"We will see another company that seeks to become a modern Web-based customer acquisition engine for small businesses, likely relying on discounts and coupons. It may look a lot like Groupon — if it’s close, it’ll be met with wild derision. But at some point, someone doing this will succeed. And give it a few years, but people will try again. The need is just too big and Groupon’s execution was too obviously flawed."
The transaction gives us the scale to be a sustainable independent local marketing oriented company that is just a bit below all the noise of Groupon/LivingSocial and the exit requirements of their capital structure.
We are large enough to have staying power and still nimble enough to effectively pivot.
We have the flexibility to create offers that stand out for consumers and have uncovered other ways to drive online acquisition for local businesses.
We can make money beyond the initial offer to our consumers, from our core customer, the merchant.
We are moving beyond merely online couponing to post couponing customer retention.
We are giving our merchant partners the ability to drive incremental revenue.
We execute on these basic premises we succeed. It is all about execution.
One of the great misperceptions that people in the startup world have when it comes to marketing is that issuing a press release will result in people writing about your news. Nothing is further from the truth. The vast majority of press releases do not result in news coverage. It takes a little more work than that to get noticed. I am going to use the recent Half Off Depot acquisition as a case study.
We closed the deal mid January. We had planned to announce sometime in mid-February. At the Half Off Depot February board meeting turning the transaction into news became a topic of discussion. Here was our general plan.
We were to drop the release at 10:00 am EST on Monday February 11. At that time I personally put it on the wire using PRWeb.
But before putting the release on the wire we reached out to four national technology news outlets that we targeted. We provided them with some details of the release and offered to share it with them under embargo. Embargo tells a reporter they can not publish anything before the embargo time date. You have to slap this on the release in large font red letters. The embargo time/date we used was 9:00 am EST on Monday February 11. This gives a reporter a jump on the release, an opportunity to break the story. It gave us an opportunity to figure out who, if anyone, would be our national lead.
After getting this cranked up and some interest from two of the four targeted nationals I reached out to the trade press. In this case Street Fight and Daily Deal Media. We gave them a 9:30am embargo. I did not want them to dork up the national publication coverage. If a national sees local before they publish more times than not they will kill their story.
I also selected local press in Atlanta and Tampa (home of CrowdSavings) and did the same as with the trade press. In Atlanta I focused more on the Atlanta Journal than the Atlanta Business Chronicle because I thought I could get the former to bite and they are a bigger outlet with broader reach.
We did this ourselves, because if you can get a hold of them, a reporter is much more likely to listen if talking to management instead of a public relations firm.
This all worked.
All Things Digital turned into our national lead, publishing their story at 9:00am. That was picked up by VentureWire. It became a reference point for the locals and trade writers to update their stories. All, to remind you, before Half Off Depot officially released any news. This was also picked up by Pando, another of our target national outlets.
So it worked. The key is talking to reporters who you think might have an interest before you issue a release. I am not really sure you need the release at all. It is mostly a tool used as a basis to start a conversation with reporters about your news.
If it works for me, and I have seen this type of thing work countless times, it will work for you.
Update: My dear friend and marketing maven Erika Brookes provided great strategic directon on how to get news coverage of the CrowdSavings transaction. Or put another way, she told me how she would approach it and I did what she said.
It is a union that has been a long time in the making. Seems to me that most deals work that way. I first approached CrowdSavings CEO Chad Jacquays about a how we might work together strategically in April of 2012. We kinda sorta know we were going to do it around Thanksgiving and the transaction closed mid January. Once we got real serious it took a solid two weeks to get it closed. Truth be told the transaction itself was more of an acquisition then a merger.
But putting the companies together is another story. Chad and Doug Bauer, the CrowdSavings CFO, have built some solid systems and a solid team that are going to make our combined entity much stronger. Going forward we are going to be using best practices which is always an interesting exercise.
If you follow me on Twitter, you know that I have been tolling on creating an employee handbook for Half Off Depot. Mostly on Saturday mornings. And I told some people that I would publish it when I finished. Well I can't do that.
As it turns out section 6.2 of the Half Off Depot Employee Handbook addresses the issue of confidenitality. And it states restricted documents can not be given to a person outside of the company. The Half Off Depot Employee Handbook is marked confidential. I can not share it without violating the provisions of a handbook I wrote. Go figure. I guess the next best thing would be to tell you how I went about creating the 30 page beast.
So when I started at Half Off Depot I was employee number 21. We had an employee handbook. It was designed for a company with about 20 employees. The big driver of the project was that we were quickly going to be approaching 70 or so employees. They needed some rules. I started with that designed for 20 people handbook. But I needed more, much more. So our corporate counsel provided a very legal cover every base handbook that was just way too serious. Way.
But it was a good outline. I just had to move all the super legal cover your bases to the back. Employees don't care about EEOC BS (and BTW I guess at this point I should state that I am a big believer in acceptance and diversity). Employees want to know work hours, vacation, and holidays.
So started asking folks that I know at similar sized companies about their handbooks. Three people that know and trust me quite well offered to provide me with copies of their handbooks as long as I never ever shared them with anyone else. While I would like to publicly thank them I fear that might even break a confidence. Thanks boys and girls. You know who you are.
Well it took me a little while to realize this but it just so happens one of the folks that provided me with their company handbook share the same corporate counsel that we use at Half Off Depot. It was way less stuffy and boring but covered the important topics. I took those two handbooks and combined them in a way that Half Off Depot actually operates on a day to day basis. When I was finished with that I compared the result with the other three I had at my disposal. Filled in a few potholes. Thing of beauty. All in it took me about 40 hours to get it together.
So the way to create an employee handbook is to get your hands on some and adapt them to the way you operate your business. It really is as easy as that.
For example, daily deals have the lowest average campaign open rate at 19%, while religious newsletters have the highest at 48%. Overall, photo and video businesses engage users extremely well from both an opens and clicks perspective.
From an abuse perspective, the construction industry, interestingly enough, has the highest abuse and hard bounce rates. Daily deals actually have some of the lowest unsub, abuse, and bounce numbers.
So why would daily deals have some of the worst engagement but some of the best scores regarding negative feedback? First of all, if you’re being flogged deals each day, there’s a chance you’re going to disengage, become a zombie, relegate the mail to a folder, etc. By that same token, however, you’re too disengaged to unsubscribe or click the spam button. The mail is just background noise to be ignored, both positively and negatively.
I think their analysis here is right on. We send a lot of email at Half Off Depot. Something in the range of 50 million messages per month. Our open rates are low, our unsubscribes low, and we get little negative feedback.
Thought it would be helpful to share my Venture Atlanta presentation. Eleven slides to tell the story in six minutes.
Put this together starting with a blank in about a week. Few words. Large fonts. I wanted people to pay attention to me, not the slides. I wanted to freedom to modify the words of the presentation after it was submitted. I actually thought about using no slides at all but was talked out of it.
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So on Wednesday I wandered down to the big fish tank for Venture Atlanta. A fine event. One of the best of startup things a guy, or gal for that matter, can do. I was there as the non-paid entertainment, pitching Half Off Depot as we gear up for our Series B in 2013.
And I gotta tell you the truth it was a little surreal. I skipped Venture Atlanta in 2011 as I was running around the Southeast expanding our business. But before that from the year it was formed in 2007 through 2010 I attended the event for the lack of a better term, an observer. I was not pitching and I was not investing. I was coaching the companies that presented. It's a fun job if you can get it and it's always easy to be a critic.
And it started out the same way as it always had. At some point or another I had coached six of the first ten early stage companies to present. They did great.
But coaching and doing are two distinct things and I was slated as the second venture company to present right after my pal Braxton of Clearleap. I had not stage pitched my own company since 2005 and the last time I did something as big as this was when Venture Atlanta was known as ION and somehow I got elected to pitch CipherTrust. I got elected again.
I was a little like the President the first time back in the bright lights and a room full of people. Rusty. It really sucks when you can not see how the people that you are speaking to are reacting. Instead of a confidence monitor with the slides they need a confidence monitor with a camera shot of the audience. Regardless I think I got my main points across. We are building a platform that enables local merchants to market online, we have a lots of revenue, we are making money, and with a little more capital we can sell more and make more money. Overall I gave my performance a B. There were better and there were worse.
My friend Taryn of Synkup gets best of show (or at least best of Wednesday) from me. I don't know if she is going to raise any money but that girl can pitch.
The early stage folks seemed much better prepared than the venture companies. I ascribe this to them having more time on their hands.
Presenters wore jeans. We are learnin to relax a bit down here.
Venture Atlanta is a great forcing event. It forced me to create an executive summary. It forced me to create a pitch. It forced me to practice.
The networking time with the VCs was fantastic. Talking to them about our business was more practice. They asked great questions, some for which I had no answers (but I will get them), and I got an offer or two to help.
It was great to spend some time networking with folks that I had not seen in awhile.
Some of the folks that I had not seen in awhile (which is almost like two years) were in the exact same place with their startup as they were two years ago. If this is you stop.
There was one out of town investor that said "all the pitches sucked." Tool.
Sam Williams talks too much. He talks so much the mayor called him on it.
Not sure how many if any checks get written as a result of a conference like this.
If you get a chance to present at something like this do it. It's worth it. And if you do it take the time to do it well.
Update: I forgot one thing. The coach became the player. I benefited greatly from my coaching session. Great ideas for improvement from experienced entrepreneurs and investors that I tried to incorporate into my presentation and slides. You can always learn and should be willing to do so.
When my kids were a bit younger and they brought home those straight A report cards we would always make a beeline for Jake's Ice Cream Midtown for a tasty treat. I would even indulge, which is quite the rarity.
Jake's closed their Midtown and some other locations during the recession. Jake, he is a real guy, is back with a new model. Home delivery. They are extending their delivery area today from their Old Fourth Ward neighborhood to all of Atlanta. And they have chosen Half Off Depot as their launch partner.
I got to test the offer. Did not get bite of what they delivered. Kids devoured the stuff. Great flavors like Chocolate Slap Yo Mama, Brown Shugah Vanilla, Sin-oh-Man, Red Velvet Cakescream, and Coffee & Donuts.
Six pints of yummy Jake's Ice Cream for $15. Half Price. Delivered for free. And for every order Jake's is going to donate a scoop of ice cream to a child at Scottish Rite Hospital.
Yesterday Groupon shares tumbled more than 10%. The stock is down 67% since the beginning of the year and 74% since its IPO last year. On top of this performance there are a mass of stories that question if offering a deal is good for small businesses. Mostly anecdotal stories such as Wafflegate. The end result is widespread concern about the viability of the online deal industry with dire predictions for the companies that participate in it. Predictions that are predominantly based on the performance of a single company that seems to have continual execution issues. However when the industry is put under more rigorous analysis, there are a number of positive signs for the market.
The percentage of merchants making money off a deal jumped 6 percentage points to 61.5%.
The percentage of new customers a deal attracts remains unchanged at 80%.
The deal site share of revenue increased by 2.5 percentage points to 45%.
The incidence of profitable daily deals increases with the merchants prior level of deal experience.
Deals appear to be sustainable online marketing programs for 30% of businesses.
Deal site loyalty levels are low (which is a positive if you are a challenger brand).
Some of Dholakia's conclusions from the data collected in the study.
"On the whole these results are encouraging for the daily deal industry. They provide no evidence to support the conventional wisdom that daily deals are working less effectively for businesses than they did in the early stages of this industry's evolution. Nor do we find the daily deal industry to becoming weaker in its pricing power."
"Daily deals continue to remain effective with repeated use, and marks the first such evidence to our knowledge that daily deals can be sustainable marketing programs for at least some businesses that use them."
And he concludes with:
"Our results find little or no evidence of deterioration in the performance of daily deal promotions over the past year for small and medium-sized businesses or with experience as the business operator runs multiple daily deals."
What I am seeing in the performance of Half Off Depots supports this conclusion. Sales are up, margins are not compressing, merchants come back to do more deals, and many merchants have made our program the core of their online marketing effort.
The reports of the online deal industry's death have been greatly exaggerated.
Last week I celebrated my first full year at Half Off Depot. It has been a pretty amazing first year. Some of the stuff we have accomplished, purposely partially masked through statistics.
We raised $7 million via venture capital and $1.5 via venture debt.
Subscribers have grown by 450%. Over 200% in 2011 and over 150% YTD in 2012.
We expanded from two MSAs in which we are actively marketing local deals to nine today. We also extended into national product deals.
Revenues doubled in 2011 from 2010 and are a pretty solid growth path for 2012.
Employees went from 21 then to forty something. The employee growth was not smooth. I fired a founder, an interesting experience. Our VP of Marketng and CTO left the team and I had to step in to lead those groups directly. Truth be told I terminated more people in the last year than in the previous ten. Startups are not all fun.
Half Off Depot turned cash flow positive. A heroic feat if you saw our financials in the fall of 2011.
Began a pretty large scale technology transition.
Made two asset acquisitions. One for a company called Dealster and one that has yet to be announced. There is a good path here for a well funded cash flow positive company.
So money in the bank, a rapidly growing member base, which brings about big revenue increases, employee growth, and a healthy bottom line in a mode to play consolidator.
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