Oct 13

Can Cloning Businesses Work? Ask Rocket Internet

One of Europe’s biggest technology companies is one that many people might not have heard of in the United States. Rocket Internet is the name of a German-based parent company of over 100 businesses with catchy names including Jabong, Wimdu and Lazada.

Rocket Internet is the kingmaker of so-called clones. The company specializes in taking a business model from a successful American e-commerce company, rejigging it and then launching it in other countries quickly and efficiently. In doing so, it “pushes down market risk by tailoring or importing a model that works in one part of the world” and taking it to another part of the world with adjustments that speak to local markets, according to Wharton management professor David Hsu.

The Rocket Internet model centralizes information technology, design, marketing and search-engine optimization in the firm’s Berlin headquarters and then sends out start-up founders to launch a particular idea in a designated market or country. A whopping 25% of the European unicorns, valued over $1 billion, are Rocket Internet companies. Just recently, HelloFresh, which delivers ingredients to make pre-planned meals, received a new round of financing, driving its valuation up to $2.94 billion from $680 million. HelloFresh is one of the rare Rocket companies that operates in the U.S., and it may be a sign that more American consumers will hear a lot more about the company.

“They bundle up a bunch of resources to get started and give enough of a leash [for start-up founders] to make managerial decisions,” notes Hsu.

“It’s an interesting hybrid for new MBA graduates where you have more or less the security of a big company and you gain the start-up experience of Silicon Valley with resources as a backup,” adds Martin Ihrig, an adjunct professor of entrepreneurship at Wharton and practice professor at Penn’s Graduate School of Education.

Though the strategy sounds relatively simple, it’s actually an impressive feat to execute, says Wharton management professor Exequiel Hernandez.

“It’s very hard to take a business model and adapt it successfully to a divergent market. Even two places that are seemingly alike, such as Canada and the U.S., have profound differences,” he notes. “Rocket Internet seems to have developed a unique skill in taking existing business models and replicates them in a foreign market. Think about cultural, legal, geographic, economic, institutional and other ways in which countries differ. The trick is to know which ones matter for a specific business model and which ones don’t. Some models are very culturally sensitive — think fashion and dating — while others are extremely sensitive to legal issues, like Uber and Lyft.”

Rocket Internet’s business model “pushes down market risk.” –David Hsu

The HelloFresh news illustrates Rocket’s “very impressive growth,” says Hernandez. Hsu adds the semi-prepared food delivery business is a “hot area with high valuations for several of the players in the space right now.” Hernandez notes that at the start of 2014, HelloFresh only had 7% of the meal-delivery market share by revenue, and that jumped to 59% by the first quarter of 2014. In the same period, [U.S. rival] Blue Apron went from 73% to 28%. He adds, “Though all IT and website development is done from Germany, they have adapted recipes to American tastes. Also, in other countries, HelloFresh doesn’t allow customers to select the meals they get in a package, whereas in the U.S., customers are allowed to do this.”

No Baby Unicorn

Rocket Internet launched in 2007 and now operates in 110 countries with 30,000 employees. In October 2014, it went public on the Frankfurt Stock Exchange and was valued at $8.2 billion. In 2014, the company reported sales of $115.7 million, compared with $80.8 million in the previous year, according to The Economist.

However, the tech company is not a baby unicorn. The founders — brothers Oliver, Marc and Alexander Samwer — have been developing their chops for more than 15 years.

In 1999, the Samwer brothers launched their first company in Germany, an eBay clone called Alando. After living in a one-bedroom apartment in Silicon Valley and interning at various tech companies, the brothers repeatedly tried to contact eBay with their idea to branch out to their native Germany. With their proposal spurned, they moved back to Europe and launched the business on their own. Their first items for sale included their childhood toys — much to the dismay of their mother, who was planning on keeping the toys for grandchildren.

Within 100 days of launching their first clone, the brothers sold their business back to the prototype, eBay, for $53 million, and they became Germany’s first Internet millionaires.

However, they were not the first online marketplace in Germany, where shops are typically shut on Sundays. “When [Alando] started, there were at least 18 auctions sites in Germany — we weren’t the only ones. [The Samwers] were execution motors,” Niko Waesche, who was brought in to design Alando’s technology platform, said in an interview in Wired magazine.

Following that success, and less than two years after Groupon launched in Chicago in late 2008, the brothers launched MyCityDeal in Berlin, which became the top daily-deal e-commerce site in 13 European countries. Like eBay, Groupon decided to buy the clone in May 2010 for 14% of Groupon’s shares, worth $170 million, within a few months after launching.

The Samwers would call themselves “execution entrepreneurs.” Their success lies in their implementation, not in fresh ideas. “We are builders of companies, we are not innovators. Someone else is the architect and we are the builders,” Oliver Samwer explained in Wired magazine.

A ‘Start-up Factory’?

Some have accused Rocket Internet of being a “start-up factory” that copies ideas that have worked in the U.S. and replicates them in markets where the prototype tech companies haven’t yet ventured. Ihrig points out that “sourcing venture ideas from abroad isn’t unique. It’s more about opportunity recognition or creative imitation when there’s an element of using existing solutions and adapting to the [local] markets.” When Starbucks CEO Howard Schultz visited Italy and observed the popularity of espresso bars, he was inspired to bring the concept to the United States. It’s “knowledge acquisition, going around the world to see what’s working and bring it to another part of the world. Rocket Internet is the biggest and most successful with their business model,” Ihrig said.

“The devil is in the details, in the execution, and details are determined through experimentation, which is not visible to outsiders.” –Serguei Netessine

Wharton experts say companies such as Rocket Internet don’t need to worry about intellectual property infringement or copyrights. “It’s quite difficult to prove appropriation of a business model,” Hsu says. You can’t patent a business model or a method on how to do business — they are intermediaries between consumers and merchants. For example, Amazon One-Click might have some elements that are patentable, but enforcing that in court is “tricky,” explains Hsu.

Serguei Netessine, Wharton-INSEAD Alliance research director and an INSEAD global technology and innovation professor, notes, “What Rocket Internet copies or adapts are business models rather than products or technologies. Business models are the DNA of the company, closely intertwined with corporate culture. The devil is in the details, in the execution, and details are determined through experimentation, which is not visible to outsiders.”

Ihrig says the Rocket Internet model is also interesting because the founders have turned the incubator/accelerator idea, which has been popular in the U.S., on its head. While these incubators may take a small equity percentage of companies they seed, like 5% to 10%, Rocket Internet designates start-up founders and sends them to countries to launch a business, offering these go-getters a similar equity stake in the companies they’re starting, according to Bloomberg.

However, one striking resemblance between Rocket Internet and incubators is the swiftness in deciding whether a business idea will succeed or fail. Rocket Internet aims to get a company off the ground in 100 days, which is a similarly tight deadline within incubators and accelerators. Ihrig notes the strategy is to quickly experiment with new ideas and redirect or shut down businesses that don’t work, based on discovery-driven planning (DPP) principles pioneered by Wharton management professor Ian MacMillan and what is popularly referred to as the lean start-up method.

“It’s interesting that they have a portfolio approach that goes back to DPP. They are unique in that they try out various products to see if it has promise for the future. Others have just one product,” Ihrig notes. What’s unique about Rocket Internet is that it takes several business ideas at a time and moves to several markets at lightning speed.

It “gives a very high incentive to flesh out” a company, says Hsu. The downside is that there are some ideas that genuinely need time to develop, he adds. During demo days in the incubator or accelerator setting, entrepreneurs have to stand up and pitch their ideas, which really “accelerates their learning,” according to Hsu.

Success Stories

One of Rocket Internet’s most successful start-ups, Zalando, is an online shoe and clothing retailer that had spun off independently from Rocket, although the Samwer Brothers retained a 17% stake through their venture capital company. Just a couple of days before Rocket Internet went public in 2014, Zalando launched an IPO with a valuation of $5.9 billion. Originally launched in 2008 as a Zappos clone, selling only shoes, it expanded into clothing sales as well. “There is much more adaptation than copying,” Netessine says. “Founders for their start-ups in respective countries have a lot of autonomy to change the business model to adapt to local conditions. Zalando is a good example.”

One key to Zalando’s success was television advertising, which was not that common at the time for e-commerce, notes Gabriel Karlberg, who was once Marc Samwer’s assistant and is now a Ph.D. candidate at the Stockholm School of Economics. “[The Samwers] do a lot of analysis and work with a lot of numbers in their marketing efforts. It’s not just trial and error,” he says.

Adds Hernandez: “It would make sense to let go of a company … once it can stand on its own. Rocket Internet doesn’t seem to be wedded to any particular industry. The only commonality seems to be that it’s Internet or mobile based. The cash from the businesses they sell or spin off may help fund new projects with higher growth potential.”

Rocket Internet’s global food takeout delivery business is another hallmark of its success. The project has been the biggest driver in raising the company’s loan portfolio value up by 77% since it went public. It operates in 71 countries and includes companies such as FoodPanda and DeliveryHero. In fact, DeliveryHero is the third most valuable European company, worth $3.1 billion, with a network of over 200,000 restaurants, according to CB Insights. “We’re the largest online takeaway delivery group, outside China, in the world,” Oliver Samwer told Reuters.

Other success stories include Jabong, a fashion retailer in India with revenue increasing 135% in 2014 from the previous year, and Dafiti, a fashion retailer in five Latin American countries with 2.1 million active customers. Global Fashion Group, which includes Jabong, Dafiti and Russian start-up Lamoda, is worth $3.4 billion and ranked as the second most valuable European unicorn by CB Insights.

“I don’t think what Rocket Internet does is easy, so I don’t see it as being something that everyone should rush into.” –Exequiel Hernandez

Fashion retailer Lamoda established its own distribution and delivery network to reach 40% of the population after launching in 2011. As Netessine explains, Rocket Internet “quickly realized that the Russian Post is too unreliable and DHL/FedEx are too expensive and limited in their service networks. This required a major pivot, which is why I don’t like calling these companies copycats. They built a distribution network from the ground up. While they certainly succeeded in certain aspects of logistics, I would not compare it with the ability to deliver letters to every single Siberian house, which is what the Russian Post must do. Lamoda delivers only in relatively large cities, and the value of the parcel is quite large, unlike a letter.”

Another Rocket success is Home24, one of the largest furniture retailers in Europe. Valued at $1.03 billion, the business exploded with 70% in annual revenue growth in 2014.

However, Hsu warns, “Valuations remain sensitive to the possibility of bubble pricing, in which case whole sectors or types of start-ups are vulnerable.”

Regional First Movers

Rocket Internet strikes into regions often before American tech companies start making inroads to the foreign markets. The company has found impressive success in emerging markets by looking for a burgeoning middle class and Internet penetration.

“Being first to market allows them to quickly capture market share and establish the brand or product,” Hernandez says. The company was behind the first e-commerce portals in Myanmar, Nepal, Pakistan and Bangladesh.

“They’re very talented at spotting markets that are emerging. For example, Nigeria had a high penetration rate and the size of the market was similar to France. It’s all about market share for them. It’s important to get that market share and later on get a handle on the cost side. They want to be the dominant player and sustain it,” says Karlberg. To that end, one of its start-ups, Jumia, the Amazon.com of Nigeria, suffered losses of 16% in 2014, according to The Economist. However, some analysts don’t expect Rocket Internet to make a profit until 2017.

For Rocket, it seems like a “race to get into a particular market,” but that begs the question of whether it’s better to “quickly build out a big presence, or maybe it’s more clever for American companies to see what mistakes are being made and come in second,” notes Ihrig.

“I don’t think what Rocket Internet does is easy, so I don’t see it as being something that everyone should rush into,” Hernandez notes. However, Hsu thinks “they’re seeding in a purposeful way. Rocket Internet is flexible, nimble and getting things done.”

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Oct 12

China: Draft Rules for Online Payments Explained


China Drawing Board Draft

At the end of July, China’s central bank issued a set of draft regulations on online payments for public opinion, which recently concluded at the end of August. The draft rules were hailed by industry players and media as the “harshest rules in history” targeting the third-party payment industry, or non-bank organizations conducting payment-related operations. The central bank purports that the broader context or purpose of these draft rules is to improve consumer protection and reduce payment-related risks such as fraud. However, the industry views these rules as a protectionist move by the central bank that benefits banks in an attempt to stifle growing usage of online transaction services offered by third-party payment platforms (including mobile payments).

I have summarized the key points of the regulations below, outlining the issues and potential consequences from the implementation of these rules:

General – The draft rules only apply to non-bank organizations that have a third-party payment license issued by the central bank. The rules govern online payments, which is defined as the transfer of funds conducted via the internet through either desktop or mobile applications. As reflected in this draft, the opinion of the central bank is that the role of third-party payment platforms is primarily to provide payment processing services for ecommerce transactions, which should be conducted following these regulations and the rules set by the customer’s bank.

Know Your CustomerOperating Restrictions – Licensed third-party payment platforms should only provide payment processing services and are forbidden from providing other financial services such as taking deposits, providing loans and other forms of financing, wealth management, and currency exchange. Payment platforms are also forbidden from opening payment accounts for financial institutions that offer the aforementioned services.

Most third-party payment platforms will be in compliance with this rule as the payment business tends to be the core focus of their operations. However, many also began offering investment products in the form of money market funds following Ant Financial’s Yuebao launch last year. According to these draft rules, payment platforms will no longer be permitted to continue offering these investment products unless they restructure the service to be offered under a separate legal entity. A more stringent interpretation of the rules may imply that payment platforms cannot even display or advertise such investment products on their websites.

ID Checks – Platforms are encouraged to follow “Know Your Customer” principles and conduct sufficient diligence on customers to verify identity. When opening accounts for customers, platforms must either perform an in-person ID check or pass multiple ID checks on the customer using external sources such as government databases, commercial bank databases, or other legal and secure commercial databases to verify a customer’s identity. If the account is a “Consumer Account” solely used for ecommerce transactions, then either an in-person check or 3 separate external database checks is required. If the account is a “General Account‘’ that can be used for a variety of transactions including ecommerce or investments, then either an in-person check or 5 separate external database checks is required.

There are three main issues with these ID requirements:

1. The requirements greatly impedes user experience since customers now have to either show up in person to some location to verify identity and open an account (much like a bank) or provide multiple IDs online to fulfill the verification requirements.

2. Aside from government-issued personal ID and bank account information, the Chinese market currently does not have robust commercial databases to provide other forms of ID verification. It may be nearly impossible for someone to pass 5 different ID checks to open a General Account as there simply isn’t enough data out there.

3. The multiple ID checks significantly increases costs for platforms as they will need to purchase the ID verification services from external data providers, costs that will likely be passed on to consumers in the form of increased account or transaction fees.

Bank of ChinaBank Authorization – When conducting customer-authorized transactions that involve the payment platform deducting funds from the customer’s bank, the following authorizations are required:

1. For transactions under RMB 200, payments for public service bills such as utilities, tax payments, and other payments occurring on a fixed schedule (ambiguous in meaning), the payment platform may verify the customer’s identity and authorize the payment on behalf of the customer’s bank.

2. For all other such transactions, the bank must conduct the verification and authorization process, and cannot assign this responsibility to the payment platform.

Typically when transferring funds into a third-party payment account from a bank account, the user would be guided to the bank’s web portal to direct the transfer into the payment account. In this case, since the transfer is conducted through the bank’s system, the bank is effectively providing the authorization. Thus these account transfer actions are currently in compliance with the rules. After the payment account has been infused with funds, the user can then conduct transactions using the account balance.

However, most third-party platforms offer a “Quick Pay” functionality where customers can transfer funds or transact directly with their bank cards without being redirected to the bank’s web portal. Under Quick Pay, users can link a debit card to the third-party payment account and can transfer funds within a certain limit (typically not exceeding RMB 50,000) as negotiated between bank and platform. To provide this service, the platform enters into contract with a bank whereby the verification and authorization of payments is conducted by the platform, which is limited by the draft rules. This user-friendly feature may be limited to amounts below RMB 200 if the rules now require banks to verify and authorize transactions exceeding this amount. Again, this rule would degrade user experience, causing greater inconvenience to consumers.

Annual Limits – For transactions conducted using an account balance from General Accounts, the maximum annual aggregate transaction volume allowed is RMB 200,000. For Consumer Accounts, the maximum annual aggregate transaction volume is only RMB 100,000. Note that this rule only applies to transactions conducted directly using a payment account’s balance and not to those conducted using the balance from a bank and then processed by the payment platform.

The annual limits should be sufficient for the majority of consumers in China since only those with very high-income levels would spend beyond RMB 100,000 in a year on e-commerce purchases. However, for consumers investing in wealth management products online, there’s a preference for flexible investment products where they can invest and withdraw at will, such as money market fund products offered by Ant Financial’s Yuebao and Tencent’s Licaitong. Even if these consumers do not invest a large amount in these funds, making constant transactions in and out of the fund may quickly add up and exceed the RMB 200,000 limit. Because these limits only apply to transactions using a payment account’s balance, consumers can continue to conduct online transactions beyond the limits by directly using their bank account balance, which would require using the bank’s web portal and authorization process. Herein lies yet another rule that is partial to the banks at the consumer’s expense.

Daily Limits – Payment platforms can choose from 3 options to conduct transaction verification: user-set password, unique digital identification such as a one-time password or a digital certificate or electronic signature in the form of a browser plugin, or a biometric ID such as a finger print. If the platform verifies the customer transaction using a browser plugin and an additional verification listed above, then the daily transaction limit can be an amount agreed upon between the platform and customer. If the platform uses a two-step verification that does not include a browser plugin, then the daily transactions for the payment account cannot exceed RMB 5,000 in aggregate. If the platform only uses a single verification method, then the daily transactions for the payment account cannot exceed RMB 1,000 in aggregate.

Beijing Traffic Jam ChinaThese daily limits pose another inconvenience to consumers using payments accounts to conduct online transactions that forces them to use bank portals for transactions if they exceed the daily limits. Although the daily limits may be increased if the consumer uses an electronic signature or digital certificate in the form of a browser plugin, installing these plugins can still be a nuisance. The majority of users in China may not be technologically savvy enough to install and update the plugins as these plugins often have compatibility issues with different browsers. And of course, platforms must develop or purchase these plugins from third parties, which adds to the cost that may be passed on to consumers.

It is important to note that all of the aforementioned rules are specific to personal accounts opened by individuals and do not apply to company or business accounts. There is only rule in the draft regulation pertaining to company accounts, and that is for transactions over RMB 50,000, a payment memo or documents demonstrating the purpose and reason for the transaction is required to be kept on record by the platform. This rule is most likely to prevent tax evasion or money laundering by organizations using online payments.

The draft rules for the online payments industry made some serious shockwaves when it was first announced. For an industry that was largely unregulated for over 10 years until 2010, these draft rules were a giant leap forward toward strict control of the payment industry. In speaking to the third-party payment partners that provide the payment-processing service for Fincera’s CeraVest platform, I found that they were mostly concerned with the excessive ID checks required to open accounts and have submitted their opinions to the central bank. Although our payment partners felt the limit on transaction volume would also degrade user experience, they think it is unlikely the central bank will move on those points when issuing the final rules.

It is abundantly clear that banks would benefit most from the current draft rules and that third-party payment providers will likely face additional costs and be required to make some adjustments to continue operating their businesses. Consumers may also feel the impact of these rules if platforms decides to pass on the increased costs from ID checks and safety features. Once the rules are implemented, consumers will be forced to use bank web portals to conduct transactions exceeding the limits set by the rules. These web portals tend to be less user-friendly and most do not provide support or good user experiences for mobile interfaces. However, I expect this may improve over time as banks increase investments in the development of their online services and applications.

(Editors Note: This article was previously published by Fincera and is reproduced with the express approval of the author.  Fincera is a leading provider of financial services in China including commercial vehicle financing and small business lending. Fincera owns and operates two web based internet finance platforms CeraPay and CeraVest)


Spencer Ang LiSpencer Ang Li has served as Fincera’s Vice President of Product since June 2015 and as Chief Executive Officer for Fincera’s multiple product development subsidiaries since March 2014. Prior to joining Fincera, Mr. Li was an Investment Banking Analyst at Cogent Partners in New York, a sell-side advisor for private equity secondary transactions, from 2011 to 2014. During his tenure at Cogent, Mr. Li conducted fund due diligence, managed marketing processes, and participated in the sale and transfer of nearly $2 billion in limited partnership interests on behalf of public pensions, large regional banks, asset managers, and other financial institutions. Mr. Li received a BS in Economics and BA in Psychology from Duke University in 2011.

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Oct 11

Durham marketing company Principled Technologies limits profits in favor of …

When Greg Carrero took a seven-week paid sabbatical from his job during the summer, his decision to devote one of those weeks to volunteering his time for a good cause was “a no-brainer.”

That’s because his employer, Durham marketing company Principled Technologies, offers an irresistible sweetener: If an employee donates a week of their time during their sabbatical, Principled will make a $5,000 donation to the charity; or it will cover the employee’s expenses for the week and give whatever remains from the $5,000 allotment to the charity.

So, in between a 12-day vacation in Hawaii and a West Coast road trip, Carrero, who works in project management and product testing at Principled, spent a week building houses in Alaska for Habitat for Humanity. It was definitely hard work, but the “rewarding feeling” made it enormously worthwhile, said Carrero, 30.

Principled’s sabbatical policy is just one example of the rich, outside-the-box benefits package available to the company’s 84 employees. That includes both big-dollar benefits – such as a medical plan that eliminates out-of-pocket medical costs for employees and no vesting period to become eligible for the 401(k) plan – and quirky but nonetheless costly perks.

“We think businesses that focus first and foremost on their clients, the people they serve, and their employees … instead of maximizing shareholder value, for example, ultimately will do better,” said Principled co-founder Mark Van Name.

In business since 2003, Van Name and co-founder Bill Catchings, who own the business, say the company’s extensive benefits and profit-sharing programs ends up taking money out of their pockets. But they’re okay with that.

“We put people over profit,” said Van Name. “So we invest in our future, we invest in taking care of people and we make a very modest profit.”

Van Name, 60, and Catchings, 57, have worked together for 30 years at several different companies, including a stint as freelance journalists who co-authored about 1,500 articles for the computer trade press. They’ve written a book about how they run their business titled “Limit Your Greed.” (They haven’t yet started looking for a publisher.)

“One of PT’s fundamental principles is everybody wins together,” Van Name said.

“Or loses together,” Catchings chimed in. “Hopefully we never have to go down that path, but we have had times when it hasn’t been as great.”

‘It’s a tradeoff’

Smaller, closely held companies tend to offer the most creative benefits, said Skip Woody, a partner and health and welfare consultant at Durham employee benefits firm Hill, Chesson Woody. Indeed, Principled’s sabbatical policy appears to be paving new ground.

“I don’t ever see anything like that,” Woody said.

There’s more, including plenty of free food.

Each quarter the company covers up to $250 in meals – $1,000 a year – at Chelsea Cafe, a restaurant situated in its office building in the Imperial Center off Page Road. And, at the end of the year, Principled donates $400 to each employee’s favorite charity.

When he’s socializing, Carrero shies away from discussing the benefits he receives.

“I try not to talk about it too much because everyone ends up hating me by the end of the evening,” he said.

“To some extent, it’s a tradeoff,” he continued. “Working here, you definitely work really hard and you take on a lot of responsibility. This is really a company where everyone wins or everyone loses.”

Principled is a thriving company that has added 10 new hires this year. The company focuses on marketing technology products for the likes of Intel, Microsoft, Dell and Red Hat. It also designs online training programs that its clients use both internally and externally, which was the impetus for its recent acquisition of Chapel Hill’s WeejeeLearning, a nine-employee e-learning company.

Despite the rich benefits, Van Name said the salaries Principled pays “are extremely competitive, typically on the high side” and that “salary is almost never an issue” when the company makes a job offer.

Beci Markijohn, who works in sales support at Principled, became a believer shortly after she joined the firm a little over two years ago.

While she was still in her probationary period and therefore was paid by the hour rather than being on salary – a probationary program that has since been abolished – Markijohn’s father was in a bad car accident. She ended up working just 10 or 15 hours one week but, even though she wasn’t entitled to it, she received a full week’s pay anyway.

“That says a lot,” said Markijohn, 40. “They felt it was more important for me to worry about my family and taking care of them than to be worried about work that week and to be worried about the hours I was putting in.”

Free health benefits

Principled is unconventional in other ways. The company eschews titles and prides itself on not having an organizational chart or strict hierarchy. The goal is for teams to be flexible and self-managing as much as possible, although there certainly are team leaders.

“What they tell people is … we assume that if you work here that you are a responsible adult who wants to do good work, and they treat people that way,” said Jared White, 32, a graphic designer at the company.

Unlike typical marketing agencies, the core of Principled’s business is conducting rigorous tests on computers, servers and other tech products and using the test results as a marketing tool.

“In a way it’s bringing an engineering sensibility to marketing,” said Van Name. Both he and Catchings have master’s degrees in computer science and once co-led a computer benchmarking subsidiary of media company Ziff Davis.

Gina Massel-Castater, a long-time Principled employee who functions as an executive assistant to senior leaders, including Van Name and Catchings, believes the company’s benefits represent “a mindset.”

“I have never worked for a place that was so compassionate,” she said.

Massel-Castater’s favorite benefit is “the entirely free health benefits.”

Profit-sharing checks

At a time when most businesses are asking employees to pay more for their insurance benefits, Principled’s program starts with paying 100 percent of the cost of the company’s high-deductible health insurance – for both employees and their families.

In addition, the company takes care of the deductibles – $2,700 for individuals, $5,450 for families. At the beginning of the year, employees get a for-medical-expenses-only Health Savings Account debit card that covers their deductibles; any money they don’t spend rolls over into next year’s account.

“I have no out-of-pocket expense at all for my health benefits,” said Massel-Castater, 63.

Other benefits include no caps on vacation time and a free laptop and a free cell phone every two years. The company also pays employees’ cell phone bills and their home Internet bills.

The owners’ egalitarian mentality extends to its atypical profit-sharing plan.

Profit-sharing checks are doled out twice a year. The mid-year check is a lump sum, which in the past has ranged from $2,000 to $5,000.

“That really favors the lower-compensated people,” Catchings said.

The end-of-year profit-sharing, on the other hand, is pegged to a percentage of employees’ salaries and have ranged as low as 5 percent and as high as 20 percent. That benefits the best-paid employees more.

Then there’s monthly $1,000 performance bonuses that reward employees for going above and beyond.

There’s neither a ceiling or a floor on the number of performance bonuses, which this year have ranged from as few as three to as many as 15 in a given month.

Although Principled is an nontraditional company, it has developed some traditions of its own over the years.

One of them harkens back to the company’s beginnings, when there was no profit-sharing plan but each employee got a $1,000 bonus check at the end of the year. So Van Name and Catchings continue to issue those end-of-year $1,000 checks – on top of those profit-sharing checks.

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Oct 10

How Tesla, Under Armour, and Sonos Do Branding

The network effect, which describes how services and technologies become more valuable as more people use them, has driven the success of many internet companies. But it is not confined to the tech sector. One group of high-growth consumer brands, in particular, has been harnessing the power of the “brand network effect,” by leveraging technology to build large, passionate online communities around their products. And as these communities grow, their branding becomes exponentially more powerful.

The advertising guru David Jones dubbed this mixing of branding and technology as “brandtech.” And one prominent brandtech company is Tesla, which has become one of the most valuable high-end car brands in recent years. The company is worth around $30 billion (compared to GM’s $57 billion and Ford Motor Co.’s $59 billion). And a large part of its success is tied to how it leverages technology in its products—and in its marketing. For example, Tesla did away with car dealers and moved customer interactions to an engaging web platform that contains all the information a prospective buyer would need, like car performance data and market comparisons. It makes the process of buying a car and customizing it simple. It also engages and builds its large user community by pushing out shareable content, letting people share their own experiences, and live-streaming new product announcements and local events. All of this has, in effect, turned Tesla drivers into Tesla marketers.


Having studied other extraordinary growth cases and worked closely with Fortune 500 brands for a number of years, I’ve observed two approaches that help brandtech companies grow massive communities of engaged customers, fast.

They leverage technology in innovative ways.

Brandtech companies use technology to create emotional product experiences that customers then want to share with others. Whether it’s a social fitness app (like sports apparel company Under Armour’s dashboard) or an immersive experience (consider how Tesla feels more like an intelligent driving partner than a traditional car), a software layer distinguishes the product by incorporating into people’s daily lives.

The speaker brand Sonos is another good example. The driver of brand value for high-end speaker systems used to be design, sound quality, and big retail events. Sonos went beyond this by building an app that connects its speakers to services like Spotify and Pandora, and recommends personalized music for customers using its own algorithm. Users communicate with Sonos every time they listen to music in their homes. Through this interface, users can follow other stations, create playlists, and see other users’ behavior. And the brand becomes more valuable for each individual user as more join. The company doubled its revenue last year (2013-2014) to more than $1 billion and its systems are installed in more than 1 million homes in the U.S. alone.

In a world dominated by smart phones, nothing is more important than a consumer-facing software layer that connects users and become increasingly more valuable. Companies that don’t have the internal capabilities to build this themselves should consider acquisitions. This past year, Under Armour has invested more than $500M in two fitness community apps, and it has grown its community to include 120 million people.

They meet consumers where they are.

Whereas brands have traditionally used a one-message-fits-all approach, disruptive brandtech companies do the opposite: they engage consumers using content that is distributed, consumed, and shared on a variety of digital platforms. They have mastered the use of social media for community building.

Red Bull is one example. It built up its YouTube presence by creating a number of dedicated channels to showcase extreme stunts and music events. It now has more than 4 million YouTube subscribers (Coca-Cola, on the other hand, has 500,000). It broadcasted the daredevil Felix Baumgartner’s space jump on Youtube to more than 8 million people live. Shareability is one of the main criteria for all of YouTube’s content postings.

Under Armour’s Facebook-driven marketing campaign for women’s wear (“I will what I want”) was a similar story. It turned into a social media sensation and got 5 billion impressions and $35M in so called “free earned media”, which is an indication of how many people have shared the content on social platforms.

Instead of operating with a campaign mindset, brandtech companies are constantly pushing out content to users, so that they resemble 24/7 media companies more than traditional consumer brands. Rather than turning to expensive traditional outlets like TV, they rely heavily on their own channels, both digitally and physically. For example, by foregoing car dealerships and setting up high tech showrooms next to well-known retail stores, Tesla is able to communicate directly with and engage an audience that might not otherwise would have considered visiting a car dealer.

The brandtech approach is fundamentally different from how brands have traditionally built communities around their products, and incumbents have a lot to learn. If established firms want to catch up and achieve the same scale and community engagement, they will need to focus on harnessing a similar brand network effect. And they can do this by creating an innovative software layer around their products and a bold strategy for engaging audiences through original content that’s shared on the right channels.

Permanent link to this article: http://homebiz2bizreview.net/internet-marketing/how-tesla-under-armour-and-sonos-do-branding/

Oct 09

Rand Internet Marketing and nChannel Announce Upcoming Partnership Anniversary …

FORT LAUDERDALE, Fla., Oct. 8, 2015 /PRNewswire/ -- Rand Internet Marketing, a full service marketing firm, is approaching three years of partnership with nChannel, the leading provider of multichannel management systems that simplify and enhance selling for merchants.

Logo - http://photos.prnewswire.com/prnh/20151007/274994LOGO

The partnership began in 2013 with a focus on helping merchants maximize their online selling potential by combining the marketing and web design services of Rand Marketing with the process integration services of nChannel. The combined solution gives merchants an end-to-end solution for selling online that includes everything from web design, advertising, social media and SEO to automated product listing, order management and inventory synchronization between the merchant's eCommerce platform and their brick and mortar and ERP systems. More recently, the duo has collaborated on marketing activities and educational content including industry-relevant e-books, articles and blog posts, press releases, webinars and trade show events.

nChannel helps sellers provide a seamless experience across all channels by enabling all existing technology to work together in a single platform, while integrating with the fastest growing eCommerce platforms in the industry, including Amazon, Magento and eBay, as well as nearly a dozen leading point-of-sale and ERP/accounting software publishers.

"Our relationship with Rand Marketing was built on a mutual goal: to help our customers grow their business by expanding to new channels – specifically the web. The partnership continues to strengthen as we identify new opportunities for our merchants and provide solutions to help them take advantage of them," said Shilpa Marano, CMO of nChannel.

Rand Internet Marketing has a large array of services and is known for their extremely effective internet marketing solutions. These services include responsive website design and development on Magento and WordPress e-commerce platforms, online content marketing, search engine optimization (SEO), graphic and logo design, pay-per-click (PPC), online banner advertising, and social media setup and marketing.

"nChannel is one of our most trusted oldest partners to date and needless to say, we are excited to strengthen our partnership," said Seth Rand, Founder and CEO at Rand Internet Marketing. "The nChannel platform is a major factor in the success of many of our Magento e-commerce clients, allowing our customers to be more competitive in today's market."

Visit nChannel.com to find solutions for your multichannel retail.

About Rand Internet Marketing

Rand Internet Marketing, a division of Rand Business Services, is based in Ft. Lauderdale, Florida, offers a full line of design and marketing services including logo design, graphic design, website design, responsive web development, search engine marketing, and social media marketing. Rand specializes in professional responsive web design and development including responsive WordPress websites and Magento eCommerce websites, search engine optimization (SEO) pay per click (PPC) management, and social media marketing. Rand also offers e-mail marketing, local directory optimization, press releases, blogging, content marketing, video production, video marketing, full color printing, reviews and reputation management, product photography, and a variety of other professional business services.

If you are in the market for a new website, or looking to generate more leads and sales through internet marketing, let the Rand Internet Marketing team help you design an integrated strategy that will help your business succeed.

For more information, call 888-707-RAND or request a consultation online at Randmarketing.com/request-consultation.

About nChannel

nChannel is the leading provider of multichannel management software that simplifies selling for retailers of all sizes. nChannel provides a single, cloud-based platform that easily integrates with existing systems to help sellers improve the management of product information, streamline supply chain processes and enhance the overall shopping experience for customers. With better business intelligence and increased exposure, nChannel subscribers are improving multichannel operations resulting in new opportunities for repeat business and revenue and making them more competitive than ever before. For more information, visit www.nchannel.com.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/rand-internet-marketing-and-nchannel-announce-upcoming-partnership-anniversary-of-three-years-300156422.html

SOURCE Rand Internet Marketing

Copyright (C) 2015 PR Newswire. All rights reserved

Permanent link to this article: http://homebiz2bizreview.net/internet-marketing/rand-internet-marketing-and-nchannel-announce-upcoming-partnership-anniversary/

Oct 08

Endeavor taps two Miami tech companies to join global network

EveryMundo is a marketing technology company serving the travel and hospitality industry. Yandiki leverages the cloud to connect enterprises with on-demand talent. The founders of these two young Miami companies were selected Wednesday as Endeavor Entrepreneurs at the global nonprofit’s 61st International Selection Panel in Morocco.

Anton Diego and Seth Cassel, co-founders of EveryMundo, and Silvina Moschini, CEO and co-founder of Yandiki, join Endeavor Miami’s growing portfolio of high-impact entrepreneurs, which now includes 11 companies in its portfolio. The three join a total of 22 high-impact entrepreneurs representing 18 companies from nine countries selected at the panel. Endeavor Entrepreneurs receive targeted services including mentorship and access to capital, markets and talent.

“Endeavor has been incredibly influential for us in the preparation for entry into the organization. Our advisors have shaped our strategy, personnel and growth tactics over the past year,” said Cassel, from Morocco. “We are excited for what’s to come.”

EveryMundo works with numerous airlines worldwide to increase their direct customer acquisition and therefore own their customer relationships. The company offers software products and services to increase online and mobile traffic acquisition and transaction conversion, in any language and country worldwide, said Cassel, adding that the team is comprised natives of 11 countries speaking 10 languages.

Yandiki’s core product, WaaS, functions as a marketplace with filtering features (skills, rating, cost, and productivity) for talent, verified through a series of customizable online tests, video interviews, and user generated feedback and certifications. The product allows for workforce monitoring including project and task management, real-time business analytics and billing, said Moschini, an international expert on Internet marketing.

Matt Haggman, Miami program director for the John S. and James L. Knight Foundation and an Endeavor Miami board member, said: “The expanding group of Miami Endeavor entrepreneurs aligns with the consistent growth we’ve seen in the city’s innovation and startup ecosystem over the last few years. These new additions also highlight both the creativity and variety of ideas that are fueling Miami’s evolution.”

Endeavor’s International Selection Panel is a three-day process, where panels composed of six top global business leaders interview candidates about their businesses, high-impact leadership potential, and timing. To be selected, an entrepreneur must receive a unanimous vote.

Endeavor Miami launched its operations in September 2013 with the support of Knight Foundation and an active local board of business leaders. For more information on Endeavor Miami or to nominate entrepreneurs, visit www.endeavormiami.org.

Permanent link to this article: http://homebiz2bizreview.net/internet-marketing/endeavor-taps-two-miami-tech-companies-to-join-global-network/

Oct 07

LogMeIn Makes Case for Internet of Things at Tech-Celebrity Gala

10/6/15Follow @JeffEngelXcon

Michael Simon

There are a lot of ballyhooed tech sectors right now, perhaps none more hyped than the “Internet of Things”—the movement to connect machines to the Internet so they can, essentially, talk to each other and to us.

That excitement was on display last week in Boston at “Xperience,” LogMeIn’s business conference that explored IoT innovation and promoted Xively (pronounced “zive-ly”), the company’s division that sells cloud software and services to manage the “connected” part of connected devices.

The gala marked LogMeIn’s (NASDAQ: LOGM) first business conference in its 12-year history, and the swanky event “is a sign of how big of an investment” it’s making in IoT, says Matt Duffy, the company’s vice president of marketing for connected products and customers.

LogMeIn initially planned on hosting around 200 attendees for the conference, held at the Seaport Boston Hotel, but ended up registering about 550 people, Duffy says.

He wouldn’t share how much LogMeIn spent on the two-day event, but it couldn’t have been cheap. Attendees were given complimentary bags for carrying laptops. Well-known tech industry luminaries Ray Kurzweil and Peter Diamandis were among the speakers. And LogMeIn hired comedian and actor T.J. Miller, best known for playing Erlich Bachman on HBO’s “Silicon Valley,” to do a half-hour standup routine during lunch on Thursday.

Miller’s brand of crude stoner humor mixed with witty social commentary was hilarious, although probably would’ve drawn more laughs if audience members had been two cocktails deep at a conference after-party—and Miller poked fun at the crowd for being so reserved. Some of his best material, at least for this group, was when he read aloud the official corporate descriptions of three companies attending the conference, which were a predictable mouthful of jargon and buzz words that cause most people’s eyes to glaze over.

In addition to the accouterments that have come to be expected from industry conferences like these, LogMeIn also made efforts to provide some steak with the sizzle, as public relations consultant Bill Baker puts it. That included a showcase of four companies that have used the Xively platform to connect their devices to the Internet.

They were SureFlap, a U.K. company that makes electronic pet doors and feeding bowls that are triggered by microchips embedded under pets’ skin or attached to a collar; Tokyo-based Sato, which uses Xively to connect its thousands of printers; Coopersburg, PA-based Lutron, whose products include light dimmers and window shades that can be controlled by mobile apps; and Braintree, MA-based Symmons Industries, which enlisted Xively to help make smart shower heads that can be monitored and controlled remotely.

Those aren’t the sexiest businesses—perhaps another sign that IoT is still searching for the product (or products) that completely change our lives, in the way that computers and smartphones did. But the mix of technologies on display last week also speak to the broad possibilities for IoT and for Xively, which could see a huge boost in business if it successfully positions itself as the backbone of companies’ connected devices.

Many businesses that are getting into IoT are “trying to do it themselves, and they’re failing,” Duffy says. “They’re realizing it’s not an easy thing,” especially for hardware companies making their first foray into software.

That’s where LogMeIn sees a bigger opportunity for Xively, which provides an online platform to help companies connect their devices to the Internet, and then helps them manage the flow of data from the machines. “It’s in our DNA to connect things,” Duffy says.

LogMeIn, best known for cloud-based software that allows employees and IT service providers to remotely access and troubleshoot computers and other devices, got into IoT in 2011 through a $15 million acquisition of U.K.-based Pachube, which provided online software for connecting sensor-enabled devices and sharing data.

LogMeIn rebranded the service as Cosm in 2012, but it remained in “beta” mode until the following year. That’s when LogMeIn changed the name to Xively and began more aggressively marketing its IoT play.

The company expanded the business last year with its $12 million acquisition of Boston-based Ionia, which helped businesses tie Internet-connected devices into their back-office sales and planning software systems.

Xively has gone through some growing pains, including the departures of three key executives last year and the closure of the London office that was once Pachube, BetaBoston reported.

But LogMeIn has also invested in Xively’s expansion. The business now makes up about 100 of its parent company’s 1,000 total employees worldwide, Duffy says.

The company doesn’t break out financial results for each of its businesses, so we don’t know what percentage of LogMeIn’s $222 million in revenue last year came from Xively. CEO Michael Simon (pictured above) told Xconomy last year that IoT could become LogMeIn’s biggest moneymaker, but it’s fair to say that Xively is not there yet.

To get there, Xively will have to … Next Page »

Jeff Engel is a senior editor at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

Permanent link to this article: http://homebiz2bizreview.net/internet-marketing/logmein-makes-case-for-internet-of-things-at-tech-celebrity-gala/

Oct 06

5 Steps to Create an Online Business That Generates $1 Million Annually

The Internet is an extremely powerful platform that allows entrepreneurs to reach a worldwide audience. The right concept paired with the right marketing can lead to explosive growth and revenue. When asked about revenue goals, a large majority of startup founders will say, “We want to hit $1 million in revenue.” It’s a milestone that serves as a goal for every business — hit that million-dollar revenue mark and then continue to scale from there.

How hard is it to reach that number? When you map out a goal and break everything down it appears much more doable than just stating you want to reach a million-dollars in revenue. Below are five steps to create an online business capable of generating $1 million annually, but rather than just listing the steps, I wanted to use a real example. LAWYERS is a project that my company is currently working on. It’s an online law firm directory that will be monetized through paid listings and lead generation. I’ll be using this example in the steps below.

1. Identify a concept that has potential to be profitable.

You first need to identify a concept that has the potential to be profitable. You need a great product or service and there needs to be a large audience that has a use for that product or service. It’s important to understand that you don’t have to launch large-scale at first. You can start regionally and then expand. Just make sure your idea can be scaled to reach a large number of potential customers.

We decided to create an online directory of lawyers and law firms because there is a large enough user base in the U.S. alone, with more than 1.2 million active attorneys and an estimated 50,000 law firms. We can also expand into other countries as we scale the directory. With this project we have two customers we need to attract — the firms and attorneys that want to be listed on the directory, and the consumers that need a platform to locate local firms and attorneys. The user base on each side is large enough to warrant us to start this project.

2. Map out a plan to monetize your idea, generating $1 million in revenue.

Your planning will make or break your business. You have to account for every expense that will come up and map out a solid plan that will allow you to launch without running out of money. Identify ways to cut startup costs and get your idea off the ground. For example, to eliminate development costs we are using this directory theme instead of developing our own from the ground up. This not only saves us a tremendous amount of money, but it allows us to launch with a proven platform.

You also need to know what your goal must be in order to reach that million-dollar revenue number in one year. How many customers do you need? What is the quickest path to reach that number? Our top directory package is $997 per year, so just using this as a benchmark, we would need to sign up 1,000 law firms at this level to hit that million-dollar revenue number. While that might seem like a lot, when you break it down you see that it’s not as difficult as it might appear. Broken down, that’s just 20 law firms in 50 states. Break your monetization goals down so they are easy to digest.

3. Provide value that surpasses other options in the marketplace.

Every idea has competition. It’s important that you identify a unique selling point that sets your idea apart from the other options. You need a potential customer to look at your offer and immediately identify why it’s a superior option. If you’re an online store, offer free shipping or discounts on a particular day of the week. You need to stand out and give customers a reason to select you over the other options.

There are other online law firm directories out there, but we are offering firms that list with us value that isn’t provided by the other options. When we determined our pricing structure we didn’t take into consideration what the other directories charge. We based it strictly on the value we are providing, and it’s ten-fold what we will be charging annually.

4. Seek validation.

Before you move forward and invest your time and money, it’s important that you validate your concept. You need to make sure there is an interest and make sure your price is justified and accepted by potential buyers. You can do this by creating online surveys, or do what I did, and cold-call for feedback.

When we were in the validation process I was cold-calling law firms and speaking directly with the person responsible for writing checks. I told them what we were doing, what is was going to cost and what benefits they would receive. It was exactly the real-world validation needed to justify moving forward with this project. We heard directly from our target customers, that yes, they would buy-in. That type of concrete validation is crucial.

5. Test, analyze data and adjust.

When it comes time to launch you will need to make sure you are constantly testing new marketing channels and new lead generation strategies. Dive into your data and determine what is working and what isn’t. Scale up the winners and clip the losers. You can never remain stagnant — you have to constantly test and adjust in order to maintain forward momentum.

Our initial marketing push is already laid out, but that doesn’t mean we won’t be constantly looking for new opportunities and shut down channels that aren’t producing the results we want. A great idea and a strong initial launch can quickly crash due to lack of testing, analyzing and adjusting.

Jonathan Long is the Founder CEO of Market Domination Media®, an online marketing agency that provides SEO coaching and online marketing consulting. Jonathan also created EBOC (Entrepreneurs Business Owners Community), a private business forum. Follow him on Twitter.

Permanent link to this article: http://homebiz2bizreview.net/internet-marketing/5-steps-to-create-an-online-business-that-generates-1-million-annually/

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