Bonobos. Dodocase. Warby Parker. A generation
of e-commerce companies is growing up using a vertically integrated
strategy where they take more ownership of the design, production,
marketing and branding of their products. But how do you know very early
on if you have a hit?
With a purely web-based or mobile product, startups can
watch how well they retain users after a week or a month. With e-commerce
companies, repeat purchases is an obvious metric, but there are also ways to
track the virality of an e-commerce product.
A YC-backed startup called Curebit has built a
business around tracking word-of-mouth referrals for companies like Bonobos.
Based on that, the company says it’s able to not only drive sales but predict
hits. What they do is create referral campaigns for e-commerce companies —
like those landing pages that say you’ll get 25 percent off or $25 off your
next purchase if you send a friend by e-mail, Facebook or Twitter.
Curebit will optimize the landing pages, copy, art
direction and then track how many people convert to making a purchase after
they’ve seen the page. On that strategy, the 12-person startup has grown to
about 3,000 clients and a break-even run rate. Their customers include Bonobos,
Restaurant.com and Jawbone.
“We still have a lot of cash in the bank,” said the
company’s CEO Allan Grant.
Since creating landing pages for referrals isn’t
technically that difficult, the base version of Curebit is free. The
startup makes money off custom services like testing hundreds of variants for
the highest-performing campaigns. For that, they’ll charge $10,000 for the
first $100,000 in extra sales generated by the campaigns, then they’ll take a
10 percent after that.
“Just having a basic feature set is not enough,” Grant
said. “We engineer virality the way that social gaming companies measure and
optimize their K-factor, viral loops and every step of the funnel.”
Here what’s the funnel might look like for a client –
Curebit drove 25 percent of Bonobos’ new customers last
year, which helped double the New York-based company’s customer base in 2012.
Over time, Bonobos had to change its referral strategy. It was centered on
Facebook sharing at first, but Curebit found that e-mail converted better for
the company. That’s unusual since Facebook is a stronger channel in 93 percent
of Curebit’s cases, Grant says.
He says the average lift in sales from referrals on
e-mail, Facebook or Twitter is about 7 percent. But after watching lots of
companies on the platform, the rate you really want to have is around 15 percent.
“If somebody’s lift is over 15 percent, then that company
is going to explode really fast,” he said.
One example is Diamond Candles, which sells giant
votive candles that have a ring hidden inside of them. Those rings are worth
anywhere from $10 to $5,000 and the candles, for whatever reason, seem to be a
great gift for women of all age groups.
“From their early days, we could tell they had some magic
element,” he said. “We can’t always tell why somebody is going to explode,
though.”
He did offer some common-sense advice, though: companies
that break out either have a) a “fantastic product” or b) a “fantastic
experience.” For example, Zappos (which is not a Curebit client) sells shoes
that other retailers have as well, but they focus on giving customers a great
experience. Bonobos, on the other hand, has a great product in pants that fit
well.
Curebit isn’t looking at raising a Series A round at the
moment. “We want to continue to grow a profitable business and if we were to do
one, we wouldn’t start looking for another three to six months.”
The company last announced funding in January of
last year with a $1.2 million round involving 25 investors, including 500
Startups, Karl Jacob, Auren Hoffman, Dharmesh Shah, Gordon Tucker, Alex Lloyd
of Accelerator Ventures and others. They’ll be focusing on growing the
customer base and on new areas like mobile referrals in the next few months.
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Read about
Curebit at TechCrunch
