StackSocial: We’re profitable and haven’t touched our Seed capital
Here’s a refreshing bit of news. More than 12 months after raising an $800,000 Seed round in July 2012, digital commerce startup StackSocial still hasn’t touched the money. In fact, it has far more than that in the bank today. This rare circumstance is fairly easy to explain, although far less to achieve. The company is generating revenue and then spending less money than it takes in on a monthly basis. To some that may sound like cheating, but to StackSocial founder and CEO Josh Payne, it sounds like a business.StackSocial offers online publishers a white-labeled daily deals, ecommerce platform and also operates its own such marketplace at StackSocial.com. The company has grown since announcing its funding in July 2012 from six beta publishers to 25 today, including most recently AOL, as well as multiple Gawker Media sites, VentureBeat, TheNextWeb, Cult of Mac, Digital Trends, TechnoBuffalo, Macgasm, LifeHack, and others.
Each of its marketplaces is tailored to the respective publisher, offering a curated collection of products according to the audiences’ tastes and interests. Offers on its site are typically discounted 50 percent from their retail value. StackSocial takes a 20 to 50 percent cut of each sale, which it shares with its publisher partners.
Payne declined to share specific financial details beyond the fact that StackSocial generates “six figure monthly revenues,” adding that the company reaches more than 30 million users per month across its network. StackSocial.com has just shy of 500,000 registered members. According to Payne, 2013 revenue will grow approximately three times over 2012, which itself grew 10X over 2011. About 50 percent of the company’s revenue currently comes from its publisher partnerships, with the other half coming directly from its owned-and-operated ecommerce site.
One key to StackSocial’s success and financial efficiency has been its focus on selling digital, rather than physical goods. Software downloads, games, and video tutorials are infinite resources that can be sold in bulk without any inventory or fulfillment cost. The company will occasionally list a physical product, and plans to do so more frequently in the future, but only if it can find ways to do so without sabotaging its operating efficiency, Payne says.
StackSocial’s product roadmap calls for an increased focus on mobile app distribution and adding community engagement features to its existing marketplace offering. A mobile product is also in the works, driven by the fact that 30 percent of StackSocial’s current traffic comes from mobile devices. The company has plans to expand beyond the technology category to service publishers in the travel, health, and fitness verticals, among others, in the future.
StackSocial has grown from 10 to 17 employees since launching into Beta, all of which work out of its offices overlooking the Venice Beach boardwalk. The company’s backers include 500 Startups, Tim Draper, Paige Craig, Siemer Ventures, EchoVC Partners, Penny Black, Jim Pallotta, Rick Merrill, Josh Resnick, Mark Schwartz, and Jeff Lapin. StackSocial was a member of the inaugural class of the Venice-based Amplify.LA accelerator.
DailyDeals platforms seem like a concept from an era gone by. But StackSocial has managed to find uncommon success in the category by tapping into highly engaged niche audiences, and leveraging the brand and trust of publishers in these categories.
It’s hard to make money in editorial, and for most media focused sites, the idea of building and maintaining an in-house ecommerce offering is simply unrealistic. StackSocial offers publishers a turnkey way to generate additional revenue. The concept of blending editorial and commerce has raised a few ethical eyebrows in old media circles, but strategies like this are becoming the status quo in today’s more competitive environment.
The model is a win for product creators as well, who desperately need additional discovery and distribution for their products, Payne says. Most of the products offered across his network are the result of inbound interest from creators.
StackSocial doesn’t set profitability as a goal, in and of itself. In fact, many of its investors wish the company would invest more aggressively in growth, even if it meant losing money each month. Payne may eventually do just that, but only when he feels that the foundation is set to make it sustainable.
“I consider us a ‘managed-growth startup,’” the CEO says. “Things are going well, and we’ve got a real business. I’m not sure I want to mess with that too much.”
[Image via WiredWiredWest]