How boo.com got booed

Boo.com was a European company founded in 1998 and operating out of a London head office founded by three Swedish entrepreneurs: Ernst Malmsten, Kajsa Leander and Patrik Hedelin. Malmsten and Leander had previous business experience in publishing where they created an online bookstore, bokus.com, which in 1997 became the world’s third largest book e-retailer (according to Investor’s Week, 26th May 2000) behind Amazon and Barnes & Noble. They became millionaires when they sold the company in 1998.

Then came boo.com.

The owners of boo.com wanted to develop an easy to use experience which re-created the offline shopping experience as far as possible. Boo.com wanted to become the world’s first online global sports retail site. The name of the company (according to Malmsten) originated from filmstar ‘Bo Derek’, best known for her role in the movie ‘10’. The domain name ‘bo.com’ was unavailable, but adding an ‘o’, they managed to procure the domain boo.com for $2,500 from a domain name dealer.

Boo.com was to target mostly ‘young, well-off and fashion-conscious’ 18 to 24 year olds. Boo marketed itself as a premium sports, urban street wear and fashion retailer, stocking quality products for the fashion conscious young individual. However, with premium products came expensive charges. The market for youth clothing was viewed as large: according to New Media Age (1999) and projections from retail analysts such as Verdict. An initial round of funding included investments from the JP Morgan, LMVH Investment and Benetton amounting to a total of around $125 million.

To make things as close to reality as possible, the virtual salesperson, Miss Boo, would great online visitors and guide them through the site, giving helpful tips and advice. When selecting products, visitors could drag them on to models, zoom in, and rotate them in 3D. The technology to achieve this was built from scratch. With all visual gimmicks and stylish add-ons, boo.com promised 8 second waiting time for the website to load.

Immediately before the launch, management team met with Larry Lenihan from Pequot Capital. The boo.com team provided revenue forecasts but were unable to answer questions about potential of the business such as “What kind of conversion rate are you aiming for? What’s your customer acquisition cost? And what’s your payback time on customer acquisition cost?” When these figures were obtained, the analyst found them to be ‘far fetched’ and reputedly ended the meeting with the words, “I’m not interested. Sorry for my bluntness, but I think you’re going to be out of business by Christmas.”

Boo.com officially launched on 3rd November, 1999, after a six-months delay. The homepage was featuring Miss Boo, as planned, but the user experience of the website turned out to be disasterous: slow site browsing, poor navigation and irritating technology.

ZDNet created a report of their experience of using the Boo.com. They describe an example search for product information, which took five user actions, including escaping past annoying animated graphics, to reach the desired location. “With products zooming all around the page, customers practically have to play target practice in order select the product they want” (ZDNet, 29th November 1999). The FT reported that one customer had been advised by Boo to “limit the amount of transactions they made, to three per twenty minutes” (Financial Times, 4th November 1999). There were also other problems. Studies sponsored by KPMG, Hewlett-Packard and VNU Publications (Computing, 30th November 2000) show the three main reasons for web purchases in the European market (UK, France, Germany) as “Ease/Convenience”, “Better Prices” and ‘Speed of Process’. Boo.com seemingly failed on all three dimensions.

A quick glimpse inside boo.com reveals some of most fundamental underlying problems, which were to affect and become critical in the post-launch period (as they did). These included unrealistic revenue projections, ambitions to immediately start globally, excessive employment benefits in pre-launch period and luxurious spending.

Few months after the launch, sales results were disappointing in some regions with US sales accounting for 20% compared to the planned 40%. The management team felt that further investment was required to grow the business from a presence in 18 countries and 22 brands in November to 31 countries and 40 brands the following spring.

The end of boo.com came on May 18th 2000, when investor funds could not be raised to meet the increasing marketing, technology and wage bills (and projected expenses for business expansion). In May 2007, Boo.com re-launched as an online travel community and review site under new ownership by Web Reservations International (WRI), unrelated to the original Boo.

The first PDA: case Apple Newton

This story is about the precursor of modern PDAs.

The Newton project was not originally intended to produce a personal digital assistant (PDA). The PDA category did not exist for most of Newton’s genesis (however earlier devices like the Psion Organiser and Sharp Wizard had the functionality to be considered PDAs), and the “personal digital assistant” term itself was coined relatively late in the development cycle by Apple‘s then-CEO John Sculley on 7th January 1992, the driving force behind the project. Newton was intended to be a complete reinvention of personal computing.

To clarify, the official name of Apple’s product was the MessagePad; Newton was really the name of the operating system. But Newton captured the public’s imagination, so that’s what the device was popularly called.

One of the original motivating factors for the design was known as the “Architect Scenario”, in which Newton’s designers imagined a residential architect working quickly with a client to sketch and interactively modify a simple two-dimensional home plan.

The end result was a however what became a template for future PDAs. Its initial version rolled off with a variety of software to aid in personal data organization and management.

This included applications as Notes, Names, and Dates, as well as a variety of productivity tools such as a calculator (metric conversions, currency conversions), time-zone maps, and a handwriting recognition, which worked even with the display rotated.

In 1993 before its release, Apple launched a marketing campaign of Newton centered on its allegedly unprecedented handwriting recognition.

When it first appeared in shops, Newton however became a disappointment. It was big (not suitable for pocket), pricy (about $700 for the first model and as much as $1,000 for later), new (no market familiarity) and had software problems (notably, its handwriting recognition was fairly inaccurate and was skewered in the Doonesbury comic strips).

PDAs would remain a niche product until Palm, Inc.‘s (by ex-Apple employee Donna Dubinsky) Palm Pilot emerged shortly before the Newton was discontinued in 1998. The cheaper Palm Pilot was released in 1995 and became a runaway success. It was smaller, thinner and sold at lower cost. It had an excellent PC synchronization and more robust handwriting recognition (Graffiti) system—which had been available first as a software package for the Newton—managed to restore the viability of the PDA market after Newton’s commercial failure.

Prodigy Communications rises high and falls low

Consider the case of Prodigy Communications Corporation. Prodigy was founded in 1984 as a joint venture among IBM, Sears, and CBS to offer “videotex” services, such as news, advertisements, shopping, and communication, from a PC. With the initial low penetration rates of PCs and modems in homes, however, it was not until 1989 that Prodigy services were first marketed. By that time many of the services we know today were already available, including email and, in 1994, access to the World Wide Web by pioneering sales of “dial-up” connections to the net. Indeed, when Prodigy first went online, it was praised as the network of the future.

At its height in 1994, Prodigy had 2 million subscribers and innovative services. Yet this first mover that could fairly be credited with creating primary demand for online services fell to a distant third behind AOL and CompuServe just two years later. Why did the front-running Prodigy fall from grace? The company made a series of operational and organizational mistakes from which they could not recover. For example, when customer usage of email accelerated in 1993 the company imposed a 25 cents charge for each email above the 30-email limit each month. Customer reaction was swift – complaints surfaced on Prodigy bulletin boards and 18,000 customers joined the “Cooperative Defense Committee” to protest the user fees. Prodigy responded by abruptly closing some customer accounts without explanation or prior notification. The company did not do much better in managing customer expectations of online chat rooms, banning discussions of any sex-related topic, including AIDS.

With Windows becoming the standard operating system for PCs, Prodigy focused on developing their own non-Windows compatible proprietary interface. Prodigy also suffered from the bureaucratic and political headaches of operating under two large, established corporate parents (CBS had dropped out in 1986), who were often in disagreement on strategy. This became particularly evident after AOL began their “free trial” marketing campaign that saw them send millions of diskettes to potential customers. Prodigy’s response was hampered by the continuing efforts of IBM and Sears to extricate themselves from the business, one in which they had invested some $1.2 billion by the time they sold the company to a group of investors in 1996. Internally, conflict between senior executives with large-company perspectives and younger employees driven by technology and entrepreneurship created havoc.

In the end a company that was first to see, and capitalize on, the huge opportunity that became the Internet changed hands and wound up being part of the AT&T empire. As of now, there is still a small group of former Prodigy employees in AT&T.

Source: Journal of Business Strategy, July/August, 2001.