$800 Million Culture: Amazon buys Zappos

posted by   Ian Wyatt   |    July 27, 2009

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Last week I saw on my Twitter feed that Zappos CEO Tony Hsieh had announced that the online footwear company would be bought my Amazon.com (Nasdaq: AMZN) in a deal valued at $800 million.

In-line with the company's culture, Tony posted a letter to employees on his personal blog that announced the big news. The announcement came after Tony posted two quotes to his Twitter feed @zappos earlier in the day:

     - "Some see things as they are and ask why. Others dream things that never were and ask why not." -George Bernard Shaw
     - "Change is the law of life. And those who look only to the past or present are certain to miss the future." -JFK

Zappos is more than an online footwear retailer. It is a high growth, entrepreneurial company that has mastered the art of building a world class culture. The company states that it is in the service business, and happens to sell footwear. And the company's tag line, "Powered by Service" further highlights the importance of customer service. A 24-hour call center, free shipping, and 365 day return policy backup this claim.

My fellow Entrepreneurs Organization / MIT Entrepreneurial Masters Program classmate David Hauser of Grasshopper posted sketch notes from a presentation Tony gave at South by Southwest, or SXSW.

Among fellow entrepreneurs and the press, the Zappos culture is regarded as one of the best. And as the company has grown, it has been able to sustain a small company atmosphere and culture like few companies are able to do with scale.

Zappos 2008 revenues are estimated to be $1 billion, and the company is profitable. The company is the dominant player in the online footwear category, with a 20% market share.

The purchase of Zappos for $800 million is a multiple of 0.8-times estimated 2008 sales. Amazon shares rose on the news of the acquisition, gaining 5.7%. Amazon currently trades at a multiple of almost 2-times 2008 sales, making the Zappos acquisition a relatively inexpensive, all-stock transaction.

Amazon is looking at the Zappos acquisition as more than just another $1 billion in revenues. Zappos sales will be a small portion of Amazon's projected sales of $22.6 billion in 2009. Jeff Bezos has "long admired Zappos" due to the company's customer-centric culture. With Amazon planning to allow Zappos to continue to operate independently, Bezos and the Amazon team are placing a high value on the culture and leadership at Zappos. You can watch video from Jeff Bezos about Amazon and Zappos by clicking here.

Congrats to everyone at Zappos for building such a great company and achieving a very successful exit. Zappos is always my first place I look when re-stocking my New Balance 992's.

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EO / MIT Entrepreneurial Masters Program - Year 3

posted by   Ian Wyatt   |    May 27, 2009

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Today I'm driving from home in Vermont to the Endicott House in Dedham, Massachusetts, an off campus retreat center owned by MIT. This is my third year of the Entrepreneur's Organization / MIT Entrepreneurial Masters Program (formerly known as Birthing of Giants, when the program was also affiliated with Inc. Magazine).

I'll be spending three days in intensive learning sessions led by business leaders, successful entrepreneurs, and MIT faculty. My class of 60 fellow EO Members are entrepreneurs from around the world, including countries such as Australia, South Africa, Switzerland, India, and the U.K. The diverse group of students provides an amazing global view that is difficult to find elsewhere.

Speakers this year include Cameron Herold (BackpocketCOO and formerly 1-800-GOT-JUNK), Omar Khan (author of Liberating Passion), Jack Stack (SRC President and author of A Stake in the Outcome), Mark Eaton (NBA star), and Eran Egozy (CEO of Harmonix, creator of Guitar Hero and Rock Band).

The program begins this evening and ends Saturday afternoon, making for three packed days of learning. I'm excited to get to MIT, knowing that I'll come back to work refreshed and full of ideas to innovate my business model, improve my management, and inspired to grow my business even during this challenging economic environment.

Look for blog posts and Twitter updates (@ianwyatt) from MIT.

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Wine Library’s Gary Vee Lands +$1 million book deal

posted by   Ian Wyatt   |    April 3, 2009

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The most up and coming wine expert and social media personality Gary Vee just landed a seven figure, 10 book deal with HarperStudio according to the Wall Street Journal.

For those not familiar, Gary Vaynerchuk (@GaryVee) is a wine retailer through his Wine Library in New Jersey, and also the host of the Internet show Wine Library TV. Gary has successfully developed his online personality through his straight talk approach to evaluating wines. In a world where wine is often thought to be expensive and complicated, Gary's funny and direct approach to wine is a welcomed change. Gary's first book Crush It! Turn Your Passion into Profits in a Digital World is slated for release in September, 2009.

With 166,000 Twitter followers (including me), Gary has successfully developed an engaged audience with a strong following. According to the Wall Street Journal, HarperStudio was in part attracted to Gary due to the platform and audience that he has cultivated through the social media.

Wine Library TV is a great example of how Internet entrepreneurs are using low cost video and social media such as Twitter to gain huge followings. And this book deal with HarperStudio demonstrates the perceived value of that audience.  I think every entrepreneur can learn some lessons from Gary about how to build a social media audience and effectively use online video.

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Plenty of Fish: $10 million revenues & 50% profit margins

posted by   Ian Wyatt   |    March 14, 2009

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It's easy is it to build a multi-million dollar web business, right? Buy a domain name. Launch a simple web site. Tell your friends about it. Viral marketing kicks in. And a few months later, you're cashing big checks and rolling in the dough. Sounds easy enough.

However, my personal experience leads me to believe that this is not in fact the case. And other entrepreneurs with +$1 million business whom I've gotten to know, whether they are in the Internet sector or not, share experiences about years of relentless hard work and no pay, before reaping the financial rewards.

While catching up on my pile of old magazines, I came across the Inc. Magazine January / February 2009 issue with a cover story titled And the Money Comes Rolling In: Markus Frind works one hour a day and makes $10 million a year. How does he do it? He keeps things simple.

The title sums up the article pretty well: social recluse Markus Fiend, of Vancouver, British Columbia, is an engineer who held several dead-end jobs before going out on his own. Five years ago he starts a web site called Plenty Of Fish, working less than 20 hours a week on the business. His site grows to one of the top ten most-trafficed sites, generating advertising revenues of $10 million a year, with 50% net profit margins. The company has three full time employees, and Markus works a couple hours a day. As Inc. Magazine's Max Chafkin writes, "It's a 21st Century Fairy Tale."

According to Inc. Magazine, Plenty of Fish is the most trafficed dating site in the world, with 1.6 billion page views a month. The site is largely a free, advertising supported dating web site with four-times the traffic of Match.com ($350 million a year in revenues, primarly through subscription fees). In early March, Plenty of Fish announce a paid membership option for members that "are serious about meeting someone." (click here for Markus's blog, The Paradigm Shift: Adapt or Die)

Inc. Magazine leads the article with the story of little work, lots of profits. And the story does sound much like a fairy tale. Much of the article on Markus and Plenty of Fish is actually interesting. I found the better aspects of the story to be the insights into bootstrapping a new business, and running a lean operation that keeps costs down, isn't constantly re-investing its earnings, and as a result throws off great cash flows. Plenty of Fish is a good example of how Internet entrepreneurs with programming experience and some free time working alone from their apartment, can build highly trafficed web sites. Today budding Internet entrepreneurs can create scalable web sites using free open-source software, previously expensive tools, cloud computing, and an outsourced sales force (Google AdWords). And this can be accomplished for thousands of dollars, compared with millions of dollars a decade ago.

Keeping things simple is key to the success of Plenty of Fish. According to the article, Markus makes few changes or improvements to the site, because he's concerned about the potential negative impact on the business. Every change to a site can impact user actions, either positively or negatively, but it isn't known until after the fact. Instead of making the experience better or trying to achieve incremental improvements, he sticks with what works. Markus says, "I don't listen to the users. The people who suggest things are the vocal minority who have stupid ideas that only apple to their little niches."

I suppose this strategy can work when your site has +1 billion page views per month.

 

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Top 5 Priorities: The Story of Ivy Lee and Bethlehem Steel

posted by   Ian Wyatt   |    January 24, 2009

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Today I'll share with you a story that I've heard told by Cameron Herold of BackpocketCOO (former COO at 1-800-GOT-JUNK) at my second year at the Entrepreneur's Organization / MIT Entrepreneurial Masters Program in May, and again this autumn when Cameron came to Washington DC to present to the local Entrepreneur's Organization chapter. This is the story of the well-regarded management consultant Ivy Lee and Charles M. Schwab of Bethlehem Steel. The lesson is the importance of defining the the top priorities and focusing on those important items, not the other work that tends to tie up most of our time at work. I have already begun implementing daily top five for myself, and at Business Financial Publishing we're planning on getting every employee on board with top five priorities every day.

The Top 5 story...

One day a management consultant, Ivy Lee, called on Schwab of the Bethlehem Steel Company. Lee outlined briefly his firm's services, ending with the statement: "With our service, you'll know how to manage better."

The indignant Schwab said, "I'm not managing as well now as I know how. What we need around here is not more "knowing" but more doing, not knowledge but action; if you can give us something to pep us up to do the things we ALREADY KNOW we ought to do, I'll gladly listen to you and pay you anything you ask."

"Fine", said Lee. "I can give you something in twenty minutes that will step up your action and doing at least 50 percent".

"O.K.", said Schwab. "I have just about that much time before I must leave to catch a train. What's your idea?"

Lee pulled a bland 3x5 note sheet out of his pocket, handed it to Schwab and said: "Write on this sheet the five most important tasks you have to do tomorrow". That took about three minutes. "Now", said Lee, "number them in the order of their importance". Five more minutes pass. "Now", said Lee, "put this sheet in you pocket and the first thing tomorrow morning look at item one and start working on it. Pull the sheet out of your pocket every 15 minutes and look at item one until it is finished. Then tackle item two in the same way, then item three. Do this until quitting time. Don't be concerned if you only finished two or three, or even if you only finish one item. You'll be working on the important ones. The others can wait. If you can't finish them all by this method, you couldn't with another method either, and without some system you'd probably not even decide which are most important".

"Spend the last five minutes of every working day making out a "must " list for the next day's tasks. After you've convinced yourself of the worth of this system have your men try it. Try it out as long as you wish and then send me a check for what YOU think it's worth".

The whole interview lasted about twenty-five minutes. In two weeks Schwab set Lee a check for $25,000 - a thousand dollars a minute. He added a note saying the lesson was the most profitable from a money standpoint he had every learned. Did it work? In five years it turned the unknown Bethlehem Steel Company into the biggest independent steel producer in the world; made Schwab a hundred million dollar fortune, and the best known steel man alive at that time.

Thanks to Cameron for introducing me to this important and yet simple method for staying focused on the priorities.  I can confidently say that on the days when I outline my top five priorities and work toward those items, I accomplish much more than when I show up to work and just start working.  I highly recommend Cameron's videos and events - he is an outstanding presenter and speaker.

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