New York-headquartered XO Group isn’t a company where you’d expect big, dramatic changes — after all, it was founded nearly two decades ago (with seed financing from AOL, which now owns TechCrunch), its flagship wedding planning site The Knot launched in 1997, and it went public in 1999.
But when I talked to CEO Michael Steib earlier, he sounded a lot like he was running many of the new digital media startups I’ve been talking to, with the aim of bringing commerce into the company’s existing and content and advertising business. Steib only became XO Group’s CEO about a year and half ago, and he said he came on-board with the aim of transforming the business.
“We have these very strong brands,” he said. (The company also owns pregnancy site The Bump and home decorating site The Nest.) “We like to say that 60 percent of readers know The Knot before they know the groom. So we had this opportunity — by investing in mobile, by transforming from a media company to a marketplace, we could transform this company into an essential tool.”
If you want to build a company at the intersection of advertising and commerce, Steib seems like the right person for it — he was previously CEO at e-commerce venture Vente-Privee USA, but he also led Google’s TV advertising initiative and worked to create new digital media businesses at NBC Universal/General Electric.
Still, it’s a big deal when someone new takes over for a company’s founding CEO. In this case, Steib said there was an eight-month transition period where he first came on-board as a president. Then, once made they made the switch for real, with co-founder and then-CEO David Liu becoming chairman of the board, Liu actually “took his family and went to China for six months.”
That made for “an unusual-but-elegant transition,” Steib said, because it meant that the team really had to treat Steib as the CEO, rather than looking to their old boss for guidance. And bringing him on wasn’t the only change — he said half the leadership team joined in the past 18 months, including CFO Gillian Munson, Jennifer Garrett (executive vice president of the company’s national enterprise group), and Katherine Wu Brady (executive vice president of e-commerce and registry).
Since XO Group is a public company, the other challenge was getting investors on-board with the new direction.
“We’d been growing 5 percent topline revenue and 5 percent costs for at least five years — there was no news here,” Steib recalled. “Then we got on this call and said, ‘Great news, we’re effecting this transition, we’re going to become a marketplace, and there’s going to be a dramatic increase in spend.’ It was disruptive, and as you can imagine, it required us to spend a lot of time with our investors, explaining what we’re doing.”
Nonetheless, Wall Street bought into the shift — while there were some bumps, the company’s stock is currently up 70 percent from its price a year ago. (In its most recent earnings release, XO Group reported a GAAP loss of $4 million for the quarter, but revenue increased 13.7 percent year-over-year, to $37.1 million.)
“What we found over the course of the year was that investors are smart, and when you can present them with an investment case and an ROI, they’re with you,” Steib said.
So what does all that mean in terms of the actual product? Basically, he said he wanted The Knot to become a site where you not only find inspiration for your wedding, but you can act on that inspiration by connecting with vendors instantly — Steib said he aspires to “that magical Uber moment,” where you order what you need with just a click. And that meant turning The Knot from a site that was “listing only the vendors who paid us” to listing and collecting user reviews for “every wedding vendor in America.”
It’s been a gradual transition, Steib said, but he suggested that the launch earlier this month of a new version of The Knot, one that was designed for mobile first, marks the culmination of these efforts: “It all sort of came together with the launch of the new site.”
Mobile, by the way, makes up 50 percent of The Knot’s traffic.
The business side, on the other hand, hasn’t quite caught up. From a revenue perspective, XO Group is still an advertising business. Even so, Steib said his sales team is pitching The Knot in a new way, and providing businesses of more detailed analytics about the effectiveness of their ads and listings — possibly laying the groundwork for a more marketplace-style business model, where the company charges a commission for driving sales leads or purchases.
“I think what our vendors heard two or three years ago was, ‘Hey, you’re a wedding vendor, you have to advertise with The Knot’ — it was an advertising pitch,” he said. “What our vendors are hearing us say today is, ‘This is how we’re bringing you business.'”