Just when people have been looking to close the book on niche daily deal sites, Hello Music is announcing some serious growth figures on its first birthday.
The Los Angeles startup, which serves professional and aspiring musicians, announced today that its membership is growing 20 percent per month, doubling to 225,000 total members in the last five months. On top of that, its Facebook brand page, which drives more than a quarter of all the company’s sales, is more than doubling its fan count each month and is currently 100,000 strong.
One year ago, while operating as a marginally successful music screening platform, the company wisely polled its members about ways to add new value. The response was overwhelming and unanimous that musicians are poor and their profession (or hobby) is expensive. The answer for Hello Music CEO Rick Camino was a business model pivot and the creation of the daily deals site he is operating today.
Hello Music divides its offerings into four categories which address the key requirements of those who create music for a living: Gear, Artist Development Services, Accessories, and Vintage Equipment. Gear, which includes for things like guitars, amps, and drums, accounts for nearly 75 percent of total unit sales and, based on the high price points of the products, an even more significant part of its revenue. The remaining 25 percent is made up predominantly of Services, such as music screening and content distribution partnerships like one recently promoted with a Delta Airlines in-flight entertainment channel.
The model is to keep the offerings simple with only four featured product offerings per day and with each deal lasting up to 48 hours (or until sold out). “We’re not Guitar Center, nor do we want to be,” says Camino. “The total number of product SKUs we offer at any time across all categories will rarely exceed 30.” Their discounts are typically 40 percent or more below retail.
Taking advantage of every available avenue to reach its customers, Hello World is the only music retailer with dedicated native smartphone apps. Its entire product catalog has been available in its iOS app for several months and, as of yesterday, is available for Android as well. This is actually more critical than in the case of most other ecommerce platforms, because Hello Music’s customers are regularly on the road touring or in the studio or garage, aspiring to play in front of a packed house.
Like many successful entrepreneurs, Camino started out to scratch an itch that he felt himself. He is a lifelong musician and built his startup team with individuals sharing the same passion and experience. “Functional expertise is potent!” says Camino. “We intimately understand the struggle of the musicians and want to be their most valuable resource.”
As are most founders, Camino is extremely passionate about his business and wanted me to know that they are thriving. But as a reporter, when I see companies announce growth figures that highlight membership rather than revenue or earnings, I am naturally skeptical. The company’s membership is free and with growth this rapid, I’d love to know more about the cost of customer acquisition and also the ongoing member activity.
The company raised $4 million from KVG Partners in early 2010 and presumably has a good portion of this nest egg remaining. It’s going to need the dry powder to combat the crowd of competing platforms. Musician’s Friend offers gear, services, and music sales including a stupid deal of the day in the equipment space. Analogous, but not directly competitive, Topspin Media is a provider of marketing software and services to artists, while RCRD Deals targets music fans with flash sales on exclusive music products and experiences.
I’ve previously reported the statistic that one in seven Americans plays a musical instrument in a formal setting each week. This is a passionate subset of the population. Hello Music is saying all the right things and seems to be driving significant engagement with their target audience. The only question that remains is whether the cash register mirrors the membership roster.