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.)
And that audience, the company writes in its S-1 filing, is comprised of
68 million consumers with $302 billion in disposable income. Nice niche.
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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