The following commentary is from an investment professional with Clear Harbor Asset Management who is a participant in TheStreet's expert contributor program.
NEW YORK (
) -- No, the video above is not from Saturday Night Live. It's an advertisement for a real start-up company that has raised $1.1 million in funding from some gold-plated names in the venture capital industry, like Kleiner Perkins Caufield & Byers, Forerunner Ventures and Andreessen Horowitz.
It's not on television, but you've probably seen it already because the clip has gone viral on the Internet, racking up nearly 3 million views on
and nearly 12,000 "Likes" on
(at the time of this writing) since it was launched less than a week ago.
I have no idea whether
Dollar Shave Club
will be successful, but this video interests me as a testament to the democratizing power of the Web and its promise to challenge powerful, entrenched interests and unleash more innovation that can improve our lives and grow our economy. Over a decade ago, the stock market got caught up in a fit of irrational exuberance about how the rise of digital communications was going to change the business landscape. The result for investors back then was painful, but the wild expectations that fueled the tech bubble are, in many cases, still being fulfilled.
In spite of all the advantages that large, blue-chip companies enjoy -- their vast marketing machines and armies of lobbyists in Washington, D.C. -- the Internet is, in many cases, turning into a big headache for them and a boon to their customers. The social nature of the Web gives consumers new ways to scrutinize and criticize the products and services they're receiving from companies and the prices paid for them. New ventures that can offer better alternatives have unprecedented opportunities to harness this to their advantage, challenge market leaders and grab market share.
By offering to ship razors every month to customers for a low price, Dollar Shave Club is using technology to challenge the business models of major consumer products juggernauts, like Gillette, which is owned by
Procter & Gamble
. For its part, Gillette is widely known as one of
CEO Warren Buffett's most successful investments, and its powerful brand and lucrative business model have long been viewed as the gold-standard for business people aspiring to build a great company.
On the other hand, many young men -- the most prized and elusive demographic for the advertising industry -- are tired of shelling out ridiculous amounts of money to buy Gillette's razors. They're annoyed by the relentless blitz of advertising and marketing that Gillette employs in order to keep its vaunted brand fresh in their minds, and they're unimpressed that the company can use revenue from its high prices to pay great athletes like Tiger Woods or Eva Longoria to tout its products. They just want a better deal with less hassle, like the one offered by Dollar Shave Club.
"Our market is the guy who is sick of over-paying for razors," said Dollar Shave Club co-founder and CEO Michael Dubin in a telephone interview. "It's that simple."
Dubin is the guy in the video. He wrote it himself and had it directed by Lucia Aniello, a friend from his sketch comedy days with the Upright Citizens Brigade in New York City, for a total cost of just $4,500. That's pocket change for agency executives on Madison Avenue that are making TV spots and billboards for Gillette and other behemoths, but their rich marketing budgets can't buy the kind of grassroots, word-of-mouth interest and enthusiasm that Dollar Shave Club is stirring up on social media networks right now with its hilarious video.
Dubin, 33, who founded Dollar Shave Club last spring with his friend's fiance's 56 year-old father, Mark Levine, employs five people in Santa Monica and sources razors from China and Korea. His lowest price for having a twin-blade razor with five cartridge refills delivered to your door every month is $1, plus $2 in shipping.
By comparison, someone in midtown Manhattan could schlep over to the Duane Reade on the corner of 43rd Street and Third Avenue and pay $15.99 for a pack of five Gillette Mach 3 refill cartridges alone. The price drops to $14.49 if you order them on
So, in an age of debt, taxes, stagnant wages and a rising cost of living for U.S. households, this is really a no-brainer.
It exists because the Internet enables Dubin to offer a new service at a low price. Meanwhile, we know about it because of the unique ability that consumers and entrepreneurs have to spread a message cheaply on the web by cutting through the fog of marketing hoopla and offering a better service, a good deal and a few laughs.
Disclosures: Worden and/or his firm hold positions in GOOG, PG and BRK. Follow him on Twitter @NatWorden.
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