Thursday, June 30, 2005
Hits and Misses
For the sequel, how about $12.5 Million Baby? Anyone who's anyone in Hollywood knows the rule: Always sign your next deal before the buzz from your last hit dies down. Now you can count boxing equipment maker Everlast Worldwide among the anyones, as the company followed its starring role in Million Dollar Baby with a five-year women's apparel licensing deal with Jacques Moret International that guarantees it $2.5 million in annual royalties. Everlast's fancy footwork has been a knockout on Wall Street too: In the four months after the movie's debut, its stock tripled to more than $13 a share.
I like big bucks and I cannot lie. When it comes to picking music, wireless carriers are a lot like radio stations: The ringtones they promote come straight from the top of the charts. Great for flavors of the month; not so great for anyone else trying to cash in on the ringtone craze. So what's an old-school hip-hop artist like Sir Mix-a-Lot -- pushing a ringtone remix of “Baby Got Back" called “Pick Up the Phone" -- to do? Mix-a-Lot turned to “mobile brand management" firm Versaly Entertainment, which picked up the phone and worked its relationships with direct-to-consumer marketers. The top source of sales: those obnoxious late-night Jamster commercials on MTV and BET. The ringtone went gold in seven weeks, selling 500,000 units at $2 a pop.
To boldly promote what no marketer has promoted before. ad agencies often promise clients the moon -- but rarely do they mean it literally. Nonetheless, Euro RSCG helped Volvo achieve liftoff with a clever promotion for the automaker's XC90 SUV: a contest that awarded the winner a seat on the first commercial launch of Richard Branson's Virgin Galactic. Not surprisingly, 135,000 would-be astronauts entered the giveaway after it was launched with an ad aired during the Super Bowl. More surprisingly, 60,000 of them also requested information on Volvo cars, and more than 1,000 placed preorders. Volvo says the sales leads and publicity it received as a result of the contest were worth $5 million -- more than twice what it spent on the 30-second Super Bowl spot.
I like big bucks and I cannot lie. When it comes to picking music, wireless carriers are a lot like radio stations: The ringtones they promote come straight from the top of the charts. Great for flavors of the month; not so great for anyone else trying to cash in on the ringtone craze. So what's an old-school hip-hop artist like Sir Mix-a-Lot -- pushing a ringtone remix of “Baby Got Back" called “Pick Up the Phone" -- to do? Mix-a-Lot turned to “mobile brand management" firm Versaly Entertainment, which picked up the phone and worked its relationships with direct-to-consumer marketers. The top source of sales: those obnoxious late-night Jamster commercials on MTV and BET. The ringtone went gold in seven weeks, selling 500,000 units at $2 a pop.
To boldly promote what no marketer has promoted before. ad agencies often promise clients the moon -- but rarely do they mean it literally. Nonetheless, Euro RSCG helped Volvo achieve liftoff with a clever promotion for the automaker's XC90 SUV: a contest that awarded the winner a seat on the first commercial launch of Richard Branson's Virgin Galactic. Not surprisingly, 135,000 would-be astronauts entered the giveaway after it was launched with an ad aired during the Super Bowl. More surprisingly, 60,000 of them also requested information on Volvo cars, and more than 1,000 placed preorders. Volvo says the sales leads and publicity it received as a result of the contest were worth $5 million -- more than twice what it spent on the 30-second Super Bowl spot.
The World According to Clark
By Michael V. Copeland, April 27, 2005
Every time technology lurches forward and creates huge new opportunities, Jim Clark cashes in. First with Silicon Graphics, then with Netscape and half a dozen other startups, Clark's genius has been to get there just a little bit ahead of the pack with his over-the-horizon thinking and his acute technical skill. That combination has made him a billionaire and afforded him the opportunity to spend his days tuning his megayachts and pondering where the next big thing lurks. Senior writer Michael V. Copeland caught up with Clark, just back from a sailboat race in the Caribbean, to get his thoughts on starting a company today.
WHAT TRAITS SHOULD EVERY GOOD ENTREPRENEUR POSSESS?
Discontent and anxiety. Most entrepreneurs are not content with the way things are. But if they're smart, they are extremely anxious too. Most ideas are going to happen whether you do them or someone else does. It's the person who feels most anxious about it and builds the prototype who is likely to win. The best entrepreneurs tend to move quickly and efficiently. They don't waste a lot of time making decisions.
WHAT IS A STARTUP'S FIRST PRIORITY?
The first thing you need to focus on is cash flow. As soon as you hit cash-flow positive, you are not using cash-you can still be unprofitable, but you are not using cash. The next goal is profitability, which, unlike in the late '90s, is very important today.
WHEN YOU INVEST IN A COMPANY, WHAT ARE YOU LOOKING HARDEST AT?
I am much more inclined to go with the people than the idea. A good team can take an average idea and make a great company, but a bad team can take a great idea and totally screw it up.
DO FOUNDERS MAKE GOOD CEOS?
It's very, very rare that a founder, especially if they come from a technical background, is going to be the appropriate person to be CEO. If you are the founder and the technical person, you must put the company's survival and success ahead of your own ego. Get a good CEO to run the business. At Silicon Graphics, all of us, myself included, would have been better off if I had gotten a CEO involved first, before raising the capital. We would have gotten a much higher valuation because, from a VC's perspective, there is less risk involved with a businessman onboard.
SHOULD YOU START A COMPANY WITH AN EXIT IN MIND, EITHER GETTING ACQUIRED OR GOING PUBLIC?
I think focusing on the exit is the wrong thing to do. The best businesses are created with the objective of building long-term, sustainable businesses-not an exit. They are usually the ones that have a much bigger exit.
WHAT CAN KILL A COMPANY BEFORE IT STARTS?
The reason so few companies are successful is that most people don't have a lot of common sense about what will sell and what won't. You need to be very pragmatic about whether people will pay for a product based on your great idea. You can't just say, "This should be great, and I am sure the world will beat a path to my door." Once you have an idea for a product or service, you need to test the market. Talk to your potential customers about what they want. And don't try to make the product do everything for everyone. Engineers often make this mistake. It's the Swiss Army knife mentality. They want to put everything into it. Don't. Go out and talk to customers as quickly as you can and put a copy of the product in front of them to get their feedback. When we went out to sell our first product at Silicon Graphics, people came back and said, "We don't want that; we want this." We sold them what they wanted.
IS TECHNOLOGY STILL THE THING THAT WILL CREATE THE NEXT CROP OF EARTHSHAKING COMPANIES?
Sometimes a particular confluence of technology occurs that enables huge opportunities like the Web and Netscape. There is a set of things developing now that at some point will lead to similar confluences of technologies and markets that are then ripe for exploitation. I don't know what the next big thing is, but I have no doubt that it's coming.
Every time technology lurches forward and creates huge new opportunities, Jim Clark cashes in. First with Silicon Graphics, then with Netscape and half a dozen other startups, Clark's genius has been to get there just a little bit ahead of the pack with his over-the-horizon thinking and his acute technical skill. That combination has made him a billionaire and afforded him the opportunity to spend his days tuning his megayachts and pondering where the next big thing lurks. Senior writer Michael V. Copeland caught up with Clark, just back from a sailboat race in the Caribbean, to get his thoughts on starting a company today.
WHAT TRAITS SHOULD EVERY GOOD ENTREPRENEUR POSSESS?
Discontent and anxiety. Most entrepreneurs are not content with the way things are. But if they're smart, they are extremely anxious too. Most ideas are going to happen whether you do them or someone else does. It's the person who feels most anxious about it and builds the prototype who is likely to win. The best entrepreneurs tend to move quickly and efficiently. They don't waste a lot of time making decisions.
WHAT IS A STARTUP'S FIRST PRIORITY?
The first thing you need to focus on is cash flow. As soon as you hit cash-flow positive, you are not using cash-you can still be unprofitable, but you are not using cash. The next goal is profitability, which, unlike in the late '90s, is very important today.
WHEN YOU INVEST IN A COMPANY, WHAT ARE YOU LOOKING HARDEST AT?
I am much more inclined to go with the people than the idea. A good team can take an average idea and make a great company, but a bad team can take a great idea and totally screw it up.
DO FOUNDERS MAKE GOOD CEOS?
It's very, very rare that a founder, especially if they come from a technical background, is going to be the appropriate person to be CEO. If you are the founder and the technical person, you must put the company's survival and success ahead of your own ego. Get a good CEO to run the business. At Silicon Graphics, all of us, myself included, would have been better off if I had gotten a CEO involved first, before raising the capital. We would have gotten a much higher valuation because, from a VC's perspective, there is less risk involved with a businessman onboard.
SHOULD YOU START A COMPANY WITH AN EXIT IN MIND, EITHER GETTING ACQUIRED OR GOING PUBLIC?
I think focusing on the exit is the wrong thing to do. The best businesses are created with the objective of building long-term, sustainable businesses-not an exit. They are usually the ones that have a much bigger exit.
WHAT CAN KILL A COMPANY BEFORE IT STARTS?
The reason so few companies are successful is that most people don't have a lot of common sense about what will sell and what won't. You need to be very pragmatic about whether people will pay for a product based on your great idea. You can't just say, "This should be great, and I am sure the world will beat a path to my door." Once you have an idea for a product or service, you need to test the market. Talk to your potential customers about what they want. And don't try to make the product do everything for everyone. Engineers often make this mistake. It's the Swiss Army knife mentality. They want to put everything into it. Don't. Go out and talk to customers as quickly as you can and put a copy of the product in front of them to get their feedback. When we went out to sell our first product at Silicon Graphics, people came back and said, "We don't want that; we want this." We sold them what they wanted.
IS TECHNOLOGY STILL THE THING THAT WILL CREATE THE NEXT CROP OF EARTHSHAKING COMPANIES?
Sometimes a particular confluence of technology occurs that enables huge opportunities like the Web and Netscape. There is a set of things developing now that at some point will lead to similar confluences of technologies and markets that are then ripe for exploitation. I don't know what the next big thing is, but I have no doubt that it's coming.
Prefab With a View
By Adam McCulloch, April 20, 2005
Peo Lindholm wanted to buy a London penthouse in 2000 but knew that all he'd wind up with were leaky roofs and corroded plumbing. That's because most of the city's rooftop apartments are landmarks in which renovations are regulated. Then he heard about a company that was lifting new penthouses into place with a crane. Lindholm and his wife bought one atop a building overlooking Lord's Cricket Ground. "We're the only people in a London penthouse who don't get wet when it rains," he jokes.
The Lindholms' apartment is the work of First Penthouse, a U.K. company founded by Håkan and Annika Olsson that has been installing prefabricated penthouses in London for the past 12 years. First Penthouse usually acts as a developer, buying air rights from building owners and selling penthouses as new construction. So far the company has sold 15 apartments for a total of $50 million.
The Olssons got the idea for prefab penthouses while trying to renovate their own top-floor apartment in Stockholm: A rainstorm nearly flooded their entire building. In 1989 the couple -- both civil engineers -- moved to London to take new jobs. They purchased aerial photographs of the city and marked flat-roofed buildings with a red pen. "We knew we had a good business idea when the whole picture was red," Håkan says. Eight months later they started First Penthouse.
The company's early projects were not without hitches. For the first, in 1993, the Olssons hired a British firm to construct the unit -- destined for a building in upscale St. John's Wood Court -- but when it was lifted into place, it didn't fit. (Modifications to an exterior wall solved the problem.) Landmark regulators were hesitant to grant approval for rooftop construction, fearing noise and dirt. Financing was also tough. "No bank wanted to be first to lend because this was so new," Håkan says.
The Olssons got a wealthy friend -- a Swedish rag-trade baron -- to put up much of the $400,000 they needed for the first unit. Then they moved construction to Sweden, where prefab architecture is more advanced, thanks to brutal winters that can make onsite work impractical. (Ikea sells a prefab house there.) To sweeten the deal for existing residents at their projects, the Olssons fund infrastructure improvements like new water tanks and elevators. They pacify regulators by using less noisy tools, such as silent diamond-core drills, and by laying sound-absorbing mats over roofs they work on.
A High-End Model
Sale price
(typical 2,000-sq.-ft. unit) $3,000,000
Prefab construction -$1,500,000
Air rights -$500,000
Finder's fee -$100,000
Project financing -$300,000
Prime contractor -$300,000
Gross profit $300,000
Source: First Penthouse
So far, the Olssons' penthouse projects have ranged in size from 300 to 4,000 square feet. A 2,000-square-foot penthouse typically costs a buyer between $1 million and $8 million, depending on the neighborhood and the slope of the roof. Of course, the same math might make sense in the United States. Håkan says he's already working with a developer to install a prefab penthouse in Manhattan's Tribeca district this fall. The plan is to ship a unit from Sweden, though Håkan hopes to eventually manufacture locally, maybe in the Bronx.
The Olssons, however, will probably never reside in one of their projects. Since leaving Stockholm, they have lived in rural Maidenhead, west of London. "We're keen horsemen," Håkan says. "We need to live in the country."
Peo Lindholm wanted to buy a London penthouse in 2000 but knew that all he'd wind up with were leaky roofs and corroded plumbing. That's because most of the city's rooftop apartments are landmarks in which renovations are regulated. Then he heard about a company that was lifting new penthouses into place with a crane. Lindholm and his wife bought one atop a building overlooking Lord's Cricket Ground. "We're the only people in a London penthouse who don't get wet when it rains," he jokes.
The Lindholms' apartment is the work of First Penthouse, a U.K. company founded by Håkan and Annika Olsson that has been installing prefabricated penthouses in London for the past 12 years. First Penthouse usually acts as a developer, buying air rights from building owners and selling penthouses as new construction. So far the company has sold 15 apartments for a total of $50 million.
The Olssons got the idea for prefab penthouses while trying to renovate their own top-floor apartment in Stockholm: A rainstorm nearly flooded their entire building. In 1989 the couple -- both civil engineers -- moved to London to take new jobs. They purchased aerial photographs of the city and marked flat-roofed buildings with a red pen. "We knew we had a good business idea when the whole picture was red," Håkan says. Eight months later they started First Penthouse.
The company's early projects were not without hitches. For the first, in 1993, the Olssons hired a British firm to construct the unit -- destined for a building in upscale St. John's Wood Court -- but when it was lifted into place, it didn't fit. (Modifications to an exterior wall solved the problem.) Landmark regulators were hesitant to grant approval for rooftop construction, fearing noise and dirt. Financing was also tough. "No bank wanted to be first to lend because this was so new," Håkan says.
The Olssons got a wealthy friend -- a Swedish rag-trade baron -- to put up much of the $400,000 they needed for the first unit. Then they moved construction to Sweden, where prefab architecture is more advanced, thanks to brutal winters that can make onsite work impractical. (Ikea sells a prefab house there.) To sweeten the deal for existing residents at their projects, the Olssons fund infrastructure improvements like new water tanks and elevators. They pacify regulators by using less noisy tools, such as silent diamond-core drills, and by laying sound-absorbing mats over roofs they work on.
A High-End Model
Sale price
(typical 2,000-sq.-ft. unit) $3,000,000
Prefab construction -$1,500,000
Air rights -$500,000
Finder's fee -$100,000
Project financing -$300,000
Prime contractor -$300,000
Gross profit $300,000
Source: First Penthouse
So far, the Olssons' penthouse projects have ranged in size from 300 to 4,000 square feet. A 2,000-square-foot penthouse typically costs a buyer between $1 million and $8 million, depending on the neighborhood and the slope of the roof. Of course, the same math might make sense in the United States. Håkan says he's already working with a developer to install a prefab penthouse in Manhattan's Tribeca district this fall. The plan is to ship a unit from Sweden, though Håkan hopes to eventually manufacture locally, maybe in the Bronx.
The Olssons, however, will probably never reside in one of their projects. Since leaving Stockholm, they have lived in rural Maidenhead, west of London. "We're keen horsemen," Håkan says. "We need to live in the country."
A More Profitable Harvest
By Bridget Finn, April 20, 2005
How do you make money by giving away free e-greeting cards? Easy: Sell flowers with them. That's what Jared Polis did in 1998 when he launched ProFlowers, an online flower business, alongside his popular website BlueMountainArts.com -- one of the 10 most visited sites during the late 1990s. Polis turned millions of free visitors into thousands of paying customers by offering his ready-made audience an easy (and cheap) way to send flowers with free e-cards. Since going public in December 2003 under the corporate name Provide Commerce (PRVD), ProFlowers has transformed itself into the third-largest flower retailer in the United States -- behind FTD and 1-800-Flowers.com. But size is only part of the story. The company is also incredibly efficient: With sales of $129 million in 2004 and net income of almost $20 million, ProFlowers enjoys a net margin of 15.2 percent -- more than twice those of its major competitors.
How does it do it? An ultralean distribution network moves flowers from growers' farms to consumers' front doors in less than half the time it takes traditional florists, at a fraction of the cost. Greater efficiency translates into better-quality flowers at lower prices -- and plenty of new opportunities. (The company has begun using the same model to sell meats, fruits, and other perishables through sister sites.) The world's fastest-growing retail florist, ProFlowers added 1 million new customers last year. Here's how the company grew a successful new business.
1 Plant the Seed
Looking for a way to piggyback a cash-generating business on top of his family's e-greeting card site, Polis realized that the $19 billion global flower industry was grossly inefficient. His solution? Develop a direct-sales network to ship flowers straight from growers to consumers. Polis hastily arranged a deal with a single rose supplier and set up a crude ordering system on Blue Mountain. As a test, he tried selling 500 dozen roses for Valentine's Day 1998 by posting a few banner ads on the site. The flowers quickly sold out, and the direct-sales distribution model worked flawlessly.
2 Prune the Middlemen
With the basic structure in place, the next step was to refine the distribution system. Retailers like 1-800-Flowers.com and FTD use local florists as the backbone of their distribution networks; flowers travel from the farm to a distributor and then to a wholesaler before finally reaching the flower shop. By the time they reach consumers, flowers can be eight to 12 days old. CEO Bill Strauss, a former operations executive at Intuit (INTU) who teamed with Polis to launch ProFlowers in 1998, developed a network-based system that transforms each domestic flower farm into a self-contained distribution facility. Growers handle everything from receiving real-time flower orders to adding personalized message cards.
3 Till the Landscape
Flowers grown outside the country arrive at a refrigerated distribution center run by ProFlowers in Miami, where employees monitor flower quality. From there, bouquets are shipped in refrigerated trucks to 12 regional distribution centers and then by FedEx (FDX) Ground or UPS (UPS) to customers -- a process that keeps shipping charges to a bare minimum. Thanks to such efficiencies, ProFlowers can charge 30 to 50 percent less for retail flowers than most of its competitors. Inexpensive roses have been one of ProFlowers's most effective sales tools; two dozen sell for as little as $30.
4 Conserve Resources
ProFlowers is obsessive about driving costs out of its operations. Outsourcing final delivery to FedEx and UPS is one shrewd technique; another is using a proprietary demand-management system that tracks sales in real time to all but eliminate spoiled inventory. Strategic partnerships with larger growers guarantee a reliable supply of flowers. With a staff of just 140 people, ProFlowers has achieved a whopping $920,000 in revenue per employee -- more than three times higher than 1-800-Flowers.com.
5 Smell the Success
ProFlowers customers receive e-mail messages informing them about the status of their orders during every step of the distribution process, and speedy delivery enables the company to guarantee that flowers will be delivered on time and last for a full week. Attention to service keeps customers coming back; last year more than 50 percent of revenue came from repeat clients.
How do you make money by giving away free e-greeting cards? Easy: Sell flowers with them. That's what Jared Polis did in 1998 when he launched ProFlowers, an online flower business, alongside his popular website BlueMountainArts.com -- one of the 10 most visited sites during the late 1990s. Polis turned millions of free visitors into thousands of paying customers by offering his ready-made audience an easy (and cheap) way to send flowers with free e-cards. Since going public in December 2003 under the corporate name Provide Commerce (PRVD), ProFlowers has transformed itself into the third-largest flower retailer in the United States -- behind FTD and 1-800-Flowers.com. But size is only part of the story. The company is also incredibly efficient: With sales of $129 million in 2004 and net income of almost $20 million, ProFlowers enjoys a net margin of 15.2 percent -- more than twice those of its major competitors.
How does it do it? An ultralean distribution network moves flowers from growers' farms to consumers' front doors in less than half the time it takes traditional florists, at a fraction of the cost. Greater efficiency translates into better-quality flowers at lower prices -- and plenty of new opportunities. (The company has begun using the same model to sell meats, fruits, and other perishables through sister sites.) The world's fastest-growing retail florist, ProFlowers added 1 million new customers last year. Here's how the company grew a successful new business.
1 Plant the Seed
Looking for a way to piggyback a cash-generating business on top of his family's e-greeting card site, Polis realized that the $19 billion global flower industry was grossly inefficient. His solution? Develop a direct-sales network to ship flowers straight from growers to consumers. Polis hastily arranged a deal with a single rose supplier and set up a crude ordering system on Blue Mountain. As a test, he tried selling 500 dozen roses for Valentine's Day 1998 by posting a few banner ads on the site. The flowers quickly sold out, and the direct-sales distribution model worked flawlessly.
2 Prune the Middlemen
With the basic structure in place, the next step was to refine the distribution system. Retailers like 1-800-Flowers.com and FTD use local florists as the backbone of their distribution networks; flowers travel from the farm to a distributor and then to a wholesaler before finally reaching the flower shop. By the time they reach consumers, flowers can be eight to 12 days old. CEO Bill Strauss, a former operations executive at Intuit (INTU) who teamed with Polis to launch ProFlowers in 1998, developed a network-based system that transforms each domestic flower farm into a self-contained distribution facility. Growers handle everything from receiving real-time flower orders to adding personalized message cards.
3 Till the Landscape
Flowers grown outside the country arrive at a refrigerated distribution center run by ProFlowers in Miami, where employees monitor flower quality. From there, bouquets are shipped in refrigerated trucks to 12 regional distribution centers and then by FedEx (FDX) Ground or UPS (UPS) to customers -- a process that keeps shipping charges to a bare minimum. Thanks to such efficiencies, ProFlowers can charge 30 to 50 percent less for retail flowers than most of its competitors. Inexpensive roses have been one of ProFlowers's most effective sales tools; two dozen sell for as little as $30.
4 Conserve Resources
ProFlowers is obsessive about driving costs out of its operations. Outsourcing final delivery to FedEx and UPS is one shrewd technique; another is using a proprietary demand-management system that tracks sales in real time to all but eliminate spoiled inventory. Strategic partnerships with larger growers guarantee a reliable supply of flowers. With a staff of just 140 people, ProFlowers has achieved a whopping $920,000 in revenue per employee -- more than three times higher than 1-800-Flowers.com.
5 Smell the Success
ProFlowers customers receive e-mail messages informing them about the status of their orders during every step of the distribution process, and speedy delivery enables the company to guarantee that flowers will be delivered on time and last for a full week. Attention to service keeps customers coming back; last year more than 50 percent of revenue came from repeat clients.
Top of the Heap
Thanks to cutting-edge logistics and e-commerce systems, Copart is sitting pretty in the salvage business.
Not long ago, Victor Viaden spotted a badly dented 1995 Ford (F) Probe on an online auction site -- and pounced. Viaden, who lives in Minsk, Belarus, and sells refurbished cars, won the wreck with a high bid of $150. He paid $3,100 to transport it to Belarus and fix it up, and sold the Probe locally for $4,500. "It's easy to get good cars now," he says.
Viaden bought the Ford from Copart, a Northern California company that is fast becoming the world's sultan of salvage. With $400 million in sales last year, Copart processes roughly 40 percent of all cars salvaged in the United States -- about twice as many as its closest competitor. On track to grow sales 13 percent in 2005, the public company has already boosted net profit 42 percent to $46 million during the first half of its current fiscal year, largely by bringing modern management to the junk business. "People are surprised when they see our headquarters," Copart president Jay Adair says of his company's sleek offices in Fairfield, Calif. "This isn't Sanford and Son."
True, but Fred and Lamont might recognize the business model. Copart acts as a broker, selling wrecks on behalf of insurance companies. Offering state-of-the-art order tracking, an online database with information on 225,000 cars, and 110 facilities in 42 states, Copart attracts big sellers. Vehicles sourced from State Farm alone accounted for nearly 12 percent of Copart's 2004 revenue, and Kemper Auto and Home Group now uses Copart exclusively to sell its salvaged vehicles.
Founded in 1982, Copart used to fax vehicle descriptions to 8,000 potential buyers. In 1997 the company made its foray onto the Web, putting inventory listings online. Today, Copart's 96-person IT department sends nearly 24,000 e-mail messages daily to buyers, and its software immediately notifies towing services when the company acquires a wreck.
In 2003, Copart replaced live junkyard auctions with Internet-based ones. In Copart's online auctions, unlike eBay's (EBAY), Adair's recorded voice provokes bidders with "Going once, going twice," which insurance execs say jacks up prices. In 2004, Copart's online auctions attracted 44,000 bidders -- 10 percent more than at the company's live auctions the previous year. Vehicles sell four times faster since the switch: A mangled Ferrari went for $576,000 in just eight minutes. Buyers save, too, because they never have to travel to a yard. "Copart cut significant cost from the process," says Craig Kennison, an investment analyst at Robert W. Baird & Co.
An unexpected benefit of online selling has been a booming international business. With the weak dollar and strong foreign demand for American cars, Copart now has customers in places as far away as Cambodia and the United Arab Emirates. Twenty-two percent of cars sold by Copart are shipped overseas, compared with less than 11 percent two years ago.
Of course, software might not be an enduring barrier to competitors' entry into salvage. But with Insurance Auto Auctions -- Copart's nearest rival -- planning to go private after poor results during much of the last four years, Copart is going, going, going. "We're in the infancy of this thing," Adair says. Given his success so far, that's not just trash talk.
By Andrew Tilin, April 20, 2005
Not long ago, Victor Viaden spotted a badly dented 1995 Ford (F) Probe on an online auction site -- and pounced. Viaden, who lives in Minsk, Belarus, and sells refurbished cars, won the wreck with a high bid of $150. He paid $3,100 to transport it to Belarus and fix it up, and sold the Probe locally for $4,500. "It's easy to get good cars now," he says.
Viaden bought the Ford from Copart, a Northern California company that is fast becoming the world's sultan of salvage. With $400 million in sales last year, Copart processes roughly 40 percent of all cars salvaged in the United States -- about twice as many as its closest competitor. On track to grow sales 13 percent in 2005, the public company has already boosted net profit 42 percent to $46 million during the first half of its current fiscal year, largely by bringing modern management to the junk business. "People are surprised when they see our headquarters," Copart president Jay Adair says of his company's sleek offices in Fairfield, Calif. "This isn't Sanford and Son."
True, but Fred and Lamont might recognize the business model. Copart acts as a broker, selling wrecks on behalf of insurance companies. Offering state-of-the-art order tracking, an online database with information on 225,000 cars, and 110 facilities in 42 states, Copart attracts big sellers. Vehicles sourced from State Farm alone accounted for nearly 12 percent of Copart's 2004 revenue, and Kemper Auto and Home Group now uses Copart exclusively to sell its salvaged vehicles.
Founded in 1982, Copart used to fax vehicle descriptions to 8,000 potential buyers. In 1997 the company made its foray onto the Web, putting inventory listings online. Today, Copart's 96-person IT department sends nearly 24,000 e-mail messages daily to buyers, and its software immediately notifies towing services when the company acquires a wreck.
In 2003, Copart replaced live junkyard auctions with Internet-based ones. In Copart's online auctions, unlike eBay's (EBAY), Adair's recorded voice provokes bidders with "Going once, going twice," which insurance execs say jacks up prices. In 2004, Copart's online auctions attracted 44,000 bidders -- 10 percent more than at the company's live auctions the previous year. Vehicles sell four times faster since the switch: A mangled Ferrari went for $576,000 in just eight minutes. Buyers save, too, because they never have to travel to a yard. "Copart cut significant cost from the process," says Craig Kennison, an investment analyst at Robert W. Baird & Co.
An unexpected benefit of online selling has been a booming international business. With the weak dollar and strong foreign demand for American cars, Copart now has customers in places as far away as Cambodia and the United Arab Emirates. Twenty-two percent of cars sold by Copart are shipped overseas, compared with less than 11 percent two years ago.
Of course, software might not be an enduring barrier to competitors' entry into salvage. But with Insurance Auto Auctions -- Copart's nearest rival -- planning to go private after poor results during much of the last four years, Copart is going, going, going. "We're in the infancy of this thing," Adair says. Given his success so far, that's not just trash talk.
By Andrew Tilin, April 20, 2005
Great Quotes of the Week
Success isn't everything, but it makes a man stand straight. -John Otway
If A is success in life, then A equals x plus y plus z. Work is x; y is play; and z is keeping your mouth shut. -Albert Einstein
Success isn't permanent, and failure isn't fatal. - Mike Ditka
Success is a lousy teacher. It seduces smart poeple into thinking they can't lose.
-Bill Gates
Success is how high you bounce when you hit bottom. -George S. Patton
If A is success in life, then A equals x plus y plus z. Work is x; y is play; and z is keeping your mouth shut. -Albert Einstein
Success isn't permanent, and failure isn't fatal. - Mike Ditka
Success is a lousy teacher. It seduces smart poeple into thinking they can't lose.
-Bill Gates
Success is how high you bounce when you hit bottom. -George S. Patton
Call Now - Robots Are Standing By
Technologies that'll get you out of voicemail hell.
By William Gurstelle
By William Gurstelle
Bipolar Innovation
Innovation is a tricky business. Consider a newfangled wireless communication gizmo like the Treo smartphone. How can PalmOne figure out whether it's worth making such a novel, specialized product? How can a prospective customer decide whether it's worth buying?
By Bruce Sterling
By Bruce Sterling
The Mad Genius from the Bottom of the Sea
Unlimited energy. Fast-growing fruit. Free air-conditioning. John Piña Craven says we can have it all by tapping the icy waters of the deep.
By Carl Hoffman
By Carl Hoffman
Why "Buy" Buttons Are Booming
In 2004, industry revenue hit $67 billion, according to ComScore Media Metrix, and sales are already up 27 percent this year.
By Elizabeth Esfahani, June 22, 2005
By Elizabeth Esfahani, June 22, 2005
The Mother of Stunt Marketers
A grilled-cheese Madonna, tattooed boxers, and Super Bowl streakers have made a name for GoldenPalace.
By Elizabeth Esfahani, June 15, 2005
By Elizabeth Esfahani, June 15, 2005
Helping Doctors Go Digital
Epocrates used viral marketing to connect with physicians -- and a shrewd business model to profit from advertisers who want to reach them.
By Erick Schonfeld, June 15, 2005
By Erick Schonfeld, June 15, 2005
A Star Is Reborn
Former dotcom sensation Akamai has shaken off 9/11 and reemerged as one of tech's hottest properties.
By Bridget Finn, June 15, 2005
By Bridget Finn, June 15, 2005
How to Ride the Fifth Wave
By Michael V. Copeland, Om Malik, June 15, 2005
Cheap computing, infinite bandwidth, and open standards are powering an epic technological transformation that will churn up huge new opportunities -- and perils for those who can't adapt.
Cheap computing, infinite bandwidth, and open standards are powering an epic technological transformation that will churn up huge new opportunities -- and perils for those who can't adapt.
A business plan with a magnetic personality
By Owen Thomas
Joe and Sandra Deeds, who had been slugging away for years selling Magnamagic paint, were perfectly situated to capitalize on the opportunity. Sales limped along at about $15,000 a year until the couple bought search ads on Google for the term "magnetic paint." A producer from ABC's Extreme Makeover: Home Edition found the site and featured the paint on the show. That, in turn, led to a licensing deal with Rust-Oleum
Joe and Sandra Deeds, who had been slugging away for years selling Magnamagic paint, were perfectly situated to capitalize on the opportunity. Sales limped along at about $15,000 a year until the couple bought search ads on Google for the term "magnetic paint." A producer from ABC's Extreme Makeover: Home Edition found the site and featured the paint on the show. That, in turn, led to a licensing deal with Rust-Oleum
Tuesday, June 28, 2005
The CEO's Secret Handbook
By Paul Kaihla, June 21, 2005
Imagine a lifetime's worth of executive wisdom, boiled down to a handy pocket-size guide. Corporate leaders swear by it -- but it's not for sale. Lucky for you, we've excerpted the best parts.
Imagine a lifetime's worth of executive wisdom, boiled down to a handy pocket-size guide. Corporate leaders swear by it -- but it's not for sale. Lucky for you, we've excerpted the best parts.
New Life for the Old UHF Band
By Om Malik, June 22, 2005
If you thought UHF had gone the way of eight tracks and Betamax, think again: The broadcast spectrum could be the future of television. This summer, cell-phone giant Nokia (NOK) and chipmaker Qualcomm (QCOM) are launching multimillion-dollar trials aimed at bringing TV to cell phones over UHF -- home to channels 14 through 83 in the rabbit-ears days before cable. (While cell phones currently transmit signals over ultrahigh frequency, they use a different slice of the spectrum than UHF TV.) UHF systems could deliver to your handset 10 to 100 channels of interactive television, everything from sports highlights to episodes of Oprah. "Phones will be the best interactive TV environment around," claims Jeff Lorbeck, senior vice president and general manager of Qualcomm's UHF-focused MediaFlo business unit.
If you thought UHF had gone the way of eight tracks and Betamax, think again: The broadcast spectrum could be the future of television. This summer, cell-phone giant Nokia (NOK) and chipmaker Qualcomm (QCOM) are launching multimillion-dollar trials aimed at bringing TV to cell phones over UHF -- home to channels 14 through 83 in the rabbit-ears days before cable. (While cell phones currently transmit signals over ultrahigh frequency, they use a different slice of the spectrum than UHF TV.) UHF systems could deliver to your handset 10 to 100 channels of interactive television, everything from sports highlights to episodes of Oprah. "Phones will be the best interactive TV environment around," claims Jeff Lorbeck, senior vice president and general manager of Qualcomm's UHF-focused MediaFlo business unit.
Must-Text TV
In Finland, viewers pay millions to make their SMS messages the stars of late-night shows.
- By Matthew Maier
- By Matthew Maier
Monday, June 27, 2005
Start Spreading the News
By John Heilemann, June 22, 2005
A little over two years ago, in March 2003, I wrote the very first Face Time -- a column that asked if Silicon Valley was turning into the new Detroit. In support of this suggestion, I cited a bunch of Valley venture capitalists spouting unusually dire assessments of the entrepreneurial condition. The collapse of the bubble, these VCs said, was more than a cyclical slump. It marked the start of a prolonged period in which innovation would be marginal and plodding -- and venture capital, like the Valley itself, would be "dead, kaput, over."
A little over two years ago, in March 2003, I wrote the very first Face Time -- a column that asked if Silicon Valley was turning into the new Detroit. In support of this suggestion, I cited a bunch of Valley venture capitalists spouting unusually dire assessments of the entrepreneurial condition. The collapse of the bubble, these VCs said, was more than a cyclical slump. It marked the start of a prolonged period in which innovation would be marginal and plodding -- and venture capital, like the Valley itself, would be "dead, kaput, over."
Dialing for Dollars
By Matthew Maier, June 15, 2005
A simple bowling simulation played on tiny LCD screens wouldn't normally generate excitement about a young software company. Yet by combining hypnotically simple games with a seasoned management team, Los Angeles-based Jamdat has taken an early lead in the race to create compelling -- and profitable -- content for cell phones.
A simple bowling simulation played on tiny LCD screens wouldn't normally generate excitement about a young software company. Yet by combining hypnotically simple games with a seasoned management team, Los Angeles-based Jamdat has taken an early lead in the race to create compelling -- and profitable -- content for cell phones.
