MarketBoy thrives with a new business model
MAY LEE AND CASIMIR WIERZYNSKI are the new breed of dot-com entrepreneur: young and adventurous, but also prudent and cost-conscious. Which is probably why their site is beginning to thrive six months after the launch.
But the partners--who met at their previous jobs in the credit derivatives division of Goldman, Sachs & Co.--say it's also because they have applied their technological acumen and business savvy to an idea who's time has come. Their New York-based company, MarketBoy Inc. (www.marketboy.com) is a Web site that resembles an auction site where the consumer gets many choices and both the merchant and consumer jockey for the best deal.
The pair plan to be profitable next year. This year, they are trying to hone their idea on the $3 million start-up funds they were awarded from angel investors. And, that means marketing on the cheap.
MarketBoy is unique. Called a continuous double auction, the site's business model mimics securities trading where sellers post their prices and buyers post their bids on a screen in real-time that can be seen by all participants, says Wierzynski, MarketBoy's president.
For the PCs, camcorders and other high-end electronic products merchants put on the block at MarketBoy, sellers can post prices depending on what prices their competition posts, and what consumers say they are willing to pay. Consumers go on the site, compare prices and place a bid for the item they want to buy. To accept the bid, a vendor clicks on the bidding consumer's name.
"If your bid is accepted, you buy the product," Wierzynski explains. MarketBoy cancels bids after a week if a consumer takes no action. "The auction never ends, which is why it's called a continuous double auction," said Wierzynski.
MarketBoy e-mails the buyer to tell them their bid is accepted. And, it notifies the merchant when someone bids close to the price the merchant is asking, with an e-mail that includes an embedded link to accept the bid immediately.
The site pays merchants, such as EMS Computing, Electroline, Abe's of Maine and Outpost, on a pay-for-performance basis--a percentage of sales. Arrangements vary by retailer. "For consumer electronics and computers there are fairly small profit margins anyway, so the profit-sharing is less than 10%," says CEO Lee.
The site has 60 merchants peddling 10,000 products. Small and regional merchants in particular, get benefits they couldn't get on their own. "We bring them new customers who might not have gone to them otherwise," Lee remarks. "We also offer them a chance to market older inventory or see what prices people are willing to bid." Some use MarketBoy as their e-commerce channel, directing visitors to their Web sites to go to MarketBoy.com.
MarketBoy also delivers customer data to its merchant partners. (The site does not share data with outside companies.) Buyers don't have to become a MarkerBoy member to bid, but they cannot check out until they plug in personal information. Data includes name, password, address, ZIP code, telephone number and e-mail address, along with credit card information, product purchased and amount spent.
MarketBoy crafts weekly marketing e-mails highlighting good deals and rebates to the 10,000 people it has collected in its database so far.
Lee and Wierzynski tally 5,000 to 15,000 visitors a day. The conversion rate--visitors who click through to buy--is about 1%.
Search engines--primarily Google--deliver one-third of the site traffic. But, clearly, success of the sire is dependent on reaching potential customers. With such limited start-up funds, though, the partners can only afford to devote 10% of the budget to marketing. So, guerrilla (direct) marketing was their only choice. "We've relied only on direct marketing; it's the best way to get the customer," maintains Lee.
First they sent out a 25,000-name viral e-mail to friends and family. While at Goldman, Sachs Lee, an attorney, was COO of her division; Wierzynski, who has two master's degrees, was the senior derivatives trader. With such highly educated partners, recipients included the Harvard Business School class of 2001 and the NYU Law School. The campaign started a brand-awareness buzz. Responses are still coming in, but they've refined the message to include a chance to win a Palm Pilot for passing along the e-mail.
In early September, Wierzynski and three employees visited four college campuses to spread the word in person, handing out postcards featuring the MarketBoy URL and a details about a contest. They also made deals with campus hot spots at the University of Pennsylvania, Georgetown, George Washington University, Temple and Cornell. At Smokey Joe's at Penn, for instance, the restaurant hands out postcards and flyers about the site that ask people to log onto MarketBoy and provide their e-mail addresses in exchange for a chance to win a dinner for two at a popular campus hangout.
They did it on a shoestring. The four shared a car and stayed with friends, one time crashing together in a dorm room. "Including the cost of the postcards and flyers, we spent about $750," chuckles Lee. The response rate from the college promotion has been about 1%.
The promotion wasn't as seat-of the pants as it sounds. The college demographic is a primary one for MarketBoy because university students are technologically savvy, accustomed to shopping online, and need electronic gear for school. Wierzynski saw a perfect example on one campus of the buying potential. "I couldn't find the entrance to Penn at first because a UPS truck [full of students' newly ordered computers] was blocking the entrance," he recalls.
Next the partners plan to leverage the gab-power of 22 "disseminators of cool" they signed up at the schools. These college kids gets discounts and deals for talking up the site and signing on others.
All of which is admirable. But is this really a good time to start a business? "One thing we've learned from our trading backgrounds is precisely at the time that things seem to be in disarray, is when there are the best opportunities to make money," Wierzynski says. "Sometimes you have to be willing to move and do things at the moment. when it's scariest to do it."
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