Why I Learnt Wasting $1,000,000 On Digital Marketing

By Steven Feeney

In 2011 my business partner and I took a trip to New York to visit a mutual friend I had grown up with. He worked for a large news aggregation software company and due to the nature of his work, always finds the latest products and industries that are happening at least 12-18 months before we here about them in Australia.

We sidelined him after a few too many beers in Soho and peppered him with questions about trending products. Most of his ideas were either beyond our budget, beyond our technical capabilities or too suited to the American market.

One though, stood out from the crowd.

Subscription ecommerce...

The ecommerce market in Australia was (and still is to some extent) highly underdeveloped. Online retail sales as a percentage of total sales still hovers at around the 7% mark. Compares this to somewhere like the UK at closer to 17% and you can see there is a massive opportunity in Australia to grow online sales.

Subscription ecommerce is a fairly recent phenomenon. Rather than most ecommerce transactions which are singular, subscription based ecommerce is a monthly plan whereby you send subscribers a product (or a selection of products) each month.

The first startup that really saw traction in this space was Birchbox. Started by two Harvard grads, birchbox sends subscribers a monthly selection of beauty product samples for $10 a month. Birchbox has raised over $70 million from investors in the US and has close to a million subscribers. The company has spawned a whole industry of copycats, ranging from a razor blade subscription service (Dollar Shave Club), men's clothing subscription (Trunk Club) and even a food subscription (Hello Fresh).

Now this was 2010. None of these companies were around when we thought we could replicate this business model in Australia.

Upon our return, we rapidly got to work, building financial models, website landing pages and creating some brand awareness on social media. We understood the power of email marketing and began driving traffic from Facebook to our landing page encouraging people to sign up to our website when we launched. This was when Facebook ads was just starting to roll out and damm it was cheap! We knew nothing at all about digital marketing and were getting sign ups at about 20 cents an email. (If you can get them for $2 today depending on your industry you're doing well).

We had spent about $70k and launched the business in 4 months. We sold 1500 subscriptions within the first week and thought we were on our way to millionaire status! Unfortunately though we had ran out of runway and our cash position was at the point where we could not continue without outside investment. We then began pitching our business to some high net worth families and managed to receive an investment of $1.2 million in a matter of weeks to invest in marketing.

The Plan

What plan!?

 

 

 

 

Leave a Comment