Loogic English

The race continues between Privalia and BuyVip. On this occasion, the competition is not in the growth of users or revenues, but in the amount of funding received. A little more than a month ago, we covered the news of the investment of 14.9 million euros in BuyVip by Kennet Partners and now we get the news of Privalia receiving 8 million euros from Insight Venture Partners and Highland Capital Partners.

Our take on it: Two American investment funds investing in a Spanish startup is a great news for us. This investment confirms the fact that the business of online outlets is perhaps the most promising internet business in Spain today.

Amongst the initial investors who betted for the project are Luis Martin Cabiedes who confirmed me that he has sold his sold his stake in the company, something that fits well with his investment philosophy: “I think that a business angel should know when to enter and exit”. Luis participated until the third round of funding which was also participated by Nauta Capital and fetched 4 million euros. Now we expect that with the returns from this exit, he will continue to invest in internet startups, something that he has done with a lot of success until now.

Seen in Expansion.

Revenues of Buyvip in 2008: 28 million Euros
Revenues of Privalia in 2008: 22 million Euros
Revenues of Vente Privee in 2008: 23 million Euros

Doesn´t it seem strange that the three main Online Outlets that operate in Spain have very similar revenues? Considering that Buyvip operates on an international level and the figure presented is from global revenues, it´s fair to think that the figure is actually lower and closer to Privalia and Ventee Privee.

How can it be that all three have such similar revenues?  and why don´t any of them publicize their profits? It seems that the race between the three “big ones” is to obtain the maximum users possible and the biggest sales figures. However, on the inside, what surely should be of concern are the profits. Unless their goal is to create more jobs than to earn money.

My impression is that the sales figures are so similar because these private online shopping clubs have similar users, in other words, one user most likely makes purchases on all three sites, including some others. Also, let´s keep an eye out for Vipventa that still hasn´t publicized their revenues, only number of users which isn´t too bad.

The other interesting point to consider is why there are such pronounced highs and lows in the traffic of these sites, as seen in the graph above?

At last month’s Iniciador in Madrid, Luis Martin Cabiedes said that you have to be prepared because you never know when a project is going to take off (he used the word ‘explode’). In Spain, we have some interesting cases of projects that have ‘exploded’, perhaps the most striking is Tuenti (who decline to comment on the financial aspect of their business). In this group we can also include Trovit, Privalia and BuyVip. Other projects that we follow with attention and ones I can dare to say are about to take off include Red Karaoke (with its WSA competition), Minube (which just received an investment from Caja Navarra), and here is where I would also include 11870.com

I think 11870.com is about to take off and this radical redesign that they have launched could be the detonant.

After the initial shock of seeing the new design on the front page of 11870.com, I spent some time browsing through rest of the site (very much liked the design of the results page) and mostly in thinking how this redesign might affect the future of the website. What I realized is that we are looking here at a redefinition of the message that is conveyed to the new user who has just arrived on the site, the base of all this is a directory of businesses and hence it doesn’t make sense disguising it as a social network. A user who arrives at the site from the search engines or in whatever way has to be able to access all the content on the site, which is only possible in two ways, with a search engine and a directory.

For me, 11870.com is the ideal site to attract traffic from the search engines and relevant geolocalized content. Add to this the fact that the content is generated by the users, and they are continually generating comments which results in the content being updated with a lot of frequency. The new front page of the site should serve precisely to tell Google that it’s going to find a lot of content for indexing. Hence the conversion from a design that highlighted things to one that serves as an access to all the information available on the site.

Allow me to conclude with another novelty that seems to be quite important: now in 11870.com, it is possible to reserve a table at restaurants (agreement with El Tenedor), reserve rooms in hotels (agreement reached with Booking.com) and reserve rural rentals (agreement with TopRural).

Also commented by Jesus Encinar and François Derbaix.

Seeing the success of the private shopping clubs in Europe, it is logical that the model goes to Latin America as well. For now, Geelbe is functioning in Argentina and thanks to the efforts of Gaston Bercun, has successfully completed its first round of funding.

The investment in Geelbe comes from the club of business angels of Inversor Global (IG) and as Gaston Bercun puts it, the money should serve for strengthening the team and start with the regional expansion of the company. We understand that this regional expansion will be to other Latin American countries where, as far as I know, there are no such online outlets of this kind.

Let me also take this opportunity to say that recently I had a talk with the founder of one of these online outlets that function in Spain and the impression I got was that with the existing competition, the optimization of resources is going to be key in these companies that are growing at a fast pace and have received important rounds of financing. What I still don’t see very clearly is if one of the companies that have received the most amount of investment will consider purchasing one of its competitor to consolidate its leadership position.

After the review of classifieds and flash game sites, I think it would be worth it to devote some time to look at the situation of the private shopping clubs or online outlets that are proliferating on the internet.

Now we can say that ecommerce is functioning well in Spain and I think that, to a great extent, it is because of the success of these kinds of sites that have become an obsession with a lot of people (waking up at 7 in the morning to enter a promotion of Privalia is something not very normal).

No surprise that this success is not only a phenomenon in Spain. In France, for example, there’s a real rage and they have Vente Privee as the best example of this business. This company has made a strong arrival in the Spanish market and already accounts for a few million clients all over Europe. On a European level, there’s another company, Private Outlet with versions for five countries.

So that’s the panorama of the Online Outlets in Spain and Latin America. I have found 10 projects of this kind, 9 developed in Spain and one in Argentina. Of the 10 projects, there are 3 (Privalia, BuyVip and Vipventa) that have received investment and compete directly with each other. There are two others that are beginning to stand out (DreiVip and Ofertix) and another 5 that are in their initial stages. Let’s take a further look at each one of them:

The leaders:

Privalia

Founders: Lucas Carné, José Manuel Villanueva and Bruno Coffre
Founded: 2006
Investors: Luis Martín, La Caixa and Nauta Capital
Funding: around 7 million euros
Access: does not require invitation
Headquarters: Barcelona (Spain)

Buyvip

Founder: Gustavo García
Founded: 2006
Investors: DAD, 3i, MCI, Michael Kleindl, Bertelsmann, Grupo Intercom
Funding: around 17.5 million euros
Access: invitation required
Headquarters: Madrid (Spain), Milan (Italy), Frankfurt (Germany)

Vipventa

Founder: David Ducos
Founded: 2006
Investors: Mobius
Funding: 2.75 million euros
Access: invitation required
Headquarters: Madrid (Spain)
Notes: the blog of Sonia

The aspirants:

Dreivip

Founder: Margarita Olivares
Founded: 2006
Investors: unknown
Funding: unknown
Headquarters: Badalona (Spain)

Ofertix

Founder: Antonio Alcantara
Founded: 2007
Investors: unknown
Funding: unknown
Headquarters: Barcelona (Spain)
Notes: Revelation Web Yahoo 2007

The recent arrivals: Geelbe (Argentina), Glamounity, Sinempujar, Compralia and Vipcompras

Do these newcomers have any possibilities to compete with the other five companies that enjoy a huge competitive advantage and with other companies that have already arrived from other parts of Europe?

As far as the competition between the three big ones (Privalia, Buyvip and Vipventa) with the figures of investments and business that they manage, the leadership is going to be closely related with the creation of a brand, with obtaining the best products at the best prices and with offering the best customer service possible.

An idea for these companies looking to increase their user base: can you imagine if one of these companies reaches an agreement with Tuenti to publish their campaigns of branded clothes in form of an event inside the preferred social network for young people?