From Gen Y to Gen I
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For Internet content companies targeting a market niche, there are two basic success strategies: 1) Identify a niche and then dominate it, and 2) Create your own niche, or at least make it look like you did.
Snowball.com, which filed late last month to go public, is opting for Plan B. The company's Web site targets teens and young adults with a mixture of original content, Web page hosting and cool stuff to buy.
If that sounds an awful lot like a Gen Y strategy -- well, it is. But Snowball.com's twist is to re-identify its 12- to 29-year-old audience as the Internet generation, or Gen "I".
(It's always strikes me as ironic when marketers targeting a demographic extol the group's resolute resistance to "assumptions about its tastes, hopes and habits," as Snowball.com does on its Web site, and then bombard the audience with ads based on those same demographic assumptions.)
While Gen I is a clever bit of branding (the company even trademarked it), the fact remains that Snowball.com competes directly against Gen Y players such as iTurf (TURF), Alloy Online (ALOY)and fashionmall.com (FASH). No heavyweights there, granted, but Snowball.com, which went live last February, still had some catching up to do.
In terms of building traffic, the company has done well. Its network of sites - including ChickClick (a group of sites for young females), gaming site IGN.com (Snowball.com's top destination) and InsideGuide, a source of information about colleges - now has 2 million subscribers.
In November, Snowball.com was ranked the 43rd most-visited site, with 4.4 million unique visitors. But the company has come under fire for its method of counting traffic to its more than 120 affiliate sites - which it doesn't own - as a Snowball.com visitor.
The argument over site traffic is academic, because the bottom line is generating revenue, and that's where Snowball.com lags. The company reported $3.2 million in revenue for the nine months ended Sept. 30. Alloy Online, in contrast, had $15.5 million in revenue in the most recent three quarters, while iTurf recorded $10.9 million.
Against this relatively modest revenue, Snowball.com faces an accumulated deficit through Sept. 30 of $23.4 million.
Snowball.com hopes to raise $83 million in the offering, which is being underwritten by Goldman Sachs, Hambrecht & Quist and Robertson Stephens. The proposed ticker symbol is SNBL.
Neither Alloy Online nor iTurf's stocks have performed well since the companies went public last spring. ALOY as of Tuesday afternoon was trading just below its $15 offer price, while TURF was at 12 7/16, a disastrous 78 percent below its first-day closing price.
Given that Snowball.com is targeting the same audience and has far less revenue, it will be hard for the company and its underwriters to muster strong investor support for this IPO.
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