• 04Feb

  A Leaner, Meaner Start-up?

  Posted by mark @ 6:03 pm in General No Comments

  I came across a great post by Stacey Higginbotham over at Giga-Om this week that highlights the struggles of the Venture Capital industry over the past decade and questions whether we need a new, smaller definition of success for a start-up that doesn’t include $100m in VC funding and an IPO.

  I think our experience with Jellyfish.com, and now Alice.com demonstrate that Stacey is right, and maybe wrong at the same time.

  The Jellyfish experience is exactly what Stacey is talking about.  We founded and sold the company to Microsoft in 18 months, without Venture Capital and with a sizeable investor return (the sale was widely reported to be for $50 million).  As Stacey writes “Maybe the ideal technology startup isn’t really about making it big through an initial public offering. Maybe it’s about selling a compelling feature to a larger company and setting the agenda at a Google or a Microsoft or a Cisco.”  Exactly.

  In contrast, Alice.com, our current start-up, presents a counter Stacey’s new start-up animal.  To date, we’ve avoided VC (raising around $10m in common stock thus far), but we’re going after an enormous market (Consumer Packaged Goods) and building a platform that isn’t easy to start from scratch.  The potential rewards are huge, but this isn’t a quick hitter.  We are taking a big swing that is going to take a big investment, even with the decreasing costs of starting a company.  Raising a quick angel round just isn’t going to cut it if we are going to realize the potential opportunity Alice presents.

  My take: the start-up funding environment is certainly changing, but there are still plenty of opportunities for both small scale and large scale investments in the market.

• 29Jan

  Building Credibility in Your Start-up—Lessons from Mint.com

  Posted by mark @ 11:48 am in General No Comments

  Want a piece of start-up advice that you might not have heard before?  Make sure you hire a very good graphic designer as one of your first employees. Don’t cut corners in this area and don’t outsource.  Period.

  I learned this very early in my career from my business partner Brian, and I really believe that it has been a critical element of the success we’ve had at NameProtect, Jellyfish and now Alice.

  I came across a blog post from the former lead designer of Mint.com recently that reminded me of this point.  The post (here) highlighted several important reasons that the Mint team succeeded in the market and ultimately exited for $170 million.  Not bad for a two year old company.  The post raises lots of good points, but the big familiar takeaway for me involved the precious commodity of credibility.

  Like any start-up, Mint.com’s big challenge was to establish credibility in the marketplace.  To get folks to trust them enough to do business with a totally new company, and in Mint’s case, to enter their guarded financial information.  How did they do it?  Jason mentions two key things:

  • Great Design. “Design has given us the credibility we need to overcome the downsides of being the new kid on the block.  It isn’t easy to convince people to give their credit card numbers to a company with a dot.com in its name, let alone all of their online banking passwords.  Design matters.”
  • Get the Media to Tell Your Story.  “We abandoned all paid search and concentrated 100% on PR and organic search.”

  These are great lessons for anyone launching an online start-up, and I couldn’t agree more with Mint’s approach.  In fact, we’ve applied the exact tactics in our start-ups, and it really starts with hiring a great graphic designer to make your product or service come to life.  Without good design, you create a huge (and unnecessary) risk that your initial customer prospects, media, etc., will question whether you’ve got what it takes to succeed.  If you look like the shaky new kid on the block, you’re probably never going to get anyone to take you seriously and you’ll have a very difficult time building the momentum needed to succeed.  Bad design is the kiss of death for an online start-up.

  Alice.com is an example of the benefits of good design.  We hired a fantastic designer as one of our first 10 employees.  And we leveraged his design to build a brand and establish credibility with investors, partners, customers and media.  Like Mint, we’ve also stayed away from spending lots of marketing dollars in paid search, instead focusing on media coverage (social and traditional).  The strategy has worked really well and our customer growth has been ahead of expectations because of it (you can see our growth from our launch in June 09 below).

  

  There are lots of things that have gone into this growth, but without good design, it would have been much harder, if not impossible, to make this happen.

• 18Sep

  The Alice.com Launch-Part I

  Posted by mark @ 5:07 pm in General 2 Comments

  Our team successfully launched Alice.com on June 23rd, 2009—a little over a year after Brian and I started the company.  I’m going to devote a couple of blog posts here on Flywheel to the launch experience and some of the key takeaways from it.  In this first post, I’ll talk briefly about how the launch of a new company is one of the best parts of being an entrepreneur.

  Day One—Starting from Scratch

  Here’s a great picture of Brian, sitting in our empty office space on our first day on the job with Alice.com last June, contemplating what we had just signed up to do.

  

  We had just left the safety and security of our roles at Microsoft.  A place with great resources, lots of smart people, and a seemingly endless supply of customers.  Now we had no employees, no company name, no salary, nothing to sit on, and a general idea about selling toilet paper on the Internet.

  Fast forward to today—Our team accomplished an incredible amount in the time since this picture was taken.  We raised money, hired a bunch of amazing people, refined our business plan, created the Alice brand, developed the website user experience and  back end systems, set up a fully functioning warehouse and eCommerce fulfillment operation, and launched Alice to the world.

  This picture really illustrates the allure of the start-up for me.  Last year, all we had was an empty office and an idea.  Today, Alice is an exciting new company with real customers, a unique value proposition and a disruptive business model (you can read all about our model here)   There are a lot of drawbacks to the start-up world, but building something from scratch like Alice is a remarkable experience and one you won’t forget.

  Launch Day

  Launch Day—at no time is the thrill of the start-up more acute than when you flip the switch and unveil the company to the world.  Rebecca Thorman, our PR and Communications Manager, did a great job of covering the excitement of launch on her blog Modite here.  It is exciting/scary/thrilling/overwhelming all wrapped up into one 24 hour period.  And it’s something that I’m sure is difficult to replicate in any other type of job.  It’s big part of the experience that makes being in a start-up so great.

  

  Alright, that’s enough cheer leading for the start-up life.  In my next post, I’ll dive into the business goals of the launch and highlight some of the really important things we did to meet those goals.

• 15May

  Why Microsoft Cashback is Working

  Posted by mark @ 1:07 pm in General 1 Comment

  According to a post today from Nielsen online, Microsoft’s cashback program is working to provide a source of sustainable and growing traffic for Msft.  Because Jellyfish.com created the technology and platform used by Microsoft to launch cashback, this is great to see.  

  Here’s my two cents on why cashback is working, and what Msft needs to do to fully capture the opportunity.  

  Why is it working?

  The paid search system became a cash cow for Google because it allowed Google to capture and sell off the thoughts and intentions of its users on a performance basis.  When I search on “Florida vacation”, for example, I’m effectively telling a bunch of advertisers what I’m interested in at that moment.  Google (copying Overture’s model) created a robust market for that intent.  This system creates amazing profits for Google, but there is a major limitation; the end consumer doesn’t get to participate in this giant market for her attention.    

  In contrast, the cashback program brings the end consumer directly into the advertising value chain for the most valuable kind of search–queries with commercial intent.  Use cashback when you want to buy something and Microsoft shares advertising revenue back with you.  The end result of this is that more folks use Live search for commercial queries, leaving Google with non-commercial search traffic (e.g., when I need to find the address of my local public library I go to Google, when I’ve got my credit card in hand, I search at Live cashback).  The data published by Nielsen backs this up, showing that Live Search is the most efficient engine at generating sales for its advertisers.  This is small now, but think about what happens if Microsoft can continue to siphon off commercial queries, and the big amount of ad dollars chasing those queries.  

  What Next?

  Aside from the obvious things (like continue to create brand awareness and better functionality for users), one element to watch is whether Microsoft can create competition and liquidity in its cashback advertising system.  If advertisers begin competing for sales on Live Search by increasing their advertising spend (what they are willing to pay for a sale on a product), the end result is that consumers will get lower net prices than anywhere else on the web.  This advertising competition is what made Google’s revenue ramp in the pay per click system: advertiser competition meant that many keywords on Google went from pennies per click to dollars per click over time.  If this happens in the cashback system, both Microsoft and the end user benefit, creating a virtuous cycle of more users, more searches, more advertisers, lower prices, more users . . . . you get the picture.

  I hope Microsoft can pull it off.  The death of traditional interruptive advertising is creating amazing opportunties, and cashback is just one example of an ad system that directly benefits the end consumer.  

  Brian and I are working on this theme again at Alice.com, this time in the Consumer Packaged Goods space where manufacturers spend billions of dollars a year on traditional advertising.  Alice is launching next month, and we’re excited to start talking about ways those CPG ad dollars can start working more directly for the consumer as well.   

• 03Apr

  Whiteboarding the business model

  Posted by brian @ 10:09 am in General 4 Comments

  We are working hard on putting all of the final pieces together to get Alice.com ready to launch.  Of course, like any startup things change at a torrid pace and the Alice business model is no exception.

  At a recent meeting with the Alice management team we went over the finishing touches of our revenue plan.  After the meeting was over I looked up at the white board to get a sense of what we accomplished and the image below is what I saw.  I then proceeded to wonder if we actually accomplished anything.  Believe it or not it was a very productive meeting.

  

  In some ways I thought it was a piece of startup artwork.  If you really look at the whiteboard image again it could be easily confused with the Whiteboard image below.  They aren’t that far off

  

  To follow Alice in more detail be sure to check out the following options

  Alice Twitter page – http://twitter.com/alice

  Alice Community Blog – http://blog.alice.com/

  Alice Company Blog – http://company.alice.com/

  Brian

• 20Mar

  Alice Blogging-Part Deux

  Posted by mark @ 11:29 am in General No Comments

  I’m happy to announce that we’ve launched an official company blog for Alice.com here.

  

  We hope to use the company blog as a place to announce official company news, and to engage in discussions about eCommerce, online advertising, and why everyone should buy toilet paper online. We hope you stop by and say hello.

• 26Feb

  Alice has a Blog

  Posted by mark @ 3:33 pm in General 4 Comments

  We hope to develop a strong community of users at Alice.com. Step one of that effort kicks off today with the launch of our Alice community blog. If you are interested in the strategy behind this effort, please keep reading. If not, this is a really short post–I hope you use your extra time to check out the Alice blog, start following us on Twitter, and learn more about why we love toilet paper.

  Marketing is about doing something for people

  I watched a very interesting presentation by John V Willshire yesterday that captures a lot of what Brian and I think about the future of advertising, especially for start-up companies. The presentation is here (thanks to paul isakson for the find). I’d sum up my view of this presentation as follows:

  • Marketing has always been about connecting people with companies
  • In the pre-Internet days of mass produced, broadcast media, the easiest way to make that connection was with interruptive advertising
  • Then the Internet arrived, and marketing started to lose the mega-phone it held to yell at people to buy stuff
  • Without that mega-phone, marketing now has to add value to get people to pay attention
  • The result: if you actually do something useful for people with your marketing budget, they have the power to make more meaningful connections for you

  This is especially true for the start-up. If you’ve got the next great product, the best way to introduce yourself isn’t with mass marketed, interruptive advertising. You’ll lose that game to a big company. The best way forward is to work really hard to be useful to a targeted community of users that will respond to what you are doing and will use their connections to spread your message.

  The Alice community blog is our first step in this process. It’s an effort to spend our marketing resources engaging with people on their terms and in ways that (hopefully) enrich their lives. Please let us know what you think.

   

• 09Feb

  Smack Shopping R.I.P.

  Posted by mark @ 8:03 pm in General 19 Comments

  It was sad to see the news today that Microsoft has made the decision to shut down the Jellyfish Smack Shopping service.

  This doesn’t come as a great surprise, as the published focus of the Microsoft acquisition of Jellyfish was to jump start what has become their Live Search cashback program and deliver a more customer-centric form of advertising to online shoppers. So although Smack Shopping is wrapping up, Jellyfish appears ready to live on in the Live Search cashback program. Brian and I think that cashback can be a game changer for online advertising, and remain excited to see what Microsoft is able to accomplish with the program.

  Nonetheless, it is hard to see Smack Shopping go. From the start, the Smack Shopping community was fantastic. The talented team at Jellyfish worked really hard to deliver a unique shopping experience with Smack and the community responded, rewarding us in ways we didn’t even think possible when we launched the service. I’ve never seen a more loyal and engaged community of users online. All Brian and I can say is thanks to everyone who was involved. It sure was fun while it lasted. And we hope to see you stop by and say hello when Alice.com launches in a few months. Who knows, maybe even SD will be there.

  So in honor of Smack Daddy (and Carl), here’s a toast to Smack Shopping and the Smack community. *Don’t wait too long buddy. Because once it’s gone, it’s gone

  

   

  (Disclaimer: Brian and I no longer work at Microsoft and the opinions expressed above are from us individually).

• 03Feb

  Alice.com in Private Beta

  Posted by mark @ 4:34 pm in General 10 Comments

  Alice is beginning to come to life. We kicked off our first test of the service today, complete with a spiffy new beta web page.

  

  Our beta test will begin with a core group of friends and family and expand from there. If you are interested in participating in the beta, you can sign up on our site right here.

  We have never launched a company with a closed beta test, and I’m already feeling the benefits. It seems like quite a luxury to kick things off behind closed doors, learning and tuning the user experience before our official launch.

• 16Jan

  Make Versus Buy

  Posted by mark @ 5:27 pm in General 5 Comments

  If you read this blog, you know that we believe that one of the only advantages that a start-up has over the big boys is the ability to execute quickly. As I mentioned in my post on the 3 advantages of a start-up, if you get there first good things can happen.

  Jellyfish.com is a great example of this. Microsoft saw our head-start with a new search advertising model and decided to acquire the company to launch its Live Search cashback service.

  Throughout the Jellyfish experience, we got many questions that went something like this: “won’t a big search company see your idea and just do it themselves?” Seems like a fair question and one we certainly considered.

  But the reality is that big companies often perform a “make versus buy” analysis whenever they decide to launch a new innovation or enter a new market. Sure they have the money and employees to do what the start-up is doing. But big companies have big competitors too, which creates pressure to get to market fast. This time-to-market pressure often means that they put a premium on acquiring that start-up with the head start. That head-start can mean the difference between success and failure.

  This concept came into sharp relief today as I read this Wall Street Journal article charting some of the early mistakes Microsoft made in the search wars that allowed Google and Yahoo! to become the two dominant search advertising companies. One central mistake was a miscalculation in0 this “make versus buy” analysis.

  Microsoft had the opportunity to buy Overture, the early market innovator in paid search way back in early 2003, a move that would have given them a huge head start in paid search. But the company balked at the billion dollar price tag, instead believing that they could build the system themselves.

  The result of Microsoft’s decision? Yahoo! snapped up Overture for more money, and Google and Yahoo! established themselves as the dominant players in search advertising before Microsoft finished building their offer internally. Microsoft has played catch up ever since, and will likely end up buying the Yahoo! search business for a lot more than that early acquisition of Overture would have cost them.

  Lesson for entrepreneurs? If you have a window of opportunity to innovate in a market first, then do it! Get there first, build value, and good things can happen.

  

   

   

   

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