Almost ten years ago, Amazon.com went public with a roadshow that emphasized the value of being virtual

- Amazon.com never closes
- build once and sell everywhere (compared to brick and mortar companies needing to roll out thousands of stores)
- unlimited inventory

Which all really come down to the fact that because of these structural advantages, Amazon.com’s (other online companies’) customer acquisitiom cost would be much much lower than the offline world.

That was true for a while until Google came along, inserted itself into 20%+ of the internet traffic, and forced companies to pay almost all their net margins into bidding for customers. Given that many of the online companies dont really have any expertise in offline acquisition or distribution strategies, they really dont know how to compare their customer acquisition cost to anything but other online channels. Without the proper yardstick, the cost of online customer acquisitino has met or exceeded offline acquisitino in many industries.

Recently, the increasing cost of online acquisition has forced many online companies to look to the offline world for distribution and customers. There are very very few companies that has nailed the the online/offline integrated distribution and usage model. . . (Green Dot, where I work, is close) but Webkinz (by Ganz) is by far the best and most well executed I’ve seen. (learn more about them here)

There are a few advantages to distributing an integrated virtual/physical service in the offline channel

- Acquisition cost can be significantly cheaper than online (cant emphasize this enough)

- Leverage existing store distribution channels and traffic (hallmarks, malls, gift shops etc)

- Allows for the creation of relationships with users ubiquitously and continuously . . . (I can hug my webkinz, but not my Penguin)

- Its the singularity advantage

- Payments, payments, payments . . . it so much easier for a kid to take their lunch money and buy a webkinz instead of trying to get a membership to habbo hotel

- Eventually, the physical good (like a webkinz) can become the main online interface, making the computer obsolete, in which case you’ve created a platform out of an application

- Many companies (such as Google) simply do not have the DNA (skills, knowledge, committment, patience) to compete with a company like webkinz in the offline world where the company have significant advantage. (manging logistics and contracts for tens of thousands of independent gift shops is not trivial)

Anyways, once in a while i get a man crush on a company, and my latest one is Ganz/Webkinz