Ah-ha 2.0

Coupang is one of the fastest growing e-Commerce companies in Korea. With over 11 million users, the Company has already achieved an annual revenue run rate of $700 million to date.

Opportunity

Coupang is looking to build a team of top talents and provide them with an unparalleled experience in eCommerce with the longer-term objective of creating the next generation of leaders for Coupang’s future businesses. For more detailed information on Coupang, please visit our website at www.coupang.com .

Job Title

Senior Manager : Strategy and Corporate Development

Job Description

Business Development Team will be responsible for developing and executing strategic initiatives for Coupang.

Take responsibility and drive all activities required to launch a new businesses, including:

• Verify business case and conduct market analysis
• Develop and implement organizational structure
• Develop and execute on marketing and PR strategy
• Implement IT setup
• Key accounts management
• Other company-wide strategic initiatives

Skills/Qualifications

• Self motivation and multitask capabilities

• Excellent leadership and interpersonal skills

• Strong ability to prioritize and organize

• Strong ability to analyze market trends and business models

• Quantitative skills to interpret business data and draw conclusions / implementation plans

• More than 3 years of experience in business development / management consulting, overseeing
major projects and leading teams or working with senior executives

• Must be able to communicate well in both Korean and English

Contact information
For more details please contact Kevin Chung at kevin@coupang.com

So I read this morning about FirstMark Capital leading a $7.5 million round in social shopping start up, Sneakpeeq.  I decided to go to the site and check it out.  Sneakpeeq aims to replicate the experience of flipping over a price tag when shopping for items in a retail store.  Sneakpeeq doesn’t tell you the price instantly when you visit a product’s landing page instead you have to click a “Peeq” button to find the price. The site features items that are similar to what you would find at Fab.com.  At first I couldn’t figure out why they would have you “Peeq” each time you wanted to see a price.  Why would you want to replicate an experience of fishing for a price tag?  That is a barrier to a purchase decision not an enabler.   And then the light bulb went off!  They were using the Peeq button to basically get you to post to your Facebook feed to create virality.  Let me walk you through what they are doing:

Step 1 – You have to use Facebook Connect to Join SneakPeeq.  No other option!

Step 2 – You are then told that you are going to get Discounts for Sharing with your Friends

Step 3 – They give you a Badge that gives you a $10 Credit once you join.

Step 4 – You have to hit the “Peeq” button to see the price.  Since you just got a  $10 credit, you want to see what you can get for super cheap.  I check out 10 products just to see how cheap I can get it.

Step 5 – Everytime I hit the Peeq button, I didn’t realize that I posted it in my Facebook feed each time!  I just posted 10 items in my feed.  Remember I had to use FB connect to use the site.  Most likely at least 1 of my friends will join and do the same exact thing to their friends.  Let the virality begin!

If you understand the viral coefficient or K factor, the goal is to get to >1.  That means for every person that you get to use your site, they will refer at least 1 other person who joins.  If you can’t get to >1 then it is not truly viral.  If you get it >1 and especially > 1.3, your site will grow very quickly.  To get there, you need to try to “infect” as many people as possible.  For a site that means you need to get some kind of messaging to as many users as possible as often as possible.  This is the problem with the usual implementation of the “Share” button.  When people shop they rarely share therefore it never really goes viral.  However, in this “Peeq” mechanic they are making you basically share everytime you check out the price.  You are basically sharing whether you really intended to or not (and most likely you didn’t intend to in this mechanic).

So did it work for Sneakpeeq?  Well based on this Compete traffic chart it looks like they made some of these changes at the end of last year and it is working.

We saw a very similar tactic used by Pinterest.  If you have used Pinterest which most of you have, you had to join by using Facebook Connect.  At that point, everytime you pinned it would show up in your feed.  Probably not a surprise that FirstMark is an investor in both Pinterest and now SneakPeeq and they understand this mechanic very well.  This is not meant to be disparaging to FirstMark.  They are a very good venture capital firm.  I hold them in very high regard.  However, has SneakPeeq crossed the line here?  Is this really social commerce or is this just using Facebook to spam your friends.? I am not saying it’s not a good short tem marketing tactic.  Zynga built their business on spamming Facebook users and getting to a level of scale where when Facebook shut those channels down, they were left as the kings that no one could dethrone.  They are now a $10 billion market cap company so its hard to argue that it wasn’t worth it.  I have a feeling we are going to see a lot more of these type of tactics this year.  Remember seeing Farmville and other games in your feed.  Get ready for tons of ecommerce posts from your friends and they didn’t even realize they were doing it.

I probably have met with over 100 start up entrepreneurs this past year and with each of them I asked “how do you plan to solve distribution?”.  I was incredibly fortunate to have built Community Connect Inc. during a time when you built unique and valuable Web properties then people would just come.  There is so much noise out there now that the strategy of getting to your end customer needs to be well thought out and executed.

A common piece of advice that I offer entrepreneurs is to find distribution opportunities where there is much greater supply of accessing your customer versus the demand.  Time and time again, you see businesses that take advantage of a temporal period of such distribution dynamics and build their companies to scale giving them a long term competitive advantage.  Here are some examples:

1. Zynga – there was once a time when Facebook allowed you to build apps on Facebook and basically massively spam your friends who in turn would spam their friends.  They basically built their business on the largest free and legal spam platforms.  Zynga’s massive success was born from taking advantage of that opportunity and growing Farmville to over 80 million Monthly Active Users.  Eventually, Facebook changed their rules of how you can message users and that SPAM opportunity  quickly went away.  However, with that initial large user base, Zynga has been able to replenish their stable of games and maintain their customer reach.  At the same time, other game publishers are locked out from building their own large customer base.  The Facebook spam window closing has created a massive barrier for other social game providers to penetrate the market!

2. LegalZoom – I had the pleasure of meeting with Brian Lee this past summer.  Brian is a very successful serial entrepreneur who founded LegalZoom and most recently founded ShoeDazzle.  Brian told me a story of when LegalZoom first started that they were one of the first to try PPC advertising on Search Engines.  At that time, GoTo.com was the only player in the space and they were able to buy clicks at $.01.  To give you perspective, I am sure the terms they were bidding on are now fetching PPCs that are well north of $1.00.   GoTo.com was hosting a user group meeting of some of their most active customers.  Brian was sitting next to someone who asked him how many different keywords he was buying.  Brian thinking that he was a pro at SEM (Search Engine Marketing) answered that they were buying dozens.  He then asked back how many that person was buying and he answered “Ten Thousand”.  Brian was shocked.  He asked that person to show him what they were doing.  Luckily, they were not in a competitive businesses so the person showed him.  Brian went home that night and started expanding his keyword campaigns.  LegalZoom invested heavily in SEM including building their own bidding and optimization technology.  LegalZoom became the leading player in online legal documents by taking advantage of incredibly cheap SEM allowing it build to a level of scale that other players are able to match.

The marketing opportunities usually don’t last long because eventually demand catches up with supply.  However those that take advantage of these opportunities usually build their businesses to a level of scale where they now have more resources to invest in the product and service making them superior to their competitors.  With an existing large installed base of customers and strong brand recognition and less friendly distribution opportunities for their competitors, they then are in dominant market positions.  So as you think of your business, keep abreast of what is happening with the new marketing channels.  Look for areas where there has been a ton of growth in supply because it usually means demand hasn’t caught up.

LaunchTime (the business I am a partner of) is very bullish on the daily deal space.  For full disclosure we are investors and are incubating businesses in this space including Yipit, Coupang.com and DoodleDeals.com.  We were told about Groupon in the middle of 2009 about 7 or 8 months after they launched.  Our initial reaction was that this business was a great idea but the low barriers of entry would force margins of the business to shrink dramatically.  This is what happens in markets with tons of competition.  Competitors compete for business and when there is not enough of a differentiation, they are forced to drop their price in order to compete to try to win the business.  Bidding wars ensue and margins are compressed.  This is what happened in Search Engine Marketing agencies.  They started off with 30 to 40% margins but tons of them both big and small sprouted up and margins got compressed to less than 10%.  So our initial hypothesis is that this would happen to Groupon.  Groupon clones would sprout up like weeds and they would start going to the same merchants and ask for much lower revenue shares and margins would be compressed.  However, it is now 2 years in the business and Groupon’s margins have been firm at 40% to 50% revenue share on the deals they run.  So how have margins remained strong as hundreds of daily deals sites have entered the market?

The reason why the margins of Groupon have held up is because of scale.  When I refer to scale, I mean the size of both their audience (consumers) and merchant network.  Groupon has over 25 million email subscribers giving them the power of being one of the few “rainmakers”.  For businesses that have the capacity and desire to add a lot of new customer, if you are featured on Groupon, they usually deliver enough new customers to completely fill that need.  At this time, very few daily deals site can do that. I would argue that LivingSocial may be the only competitor in the same ball park.  So when people think that Groupon has a lot of competition, in reality, they don’t.  They are working primarily with businesses that want a lot of new customers and the capacity to handle the “firehose” – being featured and getting a ton of new customers.  They are not interested in working with the business that wants a handful of new customers such as the popular restaurant that has a little excess capacity on a Monday night at 5pm.  They want to work with the large new restaurant that needs a lot of new customers right away so their business can quickly have a loyal regular customer base.  If you want the trickle of new customers, you can go to their competitors or just use Groupon Stores.  Groupon Stores doesn’t even to plan to make money from a revenue share just on breakage of non-redeemed vouchers.  The market for the trickle of customers is competitive and will have low margins.  The market for the firehose will not have low margins because it won’t be nearly as competitive.

Will Groupon be the only player with scale?  No, there are plenty of companies with very large audiences and customer bases that will tap into this model.  However, there are not going to be thousands.  There is just not enough consumer attention to have that many at scale.  People will go to a small handful of very large general market plays – like having a few major prime time major tv networks.  And then there will be a good number of middle tier players that are focused on a certain vertical or niche – like having a bunch of pretty popular cable networks.  And then there will be a ton of very small scale players – like having tons of people handing out paper fliers.  So the small handful of very big players and the good number of middle tier players will be a more competitive market than what we have now but there are millions of merchants to choose from on who to partner with to be their “firehose”.  The most coveted merchants will see more generous revenue shares.  However, there are plenty of good merchants to choose from for these larger scale players to choose from who will play ball at these higher revenue shares.  So if you want to pick the winners in this market – pick those who can get to scale as the very big players or the middle tier players.

The week after we sold Community Connect Inc., I didn’t receive any calls from Executive Search firms.  I remember waking up early one morning and feeling panicked not knowing what I was going to do next and more importantly that no one really cared.  Well, that didn’t last long as I soon started getting calls and being pitched CEO gigs.  When we sold Community Connect, we had about 130 employees and we were generating about $20 million in revenues.  Was the next stage of my career growing a company to over 1,000 people and 9 figures in revenues?  I had to take a step back and decide on what I really valued and liked to do.  Selling Community Connect gave me this enormous gift of having some financial independence and allowed me to  focus on what was going to really make me most happy.  So I reflected on the 12 years of running Community Connect and tried to recall the periods in which I was happiest and soon realized that I had the most fun in the early days.  Yes, I was in my early 20s and we were pioneering the concept of social networking before the term “social networking’ was even coined but what really made it so enjoyable was the people.  The environment and energy was incredible when the company was less than 50 people.  We all felt we were really “in it” together, everyone had this great entrepreneurial energy and most importantly we all became friends.  There was no sense of “corporate culture”, no formal corporate communication plans, no corporate processes.  Just a group of people trying to make things happen.  Organized chaos among a group of people that really enjoyed working and hanging out with each other.  That is what I missed.

I described this to a good friend and mentor – Bill Lohse.  Bill has had a very accomplished career including being President of Ziff Davis Publishing and he told me that what I longed for again is when a company is a family or a tribe versus an organization.  When a company is less than 20 people it really is like a “Family”.  Everyone is incredibly close.  It doesn’t mean that you all get along at all times but there is a level of connection and loyalty that is so powerful.  Everyone knows what is going on, there are no secrets.  Not because there are formal communication plans, it is because that you are all working so closely together that this complete openness is just organic.  When a company is between 20 and 50 people, it is like a “Tribe”.  The connection is still really powerful and there is this great underlying feeling of support from one another.  Greater than 50 people and especially over 100 people is when the company becomes an “Organization”.  There are HR policies, formality, hierarchy, roles and structure.  I enjoyed the challenge of growing an organization but I longed for the days of the family and tribe.  To this day, I think about those family and tribe members.  My family, there were obviously the co-founders: Pete, Mike, Cal and Grace.  Then there were those people that joined and help grow our family and tribe,: Betty, Omar, Candace, Ian, Stephanie, Alexis, Bea, Rashmi, Gary, Dan, Zakia, Edmund, Maheen, Mallie, George, Arul and Kingsley to name a few.  Those were amazing times and we all keep in touch one way or another.  Watching our careers evolve, attending each others weddings, celebrating the birth of our children.  I feel that the impression that was made on us from those days will last forever and be something that we all cherish.  I know I do at least.  This may be the biggest reason why I wanted to get back into start ups.  Having a chance to work with a group of people as a family and tribe is truly an awesome experience.  It may not be for everyone but I know it’s for me.

Just when you thought the Group Buying space couldn’t heat up anymore, Groupon goes and gets a $135 million investment from DST and Battery Ventures at a more than $1 billion valuation.  Groupon has proved how incredibly lucrative this business is as it has achieved a $1 billion plus valuation business in less than 18 months. In my last blog post, I discussed how the Gold Rush was over for Social Games.  Well, it just moved over to the Group Buying business!  A lot of things are happening in this space and the big question  is how is all of this going to shake out?

There will soon be hundreds if not thousands of Group Buying sites

There are now over 80 group buying sites in the U.S. alone.   I predict there will soon be thousands.  Let’s talk about the barriers of entry.  A service like Groupon which has scale in audience can go to merchants and ask for exclusives by guaranteeing high minimums and they will get them.  However, their value proposition is about being selective and curating deals that they think are the most relevant.  So in a city like NY where they feature 2 deals per day, they can only lock up about 800 merchants per year.  NY has nearly 2 million small businesses and I suspect a good percent would be a good fit for a group buying service.  Unlike flash sales sites like Gilt which have more scarcity in brands that they can work with, group buying sites have a much longer way to go before they actually really start stepping on each others toes.

So selling to merchants is not much of a barrier, how about the technology platform?  Well, that is even more commoditized.  These platforms have proven to be pretty simple thus far and are quickly becoming a non issue.  New companies such as Group Commerce, Offer Foundry and AdBlade are already offering white label solutions to partners and only asking for a revenue share.  I am sure there will be more solutions in the market with even lower costs.  Some of these platform plays are also building out their own salesforce to bring in merchant deals.  That way they package both commodities – merchant sales and the platform.  The partner just needs to bring the audience.  So with merchant sales and the platform not being much of a competitive barrier, what is the competitive advantage?

Race to the Inbox and staying there

At the end of the day, the only main competitive barrier is distribution in the Inbox.  Email is proving to be the most effective way of delivering these deals.  From a user’s perspective, signing up for more than 2 to 3 of these services is just too overwhelming.  So the main goal for all of these players is to get users to subscribe to your email and to have them keep it there.  Who will win in this race to the inbox?  Well, those that can acquire email subscribers the fastest by either raising the capital to aggressively acquire users or who have existing audiences that they can get to sign up.  But once you have them, you need to keep them.  If you lack relevancy, the switching costs are so low that you will easily see them move elsewhere.  Relevancy will be based on how well you match up the deals to the taste and preferences of the user.  These services will offer greater filtering technology to show you relevant deals.  I think this will be led by aggregator services like Yipit, who ask users for interest preferences such as sporting events, restaurants or spas and comb through the 80+ sites to show you the most relevant deals.  The other route to go is for these services to be much more verticalized by demographics or psychographics.  An example of this is Gilt City which caters to more luxury offers.  So instead of offering the pizza place that Groupon features, Gilt City will feature the Michelin star restaurant.

So get ready for a new gold rush!  There will be an unbelievable amount of competitors in the space.  For consumers, great news as you will benefit from so many great offers.  As for the competitve players, it’s all about execution……..good luck!

I have written a good amount about the success of companies like Zynga and how these apps should be called Viral Games and not Social Games.  It was the ability to utilize the different FB communication tools (Feed, notifications, wall posts, invites, etc.) that drove the massive scale of these apps.  Eventhough social games are only able to monetize at Lifetime Values of about $.40 per user, they made the economics work because the virality and scale of Facebook gave them a path to become large and profitable businesses.  This created the Social Game Gold Rush as companies were raising money and game developers were emerging left and right.  Well, I have news for you:

The Gold Rush is Over!

So what has happened?  Well Facebook has completely curtailed all of the viral mechanics that made these games successful.  To give you an idea of some of the practices that were stopped, here is an example.  Game developers were building aggressive practices such as showing a friend invite screen to anyone that first joins the game and then defaulting the invite so all of your friends are checked.  So you were defaulted to opt in to invite all your friends on Facebook.  People would mistakenly hit “Continue” not knowing that they just sent an invite to their hundreds of friends and then their friends would go through the same experience as they checked out that game and most likely fall for the same viral trick.  Facebook obviously found this “spammy” which they should and made a rule to all developers that they were no longer allowed to mass invite your friends to a game when you first join or they would be shut down.  This is one of many changes made by Facebook and some people would argue that reason why they are shutting down these viral channels is to force social gaming companies to spend money on advertising via Facebook.  That may definitely be true but I think the bigger motivator was that it just added a lot of “spam like content” on Facebook and users were getting fed up.  When you have a Facebook fan page titled  “I dont care about your farm, or your fish, or your park, or your mafia!!!” and it has over 6 million fans, pretty much proves the point that these virality mechanics were definitely getting spammy.

So where does it leave us.  Well, if you are a game developer without a hit game/app that has achieved scale then you are pretty much toast.  There were 3 legs of the marketing stool to FB apps/games – viral, cross marketing and paid.  If you are not already one of the bigger boys then you are now left with just 1 leg of that stool – paid marketing.  And unless you have figured out how to monetize your app or game so much better than everyone else, it is pretty impossible to make the economics work when your marketing costs are now so high.  For the companies that have already achieved scale, they survive for now by having the 2 legs of the stool they need to explore other avenues of distribution.  And from recent announcements from Zynga such as the distribution deal from Yahoo, it sounds like they are doing just that.