StyleFeeder is that rarest of animals: a profitable Web 2.0 company, and on the East Coast to boot. It may also have one of the largest ratios of users to employees of any Web business: more than a million registered members, served by a grand total of only six full-time employees. I met all six a couple of weeks ago when I stopped by the company’s offices in hip Central Square, Cambridge, MA, for a progress report.
As I explained in a January 2008 profile, StyleFeeder offers a shopping search engine that uses sophisticated machine-learning algorithms to study users’ tastes and recommend new products from thousands of online retailers. Anytime a user clicks on a recommended product and ends up buying it, StyleFeeder earns a nifty commission. Recently, the startup rolled out a personalized shopping service for the Elle magazine website, and plans to expand the partnership with Elle owner Hachette Filipacchi Media to the publisher’s other websites, which cover the fashion, automotive, luxury design, women’s health, and hobbyist markets.
Software engineer Philip Jacob started StyleFeeder in late 2005, sold it to now-defunct blog aggregator TopTenSources in 2006, and spun it out again in early 2007. The company has raised $3.5 million from Highland Capital Partners and Schooner Capital—a modest amount, as tech startups go. But it’s been enough to power the company all the way to profitability, thanks to some shrewd decisions that have kept the company’s costs low.
One, as Jacob explained at Xconomy’s cloud computing forum last year, was to outsource the company’s entire IT infrastructure to Amazon Web Services. Another was to keep the staff small and hire freelancers to do much of the coding scut work. A third was to jump on the Facebook bandwagon at exactly the right time—-mid-2007, when the social networking site was opening the doors to providers of third-party applications. StyleFeeder’s intrinsically social approach to personalized product recommendations vaulted it to the number-one spot among Facebook shopping apps, which brought hundreds of thousands of new members streaming into StyleFeeder itself.
As Jacob and StyleFeeder’s vice president of business development Shergul Arshad told me during my recent visit, the Facebook wave has largely crashed and dissipated for StyleFeeder (and for a lot of other third-party app providers). But that hasn’t slowed the company’s growth—a record 2.1 million unique visitors stopped at the site in March. I talked with Jacob and Arshad about how they’ve managed that expansion, how the company’s relationship with Facebook has evolved, where its recommendation technology is going, and how women and men use the site differently.
As you’ll see, they didn’t need a lot of prompting from me to wax on about the company’s business model, which clearly still energizes them, even as the company approaches its fourth birthday. Part 1 of the lengthy interview appears below; we’ll publish Part 2 on Wednesday. [Update 4/29/09: Part 2 now published.]
Xconomy: It’s been a while since we talked about StyleFeeder. How have things been going?
Philip Jacob: We’re kind of in this interesting space. The economy has not done well, but we’re not only doing well, we’ve been doing really well for a long time. At this point, we’re profitable, which is unusual not only for a Web 2.0 company but for an East Coast startup.
We learn about people’s tastes and preferences and help them with their online shopping. If you say you like jeans, we know what kind you might like based on your other preferences. We have this tricked-up collaborative filtering system that powers personalized search and production recommendations and will also introduce you to other people who shop like you do. We are continuing to execute on that and adding new features and monetizing the site through affiliate relationships and our partnership with Hachette Filipacchi. We’ve been up live on the Elle Magazine site for about five or six weeks now.
We’ve done a lot with a little, which was an idea that was part of the original wave of Web 2.0 startups that sort of got lost. People started out taking $2 million or $3 million [in venture capital], which was great. But then when you start taking $10 million or $20 million, that starts to look like
