Big, beautiful data: Poshly begins monetizing its super-personalized beauty products platform

By Erin Griffith , written on November 6, 2012

From The News Desk

Sometimes it takes grueling blood, sweat, and tears for a startup to gain momentum. Other times things fall into place serendipitously.

The road to monetization has been paved with some serendipitous good luck for Poshly, a beauty startup that quietly launched in June. Founder Doreen Bloch responded to a Tweet from one of the largest beauty companies in the world, L'Oreal, about its Women in Digital initiative. Fast forward a couple of months, and Bloch was rubbing elbows with Tina Fey at an awards ceremony and pitching her barely-launched site to the brand managers at each of L'Oreal's products. Now she has more than 50 brands using Poshly for highly targeted contests and giveaways, as well as the exhaust fumes of data points they produce.

It happened again this summer when Instyle featured Poshly's highly targeted beauty product giveaway machine. Poshly had initially planned to shut down the giveaway site -- it was only built to gather data in the development of Poshly's B2B analytics platform for brands. But since InStyle liked it enough to rave about it, and the tens of thousands of existing users continue to return regularly, Bloch decided to keep it intact as an important part of the company.

Now Poshly is beginning to turn on the revenue spigot. Last month, brands began paying the company for its very specific, very targeted insights. And next year, the company will use those insights and its proprietary personalization engine to start selling beauty products online with its own ecommerce site.

Beauty ecommerce has been a tricky nut to crack. The industry is incredibly fragmented: Tens of thousands of products from more than a thousand brands exist with the largest company owning a tiny 12 percent market share. Only 4.5 percent of the $66 billion spend each year on beauty in the US happens online. That percentage is much higher in categories like apparel and accessories, which this study points out, have bucked similar beliefs that shoppers require a "touch and feel" in order to buy.

Overwhelmed consumers only buy products online when they're replenishing something they've already tried. They're not willing to experiment without sampling first, which is why they're paying $10 a month for a box of samples from the likes of Birchbox and Ipsy. Those businesses focus on beauty magazine-style curation to deliver awesome samples and up-sell users on the full-sized versions. Poshly approaches the issue with a different technique: giveaways.

It's something beauty brands are very familiar with, since they've been offering giveaways with magazines for decades. Poshly is building out its ecommerce site for similar upselling capabilities. But in the interim, it's offering brands giveaways with mega-personalization.

It works as such: Users take an intensely personal quiz whenever they want to enter a contest. We're talking all the dirty details of dandruff, freckles, stretch marks -- the works. Giving up information about ourselves to companies in exchange for something free is becoming the standard currency of the Web. As a result, Poshly is sitting on the big data equivalent of that Onion article, "Insecurities Laid Bare in Wal-Mart Shopping Cart." A little unsavory, but the holy grail to beauty brands. Head and Shoulders can't find people with dandruff issues to target marketing to on Facebook unless they've publicly "Liked" their page on Facebook (which, who would do that?). But they can on Poshly because that info is between you and Poshly.

Bloch ensures me the company doesn't share anything personally identifiable and simply uses the data for targeting its contests. Poshly's other offering, aggregated data, is in high demand from brands because it's immediate and cheap. The alternative to Poshly's custom data on, say, whether users like black nail polish outside of Halloween, is to commission an expensive study from a research firm, which takes months to get the results back, Bloch says.

The company could find itself a hot way to market today and out of style in a few months. It takes more than a few months to change the way an entire industry reaches consumers online. But fortunately companies like Birchbox are already forging the path for alternative ways of digital sales. Whether Poshly's early revenue moves out of the experimental phase and into repeat buys from brands won't be clear until the company launches its ecommerce site. That takes a hell of a lot more of an investment in logistics -- Birchbox had to buy its own inventory to send the message that it was serious about becoming a real retailer to its beauty brand partners.

To argue that Poshly stumbled its way into clients and momentum discounts Bloch's competence as a founder. Silicon Valley-raised, Bloch speaks the language of startup. With a stint as an analyst at SecondMarket and founding a student fashion magazine while at Berkeley, she likely feels at home navigating the waters of venture capital, which she's doing right now.

Poshly is in the middle of a seed round of funding which Bloch says she hopes to close by the end of the year.