If you didn’t see a wide open market for custom T-shirts, I wouldn’t fault you.
But a startup called Teespring is generating a huge buzz at Y Combinator’s demo day. The company presented today to a roomful of investors and press, and announced that it pulled in $750,000 in revenues in a single month.
“We turn affinity into money,” said founder Walker Williams. The company has tapped into niche communities on social sites like Facebook or Reddit. For instance, a Facebook page with several thousand “likes” for dedicated fans of “big trucks and bonfires” might want to offer its community a custom T-shirt.
The company hopes its sales will eclipse chief competitor Threadless by the end of the year. Developer groups like Node.js and Hacker News are already customers, and the company intends to boost sales by lining up celebrity spokespeople.
As we reported earlier this month, Teespring was started at Brown University when the campus community reacted to a police raid at a local bar. The founders realized that a T-shirt would bring students together in a common cause.
The company has a unique model that caters to amateur marketers and merchandisers. A community group creates a T-shirt, uploads it to the Teespring website, and then hosts an embedded sales page on its own site. If enough are ordered, the shirt goes into production.
I was introduced to Teespring through Reddit cofounder Alexis Ohanian, who also serves as an advisor to Y Combinator’s startups on the East Coast. Ohanian said he’s a “huge fan” as it makes merchandising easier for startups and community groups.
“[Merchandising is] a huge pain for lots of reasons, and they’ve brilliantly solved it by making a solution that’s both economical and high-quality,” said Ohanian.
Longtime readers know that I’ve long been positive about mobile payments company Square and, well, not-so-positive, about daily deals site Groupon. (Disclosure: I have puts against Groupon.)
But I think Groupon’s new payments system could present a real threat to Square. And if I’m right, Square should be worried. Very worried.
I had the opportunity to try Groupon payments at a Bay Area ice cream shop on Friday. Although the early test system wasn’t nearly as polished as what Square offers, it worked well enough. And for a typical business, it promises to be a lot cheaper. Square is charging 2.75% of the transaction; Groupon is charging 1.8% + 15 cents for most transactions and 2.7% + 15 cents for American Express transactions. The ice-cream shop owner I spoke with said that Groupon is currently providing the system without any service charges while it is in test mode.
Groupon exposes a longstanding flaw in Square’s business model: It gets too expensive when a business reaches scale or for businesses with high-dollar value transactions.
Although others, like Verifone’s Sail payments system, have tried to compete on price, they haven’t been transparently cheaper. Sail allows businesses to buy down their rate, to 1.95% by paying $9.95 month. Groupon offers a substantially lower rate without any such commitment. Groupon’s pricing is the first I’ve seen that, if I were wearing a Square management hat, merits a response.
For some merchants, Square will continue to make sense. Given the ice-cream place’s low average transaction value, I told the owner that after his trial with Groupon ends, he will save money with Square. But $6 transactions like mine are likely money-losers for Square.
Groupon also has two assets that are critical to the space: a large salesforce and a large customer-service team.
Payments has traditionally been a push business. Hundreds of sales organizations actively call on businesses to get them to accept credit cards. Square has tried to turn it into a pull business, with businesses seeking out Square, either directly or through retail channels such as the Apple Store or the UPS Store.
Groupon has always been about the push model; the only reason it became a multibillion-dollar company is that its salesforce aggressively went after merchants and convinced them to do deals (deals that, in many cases, were bad for the merchant). The ice-cream shop, for example, was approached by Groupon; it didn’t seek the company out.
In this case, Groupon has a product that is substantially cheaper. If I were at Groupon, I would aggressively target Square merchants who are likely to have higher average tickets and are likely to save with Groupon’s pricing. The sell is simple: You’ll save money with Groupon, and I’ll show you. You don’t have to commit a penny. In fact, feel free to keep using Square for your low-value transactions.
Distribution is also an important point. With Groupon, I can get someone to come set up the payment system for me. With Square, I’m on my own.
The other thing =Groupon has going for it is a large customer-service team and substantial experience with customer service. Service is important when money is on the line. Although I’ve had my run-ins with Groupon customer service and a source formerly with Groupon’s customer service team says that customer-service is deteriorating as the company focuses more on the bottom line, Groupon has been doing customer support at much larger scale than Square. My one encounter with Square’s customer service felt like I was talking to a brick wall: My account was suspended because Square suspected I was committing fraud. The good news is that Square’s fraud detection algorithms worked — it’s what I was testing; the bad news is that I couldn’t get anyone at Square customer service to listen to me. (Square PR offered to reinstate my account.)
What Square has going for it is that has a very polished experience. I frequently talk about Square in the same breath as companies like Virgin America, American Express, Apple, and Sonos that are known for great experiences. It also has innovative features such as Pay With Square, which allow consumers to make payments without pulling out a credit card.
But that only takes you so far. You reach a tradeoff of what people are willing to pay for that great experience. Square is combining the pricing of the great experience with the price of the transaction; those are often separate things. The equivalent would be if carriers charged 40% more for data plans on iPhones than they do for data plans on Android. I’m happy to pay an extra $200 to get a better experience by buying an iPhone; but I wouldn’t pay a lot more on an ongoing basis to use an iPhone.
Many merchants just care about payments. The ice-cream shop I visited didn’t even bother to offer me an e-mailed receipt, even though Groupon’s system supports it. Payments was Square’s hook to get people in the door to enthrall them with all of its other services. Groupon’s pricing strategy can close that door.
There’s another company that had a great experience at a premium price: TiVo. The core DVR features are infinitely better than those that come with Comcast’s crappy DVR. It has built-in integration with Hulu Plus, Netflix, and Pandora. But distribution and pricing won, and TiVo is now a minor player in a space that it essentially created.
This is not to say that Groupon has a winner on its hands. It’s possible, even likely, that Groupon will harm Square while doing nothing meaningful for its own business.
Groupon is building up a feet-on-the-street salesforce to tackle payments. (Its North American sales have largely been on the phone.) That’s an expensive proposition. And at these prices, Groupon will have to do an incredible amount of volume to make money.
Groupon’s move into payments, while sensible, reflects a company that is flailing for a business model. But that flailing may end up poking Square in the eye.
At an event at eBay’s headquarters Thursday, online and mobile payment company PayPal announced partnerships with several point of sale system companies to integrate mobile check ins, electronic receipts, and PayPal integrated cash registers.
“In-store payments are a natural extension of what we’ve done. As mobile has become important, retailers have gotten interested in how they can use mobile as a connective tissue the consumer,” said PayPal’s vice president of retail Don Kingsborough in an interview with VentureBeat.
PayPal has cut deals with VeriFone Systems and Equinox Payments to integrate the company’s payment system into cash registers already present in many retail stores. Both company’s point of sale equipment is found in many large- and medium-sized chain stores, along with smaller businesses.
Verifone has entered “a comprehensive licensing, marketing and implementation agreement” with PayPal for its cash registers. Initially, PayPal’s digital wallet will integrate with Verifone systems, as an alternative payment option. Likewise, the deal with Equinox enables customers to pay with PayPal’s mobile app.
The payment company has also partnered with smaller point of sale system companies Vend, Erply, Shopkeep, and Leapset. Small businesses use their POS software to run their business and accept in-store payments. PayPal’s partnership with Vend and others focuses on mobile payments and check-ins. Customers can check into a store using Vend, Erply, Shopkeep, or Leapset cash registers, pay with the PayPal mobile app, and receive email receipts.
PayPal announced partnerships with several retailers, including JCPenneys, Office Depot, and Jamba Juice, to process mobile payments and offer mobile offers, such as coupons.
The news could threaten mobile payment company Square, which offers payments processed with a smartphone but only with Square-enabled cash registers. Right now, the majority of businesses using Square are small and localized. Now that PayPal has partnered with POS companies whose terminals are used in major retailers, it could hamper Square’s potential growth into larger-scale retailers.
The debate over the true impact of piracy is likely to intensify between now and this summer, as several of the country’s largest Internet service providers inch closer to voluntarily implementing anti-piracy policies from the Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA).
Both the RIAA and MPAA met with several ISPs last July to discuss voluntary policies to discourage internet subscribers from illegally downloading music, movies, video games, and other software. The ISPs participating in the anti-piracy measures — Comcast, Cablevision, Verizon FiOS, Time Warner Cable and others — should be ready to implement the new policies by July 2012, said RIAA Chief Executive Cary Sherman at an event in New York yesterday.
“Each ISP has to develop their infrastructure for automating the system … (necessary) for establishing the database so they can keep track of repeat infringers” Sherman said. “Every ISP has to do it differently depending on the architecture of its particular network. Some are nearing completion and others are a little further from completion.”
Many people believe that turning ISPs into piracy police will infringe on their right to privacy. The ISPs do have access to everything a person browses on the internet, but they are legally unable to share that information with third-parties without explicit consent from users. Others point out that this is less about wanting to stop digital piracy and more about big media companies’ failure to innovate. On the other side of the fence, copyright holders claim that they’re losing millions of dollars due to piracy.
Piracy does cost content makers a lot of money. In addition to the alleged lost sales, efforts to stop piracy are also costly, as you can see in the infographic below. (Click image to enlarge.)
Updated at 4:30pm PST for record $1 million amount.
Earlier this week, crowd-funding site Kickstarter set a new record when the Elevation iPhone Dock became the first project to close in on the $1 million dollar mark. But that milestone has officially been bested. In its first 24 hours, gaming studio Double Fine Adventure’s Kickstarter project has raised more than $1 million and it shows no signs of slowing down.
Double Fine’s Tim Schafer tweeted the above photo of the Double Fine team celebrating the $1 million mark.
As GamesBeat reported yesterday, Tim Schafer and Ron Gilbert are legendary game-makers from the golden age of PC gaming, having created classic LucasArts adventures such as Maniac Mansion, Secret of Monkey Island, Day of the Tentacle, and Grim Fandando.
But in the era of Angry Birds, publishers weren’t willing to take a risk on a new project from the duo. As Schafer put it in the Kickstarter video, publishers would laugh in his face if he asked for the funds to do an old-school adventure game. But legions of fans are always asking for it, and offering to pay. So they turned to Kickstarter, hoping to raise $400,000 and offer fans a chance to watch the creative process, pitch in ideas, and even star as characters in the game.
Sketches of Double Fine’s new game
“There’s an unprecedented opportunity to show the public what game development of this caliber looks like from the inside,” Schafer said. “Not the sanitized commercials-posing-as-interviews that marketing teams only value for their ability to boost sales, but an honest, in-depth insight into a modern art form that will both entertain and educate gamers and non-gamers alike.”
The incredible response to the project is going to give Double Fine a lot more leeway in how it crafts the game. “Additional money means it can appear on more platforms, be translated into more languages, have more music and voice, and an original soundtrack for the documentary, and more!” the team wrote in an update after passing its goal by a wide margin.
At an event at eBay’s headquarters Thursday, online and mobile payment company PayPal announced partnerships with several point of sale system companies to integrate mobile check ins, electronic receipts, and PayPal integrated cash registers.
Sketches of Double Fine’s new game
