Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
What do you get when infomercials marry webcasts? An e-retailing video business.
Scott Ferris once was a fan of broadband. In fact, he worked on cable systems in London and Orlando that relied on broadband technology to deliver content to consumers.
But today Ferris focuses on delivering content to consumers over the tried-and-true POT-plain old telephone-line. “I knew from my experience that when you get into 30-year-old cable systems, you wouldn’t be able to get broadband into the home,” Ferris says.
Ferris has used his insight into the nature of the broadband business to help build Vendaria Inc., which creates video presentations for retailers’ and manufacturers’ web sites and that could change the way consumers experience shopping on the Internet. If he had expected broadband to be the key platform to deliver video, he’d probably be out of business today, he says. “It was a big bet,” Ferris, CEO, says. “All the investment capital was going to broadband, the angel investors in our company were broadband. But I didn’t think we could make a meaningful business out of broadband in three years.”
Vendaria’s video product has been in the market for barely a year and a half. But in that time it has racked up some high-profile users. EddieBauer.com did an extensive test of Vendaria videos during holiday shopping last year. Starbucks Coffee Co. uses Vendaria’s videos at its web site to sell coffee makers and is developing a coffee education video. Toy manufacturers Hasbro Inc. and K’nex Industries Inc. have created videos that appear at Amazon.com, as well as at other sites. And the company is in discussions with other retailers and manufacturers.
The holiday test
While most retailers don’t like to disrupt their tried-and-true approach to selling during the holidays, that’s exactly when The Spiegel Group’s EddieBauer.com put Vendaria videos to the test. In fact, EddieBauer.com tested the videos over a wide range of products and price points, from an $18 snow globe to a $298 leather jacket. While it found that the snow globe video wasn’t effective-“Snow globes don’t need a lot of explanation; people know what to expect of them,” says Brian Walker, manager of business development at Eddie-Bauer.com-videos were effective with higher priced products. Conversion rates were 10% to 15% higher on the products that featured video, Walker says.
Similarly, Starbucks is pleased with the results of its video promoting a coffee brewer. “Viewing the video has had an impact on whether a customer buys,” says Lourdes Orive, director of interactive operations at Starbucks. “Viewing the video makes people more inclined to buy.” Customers watched the video nearly 34,000 times between May 30 when it went live and the end of the year. The last few days of the year saw more than 700 viewings each day.
The most viewed products at EddieBauer.com during the holidays were a men’s watch and a men’s leather coat. “This feature is useful for customers considering higher priced products, especially if they’re gifts,” Walker says. Customers also took to the videos on products that had multiple features, such as down coats or flannel-lined jeans, where customers sought additional explanation.
Eddie Bauer’s and Starbuck’s results confirm early experiments on the web. Gifts.com, a division of the Reader’s Digest Association Inc., experienced a lift in sales when it displayed a Mothers Day pendant in a video created by RichFX Inc. In fact, viewers of the video were three times more likely to buy the pendant than were viewers of the traditional flat image, Gifts.com says (See Internet Retailer, July 2001, p. 40).
EddieBauer.com still has not computed ROI on the videos, Walker says, because too many variables come into play during the holidays. Among them is the fact that conversion rates during the holidays are typically higher than the rest of the year, so it’s hard to tell what effect videos by themselves had on conversion rates. Furthermore, Eddie Bauer did not promote the videos strongly and customers did not come to the site expecting them, so they were less likely to view the video if they just came across it on the site, Walker says.
Nonetheless, Eddie Bauer liked the experience with the videos and will continue testing, Walker says. In fact, one of the features that attracted Eddie Bauer to Vendaria in the first place proved to be important to the videos’ success on the site: They were easy for consumers to use. “We explored video many times in the past, but we didn’t like the idea of customers having to pick from a menu of video options,” he says. “We never saw what seemed like a good experience until Vendaria came along. The Vendaria experience was designed from the customer perspective.”
Streaming media for dummies
Part of the problem that Vendaria had to solve as it was developing its product was how to deliver video to consumers without broadband and without requiring them to install a plug-in to be able to view the video. Ferris directed Vendaria’s tech development team to focus on creating a technology that consumers would find easy to use. The team came up with what Ferris dubs “streaming media for dummies.”
It works like this: When a consumer accesses the video, the Vendaria system detects the consumer’s operating system, media players, browsers and connection speed. It takes all that intelligence back to the Vendaria system which then downloads the version appropriate to the customer’s operating system. Meanwhile, the customer sees a message that says “video loading.” “The ease of use and the user experience in viewing the video was a big draw for Starbucks,” says Orive. “Users with a 56K connection can view the video comfortably and easily with whatever media players they are using.”
While the tech staff was developing the delivery technology, Vendaria also was researching the market. Ferris says the company spent six months trying to get into the minds of Internet shoppers. What those shoppers wanted, he reasoned, would shape the Vendaria technology. The results were no surprise: Consumers liked the convenience of online shopping, they liked being able to shop on their own time and they liked being in control of the process. They didn’t like the difficulty of getting a feel for the features and benefits of a product and they found 2-D products with text uninspiring.