1Mby1M Incubation Radar 2010: FreeLunched

By guest author Praveen Kumar

In a new flavor of the daily deals trend, FreeLunched works with retailers to offer promotional giveaways and allows users to post product reviews. While the original free lunch was just that – lunch, for those who bought a drink, in a custom thought to have begun in the saloons of New Orleans before the American Civil War – recent giveaways on FreeLunched included a portable PlayStation, Amazon gift cards, and a boxed DVD set of season six of the popular television series “Lost.”

Here’s how it works: The site gives away an item a day to one of its registered members. Each giveaway is followed with a flash sale e-mail campaign which is sent to all who entered that day’s giveaway. All registered members who visit the site to sign up for that day’s giveaway get one entry a day. They can earn additional entries by writing reviews, rating reviews, answering trivia questions on Facebook and referring friends to the site. In the next phase of its market plan, the company wants to create a consumer social ad network in which FreeLunched members will build their own advertisements using approved materials from FreeLunched sponsors and then share them with their social networks. Members will earn reward points depending upon the exposure of a particular product they provide. Points can then be redeemed for items from the FreeLunched store.

The company’s merchants have to pay a flat fee of $250 and a 10% commission on all sales generated from the flash sale. In return, they receive twenty-four-hour listing on the company’s home page, twenty-one days worth of user reviews in their forum, a minimum of three Facebook and Twitter posts, and a one-day flash sale e-mail campaign at a suggested minimum discount.

Miami-based founder Mike Dannheim started his first profitable business when he was sixteen and has ten years of experience in sales and business development with companies such as Key Bank, Merrill Lynch, and AdShip, which he joined in 2009 to pursue a consulting opportunity. There he helped to build the company’s advertising model, developed revenue generating partnerships, and played a vital role as a member of the QA department.

Dannheim got the idea for his venture, which he founded just a few months ago, from a marketing campaign called “game.beawinnergiveaway.com” run by Samsung in which company gave away an item a day. He saw this model combined with a flash sale e-mail campaign as a great business opportunity.

The market landscape for FreeLunched is quite competitive; there are a large number of companies that host promotional giveaways such as Bigprize.com, which hosts giveaways on Facebook; Groupon.com, which runs flash sales for local businesses; MyLikes.com, which offers individuals the ability to run pay-per-click advertising campaigns on their social networks; Lockerz.com, which offers individuals the ability to earn points (used to purchase products from their store) by watching commercials and answering questions; and Swagbucks.com, which rewards people with points for sharing what they are doing on the Internet, and these points are redeemable for items from its store. See the recommended readings to read recent DR and IR coverage of daily deals sites. FreeLunched aims to address what it sees as competitors’ shortcomings through the two phases of its launch: Phase one is meant to combine the power of a flash sale with a promotional giveaway and by leveraging social networks, says FreeLunched, it brings transparency to giveaways, creating a more trustworthy environment. Phase two transitions FreeLunched into a points-based retailer and takes on the MyLikes.com reward model.

According to eMarketer, brands will spend an estimated $61.8 billion on online advertising in 2010. FreeLunched is trying to leverage its back-end analytics to monitor and adapt to its user base through different growth stages. As the present majority of the company’s user base consists of women aged twenty-five to forty-five, the company is targeting e-retailers of women’s apparel, women’s accessories, baby clothing and merchandise, and consumer electronics.

FreeLunched penetrated the market through grassroots referral programs on social networks such as Facebook and Twitter. At present, it has engaged its first two paying customers and anticipates its first significant revenue this month. FreeLunched has just finished three months of beta launch and has over 3,600 registered members, again, most of whom are women aged twenty-five to forty-five. The site has received over 30,200 visits with well over 160,000 page views and an average time on the site of over five minutes and fifteen seconds. Daily traffic has been over 300 visits a day. FreeLunched  is one of five companies to participate in the fall class of “Incubate Miami,” a local business incubator out of Miami, Florida, and has received positive feedback from both Sony’s and Microsoft’s Twitter pages.

Dannheim received small loans for FreeLunched from an uncle and his girlfriend in January 2010. To continue financing the company, he has also used his savings and sold some of his personal belongings. Dannheim says that he will reverse this flow of capital in the month of September and is planning to raise funds before the end of October. Dannheim says that three  companies that have potential to be clients (currently in negotiations) are boutique retailers www.bluematgroup.com, www.agooforyou.com, and www.motherofasale.com.

To achieve good growth for phase one, the company plans to focus on traffic generation. For phase two, it plans to sell days/e-mail campaigns to e-retailers by outbound sales calls, conventions, and strategic partnerships, and for phase three, it plans to add additional components to the FreeLunched platform.

FreeLunched presented at Sramana’s 1M/1M roundtable on August 26, 2010. The recording of the session is here. You can also find Sramana’s recap here. Sramana advised Dannheim to build a highly targeted audience for which he has very precise data, so that he can segment and target this audience on behalf of his retailer customers. His pitch to retailers needs to be that he has a very targeted audience on which he can run a precise promotion. For now, according to Sramana’s assessment, phase two is irrelevant.

Recommended Readings
The 1M/1M Incubation Radar: Off The Quad
Deal Radar 2010: LivingSocial

This segment is a part in the series : 1Mby1M Incubation Radar 2010