Chuck Goldman, CEO of Boston-based mobile app development house Apperian, called me this week to let me know about the launch of Timberland Expedition. The new iPhone application, which went live in Apple’s iTunes App Store today, was designed by Apperian to appeal to the outdoor-enthusiast types whom Stratham, NH-based Timberland (NYSE: TBL) considers the core market for its footwear and athletic clothing.

I’ve been playing around with the free app a bit today, and I’m impressed by its combination of slick design, useful features and content, and entertainment. The app is important for Timberland because it’s the company’s first venture into the burgeoning world of mobile marketing. And it’s important for Apperian because it’s exactly the kind of application that the startup, which I profiled when it came out of stealth mode back in March, says it’s best at building: those that help big companies extend their brands into the mobile universe.

“It’s shaping how users interact with a big brand that’s fun and exciting for us,” says Goldman. He calls the Timberland app, which Apperian built in conjunction with Mullen, Timberland’s Boston-based advertising agency, “an ‘edutainment’-type app that combines the core location features of the iPhone with user-generated content and a blend of catalogs and other content to extend Timberland’s marketing efforts onto a brand-new platform.”

Which is a mouthful. What the app really does, more than anything else, is leave the user with a warm-and-fuzzy feeling toward Timberland. That is, assuming he or she has a penchant for outdoor exploration, electronic gadgets, and shopping, which is not-unusual combination in New England. While Zumobi, a Seattle-based mobile application developer, has worked with REI to produce a snow-report application for iPhones, BlackBerrys, and Windows Mobile devices, the Timberland app represents the first time an outdoor gear retailer has come out with a multipurpose mobile application, Goldman says.

When you open the Timberland app, you see an antique-looking compass that gives you four options:

1. Expeditions—a selection of suggested hikes, bike rides, scenic views, and local attractions around, initially, six cities: Boston, Chicago, Denver, Los Angeles, Minneapolis, and New York. (Here at Xconomy, we’re lobbying for the addition of Seattle, Portland, Vancouver, and San Diego.) Each expedition comes with a brief description, a photo, a link to a Google map, and directions to the spot from the user’s current location. Whenever you click on “expedition” on a map, you also see the locations of nearby Timberland stores, which Goldman says was part of Apperian’s strategy to use the app to drive traffic to bricks-and-mortar outlets. Interestingly, Timberland plans to expand the Expeditions section over time using destinations, photos, and writeups submitted by users. (That’s the “user-generated content” Goldman mentions.)

2. Gear—what Goldman calls a “micro-catalog” showcasing Timberland merchandise, with an emphasis on two brand-new footwear lines called Earthkeepers and Timberland Mountain Athletics, both made with recycled rubber. You can’t actually buy shoes from the micro-catalog—Goldman says that function is coming later—but you can click on Timberland’s phone number to order from a telephone rep.

3. Timber Trail—a game that challenges the user to cross an outdoor expanse without running out of energy, food, or water, and without being attacked by bears, snakes, or bees. At the beginning of the game, players gets to choose which Timberland accessories to …Next Page »

Comments | Reprints | Share:        

Back in 2007, Xconomy ran a story by freelance contributor Seth Shulman about a class-action lawsuit unfolding against Norwalk, CT-based Webloyalty, an online marketing company. The comment section of that story became something of a clearinghouse for ongoing complaints against Webloyalty, which runs many of the discount programs pitched to consumers as they are finishing e-commerce transactions.

If you’ve ever bought a movie ticket online at Fandango or Movietickets.com and then been offered a $10 rebate, you might well have seen a Webloyalty offer. The problem—as scads of consumers alleged to Xconomy, the Connecticut Better Business Bureau, the New York Times, and other organizations—was that by accepting such rebate offers, many people unwittingly signed up for discount programs that carry a $10 monthly subscription price, fees that customers often didn’t notice on their credit card bills until months or years later.

Well, now there’s finally something for Webloyalty’s critics to be happy about. On June 30, a federal judge in Boston approved a settlement agreement in a class-action lawsuit alleging that Webloyalty broke state and federal laws by failing to disclose details such as the monthly charges. Webloyalty maintains that the details about its charges have always been clear in the fine print and in the follow-up e-mails it sends to subscribers, and it admitted no wrongdoing in the settlement. But under the terms of the settlement—which went into effect on August 14—the company agreed to change the way it markets its programs, and to partially or fully refund Webloyalty members for each program in which they were enrolled. (That includes programs known as Reservation Rewards, Shoppers Discounts & Rewards, Members Specials, Buyer Assurance, Distinctive Privileges, PC Protection Plus, Travel Values, Travel Values Plus, Classmates Rewards, and Wallet Shield.)

Up to 20 million people who joined Webloyalty’s programs between September 30, 2000, and September 30, 2008, will be eligible for the refunds, according to David George, a plaintiff’s attorney in the suit quoted in “The Haggler,” the New York Times’ consumer-protection column. If you’re one of these people, you can’t dally too long: members of the settlement class (meaning any U.S.-based Webloyalty subscriber who didn’t explicitly opt out of the settlement before May 29, 2009) must submit claim forms by January 11, 2010, to get their payments, according to this website created by Garden City Group, a Melville, NY, company that specializes in administering class-action settlements.

In comments to Xconomy, Beth Kitchener, Webloyalty’s vice president of corporate communications, said “we fully support the judge’s decision” to approve the settlement agreement. “Given that the settlement terms are consistent with our commitment to maintaining high standards in our marketing and customer service practices, we believed it to be in the best interests of our company, our clients and our members to resolve this matter and move forward,” Kitchener said.

It’s hard to gauge what material effect the settlement will ultimately have on Webloyalty. If all 20 million members of the settlement class were to apply for payments of $10 or $20, that could translate into a hit of $200 million to $400 million. But “the actual amount of payments is dependent on …Next Page »

Comments (2) | Reprints | Share:        

The online grocery business famously flamed out earlier this decade, after hundreds of millions of dollars were pumped into companies like HomeGrocer.com and Webvan. But online grocery sales and advertising have been making a comeback in recent years, and one of the industry survivors, MyWebGrocer, based in Colchester, VT, has raised a healthy $13 million this month to fuel its growth in this promising Internet market.

MyWebGrocer—which provides online commerce software and digital media services to more than 90 grocery store companies including A&P, Food Lion, and other regional and national outfits—has seen its own fortunes grow this year. New York-based Stripes Group provided the financing on August 5, according to a company statement. MyWebGrocer now plans to use the money to roll out some new iPhone apps for consumers to do their grocery shopping, and to boost its staff from about 70 today to 110 over the next year, the company’s founder and CEO Rich Tarrant tells Xconomy.

MyWebGrocer appears to be well positioned to capitalize on the growing desire among grocery retailers and consumer goods providers to attract customers on the Web. For one, the firm’s e-commerce software and other Web products are designed to enable regional and national grocery stores to gain more online customers and revenue. Secondly, its growing advertising network caters to consumer goods companies that want to put their wares in front of online shoppers. Yet the firm faces significant competition, especially in attracting ad revenue from consumer goods providers, which have a wide variety of online advertising venues to choose from.

The good news is that more online ad dollars from consumer packaged goods companies are going to firms like MyWebGrocer. Packaged goods companies spent $156.2 million on online advertising in the first quarter—up more than 50 percent over the same period two years ago, according to Nielsen NetRatings. Also, frugal shoppers are going to the Web to find online-only coupons on grocery items to save money.

For its part, MyWebGrocer wants to expand the reach of online grocery shopping to the mobile world, Tarrant says. The firm’s first iPhone app—scheduled for release next month— is designed to …Next Page »

Comments (2) | Reprints | Share:        

Last month I wrote about the Daily Grommet, an e-commerce startup in Lexington, MA, whose website features one cool new product or service—a “grommet,” to use the company’s term—every weekday. Far from being yet another automated online store, the Daily Grommet puts its own staff members on camera to record short, homey, informally edited videos explaining what’s compelling about each day’s product, including their creators’ backstories. Yesterday’s grommet, for example, was an “athlete-engineered” sunscreen that doesn’t sting your eyes, developed by a former Apprentice competitor named Josh Shaw. In the video, Daily Grommet CEO Jules Pieri and chief discovery officer Joanne Domeniconi sit in the squinty-bright sunlight outside the company’s headquarters and demonstrate the product’s non-stinging, non-greasy credentials on their own skin.

That personal approach, along with the staff’s discriminating tastes, is winning the company a lot of fans. “If I buy [products] via Daily Grommet, I know that Jules’s team has tested them and determined that they’re actually excellent,” comments Dan Weinreb, a software engineer at Cambridge, MA-based ITA Software who is a repeat customer.

Pieri says the hands-on approach won’t keep the company from scaling up. She has plans to launch up to a dozen topic-specific versions of the Daily Grommet that would focus on sports gear, food and kitchen products, garden accessories, and the like; each such “vertical” could ultimately earn $25 million a year, she calculates. That’s ambitious for an angel-funded company that’s less than a year old, but it might not be too far-fetched. There’s growing buzz (and venture activity) around the category of so-called “curated marketplaces,” from Woot to Gilt Groupe, which seem to attract a more loyal following than typical e-commerce sites.

In a lengthy interview on July 7, I asked Pieri for the whole story behind the company— why she started it, how the product selection process works, how the company hopes to make money, and what it’s like to be a woman technology entrepreneur in New England. Here, as promised, is a complete (well, slightly pared down, but still pretty long) version of our talk.

Xconomy: What’s it like to be running an e-commerce company in the Boston area, rather than Silicon Valley or some other more likely place?

Jules Pieri: At the end of the day, I do think people form their impressions of an area by the products that come out of it. With Tokyo you might think of consumer electronics, with Detroit you think of cars, with the West Coast you do think of consumer Internet. I made a decision to locate the company in a place that isn’t broadly known for consumer Internet, but there’s no reason it couldn’t be and shouldn’t be. We obviously have the education resources and the technology credibility and the workforce to use technology effectively. And we have some consumer businesses—VistaPrint and Zipcar are well known, and there is a long list of not-so-well-known ones.

X: Can you tell me a little about your own background, and how you came to start an e-commerce company?

JP: I grew up in Detroit, on the wrong side of the tracks, definitively. At the University of Michigan I studied industrial design, graphic design, and French. Right out of college I went to Paris and worked as an intern, then got a job as an industrial designer for Burroughs, before it was Unisys, and then Data General here locally, where I designed computers and packaging for computers. Then I went to Harvard Business School, followed by a stint in Dublin, Ireland, from 2001 to 2005. My husband and I wanted our family to have an overseas experience, so we …Next Page »

Comments (2) | Reprints | Share:        

Much of the buzz about Amazon’s surprise announcement yesterday that it is acquiring popular online shoe retailer Zappos for more than $900 million is about whether the Las Vegas-based company really needed to sell, or was pressured to do so by its main venture backer, Sequoia Capital. But the first thing I wondered when I heard the news was what the acquisition might mean for Kiva Systems, the Woburn, MA, startup whose robots staff a huge Zappos distribution center in Louisville, KY.

Zappos has been working with Kiva for almost two years, and the company’s shelf-toting robots, which help speed the process of order fulfillment, have been operating in the Louisville location for over a year. And in fact, the shoe seller recently ordered more Kiva gear to prepare for the holiday rush, says Kiva CEO Mick Mountz, whom I reached by phone this morning. “We don’t know anything more than what’s in the press right now, but our reaction is that this is a good thing for Kiva,” Mountz says. “They’re growing quickly, and growing their Kiva system to support that. If you take the press releases at face value, they are going to keep the two companies separate, and it’s all about growth. What that implies to us is that they’re going to need more Kiva equipment to keep doing that.”

Indeed, Zappos CEO Tony Hsieh said in an open letter to employees that the Louisville warehouse might even grow into a hub for Amazon’s own inventory. “As many of you know, we were strategic in choosing our warehouse location due to its proximity to the UPS Worldport hub in Louisville,” Hsiesh wrote. “Amazon does not have any warehouse locations that are closer to the Worldport hub. There is the possibility that they may want to store some of their inventory in our warehouse or vice-versa. Right now, both Zappos and Amazon believe that the best customer experience is to continue running our warehouse in Kentucky at its current location.”

Kiva’s whole mission is to help companies get products off the warehouse shelves where they’re stored and into boxes for shipment to consumers faster, using agile wheeled robots that carry the shelves to stock pickers. That means Amazon has always been one of Kiva’s dream customers—and now, thanks to the Zappos acquisition, it’s an actual one. “What that means to our business is that the number-one and number-two e-retailers are now using Kiva, the number two being Staples,” says Mountz.

E-commerce companies have been Kiva’s strongest customers lately, according to Mountz. “From where we sit, e-commerce is doing pretty well right now,” he says. “Diapers.com recently got some expansion gear from us. Quiet Logistics, which is supporting the Gilt Groupe, just purchased some additional gear.”

And if Amazon wants to keep expanding at its current rate, it’s going to have to look at warehouse automation technologies, Mountz believes. “If you look at their business, they are at $20 billion a year and growing at 5 percent. That means they need to add a billion dollars of capacity a year—that means opening one or two new distribution centers every year. Along those lines, the Zappos folks have plenty of space down in Louisville, and a great location next to the UPS Worldport hub, so if we had to predict, we’d think they’re going to end up using that building for even more beyond the growth Zappos has planned.” [Update: In a follow-up e-mail, Mountz noted that Amazon's recent growth rate has actually been closer to 15 percent or $3 billion in additional gross revenues every year.]

Meanwhile, Kiva is busy building and delivering the equipment Zappos needs for the holidays, Mountz says. “We have ongoing, project-level dialogue with Zappos every week, and we’ll just have to see what they learn over time,” he says. “We think Kiva is going to be a big part of their material handling as they go forward.”

Comments | Reprints | Share:        

[Addendum, 10/4/08: Boy Genius Report has published pictures from a reader who obtained a Kindle 2. It's unclear so far which, if any, of the features described in my article below, published 10/3, are included.]

I wanted to love the Amazon Kindle. I’ve been a believer in the future of e-books ever since the late 1990s, when I briefly worked for NuvoMedia, the company that introduced the Rocket eBook. I was thrilled when I first heard that Jeff Bezos had decided to get serious about the technology, figuring that he was sure to have a better understanding of what makes for a great reading experience than Sony, whose PRS-500 reader, released in 2006, was a disappointment. I was intrigued when Amazon said Kindle would have a wireless chip, allowing free, nearly instantaneous book downloads over a national EVDO network. But when the first version of the Kindle came out in November 2007, it was so astonishingly ugly and expensive that I immediately soured on the product.

Now, though, there are reports that the “Kindle 2.0″ is on the way. And being an optimist, I’m hopeful that Amazon will work out some of the kinks in the first-generation device. In late August Business Week’s Peter Burrows reported, based on an interview with an unnamed source who had seen the new device, that Amazon brought in a consumer-electronics expert from international design house Frog Design to guide the Kindle’s overhaul, and that the new version is thinner and “more stylish,” with an improved screen and user interface. “They’ve jumped from Generation One to Generation Four or Five. It just looks better, and feels better,” the source told Burrows.

That’s all very encouraging. But Amazon needs to change more than just the gadget’s look and feel. If it really hopes to catch up with slick rivals like the iPhone (which is a credible e-book reading device in its own right) and compete with Sony’s expanded e-book reader line (the latest addition to which was announced this week), the Kindle needs some basic operational improvements: fundamental design matters like the placement of the page-forward and page-back buttons were badly flubbed the first time around, according to many owners. Amazon also needs think more flexibly about content pricing. And it needs to charge less for the device itself: the current $359 price tag probably reflects Amazon’s actual cost (the electronic paper screen, designed by Cambridge, MA-based E Ink, is very expensive), but I don’t think the company will see mass adoption at any price above $249. Dropping the price to $199, the same as the 8-gigabyte iPhone 3G, would get people thinking seriously about the Kindle as a holiday present.

I’ve met Bezos, and he strikes me as a big-picture guy. I’m sure he understands that the Kindle is more than a reading appliance—it’s an entire publishing platform, a system for browsing, purchasing, and consuming books, magazines, newspapers, and other digital media. So, just as Apple has continually revised and updated iTunes and the iTunes Store (without which iPods and iPhones would be fairly useless), I’m hopeful that Amazon is looking at ways to make the whole Kindle package more appealing to readers. But just in case they need some suggestions, here are a few:

1. Explore motion-activated scrolling or page turning. One of the biggest complaints from Kindle customers has been that the page-forward and page-back buttons are so large and awkwardly placed that it’s easy to hit them accidentally. Amazon will surely try to fix this problem in the Kindle 2.0, probably by moving the buttons around or making them smaller. But there’s an affordable technology—tilt activation—that could help them get rid of the buttons altogether.

Last week I bought an app for my iPhone called Instapaper Pro that’s quickly becoming indispensable to me. Its main function is to copy stripped-down versions of Web pages, then download them to your iPhone. Say you come across a long newspaper article and you want to read it later. You just click the “read later” bookmarklet in your browser, and the article will automatically show up, minus ads and other junk, on your iPhone. I find this extremely useful. But what makes Instapaper even cooler is the “tilt scroll” feature, which allows you to advance through the copied Web text simply by tilting the phone slightly backward or forward. It’s an ingenious use of the iPhone’s built-in accelerometer—the same tiny chip that prompts the Web browser window to rotate by 90 degrees if you want to view it in landscape mode rather than portrait mode.

It ought to be easy to build something like this into an e-book reader. Tilting the Kindle backward or forward might not be the most natural way to activate a page-turn, since Web pages scroll up and down, while book pages flip from right to left. But any movement that the accelerometer can detect is fair game. Maybe a sideways jiggle?

2. Try different pricing and distribution models for e-books. Amazon charges $9.99 for the Kindle versions of new releases. That’s less than what you’d pay for a hardcover, which is part of the Kindle’s attraction. And in light of the fact that Apple does pretty well selling albums on iTunes for $11.99 to $13.99, I’m willing to revise my earlier argument that new-release prices should be slashed to $5 or $6.

But I still don’t understand why e-book publishers and device makers aren’t exploring more of the …Next Page »

Comments (13) | Reprints | Share:        

It may still be a while before robots can actually change diapers, but at least they can help move them around inside warehouses. That’s the word today from Kiva Systems, the Woburn, MA-based maker of “automated fulfillment systems”—i.e. fleets of squat orange robots designed to move shelves to human order pickers, rather than forcing workers to endlessly walk warehouse aisles. Online retailer Diapers.com plans to install Kiva systems at all three of its distribution centers, where they will “store, move and sort a variety of baby products, including diapers, wipes, formula, bottles and clothes,” according to a statement from Kiva.

Comments | Reprints | Share:        

The “Give One, Get One” program introduced last holiday season by the Cambridge, MA-based One Laptop Per Child Foundation—which gave consumers in the United States and Canada the opportunity to buy two of the foundation’s XO laptops for $400, and have one sent to a child in a developing nation—was a success in several respects. It generated public excitement about the XO by giving the general public its first chance to buy the machine; it created more orders for the laptop, improving the economies of scale involved in its manufacture; and, of course, it meant that more children received laptops (100,000 more, according to the foundation).

But judged by the standards of most commercial consumer-electronics rollouts, the “G1G1″ program was a fiasco. The foundation didn’t have enough staff to respond the tens of thousands of orders that started rolling in as soon as the program launched. The company it hired to manage fulfillment, Miami-based Brightstar, lost thousands of customer addresses through computer glitches. Many customers—some of whom had planned to give the XO to their own children, grandchildren, neices, or nephews as holiday presents—didn’t receive their laptops until March.

Now OLPC says it plans to repeat the offer for the 2008 holidays—but this time, Amazon will be in charge.

IDG News Service broke the news on Wednesday, after speaking with an OLPC regional director who said the XO will be available from the Seattle-based e-retail giant starting around Thanksgiving. The director, Matt Keller, who runs the foundation’s operations in Europe, the Middle East, and Africa, said the foundation is still too small (with only 25 core staff) to handle such a large program on its own.

Boston Globe reporter Hiawatha Bray spoke with OLPC founder Nicholas Negroponte for a story published today that says the switch to Amazon should eliminate last year’s delivery problems. “Many things in the last G1G1 did not run as smoothly as we would have hoped,” Negroponte told the Globe. “Those things, mostly related to fulfillment, by their nature, are what Amazon can fix.” But Negroponte didn’t share additional information, saying Amazon would announce the details of the program when it’s ready.

Comments | Reprints | Share:        

Why do airlines give away frequent flyer miles? For the same reason that credit card issuers offer cash-back programs: because hanging on to existing customers by giving them rewards is generally cheaper than recruiting new ones. That basic truth has made frequent-flyer programs and other loyalty programs into a huge business: one in three Americans has a frequent flyer card on at least one airline, and 88 percent of all credit-card purchases in the United States are made using rewards cards (many of which help consumers rack up even more miles). There are so many loyalty programs, in fact, that it’s getting harder for each company to make their rewards program look better than the next guy’s.

That’s where Mall Networks comes in. If you went just by the Lexington, MA, startup’s name, you might think that it owns chain of shopping malls, or that it runs a TV network for malls, sort of like the CNN Airport Network. Not at all. In fact, the company’s business is to help ensure the loyalty of loyalty-program members, by creating online malls—really, just collections of products from 700 name-brand merchants such as Lands End.com, Wal-Mart.com, HomeDepot.com, and Buy.com—where people like Chase credit card holders or Spirit Air frequent flyers can earn extra points or miles for every dollar they spend.

Today Mall Networks announced that it has earned a big reward of its own: a $7 million Series B investment led by Waltham, MA-based Dace Ventures, with participation from Series A investors Flybridge Capital Partners of Boston, Wellesley, MA-based Venture Capital Fund of New England, and LBO Enterprises. Mall Networks CEO Dave Andre says the three-year-old, 40-person company will use the money to expand its platform to accommodate more clients and to hire about 10 additional sales, marketing, and service staff over the coming six months.

It’s easy to see how Mall Networks attracted the new investment: it’s one of those companies that has capitalized on the fluidity of Internet-based transaction data to carve out an entirely new niche, engineering what might be called, if you’ll forgive the lapse into biz-speak, a “win-win-win” scenario. Consumers who buy stuff through the malls—which are generally branded to look like they’re run by Chase, or Spirit Air, or whoever the Mall Networks client may be—win by earning rewards faster than they would if they made their online purchases elsewhere. The credit card companies and airlines win because they’re able to provide a benefit to their loyalty-program members at zero added cost to themselves (the rewards are generally funded by the merchants, out of the standard commissions they pay for purchases referred by outside websites). And the merchants win because they’re picking up customers who might not have shopped at their sites otherwise.

If you wanted to throw in a fourth winner, it would be Mall Networks itself, which charges clients to administer the loyalty-shopping programs. It’s a function most big financial companies and other service providers are happy to farm out. “It takes a whole bunch of expertise of different sorts” to set up the malls, monitor customers’ accounts, move points around, and market the programs correctly, says Mall Networks CEO Dave Andre. “The banks don’t want to have to put together 600 contracts with different merchants. That’s clearly something that needs to be outsourced. And with the banking and airline industries in turmoil—canceling programs that cost them money—these programs, properly executed, can be profit centers.” For example, companies can keep a slice of the merchant commissions for themselves.

For loyalty-program members, the only downside to shopping at a Mall Networks mall is that the prices offered by participating merchants aren’t always the lowest ones available on the Web. But retailers are free to sweeten the deal by offering higher multiples on what consumers spend—Target.com, for example, offers 6 miles for every dollar spent by the members of one airline frequent-flyer program. Which means it can be worthwhile to pay a little more, if it gets you enough points or miles for that next big reward. “If you’re 350 miles short of a European family vacation, those last 350 miles are really valuable to you,” points out Andre. “The value is really in the eyes of the consumer.”

Comments | Reprints | Share:        

For many online shoppers, no sooner have they hit the “buy” button than they’re struck by angst over whether they missed out on a better deal at another site. But at BeatThat.com, a consumer electronics shopping site that emerged from beta testing yesterday, there’s less reason to worry: the site digs up the Web’s best deals on camcorders, digital cameras, GPS devices, MP3 players, printers, and TVs by paying consumers for the information.

If you find a product advertised at a price that’s lower than the lowest one currently featured at BeatThat, the company will pay you $2.00. That way, “there’s an incentive for the deals to keep coming in until, quite frankly, you just can’t find a better one,” says David Parker, CEO of Cambridge, MA-based Digital Advisors, which created the site. “At that point, we can very confidently say we have the best prices on the Internet.”

Digital Advisors is a five-year-old, privately funded company that already operates a network of shopping websites, focused on high-definition TVs, digital cameras, satellite TV units, laptops, and camcorders. “All of those sites are doing fine. The concept is to help consumers make good choices,” says Parker, who was a co-founder of Bedford, MA-based SoundBite Communications and a business development executive at Viaweb (the maker of Web storefront software founded by Paul Graham, now of Y Combinator fame) and Direct Hit (a search engine acquired in 2002 by Ask Jeeves, now called Ask.com). “But about a year ago we decided that we wanted to try something different. We have a couple of people on our staff who are really good at sniffing out excellent prices, and a light bulb went off when we realized that the best prices we were showing on our sites, which were provided to us by an aggregation service, were never the best prices you could get.”

Parker knew there was a business model in attracting customers looking for price information on specific products, since they’re usually on the cusp of a major purchase, and e-retailers are willing to pay a commission for them—indeed, that’s how Shopzilla, PriceGrabber, and the plethora of other comparison-shopping sites make money. “So we came up with the concept for BeatThat, which would have a fixed inventory of products and would always have the best prices for those products,” he says.

The difference between BeatThat and the other shopping sites, Parker explains, is that every price shown on BeatThat has been submitted by a “Deal-Finder”—a person who’s an expert at sniffing out bargains. Like amateur commodities dealers, these contributors spend much of their spare time sifting through websites for discounted products that retailers themselves often aren’t highlighting. They also keep track of the confusing world of coupons, manufacturer rebates, and free shipping offers, which tend to change from day to day. To motivate inveterate bargain hunters to contribute their discoveries to BeatThat, the company set up its payment system, which is already netting several of the top Deal-Finders more than $1,000 a month, according to Parker.

“We didn’t want to rely on the merchants to tell us when the price is good,” Parker says. “We wanted to rely on the literal wisdom of the crowd. And if you have a large enough crowd looking for the best deals, you are going to find them.”

Anyone with an account at BeatThat can submit their product discoveries to the site; once the information is verified, Digital Advisor will put up to $2.00 into user’s account. Once a month, the accumulated funds are transferred into users’ Paypal accounts. After submitting three approved deals, a user is invited to become an official Deal-Finder.

But finding the absolute lowest prices on the Web comes with one big hazard: the best prices are often found …Next Page »

Comments (5) | Reprints | Share:        

Los Angeles-based Shopflick, creator of a platform for Web-based video product tours and advertisements, announced today that it has raised a $7 million Series A venture round. The round was led by Menlo Park, CA-based Panaroma Capital and Venrock, which has offices in New ork, Menlo Park, CA, and Cambridge MA.

Comments | Reprints | Share:        

Kiva Systems may be winning its battle against the science-fiction robots.

The Woburn, MA, company is a newcomer to a hidebound business. It builds “mobile fulfillment systems” that are overturning all the traditions of warehousing by making the shelves move around, rather than the people. The moving is done by squat wheeled robots that maneuver under the shelves, pick them up, and trundle them over to a person at a picking station, who grabs whatever items are needed to fulfill the next order and boxes them up to be shipped to a retail store or a mail-order customer.

It’s amazing to watch dozens of these little orange robots working in concert, lifting and spinning and scooting without once colliding or spilling anything. (For a lighthearted look at Kiva’s system in action, see this YouTube video of the robots dancing the Nutcracker ballet.) But warehousing is a centuries-old industry in which the last major innovation was the forklift. Convincing a warehouse manager that he should hire a fleet of R2-D2s to staff his next facility is a tough sell.

“If you just go to the people who run these factories and warehouses and say ‘We’re going to have a bunch of robots help your workers,’ they are going to say ‘Obviously this is an East Coast pointy-head who doesn’t understand what a real warehouse is like,” says Mitch Rosenberg, Kiva’s vice president of marketing. To them, the word “robot” is likely to evoke visions of Robbie the Robot from Lost in Space. But show these same people a Kiva warehouse in action, Rosenberg says, and they start to understand the practical potential, he says—including potential productivity increases on the order of 200 to 300 percent.

There’s certainly room for improvement in an industry where most pick workers spend hours each day walking up and down miles of warehouse aisles. This isn’t a terribly efficient process, as online grocer Webvan learned the hard way. After raising some $800 million in venture capital, the onetime dot-com darling went bust in 2001 because—among other things—it never found a low-cost way to fulfill orders.

After all, if every customer’s order sends a pick worker scurrying around a warehouse just as if they were at the supermarket, most of the fabled efficiencies of Internet-based commerce shrivel away. “When you go grocery shopping, what percentage of the time are you actually putting what you’re looking for into your basket?” asks Rosenberg. “Most of the time you’re just walking and waiting to encounter it.”

It’s recognizing and grabbing items that supermarket shoppers—and warehouse stock-pickers—are really good at. Webvan executive Mick Mountz realized that if he could somehow make the bins full of stock come to the pick workers, rather than sending the workers to the bins, the humans in a warehouse would be able to spend more of their time being smart and less just walking around.

The idea came too late to save Webvan. But after the company folded, Mountz went enlisted Raffaello D’Andrea, an expert on automatic controls at the Swiss Federal Institute of Technology, and Peter Wurman, a computer scientist at North Carolina State University, to help him put the concept into action. The result was Distrobot, founded in 2003. (The company changed its name to Kiva Systems in 2005.)

The system Wurman, D’Andrea, and CEO Mountz have now spent five years perfecting is as much about software as it is about robots. A master inventory database knows which shelves in a warehouse hold which items. When an order comes in at the Staples warehouse for a box of green pens and a ream of paper, the system wirelessly instructs two robots to find the appropriate shelves, pick them up (a platform atop a large screw lifts up the shelf a couple of inches as the robot spins underneath), and carry them to a designated stock-picking station.

If both units arrive at the same time, the system tells one robot to wait until the other moves out of the way. The robots have infrared sensors to warn of nearby objects—but collisions are unheard of, because the units are continually reporting their positions to the master system. They keep track of their own locations by watching for small bar code stickers attached to the warehouse floor.

At the station, a laser pointer shows the stock-picker where to look for the green pens or the paper. The worker grabs the needed item out of the indicated bin, places it into a box, and punches a button to let the system know the action is done. When the whole order is assembled, the box coasts off to the …Next Page »

Comments (1) | Reprints | Share:        

Newton, MA-based customer-rewards startup Jackpot Rewards says it will still hold a $1 million prize drawing every week. But as we reported yesterday, the company no longer promises that it will actually give the money away—removing one of the major incentives to join the company’s cash-back rewards program and making some existing members angry enough to cancel their memberships.

Jackpot Rewards didn’t return our calls inquiring about the change until after our story went to press yesterday. But later we were able to reach CEO Jim Miller, who says that the company is scaling back its jackpots mainly in order to spend more money subsidizing the product discounts it provides through its “Deal of the Day” offers. According to Miller, customers have been telling the company that they value these discounts more than they value the chance to win $1 million every week.

To be fair, the company’s earlier scheme was almost too good to be true, offering much better odds of winning than most other million-dollar sweepstakes. All members had to do to clinch the million-dollar prize was match two of the six balls in a thrice-weekly lotto-style drawing, then be the lucky person selected from all of the those qualifying—a group that included only 464 people in the company’s first drawing and 1,726 by its third.

Winning is now far more difficult. Under the new rules, people who qualify in the thrice-weekly drawings are assigned a number between 0 and 249,999, and win only if their number comes up in a random drawing. The company promises that during weeks when nobody wins—the likely outcome the vast majority of the time—it will hand out a $1,000 prize.

My conversation with Miller started out focusing on the reasons for the company’s change of heart—which is seemingly a major one, given that the company’s marketing message centers not just on giving away part of its own profits, but on encouraging people to “dream big” about the things they could do (including donating to charity) if they won a big jackpot. But after covering that—as you’ll see from the following transcript—we moved on to a discussion about the real value of the cash-back rewards Jackpot Rewards members can earn.

Xconomy: A former member of Jackpot Rewards sent us a copy of the customer newsletter from last week in which you announced that you are doing away with the guarantee that someone will win a $1 million prize every week. Can you please explain the thinking behind that decision?

Jim Miller: We wanted to stick with [offering] the best odds anywhere in the industry. Looking at us compared to other sweepstakes in the space, we are still doing that. We think that in that regard, the value proposition is still there. We are still leading in that category. And we are going to be implementing more prizes at various levels.

But what we’ve already found in the feedback from our customers is that the place where they really feel like we are spreading the wealth around is the “Deal of the Day” that we offer to customers. You can see that with [deals like] the trip to the Masters’ Tournament for 75 percent off, or exclusive tickets to sold-out events like Bruce Springsteen and Seinfeld. We are really responding to what we’re seeing as what motivates our customers.

X: The weekly $1 million prize was one of the company’s key marketing messages when you launched in February. In fact, in our interview, you told me that it was one of the things that differentiated you from other companies like Publishers Clearinghouse, which in your words would spend six months talking about giving away a million dollars before they actually gave it away—whereas, you said, Jackpot Rewards was going to go out and actually give away a million dollars, every week. This seems like a big change to that message.

JM: We see it as keeping the commitment to having the best odds. If you look at [Publishers Clearinghouse] as a comparison, it’s one that we still think is a welcome comparison, because their odds are 1 in 699 million. You’re talking about very good odds, with what we think is a very good value proposition, but also enabling us to provide increasingly attractive deals of the day to our customers— spreading the wealth and having people experience that in multiple ways.

X: Are you saying that the money you save by paying out less often on the million-dollar jackpots is going to be shifted over to providing more discounts?

JM: We’re shifting our priorities, and we’ll be implementing in the next few weeks things that we think our customers will find even more attractive. We’ve found that they are engaging with the site in ways that probably even exceeded our expectations on the shopping side. We think it’s good to enable people to save, especially as we head into what by all accounts looks like a recession. This enables us to have a little broader latitude to provide even better deals elsewhere on the site. And the third leg of the stool is the giving side. I think [members] will see in the coming months that we’re doing interesting stuff there, and that we’re remaining as committed as ever.

X: When I asked you in February whether Jackpot Rewards would have enough money to fund the weekly $1 million jackpots, you said that even if you were not able to recruit members as quickly as you predicted, you would still …Next Page »

Comments (14) | Reprints | Share:        

Less than seven weeks after it made a big media splash by promising to donate half its profits to children’s charities, Jackpot Rewards, the Newton, MA, customer-rewards and sweepstakes startup backed by Boston investing legend Peter Lynch, has put an end to what was perhaps the most unusual (and most expensive) part of its part of its sales proposition: a weekly $1 million prize drawing with a guaranteed winner.

In an e-mail newsletter circulated to program members last week, the company said that, “In order to create more winners, we’ve decided to make some changes. Beginning April 6, we will continue to hold a $1 Million Jackpot drawing on Sundays; however, there will not be a guaranteed winner each week.”

The change has upset some customers, and seems to represent a reversal of what had been one of the company’s most audacious and distinctive marketing promises. “When you look at most sweepstakes that have a large prize, it’s either illusory in which no one wins, or like Publishers Clearinghouse they take six months telling you that they’re going to give away a million dollars,” Jackpot Rewards CEO Jim Miller told Xconomy in February, when we covered the company’s launch. “Our philosophy is rather than telling you what we’re going to do, let’s just go out and start doing it. Ten days after we launch we’ll be giving away our first million-dollar jackpot and then each week thereafter.”

The company did give away five $1 million prizes before shifting this week to a random drawing system with no guaranteed winner. It was not immediately clear how this change in the company’s procedures would “create more winners,” in the newsletter’s words, rather than the same number or fewer. Jackpot Rewards executives did not respond to Xconomy’s requests for comment in time for this article.

Jackpot Rewards charges $3 per week for membership in its customer rewards program, which offers cash-back rewards of varying percentages when members shop at a selection of several hundred online retailers. The sweepstakes portion of the company’s program is designed as an incentive for consumers to join the shopping-rewards program—and to recruit others into the Jackpot fold (if friends join, members get more entries in the sweepstakes).

As the sweepstakes program was originally presented, the company promised to select at least one million-dollar winner each Sunday from a pool of members who qualified by matching the numbers on at least two out of five white balls or one white ball and one red ball in thrice-weekly, Lotto-style drawings for a progressive $100 to $150 million mega-jackpot. The odds that a member with matching numbers could win the million dollars were therefore determined by the number of other qualifying entries—and according to the company, only 464 people qualified for the first $1 million drawing on March 2, while 1,300 qualified for the March 9 drawing, and 1,726 qualified for the March 16 drawing.

Under the new rules for the weekly sweepstakes, published on the company’s website, the chances of winning the weekly $1 million prize are much smaller than that. In fact, it’s possible, perhaps even likely, for the new process to produce no big winner at all. Under the new rules, members who qualify for the million-dollar sweepstakes through the thrice-weekly drawings are now assigned a unique number between 0 and 249,999. The company then selects a random number in that range, and if there is an entry matching that number, that member wins. (The $1 million prize is payable as a lump sum of $420,000 up front, or in 41 equal payments of about $24,390 over 40 years, according to the rules). If there’s no matching entry, the company picks one of the qualifying entries at random for a $1,000 prize.

In effect, then, the company has replaced its $1 million guaranteed prize with a $1,000 guaranteed prize. “The $1 Million drawing will continue to have the best odds to win $1 Million of any sweepstakes and in the coming weeks we will be offering more prizes and deals,” the company said in the e-mail newsletter.

It is not clear what provoked the change. When I asked Miller in February how long the company could go on funding a million-dollar weekly prize, his answer was as follows: “The company is structured in a such a way, and has sufficient funding, so that even if we grow at a glacial pace that’s far below what any model of the marketplace would predict, we will still be able to fund the weekly $1 million jackpots for almost as far as the eye can see.”

The eye must not have been able to see very far, and at least one customer is not happy about it. Leslie Sault of Virginia Beach, VA, says she cancelled her Jackpot Rewards membership last week after reading about the change in the newsletter. “I am no expert, but for some reason the term ‘Bait and Switch’ comes to mind,” Saul told Xconomy.

Jackpot Rewards launched with $16.7 million in financing, with Fidelity Magellan Fund legend and philanthropist Lynch as one of the leading backers. The company’s own philanthropic intentions are a big part of its marketing pitch. According to Miller, the idea for Jackpot Rewards came up in discussions among a group of Boston area businesspeople, including Lynch and himself, who had set out to create new models for raising money for charities. “What we were looking for was a way to create an economic engine for the common good,” Miller said in February.

Update, April 8, 2008: We’ve published a followup interview with Jackpot Rewards CEO Jim Miller, who says the company is scaling back the weekly jackpot in order to spend more subsidizing the product discounts available to program members.

Also, I spoke with Richard McGowan, a Boston College statistics professor and an expert on the gaming and lottery industries. He says that even with the recent changes, the odds of winning the Jackpot Rewards million-dollar drawing are still “a lot better” than the state lottery.

“In terms of lotteries, [Jackpot Rewards] is the best thing going,” McGowan says. “The odds are not great, but most people play their dreams, and when you think about it, this gets you a lot closer to your dreams than some other sweepstakes.”

Update, April 9, 2008: The Jackpot Rewards story has now been picked up by the Boston Globe, the Boston Herald, and Mass High Tech. The Herald’s story is the best, observing: “…although it’s backed by former Fidelity money management guru Peter Lynch and former Boston advertising ace Jack Connors—and it promised to donate half of its profits to children’s charities—it was the hype of a weekly $1 million winner that garnered media attention for Jackpot Rewards….Its reversal calls into question whether that lucrative incentive was a marketing ploy to attract members, but Miller says the policy change is a matter of a young company adjusting to customer requests.”

Comments (1) | Reprints | Share:        

The idea of sponsoring a weekly $1 million sweepstakes isn’t exactly high-tech. Neither is the idea of giving consumers cash rewards for their purchases, or the concept of committing a portion of your company’s profits to kids’ charities. But mash these things together—and put the whole thing on the Internet, where viral marketing and other network effects can really kick in—and you’ve got an intriguing Web 2.0 business plan that just might end up generating a lot of money for children’s health and education.

That’s the hope at Jackpot Rewards, a Newton, MA-based startup launching today with backing from some of the region’s most notable business leaders and philanthropists, including former Fidelity Magellan fund manager Peter Lynch and Hill Holliday founder Jack Connors. The basic pitch to users is simple: In return for a $3-per-week membership fee, users get quarterly checks amounting to 12 percent of their purchases at more than 550 participating online retailers, such as Best Buy, Barnes & Noble, GAP, Land’s End, Nike, Overstock.com, and Target. As an enticement to join, members also get to pick Lotto-style numbers that are entered into a thrice-weekly drawing for a progressive jackpot worth $100 million to $150 million. If at least two of their six numbers come up in a Monday, Wednesday, or Friday drawing, members are also entered into a Sunday drawing where someone is guaranteed to win $1 million—a prize paid out in the form of an annuity financed by the aforementioned membership fees.

Those are the mechanics, anyway. If a Visa or a Publishers Clearinghouse came out with a similar cash-back/sweepstakes program, the world would probably yawn. But Jackpot Rewards has an intriguing backstory that may increase both its appeal to consumers and its chances of success. Frankly, it’s one of those sounds-to-good-to-be-true tales that activated all of my skeptical journalistic instincts when I first heard about the program—but after getting the whole story last week from CEO Jim Miller, a former telecom entrepreneur with a history of raising scholarship money for at-risk inner-city youth, I’ve adopted an attitude of watchful optimism.

It all centers around two facts: One, that Jackpot Rewards will donate half of its after-tax profits to children’s charities, and two, that everything about the company, from the structure of the rewards program to the rules of its sweepstakes, is designed to maximize the amount the company is able to give away. In that sense, Jackpot Rewards is part of a corporate-philanthropy and social-entrepreneurship movement that goes back decades. But few social entrepreneurs in history have hatched schemes as high-stakes or as brazenly consumer-oriented as the Jackpot Rewards program, which has been four years in the making.

“What we were looking for was a way to create an economic engine for the common good,” says Miller. “So we asked ourselves, what is something that can create a massive network effect that will drive large numbers of consumers to participate? Well, you will find that over 50 percent of consumers participate in some kind of rewards program, whether it’s a cash-back card like the Discover card or one of the frequent-flier-miles credit cards that a lot of people carry. And sweepstakes are considered one of the most effective …Next Page »

Comments (29) | Reprints | Share:        

While Amazon and eBay may dominate shopping in most of the Web universe, things are still up for grabs on planet Facebook. There, the leading shopping application is from a two-year-old Cambridge, MA, startup called StyleFeeder. More than half a million people have made StyleFeeder’s shopping app part of their Facebook profiles—which is about 50 times as large as the Facebook user base claimed by the nearest competitor, eBay.

The personal shopping engine at StyleFeeder’s own website boasts a similar number of users. And this week the startup literally capitalized on its lead, raising $2 million in Series A financing from local venture firms Highland Capital Partners and Schooner Capital (the same two firms that provided the company with a $1 million seed round last year).

“Obviously, at some point, an eBay or an Amazon will do something innovative with their Facebook apps, but we’ve established such a big lead right now that we want to keep being pervasive,” says Shergul Arshad, StyleFeeder’s vice president of business development.

I spoke with Arshad and Phil Jacob, StyleFeeder’s founder and CTO, by phone yesterday. They said the success of the StyleFeeder Facebook app, launched last June, was something of a surprise, even to them. “The Facebook platform was very new at that point, and I don’t know if anyone really knew what it was going to become, but it looked pretty interesting,” says Jacob. “We looked at the API [the application programming interface, the specifications outside programmers can use to interact build software that interacts with Facebook's database] and it looked like we would be able to weave ourselves into the social fabric of Facebook pretty easily, in a way that was truly useful.”

And a useful Facebook app is not a common species, as you may know if you’ve been anywhere near the site in the last year. Puerile gag applications like “Zombies” and “Vampires” have proliferated at viral speed, only to shrivel as the novelty wears off. (”Facebook apps are for toddlers,” the Wall Street Journal’s Kara Swisher wrote last October—and out of everything she’s said about the company and its founder CEO, Mark Zuckerberg, that’s about the nicest.) Stylefeeder, by contrast, gives readers fairly accurate (in my experience) recommendations about products they might want to buy, based on the preferences of people with similar tastes—and the more products users click on, the better StyleFeeder gets at matching them with their “Style Twins”.

“There’s kind of a backlash today against a lot of these useless Facebook applications,” says Jacob. “The utility we provide has been a big factor” in StyleFeeder’s relative success on Facebook, he believes.

StyleFeeder is by no means the first Web company to offer product recommendations based on its understanding of users’ tastes. So-called collaborative filtering software goes back nearly to the beginnings of the Web and is a key element of venerable e-retail sites like Amazon. But StyleFeeder’s success on Facebook isn’t the only thing that sets it apart from the pack; the company has introduced a couple of twists on collaborative filtering that are helping to keep the technology relevant in the Web 2.0 era.

For one thing, rather than limiting its style recommendations to products culled from a single catalog, the way most e-retailers do, StyleFeeder allows users to rate and recommend any product found anywhere on the Web. Jacob says that started out as a practical strategy: the company wanted to let users decide what to share. But in any case, populating the StyleFeeder database with products from just a few vendors would have made it “incredibly narrow,” in Jacob’s words. “People want choice and depth, and once you’ve experienced this very, very long tail, anything less starts to seem underwhelming.” (If you think Amazon has a lot of products, get ready for another multiple: there’s 20 times as much stuff in StyleFeeder’s database.)

In addition, StyleFeeder’s brand of collaborative filtering hinges on a unique implementation of a machine-learning algorithm called maximum margin matrix factorization, or M3F, which—naturally enough, this being Cambridge—hails from the MIT Computer Science and Artificial Intelligence Laboratory. Jason Rennie, who received his doctorate from CSAIL in January 2007, is StyleFeeder’s head of machine learning technologies; he’s tuned M3F in a way that helps StyleFeeder determine exactly which attributes of each user—such as their gender, age, location, or previously expressed preferences—seem to make the most difference in their product choices, and it can apply those insights to produce more accurate recommendations for similar users. M3F “performs several percentage points better than the state of the art” in collaborative filtering, Jacob says. (Which makes it the new state of the art, the way I read it, but I won’t quibble.)

StyleFeeder is using the venture infusion to hire more developers—which Jacob says hasn’t been a problem so far, despite the Boston area’s reputation as an unfavorable environment for consumer-facing Internet startups. The company also hopes to acquire more users over the coming year and “work toward profitability,” according to Jacob. Highland Capital and Schooner Capital “are very big believers in what we’re doing, as evidenced by the fact that we didn’t go outside our original funders for this round,” says Jacob. “And frankly they are incredibly well connected and add a ton of value to what we do.”

StyleFeeder’s $3 million in funding to date isn’t a lot, especially compared to figures like the $10 million raised by Needham, MA-based Matchmine, another company focused on facilitating online shopping by determining Web user’s personal preferences. But Jacob says it’s plenty for now. “More and more, people are losing sight of the fact that in the Web 2.0 era you can build a large, consumer-facing website—if you have a good product and you can communicate it well—on much smaller amounts of capital,” he says. “We’ve taken in only a million so far, plus the new $2 million round, and we’ve already got metrics like half a million users. All of our infrastructure technology stack is open-source, our technology costs are really low, and we are not spending money on Superbowl ads and this kind of crazy stuff.” And that, in the end, may be the real way to overtake Amazon and eBay.

Comments (1) | Reprints | Share: