Boo’s Rebirth

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.

Part­ner­ships

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.

Fran­chis­ing

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.

Glo­cal­iza­tion

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).

Buy It!

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.