media. I haven't seen anybody really tapping into commercials on Prime Video.

36:17 Preston Alder

Yeah, I think you've hit the big ones.

36:30 Preston Alder

Podcasting. It seems like it's kind of a tertiary thing, right? Podcast ads.

36:33 Stephen Brown

Kind of hit and miss.

Well, in podcasts, seeing that we're on a podcast, the audience sizes are much smaller than I thought they would be. It's really hard to build a podcast audience. Now it's super engaged, super targeted, I think, if you have the right product.

36:55 Stephen Brown

I think podcasts are very fragmented. You do have some podcast networks, but for the most part you just have a bunch of indies like us who are putting our stuff out on RSS feeds and then pushing them onto all the major podcast channels.

37:03 Stephen Brown

So part of the challenge of a podcast is how fragmented they are, and nobody's really built an ad network that podcasts can plug into. Kind of like Google was one of the innovators there, it was really easy to put AdWords on your webpage. There's not an equivalent for podcasts.

And so I think it's a very fragmented experience. There are some that are doing really well, and then there's a whole lot that's just a labor of love, or part of a business strategy like ours.

37:45 Stephen Brown

From a monetization standpoint it's really hard to get leverage on podcasts. And I'd be curious, at least some of these big ones, you get your Joe Rogans. I'd be curious how well those ads perform. I've occasionally listened to a Joe Rogan episode and I've heard Traeger advertise on there. I wonder how that does. Are they moving a lot of product with that?

38:06 Preston Alder

Yeah, the supply is just so limited that they probably have to pay so much to get on there.

38:12 Stephen Brown

They probably have to pay a fortune.

Whereas you could get onto a small podcast like us, if we were doing ads, but our audience isn't that big. So the ROI is hard. It's not like an ad network you can push out and hit a lot of people.

Podcasts, it's a long tail thing where there are a couple of ginormous podcasts, a whole bunch of small things. And it's really hard, probably really expensive, to get into the big ones. And it's not cost effective to spread out into the small ones.

38:53 Stephen Brown

So that's a challenge. Maybe that's what we should be building, Preston, is an ad network for podcasts. Which is basically what AppLovin is, an ad network for apps.

In the early days of the phones you'd get on and maybe you'd have to spend a buck to go for the paid version of the app. Now it's just all ads.

39:09 Stephen Brown

It's annoying. I hadn't really gotten into mobile games, but getting pneumonia, where I was kind of zoning out trying to survive this awful fever, I found myself playing a lot of mobile games. And I was like, it's all ads now. It's annoying.

39:34 Winners, losers, advertising, and inventory

Stephen Brown

All right, let's move on to the next prediction.

I'm going to say that for ecommerce sellers, we're going to stick to that theme of K-shaped. It's going to be a market of winners and losers.

So here's my thesis. I don't feel like it's necessarily based on the size of the business, but I do think that bigger businesses inherently have some advantages, they have more resources.

40:00 Stephen Brown

What we're going to see with ecommerce businesses is a separation based on execution and excellence. Marketing excellence, operational excellence, supply chain, fulfillment, and financial excellence are going to be really critical. And those that are good at it, I'm not sure that they're going to flourish, but they'll survive and maybe do better.

And I think that those that don't level up their game are going to suffer and possibly go out of business. In some ways I hate this prediction, but I could see some losses in 2026 because of lack of operational execution.

40:25 Preston Alder

Yeah. And I would add to that prediction, those who utilize AI the best in all of those different functions will likely be the winners, just for reducing their overall cost and improving efficiencies.

I think where smaller sellers have an advantage, smaller teams, is they can be more nimble in how they utilize and implement AI. Whereas bigger brands, bigger companies and teams, can't do that.

40:55 Stephen Brown

You're spending lots of time debating what we do and less time actually doing it. That's why I think it's about execution.

41:06 Stephen Brown

And I still feel really bullish about ecommerce businesses. Just like we saw with SaaS, where SaaS made it easier to start a software company, I feel like Shopify and Meta and a lot of things we've talked about, it's still really easy to launch an ecommerce business. I just think it's going to be harder to scale an ecommerce business.

41:40 Stephen Brown

And I think part of that execution excellence is also going to be product. I think vanilla, undifferentiated products, it's just going to be a lot harder, because it's easier for competition to sneak in.

I don't know how this is going to trend, I don't know how we would measure this outcome. I still think ecommerce as a whole, we saw a lot of strength in Black Friday Cyber Monday, more growth in ecommerce than in brick and mortar. But I just feel like we're going to see more brands not make it, because of just how difficult it is to run an ecommerce business today.

42:10 Stephen Brown

All right, this is going to be a fun one. You asked me, what's your prediction for advertising? Now this is more you, so I should probably be like, what's your prediction?

But my financial, I'm going to play it kind of safe. I think the safe bet is that cost of advertising, CPMs, will probably go up, not down. But I do have two outlier conditions.

42:40 Stephen Brown

Will AI, coming back to our earlier conversation, if there's a really efficient ad platform, could it push the efficiency of advertising, make it more cost effective in general? I think there's that potential.

And then obviously if we have an economic decline, usually advertising gets hit. If there's lower demand for advertising but the same amount of ad inventory, that should, in my thesis. I did a little research, usually when there's a recession, things get better.

43:10 Stephen Brown

And this gets into my last prediction. But I think the safe bet is that ad costs go up some. I'd say the most positive thing is, does AI create more inventory and more competition, which is better for the businesses?

What are your thoughts? Would you twist my thesis in a different direction?

43:35 Preston Alder

Yeah. I may be leaning too much on our micro experience with the brand that we're running, but I do think there's this chance that advertising costs decrease. Not necessarily CPM.

So something interesting I've seen and I've heard with Andromeda is that CPMs have actually gone up, but cost per acquisition and new customer acquisition has dropped. Because the tool has just gotten better at matching ads with the consumer.

44:02 Stephen Brown

Converting, matching, which is a win all around. If they get more ad dollars but we get a higher conversion rate, then everybody wins.

44:12 Preston Alder

Exactly. And hopefully the competition of AI, if they come in the ads game, across the board all the platforms get better.

I think those who play into the changes, into the way that advertising is using AI to do their matching, then there's going to be winners and losers. Kind of like what you've said with a couple of the other points. The question is, how big of a bucket are winners and how big are losers?

44:44 Preston Alder

I don't know. As I'm listening to you go through these predictions, it's like, how do you adjust as a brand and be the winner in each of these areas?

44:50 Stephen Brown

Yeah, how do you make sure we're on the winning track? Because it could be good.

I don't know if it's a rising tide lifts all boats economy, we'll get into that at the last prediction. But I do feel like if you're on the right part of the trends, it could be a good year in a lot of ways.

45:16 Preston Alder

And if the economy goes bad, if you're doing the right thing, you survive and you're ready for when things go well.

45:26 Stephen Brown

So this next prediction is almost a derivative of the execution excellence. I've carved this out as a separate prediction as well.

I think inventory optimization is a critical skill in 2026. I feel like cash flow is just tighter than ever, margins are tighter than ever, and the cost of capital is still high.

46:00 Stephen Brown

And so I feel like inventory excellence is going to be a really critical skill for businesses in 2026, because there's not a lot of wiggle room to get it wrong.

Unlike a couple of years ago where you could overorder, that's okay, there's enough efficiency that you could just sit on inventory. I just don't know that the industry can, especially these smaller businesses that aren't as sophisticated, can get away with that.

I feel like we're going to collectively as an industry, we'll say the smaller part of the industry, get better at demand planning than we've ever been.

46:25 Preston Alder

Yeah. For us it's been a huge factor, because we're importing from overseas. There are big days in inventory that we have.

We've seen the struggles of inventory management and the impact it has on the business. And so any leg up that a brand can get on the competition and improving profits, I think is just becoming more and more crucial to stay in the game.

46:55 The economy, and the private equity bonus

Stephen Brown

All right, let me get to the final prediction, and then the bonus prediction.

Final prediction is how I'm feeling about the US economy. I'm not going to talk about the global economy, we're a US brand. LedgerGurus, we work mostly with US brands, or brands that are selling into the US. So this is specific to the US.

47:19 Stephen Brown

I'm going to say we are meh at best.

Now, I think there are some mixed things. On the negative side, I think there are big time affordability challenges with inflation. We're just seeing pressure in a lot of areas, housing, energy. We're seeing some increasing layoffs. I don't think it's bad, but we've seen unemployment tick up this year. There are concerns about the AI bubble. I'm less concerned about the AI bubble, and I'll get into that in my bonus prediction.

47:50 Stephen Brown

Now on the other side, the big beautiful bill, we've dug into it a little bit, there are a lot of stimulatory things there. There's no tax on tips. There are some really good things for businesses around accelerated depreciation. So I think there are some stimulatory impacts of that bill. And obviously we've talked about AI.

48:20 Stephen Brown

I do think in a weird way immigration has some potential positives, because there is a thesis that I've heard, I don't think it's perfect, but if you take people out of the system, does that help preserve jobs?

It's a double-edged sword. You might lose some consumers, but the question is, are those consumers of ecommerce, the traditional DTC brand, or are they more of a lower-end consumer?

48:50 Stephen Brown

But if we reduce that population, the work's got to come from somewhere. Now, I am worried, because I don't see a lot of white guys mowing lawns or framing or doing stuff like that. So I'm not sure where the labor comes from. But I do think it may have a positive effect on employment. There might be a macro recalibration of labor because of the lower supply.

49:10 Stephen Brown

But add it all up and it's just meh for me. There are some good things, there are some bad things. I'm not super excited, but I'm also not feeling like we're set to crash. But I will give that in my bonus prediction.

So what are you thinking about macroeconomics?

49:22 Preston Alder

My question is, I feel like we've been in this meh stage since post-COVID. How long is this going to go on?

49:27 Stephen Brown

For a few years, yeah.

And I come back, you had a good point. There are a lot of little things adding up. Is there just one more straw to cause it to all crumble, or will things settle?

49:42 Preston Alder

Or is AI that good? It's like the bubble actually is not a bubble, I don't know.

49:47 Stephen Brown

Yeah, it has been years of this.

And there are two things. You could go before the next downturn. One, you could argue we've been in a downturn. I think ecommerce was in a downturn for a few years. There's just been one thing after another. We had a huge spike and then it was a slump. And I think we've been crawling out of that. We've seen this year that ecommerce sales as a percentage of total retail has now surpassed peak COVID.

50:20 Stephen Brown

But yeah, there are a lot of little things that are adding up. Do enough of those little things add up to cause things to topple over, or do things just kind of settle?

To me this is a really foggy year. I'm having a really hard time as we're planning individually, but also as I'm thinking about this with the other customers I work with. How do I think about this year? And I'm having a really hard time seeing through the fog of all of the things going on, good and bad.

50:50 Stephen Brown

So this is my bonus prediction. Any more thoughts on the meh economy?

50:50 Preston Alder

No, no thoughts.

50:52 Stephen Brown

Okay, here's my bonus prediction. This is me being a doomer.

I was talking to a friend the other day, and everybody's talking about the AI bubble and if that thing pops. But I'm less concerned about that, because the AI bubble is largely being fueled by public companies deploying cash. They're not leveraged. And I think when we get into trouble is when we're leveraged.

51:30 Stephen Brown

So I'm less concerned about AI. If we look at 08, that was housing leverage. If we look at, not the great recession, the tech bubble, that was tech investment leverage. But the deployment of AI is largely coming from these rich companies.

So I was talking to a friend and I was like, I think the real bubble is a private equity bubble.

52:00 Stephen Brown

Private equity is gobbling up everything, and that whole industry is levered. They don't buy a company outright. They go to a bank, they get a huge loan, they stack the debt onto these companies, and then they squeeze every dollar out of them.

And I'm just seeing private equity everywhere I turn. They're coming into the accounting industry. I haven't seen it real heavy in ecommerce. But I saw it in tech before I left tech. Everywhere I turn, they're in housing.

52:30 Stephen Brown

And they're so levered that the problem is, if there are any issues, like a small bump economically and they can't service that debt, those businesses do not have the free cash flow, because they've got this huge debt hanging over their head. So they have to perform at a certain level.

52:50 Stephen Brown

I'm not sure this happens in 2026, but I guess this is a 2026 prediction. My out there prediction is, I think private equity is a huge risk to the economy because of the nature of how they fund acquisitions and run businesses.

And not all private equity is equal. And the other thing is, a lot of them aren't public. For every Blackstone and KKR, there's a million that are private. But they're all levered. They're all levered to the hilt.

What do you think about that?

53:03 Preston Alder

Do you know what kind of portion of the economy private equity makes up?

53:08 Stephen Brown

That's a good question. I should have done some research on how much is going to private equity. But I feel like there's so much acquisition of businesses that is happening at private equity levels.

Whereas 20 years ago you wouldn't see small businesses getting bought up by private equity. Now you do. We're seeing it in the accounting industry, they're just gobbling stuff up.

53:40 Stephen Brown

I read a couple of months ago about how private equity was going after plumbers and HVAC. And there's a lot of virtue to that, because they're coming in, they're applying better business practices. But they're doing a lot of consolidation.

53:45 Preston Alder

They're doing a lot of consolidation too, right?

53:56 Stephen Brown

Let's look at tradespeople. They're terrible business people, they're technicians who run businesses. Often they have terrible business practices, they're not good at invoicing, they're not good at customer service.

So the thesis is, hey, we'll come in, we'll run a tighter shop, have greater execution, better profits. But they have such high debt that I just don't feel like they have the resilience, because they've modeled so much debt in there. I feel like you could see some failures.

54:20 Stephen Brown

My thought is, where there's leverage, there's risk. And where is there a lot of leverage in the economy? Private equity. And where is there private equity? All over the place.

We don't even realize it. If there's an opportunity for cash flow, private equity is going after it.

54:39 Preston Alder

Makes me want to look up some numbers and dig into that a little bit.

54:45 Stephen Brown

Yeah, I don't know how to do the trade on that one. It's not like The Big Short where you could go out and, so much of this I feel like is in privately held companies taking debt from limited partners, banks, wherever they can get financing.

And because they're financially disciplined, the thesis is they're good. But I just feel like the underlying economic model of private equity could create some risk with economic downturns. Their ability to service the debt is at risk. And then what happens if that debt doesn't get serviced? Now you have a financial crisis.

55:20 Stephen Brown

So there's my outlier crazy idea, that if we do have an economic crisis in 2026, it's going to be rooted in private equity, not AI.

55:31 Preston Alder

And I could be off by saying this, but it seems like private equity, venture capital, just the number of firms I've seen and those companies pop up over time.

Are there less sophisticated private equity companies? And does that factor into part of the issue? Not only is it a lot of leverage, but less sophisticated leverage.

55:55 Stephen Brown

Yeah. They're good about deploying good business practices. But there's something to say about these inefficient mom and pop small businesses. They may not move the needle, they may not be as profitable, and there's a lot of turnover. But you've distributed the economic risk. If you have a whole bunch of small businesses versus a concentration risk, it's a little scary.

56:30 Stephen Brown

And the thing I don't love about private equity is they just don't care. They will lay off.

Let's say they have a downturn. Because I've worked for a private equity company, they'll cut costs. So they'll do what they need to to service the debt and to generate the revenues. So let's say they don't crash, but job losses are higher, because they'll just be like, cut costs. And then that has a downstream negative effect.

57:02 Stephen Brown

So there's my outlier additional prediction of the private equity bubble that nobody's talking about. I hope I'm wrong. Hit me up in the comments. But that's one I don't think anybody's talking about that they should be.

57:02 Preston Alder

Very interesting. I'll be watching.

57:05 Stephen Brown

Okay, that's our predictions for 2026. Any final thoughts, Preston, before we call a wrap on this?

57:14 Stephen Brown

We're going to have to get together in a year and see if our assumptions were right. But I do think this is how we should think about planning our business, is using some of these considerations. And hopefully they're helpful for those of you that are listening.

57:29 Preston Alder

And I think with each of these risks, figuring out how to be on that winning side. And in case it happens, if not, you're in a good spot.

57:34 Stephen Brown

Yeah, and get after the opportunities if you can.

All right, well that's a wrap. Thanks, Preston. If you've liked this episode, hit us up on the socials or in the comments. We'll talk to you later.