According to Chris Keall's NBR article this morning, it seems a little known Kiwi is trying to save online publishing in the US. By little known, I mean he's not a household name in New Zealand. But Jonty Kelt is well known in tech circles in the USA, having played a major part in innovative company DoubleClick. DoubleClick ran a large advertising network and was purchased by Google back in 2007 for 3.1 billion. A kiwi through and through, Kelt was born in Hawkes Bay and studying at Otago University.
So what is Kelt up to in the USA? Kelt started a business called GroupCommerce back in 2010. The aim of the business is to provide white-labelled e-commerce solutions to large publishers. What does that mean exactly? Well one of GroupCommerce clients is the newspaper the New York Times. With so much free news available for free online, the NYT is struggling to make money. It's a challenge getting readers to pay for online access to read their paper. Solution: Turn their website from just information, to an online store.
GroupCommerce installed an online shopping mall for The Times on their website. With so many readers online, its inevitable that some of those will be keen to buy products on NewYorkTimes.com. Its a way of the newspaper supplementing the loss of advertising revenue in their papers, with profit from selling products on their website.
Many are saying this is the future of online publishing, the only way newspapers will survive in the long term, and it makes sense. If you sell an online subscription to your newspaper for $20 a month, the bulk of that goes on running costs. But if you can sell products as well, the profit from those products provides an extra revenue stream. Its diversifying away from relying solely on advertising revenue.
GroupCommerce offers a white label solution as do a few other competing white-label daily deal services. What this means is that they will install the software on the NYT site which will offer thousands of products. It will look like the New York Times is actually selling the products, but in actual fact GroupCommerce runs the warehouse and handles all the orders, NewYorkTimes promotes their very own store and provides the customers.
It looks like an effective model, and from a publishers point of view, they have nothing to lose and everything to gain from installing one of these white label shopping malls. What makes the model even more effective is if they offer daily deals on selected products. We all know the pulling power that daily deals have, and with the amount of traffic that a site like New York Times has, its a good recipe for success.
Here in New Zealand, a similar service operated last year through a company called Hubsta. The service offered the same concept, a white labelled e-commerce store on established websites. Hubsta was even used by Yahoo New Zealand and the NZ Herald! Hubsta handled all the orders, and backend management, the publishing site offered the customers. But the company went into receivership in 2010.
However we don't believe that the model is flawed, shown by GroupCommerce's monthly growth of 24%. Kelt has raised over 40m US dollars in venture capital and boasts some powerful investors including Bob Pittman who started MTV.
In New Zealand however, a similar model is being used with great success, but in a slightly different format. The New Zealand Herald and GrabOne have a partnership that has stood since GrabOne launched in 2010. The Herald will send traffic to GrabOne from their network of websites, in return for a cut of the commissions.
In fact The Herald has always owned a part of GrabOne, but you can see that in essence its the same model. NZ Herald wants to offset declining advertising revenues, and diversify their income sources. The NZ Herald partnership with Hubsta didn't pan out, but GrabOne has been very successful with the NZ Herald going from 25% ownership to 75% recently. The difference here is that GrabOne was launched as a separate website, and grew of it's own accord. It wasn't a private labelled service run on the Herald website.
As for overseas, its doubtful whether the market can sustain more new daily deals brand launches. Far better for websites like the NYT to run white labelled deals through their own website. The New York Times already has the trusted brand name. The best use of this is to promote deals themselves, through using the GroupCommerce backend.