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I'm going to re-post my comment from the previous thread because I think it applies even more now. How did they get $5 million in funding? What is their busin

I'm going to re-post my comment from the previous thread because I think it applies even more now. How did they get $5 million in funding? What is their business plan? I would really like to know. ---- 1. Collect mail door-to-door 2. Scan each page of mail, including envelopes 3. Post scans online 4. Return requested physical mail 5. Charge $4.99 for this service 6. ... 7. Profit? Looking at their job postings, they have one person per city managing a team of people working probably close to minimum wage going door-to-door. These people most likely scan mail at their homes using a scanner provided by Outbox. Let's say they pay a City Manager $100,000, or $125,000 after taxes, unemployment insurance, and benefits. An individual can take on 30 customers, is paid above minimum wage (let's say $15 after taxes, etc.), and works 7 hours a day (or 35 hours/week, making them part-time employees). That's roughly $30,000 per worker annually. At $4.99 per month, none of the economics work. At 30 customers per part-time employee, the break even point is $100 per month per customer. At $4.99 per month each PTE needs to handle around 600 customers each to break even. 100 customers per PTE at $30/month also breaks even. But even 100 per PTE seems unrealistic. Unless I'm missing something very basic, it just doesn't scale at $4.99 per month. At all. It's not even close.

danielweber 13y ago
Do they really need to go door-to-door? Why can't the USPS just forward it all to Outbox?
- arbuge 13y ago
  I think they tried to set this up once, but the USPS is giving a partnership with them the cold shoulder... http://www.theverge.com/2013/2/28/4039990/the-postal-service-is-bad-but-outbox-is-worse http://www.theverge.com/2013/2/28/4039990/the-postal-service... "At the time of its announcement, Outbox suggested it had reached an agreement with the USPS to allow it to intercept mail from ever being delivered to your home, and that it would instead be delivered to its warehouse. This would have made the service less wasteful, to be sure. From its description of the service today, that no longer appears to be the case, and Outbox employs its own "postmen" to pick up already delivered mail from your home mailbox."
  - beat 13y ago
    Could still happen in the future. Certainly, last-mile delivery is an expensive pain point for USPS. But cutting that deal is going to be high-risk and expensive.
- joshuaellinger 13y ago
  They tried to cut a deal with the USPS where the scanning happens at the distribution centers. The USPS said that they would never do it.
  - nawitus 13y ago
    Don't citizens have the 'right' to forward their mail to a given destination? Or register Outbox address as their official mailing address?
- ef4 13y ago
  Their FAQ addresses this: "On first glance you could just use the free USPS product mail forwarding to send your mail to our warehouse. However, in many cities, mail forwarding results in a 10 day delay (often more) of your mail, does not include catalogs and other standard mail, only lasts 12 months, and nearly certainly loses most of your packages. Thus mail forwarding to our address would create a terrible user experience."
Ilmesnkie_Jones 13y ago
I suspect there is an economy of scale in that if the same piece of junk mail is delivered to 100 house it only really needs to be scanned once unless it has some kind of unique code as it wouldn't matter whose piece of junk mail you got a picture of. Otherwise I'm with you in thinking this is absurdly cheap.
- mratzloff 13y ago
  I don't think they can count on that. There are often subtle mail-merge changes in junk mail contents between recipients. Something as simple as "Dear Frank" or "Dear Mr. Jones" makes this unfeasible.
joshuaellinger 13y ago
1. get people to opt-out of all the junk. 2. sell advertising on the site to replace postal mail. 3. provide last-mile services for UPS/FedEx. 4. capture $1 per bill from the bill senders. 5. focus on saturating by zip code. and... 6. make a smart mail box that knows when it has mail in it. You put it all together and they can make $25/month per customer and only they only have to visit the mail box when your mom sends you cookies. It is still a big gamble but that's what you do when you are Peter Thiel. Will and Evan are smart guys. This is their 2nd pivot and the bet is that they can find a way to make money in this space.
- mratzloff 13y ago
  Thanks for the detailed reply. 1 & 2. Online advertising simply cannot make up the difference. Even if they OCR the mail to build targeted profiles of each user, a) I doubt it would come close to the kind of targeting that Google, Facebook, etc. are potentially capable of, and b) we're talking about a very large discrepancy in price versus cost. 3. Last mile services are the most expensive part of mail delivery because they cannot take advantage of economies of scale. This is why many times UPS and FedEx pay the USPS to handle last mile delivery. They are already legally obligated to, they have the infrastructure, and it's the most expensive part. UPS and FedEx charge high prices for the cheapest part of delivery (in aggregate) and give the leftovers to the USPS. 4. How? 5. This seems to be their strategy. I've demonstrated why it's unlikely it can work. 6. I get mail most every day, and I suspect I am not an outlier. Given that, giving away an expensive gadget does not seem to make much sense for most users.
  - joshuaellinger 13y ago
    I was making a case for why it is worth throwing another $5M at when you have already thrown $2M. You were asking why they got the funding, not if it would work. Very different propositions -- they only have to get to 1 in 10 odds to make it worth funding. ... But as for the points, 1 & 2. It's a better marketing proposition than Facebook is today if done right. There is $17B spent on postage and maybe about $30B spent on printing in direct mail today in the US alone. Once you get penetration, the ads will come to you digitally and would know what people want (because they will tell you by opting out what they don't) and you have rooftop location which Facebook doesn't have or doesn't expose. Trust me -- this is my business. A good replacement for direct mail is giant opportunity. 3. Yeah, I don't like the last mile part either. Will and Evan do. However, it is clearly a place to extract value if they can saturate the dense zip-codes and have a good relationship with the individuals. It is no different than JetBlue taking traffic on major routes. The USPS is burdened with Rural delivery. UPS and FedEx prove that Urban delivery can be profitable. 4. Bill Pay. The existing services in this market charge the biller $0.75 to deliver. The biller saves on printing so both sides win. This is a proven market with PayTrust being the pioneer. At scale, it is clearly a good revenue source. Outbox is a natural to capture business from the existing services. 5. Saturating zips. I don't think you've demonstrated that the costs won't work. You assume a certain ratio of FTE to customers and then say it is impossible. That same type of logic is why everyone said UPS and FedEx would never work. I don't know if you are right. But these VCs are not dumb money -- they probably have better numbers on this than you do. This is exactly what they are testing in Austin and SF today so, internally, they have some decent estimates of the costs. ... 6. How often do you get mail that you care about? For me, it is once per week at most. Using Outbox lets you change what you get in the mail. People will opt-out because it is easy. Thus, people are likely to wind up with only a few items being delivered per month once Outbox builds relationships with the billers and stops the paper advertisers. ps - I don't think they are talking about a smart mailbox. I just like the idea.
jaekwon 13y ago
Sell the data to government agencies across the world. Welcome to the information economy, where your startup is the commodity. Silicon valley is the spy capital of the world. I wouldn't be surprised of a lot of VC firms were actually funded by the intelligence agencies at a net loss. The more people use the internet through centralized services with shitty encryption, the more the NSA & privatized surveillance complex benefits. Even if you don't believe this theory, you must believe that intelligence agencies would pay handsomely for a subscription to technology that can parse and categorize people's mails.
- mratzloff 13y ago
  Yes, this is definitely a possibility that I hadn't considered.

danielweber 13y ago

Do they really need to go door-to-door? Why can't the USPS just forward it all to Outbox?

arbuge 13y ago
I think they tried to set this up once, but the USPS is giving a partnership with them the cold shoulder... http://www.theverge.com/2013/2/28/4039990/the-postal-service-is-bad-but-outbox-is-worse http://www.theverge.com/2013/2/28/4039990/the-postal-service... "At the time of its announcement, Outbox suggested it had reached an agreement with the USPS to allow it to intercept mail from ever being delivered to your home, and that it would instead be delivered to its warehouse. This would have made the service less wasteful, to be sure. From its description of the service today, that no longer appears to be the case, and Outbox employs its own "postmen" to pick up already delivered mail from your home mailbox."
- beat 13y ago
  Could still happen in the future. Certainly, last-mile delivery is an expensive pain point for USPS. But cutting that deal is going to be high-risk and expensive.
joshuaellinger 13y ago
They tried to cut a deal with the USPS where the scanning happens at the distribution centers. The USPS said that they would never do it.
- nawitus 13y ago
  Don't citizens have the 'right' to forward their mail to a given destination? Or register Outbox address as their official mailing address?
ef4 13y ago
Their FAQ addresses this: "On first glance you could just use the free USPS product mail forwarding to send your mail to our warehouse. However, in many cities, mail forwarding results in a 10 day delay (often more) of your mail, does not include catalogs and other standard mail, only lasts 12 months, and nearly certainly loses most of your packages. Thus mail forwarding to our address would create a terrible user experience."

Ilmesnkie_Jones 13y ago

I suspect there is an economy of scale in that if the same piece of junk mail is delivered to 100 house it only really needs to be scanned once unless it has some kind of unique code as it wouldn't matter whose piece of junk mail you got a picture of. Otherwise I'm with you in thinking this is absurdly cheap.

mratzloff 13y ago
I don't think they can count on that. There are often subtle mail-merge changes in junk mail contents between recipients. Something as simple as "Dear Frank" or "Dear Mr. Jones" makes this unfeasible.

joshuaellinger 13y ago

1. get people to opt-out of all the junk. 2. sell advertising on the site to replace postal mail. 3. provide last-mile services for UPS/FedEx. 4. capture $1 per bill from the bill senders. 5. focus on saturating by zip code. and... 6. make a smart mail box that knows when it has mail in it. You put it all together and they can make $25/month per customer and only they only have to visit the mail box when your mom sends you cookies. It is still a big gamble but that's what you do when you are Peter Thiel. Will and Evan are smart guys. This is their 2nd pivot and the bet is that they can find a way to make money in this space.

mratzloff 13y ago
Thanks for the detailed reply. 1 & 2. Online advertising simply cannot make up the difference. Even if they OCR the mail to build targeted profiles of each user, a) I doubt it would come close to the kind of targeting that Google, Facebook, etc. are potentially capable of, and b) we're talking about a very large discrepancy in price versus cost. 3. Last mile services are the most expensive part of mail delivery because they cannot take advantage of economies of scale. This is why many times UPS and FedEx pay the USPS to handle last mile delivery. They are already legally obligated to, they have the infrastructure, and it's the most expensive part. UPS and FedEx charge high prices for the cheapest part of delivery (in aggregate) and give the leftovers to the USPS. 4. How? 5. This seems to be their strategy. I've demonstrated why it's unlikely it can work. 6. I get mail most every day, and I suspect I am not an outlier. Given that, giving away an expensive gadget does not seem to make much sense for most users.
- joshuaellinger 13y ago
  I was making a case for why it is worth throwing another $5M at when you have already thrown $2M. You were asking why they got the funding, not if it would work. Very different propositions -- they only have to get to 1 in 10 odds to make it worth funding. ... But as for the points, 1 & 2. It's a better marketing proposition than Facebook is today if done right. There is $17B spent on postage and maybe about $30B spent on printing in direct mail today in the US alone. Once you get penetration, the ads will come to you digitally and would know what people want (because they will tell you by opting out what they don't) and you have rooftop location which Facebook doesn't have or doesn't expose. Trust me -- this is my business. A good replacement for direct mail is giant opportunity. 3. Yeah, I don't like the last mile part either. Will and Evan do. However, it is clearly a place to extract value if they can saturate the dense zip-codes and have a good relationship with the individuals. It is no different than JetBlue taking traffic on major routes. The USPS is burdened with Rural delivery. UPS and FedEx prove that Urban delivery can be profitable. 4. Bill Pay. The existing services in this market charge the biller $0.75 to deliver. The biller saves on printing so both sides win. This is a proven market with PayTrust being the pioneer. At scale, it is clearly a good revenue source. Outbox is a natural to capture business from the existing services. 5. Saturating zips. I don't think you've demonstrated that the costs won't work. You assume a certain ratio of FTE to customers and then say it is impossible. That same type of logic is why everyone said UPS and FedEx would never work. I don't know if you are right. But these VCs are not dumb money -- they probably have better numbers on this than you do. This is exactly what they are testing in Austin and SF today so, internally, they have some decent estimates of the costs. ... 6. How often do you get mail that you care about? For me, it is once per week at most. Using Outbox lets you change what you get in the mail. People will opt-out because it is easy. Thus, people are likely to wind up with only a few items being delivered per month once Outbox builds relationships with the billers and stops the paper advertisers. ps - I don't think they are talking about a smart mailbox. I just like the idea.

jaekwon 13y ago

Sell the data to government agencies across the world. Welcome to the information economy, where your startup is the commodity. Silicon valley is the spy capital of the world. I wouldn't be surprised of a lot of VC firms were actually funded by the intelligence agencies at a net loss. The more people use the internet through centralized services with shitty encryption, the more the NSA & privatized surveillance complex benefits. Even if you don't believe this theory, you must believe that intelligence agencies would pay handsomely for a subscription to technology that can parse and categorize people's mails.

mratzloff 13y ago
Yes, this is definitely a possibility that I hadn't considered.