DailyCandy’s ascent inspires two emotions straight out of a novel with a red stiletto on the cover: catty jealousy and fear of abandonment. For six years, Candy’s breezy tips on fine-tuning one’s dining, shopping, and primping habits have cultivated an intimate rapport with readers. Written in a cliquish chick-lit chirp, the dispatches appear to come from a gossipy, mysteriously connected friend somewhere in the East Sixties. And with the recent news that the bustling enterprise was on the block, our friend was about to marry very, very rich.
The selling of DailyCandy—first announced in the Wall Street Journal in February with a $100 million price tag attached—has been watched by many anxious eyes. To some, its successful handover to a big-time buyer (still pending at press time) would herald nothing less than the second coming of the dot-com boom and the rebirth of Silicon Alley. A definitive price would finally be set for such esoteric assets as “consent-based access” and “qualified Web,” and a hefty deal would reestablish Bob Pittman as a Web visionary. When the enigmatic AOL veteran paid $3.5 million for a controlling interest in the company in 2003, industry observers knew he was up to something—but what?
In other words, that’s a lot of pressure on a site (I almost wrote “a girl”) that just wants you to know about the Marc Jacobs sample sale.
DailyCandy’s modus operandi is as simple as they come. It generates e-mails telling you what to buy and, on occasion, how to spend your weekend. The medium (e-mail) is the message (“you’re in”); the content, instead of being flanked by ads, is the ad. The genius is in the pitch of the pitch, which sustains an uncanny illusion of personal attention. “You’re no Cyndi Lauper,” a sample e-mail starts, “but the wanting to have fun? There you concur.” “You’re known for your stellar manners,” begins the very next one. On any given day, your in-box may hawk an online jeweler, steer you toward a tote made of discarded sails, coo over a spa, or gush about a hotel in Udaipur—but the story is always you. DailyCandy is content to act the sassy sidekick, or Sidekick, to your star. The coup de grace comes in the form of Sujean Rim’s delightful, feathery watercolor in every e-mail: a hip sweatered couple, a girl riding a bike with a flower bouquet in the basket. After three or four doses, each of these insidiously flattering pictures begins to look like your portrait.
The brain of the operation is Dany Levy, a former New York staffer who based the idea on TheStreet.com’s newsletter: up-to-the-minute info delivered straight to your in-box, except with lifestyle trends instead of market news.
Levy manages to sound jazzed and lawyered-up at the same time. When she says of her company’s mission, “It’s culture fun!” the line comes across as scripted and yet somehow genuine. She talks fast and gives every sign of thinking very fast, too. After New York, she tried Self and Lucky, but the production pace of monthlies frustrated her. She wanted something much quicker. Something daily.
The first batch of Candy went out in March 2000, written by Levy herself. The address list was 700 names long, a mix of friends and editors largely plucked from her own Rolodex. By 2003, the newsletter had amassed about 285,000 subscribers, began adding other city editions, and attracted Bob Pittman’s attention. As of now, it boasts an audience of about 1.2 million and publishes eleven individual newsletters (including Dallas, Atlanta, “Everywhere,” and “Kids”).
To help the site flow with the bewildering currents of female taste, DailyCandy operates as a decentralized democracy. Its four editors in New York are ensconced in a Manhattan office, the only swath of real estate to the company’s name and still slightly mythical: I asked to visit it and was brushed off in full character (“Unfortunately, the editors are too damn busy shoe shopping and circling each other’s fat with thick black marker—they’re just not up for entertaining”). The other eight cities with their own newsletters get one editor each, all working from home, exactly as DailyCandy would want you to imagine: a girl at her iMac, languorously typing up a beauty tip.
Each city editor, in London and Dallas alike, is expected to find and pitch enough scoops and quips to keep up the daily pace. Being swamped with suggestions from eager publicists helps, although not, says editor-at-large Dannielle Romano, as much as one would suspect: According to her, DailyCandy uses less PR-generated fodder than most consumer magazines. Editorial decisions are made in a multitiered roundelay of conference calls; ideas deemed unworthy of solo spotlight get lumped together in packs of four or five for “Weekend Guide” mail-outs. The Website depicts a comely staff of 28 (all three forlorn-looking males hold IT positions). It’s a surprisingly robust masthead, considering that the entire operation produces about 1,500 words a day—barely a peep in the days of unrelieved blogorrhea and Web-wide word bloat. The far-flung editors appear to see each other in person very rarely; I did not ask what happens when they do, but if I did, I’m sure the answer would have been pillow fights and much mutual hair-braiding.
And that is basically it; DailyCandy has stoically declined any invitation to branch out. The inevitable book, just out from Hyperion, gets a smiling dismissal from Levy as a “fun way for the editors to cut loose and write something more literary.” Where a lesser entrepreneur would have long ago cashed in with DailyCandy bath gel, a DailyCandy yoga mat—hell, DailyCandy candy—Levy has stayed almost fanatically true to That Thing She Does.
So surgically calibrated is the company mission that it resists even the most obvious spinoff idea: a newsletter for men. Two laddish copycats—Thrillist and the suspiciously assonant UrbanDaddy—are duking it out for a piece of the underserved demographic. “The concept of ‘DailyCandy for men’ unfairly implies that men don’t read us, which they do,” deadpans Levy.
DailyCandy makes its money on ads in two ways: discreet sidebars on the site or in the e-mails themselves and separate, paid-for mail-outs, each honestly tagged “A DailyCandy Dedicated E-mail.” The company’s unique business model forces it to walk a microscopically thin line. On one hand, it prides itself on its unsullied integrity. On the other, its editorial content is practically indistinguishable from advertising—completely indistinguishable as far as the average reader is concerned. The paid-for e-mails are mildly curated (“We work with the advertiser to find an angle that will make their product more attractive to our reader,” says Levy) and written in the same breezy style as the unpaid ones. Often, admits Romano, these “advertorials” are written by the advertiser, faithfully copying the Candace Bushnell cadences of the house style. Clicking on a “dedicated” e-mail can induce a Twilight Zone moment as your trendy friend’s standards mysteriously drop: “When it comes to bath and body products, you really like to play the field. But … nothing compares to your first love, Neutrogena.”
On a given day, your in-box may steer you toward a tote made of discarded sails, coo over a spa, or gush about a hotel in Udaipur—but the story is always you.
Needless to say, paranoia creeps in. With the Internet a perfect playground for stealth marketing and beverage-company street teamers trolling Web boards to casually big-up Coca-Cola Blak, everyone is a suspect. It’s one thing to take shopping cues from a pal; it’s quite another when she’s just joined Amway.
The company knows this, and fiercely combats any perception of impropriety. “DailyCandy is strictly editorial. There is no pay for play,” reads the bottom of every message (except the dedicated ones, naturally). “You cannot pay to be in DailyCandy,” says Levy with added steely staccato. She peppers her side of our phone conversation with the word integrity. Integrity of the product, integrity of the site, editorial integrity. The site’s FAQ cuts to the chase: “No, we would never sell our subscriber list to anyone. Not for any amount of money.”
But there is, of course, one way to buy DailyCandy’s subscriber list. That way is to buy DailyCandy. And this brings us to the February announcement heard round the world—or at least from Wall Street to the upper reaches of Madison Avenue.
Bob Pittman is no stranger to the steep appreciation of hard-to-define businesses. As Steve Case’s associate, he oversaw AOL’s monstrous growth in the nineties. He also quickly became the chief scapegoat when AOL’s acquisition of Time Warner went awry in its myriad predictable ways.
New York’s longtime readers may remember Pittman, an energetic Peter Gallagher look-alike, as a bona fide celebrity and Manhattan social-scene staple in the late eighties, after he shepherded the nascent MTV into its present shape for Time Warner. Pittman’s first public act after the AOL debacle was buying DailyCandy through his Pilot Group. Back then, the deal seemed a tad batty, the kind of purchase people would have expected his Everest-climbing socialite ex-spouse—Sandy Hill Pittman—to make. It may soon begin to look like the prescient orchestration of a comeback.
Perhaps tellingly, Pittman’s reasoning for the purchase harks back not to the AOL years but to his old-media background: “Bob and I had seen something similar in TV,” says Pittman’s partner Mayo Stuntz, the Pilot Group’s co-founder, “back when we were at MTV Networks.” After cable claimed a large enough portion of the TV market, the next logical step was the introduction of targeted networks. Likewise, with the world more or less used to the Web, Pittman envisioned the Internet dividing into “channels” along established loyalty lines. DailyCandy seemed a perfect, compact case study. The man who said, back in 1997, “I never want to build another brand as long as I live,” found a naturally self-perpetuating one. “Readers tell others about DailyCandy,” says Stuntz. And the company “proved it could replicate their product in market after market.”
But how much is DailyCandy really worth? If yes, then what about it commands the price? The past year has been good to the Web, with offline behemoths moving in on the better-tested online properties. Rupert Murdoch’s News Corp., in its virgin Internet purchase, picked up MySpace—a social-networking tool that doubles as a launching pad for bands—for $580 million. “Thanks for the add,” indeed. NBC shelled out $600 million for iVillage, a female-oriented Web community, with an eye toward integrating it into its existing assets like MSNBC.com. The New York Times Company bought About.com for $410 million.
What’s being purchased in every case, including the sale of DailyCandy, is not a successful business with a successful product (say, Netflix or Amazon), but a neatly prepackaged audience for hawking the purchaser’s product. The absorbed company’s primary role is to deliver a demographic—carefully, without spooking the herd—and, perhaps, tiptoe away. In a time when TiVo and YouTube allow more and more viewers to skip the commercials, it may very well be a better use of advertising dollars to simply buy an audience.
This line of thinking can still seem absurd. Professor Eben Moglen of Columbia, an eminence in the field of Internet law, told me that he saw the sale of DailyCandy to a larger entity as “a straight media-property acquisition, based on the advertising revenue, which is measurable. No one values [DailyCandy] either more or less because of the wealth or acquisitiveness of the subscriber base, but simply on the basis of what it produces in ad sales.”
DailyCandy’s subscriber list can be taken as the Holy Grail of e-commerce: a million trendy female shoppers, begging to be spammed.
But is that really the case? Was Murdoch really salivating over MySpace’s awesome ad revenues when he bought it, or was News Corp. more interested in pocketing a dynamic network of 65 million interconnected users (DirecTV, for comparison, has 15 million) and then figuring out how to sell them Fox content?
It’s nearly impossible to apply the usual valuation formulas to DailyCandy. According to the Wall Street Journal, the company projects revenue of “somewhere less than $20 million” this year. Most successful businesses go on sale valued at least ten times their yearly revenue, so by this standard, DailyCandy should cost $200 million or more. About.com, for instance, was generating about $40 million a year when it went to the Times for more than ten times that. It is similarly unclear why DailyCandy’s margin is 60 percent of revenue, according to the Journal, and not, say, 80. There are no trophy offices, no printing expenses, just a handful of salaries. Creative penny-pinching has long been something of a selling point for Dany Levy (the actual candy that comes with the company media kit is a decidedly budget-looking handful of Jolly Ranchers). “One reason we survived the dot-com crash,” she says, “is that we never took venture money and focused on the product instead.”
Of course, Pittman could simply have been testing the market waters with the Journal article, throwing out the equivalent of eBay’s “Buy It Now!” price to see if it sticks. That was the view of a high-ranking executive who briefly explored the possibility of purchasing DailyCandy. He told me that the hard numbers in the company’s abstract diverged somewhat from the picture painted in the Journal. Although DailyCandy has a “legitimately high profit margin,” he says, the report estimated $9 million in revenue in 2005 and was, rather optimistically, in his opinion, projecting $18 million for 2006.
The would-be buyer also notes a major difference between DailyCandy and the likes of iVillage: a conspicuous lack of any tangible community. DailyCandy is not quite a Website—it doesn’t have page views; most customers visit the site DailyCandy.com only once—to subscribe. Oddly, it doesn’t even bother to provide any forum where people could, say, chat about its latest recommendations or offer their own. The savvy friend will talk your ear off, but you won’t get a word in edgewise: Feedback opportunities are limited to an uninviting “contact us” form. As a result, all discussion of DailyCandy has traveled over to other Web communities; this has already freaked out some suitors. Its one-sidedness makes DailyCandy “the odd duck among all these other animals,” says the potential buyer. “I do think it has value, but the lack of page views makes it hard to monetize even by Web standards.”
In other words, nobody knows how to price the company, whose central asset is a sexy mailing list. The rotund neatness of the floated $100 million price tag may be interpreted as “your guess is as good as ours.” (A source inside the company insisted it was worth much more.) The bare functional core of any major Website—the programming, the design, and the bandwidth—can be yours for about $20,000. The rest of the value is locked in with the unquantifiables—the buzz, the virality, the self-perpetuating magic: Why did teens abandon Friendster to colonize MySpace? Where’s the guarantee they won’t decamp en masse and migrate to TagWorld next?
Unquantifiable magic is what DailyCandy specializes in. Viewed together with its too-good-to-be-true content model—tips on selective consumption!—the list becomes nothing less than the Holy Grail of e-commerce: a million trendy female shoppers begging to be spammed. Even with the questionable price, the likely buyers were numerous. Condé Nast, for instance, a natural partner with a surprisingly low-profile Web presence, has been circling Levy’s ship for years. The reason behind putting DailyCandy on the block with such a bang may have been to deliver a “hurry up and marry me already” message to 4 Times Square, especially if another lifestyle-media giant was showing interest.
With a new owner, there is, of course, a limit to how much paid advertising readers will allow to be mixed in with the editorial content—and how wide DailyCandy can reach without either lowering its bar or raising it into luxury porn. The core demographic seems antsy as it is: “No longer was I getting information on cool little shops and indie bakeries. I was being told about Über-extravagant vacations that I could never afford,” complains an ex-subscriber on Yelp.com, an informal business-review site. “This ‘friend’ of mine is slowly making her way out of my social circle,” notes another. “I wonder if they think I’m in their demographic,” worries a reviewer at the end of an otherwise glowing write-up. Such is the flip side to DailyCandy’s just-for-you interface: People take things personally.
After all, this is a company that ran a survey once, asking, among other things, where readers pick up cosmetics (CVS, Macy’s, Sephora)—and Gawker.com immediately reported that choosing the drugstore option would blacklist you from DailyCandy’s e-mail server; even if it wasn’t true, it felt possible. If an old-media conglomerate is our swooning gal’s new mom, DailyCandy’s editorial focus may have to accommodate the CVS crowd. Its ultimate downfall would be every stylish New York girl’s nightmare: a slow descent into the strip mall.