Sunday, April 01, 2001

The New Economy


PlanetFeedback.com optimistic despite cuts

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        To whom it may concern:

        We're writing to complain about the Internet. A year ago, we raised a lot of money, started a dot-com business and threw a couple of parties. We told anyone who'd listen how the Internet would change life. Spike Lee filmed us.

        But things haven't worked out like we planned. Last spring, the market crashed, and it'll be a long time before we can raise more money, if ever. The economy is sinking, and we've had to lay off people. We have cash to last a while, and we need sales. We hope you are willing to address our concerns.

        If only there was some place to send that letter.

        PlanetFeedback.com of Over-the-Rhine helped a woman in Fairfield, N.J., who found hair in her pizza complain to Pizza Hut and another in Meadville, Pa., complain to McDonald's about a tepid, raw hamburger.

        Complaining won't fix the economy or restore investors' confidence in Internet companies, so the people at the 15-month-old startup are doing what one of their investors calls “heavy lifting.”

        Two weeks ago, eight of about 50 employees were laid off, to provide cash that will support efforts to sign clients. Chief executive officer Pete Blackshaw is constantly on the road, drumming up business and evangelizing what companies can learn from consumers.

        For all the bad news — the layoffs, the market crash, the grueling work of signing clients — the good news for PlanetFeedback is that it outlasted its competition and today has enough cash to last 18 months.

        “We've clearly emerged as the elite player in the feedback space,” said Mike Nazzaro, PlanetFeedback's chief operating officer and co-founder of the company.

        “Our challenge, obviously, is to make sure there is a feedback space.”

        PlanetFeedback has won a few converts to its belief that consumers will use the Internet to tell companies what they think, and that corporations will pay to listen.

        The Web site has 230,000 registered users, who've sent more than 300,000 letters of compliment and complaint over the past year. That's about a third of the goal of 1 million letters, but enough to build on.

        In March, the company began selling BrandPulse, a service that pulls together letters about a company or an entire industry, turning them into reports that give a picture of consumers' opinions.

        At PlanetFeedback, 39 percent of the suggestions sent to McDonald's asked that the company put a veggie burger on the menu. When fast-food customers make comments about service generally, 78 percent of the letters are complaints, ranging from a high of 87 percent at Steak 'n Shake to a low of 51 percent at Starbucks.

        The data can be sliced and diced any way companies want. What are women saying? What do teens like? What are people saying about a new product? And what are they telling their friends?

        “What they have is a consumer who's highly influential, and whose emotion has been raised to a point where a reply is absolutely required,” said Nancy Bachrach, chief marketing officer at the ad agency Grey Worldwide in New York. “One of those is worth a thousand focus groups.”

        Grey is working through the elements of a deal to subscribe to PlanetFeedback's service, Ms. Bachrach said. The agency will use the service not only to track what consumers say about clients' brands, but also to learn about clients the agency is pitching.

10 core clients

        PlanetFeedback needs dozens of Greys. The company has 10 clients — half for BrandPulse and half for companies, including the Chicago Tribune's Web site, that use PlanetFeedback's letter-writing utilities on their sites. Another 10-20 potential clients are close to signing, and upward of 50 more have been approached, Mr. Nazzaro said.

        The company emerged early last year to become the poster child of Cincinnati's New Economy movement — a pure Internet business that raised $31 million in venture capital, hired more than 40 eager people and moved into a freshly remodeled loft in Over-the-Rhine. The plan was to spend most of that money on advertising to pull in consumers, raise more money to build BrandPulse, then take the company public.

        The ripples have drifted far from that first splash. The crash of Internet companies on the stock market has erased any hope of a lucrative public stock offering soon. Two weeks ago the company laid off eight employees to focus its cash and resources on signing customers.

        Early last year, Mr. Blackshaw was everywhere, talking to City Council, chambers of commerce and anyone who'd listen about the promise of the Internet and Cincinnati's potential in the New Economy. He's much less visible today on Main Street, spending more time on the road to pitch clients and build the business. He was not available for an interview.

        “When we started, speed was more important than getting it all right,” Mr. Nazzaro said. “The thinking was: Go big or go home. ... I was always worried another PlanetFeedback-type company was going to get funded in a big way and steal the market from us.”

        Competitors folded after the market crashed and venture funding dried up. “When the competitive threat went down, we really scaled back the rate of spending, and intentionally went on a slower schedule,” he said.

        The early youthful enthusiasm of the company's managers has taken on a mature seriousness. They still believe in PlanetFeedback's future as a business, but Mr. Nazzaro said he can't guarantee the company will be profitable a year from now.

        “To the extent that online feedback is continuing to grow, I think PlanetFeedback is emerging as a place to go,” Mr. Nazzaro said.

Reality check
        Board member Jack Wyant of Blue Chip Venture Co., which invested in PlanetFeedback, said the Internet's reality check changed the focus for Mr. Blackshaw and his team.

        “The excitement of going on a voyage through uncharted waters is greater at the beginning than in the middle,” he said. “A year ago, they exuded a missionary zeal for a brand-new idea. A year later, their zeal has been influenced by how difficult it is to launch a new idea. It's hard work.”

        The board of directors, he said, has been part of that influence. “I think the board has urged the company to go from evangelical startup to a real business with enduring qualities — it makes money, it has customers.”

        That means sustaining traffic on the Web site and getting consumers to return — “traction,” Mr. Nazzaro calls it. It also means working hard to sign customers, and stretching the company's cash.

        “Having a high cash balance gives us flexibility and gives us options,” he said. “Corporate customers can be a little bit leery about doing business with an Internet company because they see so many of them going away. If we can point to traction and point to these solid cash reserves, it's helpful to us.”

        PlanetFeedback has expected airlines and hotels to be a big target for consumers using the site, and last summer the company was aiming a big share of its advertising spending at airports and travel magazines.

        Travel is big, but bigger still are restaurants and retailers. The companies that get the most letters are Wal-Mart, McDonald's, Taco Bell, Amazon.com and Target. And consumers aren't just complaining. About half the letters are compliments, questions and suggestions.

Ad budget slashed

        Maintaining that level of traffic is vital, but to conserve cash, PlanetFeedback has stopped buying TV and magazine ads. Mr. Nazzaro said that for the foreseeable future the company will try to build traffic with low-cost and no-cost Internet marketing.

        It's trying to build traffic by offering free use of its letter-writing utilities to newspaper and TV Web sites. The company's affiliates program pays Web sites about $1 every time a user clicks a link to PlanetFeedback and writes a letter. Search the word “complaint” at Goto.com, and PlanetFeedback shows up high in the results.

        “The true test is: Do we have enough traffic to go sell the product to companies? And the answer to that is yes,” Mr. Nazzaro said.

        Grey's Ms. Bachrach compares PlanetFeedback's service to a big focus group. Put eight consumers in a room, and one will usually speak longer and more thoughtfully than the rest.

        PlanetFeedback “is talking to the consumer who ends up dominating the discussion,” she said. “It's considerably more efficient to sit at your desk and tap into their knowledge, than to have eight highly paid people travel out of town for three days to be shut in a room with 20 consumers, only three of whom are interesting.

        “I think on that basis it really is a brilliant investment.”

        “PlanetFeedback will be the last one standing,” said Blue Chip's Mr. Wyant. “There is some empirical evidence” — namely, the 10 customers - “that what they do is desired by consumers and paid for by business.”

        An initial public offer for PlanetFeedback, however, doesn't appear likely. He said he sees the company getting bigger, probably by buying another company, and then possibly being acquired itself at some point.

        But first, “it's imperative to become profitable. Then our options become varied.”

        E-mail John Byczkowski at johnb@enquirer.com or call 768-8377. Find a list of local New Economy companies at Enquirer.com/neweconomy/.



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