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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

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.

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.