First it was Apogee Search in "The Journal" and now Austin-based Bazaarvoice is featured on page B3. The article reads like a case study about how customer reviews can increase conversion rates for web retailers, the largest of which are Bazaarvoice customers. The product reviews space is really starting to heat up with Bazaarvoice and another company named Power Reviews leading the charge.
In a strange case of serendipity, Power Reviews announced $15M in a second round from Lehman Bros, Menlo Ventures, and Draper Richards the same day that Bazaarvoice announced their second round. It’s certainly nice to see investment in this space, but by many measures Bazaarvoice has the leg up on the market.
Financial Performance
Bazaarvoice had raised $4M and was able to turn the corner on profitability. They raised $8.8M more in order to invest in new products and grow the company faster. Power Reviews raised $7.5M in their first round and couldn’t achieve profitability, and now have raised $15M more with no forecast for profitability.
Customer Base
Bazaarvoice has secured some of the largest retailers on the web, including Home Depot, Petco, HP, CompUSA, Toshiba, and Dell. PowerReviews seems to have had success in the second tier retailers like Lamps Plus, Ace Hardware, and Radio Shack with Toys-R-Us and Staples being the two largest. I’d say Bazaarvoice is winning with the power web retailers at this point.
Strategy
Part of the PowerReviews strategy is to combine all their client’s reviews into a single shopping destination website, Buzzillions.com. It’s hard to be #1 in two different businesses; shopping destination and business SaaS software. Chances are you’ll be mediocre at both. By definition I’m not going to Buzzillions.com because it only contains reviews from Power Review clients. You would think that the company could always dump the website and stick to their knitting of making great software, however the shopping website is the heart of their economic model. Their customers get the review software for free, and PowerReviews makes money per click through to the retailer.
This is a big market, and there is plenty of room for more than just one company. But I will predict that PowerReviews will never generate $22.5M in earnings to ever pay back their investors.
Was this posting written by BazaarVoice’s marketing team?
Nope, just my own musings. When I talk to people about flawed strategies it always requires elaboration. As I stated, it’s a big market and there is plenty of room for more than one company, but if it was my venture money I’d bet on Bazaarvoice.
I’m open to other opinions, and I’d enjoy reading them here.
Bazaarvoice has a great team and they’ve done a great job of steering their company & concept in the right direction, landing some great clients. They deserve all of the favorable press they are getting.
I like the PowerReviews model, though you have it slightly wrong.
They don’t make money per click to the retailers. They sign up as an affiliate for the retailer and they collect the affiliate commission on sales. The company that works with them gets the review engine for free – though it is not ‘white labeled’.
BazaarVoice collects an up-front initiation fee, a yearly fee and a yearly review moderation fee, though their solution is ‘white-labeled’.
I’ve worked with both companies, and both have stellar staff and support.
There are a few other technical differences as well. I think there is room for both models in the market place.