It's been a month now, since Nykaa announced their acquisition of LBB (Little Black Book), and I've been thinking why.
1. Why did LBB need to get acquired? What went wrong, if anything?
2. Why would Nykaa acquire LBB? What are they going to do with it?
Originally started as a Tumblr blog, LBB was a lifestyle discovery and recommendation platform for local businesses. LBB figured out early enough that content was key to their growth. Initially, they had in-house teams that would explore the cities they operated in and offered a curated list of things to do. They were soon able to build a user community on their platform which started dishing out their own recommendations on the platform. With this heavy inflow of user-generated content, things were going great for LBB. What happened then?
At its peak, LBB had two primary sources of revenue - advertisements and sponsored content.
In 2018, the founder was quoted by Fortune India saying “Our revenues catch up with our expenses really quickly. Purely from ad sales, we broke even last year, our burn is very easy to control, our content is coming to us for the most part free from our consumers, and our merchants are getting in touch with us.”.
Monetization of the content, it seems, was an after-thought.
Their focus, and dependence on user-generated content was obvious. LBB realized their potential as a Social Commerce platform, almost unexpectedly. And by the time they did, they were playing catchup to newer platforms like Meesho, with a well-defined business model, and other established platforms like Instagram, YouTube, Snapchat, etc., each with an exponentially larger community than LBB.
And then they got into some unusual partnerships, such as the one with Swiggy for food deliveries for restaurants that people might discover on LBB. A force-fit at best.
Also, unlike their peers in the industry, LBB didn’t have a clear focus area. While Zomato was a restaurant discovery platform and Tripadvisor a travel recommendation platform, LBB was a classic case of “everything for everyone”. Zomato and TripAdvisor, despite having a clear category focus, found ways to monetize their platforms early enough, while LBB still seem to be meandering their way through.
Which brings us to the other question. What would Nykaa do with LBB? Nykaa has now inorganically gained a content platform that they can repurpose to build their brands on. Or this could be Nykaa signalling a deeper foray into the highly lucrative fashion retail space. Either way, LBB can be expected to have a sharper focus.
