The Knot Opens Up

David Gardner recently sat down withThe Knot (Nasdaq: KNOT  ) CEO David Liu, who co-founded the wedding media and services company that serves as a one-stop shop for brides and grooms.

What follows is an excerpt from the interview. Liu discusses why it took The Knot seven years to turn a profit, what the typical user of The Knot looks like, competitive threats, and offline business prospects. He also dishes on The Nest -- specifically, how many Knot customers migrate to The Nest -- and what he's learned in his nearly 10 years as an Internet entrepreneur.

David Gardner: Talking about those who visit TheKnot.com, if the math still works out about this way, maybe it's trending up a little bit, but the divorce rate seems to be something like 50% in this country. And again, perhaps our marriages are remaining a little bit more stable than they were 10 years ago. I can't quite remember, but how many people are coming back for their second or third marriages? Is that a meaningful count for you?

David Liu: It is increasingly so. I've heard figures where 30% to 40% of people getting married today, at least one person is having a second, if not third, wedding. As bad as it is for the social fabric of our society, it generates repeat customers for us, so we can't complain.

David Gardner: David, are you rooting for divorce?

David Liu: No, no, no, of course not! We just want people to have a really great party when they get married, but I think also the second wedding is a very different type of event, and a site like ours is able to really deal with a lot of the nuances that traditional media companies have not really been able to cover.

David Gardner: And David, maybe an obvious criticism that somebody could level at The Knot is, hey, this is just about marriage -- just a single experience. I know you're trying to extend that to newlyweds with TheNest.com. What is the state of that business today, and five to 10 years from now, does that end up being bigger than TheKnot.com?

David Liu: Well, we're really excited about The Nest. It's been live almost a year now, and our goal really is to create a new brand for consumers who are now post-wedding day. As you mentioned, we do enroll over a million members to The Knot.

Well, these women give us their name, their address, and most importantly, their wedding dates, so we actually know the moment they become newlyweds. And as a newlywed, the behavior is very predictable. Many of them will be buying cars. Our members will spend over $100 billion on new home purchases in just the first couple of years. Sixty-five percent will have a baby within three. So we believe that if you look at the local advertising opportunity, the national advertising opportunity, in these new markets, The Nest has the potential actually to eclipse the size of The Knot.

David Gardner: Let's talk about competitive landscape for The Knot. I mentioned it a little bit earlier. There are a lot of other wedding brands, maybe not as special as TheKnot.com -- but Weddingchannel.com, a little bit more diffuse, but something like iVillage (Nasdaq: IVIL  ) or Martha Stewart Living (NYSE: MSO  ) . These are companies that are also trying to meet the same need, and Google (Nasdaq: GOOG  ) , of course, with its local listings. Who are competitors in that group for you?

David Liu: Well, what's amazing is we face competition from so many different sources. When you think about the different revenue streams, on the advertising side, as you said, you have the Martha Stewarts. Conde Nast publishes three bridal publications. You have independents like Bridal Guide, and then there are just hundreds, if not thousands, of online wedding websites.

On the commerce side, we sell these wedding supplies, so there are a lot of retailers we compete with. On the local side, we compete with the Yellow Pages, the local newspapers. Every major market has two or three other local wedding magazines, so the competition is fierce.

What we have done that makes us somewhat unique and provides a certain advantage is the fact that we have this very well-recognized national brand now, and we're able to touch people on so many different touch points -- between broadcast within the magazines, local and national -- that we've been able to create an umbrella effect for the different products. Our growth rate is really representative of, I think, the market share we're taking from the incumbents. We still consider ourselves "the little engine that could," and we still have to fight pretty hard against the Goliaths, but we're making progress.

David Gardner: According to our numbers, 4.6 million people in the United States get married each year. TheKnot.com gets around 2.1 million visitors a month. With that in mind, how much of the wedding market has The Knot already tapped into?

The Knot is a Motley Fool Rule Breakers recommendation. Subscribers can read the rest of this transcript, or listen to the entire interview via audio file, byclicking here. Not yet a Rule Breaker? Be our guestfree for 30 days and you'll have full privileges: access to our more than 30 buy reports (our recommendations are beating the market at large by an average of 21 percentage points), our library of interviews, and our world-class discussion boards. To get started right now,click here.

Fool co-founder David Gardner does not own shares of any company mentioned in this article. The Fool has adisclosure policy.


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