The way people seek and buy music—in a store, online, or a download—is as generational as the art itself. Madrona Venture Group is staking a claim on 'buy' buttons as the next hit.
Along with Cross Culture Ventures, Muse Capital, Lowercase Capital and Arnold Venture Group, Madrona, whose e-commerce portfolio includes Amazon, ShareBuilder, Redfin and Farecast, just led a $6.5 million investment in ReplyYes, a Seattle-based company that combines e-commerce and mobile messaging to make it easier for consumers to buy and pay for things on social media recommendations.
"Any e-commerce business that tries to streamline processes between something they want to buy and the transaction can be interesting," said Scott Jacobson, a managing director at Madrona who has also worked for Amazon in his career, proving a background in e-commerce.
"When I was at Amazon, we used to measure the distance from the discovery to the purchase click," Jacobson said. "The shorter distances decreased the likelihood of abandonment."
One of ReplyYes' products is The Edit, a text-based service that trades in older school music. Working like a social network version of Record Store Day, The Edit sends vinyl music fans daily recommendations based on musical preference and supports instant payments and shipping by replying "Yes," executing the transaction based on stored credentials.
The Edit has been successful for ReplyYes, selling more than 100,000 vinyl albums in about a year. That not only attracted Madrona's attention, but also Universal Music Group, which has entered into an agreement with ReplyYes to apply the same sales process to music and related lifestyle items such as tickets and merchandise.
"The idea that's not rocket science is: You already have a trust relationship with the brand," Jacobson said. "You just give the card info and some information up front about songs or comic books and stuff like that, and the tech puts the products in front of you."
The technology guts behind ReplyYes aren't rocket science, but artificial intelligence. ReplyYes uses AI to "learn" from consumer feedback to personalize each user's experience. Besides music, ReplyYes also powers recommendations over text and Facebook for the Origin Bound graphic novel store and Lowercase Alpha, which allows consumers to test new mobile apps before launch.
ReplyYes is a twist on in-app commerce in that is specifically designed to generate incremental sales for e-commerce retailers, said Thad Peterson, a senior analyst with Aite Group. Overall, it dramatically reduces purchase friction, expands a "one click" option and reinforces the consumer movement to mobile purchasing, Peterson said.
"It expands the simplicity of iTunes, Amazon Pay and Google Play outside of their proprietary offerings," Peterson said. "It still relies on card-on-file for provisioning the account instead of defaulting to other, simpler options such as direct carrier billing from Boku."
ReplyYes attempts to differentiate itself from other embedded buy buttons by making the recommendations more distinct than the generalized social network ads that retailer expert Anil Kaul from Absolute Data says may cause embedded buy buttons to sputter.
ReplyYes' machine learning produces "informed" recommendations over social media that the consumer partly drives, rather than ads with transaction capabilities, claims David Cotter, CEO of ReplyYes, which uses a mix of monthly and transaction fees as a revenue model.
"Our vinyl store has tens of thousands of users, and they all get different and distinct offers each day, so it's a more personalized engagement," Cotter said.