E067: with Adam Bernhard

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Jason Calacanis hosts This Week in Startups with guest Adam Bernhard, CEO and Founder of Hautelook.

00:01:00  Open Angel Forum in NY was great

00:01:30  Jason will be speaking:

Aug. 3rd – FoundersShowcase
Aug. 14th – The Audience Conference
Oct. 5th – Future of Web Apps

00:02:00   Adam Bernhard, CEO and Founder of HauteLook (@HauteLook) a flash sales company, they bring in 8 – 10 brand a day and sell approx. 800 different items for a 48 hour period. In the industry it is being coined as Social Commerce and is becoming a major marketing vehicle for brands and a discovery tool for products

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00:05:30   Ask JasonJeff LeeSevenLunches – How do we get customers without spending too much money?

Answer – Guerilla Marketing is using flyers and any method to get your name infront of anyone. You need a combination of Guerilla and viral emailing. Jason likes to use what he calls the “Control-F” measure. How forwardable is your email, you have to write something good and compelling. By the combination I mean write great emails and enable the restaurants to help you with marketing by placing a promotion in there store that mentions your site. Let your current members be your referral service offer them something for free for referring people that sign-up. You could do something like the DailyD and ask people to suggest new restaurants and bring your requests to them. Consider approaching restaurant associations but bring compelling data so you can show them your successes. One thing you will have to do is temper the expectations of the restaurants while you grow but convince them if they help you grow it will pay dividends in the long run. Focus on one geographical local and get traction, learn and then spread to the national markets.

The Interview

00:16:30  How did you get started? We were in the apparel business as liquidators and saw an opportunity to help brands liquidate excess inventory and thought we could use this as a marketing channel for brands and to enable them to continue to brand building

00:19:00   The customers are educated and recognize brand value but what we break down the geography barrier at an affordable price

00:20:45  In order to see the deals you must be a member

00:21:30  Are their affiliate programs for the industry? We don’t do that we try protect the customers and the brands

00:22:30  What was the inspiration for the business? We were a liquidator and saw the opportunity and an original idea. It was coincidence that we launch 10 days after Gilt. We started out with 4 people and have rapidly grown to 200 employees in 2 years.

00:24:00  What is it like to grow so fast? It makes it fun we many of the people hired are young which fits into our approach. Fashion is fun, fast and always changing.

00:25:00  Are you considering other verticals? We are currently in 11 and launching many more, men’s products will launch Monday, wine and gourmet food will follow soon.

00:26:30  Is their enough excess inventory for all the new companies popping up like this? Brands only want to deal with a few of the major players, so I don’t see this being a problem for us

00:28:00  Do you require exclusive deals? No we have no contracts, these companies are our partners, we don’t buy inventory they buy the event from us that is what we manage

00:29:00  Recently received funding ($31 million) from Insight Venture Partners

00:30:00  Who loses in this type of business? No one really, brand win, maybe the brick and mortar retailers but that is such a big market that they probably win due to us helping the brand

00:34:00  Do you expect 10x growth in 3 years? More than likely the business will look very different by then

00:35:30  Jason predicts people will start to use these services exclusively

00:37:00  IPO soon? We are going to focus on our continued growth but many opportunities are available

00:37:45  Gilt vs. HauteLook are very different business models, Gilt purchases the product and work only with very high end. HauteLook is more casual California style

00:39:30  Will you get in to the media business? Magazines? Video? Partnering with media is interesting, which ties in well with marketing. One thing we do well is gather data and we have real time analytics (like Chartbeat). Which has been a great value for our partners, in one instance we helped them decide whether to build a store in a specific location

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00:43:40  Return rates are very low around 11%

00:44:00  Will you expand globally? No their is plenty of opportunity in the US

00:45:00  What is the toughest thing for you? Deciding where to go next and which opportunity to take, it comes down to magnitude and discount available

00:46:30  What is the profile of the addicted person? Well our users are highly engaged, in one mailing survey we had a 20% open rate in 45 minutes

00:49:50  Can anyone add a product? It has to have an original MSRP

00:50:30  Will HauteLook have a private label? currently no plans to do that but we have plenty of opportunity in this business. UNIQLO is an example of fast fashion in stores in Asia

00:53:00  How does the industry look at them? They are way into the user experience in store and do A/B testing for consumer responces

00:55:30  All goods are first runs in HauteLook

Create Your Opportunity – .CO is the new web address that  gives you a truly global, recognizable and credible option for branding  your online presence.

01:01:00   Contest – one person will win a free domain name (money for the expense paid by Jason) to the person who buys a .co domain and tweets it (include @Jason #TWiST and the domain name you purchased)

The News with Lon Harris

01:02:30   Google/Zynga Partnership – In an interview with the Wall Street Journal this week, Google CEO Eric Schmidt seems to have let the cat out of the bag and confirmed an earlier report by TechCrunch about a Google/Zynga partnership.

When asked about Google’s partnership with Zynga, Mr. Schmidt said “we haven’t announced it” but “you can expect a partnership with Zynga” in the future.

TechCrunch reported back in early July that Google had invested between $100 and $200 million in Zynga and that a strategic partnership was in the works. Neither company had confirmed any of this information since.

Thoughts on what kind of partnership these two may be planning? Is this Google trying to lure people away from Facebook and into its forthcoming Google Me social network? Or does Google possibly have plans to build an open platform for games, to compete more widely with Facebook for the casual gaming audience?

Response: The game is devalue the other guys assets, Facebook will be doing search and ads. 90% or so of Facebook users either upload photos or play games. Jason believes a Zynga / Twitter deal will happen and Zynga will possibly be bigger than Facebook, every site can add a social graph

01:08:00   Facebook Puts Off IPO – According to a report in Bloomberg, Facebook will put off its IPO until 2010, to give Mark Zuckerberg and Co and chance to gain more users and boost sales. The hope is that another year of growth without the scrutiny that would come from a public listing will benefit the company and drive the price higher, while also giving Zuck a shot at improving his leadership and communication skills and allowing some of the recent scandals and controversies to die down. In a TV interview last month, Zuckerberg said Facebook would go public “when it makes sense,” but most had believed this would be some time in 2011. Facebook is currently valued at $24.9 billion and did something between $700 and $800 million in sales last year.

Thoughts? Think we’ll see a Facebook IPO in 2011 or 2012? Is an extra year really going to help?

Response – They can change their minds but why would they leak this? No idea, it maybe about the valuation and bigger expectations. They will probably try increase their EBITDA and will be squeezing the advertisers

01:16:30   Spotify Setbacks – Spotify music service, which has now been launched and popular throughout Europe for some time, continues to struggle with a US launch, and according to Billboard.com, they have experienced yet another setback. Billboard reports that Spotify is back to square one in its negotiations with US record labels, which have essentially rejected the service’s European business model outright. (The European model is basically “freemium.” You can stream music for free if you see ads, or you can pay for a subscription without ads and with mobile access.) Warner Music Group and a few other labels are on the record as disliking the freemium model. Billboard reports that Spotify is basically starting from scratch, asking the labels what kind of model they would need to see in order to allow the company to launch stateside.

Spotify denies the allegations in the Billboard article and claims that they are still planning to launch a US version in 2010. The article also reported that Spotify CEO Daniel Ek had approached Founder’s Fund’s Sean Parker to lead US operations, which Ek has denied.

You’ve had a chance to test out the European Spotify service…Think it will have a shot stateside? Is it crucial that the company launch soon, considering its healthy competition from Pandora, as well as planned streaming music products from Google and Apple on the horizon?

Response: It’s a great service and too good to be true, the music industry will screw it up and music will go to the subscription model

01:24:00   Voyurl – Voyurl is a new service that’s in stealth mode that’s basically Blippy for your Web behavior. You can choose to share with other people a list of what websites you’re visiting (with the obvious option to disable, say, pornographic or other embarrassing sites.) As the site’s welcome page reads:

“A little creeped out? That’s cool. But don’t worry, it’s ok to look. Besides, you can turn off voyurl at any time, for those, ahem, unmentionable sites. Plus, you can set your own filters. See, it’s not that scary.”

TechCrunch is also now reporting that the site has taken out some Google ads for the names of prominent investors, hoping to grab them while they’re Googling themselves. They’re also fundraising using Kickstarter (though they’ve only raised $1,300 so far.)

Think this concept has legs? Would you potentially invest? Do people have any interest in sharing their web behavior in real time with others, especially considering the potential for embarrassment?

Response: It’s basically Blippy for web behavior, the idea has been tried before, people will do it, it’s customizable but it should look like a browser and any site you visit should be public, it’s an interesting idea

01:31:00   Facebook Hacker – A guy named Ron Bowes, a security consultant and map developer, created and uploaded a torrent this week that contains more than 100 million Facebook users’ information. He’s being referred to as a “Facebook Hacker,” and has been accused of a security breach, but claims that all he’s really done is compile publicly-available information in a nice format for easy statistical analysis. Facebook itself says that Bowes’ data is no different than what you’d find in a phone book. Gizmodo is now reporting that several major corporations have gone ahead and downloaded the torrent, based on a scan of IP addresses. Their list includes Apple, the BBC, Disney, Goldman Sachs, HBO, HP, IBM, Intel, Motorola, Pepsi, Procter and Gamble, Viacom and…wait for it…The Church of Scientology!

Did this guy do anything wrong? Would you be concerned to find out your data was included in his Facebook Directory torrent?

Response: He’s indexed the site, you can’t trust Facebook and if you put personal information on the site it’s probably on the torrent. Jason thinks he’s a hero for bringing the issue to light.

Special Thanks to Newtek for the Tricaster, the network wouldn’t have been possible without it, it’s the backbone of what we do.

01:39:00  END

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