|
Babytree.com Branches Out
 Beijing-based Babytree.com is a social networking site for young parents in China. With co-founders Allen Wang, the former Asia Pacific marketing director for Google (Nasdaq:GOOG) China, and Bo Shao, Eachnet founder and founding managing partner at Matrix Partners, Babytree.com has supplemented ad revenues by entering the e-commerce business, with a focus on customized goods. The company opened an early education business in January 2008 only to close it six months later and recently started a database marketing JV with Redbaby. Last March, Babytree.com completed its second round of funding, $10 million from Matrix Partners, and intends to use part of the funds on M&A. We recently sat down with Allen Wang to find out more about the company's development and how its user-generated content compares to parental sites here and abroad.
What's different about Babytree.com as compared to parental education sites overseas?
Allen Wang: Babytree.com attracts large numbers of users by housing an online community, while American parental education websites attract users with detailed and well-organized information. Ninety percent of our content is user-generated, while at least one-fourth of our user requests are for expert knowledge. So it's urgent that we make our information more professional, well-organized and easy to find.
Our Q&A platform went online over a year ago and ranks tenth in terms of the quantity of questions and answers. Everyday we have 800 questions raised and each one will get six to eight answers. We will finish a four-month redesign of the platform in two weeks.
Who are your domestic competitors?
Our oldest competitor is Yaolan, a Beijing-based infant-care information and e-commerce site started in 1998. Yaolan mainly provides information, while Babytree.com targets 70s and 80s generation parents who are eager to communicate and share. Yaolan’s management team is also third or fourth generation, while ours is still at the entrepreneurial stage. We have three to four times the traffic of Yaolan. Some other competitors are Iyaya.com in Shanghai, ci123.com in Nanjing and Liba.com [a Shanghai-based wedding and home decoration-focused e-commerce site] to some extent too.
How many users do you have so far, and how do you intend to attract new users?
We host nearly 1 million unique IP addresses per day and have almost 2 million registered users. Almost half of our registered users visit our site every two weeks.
We rely on word-of-mouth to attract new users. Our year-on-year growth is 700-800%, monthly is 30-50%. I hope we can pare it down to healthier daily and monthly growth of 10-20%. Fast growth can create problems if new users don't know each other and can't find things to talk about. We put small games on our site so that new users have something to do.
In terms of the kinds of new users we are looking for, I hope we can lower the entry level and focus on tailoring our services to local users. A website that does a great gob nationwide does not necessarily do a good job in every city. This is also the case in the manufacturing industry. Pampers are doing better in southern China than in northern China since P&G (NYSE:PG) is headquartered in Guangzhou.
As part of our effort to build a large local user base, we have established a Shanghai subsidiary, which is our first and maybe only subsidiary for a while. We chose Shanghai because it houses a large number of mothers, a large portion of people that match the western tone of our site and a lot of ad clients. Based on these criteria, Gangzhou is another option for expansion, but, since it already has a predominant local site similar to Babytree, we still haven't decided whether to move out there.
Is Babytree.com mainly popular in Beijing?
Beijing users only account for 12% of all of our users. Our market share is much smaller in Shanghai than in Beijing, so we have room for improvement. The good news is that while people regard Babytree.com as a mid- or high-end site, many of our users are actually from second- or third-tier cities.
How are you monetizing your site?
In the next year or two, we are going to do two things. First, we will continue to sell ads which will allow Babytree.com to become profitable roughly in the third quarter. Babytree.com is a nationwide website, so most of our clients are nationwide brands. Second, we plan to launch an e-commerce service within the next month which will generate revenue in the mid- to long-term. When Babytree.com matures, I estimate ads will generate 60% of our total revenue, with 60% of our ads being activity-based. The rest of our revenue will come from e-commerce and customized products.
I hope general e-commerce [as opposed to the sale of customized products] won't surpass 20% of revenue. If it grows further, we will start developing products with really small profit margin. Customization itself is very profitable. For example, we can earn a lot from photo albums. Currently, Babytree.com has a large storage of nearly 50 million photos.
Can you talk more about 'activity based' ads?
Our ads are interactive, as opposed to simple click through ads on portals like Sina (Nasdaq:SINA). Click rates for Sina's ads are declining every year, and most are below one in a thousand or even one in ten thousand because they are not very attractive. A recent ad we had for domestic milk powder brand Feihe was a jigsaw puzzle. Interactive ads require more creativity, organization and management, so we consider it a challenge to make the process efficient and productive.
You said last November that Babytree.com would enter the e-commerce field through acquisitions. Is that still the case?
We said we would take advantage of the economic downturn by making some acquisitions, but we didn’t say the goal behind doing so was e-commerce. In Internet-related industries, it’s almost impossible to acquire the targets’ brand and traffic, so the essential question behind an acquisition is whether the potential target has technological value for our company.
Recently, Babytree.com and the entrepreneurial team of Redbaby [a Beijing-based catalogue and online baby goods retailer] established a joint venture that does database marketing. We provide the database and Redbaby does the marketing since they’re experts at direct and telephone marketing. In terms of e-commerce, Redbaby’s experience will be valuable when it comes to large-scale inventory, delivery and supplier selection. We don’t plan to follow their capital-intensive operating model though, which requires an extensive inventory network.
Have you ever considered other offline businesses like the early education market?
We opened an early education center in Beijing on January 27, 2008, broke even in March and closed the center in June. The cost of building the user base was simply too high. We think the fact that several early education companies cannot break even for two and a half years is due to the high cost of building clients. Plus, since Babytree.com was only one year old, we felt it wasn’t the right time to divert our attention. Also, I’ve come to believe that quality interaction between parents and children is the best early education there is. So if Babytree.com ever enters the field again, I think we will focus on early education at home rather than in the classroom.
|
