BizOrigin

Leverage: Ending gift card clutter!

Do you have some gift cards from the holidays taking up space in your wallet? Wouldn’t it be nice to exchange those Gap cards for Nordstrom?

Leverage, an Irvine based start up affords its users an opportunity to purchase and track cards from hundreds of national retailers in one place. Unlike other gift card sites, Leverage’s business model is unique. Rather than paying extra for the privilege of purchasing a card, consumers collect interest on card balances on account. At a time when most cards go unredeemed and sites charge a premium to buy gift cards online, Leverage’s free approach is refreshing and makes a great deal of sense for gift card holders. Moreover, since cards are tracked electronically all in one spot, it helps in cases where a physical card is lost, gift card balances need to be checked, and it removes the need to hunt for all that plastic (especially when shopping online).

Once registered, unwanted gift cards can then be swapped with other users in the Leverage community. Members get full value in the exchange and Leverage does not charge a fee for the service – all of the other places you can swap or sell a card do charge fees.

The Leverage "virtual wallet" goes further in tracking loyalty programs such as frequent flier programs of major airlines, hotel stays, rental cars, etc. At a glance, a member can determine loyalty point totals from various programs rather than having to log on to each airline/hotel site separately, remember usernames and passwords, etc. How many of us can attest to losing frequent flier miles to expiration? Tracking loyalty points on Leverage provides full visibility and increases the chance that they will actually be redeemed for awards.

Additionally, Leverage offers consumers a way to receive specific, targeted offers and coupons. Leverage will anonymously combine the information gained from activity on the site with profile, gift card, and loyalty program information to “pull” offers to you from retailers and manufacturers. Such messages would only be delivered to members when they are in the mood for them rather than interrupting you with email (in other words, you see you pulled offers only when you log into your Leverage account). The Leverage user would essentially decide what messages they’d rather hear about; for example a 30% off in-store coupon at Borders, or a sale announcement at the exact online apparel store that they are holding a $50 gift card to in their Leverage wallet.

Additionally, with their Transparent-Targeting mechanism, Leverage provides members with the exact targeting rationales from the retailer for each offer that gets pulled. For instance, a communication from a retailer might be target you and let you know that "you received this offer because you’re a 25-40 year old female, holding at least $48 worth of our gift cards and you indicated an interest in fashion". This is all done anonymously and members would also be able to exercise full control by "dialing up or down the volume" to get more or less messaging from the retailer or the specific category.

This control and feedback, unprecedented in the industry, enables a member to anonymously ask for relevant information and for retailers to target their messages to a motivated consumer.

All in all, Leverage offers a unique approach to a sticky problem; that of purchasing and keeping track of gift cards and loyalty programs. It offers retailers targeting messaging and consumers with an ability to control what they want to see and hear about.

Contributed by Rabinder Sekhon, Sekhon Advisors

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Intrade: Fantasy markets making real money

According to the WSJ’s fantasy political market, today’s top pick for president is Barrack Obama (trading at the highest price), followed John McCain and Hillary Clinton. The most active trading is for Mike Huckabee (largest volume of shares traded).

Fantasy betting has risen considerably in popularity in recent times, with web sites devoted to picking winners in every sport from football to fly fishing. The built in social network of most sites allows users to participate in fantasy betting with friends and family.

 BetFair as the front runners in the prediction markets game. 

BetFair is aimed at the European market and charges commissions on winnings (there is no charge for a net loss). Betfair was founded in 1999 and claims to process 15 million trades a day.

Intrade powers WSJs fantasy political market. Trading on the prediction market is simple. For example, if you think the likelihood of Hillary Clinton becoming president is more than 17% (see table above for Ask price) you buy contracts. If you think the probability is less, you sell a contract. The site charges 5c per trade. Members buy and sell contracts against each other. Intrade charges 5c per matched trade.

The big question is - other than being quite entertaining, are fantasy markets able to predict the outcome of events in a reliable fashion? Given that the betting is probability based, one can infer that with a suitable, unbiased population size, the predictions should be at least as good as those of the experts - similar to the financial markets where the success of the expert predictions of, say, the level of the S&P index in the future, has been no higher than those of the lay person. In a market where the collective thought process actually influence the outcome, it is very likely that the aggregate forecasting ability of the masses will actually provide a more accurate representation of reality.

Earlier we looked at crowdcasting and polling as ways of harvesting collective wisdom. Predictive markets are like 4 dimensional polls in that they have a time component folded in. Like true financial markets, they reflect the quicksilver nature of changing sentiments.

By the way, is the US in recession in 2008? According to Intrade, 65% think so!

Do you spend time on the Fantasy betting or Predictive markets sites? Take our poll on the sidebar.

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Hot or Not Valuation - $20M is way too low and is very likely wrong

I am intrigued by the metrics and the factors related to the valuation of online enterprises (see here, here and here). Every time there is a new major acquisition, it gives us a new data point to calibrate the dynamics of the current market conditions and expectations.

Blogosphere is reporting that Hot or Not was acquired for $20M by a Canadian company, Avid Life Media. HotorNot is an online photo rating site that has a dating component to it.

HotorNot’s web strategy gives some insight in to the free vs. paid service models. HotorNot had a paid "premium services" model and they claimed that the conversion rate was very high (as much as 15%; typically it is 1 to 3% for similar sites). Then last April, in a very bold move, they changed their business model and decided to go the completely free route.

The site did see a huge jump in traffic; from 6M visitors per month to 10M visitors/month; the revenue from advertisements and virtual gifts increased, but not to the level that would make up for the lost receipts from the membership plans. Of course, a period of few months is not enough time to gauge the effect of a major transitions, but it was interesting to watch them go through the transformation.

With the free service, came spam; and I understand that they have gone back to the paid premium service model, mainly to protect the users from getting junk mail.

From the Alexa traffic graphs, it seems that they did experience a huge traffic boost but it was not a sustained one; the traffic is back to the pre-free-model levels.

There are reports that HotorNot was acquired for $20M but I hesitate to believe these figures.

Some of the available stats about the site are as follows: Annual Revenue(est.) $5M; profit (est.) $2M; the current visitor count has stabilized to around 5M visitors/month. They also have an established brand and a significant presence on Facebook.

Given these numbers, where would one peg the valuation of HotorNot?

As a comparison, Face book has about 100M monthly visitors (theoretically valued at $15B) and Plaxo has about 2M visitors/month, and was looking for a valuation in the range of $200M.

Another variable that goes in here is that HotorNot is a risqué dating site, and traffic on similar sites does not monetize well.

Even after taking this in to account, I find it hard to believe that HotorNot would receive a valuation of $20M, I think there are some multiples missing here.

If I were to throw out some numbers, I think the total package that HotorNot sold for, might be about $40M, may be $50M (but definitely not $100M).

Well, we will know in a couple of days.

You can add your estimate of the valuation in the poll (current poll is on the sidebar, see here for the results of past polls)

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Predictify the Presidential elections

Question: Who is going to win the Democratic primary nomination
Prediction: Barrack Obama

That is according to Predictify, an online site crowdcasting site that uses the wisdom of the masses to "predict" the outcome of events.

The Preditify process is simple. On the site, you can either predict the outcome of events, or pose a question along with multiple choices, and let the global crystal ball steer you towards the truth.

Posting is free if you want up to 200 responses (after which that poll is closed), or you can post a premium question for which you get charged $1 per response up to the maximum number responses that you want to generate. Premium questions ask for some personal information from users. The overall demographic information is available online and also shared with the poster of the question.

The following were the responses to the predictions for the Oscar for best picture.

Questions range from politics and current events to sports and pop culture.

So can the wisdom of the crowds be trusted? You be the judge

Question: What position will Hillary Clinton finish in the 2008 Iowa caucus?
Prediction: 1st
Actual: 3rd

Question: Who will capture the most delegates in the Republican primaries on super Tuesday?
Prediction: John McCain
Actual: John McCain

The first poll (at the top of this post) which places Barrack Obama as the popular choice for the democratic primary nomination might be suffering from population bias at this point (as they say, time will tell). Young, energetic democratic voters who spend a large part of their time on the web would be expected to support Barrack Obama in large numbers.

Which brings us to the next question; is there any real money to be made on the site? The answer is yes but it depends upon your definition of real. Part of the pot in premium questions is shared with the predictors. The amount depends on their accuracy, level of expertise and how quickly the users responded to the question (ie before the wisdom of the crowds became apparent).

The current top winners on Predictify are listed below. the #1 predictor’s payout is $154 or about $0.05 per question. There are respondents who have higher accuracies and are generating $0.50 per poll. Meanwhile, it would be safe to predict that the users of the site are hanging on to their day jobs!

Question: Would you trust the wisdom of the crowds to make business decisions?
Take our poll (current poll is on the side bar; see here for past polls).

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