(Buying) power in numbers
Startup FanForce riding the resurgent wave of online group buying
Group buying, the concept of online shoppers banding together to command discounts, is all the rage. Again.
After crashing with the dot-com bust, the once-hot idea has been resurrected. Sites are popping up in every major city. Hundreds of millions in venture capital is pouring in. Industry leader Groupon is valued at more than $1 billion, by some estimates.
And an Austin company is planning to take the concept to an even bigger audience.
The company, FanForce, launched at South by Southwest this year. Its founders previously worked at Austin-based e-mail archiving company MessageOne, which Dell Inc. acquired in 2008. After the Dell purchase, some MessageOne executives became interested in the traction that group buying sites such as Groupon and LivingSocial were getting, said Samy Aboel-Nil, a FanForce founder.
“The more we looked at it, the more we realized that the horse was out of the stable,” he said.
But FanForce wasn’t created as a deal site. Instead, it provides the technology to enable anyone to offer group buying on their own site, and splits the revenues.
“Our approach was, let’s not be a deal site — let’s be an arms broker, if you will,” Aboel-Nil said.
Aboel-Nil’s company is now poised to bring its technology to a wider audience, after Fan- Force was recently purchased by the Seattle-based deal site Tippr.com. As part of the merger, FanForce founders joined Tippr’s management team, including Aboel-Nil, who is now Tippr’s president and chief operating officer.
And though FanForce’s technology now powers Tippr.com, that’s just a small part of the business, Aboel-Nil said.
“This is a showcase; this is where we show off our technology,” he said. “But the real growth is, anybody with a big audience can launch a deal site.”
One of those sites is the popular blog, “365 Things To Do in Austin,” which was started this year by Austin real estate agent Kristy Owen.
Owen’s blog (http://365thingsaustin.com) gives
readers a daily idea of something to do around town, directing them to local spots such as Stubb’s, Westgate Lanes and Stunt Ranch Paintball.
The blog took off once she imported it to Facebook — it now has more than 97,000 fans.
In March, Owen partnered with FanForce and began running deals on her site — deals that were paired with whatever restaurant or venue she’s promoting.
“I never expected to make money, but it’s funny how life works out,” said Owen, a Houston native and University of Texas graduate.
Not that she’s planning to quit her day job.
“Everyone thinks the blog has helped my real estate career tremendously,” Owen said. “If I was a travel agent, I’d be overflowing with business.”
Those kinds of success stories were the holy grail in the early days of group buying. But the concept flamed out in the dot-com bust, most notably with the failure of the deal site Mercata almost 10 years ago.
Ultimately, group buying was ahead of its time, Aboel-Nil said. People are now much more comfortable making purchases online, he said. And with the advent of social networking, bargains can now be advertised through friends lists and on Twitter.
In the wake of Mercata’s failure, Tippr CEO and Seattle entrepreneur Martin Tobias acquired a portfolio of group buying patents from the company.
FanForce’s merger with Tippr made sense, AboelNil said, because FanForce provided the technology and Tobias provided the patents and a brand name. “We didn’t do a lot of things he did, and vice versa,” AboelNil said.
Tobias said he was introduced to the FanForce team by a common investor with RRE Ventures who had put money into MessageOne and one of Tobias’ companies.
“The more we talked, the more it was clear that there was a super-good alignment of interest and what we needed and what they needed,” Tobias said.
Unlike its competitors, Tippr manages a network of publishers in addition to its own site. Sites like Groupon aren’t interested in enabling others to do group buying, Tobias said.
But in the long run, the bigger opportunity is “to power everyone else with this new technology,” he said.
As an example, he pointed to search engine Yahoo, an early market leader that ultimately decided, according to Tobias, that its primary value was in its own brand.
“And now Google’s 20 times bigger than Yahoo because they’re enabling everybody else in the world with ad technology and search technology,” he said.
Aboel-Nil and his team will stay in Austin, along with software engineering operations. Tippr’s sales and marketing will be based in Seattle, he said. In total, the company has about 30 employees, with nine in Austin.
The company is on target to double its gross revenue every month, Aboel-Nil said.
Tippr’s ultimate goal isn’t to try and beat out the Groupons and LivingSocials of the world, he said. Those are here to stay.
But where Tippr can make an impact is by bringing group buying to niche sites — and target deals based on a site’s particular demographics.
“That’s a big market. And there’s a lot of them,” AboelNil said.
From left, John Whitmarsh, Dane Knecht, Jordan McCoy, Isaac Specter, Paul Bordelon and Samy Aboel-Nil of Austin’s FanForce.com, which was recently acquired by Tippr.com. According to Aboel-Nil, FanForce’s mission is not to be a deal site, but rather ‘an arms broker, if you will.’