They say that fashion is cyclical. If that’s so, Boo.com‘s return wouldn’t come as a surprise. As you know, Boo.com was one of the biggest Internet failures, burning through over $100 million in investments before closing its doors. However, Boo’s story did not end with the site closing. Fashionmall.com bought the domain name and is set to relaunch the company as a European fashion portal. Whether it succeeds is not something we can discuss yet but it shows another way companies can enter foreign market.
Since Boo’s failure, we now all know that trying to attack 15 markets at once is sheer insanity when you’re a startup. As some of the people within Boo used to say,
if we make it, people will think of us as geniuses, and if we don’t, there will be studies written about how it’s impossible to do it. Hindsight being 20/20, we can now say that the attempt to capture so many markets quickly failed.
In my discussions with European companies, however, I’ve noticed a number of ways in which companies are globalizing. Here’s a quick rundown.
When Internet.com started expanding overseas, we were looking at a way to limit our potential risk. As a result, the approach we took (back in 1996) was one of joint partnerships, offering our content in exchange for a stake in the new business unit. Internet.com would focus on producing content and the partner would translate the content, market the brand in the local market, and sell advertising in the local market. In exchange, Internet.com would receive a quarterly fee based on a percentage of advertising revenues. This approach has advantages for content providers in that it does not affect the bottom line in a negative way. The downside, however, is that you do not have much control over the total deal and it makes it harder to assume full control if you feel like doing so.
Etrade is now in 9 countries outside of the United States. In doing so, they have been using a franchising model. Entrepreneurs have approached them and bought the rights to the name and are renting the technology from Etrade. If the market succeeds, Etrade then looks at the partnership and talks to its franchisee about possibly merging the operations within the global Etrade by acquiring the franchise. It’s an interesting model in that it goes beyond what Internet.com did. The one extra step is the license of technology. As a result, Etrade is a financial technology company when it comes to the international market. This model seems to have worked well for Etrade and seems to be the most cost-efficient approach to going global.
This is a term popularized by Yahoo! The basic idea of glocalization is best embodied in the slogan
think globally, act locally. In entering foreign markets, Yahoo! hires a completely local team which has full control of the local Yahoo! portal. The team strikes partnerships, sells advertising, and does marketing as an almost independent company. Essentially, the local Yahoo! portals are wholly-owned subsidiaries of Yahoo! corporation and act relatively independently of the parent company.
In this model, Yahoo! essentially becomes an incubator for people who want to become the Yahoo! of [insert country here]. Yahoo! owns the whole company but by going local, can be more in tune with local business traditions, which may be different from those of the United States.
As a result, overseas Yahoos sometimes have strategies that differ from the main site but are a better fit for the country they are in. For example, Yahoo! Europe entered into distribution deals with large media companies whereas it wasn’t traditionally something Yahoo! US did and got into the access game long before its US counterpart did.
As time went by, the US operation have started to take a look at what its European counterpart is doing and sometimes adapted similar strategies.
Another advantage in this approach is that, by having local executives, your company is not seen as an American invader (and in Europe in particular, American domination is a big issue).
Back when it was riding high, Amazon did something very smart: it started using its overpriced stock to acquire companies. In doing so, Amazon ended up picking up a German online retailer. This approach can be seen as a good way to quickly enter a market if you’ve got the money.
However, this is a strategy that is very difficult to accomplish. First you have to have the cash or stock to make the acquisition. But that’s the easy part. The tough part comes in the integration of back-end systems and the switch in brand name. If you want to become a dominant player globally, having a strong brand is essential but what do you do when you have several.
In the case of Amazon, they went out and completely changed the name from the get-go, creating some controversy in the process. Over time, this proved to be the right strategy but had they picked up a more established player, it might have been difficult for them to do so.
The other issue they have had is in integrating the back-ends. In the final analysis, they decided to drop the integration altogether and completely switch to Amazon’s back-end, but not after having spent many months trying to make the two systems talk to each others. Once again, this is something they managed to do without causing too much trouble for the customer but it shows that you need more money than just the price of acquisition in order to take that approach.
An interesting case to follow now is the acquisition of Lycos by Terra Networks. At the current time, few customer facing changes have been made but it will be interesting to track as both companies are trying to merge their operations.
Which brings me back to Boo.com’s revival. Fashionmall bought the brand name and is now trying to relaunch Boo under a new model. Will they succeed? I really don’t know but I’d like to wish them the best as they attempt it. What is interesting in this attempt is the fact that Boo may or may not be a tarnished name. What I mean is that Boo is a well known name but many people know it because of the headline-grabbing failure of the previous iteration.
Interestingly enough, however, there were still enough visitors to the site this summer, after it had closed, for it to rank in the Media Metrix ratings. It will be interesting to see if Boo can survive as a brand and whether the original ad campaign built enough goodwill for it to succeed.