i need more perpective about this case study:

After wrestling with the decision to pursue a platform- or a retail-oriented strategy, Joyus ultimately decided on a platform and built its investor pitch around this strategy. How do you explain this decision?

JOYUS - STRATEGIC DECISIONS IN THE ONLINE VIDEO SHOPPING MARKET

INTRODUCTION

Sukhinder Singh Cassidy walked through the doors of Joyus, the company she had co-founded in 2011. Although the firm was only a few years old, Joyus had already established itself as the premier online video shopping network. Joyus was a pioneer in bringing the multibillion-dollar "direct-response" shopping model online. The company had enjoyed several years of success, and Singh Cassidy was now enthusiastic about devising a bold strategy for the future. Investor interest was growing, and Singh Cassidy was considering different strategic options to cement and expand her company's position in the market. She knew the potential was there; the question was which path to follow to capture it. As she made her way through several rows of busy employees, past the photo studio, video production and the board of performance metrics, she was already deep in thought, considering Joyus's ambitious next moves.

OVERVIEW OF THE ONLINE VIDEO SHOPPING MARKET

E-commerce has become a fundamental aspect of the overall commercial landscape worldwide. In the United States, online commerce was a gigantic market that continued to expand. In the 2014 holiday season (November to December) alone, more than US$53 billion was spent online.2 Business-to- consumer e commerce sales in North America were expected to continue growing, with $660 billion in sales projected by 2017.3 By any metric, online shopping on desktop and laptop computers, and increasingly through smartphones and tablets, was changing the means and medium by which people around the globe purchased consumer products.

An increasingly important part of this e-commerce market space was the growth of online video shopping. Traditional e-commerce was based on web pages that offered static content such as images of the product, specifications and some reviews. Amazon.com represented the archetypal conventional online-shopping experience. Many companies that had transitioned to online shopping utilized a similar static presentation (e.g., Walmart, Target and Best Buy). While this approach was a simple and effective means of showing products for sale, it was also generally a bland and unsophisticated presentation. With the rise of YouTube and user-created video content, the importance of online video in the consumer space increased dramatically. YouTube had more than a billion users, and 300 hours of video were uploaded to YouTube every minute.4 Mobile devices accelerated the consumption of online video, and video already represented more than 50 per cent of all mobile data traffic. With this explosion of video content and viewers, online video advertising had grown just as dramatically. For example, in the United States, digital video ad spending was projected to grow from $2.89 billion in 2012 to $12.71 billion by 2018.5 Meanwhile, traditional television advertising was still a dominant driver of U.S. ad spending with $64.54 billion spent in 2012 and $78.64 billion projected by 2018.6 Online video advertising was similar to its traditional television counterpart, wherein large brands spend money on substantial campaigns via TV commercials, designed to encourage overall brand awareness. Online video advertising was still in its relatively early days. Most online videos, whether user-generated or professional video (e.g., news content and TV shows streaming online), were monetized through a 15- to 30-second brand advertisement (called pre-roll advertising), prior to showing the video itself. In the United States, the other key portion of the TV market was "direct-response" shopping from channels such as QVC and the Home Shopping Network (HSN). These channels, which emerged in the United States in the 1980s, introduced the concept of a televised sales pitch for products, which viewers (potential customers) could then call in to order. Both QVC and HSN had grown substantially to become the dominant players in this segment; in 2014, the larger QVC posted $9 billion in revenue, while HSN posted revenues of $3 billion.7 However, contemporary online video platforms, such as YouTube and Facebook's new video service, did not offer easy or well-integrated ways for individuals to shop for displayed products/services, and catered only to the branded video advertising market by offering pre-roll advertising. These platforms also did not provide a backend for the merchandising of products or ways to track, fulfill and ship the product. Traditional TV shopping companies also did not offer any digital video shopping channels. They had traditionally serviced a different demographic of customers who still predominantly shopped live on TV and used the Internet as a means for completing the transaction online. For these companies, however, their core competency was not to create and deliver native online video content to digital consumers, most of whom consumed the majority of their content on their desktops, mobile phones or smart TVs. After all, digital consumers were e-commerce natives. As online and mobile online shopping continued to grow and become commonplace in the modern consumer environment, the market in this space was primed for innovation and competition.

BACKGROUND OF JOYUS

Joyus was founded in January 2011 in San Francisco, California, by co-founder and chief executive officer (CEO) Sukhinder Singh Cassidy, who was an experienced Silicon Valley executive and entrepreneur. Singh Cassidy was joined by co-founder and vice-president (VP) of Product, Diana Williams, formerly senior product manager and then director at eBay Inc.; chief curator Gina Pell, an online fashion entrepreneur of Splendora, which was acquired by Joyus; and chief technology officer and VP of Engineering Sin Mei Tsai, formerly of Silicon Valley tech firms Sheyna and SendMe, Inc. Singh Cassidy, in addition to being co-founder and CEO, was also a key figurehead and ambassador of Joyus, frequently championing the company to media and investors alike. Singh Cassidy had graduated with an undergraduate business degree from the Ivey Business School at Western University in Canada in 1992 and then moved to New York to be a financial analyst for Merrill Lynch. Her career path had taken her to Amazon.com from 1998 to 1999, financial software company Yodlee, Inc. (which she co-founded) from 1999 to 2003 and then to Google from 2003 to 2009, where she was president of Asia Pacific and Latin America Operations. After Google, Singh Cassidy spent a year as CEO-in-Residence with venture capital firm Accel Partners. She joined Silicon Valley fashion start-up Polyvore as CEO in February 2010, before leaving over strategic differences with the founder in September of the same year. Joyus emerged from Singh Cassidy's passion for the shopping category and women's media; she was also at a point in her career, in terms of her senior leadership experience and knowledge, where she was ready to lead and found her own company. In 2009 when she left Google, Singh Cassidy believed she had a dual opportunity: to reinvent online shopping for inspiration and entertainment (rather than convenience alone) and to help make women feel great doing it. Although her time as CEO at Polyvore, also a women's social commerce site, did not turn out quite as expected, Singh Cassidy learned how much brands loved inspirational content combined with the ability to shop the links directly online. She recognized that the familiar television-oriented QVC/HSN direct-response model might work in the exploding online video sector and decided to explore this possibility.8 Teaming up with Pell from style blog Splendora, Singh Cassidy shot a series of test videos and showed them to a focus group of female friends. One of the core ideas driving Singh Cassidy was that viewing video content that was "curated" (i.e., specially selected, organized and prepared for presentation) would lead to more view-to-sales conversions. In other words, rather than just browsing content, viewers would instead be enticed and then actually follow up and buy the products. Things moved extremely quickly after these early results. Singh Cassidy incorporated the company, obtained some early investment capital, launched an alpha website using YouTube and PayPal, and acquired Splendora (and its current subscribers). Joyus grew rapidly over the next several years. By late 2014, Joyus was a bustling company with 35 fulltime staff. Joyus's efforts over these years focused on more fully developing the nascent direct-response online shopping model as the first player to launch the service. Singh Cassidy and the management team believed that five important features would drive the company's business from launch to a large-scale online opportunity:

• The explosion of online video consumption, including an increasingly fragmented number of places people consumed video: on mobile, over-the-top (i.e., third-party content that was delivered without the intervention or control of a system operator), YouTube, Facebook and numerous large online media sites.
• The fact that video monetization was still in an early stage and, while growing, generally provided a poor user experience, forcing users to watch a brand advertisement in order to make the business model work.
• Consumers' increasing adoption of content- and commerce-oriented sites, such as Pinterest and Houzz.
• The overwhelming number of product choices on sites such as Amazon, but the sites' limited ability to help the consumer understand which products were "special" and to focus their attention on those products.
• The fact that brands and publishers were looking increasingly to online content marketing in an effort to engage online users in more authentic ways than traditional brand ads (and convert them into customers).

To execute on this opportunity under the broader vision "to delight and empower women every day with compelling products, great advice, and easy entertainment," the Joyus team sought to advance the direct response model. Joyus utilized a key technology platform (i.e., an easily "shoppable" video player) combined with captivating, expert-led videos that featured merchandised products that consumers could view and then shop for online. Joyus's target market (in the United States only) was urban, educated women, aged 30 to 60, with annual household incomes greater than $50,000. Joyus developed its shopping network through three core components: consumers, brands and publishers.

Consumers

On the consumer side, Joyus aimed to attract, retain and convert viewers to buyers by creating original video content around select products and by providing expert advice to both entertain and engage users. Joyus's programming featured new daily shopping videos in the categories of fashion, beauty, health and lifestyle. A typical Joyus video was based around a popular or trending product, shot professionally by Joyus's production team (at a chosen location or in Joyus's studio) and then video-edited into an interesting, sophisticated and attractive package. Feature items became a focal topic for presentation and discussion by Joyus's team of experts currently 10 regularly appearing "hosts," who were experts on health, beauty or fashion. All of Joyus's videos showed the product in use (e.g., models demonstrated the fashion look or the skin care product) to help illuminate its qualities and features. Joyus produced between 600 and 800 new videos in 2014, in addition to having a large "back catalog" of shoppable videos in its library.

Brands

Another core feature of Joyus was its network of newer (or discovered) brands, in addition to representing established brands. Joyus's relationship with its network of brands provided a mutually beneficial partnership. Companies saw their products marketed in a premium way with high-quality, polished content generated by Joyus, which provided a high return on investment for the brands' marketing dollars. This high-quality production was backed up by Joyus's analytics, which tracked, among other metrics, views, impressions and units sold, and calculated conversion rates and revenue-per-view. For example, Joyus reported that every view resulted in an average of $0.60 to $1 in gross product sales per video view. For example, that $600 to $1,000 in sales would be generated per 1,000 views of the video. For Joyus, these relationships with brands provided both access to the high-profile products that their customers wanted and the ability to sell exclusive products available nowhere else on the web. Currently, Joyus carried more than 500 brands across the four key categories of fashion, beauty, health and fitness, and lifestyle. Product fulfillment models included consignment, inventory/warehousing and drop-shipping.

Publishers

Given the fragmentation of online video, many of Joyus's views and viewers came from partnering with numerous online publishers for the syndication (i.e., licensed right to broadcast content) of Joyus videos, which were embedded on the online publishers' websites. These relationships helped to market products and to build awareness and reach for the content Joyus produced, which subsequently helped Joyus to acquire shopping customers at a low cost. Joyus had 40 different publisher implementations, including partnerships with lifestyle publishers People (magazine) and People Stylewatch, AOL and AOL StyleList, as well as Internet providers CenturyLink, ATT and Verizon. These publisher arrangements enabled Joyus to reach up to 100 million monthly unique visitors each month.

How Joyus Was Funded

In the early days of Joyus in 2011, the company was funded by a $550,000 convertible note from angel investors, which was followed up shortly thereafter, in May of the same year, by a first round of institutional funding, which raised $7.9 million from Accel Partners, Harrison Metal and the conversion of the note into equity.9 In May 2013, after almost two years of successful operation and clear demonstration of their concept in action, Joyus announced a second funding round of $11 million. This round of funding was led by veteran Silicon Valley investment firm InterWest Partners and media juggernaut Time Warner Investments, with participation from Series A investors Accel Partners and HarrisonMetal.10 In mid-2014, Singh Cassidy was preparing for another round of financing, and contemplating the strategic business models the company would pursue to accelerate its growth.

STRATEGIC OPTIONS

Singh Cassidy was pleased that Joyus had experienced a strong start-up and had clearly demonstrated both the efficacy and potential of its pioneering online direct-response shopping model. Joyus's products were selling well and maintaining satisfactory margins, but Singh Cassidy had high hopes for improved performance in 2015 and beyond. However, she was not looking at small incremental improvements, but rather evolving Joyus to its next level of potential. The company had raised a substantial amount of money, and the management team would need to decide on their strategic options for moving toward the future. Singh Cassidy and her management team faced some serious questions regarding the direction they wanted Joyus to take. Further complicating matters was that, over the past few years, Joyus's competitive landscape had evolved rapidly. Online shopping giant Amazon was now launching shoppable video services, and YouTube was adding a shoppable component to its video player for advertisers. Video was also exploding on platforms such as Facebook and Instagram. While this dramatic increase in video presented opportunities for further growth and expansion for Joyus, it also posed some threats. Major players such as Amazon and YouTube, for example, had considerable reach and resource power that Joyus could not directly match. Nevertheless, with Joyus's growing brand and momentum, as well as its recent successful fundraising, some attractive potential directions were available.

Platform Strategy

One potential direction for Joyus was to further grow its current shoppable video platform. In other words, Joyus could use its existing video platform but generate more content. More content and more products would generate more sales and more distribution. More video content would also open up further syndication options as its video catalog grew.

Retail Strategy

Another potential direction for Joyus was to become more of a traditional retailer, moving "upstream" by selling more exclusive products not carried by sellers such as Amazon. Joyus would provide high-end product choices and become a premium shopping channel. It would focus on carrying desirable, more expensive products (with better margins) that no one else had. This approach would follow a more traditional upmarket retailer path for Joyus.

CONCLUSION

As Singh Cassidy went about her morning, the challenges and complexity of the coming year weighed on her mind. She was immensely proud of the work that she and her team had accomplished over the past several years. Joyus was transitioning from a start-up to a powerful, substantial player in the online video commerce space. However, this space was rapidly changing, posing important strategic challenges for Singh Cassidy and the Joyus team. There was no time to lose; with major Internet players such as Amazon, YouTube and Facebook moving into this space, she had little time to ponder the potential directions Joyus could go. These major players and indeed other potential Silicon Valley competitors would not wait for Joyus to be ready. Singh Cassidy and her team would need to decide on the strategic choice that made the most sense for Joyus and then execute on that decision quickly, to capitalize on both the market opportunity and the need to raise capitalto achieve their ambitions.