Yes, this is about the Cork’d acquisition and its my analysis as a tech industry vet thats been in and around deals like this for over a decade. Now before you all fly off the hook and start jumping on my throat, hear me out. I am 100% in favor of Web 2.0/Wine 2.0, technology, and anything else that has to do with exposing as much great wine to as many people as possible. However, lets take a look at the Cork’d acquisition because its very revealing.
First of all, Gary V., congrats – this is a good acquisition for you and your retail business. Very forward thinking. You have a lively “Vayniac” community and a thriving retail business. This functionality you’ve acquired is very very smart. Its a robust technology that will serve your community very well and it was put together by some thought leaders in the Web 2.0 world. Now your existing community can really do some great things including the notes and sharing comments and Twitter and all the rest. I actually thing that this can position you as a real challenger to the “Wine.com”s of the world. You’ll actually have a useful wine e-commerce site thats more than a wine clearing house.
That brings me to the thesis of this post. This acquisition is actual proof that a site based SOLELY on tasting notes and hoping to attract alot of users is, in reality, of little value (financially). What Gary did was acquire technical functionality to enhance his pre-existing community – savvy move by Gary but what amount do you think the 20,000 pre-existing registered users brought to the deal? Gary’s got a community and following already. There’s a remote
chance that some of those Cork’d users may actually buy from Gary so there’s that value but what that amounts to is a mailing list that Gary can promote to. That’s worth about $10K and you can get much better qualified list from a magazine publisher.
Cork’d had (and has) some very advanced technological features and, like I said above, the synergy with Gary’s site is to help create fanatical WineLibrary customers. Gary’s business is retail. It pays the bills. At the end of this, Cork’d was a short cut for Gary to build the features he needed for his site without paying for a custom contract to re-create. Gary made a “build versus buy” decision. In this case, its a simple decision for Gary – How much to get a gaggle of engineers and pay them to re-create Cork’d for me, add some percentage on top of that and offer that to Cork’d. Any decent private equity guy/gal could do that calculation for you.
Do the 20K registrants of Cork’d add any value to that equation? Answer is a resounding “NO”.
So if I may be so humble, if you’re working away on a site that collects tasting notes and is attempting to create a community with a business plan of marketing to that community and creating ads for them you need to be careful. Step back, do some deep analysis, write a business plan and flesh out exactly what your goals and missions are before you spend a year on creating custom functionality for a real business person. If you can create the site on your own and you don’t have a business plan written they you’re better off consulting because you’re obviously a talented programmer. Your opportunity cost of spending all your time on a site like Cork’d is going to be painful when you could’ve been billing $100 per hour for your time.
Enjoy the Wine Life!