A company that is transparent about the importance of customer tracking and its impact on their business.
Privacy concerns have stymied some sites like Facebook because they started as something more personal; a place to share experiences and semi-intimate info that might, as a sideline, offer some stuff for sale. Newer companies have neither the legacy nor the hang-up. Their purpose is to make money by selling and to do so by identifying, managing and measuring the impact of what one calls their 'viral coefficient.'
Free of the artifice that this is all about fun, friends and family, such companies can focus on what matters, which is figuring out sources and uses of influence that drive sales. While some may argue that this gives away competitively sensitive data, the reality is that the ability to execute based on the insights such data provides is a much more challenging differentiator than the mere availability of the data itself.
In the long run, capturing the right information and acting on it will provide business advantage. Sharing the sources of such information (presumably without names and addresses) will reduce some of the opposition to its use and perhaps even enhance the quality of the services being provided. Which is exactly why people started to permit strangers to gather so much about themselves in the first place. JL
Natasha Singer reports in the New York Times:
Fab.com is a pioneer in social retailing, the kind of e-commerce site that encourages shoppers to discover and select products through crowd-sourcing. It sends out e-mails daily, alerting design mavens to flash sales of whimsical, limited-edition items — like candy-colored typewriters or clear plastic coasters embedded with gummi bears — and offering a variety of ways to share their favorites with friends. Founded last June, Fab has already racked up more than 4.5 million members, who collectively shell out about $400,000 on a typical day, the company said.
But behind that fast success is a new social media math
BUMBLEBEE-STRIPED or polka-dotted, neon orange or neo-argyle, socks of all types are selling out fast on Fab.com, a popular design e-tailer. Gung-ho for hosiery, its fans are even posting sock images on Pinterest and tagging them on Tumblr blogs.
“It’s Happy Socks Day at Fab,” says Jason Goldberg, the company’s chief executive and founder, as he checks digital dashboards on his iMac screen that continually chart customer sharing and spending. “It’s socktastic!”
Mr. Goldberg is among a new generation of e-commerce executives determined to measure the impact of social marketing and act on it in nearly real time. He keeps constant track of how many people visit Fab.com from, say, Facebook, Pinterest and Google Plus. He gauges Twitter posts that mention the site’s newest items as harbingers of next-day sales. He regularly blogs about the company’s revenue, product trends, app use and leading sources of traffic. He has also hired two customer analytics start-ups to determine the current and potential value of Fab.com shoppers.
“On typical e-commerce sites, every single piece of real estate is calculated to measure the return on investment of each pixel,” Mr. Goldberg says. “But social media marketing needs to be measured differently than traditional marketing. We need different ways to measure sharing.”
With headquarters in the West Village of Manhattan that offer a sweeping view of the Hudson River, Fab.com is a marriage of instinct and analytics. Mr. Goldberg and a co-founder, Bradford Shellhammer, started the site last summer after an earlier joint project, a gay social network called Fabulis.com, failed to gain traction. Their subsequent plan was to build an e-commerce design powerhouse through word of mouth, a kind of seamlessly shareable Ikea.
Mr. Shellhammer, the chief creative officer, is the tastemaker with a knack for identifying conversation pieces — like, say, Beardo, a knitted hat for beards — that can send thousands of people shopping and sharing daily. Mr. Goldberg, meanwhile, is the number cruncher who, at every stage of the company’s development, seeks metrics to expand sales and brand engagement. In fact, even before the pair introduced Fab.com, Mr. Goldberg began measuring the financial impact of online word of mouth.
To create an audience before the shopping site even went live, the company bought ads on Facebook, inviting “influencers” who liked certain flash-sale sites, design magazines, design blogs or designers to join. But rather than simply calculating how much it cost to acquire each new member, Mr. Goldberg set about examining the ripple effects. After seeing an ad, he says, each person who joined typically invited three friends to join as well — resulting in one additional membership, on average.
“It was basically ‘Buy one, get one free,’ “ he says. “We were looking at the viral coefficient of the ad, so suddenly your costs went way down.”
By the time Fab.com was up and running, it had signed up about 175,000 members. Of those, he says, 30,000 came from ads — at an acquisition cost of about $2.50 per member.
Extrapolating from the company’s sales trajectory, Mr. Goldberg said Fab.com is on track to have revenue of about $140 million in the coming year. He declined to comment on sales for the company’s first year, when ends next month.
In search of insights into user behavior that could bolster sales, Fab.com hired two customer analytics start-ups: Custora in Brooklyn and RJMetrics in Philadelphia.
With access to Fab.com’s historical and current sales data — minus personal details like members’ names, addresses and credit card numbers — RJMetrics generates online dashboards displaying the company’s total gross revenue, revenue per day, orders per day and membership statistics, updated every few hours. RJMetrics’ system also segments Fab.com members into cohorts, depending on the week they joined the site, then shows the groups’ past spending and frequency of purchases.
That system uncovered an interesting trend, Mr. Goldberg says. Of the 12 percent of members who made a first purchase, half returned within two weeks to make a second; one-third made a third purchase within 30 days.
“We are building an addictive business here,” he says.
Custora, which also works with sites like Etsy and Revolve Clothing, creates similar online dashboards. But its specialty is identifying the most valuable customer segments and using algorithms to forecast their potential spending over time. Right now, for example, only 15 percent of Fab.com purchasers shop with the company’s iPad app. But a Custora forecast estimated that, over the next two years, a typical iPad customer would spend twice as much as a typical Web customer and that the iPad cohort would generate more than 25 percent of Fab.com’s revenue.
In an era of online behavioral tracking, Fab.com has been more transparent than some other sites about a lot of its customer surveillance, data collection and analysis. Mr. Goldberg writes regularly about the company’s social marketing practices and metrics on his blog. Likewise, when Fab.com was seeking seed money last year, Mr. Goldberg gave several venture capital firms passwords to the RJMetrics’ dashboard so they could see the company’s revenue and customer trends for themselves.
“V.C.’s could see it every day,” he says. “They could come back and say, ‘How did Fab do today?’ ”
Last December, Fab raised $40 million from Andreessen Horowitz, Menlo Ventures, First Round Capital and several other sources, including the actor Ashton Kutcher. Mr. Goldberg, meanwhile, is now an investor in and a board member at RJMetrics.
THIS month, the site even re-engineered its look — to Fab 3.0 — to capitalize on recent data indicating that users who had checked out the site’s crowd-sourcing feature were more likely to make purchases than those who had not. Among other updates, the site now gives more prominence to a live feed featuring the products that members have just bought or liked.
Of course, techniques to calculate the financial impact of social marketing are still evolving. But, Mr. Goldberg says, trying innovative analytics helps give his firm an advantage.
“It’s understanding that you can’t
just look at sales orders,” he says. “You have to look at how you measure excitement.”
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