Why I’m Joining BuzzStream

TIME TO BE AWESOME

I’m joining BuzzStream – a great marketing SaaS startup in Austin, Texas – as their first full-time marketer. I will be moving to Austin to join the team there. I am very excited – it’s a tremendous opportunity and I feel honored that their team has let someone like me manage their marketing.

BuzzStream enables marketers to manage their link development (for SEO) and PR & influencer engagement in a highly systematic, measurable, and scalable way. It’s sort of like Salesforce.com for SEO & PR, but it has a lot more functionality for marketers to be even more efficient and effective in their outreach.

(If this sounds like something you can use, please go over to BuzzStream.com right now and sign up for the free trial. If there’s anything you really like or think we can do better, please don’t hesisitate to drop me an email at matt at matt gratt dot com – customer feedback is incredibly important to us.)

Because BuzzStream helps marketers manage their SEO & PR, it would be inappropriate for me to compete with our customers by providing SEO consulting services or building SEO-focused affiliate sites. Accordingly, I am exiting the SEO consulting market and will no longer be involved in Subscription Media Network, my affiliate site holding company. I will no longer be providing these services, but I am happy to refer you to a qualified consultant (who, as almost all top-shelf search marketers do, uses BuzzStream).

So, Why BuzzStream?

In my last post, I detailed how to evaluate a marketing opportunity at a startup. Let me explain how BuzzStream matches up to these criteria.

The Market: Every Company Will Need a BuzzStream Instance

There are a few interesting trends going on in the world of marketing and PR:
- PR & social marketing are becoming more important marketing channels as buyers grow to distrust advertising and increasingly rely on peers, reviews, and recommendations.
- Publications’ audiences are becoming more and more fragmented, and the number of influencers in almost all markets is constantly increasing.
- It’s becoming harder and harder to get coverage and links as markets become more competitive.

For example, in his Supermac war stories, Steve Blank identified his PR goal as producing “5 positive product reviews per quarter.”

Now Steve Blank is (in my humble opinion) one of the best technology marketers of all time. But 5 product reviews per quarter? For a prosumer/consumer tech product?

If you identified this as a goal today, you’d be laughed out of the building. Hundreds (if not thousands) of publications now cover Mac accessories, not to mention the publications that cover graphic design applications, hardware, and the other market segments you’d need to reach today.

This is just one example of the explosion of media and fragmentation of attention. This same big bang like explosion has happened in almost all sectors – from enterprise software to health and fitness – and marketers need dramatically better tools to manage it all.

This is a great market, and will only become a better one as time goes on. And in my (very biased) opinion, BuzzStream will become one of the core set of cloud apps – along with CRM, marketing automation, and web analytics tools – that all companies use to manage their marketing.

The Team

BuzzStream’s team is excellent – from their chairman and advisory board to the executive management, to the staff, BuzzStream’s team are some of the smartest, most driven people I’ve met in a long time.

They’re also fine people and great to hang out with. And most importantly, they’re relentlessly focused on their customers’ success.

The Customers

BuzzStream customers include some of the most sophisticated marketers in the world. (And I’m not just saying that because I was a customer.) From enterprise-level search marketers like HomeAway to top web marketing agencies like Distilled and SEOGadget to great startups like RunKeeper and Apptopia, BuzzStream helps great companies grow.

Working with sophisticated marketers like the teams at these companies is both a joy and an honor, and I look forward to it.

And more importantly, people like the product:


Furthermore, BuzzStream gets great reviews like:

Austin, Texas

Austin is a lovely town – it certainly doesn’t match stereotypes of Texas. They have a burgeoning tech community, talent from giants like Tivoli (now IBM) and Dell, large startups like Whaleshark Media (coupons & deals) and HomeAway (vacation rentals), and great emerging companies like Breaking Point Systems (security), InfoChimps (datasets), and Mass Relevance (social media).

The nightlife & food are fantastic, and when you walk around, it feels like there’s always a Wilco song playing quietly in the background. And if you’re as fond of tacos and live music as I am, you’ve found a great place to spend time.

And did I mention it’s warm? Coming from Seattle, it feels like the weather is beautiful every day. Even better, I’ll get to use the phrase “All Hat and No Cattle” in conversation.

New Channels and New Challenges

In this role, I’ll get to step beyond SEO into email marketing, paid advertising, PR, and thought leadership. I’ll also play a part in customer adoption and churn reduction. Personally, I’ll get to grow my skills and take on some really exciting new challenges.

The Cross-Country Tour

As some readers may know, I currently live in Seattle. I’ll be working out of BuzzStream’s Austin offices, so I’m going to drive from Seattle to Austin. My current route takes me down I5 to Portland, San Francisco, over to the Central Valley, thru Las Vegas, and straight on through Arizona, New Mexico, and Texas out to Austin.
If you may happen to live anywhere along this (vaguely defined) route, please drop me an email at matt (at) matt gratt dot com, and we can meet up for food, coffee, or drinks.

Thanks for reading. Please check out BuzzStream and let me know what you think!

(Opening Image Couresty FAKEGRIMLOCK Under Creative Commons)

How to Evaluate a Startup Marketing Role

When you join a startup as a marketer, you have to be careful. Really careful.

Some non-marketing founders view marketing as a magical potion that can heal a lack of a great product, a great market, and a great team. They think getting some digital ink in TechCrunch/search engine rankings/email marketing/etc will cause the world to beat a path to their door. (Fortunately the popularity of Lean Startup and Customer Development has made excellent progress in killing this belief, but it’s still present.)

This is simply not true – press doesn’t help a startup that’s not ready for prime time. And all the demand generation/demand harvesting/branding/thought leadership/channel optimization/etc. in the world can’t help a startup that hasn’t achieved product-market fit. Additionally, startups with limited markets or markets facing impending obsolescence all spell a limited, yelling-filled tenure for their marketers.

When you look at startup marketing roles, you should ask yourself some questions:

Is this a great market? Will trends in the market drive increased adoption of the product?

As Marc Andreesen says:

In honor of Andy Rachleff, formerly of Benchmark Capital, who crystallized this formulation for me, let me present Rachleff’s Law of Startup Success:
The #1 company-killer is lack of market.
Andy puts it this way:
• When a great team meets a lousy market, market wins.
• When a lousy team meets a great market, market wins.
• When a great team meets a great market, something special happens.
You can obviously screw up a great market — and that has been done, and not infrequently — but assuming the team is baseline competent and the product is fundamentally acceptable, a great market will tend to equal success and a poor market will tend to equal failure. Market matters most.

Sequoia’s Don Valentine offers a similar sentiment:

“I like opportunities that are addressing markets so big that even the management team can’t get in its way.”

The market always wins. At some level, the market is like the ocean – it was there before you, it will be there after you, and it will grind anything in its way into dust. But, like the ocean, if you find a great wave and work with it, rather than against it, you can have a great ride.

Does the company have a great market? How big is it? Will trends drive an increased need for the product in the future? Or will other options emerge that circumvent the company’s offering entirely?

Is the team great – both for the market, and for you? Do you think they can conquer the market? Do you want to spend an afternoon with them?

Conventional wisdom suggests that the team is the most important factor. I continue to think the team is really, really important, but simply can’t overcome a bad market. (And after all, some of the largest startups ever – like Google, Microsoft, and Facebook – were started by college students in huge markets major players ignored.)

With market as the first criteria, evaluate the team. Can they succeed in the market? Do they have significant blind spots, or are they focused on customers? Do they have ‘the skills to pay the bills’? Remember, startups are hard. As Paul Graham says, you want people who you’d describe as animals.

Additionally, you’ll be spending a great deal of time with your team, so it works best if you like the other folks on the team, at both a personal and a professional level.

Is the product great (yet)? Do customers like it? Does the product roadmap make sense?

People really don’t like it when you reposition their companies without their permission. And if the company hasn’t achieved product-market fit, they need customer development, not marketing. If you’re joining a company in a marketing role, absolutely make sure there are customers, they pay consistently, they’re using the product, and they like it.

Perhaps more importantly, see what the customers have to say about it. Do some Twitter searches (Topsy is great for this) and some Google searches, especially for things like “[product name] problems” and “[product name] sucks”. If you find too many negative results, that may speak to deeper problems.

Do you like the customers? Do you like the market?

You can’t be a great marketer serving customers you hate. If you don’t like technically unsophisticated people, don’t sell software to school teachers. If you think IT people are weird, don’t market systems management software.

The more you like the product and like the customers, the better you’ll do. If you could happily drop down into a customer’s shoes for a week or two, you’ll be a much better marketer.

Is the startup in a place you want to live? Is the work-life balance appealing?

Work/life balance – pick a place where you can walk or bike or bus to work and relax, get work done, and destress. Do not sign up for a freeway commute or you will spend your life tired and pissed off and sleepwalking through your day.
You are a person – live and work in a place you like, especially if your friends, family, and hobbies are nearby.

- Michael Wolfe, Founder, KANA, Vontu, I/PRO, & Pipewise
Marketing, for all its appearance of sitting at a whiteboard, spreadsheet, or Word doc, is hard mental work that requires a mix of creative, persuasive, and analytic skills. It’s hard to deliver this if you sleep under your desk and work 100+ hours a week consistently.
And after all, you are a person, and you deserve to be happy.

Will You Learn Something New?

If you aren’t learning a new channel, a new skill, or get to serve in a different role than you have before, it’s not a great opportunity. The world of marketing is changing too fast to specialize in only one channel.
As they say, one trick ponies rapidly become glue.

Thanks for reading! How do you evaluate new career opportunities?

More on Quora

My name is Matt Gratt, and I’m a Quora-holic.
(Hi Matt! The room shouts in unison.)

Just kidding. But I do really enjoy using the Q&A web application. If you love learning new things, it’s a great way to spend an afternoon.

Quora still has issues – I’ve written about those before. Quora’s answer quality is still really strong in some places, but it can be really inconsistent.

It seems that prominent users who write good answers have big networks of other users who write good answers. When these prominent users interact with a thread, it gets placed into the activity streams of other ‘good’ users. Then the answer quality can get really high.

However, when your thread gets low quality answers, these higher quality users don’t engage with it, and the answer quality starts low and stays low. (Upon further research, I see Quora’s Marc Bodnick has given some tips to get better answers for your Quora thread.)

You might call this the ‘broken windows theory’ of Quora threads.

However, in Quora’s defense, it seems that the overall quantity of the answers is improving. And according to PandoDaily, the quantity of content is improving, especially in categories like food and entertainment, life advice, and news and politics. Even JJ Abrams is answering movie questions now.

How to Write Better Quora Answers

While indulging my Quora addiction, I’ve discovered some ways to make your answers even better:

  • Include pictures. If you’re answering a web marketing question, include a relevant screenshot. It’s not hard to draw a graph to describe what you’re talking about in MSPaint or your other favorite graphics program.
  • Use facts. Cite sources. Many Quora users are still largely left-brained Silicon Valley folks – so facts are important. If you can, cite some sort of primary source or provide data.
  • Promote your answers. If you have Quora credits, you can promote your answer to other Quorans. This is a great way to get upvotes, get into more people’s feeds, and get even more upvotes, touching off a virtuous cycle of exposure and upvotes.
  • Feel free to add clarifying statements to the front of your answer. I answer a lot of marketing questions, and as you may know, all marketing is situational. (If marketing wasn’t, all marketing people would have been entirely replaced by interns reading blogs roughly 3-4 years ago.) As such, the answer is going to be very different depending on company stage, market type, etc., so I caveat a lot of questions at the beginning. If you answer vague questions, you can too.

Must-Follow Quora Users

Matthew Carroll

Matthew Carroll is an entrepreneur focused on apparel ecommerce – specifically the operational, unsexy side of ecommerce. He shares great information about financial models, inventory, ecommerce strategy, and more. His writing is frequently featured in Forbes. He even became an advisor to ManPacks based on his Quora answers. And his brand is called ‘Fail Harder’ – perfectly encapsulating the entrepreneurial spirit.

He does a lot of data-backed trend analysis as well – if you like Grattisfaction at all (or at least sometimes), you’ll definitely like his answers.
Great Answers:
How do Subscription Commerce companies manage the fulfillment side of their business?
How Does Gilt Groupe’s Business Model Work?
What is the Next Wave of Innovation in eCommerce After Flash Sales and Private Sales?

Marc Bodnick

Marc is a Quora employee working on product marketing, community, and business operations. He’s a master curator of Quora answers – simply reading his upvotes is like wandering through the sum of human knowledge.
He also co-founded Elevation Partners – the PE firm that Bono is involved in. And he uses a picture of Biggie as his avatar.
Marc Bodnick on Quora
Great Answers:
Why do people sell their businesses to Warren Buffett?
Are two party negeotiations a zero sum game?
When should you trust your gut feeling?

Michael Wolfe

Michael Wolfe is a multiple-time successful entrepreneur, with startups like Vontu, Kana, and I/PRO on his resume. Now he’s the CEO of Pipewise.
He answers questions about entrepreneurship, technical strategy for startups, and life in general.
Great Answers:
What is the best place to host a Startup SaaS?
Has Google reached its prime?
What characteristic of human psychology drives people to be so territorial about their airplane seat?

What do you love and hate about Quora? Who are the best people to follow?

9 Growth Hackers You Should Follow on Twitter

growth hackers on twitter
Image courtesy FAKEGRIMLOCK under Creative Commons

The Growth Hacker meme has finally taken off.

After a couple years of describing myself as a growth hacker and being met with blank stares, things are changing. I’m happy that people may now understand that a growth hacker is a person who can drive customer/user/MRR growth through a sophisticated combination of marketing, technical, and analytical skills. Basically, a growth hacker is a rain maker for the modern web company.

But where can a journeyman growth hacker like me look for advice? Fortunately, there are many prominent growth hackers that tweet, blog, answer questions on Quora, and otherwise share their wisdom. Here are some of my favorite growth hackers to follow on Twitter. (A number of them are CEOs and CTOs – that gives you some idea about how valuable this skillset is to the modern web enterprise.)

Sean Ellis – CEO – CatchFree

Sean is perhaps the original growth hacker – he coined the term. He also was the original VP marketing at some companies you might be familiar with – LogMeIn and Uproar – and helped accelerate growth at WordPress.com, Xobni, DropBox, and Eventbrite. (I suspect there’s some I’m missing.)
Now he’s the CEO of CatchFree – an amazing resource for finding free apps. He also writes the (aptly named) Startup Marketing blog.
Must-Read Posts:
Optimization Mistakes that Kill Startups
My Favorite Online Marketing Tactic – Doesn’t Work
To Pay Or Not To Pay To Acquire Users?

Noah Kagan – Chief Sumo (CEO) – AppSumo

Noah Kagan was the growth hacker behind Mint.com‘s initial growth. He was also an early product manager at Facebook, pushing out many of the features that everyone was incredibly upset about and soon recognized as better, like the newsfeed. (As a Facebook user since Fall 2004, I remember the incredible acrimony around the newsfeed, before it was recognized as superior.) He is now the CEO and Chief Sumo of AppSumo, a company that helps developers get distribution and entrepreneurs up their game. (And like me, Noah went to UC Berkeley.)
Must Read Posts:
Speech at UC Berkeley
How Mint Beat Wesabe
Quant-Based Marketing for Startups

Justin Briggs – Inbound Marketing Leader – Big Fish Games

Justin Briggs is the inbound marketing leader at Big Fish Games. He’s a gifted growth hacker, and has done everything from develop new techniques for visualizing link graphs & site traffic to get coverage in publications like Wired and MSN. Before Big Fish, he was a prominent consultant at Distilled.
Key Posts:
Business Metrics for Link Reporting
Building the Implicit Social Graph
How to Build Links and Drive Traffic with Infographics

Dan Martell – CEO – Clarity

Dan Martell founded Flowtown (acquired by DemandForce), Spheric Technologies, and now Clarity. He’s also an angel investor and a 500 Startups mentor.
Key Posts:
Hustlin’ for Conversions
Content Marketing for Startups
Why Building Great Admin Dashboards Can Lead to Amazing Products

Andy Johns – Product Manager, User Growth – Quora

Andy Johns is the Product Manager for User Growth at Quora. From Quora’s third-party traffic data, it seems like he’s doing a good job:

Before Quora, he worked on user growth at Facebook and Twitter. The scoreboard suggests he did a decent job.
Key Posts:
How Does Quora Manage to Get Such Good Google Search Placement for Its Questions?
What Are Some Top Strategies for Conversion Optimization?
Does Quora Research Its Users’ Behavior?
How Does Andy Johns Bring Traffic to Websites?

Dharmesh Shah – CTO/Co-founder – HubSpot


Dharmesh Shah is the founder and CTO of Hubspot, a large inbound marketing software company. He also wrote the ‘Get Found Using Inbound Marketing‘ book, and the author of OnStartups.com.
Key Posts:
Building a Startup Marketing Plan – Tips in 3 Words
Startup Lessons from 17 Hard-Hitting Quotes in “Moneyball”
Insider Tips from HubSpot’s Launch of Marketing Grader

Mat Clayton – CTO – Mixcloud

Mat Clayton is one of the world’s experts on driving user growth through open graph actions. His startup, Mixcloud, has seen 20% user growth month over month from clever Facebook & Twitter integrations.
Key Presentations:
The Next Level of Social Integration
Social Design

Danielle Morrill – Director of Marketing – Twilio

Danielle is behind Twilio‘s massive adoption and near universal marketing presence. She also mentors for 500 Startups, and shares wisdom about many growth topics, especially business development and successful event marketing. (There is a pervasive myth that PR & BD aren’t growth hacking. Growth hackers don’t exclude any tool from their arsenal.)

Key Posts:
Startup Marketing – 2nd Class Citizen, 2nd Rate Results
How to Hustle SXSW for Fun & Profit
Close the Loop on Your SXSW Campaign & Leads in 5 Steps

Neil Patel – VP Marketing – KISSMetrics

Neil Patel is currently the VP Marketing and cofounder of KISSMetrics, the leading customer analytics provider. (Customer analytics differs from web analytics because it integrates cohort data, CLTV, and other business metrics, rather than reporting on pageviews.) Neil also co-founded CrazyEgg & ACS (a high-performance SEO & digital marketing consultancy). He is also an angel investor, and frequently speaks at conferences.
Key Posts:
10 Lessons Seth Godin Can Teach You About Blogging
7 Business Mistakes That Nearly Broke Me… Literally
Design is Marketing
Are You a Hustler?

The Growth Hacker Twitter List

I’ve thrown all of these Twitter accounts into a Twitter list – you can follow it here. I’ll continue to maintain this list, and hopefully it will become one of the best sources of information on up-to-the-minute growth hacking strategy.

Follow the Growth Hacker Twitter List here.

I’m sure I’ve left some awesome people out – there are a number of great growth hackers at startups like Zynga, BigDoor, Cheezburger Networks, and many others. Who are your favorite growth hackers on Twitter? (Please leave a comment and I will add them to the Twitter list.)

Linkbranding and Influencer Engagement: How to Do It Right

John Doherty recently coined the term “LinkBranding” – moving beyond SEO oriented link building to get links that deliver sustainable brand value. Because these links are for people as well as search engines, they deliver more than just SEO value – they drive relevant, engaged traffic AND build brand equity.

What Does This Look Like?

In great linkbranding campaigns, marketers engage relevant influencers and deliver overwhelming value to them. This is a pretty abstract concept to wrap our heads around, so let’s look at an example.

I was reading one of my favorite startup blogs, Startup Lessons Learned by Eric Ries, and I noticed its great new design. (Eric’s blog is about the lean startup – basically ensuring startups build things people want by using customer development and market validation techniques to avoid the failure of the late 90s.)

But wait! In addition to a new design, there’s this badge from the design company, Digital Telepathy. (I’ve outlined it in red for visibility.)

Linkbranding at its finest

Let’s take a closer look:
digital telepathy badge

This is what great online marketing looks like.

In one fell swoop, Digital Telepathy:

  • Gets in front of an incredibly influential audience of founders, VCs, CEOs, and other executives.
  • Builds trust by associating themselves with a thought leader in startup theory.
  • Gets referral traffic from Eric’s blog.
  • Gets a site-wide exact match anchor text link (things SEOs’ dreams are made of) on a high authority site that will only get better with age.

All for the cost of one custom Blogger theme. And that, my friends, is linkbranding.

What Working at a Startup is Actually Like

While ‘the Social Network‘ gives many people the impression that early stage companies are all fun, games, and wild user growth, that simply isn’t true.

I was watching the videos from FailCon last week and I saw this video from Travis Kalanik, Uber CEO. It is the single most accurate depiction of running an early-stage enterprise/telecom-focused company I have ever seen.

YouTube Preview Image

I suspect working at an early-stage consumer company is somewhat different – you probably spend a lot of time wondering why people don’t come back to your app.

(I don’t want to give people the impression that all investors are duplicitous – many are absolutely on the side of the entrepreneur. It is really quite rare to get sued by your investors.)

Will Pictures Rule the Internet?

Text rules the internet. It has for years. From the early days of BBSes and Usenet to modern SEO-driven sites, the web has largely been an interconnected series of text documents.

But now pictures are making a play for dominance. With the rise of Pinterest, Canv.as, and even more image-driven sites, a new era of communication almost entirely without machine-readable text is upon us.

(This is largely due to technological reasons and the increasingly wide spread of fast internet connections. As the web becomes more media-driven and dynamic, we’ll see structures based on text metaphors fade into the background. We’ll still have text, but we’ll see a growing number of services based on images and video communication rather that long form text.)

In this post, I’ll look at some of the trends in UI design and think about how marketers, product managers, and internet companies can take advantage of this shift.

Are Picture-Based Sharing and Curation UIs Becoming Ubiquituous?

Just about everyone is familiar with Pinterest at this point, but in case you’re not, it looks like this. The UI is basically a stream of pictures with minimal text.
screenshot of pinterest

Pinterest looks oddly similar to Canv.as, 4Chan founder Moot’s entry into the social sharing space:
image of canvas for blog post

We also see this design pattern on highly shared, curation-based non-social sites, like ThisIsWhyI’mBroke:
Screenshot of This is Why I'm Broke

HackerThings, a curated site of merchandise for ‘hacker-type’ people, uses the same pattern. And I want to buy everything on the site:
image of hackerthings

What Opportunities Does This Shift Create?

For Entrepreneurs and VCs

There’s a massive ecosystem of companies devoted to the production, quality assurance, and data mining of text on the internet. All of this functionality will need to be ported to images, and it will be technologically complex functionality to implement.

There will be a generation of companies that extracts data from this new internet of images. These use cases will range from reputation management (is a negative image of your brand getting hot on Pinterest?) to plagiarism checking to Nielsen-style ratings and affinity data aggregation.

Effectively every tool we have for dealing with the internet is built on the assumption that the data on the internet is largely made of text or some sort of form field. As this becomes less true, we’ll need a new generation of image-centric tools, which will create opportunities for a new generation of marketing tools vendors, or at least a very robust M&A environment for these companies.

For Marketers

Every piece of content you create should have a shareable image badge. Where a magazine has a pull-quote, you should have a shareable image. See, for example, this image from Josh James’ blog:

Josh James Shareable Image

If I had a female-focused consumer web app, I would think about getting users to create personalized images (like the Visual.Ly Twitter Infographics) and prompting a shareon Pinterest. I think there’s particularly a lot of potential here with quizzes – give people self-descriptive quiz images and a Pinterest button, and watch the traffic roll in.

For Agency Folk

Find some marketer-designers. Much like agencies of the past few years have found marketer-developers and marketer-quants very useful, marketers that know how to communicate with images will be in demand. (This skill will probably be included in the ‘social media marketer’ roll.) This is a channel that can drive a lot of traffic for marketers smart enough to embrace it soon.

Additionally, get the rest of your marketers some Photoshop classes and some design thinking training. We’re only going to see more data and complex ideas communicated through images to save time, so everyone will need to know how to make graphics work for them.

Increasingly people will link back to your site with an image rather than a headline. If you embrace the curated image, you’ll receive disproportionate returns for the next 6-9 months, after which point it will become pretty normal.

What do you think of image-based sites? Are they here to stay, or a flash in the pan?

Thoughts on #Subcom (Subscription eCommerce)

Subscription Commerce Subscriptions Are Like Getting Presents Every Month

There’s an interesting trend going in subscription ecommerce – where people order goods on quarterly or monthly subscription basis. This is a new reinvention of a very old idea, and lots of cool companies – from Shoedazzle to Guyhaus – are emerging in this market. In this post, I’ll share some thoughts about the nature of the #subcom market and the opportunities it creates.

For background, check out this infographic from KISSMetrics & Sean Percival:

The Rise of Subscription Commerce
Source: Box It Up – The Rise of Subscription Commerce

Curation versus Personalization

The most important part of the customer experience is the box and its contents. Every week when subscribers get their box in the mail, they must be absolutely delighted.

It seems that these companies are taking one of two approaches – either have experts curate the contents of the box, or enable users to select what goes in the box, often suggesting other items later.

There are major historical precedents for both of these models succeeding in media – the book of the month club, which became a huge business in the 1920s and 30s. The other model – of selection with computer aided personalization – helped NetFlix rise to prominence and millions of subscribers.

After a brief analysis of the market, it seems that services targeting a value proposition around deals tend to go with a curation-based model – companies like ShoeDazzle, Birchbox, and Stylemint deliver their value this way. By contrast, companies with a value proposition focused more around value and convenience tend to pick personalization – Manpacks and GuyHaus are examples of these companies.

Both of these models have consequences. With curation-based customer delight, companies have to source and deliver great merchandise that delights the customer. This merchandising skill is the main driver against churn – which is one of the biggest problems subscription commerce companies face.

By contrast, the personalization companies need to execute incredibly and are playing a game based on margins. This makes them vulnerable to players like Amazon.com, who can drive economies of scale with their size.

One Box to Rule Them All

There are a tremendous number of small players in this market, and a few larger ones like ShoeDazzle and Birchbox that are scaling. I imagine there are a number of large companies – both ecommerce companies like Amazon and BlueNile – and traditional companies – like Sephora and Walmart – that are watching this space with baited breath.

However, this sector creates great opportunities for consolidation and exits. I don’t see consumers subscribing to a large number of boxes – it seems like it would be easier for a company like ShoeDazzle to intrude into Birchbox’s territory, and create one box to rule them all. Similarly, I wouldn’t sign up for a subscription from GuyHaus, Manpacks, and a company that delivers razors – I would simply order all of them from one vendor.

Capital Intensity and the VC Opportunity

Subscription ecommerce businesses require inventory and massive subscriber acquisition to scale, neither of which are cheap. While these companies are inexpensive to start (especially if you store inventory, and pack and ship out of a spare room), they’re very expensive to scale.

This creates a major opportunity for venture capital investors to add value. While web companies are getting cheaper to start and scale due to the growth of open source software and free distribution platforms like Google, Facebook, and Twitter, these subscription ecommerce companies are still costly to grow.

Expect to see some major venture wins in this space as ShoeDazzle and others get acquired by forward thinking retailers, or become large retailers themselves.

Economic Sensitivity

It seems to me that these companies as a whole are very vulnerable to the economic environment, and the onset of a double-dip recession in the United States could really hit this whole category. I don’t see people keeping a $40/month shoe subscription through tough economic times.

What Do You Think About Subscription Commerce?

 
(Image of Present Courtesy Fazen Under the Creative Commons License)