CEO Cheryl Yeoh’s vision for CityPockets was being corrupted just months after the company launched. Originally conceived as a wallet for the growing number of daily deals sites, she changed course when an early investor convinced her that the “sure path” to success was to give merchants a way to get back in touch with customers who had already bought earlier deals.
“One of my naïve mistakes as an entrepreneur, [was] following too much of what investors wanted us to do,” said Yeoh, who had been crashing on a friend’s sofa and living on a $35 weekly food budget. “I was like ‘If I’m gonna suffer for this, I better suffer on my vision, my terms.’”
Those terms didn’t include contacting individual merchants, who were already being “bombarded” with offers from daily deal companies, and convincing them to sign up for a remarketing tool. They also didn’t constitute giving up the “entrepreneurial dream” to accept a buyout offer in December 2010 from Living Social for less than $1 million, an amount she saw as “not enough.”
So she went back to the original idea. CityPockets refocused on creating a website that would upload and organize people’s coupons from the growing number of daily deals websites–Groupon, Gilt City, Travel Zoo–and warn them when they were about to expire. And it expanded its services, launching a secondary market place so people could sell coupons they no longer planned to use. It also added apps for the iPhone and Android that would let consumers find instant deals on the go.
But that didn’t work either. At its peak it had only 50,000 users, about half the number she had projected. The problem, Yeoh discovered, was that the model didn’t lend itself to viral growth: No one wanted to brag to their friends about how many coupons they were buying, lest they appear addicted, or, presumably, advertise the fact that they had just saved 90% on yet another laser hair removal purchase. Plus investors love affair with the daily deals companies on which CityPockets depended was ending. Groupon’s stock price plunged by more than a quarter within a month of its November 4 close, according to data from Yahoo Finance. And earlier that month, Gilt City bought BuyWithMe, which acquired six smaller daily deal companies earlier in 2011, in what was widely viewed as a fire sale.
Not even all her employees thought the company was viable. Some became “very negative” about its prospects, posing a new threat to the company vision. She fired them. “You just don’t vocally criticize your product,” she said.
But she also knew that it was time to try something else. So, she thought, rather than ditch her dream, why not extend the daily deal website to more traditional forms of discounts?
The market was there. The number of coupons redeemed between 2006 and 2011 had grown 35% to 3.5 billion, and about 4% of those were Internet coupons printed at home, according to collaborative commerce network operator Inmar. Websites like Couponmom, Slickdeals and CouponCabin were popping up. And in at least one case, investors took note, pouring $200 million into Coupons.com in June 2011.
But most coupon sites, Yeoh said, are too cluttered, and they don’t let users easily follow the deals their friends were finding. Hers, modeled after Pinterest, would provide a visually appealing way for deal mavens to share deals with their followers. And because the site was built specifically for coupon sharing, users don’t risk irritating their friends as they do when they post on networks used for social and professional updates, like Facebook and Twitter.
So, last March, Yeoh hedged her bets, continuing to run CityPockets as a daily deals wallet, but launching a private beta version of Reclip.It to select “mommy bloggers.” By June, she decided to go all in, shutting down CityPockets entirely.
It wasn’t an easy move. “CityPockets was my baby,” said Yeoh, who held out hope the idea would work longer than the rest of her team. But, she said, “I realized at some point that we were building on top of a business model that wasn’t stable yet.”
The site is now filled with sundry bargains, posted mostly by coupon bloggers and other deal sites. Among the almost 50 found on a recent Tuesday afternoon in the grocery’s and household products section, Money Saving Mom clipped a free sample of Finish Quantum dishwashing tablets. Tech buffs could find more than 100 deals, including $15 off purchases of at least $150 at electronic store J&R and $7 Vibe Sound DJ 750 noise reducing stereo headphones. And outdoor enthusiasts could buy a Wenzel North Woods 4-Person Tent for $30.
The site isn’t yet completely seamless. Many of the free deals quickly sell out, leaving users to find out that they can’t get a product after they click on a link. (Yeoh said she’s working on way to improve this). With others, users learn they don’t qualify for deals only after navigating through multiple screens (curse you Brown Cow yogurt! I want my free cup even if I haven’t eaten you before), and others may carry too high a price for many consumers (it’s gonna take more than a free sample of Lifestyles Ultra Sensitive condoms to get me to repost a prophylactic ad with a note about “what [I] love about [my] sensitive man” on Facebook).
Still, the business is showing early signs of success. Within a month and a half of its March private launch, it had 10,000 users, Yeoh said. And it’s growing at about 30% month over month. It raised $750,000 from Great Oaks Venture Capital and another $70,000 from accelerator 500 Startups. And while it has some revenue, it’s perfecting the user experience before focusing on bringing in money. But they’re not far off. “Probably in the Fall sometime” they will offer national retailers ways to advertise to customers who use the site. “Pretty big brand names,” have shown interest, she said, though she declined to name them since no deal had been struck.
Keeping true to her initial plan was critical to the company’s future. “The vision is very similar but we’re attacking a larger space way more potential,” Yeoh said. “I’m way more confident that this will get us somewhere further along.”