Almost without thinking, Net stock investors immediately chunk Net stocks into two separate piles today – either business-to-consumer (b-to-c) or business-to-business (b-to-b). In fact, judging by the continued collapse in valuations among e-tailers, one could even get the initial impression that b-to-c e-tail has become almost a dirty word. At the very least, it is an acronym that venture capitalists and investment bankers no longer salivate over.
However, at first glance, that’s exactly what online print Web site iPrint.com appears to be – a great b-to-c site for consumers and small businesses. Ordering personalized stationary and business cards online are only a few simple mouse clicks away at iPrint’s site. While this is all great for customers, the b-to-c e-tailer slant certainly hasn’t helped boost the company’s valuation. iPrint.com is now down 55% from its IPO price of $10 a share back in March of this year.
That’s why iPrint.com CEO and chairman Royal Farros is hoping there’s enough room in the online universe for a third pile. He calls it “b-to-little b.” After all, the primary iPrint client is indeed a small business owner. In short, iPrint is hoping to become the dominant online infrastructure provider for commercial printers around the country. We recently sat down with Farros to discuss the intense competition swirling around the online printing arena and iPrint’s important role inside this eye of the hurricane.
ISR: Why don’t you start out by describing to us your core business?
Farros: iPrint is a leading online print shop. We allow people to create, proof and order all popularly printed items. Things like business cards, letterhead, envelopes, invitations, announcements and business checks. We even do things like photo mouse pads, photo t-shirts and putting your logo on a coffee cup typ. stuff.
ISR: But you’re not actually the printer for all of these examples; you’re more of the middleman helping facilitate these transactions and serve as the customer interface, right?
Farros: Exactly. The Internet is really the first electronic print broker or Internet print broker. We really love this role because we bring technology to the equation. The commercial printing industry is absolutely enormous. It’s highly fragmented. There are about 50,000 commercial and quick printers out there. There’s some really excellent ones. So what we get to do is tap into all the really great experience and talent out there without having to have that type of operating costs. So we love the position we’re in playing as an intermediary.
ISR: Long term, how much of challenge will it be to continue to convince all of these printers that you are adding so much value that it’s not in their best interest to establish their own retail Web operations?
Farros: First of all, we don’t have to convince them of it. This is something that has sort of plagued the printing world for a long time. So when we walk in and say – “we’re going to take away a lot of your pre-press”- they are the very first people in the world that say – “that’s really great.” It’s like talking to people in a building living on the tenth floor and then you coming in saying ” hey, we’d like to put an elevator in here.”
ISR: You definitely wouldn”t get an argument from me on that one.
Farros: Yes. The easiest people to convince in that case would be the people that would have to walk up the ten stories. From a printer’s point of view, they really like what we’re doing. Also, most of these people are not reaching out and grabbing customers. They’re basically letting customers come to them. So when we talk to these printers, we become either their fastest growing customer or largest customer. So the other thing they love about working with us is that we send them lots of orders.
ISR: If iPrint is becoming such an integral part of life for many pr
inters, I almost wonder if it makes sense for iPrint to become an actual wholly owned component of one of the large commercial print shops?
Farros: The way we like to describe it is – we’re doing what Visa does. There’s not a single printer out there that would want to spend the tens of millions of dollars that weve spent pulling together all the talent and many years creating this infrastructure. We’re very much like Visa. One single bank couldn’t create the Visa system. So instead, Visa said to the majority of the banks in the world – “we’re going to create one infrastructure and it’s going to be called the credit card system. Then you folks can tap into it.”
ISR: Okay. So the simple analogy for iPrint is that youre trying to become the “Visa of printing.”
Farros: That’s exactly why we’re very bullish on our barriers to entry. We’ve created a system that’s not just one piece of software. For someone to re-create what we’ve done, would take years to do. The more people that tap into it, the more everyone enjoy the economies of scale.
ISR: Okay, fair enough, but what about the way Kinko’s is approaching this market? Kinko’s merged Kinkos.com with an online startup called LivePrint.com back in early March and raised $40m in venture capital for the new company.
Farros: We know the Kinko’s folks well. They made the decision that they wanted to own technology and were not in the selling of technology business. We’re in the licensing and almost an ASP or ISP model. So for better or for worse, if their goal is to own technology, then they had to do it by going down a different route.
ISR: In fact, up until January they utilized a licensed private label version of your system, right?
Farros: Yes. Even though we may not be working with them today, we really love the fact that they’re doing something aggressive. Remember, Kinko’s is only a percent or so of the overall market. So even though Kinko’s has a wonderful brand name, they’re still only a small part of the market. We look at it as a win all the way around.
