Hi Guys! This is John Buchanan, co-founder and COO of Postabon. I'm a former Investment Banker, Harvard Business School graduate, and new father. I thought I'd share some thoughts about the business and motivation behind Postabon, since I have a relatively unique perspective on this. Shaneal's been a little busy with the tech side of things since the launch (although he promises me he'll post another blog entry this week too!).

As some background, Postabon (www.postabon.com) is a crowd-sourcing platform that encourages users to find and share in-store discount recommendations.  Users can post shopping recommendations from their mobile phone or PC that are then viewable in real-time by any other user of the platform. We currently have 800 recommendations posted by users in Manhattan ranging from after holiday sales, happy hours and stores with generous return policies.

During the two years I was a student at Harvard Business School, I read over 800 business cases that outlined a problem facing a "protagonist" or a real life business manager. During each 90-minute class, a group of students (often unfairly) evaluate the manger, their industry and the situation at hand. While I often complained about the amount of reading, I found the training helpful while developing a business plan for Postabon, the company I co-founded with another HBS grad this June. Network effects, a concept I learned about at HBS, is an important aspect of our business model and the subject of this blog post.

Two trends led us to start the business 1) intense consumer demand for discounts and 2) and a change in the way people use mobile devices. Initially this led us to a similar conclusion as mobile couponers like Cellfire, Yowza, and others; partner with advertisers to offer location based discounts. While some of these mobile coupon providers have gained traction, we identified a flaw in this business model related to network effects.

Network effects is based on the idea that value of a networked service increases with each additional user added. Think of owning a telephone – it's worthless if you're the only person that owns one, but as more telephones are added to the network its value becomes exponentially greater. In the case of mobile couponers, network effects apply to users and advertisers. From the user's perspective, the network of local coupons becomes more valuable as the density and quality of discounts improve. From the advertiser's perspective, the value of advertising on a coupon network improves as users are added.

Several mobile coupon companies develop sales forces to sell large retailers or CPG companies to provide content on their network.  Without users, it's hard to convince these national players to publish content. For example, despite a fair amount of capital and some success (especially among grocers and west coast businesses) there are no deals posted on Manhattan from Cellfire. Without deals, there's little reason for me or other New Yorkers to use the Cellfire platform. Network effects create a barrier on both sides of Cellfire's business model and have prevented mainstream success.

We strive to make Postabon a very agile business, that can quickly change to find Product/Market Fit. Shaneal has done some work for the military, and likes to talk about the OODA (Observe-Orient-Decide-Act) Loop and Boyd's Law - which roughly says the team that can iterate fastest, wins. As soon as we realized some of the down-sides of a advertiser-based approach, we  adapted the Postabon platform to take full advantage of network effects and make it more focused on user-generated content and deal finding.

Postabon's crowd sourcing approach was developed to address the network effect constraints we identified in these other companies. Crowd sourcing allows us to generate significant content density on our network at a minimal cost.  Over the past six weeks we've generated over 1,000 posts with 800 in Manhattan or approximately 80 deals per square mile.  The closest competitor has approximately 200 deals on the entire island of Manhattan.  As we continue to attract more users who both post, review, and act on deals, our platform becomes more valuable to local and national advertisers. While Postabon also faces some user network effects it is our belief that a minimal number of active posters quickly creates a platform that is more valuable than alternative platforms.  It is our belief that we can quickly scale in a city like New York with minimal cost.

While the first month of our launch has significantly exceeded our expectations, Postabon still has a ways to go. We're looking forward to expanding in New York and other cities and continuing to prove our business model.