On this episode of Recode Decode, hosted by Kara Swisher, David Rosenblatt talks about his journey from online advertising to his current post as CEO of luxury goods marketplace 1stdibs.
You can read some of the highlights here, or listen to the entire interview in the audio player below. We’ve also provided a lightly edited complete transcript of their conversation.
Kara Swisher: Hi, I’m Kara Swisher, executive editor of Recode. You may know me as the top bidder on your sunglasses auction, but in my spare time I talk tech and you’re listening to Recode Decode, the podcast about tech and media’s key players, big ideas and how they’re changing the world we live in. You can find more episodes of Recode Decode Apple Podcast, Spotify, Google Play Music or wherever you listen to your podcasts. Or just visit Recode.net/podcasts for more.
Today, I’m in New York City and in the red chair is David Rosenblatt, the CEO of 1stdibs, which is an online marketplace for furniture, jewelry, art and antiques. David was previously the CEO of DoubleClick, the online advertising company bought by Google in 2007, which is a basis of most of their business at this point. And, he serves on the boards of several important companies, including IAC and Twitter.
David, welcome to Recode Decode.
David Rosenblatt: Thank you for having me.
No problem. We’ve known each other a long time, haven’t we?
We have. Back in the DoubleClick days. And before that. Where were you before that?
I was at DoubleClick for a long time.
For a long time, yeah. So, what I’m going to start with is sort of your background. You’re in a completely different business than what you started in. Well, sort of, it’s a marketplace.
To some degree. Yeah.
Yeah. But it’s different at the same time. Give everybody your background a little bit, where you came from.
How far back? Professional background, I assume.
Professional. Like how did you get into the internet space?
I did a bunch of different stuff. I majored in Chinese Language and Literature in college.
Okay, that’s totally not relatable to this, but okay.
Exactly. Did a tour of duty in Asia. Came back. Did a stint on Wall Street. Didn’t like that. My honorable discharge from investment banking was to go to Stanford Business School.
Why didn’t you like investment banking?
I didn’t like being an agent as opposed to being a principal in any business, number one. And, number two, I didn’t want to be in a quantitatively oriented job. I wanted to be in a job where I was making something and could actually impact an industry.
Where did you grow up?
Yeah, I’m almost embarrassed to admit that these days. It’s true.
Did you go to the same schools as my kids there or you grew up in the area?
The Georgetown Day School, for some reason.
No, I went to a school in the same kind of bracket.
Same genre. In the genre.
Yeah. Exactly. Yeah.
But, you went into investment banking because that’s what people did, or?
No, because I literally, in college, and unlike many other people in tech, I don’t think I took a single class with a number in it the whole time I was in it. I don’t think I read the Business section until I was 25. And, to me, business meant finance.
Right. That’s what everybody did.
And, so when I got to the point where I felt like I needed a real job, a real job was something in finance.
So, no computer background, that’s what I’m getting at here.
So, no technology background.
Were you not a secret geek in high school or things like that?
No, no. Unfortunately not. I wish I had been, but I’m not. And, so I ended up going to Stanford Business School from 1995 to 1997. That coincided with the birth of the internet as a commercial medium. And, in fact, I still remember, we used to have these sessions called Meet The Companies, MTCs. And, the first Meet The Company that I went to was with two grad students who had started a business called Yahoo. And, the room was about a third filled.
This was Jerry and Dave.
This was Jerry and Dave. It was about a third filled. And, they kind of walked through the business and I remember all of us walking out thinking, “Eh, sort of an interesting idea, but doesn’t seem like a real business to us.”
This was what year? What year was this?
This would have been 1995. The fall of ’95.
Right. They went public not soon after, right? Relatively soon.
I don’t remember exactly.
Yeah, it was soon after.
But, they were still grad students at Stanford at that point. Anyway, to cut a much longer story and uninteresting story, short ... The summer between my two years I wanted to get into tech. I didn’t know how to do it, so I wrote letters to 20 VCs and I said I’ll work for free. Put me into any company in the country. Only one person wrote back. That was Alan Patricof, who was sort of the dean of the VC community in New York. And, he put me into a New York company, which that company ended up not being the one that I stayed with. But I loved the experience.
Which was it? What was it?
It was called Omnipoint. It was the first GSM licensing on the east coast.
But I loved the experience and probably, more importantly, I met the woman who would later become my wife that summer.
All right. That’s good.
When I graduated Stanford, on that basis, I moved back to New York.
So you left Stanford, where everybody stayed in tech, to come back to New York?
Yeah, only because of a woman.
Yeah. Okay. All right. Okay. But you moved to New York, which was not the center of tech.
But I moved to New York.
Because right then, at that time you were there, it was Jerry, Larry and Sergey. They were all there at Stanford.
It was everything. Yeah. I mean.
Excite at Home was there. They were all ...
Yeah, exactly. So, in the end, I basically decided to prioritize my relationship over my career.
I ended up, as I sort of came back to New York and I met the very small number of digital startups that people felt were promising. I ended up connecting with Kevin O’Connor, who had recently founded DoubleClick, and he brought me on as one of the first product managers.
And, why did you like that? You just met him? Where did you meet him?
I met him through a mutual friend. Actually the first weekend I was back, I went to a friend’s bachelor party, or engagement party, or something like that. And, I met a guy ...
There’s a difference between the two parties.
I know. I know. Although for my purposes, there wasn’t.
I met him and he happened to be working ...
Strippers or canapes.
Exactly, well I don’t remember if there were any strippers there. My memory of that night is fogged over.
And, so he happened to work at DoubleClick. He said, “Look, I think you should meet our founder.” I did. He offered me a product manager job. And, I took it and ended up spending 11 years there and then another year at Google, after we sold the company.
What attracted you to it? Explain what DoubleClick did. Because it was a really seminal company in the online advertising space and became sort of the backbone, one of the backbones, of Google’s businesses. Overture was the other one.
Yeah, DoubleClick invented the display advertising industry. It started out life as an ad network. I was hired to unbundle the technology that drove the network and sell it to publishers who competed with the DoubleClick ad network, like the Wall Street Journal and others. That business ended up really surviving the ad network business, which we shut down and sold, and became the core of the company. We, like a lot of digital companies, sort of tracked the kind of equity market, public equity market for digital companies. So we went public in ’98. We had a $15 billion market cap by the year 2000. And, then we hit the wall, along with everybody else. Unlike most other companies, we were fortunate in the spring of 2000 to have raised about a billion dollars.
So we had the capital to remain solvent when others went bankrupt. So, I was promoted in 2001 to be the No. 2 person. Between 2001 and 2004 we both survived the dot-com meltdown and also attempted to diversify away from our core business, which was advertising, into things like database technologies and data itself.
Because everyone was looking for something else.
Everyone was looking for something, for a way out.
What happened in 2004 is the equity market for internet stocks came back. We, however, did not come back with it, because by that point we had diversified away from being what everyone thought we were, which was an internet advertising company. And the board ended up deciding to sell the company through an auction. We ended up being acquired by Hellman & Friedman, which is a San Francisco-based private equity firm.
They asked me to stay on as CEO, and our strategy from that point on was basically a kind of back-to-the-future approach where we reversed our way out of the diversification that we had followed for the previous three years.
Although data would later be very important, which is interesting.
Well, data’s always important, but there are different ways to be a data company.
Sure. I want to talk about the origins of that. One of the reasons I wanted to have you on — as well as to talk about 1stdibs —but, the origins of advertising. People don’t really understand how sort of piecemeal it was in moving forward. Like, everyone thinks, ah, Google now, Facebook now. But there really was a really questionable period of time, how it was going to monetize, correct?
I remember we had ... Actually it’s funny, after the dot-com meltdown, a bunch of leaders in the industry, both among ad technology vendors like us and also publishers like MSN, created this group of people, which they called the loya jirga. The loya jirga was a form of governance in Afghanistan, which at the time, obviously was, we felt, sort of appropriate. And this loya jirga then proceeded to create a lot of the infrastructure, which allowed the industry to mature to a point where it really could go mainstream.
So, I think the IAB, the Internet Advertising Bureau, came out of that. A lot of the standards around ad creative and so on came out of that.
Explain for people who don’t understand what the problem was. There was just no, there’s no standards. There was no real, the ads were not useful or helpful. What were the big issues you were facing then?
I think the big issues were, again, it was in the wake of the dot-com meltdown. Things were different before that. The industry was not standardized. So it was incredibly expensive to operate, both as a seller and as a buyer. There was no standard definition of what an ad unit was. There was no standard way to price it. There was no standard way to evaluate the efficacy of the advertising. And, in that kind of environment, big companies like Procter & Gamble ...
Who were the buyers.
... on whom the future of the industry depends, aren’t gonna buy at scale.
They dabbled. So in retrospect, what happened is, in that sort of fallow period from ’01 to ’04, a lot of the infrastructure that ended up forming the basis for the industry was created. The ultimate event, though, which I think actually allowed the display business to become as big as it is today, was the creation of the DoubleClick ad exchange. And the conversion of the display advertising business from a sort of old-fashioned, three-martini lunch, negotiated-ad-buy universe to one in which ad inventory was monetized through a marketplace of tremendous scale. And that was what we created and what became the basis of the DoubleClick business of Google.
It was the Google of advertising. It was the Google of that, because Google had bought Overture and was doing that in search.
Yahoo bought Overture.
Yahoo bought Overture.
To compete with Google.
Yes, compete with Google. I’m sorry. And, Google had bought, what was the one it bought? Oh, I’m blanking.
Yeah, one of them.
Which became the basis for AdSense.
What was interesting is that they did the same thing. They were in the same genre in their money making. The kind of idea of making it automated, I guess that’s what you’re saying. Advertising ...
Making it automated and allowing advertisers to ... Actually the difference was in the ... What ad exchanges allow is for the advertiser to buy the underlying audience. So, publishers at the end of the day, are simply a proxy for underlying audience. Our theory in developing and launching the ad exchange was, if you could somehow separate that underlying audience from the publisher and allow advertisers to buy that audience directly, then it becomes a much more efficient process, at least in an economic sense.
And, that’s what happened. Today, I don’t know exactly, but I think its GMV is somewhere in the $20, $30 billion annual range.
And, where did you get that insight? What was the insight from?
It was really motivated by fear, actually. We understood that Google was aiming to enter our business. And, in fact, based on what we knew, they had a lot of resources behind it. So we got behind closed doors and we came up with, what we called Project Centillion.
Where do you come up with these names?
Centillion, according to the PM that invented this, is the only number that’s bigger than a Google.
Oh, all right. Okay.
And, the idea was if you could create an ad exchange then all the stuff that Google was building mattered a lot less than the scale and the reach that we would be able to deliver as an alternative.
Right. And you still had relationships with publishers and others.
Yeah. We worked with every major brand and publisher, including AOL, Viacom and so on.
People were, even then, scared ... They were still scared of Google at that time. They were still nervous about what it was doing.
Of course, yeah.
Even though Google had just started only a few years before, which was ...
Well, even, I don’t remember the numbers, even by then it was pretty clear they were the force to reckon with.
Absolutely. And Facebook didn’t exist.
And, there was no Facebook.
There was no Facebook, right.
So they were the only large cat game in town, other than Yahoo, which, even then, you could see the beginnings of decline.
It took forever for that to die, didn’t it?
Right. It did.
It’s still dying. It’s still slowly dying. It’s like watching someone fall down the stairs in slow motion, in a lot of ways. But you sold it to Google. I’m going to fast-forward to 1stdibs, how you got there. But you sold it to Google. What was the thinking behind it? Was it they needed you because ...
Well, the basic idea behind the merger was, what we offered was an ad platform, which publishers would use to manage their own advertising. On the basis of the scale of that ad platform — and by the time we sold the company I think we were delivering somewhere between three to four billion ads a day — the idea was we would create this marketplace to help publishers monetize unsold inventory, right?
Using our technology to help monetize the unsold inventory that they were selling.
And, then they didn’t have a great solution for unsold inventory. That was the problem that the ad marketplace, the ad exchanges pointed at. And, so the simple idea was, let’s marry our publisher installed base with their monetization machine and basically take the DoubleClick strategy as it existed then but power it with all of the demand that Google could bring from advertisers they already work with.
Right. And, how did you feel about that? I mean did you think that you could have been by yourselves? Or, there’s always a moment where ...
The analogy I used with our board at the time is ... So, the courtesy of having reversed that diversification and the newfound focus that we had as a company, we were doing extremely well. So the analogy I used at the time ...
But, Google was coming at you.
Yeah, I felt like we were on the deck of the Titanic, pre crash, clinking champagne glasses. We had this huge iceberg in front of us called Google. Either we were going to hit it, in which case the party was over, literally. Or, we could bypass it, in which case, life would be better than obviously if we had remained independent.
And, wasn’t necessarily good at everything. But this was an area you thought that they would excel at, that they were aiming.
Why did they need to buy you at all, did you think?
First of all, I think, what Google ...
They’re not buying Spotify right now, or maybe they are.
Yeah. At the time, Google was functionally organized, so they had very few people that were focused on this business and that we felt really understood it. And, like a lot of companies, they thought about this new business in terms of the old business — meaning search — even down to the terminology they used. And, none of that stuff applied or was right.
Secondly, big publishers were threatened by Google.
And, yet at the same time, Google needed those publishers for inventory to sell, because they didn’t have, at the time, a whole lot of display inventory themselves.
So those were the two things that we could deliver, right? A great product, it was a technology-driven company. We had something like 800 engineers. We were by far the market leader and we had the best relationships with the best publishers.
Right. Remember how it was greeted at the time? Microsoft went crazy.
Yeah, right. That’s true.
Crazy. I remember getting calls.
Microsoft and Yahoo both bid for us.
We ended up in a bidding war between those three. Google obviously won. Microsoft under Ballmer at the time was, not surprisingly, hypercompetitive and reacted in a way that hypercompetitive companies do, which is they bought what they thought was the alternative to DoubleClick, which was a company called aQuantive.
For twice the price in absolute terms. They paid $6 billion.
Only to then realize they bought the wrong company and ended up writing down, I think ...
That sounds like Microsoft’s acquisition strategy.
Yeah, and look, I think they wrote down the full $6 billion purchase price.
They did. They did later. And, then what did Yahoo buy?
To develop the in-ad exchange and they never invested in it and then it, too, died a slow and painful death.
Yeah. So everyone was grabbing for one of those. But you guys faced a lot of regulatory pushback.
We did. So we got to a deal with Google in April of ’07 and it took us a year to get clearance in both Europe and the U.S. In the U.S. we got clearance on December 23 of ’07 because in its bravery the FTC picked a time when they thought that people were going to be on vacation.
To approve it. We got approval in Europe a couple of months later. And, closed in-
You wouldn’t have gotten it today, I’ll tell you that.
We probably wouldn’t have, yeah.
Never today. So, you didn’t stay there for long, right?
I stayed there for one year. Yeah. Look, my goal in that year was to do the best I could to help see the integration through and make sure that our best people were taken care of.
Why not stay at the board? They would have liked to keep you, I’m guessing?
I’m not sure. I mean, for one thing, I lived in the wrong city. I wasn’t interested in moving out to Mountain View. And Google is an absolutely incredible company, but, the truth is, I was also used to running the show and I wouldn’t have, obviously, at Google.
Who would you have worked for? Susan or?
Well, I did work, in that year, I worked for two people actually. I worked for Jonathan Rosenberg, who ran product at the time, and Omid Kordestani, who ran sales. Again, both of whom I like a lot. But because, at the time, Google didn’t have ... wasn’t organized around business units, there was no natural role for me and I lived, again, in the wrong city.
Right, and then you stayed here.
And, I also wanted ... I enjoy the process ...
So now we’re going to get to how you got here. I’m sorry to go into that because it’s so interesting. Because you were there at the dawn of this very important business for Google and sort of runs thing. When we get back we’re going to talk more with David Rosenblatt. He is the CEO and are you the founder of 1stdibs?
No. I’m not.
No, you’re not. But, it’s an auction company. You’re going to explain it in a second.
I’ll explain it.
All right. Great.
It’s a marketplace.
We’re here with David Rosenblatt, who is the CEO of 1stdibs and he is gonna explain that. So you left Google. You sold DoubleClick for $3 billion, is that right? That’s a good sale. But they made it into an even bigger business. And you got out of the online advertising business. Why?
Why? What happened?
Well, I stayed in it ...
You had done it for a dozen years.
Indirectly, through boards and angel portfolio. But, basically as an operator. Listen, I mean, I had done it for a long time, over a decade. And, we had created at DoubleClick the display advertising industry and I was ready to learn new things. That’s what attracted me to the internet in the first place.
Right, but you were probably offered lots of ad jobs, right? And, it was still like evolving and Facebook had just started. Did you ever think of going there? I’m sure you had an offer from them.
Yeah, I didn’t. Again, the other issue is location. So I live in New York. I sort of flirted, for a short time with the possibility of moving out to the valley. Decided that-
Why didn’t you?
Because I love living in New York. I walk out onto the street and I feel a rush of energy that I don’t feel anywhere else in the world.
And, I guess, the only business would be AOL, right here, was here at that time.
At the time, AOL, I’m sure there were others that aren’t coming to mind.
Foursquare, yeah, Foursquare was around. There was a couple. But, what made you go into this? How did you get to 1stdibs? And, explain what it is.
So, 1stdibs is the world’s largest marketplace for luxury design.
So, the simplest way to think about it is it’s eBay meets Sotheby’s.
There are differences in terms of the business model and so on, but it’s kind of an easy way to conceptualize it.
So, how did I get to 1stdibs? In the wake of leaving Google, I joined a bunch of boards. One of them was Twitter. One of Twitter’s investors was and is Benchmark.
I’ve heard of them.
They’ve been involved in something recently, I’m trying to think. Uber, maybe?
And so, two years after I left Google, I was talking to Benchmark and they said, “Hey, you know, we’re thinking about investing in this company called 1stdibs and we’re likely going to need somebody to run it, would you be interested?” I had never heard of 1stdibs. So after they explained to me what it was, I called an interior designer who I had done some work with and asked him, “Hey, Russell, have you heard of this company, 1stdibs?” And, he said, “Have I heard of it? 50 percent of your apartment was sourced on 1stdibs.”
So that was the first time that the light bulb went off. And, I spent some more time with the founder and with Matt Cohler and Bill Gurley from Benchmark. Even though it was a very small company compared to what I had run before, and it basically wasn’t growing, I was really intrigued by the concept and by its potential. So I joined.
And, talk about sourcing. Explain, because you don’t think luxury goods is something that’s either scalable, speaking of things that are done in an old way. You go to those design places, there’s one in San Francisco, a design center. People pick things out. They sit on settees. They go through things. They wander around. It was done in a very old-style way of antique stores.
Yeah. Like a lot of industries.
Yeah. But really it’s a harder one to do. So, explain how you ... It’s not one you would think of for digitization.
It’s true that most people wouldn’t think of it that way. On the other hand, most people didn’t think that fashion would be amenable to digital disruption either. These are things that you want to try on. How can you buy something without trying it on and looking at yourself in the mirror and so on. But, actually it turns out that the luxury collectibles business, for lack of a better word, is a $300 billion industry. It’s a global industry.
It’s mostly a one-of-a-kind business, meaning that there are very few copies of what people buy, so the likelihood is that the buyer’s not going to be in the same city as the seller, which means there’s a lot of value to an intermediary.
Yes. Remember because you got grand tours of Europe to get their collections or their furniture.
And so if that grand tour of Europe can be brought to your doorstep, then ... And now you can do that shopping trip at 11 o’clock at night, why wouldn’t you? And, in fact, as we look back at the origins of 1stdibs, the story is our founder was in Paris. There’s a neighborhood in Paris called the Paris Flea Market, which hosts a lot of these antique stores ...
I’ve been there.
To which interior designers used to go all the time. There’s a Woody Allen movie that was set there, “Rhapsody in Blue,” and so on. Sort of occupied a pretty important place in the country’s mythology, culture.
Sure. And, there’s places in New York like that.
Yeah. In every city, actually. So, what happened is, our founder started the business by walking around the Paris Flea Market, taking pictures of items and putting them on a website. And, then shortly after he launched the website, 9/11 took place and all of a sudden high-end interior designers who used to or previously had flown to Paris with their clients to look at product now, not only were they not able to do that, but they didn’t have to anymore because — voila — they had this website that allowed them to see the same product.
He, then, quickly moved to New York and he ran that business organically over the following 10 years by adding, on the supply side, the best dealers in the country. It was all or mostly U.S. of high-end, vintage and antique furniture.
Sort of Etsy does that. I’m trying comparables.
That’s one way to think about it is, Etsy with three zeroes at the end of it’s AOV. Right? And, so he added the best dealers of, again, luxury, vintage and antique furniture, and then expanded into jewelry and art, mostly U.S. And that was the business that Benchmark invested in. It was the first outside capital in the company at the end of ’11, and it was in conjunction with that financing that I joined the company.
So you were attracted to what? The idea that anything can be digitized, is the concept, right?
Listen, my basic belief is everyone is going to do everything over the internet. And, why would that not ...
Well, that word I don’t like because Amazon stands for a certain way of doing business that’s a little different than our approach. But, the bottom line is, this industry, too, will become digital. It didn’t have that disruptor yet. And I felt like we had the best shot to be the vehicle for that kind of evolution.
Explain the business model. I’m trying to think of like how ... There’s other things that you got a fee for, finder’s fee, or what’s the ...?
So the business model has shifted. In fact, I think, with maybe one or two other exceptions, we’re the only marketplace that I know of that has successfully made the transition from being an advertising-based business to being an e-commerce business.
So, what do I mean? For the first 11, 12 years of the business, the way it worked is pretty simple. Sellers, all of whom were professional sellers — so, dealers or galleries. We don’t source from individuals — would pay, essentially, a fixed monthly fee in exchange for the right to advertise items on the site. However, all contact between buyer and seller up to and including the order itself, then happened off the platform.
You would just be a finder, essentially, or lead generator?
Really sort of an ad repository.
I guess another way ...
So, if you were a seller in Paris, you’d just put your stuff on the site and then try to sell it off of it.
And, conversely, if you’re an interior designer in New York, I guess, what you’re saying is, the site would help you with discovery.
But nothing else.
Okay. So, the first year or so was spent kind of building the team and improving the basic technology of the structure of the company. At the end of that year, we relaunched the website. And, as part of that relaunch, we tested the idea of e-commerce. So, we put a button on the site alongside the seller’s contact information that allowed people to buy. And, very quickly, even though this contact information was right there, we were getting about, really from Day One, about 20ish orders a day at an average order value of about $2,000.
So we said, “Hey, there’s something here and actually people are willing, at least some people are willing to buy this stuff online.” And then, as we spent more time thinking about it, what we concluded is an e-commerce model actually would allow us to bring major, major benefits to both sellers and buyers. Things that simply weren’t possible in kind of the old way.
So our primary focus over the last four years has been to transactionalize the marketplace. It has been fascinating, in part, because again, I don’t think anyone else has ever done this successfully, and making that change is a hell of a lot harder than it looks.
Right, so explain why does that work in these items ... If you’re selling a settee or a chair, for example. Is it the one-of-a-kind part of it? I mean, because Etsy works very well, I think. Amazon works well, obviously. What is it about the things that it’s just easier or the transit that you give every part of it?
Well, so, first of all, this is a market, which is inherently inefficient, right? It’s a mostly one-of-a-kind market. And, it’s hard to do discovery. It’s hard to find stuff, right? So, all of a sudden, again, we have the best dealers in Vienna and we have the best dealers in Stockholm ...
And, you seek them out. You try to get ...
We seek them out, right. And, often they actually seek us out because we do have a very strong network effect, which means we’ve aggregated the best buyers in the world.
This guy in Sweden is on it, so.
If you want to be in front of those best buyers, it’s a magical opportunity. Otherwise, they’re restricted to being a dealer in Malmo, Sweden, and would have to limit yourself to people who made the trek out there.
So from the seller’s point of view, what we’re able to do, again, is introduce them to a global audience of the best buyers, both consumers and also interior designers.
So, how do you do that side? Because then you have the other side, which has to be just as ...
So on the demand side we have two types of buyers. We have interior designers, who are to this world what agencies are to the media world. And then we have consumers, which in this business are called collectors. It’s a fancy industry so they get a fancy name.
I think “rich ladies” immediately.
Not all ladies, but yeah. They skew higher net worth. That is true. What we’re able to do for them, again, in addition to solving the discovery problem, is we’re able to create a buyer assurance policy, which in this market is really important because you’re spending ...
Do you know it’s real?
Well, we guarantee the authenticity of all pieces that are sold through the marketplace. And, again, that’s something that ...
And, do you look ... You don’t look at them, how do you guarantee the authenticity? Because I’m thinking of TheRealReal which does, you send it in and they make sure it’s a Bill Blass or ...
We don’t do that. We do it in a couple ways. One, and most important is, we vet our dealers and our galleries. So only the best can sell on 1stdibs and we only accept a minority of those who apply to be able to sell. Secondly, we vet at the item level for certain types of orders. So we average now about 10 orders a day above $10,000 per order. So, each of those, we take a look at individually on top of it. And, the reason why we’re so careful about it is, we 1stdibs accept that risk. So, we provide an iron-clad buyer assurance policy. And, that’s part of ...
How do you vet someone? How do you know?
Well, again, we vet at the dealer level, number one.
They have to have references. We look at samples of their product. We do background checks, all that kind of stuff.
But another interesting dimension of marketplace and very strong network effects is once they join the marketplace, because we’ve aggregated so much qualified demand, just maintaining their participation in the marketplace is itself the biggest incentive to play by the rules. Because if they don’t, obviously they get kicked out. And because so many people now rely on 1stdibs as sort of a sole source way to buy stuff, they have to be there.
And, then you split it up by search, lots of photos and ...
There are a lot of photos, yeah. How do we make the experience better? Number one is by aggregating product. Number two is by this buyer’s assurance. Number three is we take advantage of our scale to negotiate preferential rates with shipping carriers. So we get things delivered at faster speeds, at lower prices and with more transparency around reporting than any dealer or any individual consumer or designer could get on their own.
So, now you’re in furniture, jewelry?
We’re in furniture, fine jewelry, art and a little tiny bit in vintage fashion, which is mostly expensive handbags. It’s not the focus of the company, though.
Right, because too hard?
It’s just not ... Our core customer again, is ...
Not doing that.
Not doing that. And, I’m not sure, we have great customers, but there are a lot of other people in that business. Whereas in the rest of our businesses, we’re able to really ...
So, who is your biggest competitor then? What would be the competitor to this?
We have a bunch of different types of competitors. In some senses, the auction houses are marketplaces themselves. They’ve invested very little in digital, so they’re not really a head-to-head player, but they’re in this market. Number two is some of the large-cap internet companies have made forays into this business.
EBay launched something called the eBay Collective, which was a direct competitor of ours. It has no traction. We have a whole bunch of smaller companies who I like to call the anti 1stdibs, meaning whatever we do they tend to do the opposite. So they rely on the old advertising and listings model. But again, the largest of those is probably, I don’t know, 5ish percent, at least as it stands today. And, then Design Within Reach and the big-box retailers are other competitors of ours.
But again, they have a different business model. They’re retailers, they’re not ...
They’re selling their own. And, they do sell ...
And, they do sell their own stuff. But they’re not marketplaces. So they have much lower reach.
They’re traditional retailers. All right. When we get back we’re gonna talk a little bit about how do you compete in this world, in an Amazon type of world, because here’s something you could see Amazon getting into very easily. And, they certainly are moving in a fascinating direction. We’re here with David Rosenblatt who is CEO of 1stdibs.
We’re here with David Rosenblatt. He is the CEO of 1stdibs. We’ve been talking about the business, which is a high-end marketplace, a high-end furniture goods marketplace, essentially.
Luxury design, so that includes furniture but also jewelry.
And, it’s antiques and new stuff, right?
Because you think antiques.
New product, which we call contemporary, is new to 1stdibs, but it’s one of our fastest-growing categories.
Right, so designers would come to you.
Interior designers, right.
Because I noticed a lot of retailers now were featuring this interior designer, it’s only on our website or something like that. So, all kinds of interior designers who are doing their own furniture, their own kind of thing.
And, also just furniture brands, right? High-end furniture brands.
Who are trying to sell stuff. Where is the biggest growth area for you?
So, the largest of our businesses overall is furniture. As a category, jewelry is growing very fast. Contemporary design, contemporary furniture is growing fast. And international — Europe, mostly — is growing very fast.
Most of your business is from where? Here in the United States?
Most of the demand is from the U.S.
Demand is from the U.S.
By the end of the year, we’ll have more furniture supply from Europe than from the U.S. But, we still anticipate the U.S. will be ...
That’s where all the furniture is.
Right. And, then, discovery. You’re not like that British auction show, what’s that British ... You know what I mean.
Yeah, Antiques Roadshow.
First of all, we don’t do auctions. So we support negotiation and fixed price sales, but not auctions.
Supporting, mean people can say ...
Meaning like you can negotiate to buy or you can buy at a fixed price.
Who decides on the prices then?
The sellers do and then the people can say no.
But it’s up to the buyer and seller to negotiate their own price.
To negotiate. And, they get in touch with each other during that time.
Through our platform.
Through your platform.
And, then you get the piece of it.
Then we get a commission, yeah.
You get a commission of it. Is there other businesses out of this? You said shipping, all kinds of things. What else could you do? Or is it just a commission business, that’s what you do?
Well, that’s the primary focus of the company. I mean, I think, how do we grow? We can grow by adding verticals, by adding geographies and by adding different types of customers. All three of those are a focus of ours.
And, obviously you depend on a robust economy wherever you are, wherever you’re selling to, if you’re selling to Saudi Arabia or wherever. People that want to buy things. Is it a worry for you?
It’s a global business. So, we feel, to some degree, as long as there are economies that are growing somewhere and there’s an appetite for great design, we’ll have a great business.
You’ll be fine. So, I want to talk a little bit, sort of beyond in the e-commerce space. You have a very particular niche in this area. Are you worried about Amazon moving into your space?
Yeah, we think we’re in a pretty different segment. I mean, as we describe it, the race for the $50 order is over. It’s been won. It’s been won by Amazon. The race, however, for the $5,000 order has not been won and that’s the race that ...
I don’t know. I just bought a lot of big things on them recently, it’s interesting.
Yeah, but if you look at, I mean, again, they don’t publish it. You look at their Average Order Value, their AOV, it’s not gonna be $5,000 bucks, right?
No. Not at all.
Whereas ours, we’re absolutely headed in that direction. So I think that’s the way we think about it. Now, that’s what makes the luxury business, in general, different and, I think, harder to access for Amazon than most other industries: It really has to do with the comfort level of the seller with the environment in which they sell.
So even though Amazon obviously has all the assets in the world in terms of customer base and logistical support and payment.
It’s Walmart, not Barneys. I get it.
Yeah, and the best sellers aren’t gonna want to sell there. I’ll give you one example — without naming names, unfortunately, because I’m not allowed to. But we just added two contemporary furniture brands to 1stdibs. Those brands had been selling on Wayfair — which, by the way, in all other respects is a fantastic company. But they withdrew from Wayfair even before they started selling on 1stdibs simply because they didn’t want the adjacency of their brand with the lower-priced products on Wayfair.
So, bamboo, they didn’t want to be next to ...
Yeah, exactly. And, that’s one of the thing that we, look, there’s a reason why you can’t buy Chanel in Target. Right? Chanel doesn’t want to be there. And they’re never gonna be there.
So you’re relying on that idea that Amazon is sort of the big-box seller, the Walmart of this generation?
We don’t think about Amazon. What we think about is the customer and both on the supply side and the demand side. And how we grow sales, right?
Where is e-commerce going, then? You have Amazon on one side, which has sucked up everything. How do you look at them? You’re in e-commerce, what do you ...?
Yeah. Look, I love the company, personally, I’m a shareholder. We track a lot of the stuff they do. We try to learn from as much of it as possible. So we admire them. We just see them as a sort of orthogonal player to what we do.
The reason I’m asking, would you see yourself buying a Sotheby’s?
Who knows what the future holds.
Oh, are you buying Sotheby’s?
Well, we’re ... Not today.
Not today. But, do you think about it? They bought Whole Foods. We just had Scott Galloway on talking about buying Nordstrom. There’s definitely going to be something occurring.
I would put it this way: I believe that we’re the disruptive entity in our business. There will be casualties on the other side of that. And who knows where that goes and, which companies those are specifically. Certainly that’s happened in every other industry, and incumbents who have not taken the digital threat or evolution seriously have done so at their own peril.
So far, we’ve seen that the incumbents in this industry have not reacted differently to the internet than incumbents in other industries, but that could change. We’ll see. There are a lot of smart people ...
Now, what is Sotheby’s doing? They’re all trying their various dot-coms.
Yeah. They hire a couple of people who worked at internet companies and then they underinvest in that business and hope that somehow a combination of their brand name and their legacy assets with these people are gonna somehow produce a company that can compete effectively with native digital companies.
It really is interesting to watch.
But, again, if you look at industry after industry — including the one that I graduated from, the ad business — that turned out not to be the right strategy.
Yeah, it’s fascinating to watch them do it over and over again. It’s interesting. You’re like, “Hey, didn’t you see this happening?” But is that a negative for you to think about owning something? Do you feel like a lot of internet companies do need to move into that analog space?
Being analog, I think, is an important part of our strategy. And, in fact, I think ...
Whatever lane is opening its door ...
But whether we do that organically or through M&As is an independent question.
What’s the attractiveness through an actual retail space, an actual physical retail space? Amazon’s looking at it. Everlane’s ... they’re all like ... Warby Parker, obviously, has done incredibly well doing that.
Because, look, the lesson of the internet is power shifts from those who control distribution — meaning supply — in every industry, to those who control the buyer. Not in a negative sense, but those who meet the buyer on his or her own terms. And, to the extent that the buyer wants to, sort of, thinks about the world in a seamless way between digital and analog, one has to be in both channels. So we will be, too.
Right. Interesting. What is the future of it? Do you go public or don’t you? Are you profitable? Is the company profitable?
Yeah, we are not by design. We are well capitalized because we are fortunate to have generous investors. But, I think, again, it’s not something that I think about. I mean the company is healthy and growing in all respects.
How many do you employ right now?
We’re a little under 400 people today.
400 people. And, mostly in New York?
Mostly in New York.
And, what do they do?
What do they do?
That’s a lot of people.
About a third of the company is in product and engineering. And, then we have a pretty substantial part that is in services.
Yeah, and then we have, just like every other company, the financing, which is important, and other groups.
How do you compare yourself to, say, those companies ... I’m thinking of something like Stitch Fix, we’re going to be talking to her this week here in New York, and others. You know where people ... Do you imagine getting into that business, sampling stuff and sending it back and that kind of stuff?
Yeah, again, I think we probably segment services like that based on the type of buyer. So, consumers tend not to be interested or able to deal with that kind of stuff. Interior designers have to. So, yes but not for everybody, would be the short answer.
All right. I want to get into some, just two, the larger e-commerce system, just a little bit and then finish up talking a little bit some other things you’re doing. Where do you see e-commerce going? I mean, do you have to get into AR, VR, what is your ...? What is the future?
I think in this industry, I think AR and VR is gonna be a game changer.
This is your time to be Big Dave and make a big picture. Because we’re about to do a Code commerce event ...
Can I just be Small Dave?
No, it’ll be Big Dave. We’re doing this commerce event, we have all kinds of people in different, like, there’s commerce changing restaurants. We have Mario Batali, others. What is happening? Because, it feels like something massive is about to happen in retail.
Well, something massive has happened.
Of course, of course. Yes.
And, it’ll continue to happen.
Stores persist. Patterns persist.
One of the points that a book I read recently made is that this sort of distinction between what one considers technology and what considers an analog is rapidly disintegrating. I think that’ll be the case too, and e-commerce will be a beneficiary of that.
So, look, we sell furniture, right? And we sell stuff that you put on the walls. And we sell stuff that you put on your body, so AR and VR is incredibly important to us. And, that, in many respects ... Nothing will ever fully eliminate the need to touch and feel something for those for whom it’s important. But it certainly can go a long way towards addressing that.
I think at some point, when it’s widely enough disseminated, the distinction, again, between a kind of analog shopping experience and a digital shopping experience won’t even really make sense. Right? Or be understandable.
Right. Do you have a VR product working?
We do have a VR product, which is very much of kind of a 1.0 experiment. It’s in our app.
How it looks in your home.
Sort of “see how this thing looks in your living room” is what it does.
Where do you imagine it going to? I was just thinking about that as we’re preparing for this conference. Where do you imagine it? It just replicates your room and populates it? Or what do you see happening?
Yeah, that you can create a 3-dimensional model of your room and you can take stuff in and take stuff out, move things around and change its colors and dimensions and design a product, actually, to meet exactly your specifications. Again, that’s really something that’s not possible in an analog-only world, obviously. But it’s easily doable over time, with the right technology, on the internet.
So, again, I think it’s early days in this business. I think when we look forward, again, we started this conversation talking about advertising, right? By 2007, the internet advertising industry was almost 15 years old. It was a multibillion dollar business. Yet the primary vehicle, at least in the display business, didn’t yet exist. And so I think we’re even earlier in that curve in design and the sale of physical products. I think we’ll look back at a year like 2017 and say, “Gee, people looked at two pictures of a couch and they spent $20,000 on it?” is gonna seem absurd.
Yeah, they probably want ... Haptics, haptics Dave.
There you go, haptics.
How you’re gonna feel it. All right, I want to finish up talking just briefly about, you’re on the board of IAC. Dara just went over to Uber. You’re on the board of Twitter. We had our nice Ted Cruz moment today on Twitter. There’s always a good thing on Twitter every day. Why are you doing these boards? I mean, I know apparently you can’t comment on, although you should. But I want to know broadly about why you’re on boards like this. And, what they’re ...
So I’m on one other, which is Farfetch, which I joined a couple months ago.
What is that?
Farfetch is a fantastic business. It’ll sound familiar based on my description of 1stdibs. It’s a global marketplace for luxury fashion.
It’s very large. It’s growing very fast. JD.com just made a significant investment into it.
So, I sit on these boards to learn. Right? Because, if my experience is limited to one company then my perspective is also limited relative to what I can learn from being involved with these other companies. And Farfetch, in particular, is the company whose business model most closely approximates 1stdibs.
What you’re doing in luxury fashion.
And, yeah, they’re sort of a couple years down the road versus where we are today in terms of the evolution of the model. So, I learn quite a bit and in return I feel like I have something to contribute really based both on my experience in 1stdibs and also having run a large-scale kind of horizontal technology platform company.
And, what do you learn from IAC besides being amused endlessly by Barry Diller?
Look, IAC is a marketplace company, right? So, I mean, you look at its strongest assets, they’re all marketplace oriented. Those are natural learning opportunities. Barry himself is obviously a fantastic person to learn from. The other people on the board, equally. I mean, Jack Welch sits in on many of the board meetings.
That must be a laugh riot.
We can all learn from everyone around us.
These are people who, I think in particular, have a kind of ability to educate ...
Do you know Dara well?
I don’t know him well.
You don’t know ... What do you think? Would you have taken that job?
Look, on paper, I think he’s a perfect fit for that job.
I checked to see if they were coming for you for that job.
On paper, he’s a perfect fit for that job.
Would you have ever taken a job like that?
I don’t think I was a candidate and I’m very happy at 1stdibs.
You’re on my list. And, then finally, Twitter. I know Twitter’s always news. But lately, it’s been quiet. Are you ... Uber’s been sucking up all the oxygen.
Silence is golden, actually. Seriously, it’s good for Twitter to have a little space to operate.
To operate, but can you talk about the social impact of Twitter right now? Not as a board member, whether it’s going to sell or not, what’s it gonna do, is Jack going to have yet another ... I put Jack up for the Uber job, by the way, so he’d have three jobs, 33 percent of each one.
As a Twitter director, I thank you for that.
Just trying to create trouble and combine two things I like covering quite a bit. But, talk about the social impact of Twitter, because it’s never been more relevant with Donald Trump is on it, everything happens. I know it’s silly things like the Ted Cruz porn thing happened, but every day it’s something else and Twitter is at the center of that action. The hurricane or Charlottesville, everyone responded to each other on it. What do you think has happened, because it’s become that medium?
I think it’s the ultimate expression of the democratization potential and opportunity of the internet, right? Everyone and anyone is put on the same level as a Kara Swisher or as a New York Times. And, that’s a really, really powerful phenomenon.
And, what do you imagine it happening? Because I think it’s fascinating. It’s never been more relevant as a medium and then still struggles as a company. It’s a really interesting dynamic that happens with Twitter.
Look, I wouldn’t say struggling, I’m not sure I would characterize it as a struggling company. I mean, a company that did $2.5 billion in revenues, it’s growing in terms of usage and engagement. The leadership now is strong and I feel good about it. Everything seems to be moving in the right direction.
Were you surprised that Donald Trump used it so heavily? It’s become his mouthpiece.
No. He’s perfect for it, isn’t he? I call him the World’s Greatest Twitter Troll. You don’t have to say anything. You don’t have to comment. I had Jack on and I said, I go, “How do you feel about that’s the most famous user?”
How do you feel about Twitter?
Yeah, “How do you feel about Donald Trump on Twitter?” He goes “It’s complicated.”
It is complicated.
Yeah, it’s a really interesting thing. Anyway, David, this has been really great. Thank you so much for being here. It’s been a really interesting interview. I think 1stdibs is really ... The reason I was interested in having you here is because the conceptual ideas behind you can digitize anything and it’s not something ... When you told me I was like, what? What are you doing? And, I didn’t even begin to make ... Now it makes a lot of sense to me.
Thanks for having me.
Yeah, no problem.
Anyway, great talking to you. Thanks for being on the show.
This article originally appeared on Recode.net.