“Zazzle”

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DISCUSSION QUESTION 1 So what do you think? Do you think Kleiner Perkins and Sherpalo Ventures made a wise decision investing $16 million in Zazzle? Three years from now, do you think that Zazzle will have disappointed or dazzled its investors? Why? Answer: . The VCs apparently think that Zazzle’s business model is scaleable, meaning that sales will quickly grow, and that as more sales are spread out over the same technological infrastructure, profits will rise. They may also feel that Zazzle is a platform for the sale of customized on-demand products, and that t-shirts, stamps, and posters are only the start. On the con side, its hard to image that Zazzle will create as much interest as the VCs project. With all due respect to John Doerr, he is the VC who said that Seg way would be the fastest company in American history to reach $1 billion in sales (see the “What Went Wrong” feature in Chapter 1). Segway has never gained traction, and may not survive. In addition, although Zazzle says that it has proprietary technology, it’s hard to believe that what they’re doing can’t be fairly easily copied. Look at the Web site of Café Press, one of Zazzle’s main competitors. It’s hard to see what Zazzle can do that Café Press can’t match. It also seems like Zazzle’s cut of the revenues generated by the freelance artists that post material on its site is very generous. An artist gets only a 10 percent royalty (17 percent if the sale is made through a referral). That means that Zazzle keeps 83 to 90 percent of the sale. By comparison, although eBay’s fee schedule is complex, in general, it charges $.25 to $80 per listing and two to eight percent of the final price. That means that compared to eBay, Zazzle keeps approximately 90 percent of the profits of the sellers that list items on its site, while eBay returns more than 90 percent of the profits. It makes one wonder how

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