The Good NET Guide

Archive for October, 2009

Sample sales are an amazing resource for marked down goods for both mainstream and luxury brands. Online private sample sales are picking up serious speed. Here is how they work: big designers, such as Marc Jacobs or Versace, place excess inventory on a sale site at 50 to 70 percent discounts over a several day period. The sales are private, available only to members, with upcoming sales from brands announced via emails. Products include clothing for men, women and children as well as jewelry, handbags and home accessories. You can get invites from other members or request invites via the site.

Startups in the online sample sales space like Gilt Groupe, Ideeli and Hautelook are all raising huge amounts of money, growing their user base at a rapid pace and turning a strong profit. The concept has even attracted retail giants like Saks and Nieman Marcus, which are now jumping on the bandwagon to offer their own private sales. Even GSI Commerce, which previously wasn’t directly involved with selling luxury goods, is getting into the private sale business with the recent acquisition of sale site RueLaLa.

It’s worth noting how sample sales have evolved in the past decade. I attended my first sample sale in 1997 in a convention center in Baltimore, where women (and a few men) were scouring for deals on clothing from J.Crew. The items were placed in huge cardboard boxes in no particular order or size breakdown. It was utter chaos, but the deals were great.

Flash forward four years to my shopping life in New York city, where sample sales are a bit of a religion. At Kate Spade, I fought intense lines (waited in an hour long line in the middle of December, nearly got frostbite in my toes), pushed my way into packed fitting rooms, and found myself intimidated by the catiness of aggressive deal-seekers. At Gucci, I was asked to sign up for an hour-long “window” of shopping time. Only all the convenient times were already taken, and I was left with times in the middle of a workday. And yet I walked away from both sales with steeply-discounted designer stuff that I wouldn’t ordinary be able to afford.

You get the point. Sample sales offer great deals, but highly uncomfortable situations. Gilt and other online private sales are simplifying the sample sale market. The online sample sale was originally brought to market in Europe by Vente-Privee in 2001. US companies like Gilt, Hautelook, Ideeli and BillionDollarBabes emerged a few years later with a similar online model, offering users radical discounts on overstock goods from designers.

Sample sales are also proving to be a compelling market opportunity. Vente-Privee itself is on target to achieve €650 million in turnover globally this year. The price (in a possible sale) for Vente-Privee is estimated at $1.5 billion, with some sources even putting the figure at between $2 billion and $4 billion. The New York Times reports that Gilt Groupe, co-founded in late 2007 by a former eBay executive and, was able to bring in $25 million in it’s first year of operation. Gilt currently has 1.6 million members. And the startup recently raised an estimated $40 million in funding in July, which valued the company at $400 million. Ideeli, which was founded in November of 2007 and now has over one million members, is set to do $50 million in revenue this year, and the company’s CEO, Paul Hurley, expects to do $175 million in revenue next year.

So why is this model successful? Well, in addition to the fact that women and men can now avoid the chaos of the in-person sample sales, the sales are now brought to the masses. So it’s no longer shoppers in New York City who can solely benefit from the steep discounts, but consumers all over the world now have access to these goods. And because the sale only takes place in short amount of time, with limited stock available, shoppers feel the urgency to actually buy the product, because it may not be available within a few hours.

Most brands are also on board with the model. Since the sample sale site presents the brand in a luxurious, desirable way, via a “private” sale, designers don’t feel that these online sales are distorting the value of their brand in any way. So Gilt can get a premier designers like Marc Jacobs to sell his coveted handbags on its site for half the price. Plus, adds Hurley, the time frame of the sale ensures designers that their clothing or accessories aren’t just sitting in a bin somewhere. Hautelook even gives designers a real-time metrics dashboard that allows them to see what items are being bought, what parts of country where specific items are selling best and more.

As I noted earlier, the success of this model has now led to a number of retail shops and other technology companies sniffing around to either acquire or build private shopping sales of their own. Yesterday, DailyCandy released the news of their private shopping club and even designers themselves, like Tory Burch, are holding few-day private sales online. And as we reported earlier in the month, we hear that Gilt, Amazon and eBay are all actively looking at acquisitions in the European private shopping club space.

Online sample sites are drawing massive audiences, and monetizing them in a meaningful way. Of course, it’s a competitive space with every site duking it out for supply (the designer inventory) and demand (the buyers). And yet, even in recessionary times, the sample sales market seems large enough to sustain a market of startups, and keeps me looking like TechCrunch pays me a decent salary (joke!).

Photo credit: Flickr/Ed Yourdon

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Startups like Bump Technologies, which recently got some funding, and My Name is E are trying to kill the paper business card, but even in 2009, many of us, including myself, still use business cards. The biggest hassle with business cards is getting the contact information into your address book as fast as possible — that’s where Business Card Reader [iTunes link] for the iPhone comes in.

Business Card Reader scans and “reads” the picture using ABBYY’s text recognition technology and enters the data into the iPhone or iPod touch address book. Basically, you open the application, and choose either to take a new picture of a business card, or if you’ve already taken a picture, you can upload that as well. After you take a picture, or upload a picture, the application scans the business card, and after about 15 seconds, you get the address book field to edit the scanned information if there are errors. Once that’s all done, it adds the new contact into your address book. It’s really that easy.

After playing around with the application for a few days and testing out different types of business cards, the accuracy, in my opinion, is about 85%. The only errors I got where if the companies name was in a logo format, and their logo had a weird font, but other then that, the app worked pretty well. If your a mobile networker, this is an app you’ll definitely like.

Business Card Reader is $5.99 from the App Store, where you can buy it today.

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Guest author Edo Segal (@edosegal) has launched and sold several companies. In 2000 he founded eNow, which he sold to AOL in 2006 (after it was renamed Relegence). Today, he runs his Incubator/Investment vehicle Futurity Ventures, which recently launched a new search engine for wisdom.

Media scarcity is dead. In the future my son will have a flash drive that he will pay $29 for that will have the capacity to hold all movies and music ever released by a major label, studio or tv/cable network. It will take 30 seconds to clone the data over the network to a friend who will pay $14.99 for a device with double capacity a year later. How does the media industry survive such a coming disruption?

For many of us that have been in this game for a while, the word “convergence” harbors some shameful vibes. It conjures up many false hopes, dashed dreams and misfires. Nevertheless, I would contend that convergence is upon us and it has arrived from an unexpected delivery man: Steve Jobs. Apple has created a media consumption experience that has reduced friction to such a point that soon the consumer will not know if he is buying music, a movie or a game. The notion of App is changing. The lines between these different forms of media are quickly blurring and soon will be completely artificial. Already these distinctions are merely fossilized conventions that stem from consumers’ discovery habits. As those evolve, like learning that it is easier to go to Amazon and search to find a product than going to aisle 9 at the store. The coming confusion of the consumption experience where a user won’t care or know if what they are buying is a movie, a game or a music track presents vast opportunity.

The prospects for the old media industry appear bleak, as the rest of the media industry follows the music industry into decline. Indeed in my discussions it is apparent that the smart money in Hollywood already sees the writing on the wall. While the trend will take longer, it is clear which direction the wind is blowing. The main lesson to learn is that the market will punish you if you don’t deliver the goods.

But the entertainment industry has a vested interest in the success of this new type of convergence, as within it lies the secret to its continuing prosperity. The only way to block the incredible ease of pirating any content a media company can generate is to couple said experiences with extensions that live in the cloud and enhance that experience for consumers. Not just for some fancy DRM but for real value creation. They must begin to create a product that is not simply a static digital file that can be easily copied and distributed, but rather view media as a dynamic “application” with extensions via the web. This howl is the future evolution of the media industry. It has arrived from a company that is delivering the goods. Apple has made it painless for consumers to spend money and get the media they want where they want it, proving that consumers are happy to pay for media if delivered in ways that make it easy and blissful to consume. For all the criticism Apple draws on the walled garden nature of its business, it has even come around to stripping DRM and allowing users to download mp3 files.

Even today if you look in the iTunes App Store you will see a myriad range of “Apps” that are just evolved ways to package media. While the traditional part of iTunes still mirrors the product taxonomy of a Tower Records, the App Store is creating a folksonomy of media products. It is where new ideas evolve, thrive and go instinctively based on market power. The App Store is where the action is. This is where evolution is unfolding as direct consumer spending spurs media development.

In preparing this post, Erick asked me, “Is Apple is a media company?” I thought about that and the answer is really that Apple is what media companies are missing. The missing part of the puzzle is what made media conglomerates such juggernauts in the past. Namely, distribution. The internet is stripping them of their control over the how their products are distributed. Media companies used to be able to create scarcity merely by delaying the distribution of their products across different channels—theaters, pay-per-view, DVD, cable channels, network TV, and so on. The internet disrupts this ability to create media scarcity. It is such a huge disruption, in fact, that it threatens the fundamental profit engine of the media business.

Both during my time interacting with senior management at Time Warner (where I worked at AOL after it acquired the company I founded, Relegence) and with some of my current portfolio companies that are working with the film and music industries, it is clear to me that many of the smart people running these media companies understand which way the wind is blowing. The music industry, as the one that has suffered most of the carnage, is ripest for change. Executives there are receptive to new ideas and move forward quickly, leaving me somewhat optimistic. It is also clear to me that it is hard for the industries which have not endured their level of pain to flee the golden cage of media’s past. But for those firms which rise to the occasion, there will be vast rewards. People’s hunger for good content will not subside. It will continue to grow, but so shall the unbearable ease of pirating it. The premise of extending the media experience to the cloud is a core necessity for the survival and growth of the media industry. It is the only way to for media companies to weather the coming tsunami of increased bandwidth and the ever open web. Hybrid media packaging with both files and an application layer in the cloud is core to a lucrative future.

For a great example of how change is happening see what Britney did today at @BritneySpears. It was, I believe, the first time a major artist premiered a music video on Twitter. This drives people to Amazon or iTunes to buy the track but in the not too distant future it could be the start of much more than that. A complete experience will unfold that will be interactive and convert to new revenue streams. Not just a purchase of a track but of an app that pulls consumers into an experience and further promotes user engagement and virality. Media becomes a platform with a funnel of traffic and conversions to alternative revenue streams. All boosted by the frictionless billing that Apple has created in the App Store. Media executives will have realtime metrics for their success as it maps to revenue and in turn this will accelerate innovation and help redefine media.

If you are a media exec and you look at your product and at the end of the day it’s a digital file that can be copied, then you have a serious problem with your format. Think of your product like a pie chart of the value you are giving the consumer. If 100% of the value is in that file, it is not a sound approach for defending the future of your business. However, if a portion of the experience is derived thorough an integration with a Web component that will yield additional value in functionality or social elements, then it will be more sustainable. There are many such examples emerging in the app store (I am T-Pain, TapTap and many more). Applications that let consumers interact with the media. Create things and share them with their friends. These will not only make the consumer the one who markets your product, but also create an unprecedented level of engagement. That level of engagement will directly map to reduction in piracy as consumers will pay for this experience and wont be able to copy it. Sell access and experiences, not media files.

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Enjoy. We did

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Fox News: Watch John mumble about gadgets while wearing orange socks

It’s time to put on the Swami hat and predict just what we have in store for 2010 and beyond. Considering all of the movement in the gadget world in the past few months, I’m fairly sure most of this going to be accurate. Given the current status of some of these technologies, it’s hard to prognosticate very far out but there are a few things that have become apparent over the past year, especially the rise of Android and our expectations for the iPad.

Without further ado… the envelope please:

Apple TV -> 27-inch iMac -> Wall Mount for 27-inch iMac

It’s sad but true: Apple doesn’t care about Apple TV. All the real brain power is going to the desktop and laptop and probably onto the iPad. They’ve made it clear with the 27-inch iMac that they can make a high-resolution screen and powerful computer inside of a case the thickness of a college textbook. Who needs a TV, let alone an Apple TV?

The obvious conclusion here is that the 27-inch iMac becomes a real Apple TV. The Mac Mini already makes a great multi-media system and a quick update to FrontRow, now considered abandonware, may make it a great 10-foot interface.

No one disputes that Silicon Valley is the global capital of the tech world. But this wasn’t always so. It is the Valley’s dynamism and networks which have given it an unassailable advantage. Silicon Valley has simply left rivals like Boston’s Route 128 in the dust.

I mentioned a little bit about my first Columbus Day in California in a previous column. But I didn’t tell you the whole story. I was invited to three amazing events on the night of October 12. Venture capital firm Alsop-Louie—known as one of the wackier and unconventional VC firms—invited me to their legendary Columbus Day party. On that same evening I had an invite from Henry Chesbrough, Executive Director of the Center for Open Innovation at the University of California-Berkeley to attend a dinner party for his forum. Down in Silicon Valley I also had an invite to speak at an event with India’s former Minister of Disinvestment, Arun Shorie—the guy who was once in charge of privatizing the country’s moribund nationalized firms and who is as close as you can get to financial royalty in India.

It was a really hard decision which one to pick. And I found myself wondering, where else in the world would I have to face such a decision? The answer is nowhere. Silicon Valley, which has expanded to embrace the entire Bay Area as an engine of entrepreneurship and innovation, is a unique place of powerful and concurrent overlapping networks. As a new arrival to Silicon Valley and San Francisco, I had read about this and did believe it. But it was hard to understand to what degree these types of concentric circles of connections were pervasive in the Valley. I am now studying how some of these networks develop and their influence on success rates in entrepreneurship.

I am focusing on what is possibly the largest of these networks, an organization called The Indus Entrepreneurs (TiE). This started as an Indian network and served as a mechanism for those from the Subcontinent to help each other. Silicon Valley is the birthplace of TiE and remains its stronghold. But at the latest TiE Global Conference, held in Silicon Valley a few weeks ago, an interesting debate broke out among the Board of Directors. While the organization remained largely Indian in composition, a significant number of non-Indians had joined TiE and become very active members (some had risen to the role of chapter president). Some members of the board thought it was time to change the name of TiE from The Indus Entrepreneurs to The International Entrepreneurs. They eventually agreed to drop the “Indus” from the name and to just call the organization TiE. The fact that such a debate even took place illustrates both the power of networks to embrace outsiders and draw them in, as well as the power of these networks, when unconstrained by convention or conservative establishment rules, to grow in unexpected ways. It’s a metaphor for Silicon Valley.

Which brings me to Boston. Ever heard of Route 128? To my surprise, neither have any of my students at Duke or the entrepreneurs I’ve met in Silicon Valley. I’m surprised because it wasn’t so long ago that Silicon Valley was considered a poor cousin of Boston’s tech center—a cluster of technology companies located along this freeway which partially rings the city. Starting in the 1960s and on through the 1980s, Route 128 was, if anything, more closely associated with tech than Silicon Valley. Today few young technology workers even know where Route 128 is located, let alone its importance in the tech world. Silicon Valley has simply left Boston’s tech center behind.

In the 1980’s the Silicon Valley and Route 128 looked very similar—a mix of large and small tech firms, world class universities, venture capital, and military funding. If you were betting on one you’d have been wise to bet on Route 128 because of its longer industrial history and proximity to a large number of high quality educational institutions (Harvard, Yale, Brown, MIT, Tufts, Amherst) and proximity to Bell Labs and other large corporate research centers. You remember Bell Labs, right? It’s where the transistor was invented. Now, aside from big biotech breakthroughs, Boston is a distant second nationally to Silicon Valley in technology entrepreneurship. So, what happened to Boston?

A young professor at UC-Berkeley, AnnaLee Saxenian, wrote a book in 1994 which answers this question. At a time when Boston still thought it was the powerhouse of the tech industry, Saxenian declared Boston the loser in the tech race and explained why it would only fall further behind. This book was titled Regional Advantage: Culture and Competition in Silicon Valley and Route 128. It kicked off a firestorm of criticism from the Boston elite. Saxenian also alienated friends at her alma mater, MIT.

She noted that Silicon Valley had an amazing dynamism about it. There were extensive professional networks, job hopping was the norm, information was exchanged openly, and the culture encouraged risk taking. The Silicon Valley ecosystem supported entrepreneurial experimentation and collective learning. In other words, Silicon Valley was a very open network—a giant social networking site working in analog before the concept of such a thing even existed.

This organizational mechanism was in sharp contrast to that of Route 128. Dominated by large, vertically integrated, and secretive minicomputer producers such as DEC, Wang, Prime, and Data General. Technology, skill, and know-how were trapped within the boundaries of the large corporations.

The differences were evident at many levels: venture capitalists in Silicon Valley had deep roots in local networks and were far more nimble than their east coast counterparts; educational institutions and research labs in the West partnered with local startups as well as more established firms, while those in the East worked only with the largest corporations; and the meritocratic openness of Silicon Valley made it a magnet for non-traditional talent and immigrants.

By the mid-1990s the east had missed the shift from minicomputers to personal computers as the flexible Silicon Valley ecosystem sped ahead with innovation across a diversifying range of components and systems going from chips, routers, and application software to ecommerce and search engines. Today Silicon Valley is the leading location for cleantech venture activity, an area widely considered to be the next big value creation engine for the U.S. and the world.

Boston, however, is no slouch. The Route 128 community remains the second biggest in the U.S. in terms of venture funds committed. Boston has powerful research institutions, still, and lots of very strong companies. In some areas, such as biotech, Boston may even rival Silicon Valley. But overall, its pretty clear that the Valley has not only won but is racing further ahead.

Most entrepreneurs and engineers that come to Silicon Valley, come to experience this network and to embrace the culture it has created. That’s why I came, too. Network effects don’t just work for fax machines. But then again, most of them knew that intrinsically. University guys like me need to do a bunch of surveys to figure it out. They voted with their hearts and feet.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.

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Want to be the head of Barnesandnoble.com’s international business? Because they’re definitely hiring a whole team, and they’re starting at the top.

Recruiting firm Russell Reynolds Associates is representing Barnes & Noble in a search for the “head of their international business,” according to a source who was contacted about the position. The job entails building the international business for BN.com from scratch, hiring the team and “building the infrastructure outside the U.S.” They prefer the executive live in New York, but Europe is ok, too. Global ecommerce experience is preferred.

Barnes & Noble is no Amazon, but it is a billion dollar company and they have an upcoming ebook reader that kicks the Kindle’s butt (it’s so easy to love unlaunched products, isn’t it?).

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Review: Sanyo Xacti CG10 compact HD camcorder Advertisers get creative at Waterloo Station, create craziness with projectors Heated slipper looks downright dangerous Spooky Tesla Radio in a jar Dear Valve, where is Episode 3?

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Daily Crunch: Down at the Station Edition

Sometimes less is more. In the case of a fan comic recently posted to Valve’s forums, it definitely raises a valid question. Where on earth is Half-Life: Episode 3 ?

Excerpt from:
Dear Valve, where is Episode 3?

Advertising is rough. People get jaded, technology gets old. Viral videos aren’t what they used to be

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Advertisers get creative at Waterloo Station, create craziness with projectors