After blockbuster 2013, StackSocial goes native mobile, increasing focus on its O&O tech marketplace
StackSocial has built a profitable and high growth business white-labeling ecommerce marketplaces for publishers. It calls the model “native commerce” after the fact that consumers never leave the publisher’s branded experience and each marketplace is tailored to the site’s unique audience. The company has grown to reach 50 million unique visitors across this network that includes AOL, Gizmodo, Lifehacker, IGN, TheNextWeb, CNET, and 9to5mac among others. But that’s only half its business.
As if by accident, StackSocial has also grown into its own recognizable brand among technology enthusiasts, CEO Josh Payne says, and now generates 50 percent of its revenue through direct-to-consumer sales on StackSocial.com. With this in mind, the company released a native iOS app today making the mobile shopping experience for Stack’s direct customers that much faster and more enjoyable.
“Technology and innovation are in our DNA, and, as we’re all aware, mobile is at the forefront of those movements,” Payne says. “With over a third of our existing traffic coming from mobile phones and tablets, this is just the beginning of our mobile strategy. Our users can expect native iPad and Android versions coming this year, as well.”
Payne has always viewed StackSocial.com as a sort of testing ground for new products and initiatives that will eventually trickle down through its publisher network. In that vein, if the company sees a conversion lift through its new mobile app, it will strongly consider building a native mobile experience for it partners. A responsive Web product is already in development.
StackSocial has undergone another major shift in the last year that has dramatically changed its business. Initially, the company sold mostly digital goods. The thinking was, these products are essentially free to store and deliver, and can typically be sold in unlimited quantity – it’s impossible to “run out” of software downloads. But a surprising thing happened when the company began dabbling in physical goods.
“We moved beyond the niche of technology enthusiasts and began tapping into the mainstream,” Payne says. “All of a sudden we have more female and elderly consumers. My dad even bought a smartphone.”
He’s referring to a FreedomPop offer which bundled an EVO 4G Android phone with a year’s worth of talk, text, and data all for just $160. “We sold thousands of those,” Payne says.
With physical goods, the company has also been able to raise the price points at which customers are willing to buy. In the digital goods market, Stack often limited itself to products costing less than $100 out of fear of an psychological barrier for consumers. The company has sold physical products costing as much as $300.
All told, StackSocial saw its revenue grow by 250 percent in 2013 and is now operating at an eight-figure annualized run-rate, split roughly evenly between publisher sales and direct ecommerce. More importantly, it’s been significantly profitable for the last two years. So much so, that the company’s investors are regularly encouraging it to spend more aggressively. StackSocial’s publisher partners saw their revenue double over the same period and several are now generating seven figures in gross sales annually. Collectively, the company now has 600,000 registered users, a figure that grew threefold in 2013. Part and parcel to this growth, Payne expects to grow the team from 20 to 40 people this year, after already doubling once in 2013.
The timing of StackSocial’s entry into the publishing space couldn’t have been better. As I wrote last August:
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 fact that the company is finding success in what effectively boils down to flash sales isn't intuitive. It seemed to many industry observers that sites like Groupon and Gilt proved flash sales were a dying trend. Even mega-etailer Fab moved away from the model over the last year out of fear that it could never foster the customer loyalty and operating margins that it would need to build a massive sustainable, business.
So what did StackSocial do differently? For one, the company hacked the customer acquisition model by partnering with publishers that already had loyal audiences. Second, the company tapped into a major pain point for publishers, allowing the company to charge meaningful commissions on every sale. Third, Stack wisely built its business early on by serving a highly passionate niche, technology enthusiasts, before broadening to the mass market.
The risk at this stage is that the company has started emphasizing its owned-and-operated marketplace at the expense of its publisher partners. Sure 600,000 users is a nice figure, especially if you can serve their needs in a way that allows you to operate profitably, but Payne needs to be honest about where those users came from. It was their relationship with the publishers that turned the users on to StackSocial. Sure, many of them shop through the company’s website directly today, but it has yet to prove that it can attract the next 600,000 users independently with any sort of reliability or margin.
Commerce is a fickle industry as consumer buying habits can change overnight. But at least at the moment, StackSocial appears to have stumbled upon a winning model. The addition of a native mobile experience isn’t a fundamental leap – really, only brings the company in step with its industry peers. But it's further proof that the company isn’t focused on adding features for vanity’s sake.
StackSocial is refreshing as a real business that is delivering value to its customers, its partners, and its investors. Imagine that.