Breaking Down The Hukkster Shutdown

(8/4, 8/12 - SEE bottom of post for updates)

With so much positive buzz from Hukkster, how could they shutdown? I have no insights into how their business was run in terms of spending, but what I can analyze is what I'd estimate they were bringing in in terms of affiliate revenue.

Their core revenue model was email alerts that would translate into sales at retailers where they would generate an affiliate commission on the sale.

Q: Was there enough affiliate revenue to run a sustainable business?

What information do we have to work with? Here is what is showcased on their website:

Ok, 877,207 sale alerts sent out, we can use that.

Let's start by looking at some industry-wide email stats.

eCommerce Avg. Email Stats: Open Rate: 17.35%, Click-rate: 3.0%

Source: Average Email Campaign Stats of MailChimp Customers by Industry

Ok, so an open a click-rate of 3% across e-commerce email campaigns. Now I'm assuming these are for general newsletters, so I expect Hukkster would have a higher rate being they were extremely targeted emails. The emails they were sending were alerts for specific products setup by the user him or herself, as showcased below:

With CouponFollow, for the highly targeted coupon alerts and reminder emails, we see as high as 35% - 40% open rates, with click-through rates at 10% to 14%.

So let's assume a nice open-rate, and click-through rate (maybe between 12% as high as 20%),

The Avg. e-commerce conversion rates from emails is around 3.35%.

Source: E-commerce Benchmarks: Email Conversion Rates Drop in 2Q13

Remember though, these are highly targeted alert emails, so let's assume a bit higher for Hukkster and say an overall conversion rate (purchase at a retailer) of around 5%.

Now the revenue model is affiliate-based, so let's dig into some stats here as well. Hukkster was mainly geared toward fashion. We need to determine the AOV (Average Order Value) and ACR (Average Commission Rate) across the Fashion industry.

Taking a look at the Acceleration Partners site, many Fashion retailers (Adidas, Modcloth, Stella & Dot, Warby Parker) had around a $100 AOV and a 7% to 10% commission rate. Monetate also states $100 AOV across the board.

So now we have a fact and made some assumptions. I've tried to keep the assumptions realistic, but also use some nice round numbers.

Fact: 887,207 Sale Alert Emails Sent

Assumptions:

  • Conversion Rate: 5%.
  • Average Order Value of $100.
  • Average Commission Rate: 10%.

Estimated Total Revenue from Email Alerts:

887,207 * 5% * $100 * 10% = $443,603

In other words that's they'd generate about 50 cents per email sent.

Honestly, that number seems a bit high to me. The conversion rate may be a bit over estimated.

But even if I'm way off in the other direct, if you pump up a couple of those numbers it isn't sustainable for the size of their team.

TechCrunch noted (from a previous Hukkster interview by Insider Louisville) "Finnegan said the Hukkster team was planning to expand to 25 or 20 people in the next year, with a five-year plan of reaching 60 employees."

Simply too many people for the amount of revenue.

A: No. I'd assume their growth and revenue projections weren't solid enough for investors.

There you have it.

Now where did they get $39,037,108.00 Total Dollars Saved? I'd assume they quantified every email alert by the amount of potential savings.

Competitors such as PoachIt, Trackif, and Coveted have seen this as an opportunity. They've been targeting the formerly Hukkster-users on social media.

Time will tell if they'll be able to create a sustainable business model where Hukkster apparently couldn't.


UPDATE: Someone on Reddit who states they worked as a remote admin for Hukkster said this:

"I worked for hukkster for several months as a "remote admin" basically we logged on at 6am and manually pricechecked items people had hukk'd. we also had to manually check to see if items were included in promos or not. then emails would be sent out. while i was working with them they cut their remote staff drastically and there ended up being maybe one 6 of us."

If that's true, that's a good startup hack... but certaintly not a way to sustainably scale. Hard to believe that's true.


UPDATE #2: Sapna Maheshwari on BuzzFeed is reporting that a Standoff Between The Winklevoss Twins And Debtholders Killed Hukkster:

"Hukkster, the discount-tracking app backed by Cameron and Tyler Winklevoss, was dying but managed to find a savior in Marc Lore’s Jet.com. A tussle over a small sum of money led to the deal — and Hukkster — getting killed."

Read the full story here on BuzzFeed.

The article also mentions they were burining through cash. This further reenforces the original hypothesis here.

Finally, a source close to me has also revealed this:

They were using a consultanting company to buid their tech, at least in the beginning.

Not a great way for a startup to build on a budget, especially hiring an expensive NY-based tech consulting company.

It's a shame, because they had a solid product offering. It's been apparent on Twitter that none of the competitors fully fill the void quite yet!

Tweet at me @mmezzacca with comments.