Building a startup involves competitive analysis. Understanding the models in your space is requisite for success, and I’m a huge believer in doing your homework. I hope that this analysis will always be helpful to anyone else who is also doing their homework on the Local Discovery space.
There are 3 things an analyst must take into account when evaluating local discovery platforms like Fever:
1.) Retention: driven by platform content, perks and gamification.
2.) New market growth: ability to efficiently launch new markets.
3.) Revenue model: usually ticketing, advertising or deals.
Retention: Fever is taking a segmented approach to content. They’ve targeted hipster events and experiences and they’ve been monetizing the supply-side of their marketplace from day 1. Based on what I’d seen from Yplan and Sosh, I thought that this approach was dangerous. When each piece of content requires a sales cycle, your platform suffers from limited supply (only a few things to do at a time), which in turn leads to limited use-case frequency (if I can’t find something I want to do, I leave). Yplan pivoted their supply side strategy to get away from this problem, and they recently downsized—so I’m not sure whether the strategy worked. Sosh was recently acquihired.
Somehow, though, it seems like Fever is avoiding these problems and their growth hasn’t shown signs of slowing. I’m not sure if that’s because they included a social networking feature inside the app to drive repeat usage, because they do giveaways and contests, or if there’s something inherently better about their content that escapes me. Either way, their retention seems stronger than both Yplan and Sosh.
My hunch is that they’re doing much better in Spain than they are in NYC and London (more on that below). Less competition in Spain could be leading to stronger loyalty.
New Market Growth: they seem to have cracked this pretty well. It’s hard to estimate the cost structure of their rollouts, but it looks like they use PR, street teams/ambassadors and coupons to drive adoption on the consumer side. There’s probably advertising in the mix as well. The tactics are either durable or they are translating to in-market virality, because Fever’s growth doesn’t seem to be slowing.
Revenue: Fever’s supply-side content is monetized immediately, so they require a sales team to go into a market prior to launch and convince merchants to list their inventory. They use influencers in the city to help with content curation, and I think this process leads to strong content offerings. They’ve talked about building venue tools as well, so I’m sure they’re looking to drive efficiency though a self-service model in the long term. Their press releases mention a much higher take rate (15%-25%) than Yplan or Sosh, which leads to a stronger cost structure but inherently limits supply to vendors willing to put up with a high take-rate. We’ve validated the ability to drive similar margins here at Offline, so it seems like there’s a good opportunity there.
Before we began monetizing, I did an model analysis of a few of our competitors to gut-check the unit economics. Here’s the one I did for Fever. I pulled my numbers from their NYC market data back in September ‘15. According to their PR, their revenue is a bit higher than I estimated in my “bottom up” analysis in the model. That’s why I believe Spain must be outperforming other markets significantly.
Fever has raised 20+ million and their last round post-money valuation was likely 50+ million. Their success seems to lie in their unique curation model (using a combination of influencers and sales) and their ability to drive higher take rates than competitors.