Crowd Pleasers: Threadless Gives People What They Want

The headquarters of Threadless.com look like the collision of a dot-com startup and the Little Rascals’ clubhouse. The main room of the offices on Chicago’s northwest side holds three ping-pong tables, a set of full-size arcade games and a photo booth. Off to one side sits a ’62 Airstream trailer and a couple of couches, catty-corner to a large flat-screen TV, a half dozen recliners and a panoply of videogame consoles.

But don’t let the slacker decor fool you. For everyone from Inc. magazine to MIT’s Sloan School of Management, these guys represent an entirely new way to create and market products: crowdsourcing, the practice of using the community outside the company to help create and then market your products.

Threadless didn’t set out to be the poster child for a next-gen business model. Back in 2000, Jake Nickell and Jacob De Hart were two college students who met up in an online designer forum called Dreamless.org. Nickell had recently won a T-shirt design contest, and the pair got the idea to run similar competitions for the community. Creators could submit art; the public could come to a Web site and vote for their favorites; and the winner would receive a small cash award. The “Two Jakes,” as they were known, would print up and sell the winning designs and plow the profits back into further contests.

Almost immediately the founders began noticing a social component to Threadless.com, the name chosen for their contests. After submitting their art, designers asked their friends to come onto the Web site to add their voices in picking winners. Without intending to, the Two Jakes had successfully tapped into word of mouth marketing on the Internet.

That success continued, with the Threadless community growing from 10,000 members in 2002 to 70,000 in 2004. Today the community stands at 1 million members and counting.

As for revenue, while the privately-held company doesn’t release sales figures, various sources have reported that revenues grew from about $100,000 in 2002 to $18 million in 2006 and as much as $30 million in 2008.

Managing that kind of growth requires some professionalism in the C-suite. In May 2008 Thomas Ryan, an entrepreneur from the world of online music retailing, stepped in as CEO of parent holding company SkinnyCorp., and founder Nickell became chief strategy officer. And in March of this year Cam Balzer joined the company as vice president of marketing — a post that had not existed before he arrived.

“The company has traditionally done almost no advertising,” Balzer says. “It’s all been driven by word of mouth. People can’t help talking about the cool T-shirt they see someone wearing. My mission here is really to find ways to amplify that buzz.”

Content Under Pressure

For both paid and unpaid marketing, that means reaching Threadless fans primarily through online social media, something they consume in large amounts and in a wide variety of channels. The company has a Facebook page (currently 95,000 fans) and a branded Twitter account (1.4 million followers), of course. But it also lets its friends connect on an array of other social platforms that would dizzy the average over-30 marketer, like sharing video on Vimeo, posting everything from T-shirt designs to ping-pong league photos on Flickr, and even maintaining music stations on Web radio platforms Last.fm and Blip, so that true believers can find out what the company’s 45 employees like to listen to.

Balzer’s team is the driving force behind that engaging content, always served up with an eye toward entertainment and mixing contests, discount offers and a healthy dose of anarchy. Charlie Festa, Threadless’ community relations manager, serves as the bespectacled public face of the company on most of its Threadless Friday video updates and many of the 200-plus videos on Threadless Tee-V. He also designs and runs extended user competitions such as this past summer’s “Threadcakes,” a contest to reproduce some of the best T-shirt designs in flour, sugar and icing, and “Threadknits,” a current competition to do the same in crochet.

Promotions manager Bob Nanna is the avowed “Twitter ninja,” watching over traffic on the brand’s main account (but also taking the title role in Threadless’ “Stump the Banana” trivia giveaway games, streamed live to the Facebook site). And editor in chief Colleen Wilson consults with all these channels and the Web site to make sure that all Threadless communications have the same sassy, informal but helpful tone.

Twitter serves as the connective tissue for both the Threadless community and its other outbound messaging, its e-mail and newsletters, which Nanna also has charge of. E-mail and newsletters — even those users have subscribed to — can choke a mailbox, and when you’re promoting several different things in each one, the details can get lost, Nanna says. With Twitter, each contest or observation gets its own 140-character mention.

“Users are going to Twitter in the expectation that they’ll receive many different messages from all the people they follow,” he says. “Whereas we would only be able to send a newsletter once or twice a week with 10 items in it at once, our people are expecting us to tweet five to 10 times a day.”

Next Page: Tops On Twitter

Tops on Twitter

Threadless has something of a symbiotic relationship with Twitter. Early on, it was added to the “suggested follower” list that first-time Twitter users see on opening an account. That leg up means that Threadless is quite often tweeting to followers who may be encountering the brand for the first time, making it all the more important to convey not just what the company sells but a sense of what it stands for: community, sharing and eclectic fun.

So while some messages flog new T-shirts, other tweets can point to interviews with indie musicians; Nanna is plugged into the music scene and has what Balzer refers to as “an innate sense of what will engage people.” Balzer relies on him and on other musicians and performers at Threadless to keep the company’s Twitter voice authentic and interesting.

“For people who use it successfully, Twitter is a very personal medium,” Nanna says. “It’s a real person speaking to you and saying, ‘This is something really cool — why don’t you check this out?’ People on Twitter don’t expect to be spoken to by a marketing-bot. It’s a way to open up an interaction that you just don’t get from e-mail.”

In May, Threadless announced a partnership with Twitter to crowdsource designs for a new line of Twitter Tees. Basically it’s a design contest for the verbal crowd. Tweets are submitted for consideration at www.Twitter.Threadless.com and voted on by Twitter users, just as in the graphics competition. The two concepts that win community approval each week get artified and turned into shirts with slogans like “It’s not piracy if there’s no parrot involved.” Within hours of the May rollout of the Twitter Tee contest, the Web site had some 200,000 votes.

Balzer and Nanna are now trying to put some of that same viral momentum behind the Threadless Facebook profile. The tool here is “Fandemonium,” a phased drive to reach the 250,000 mark by getting current followers to recruit their friends. The inducements, laid out in a menu on the page, are a mix of Threadless gear giveaways and zany experiences that are worth more than swag to the Threadless crowd. The warehouse manager was bombarded with eggs at the 90,250 mark and again with chocolate at 94,500. At 92,500 Facebook fans, Festa and the crew threw a mini-fridge off the roof. For 92,750 fans, Wilson offered a short video lesson in tap dancing; at 95,250, Nanna himself will teach the art of cooking an artichoke.

“These are just fun videos, not overly promotional, that reinforce the sense of Threadless as a fun community,” Nanna says. “They make us a good place to hang out and interact online.”

Brands Love

A fun hang it may be, but brands are increasingly interested in tapping into Threadless’ creativity and community. Both those things happen with the “Threadless Loves” design challenges, in which the designer audience is asked to produce ideas for a specific theme, such as travel, horror or children, often sponsored by a brand or charity. Unlike the regular crowdsourcing process, the winners in these challenges are chosen by a panel of judges from Threadless and the sponsor.

But this is branding the Threadless way. Contest rules prohibit corporate logos and make clear that the aim is to express a theme, not sell the sponsor’s product. For a Threadless Loves Pre-loved contest earlier this year, sponsored by Volkswagen’s pre-owned division, the contest rules emphasized the “love” portion of the slogan. The winning design, showing an astronaut whose hands encircle the earth in a heart shape, won the designer a pre-loved Volkswagen, $2,000 in cash and a $500 gift certificate.

He was also able to contract with Volkswagen for a non-Threadless printing of his design as a showroom giveaway — this time with the corporate logo on the sleeve.

Balzer says Threadless is getting more aggressive about seeking out challenge partners but is careful to make sure the brands and sponsors are a good fit for its designer and user communities. For example, Microsoft wanted to run a design challenge offering a Zune HD player, an Xbox 360 and a stack of videogames as a prize. The Threadless team brainstormed about a contest that could incorporate the brand without blatant pitching.

What they came up with was a contest in support of BlameDrewsCancer.com, a Web-based charity founded by online personality and Hodgkins’ Lymphoma patient Drew Olanoff. The challenge became “Threadless Loves Geeks,” and Microsoft agreed to throw a $2,500 donation to BlameDrewsCancer into the prize kitty.

“Microsoft had their marketing goals and their target audience, but for us it was about, is there a cool challenge here?” Balzer says. “We’re getting approached constantly by brands wanting to work with us, and while we’re not snobs, we always have to ask, where’s the engagement in these promotions for our community?”

Most recently Threadless has found that engagement with Mountain Dew’s Throwback, a limited-time revival of the brand’s old ’80s drink formula made with real sugar and featuring a hillbilly on the package. The challenge: to design a T-shirt with the same retro feel as the product. And the reward is to have that design added to the limited-edition T-shirt series Mountain Dew will roll out when Throwback hits stores at the end of this year.

Next Page: Changes Ahead

Changes Ahead

As it approaches its 10th anniversary, Threadless is contemplating some changes in both its marketing style and its product lines.

For one thing, the company is interested in finding product extensions that are an organic fit, like the partnership with Blik that makes Threadless designs available as oversized wall decals. In mid-November, iPhone case maker Griffin licensed and produced cases with some of Threadless’ most popular graphics. The first two items in that line are now for sale in Apple stores and on the Griffin Web site, and Balzer says more are in the works — as are other possible licensing deals.

“We’re really picky about who we work with,” he says. “It’s about whether the artists would be proud to have their work shown on that product.”

Internally, Balzer and his team are working to add some formal metrics to their new marketing efforts. “Over the last six months here I’ve been building a metrics foundation and an investment model that we can use to understand the value of customers over time. It’s been interesting to marry that science of marketing metrics to a business where it’s really about making people love you.”

For example, Threadless’ e-mail communications are undergoing some adjustments due to comments and complaints detected through social channels. The brand has had some deliverability issues, so it’s testing new formats. Where Monday e-mails announcing the week’s new tees had a model shot and a large block of copy for each design, the new version offers fewer model shots, more close-ups of the designs, and slimmed-down copy. The change, Balzer says, has improved both deliverability and clickthrough rates.

However, this drive to measurability will have to add to the impact Threadless has already had with its community-based approach, not undercut it. “We’re interested in acquiring new customers,” Balzer says. “But it’s never going to be boiled down to a spreadsheet operation.”

How Threadless Handles Crowds

STEP 1

Each week, a thousand or more designers submit graphics to the Threadless.com Web site.

STEP 2

Threadless checks them for copyright and to assure a level of quality, narrows them down to about 100 and puts that selection up on the Web site.

STEP 3

Registered users can rate the designs from 1 to 5. They can also check a box that says “Yes, I’d buy that!”

STEP 4

The week’s top 6 to 8 vote-getters go out for production and on sale on the Web site.

STEP 5

Designers whose ideas were selected get $2,500 in prizes and a chance for more rewards as best T of the month or the year. Threadless gets a license to print shirts.

Selling in the Social Net

AS MARKETING VICE PRESIDENT, CAM BALZER EXPLAINS THAT Threadless is just beginning to test the waters of paid marketing and wants to explore channels that will integrate best with its already-successful word of mouth efforts.

But just because those efforts are exploratory doesn’t mean Balzer can afford to overlook ROI. “Because we’ve done so well without spending on marketing, we’re starting from an infinite ROI,” he says. “Any dollars spent comes directly out of our bottom line.”

For that reason the company opted to buy cost-per-click (CPC) Facebook ads against a “Summer Heatwave” sale of its T-shirts last June 1 through 10. Working with digital agency Performics and Facebook’s self-service ad platform, Threadless placed small display ads on the right side of members’ profile pages, targeting users 18 and up. The ads linked to a landing page for the summer sale where visitors could order shirts.

Performics is part of an alpha test for a new Facebook advertising interface, so the agency had access to some advanced pilot tools for managing and optimizing ads, says Craig Greenfield, Performics vice president of search and performance media. The graphic-and-text ads were optimized to make more use of the images that produced the most clicks.

As a result, the campaign earned an average clickthrough rate of 0.07% and created a three-to-one return on ad spend. “We see a lot of promise in Facebook ads,” Balzer says. “The ability to reach our core demographic of online actives is tremendous.” And for this and subsequent Facebook CPC campaigns, 80% of the users clicking through the ads to buy are first-time shoppers.

“The ability to keep tapping new audiences every time we go out is huge for us,” Balzer says.

With that experience in mind, Threadless is now considering paid ads in another social medium, the social news Web site Digg. The attraction there, he says, is that users can vote the Digg ads up if they like them or bury them if not, just like its news stories.

“That takes the core idea our business is built on and filters it out into the ad world,” he says. — BQ