There are lots of other things you could do instead.

Things could be going better for flash sale sites: "It's a classic case of investors and entrepreneurs not really understanding how an industry operates." [The Verge]

How are we supposed to know if Netflix's expensive original TV show, "House of Cards," is a hit or a miss? Good question. [Vulture]

Twitter was mentioned in 50 percent of Super Bowl commercials. That's a lot of free advertising. [Marketing Land]

Speaking of: Did Oreo have some poor designer on call last night? Because when the lights went out halfway through the game, the company's Twitter team was ready with an appropriate ad. [BuzzFeed]

Generally speaking, Twitter users went bonkers during the blackout. That's when tweets for the event peaked, at 231,500 per minute, most of them terrible jokes about Bane. [CNET]

Former CNET staffer Greg Sandoval, who left out of concern over interference from corporate overlord CBS, has landed at the Verge, the site that broke the news of Mr. Sandoval's departure. [New York]

The flash sales wine site has had numerous strategic stumbles under founder Philip James. In December 2011, the site expanded into European markets, but pulled out of the U.K. in July, after just seven months. There was also the acquisition of the French competitor Vinobest and attempts to get into experiences. But last January, 15 percent of employees were handed a pink slip, followed by 11 layoffs in June and six more in July.

A spokesperson for the company confirmed to Betabeat that the layoffs were related to a strategic pivot toward direct response under CEO Jay Sung, who replaced former CEO Kevin Fortuna this past December. The spokesperson said Mr. James is still with Lot18; he will be charge of what a source close to the company called Lot18's "hail mary" pass: selling wines through a subscription model.

Mr. Sung (Photo: LinkedIn)

"The point being from the beginning they were trying to build an interesting high-end brand and now it’s like, 'We just need to get users, we don't care who the fuck they are,'" said the source, who added, "Jay Sung, a direct marketing guy, is now running the company, which tells you exactly what you need to know. Any pretense of higher-end lifestyle stuff is going by the wayside."

The spokesperson also confirmed that the layoffs were related to the existing flash sales business, which will continue on. "Everyone built [flash sales] up to the place where it can run with lower burn," he said, noting that Mr. Sung chose the remaining staffers "because he believes in their ability to fit in with the new subscription model and support flash sales." Mr. Sung also told ATD that Lot18 needs "to resource according to our new business model and operate the existing business more efficiently with considerably less burn."

Lot18 is going after the market currently dominated by industry veterans like Global Wine Company and Direct Wines, which run The New York Times Wine Club and a wine club for The Wall Street Journal, respectively. "If you look at the $30 billion to $40 billion wine market, the vast majority are not at that high end," said the Lot18 spokesperson. The company needs to look for customers "who can't afford $50 for a Cabernet, but can afford a $15 Cabernet."

Our source said it wasn't yet "game over," for the startup. "If Lot18 can put better wines in front of people on a club basis, they can justify an exit or acquisition, that would end up making their investors happy." Bottoms up?

Mr. Ryan, at TechCrunch Disrupt New York last May.

Around 4 p.m. on a recent Thursday, all but 14 of the employees of the members-only luxury e-commerce site Lot18 got an email asking them to report to the new conference room for an urgent meeting. The remaining employees, including the vice president of operations and director of operations, received an almost-identical note but were asked to report to the “alt” conference room instead. They were told they were being let go, asked to leave the building immediately and instructed to return on Saturday to clean out their desks.

The survivors were shocked by the layoffs, which came a day earlier than planned due to inquiries by Betabeat. Lot18, which started with private sales for wine before moving into full-price wine and epicurean deals, has raised a total of $44.5 million from investors—its latest round spearheaded in November by the highly regarded Accel Partners. Lot18 also moved into a new office over the summer that features a tasting room, mounted LCD screens that pop up a buyer’s location on a map every time Lot18 sells a bottle and a permanent DJ booth. In its one-year existence, Lot18 launched several new verticals, bought Paris-based e-commerce site Vinobest, and announced a foray into Europe.

To industry insiders, the scenario sounded familiar. Mass flash sales—deep discounts that expire usually after one to three days—had been touted as the first real innovation in e-commerce in years, and start-ups that applied the flash-sales phenomenon to the luxury market had investors salivating. But the former venture capital darlings suddenly seemed to be hemorrhaging employees. Earlier this month, another site, Boston-based Rue La La, slashed 60 of its 550 employees after months of growth.

Suddenly, the question is being asked: Could flash sales for the well-to-do wind up being more of a marketing gimmick than a business model?

A week before Lot18’s conference room trail of tears, Betabeat broke the news that Gilt Groupe, the high-fashion flash sales powerhouse, was also shedding staffers. Back in November, Gilt Groupe CEO Kevin Ryan happily boasted about hiring a worker a day in 2011. But by late January, the company was admitting that 10 percent of its 900-person staff had been dismissed, despite the company’s having raised $138 million less than a year prior at a $1 billion valuation.

Mr. Ryan assured the press that Gilt would have its head count back up by the end of March. Insiders say the layoffs are part of a prudent debloating before the company packs up its PowerPoints and sets out to pitch investors in the ritual pre-IPO roadshow. Gilt has raised about $238 million from investors and Mr. Ryan says a public offering could happen by the end of the year, but insists it’s unrelated. “Forget IPO,” he told Betabeat by phone. “I think it’s the right time to cross over into profitability.”

The other companies had similar explanations for downsizing. Lot18 had grown too fast, management explained, and those being let go were “nonessential.” Lot18’s cofounder and CEO Philip James, an oenophile who has two wine start-ups and a Mt. Everest climb under his belt, emailed a statement: “Lot18 is a business built on core fundamentals and we expect to reach profitability on the money we’ve raised. I’m not going to preclude the possibility that we’ll raise capital in the future, but that would be for growth.” Rue La La brushed off its layoffs as a product of “restructuring,” “outsourcing” and “consolidating.”

With $500 million in revenue in 2011, Gilt Groupe is moving toward full-price and private label offerings, and is likely to emerge from the moment of reckoning on top of the heap thanks to its buying power with brands. (Unlike some competitors, sources say, it never resorted to the black market in flash sales early years.) But scuttlebutt from inside Gilt’s velvet rope is that some of its new verticals are falling short of hopes.

When Gilt Groupe arrived in November 2007, its sparse home page conveyed maturity, taste and exclusivity—a black and gold gateway into your own private sample sale. Super savings don’t have to be gauche, Gilt whispered, a relief amid the Great Recession, both for the luxury brands that found themselves unable to move handbags and for their status-conscious customers.

Mr. Ryan, a Doubleclick veteran from Silicon Alley’s early years, borrowed the idea for Gilt from Ventee-Privee, the grand-mère of flash sales sites, which launched in 2001 and claims a $3 billion valuation. But for the public face of the company, he put forth cofounders Alexis Maybank and Alexandra Wilkis Wilson: leggy, blond, accomplished Harvard Business School classmates, and living embodiments of the Gilt Groupe customer (chairman Susan Lyne joined later). Their first sale was a still up-and-coming designer named Zac Posen, whom they met at Harvard, natch.

As Gilt captured media attention, mindshare and $25 million in revenue in its second year, luxury flash sales sites began raking in venture capital. Ideeli has raised $64.8 million; Beyond the Rack is up to $53.6 million. In 2009, Rue La La was acquired in a deal worth $350 million; in early 2011, Nordstrom acquired Hautelook for a deal worth $270 million. One Kings Lane, the original Gilt Home, has collected a tidy $63 million in VC funding. Daily Candy launched a private shopping club; eBay launched a high-end fashion deals site. The luxury craze isn’t over: The Clymb raised $2 million for a members-based deals site for the outdoor market over the summer and Los Angeles-based LuxeYard just announced a $3.5 million investment last week.

Retailers had always struggled with the problem of unloading unsold merchandise without degrading their brands, relying on outlets like Ross Dress for Less or T.J. Maxx. Gilt Groupe presented a sleeker option, and the membership structure of “private sales” lent it an air of exclusivity. “It felt like you were walking through Barneys, it’s just that everything is 70 percent off,” said one former employee.

Gilt Groupe also found macroeconomic forces aligning in its favor. On the heels of the consumer boom that preceded the recession, estimates are that luxury goods inventory rose to 10 times its normal level. And Gilt was poised to help. By 2009, it was up to $170 million, and by 2010, $423 million. “They were just the shit, right?” said Matthew Carroll, founder of the outdoor brand Cloven Footwear and a Gilt Groupe vendor who has written something of a dissertation on the company’s meteoric rise on Forbes.com. “In 2009 I worked with them and I felt honored just to get an invite to the service. I felt cool.”

Soon, manufacturers began cutting production, and by 2010 the supply of high-end goods had dried up. Flash sales start-ups responded with varied approaches. Ideeli went downmarket. “I’m not the most popular guy at parties in New York because all our friends are after high-end brands,” Ideeli CEO Paul Hurley sheepishly confessed to Reuters. “But the opportunity is much larger elsewhere.”

Gilt stayed the luxury course, opting to sell more categories to that same affluent urban sophisticate. After Gilt for women, there was Gilt Man, then sites for kids, design, travelers, foodies and so on. Around Christmas 2010, they even sold a few Volkswagen Jettas. “Gilt was one of the first ones to get into flash sales and I think they wanted to do that for every luxury vertical and be the Amazon of luxury, rather than a flash sales site,” said a former Gilt employee. “It was really a sprint to own the market,” said another former employee about the new verticals. “At the time we were growing faster than eBay did, we were growing faster than Amazon did out of the gate. It’s slowed now.”

Mr. Ryan prefers to err on the aggressive side. “I certainly would rather launch five new things—and they might be verticals, initiatives or different promotions—and maybe one of them doesn’t work and that’s O.K. That’s fine. Being the last person to market? Certainly you’ll be a loser,” he said, adding, “From my point of view, to date, all of our verticals have worked.”

Not everyone agrees. Some of those new verticals, like Gilt Home and Gilt Taste, involved increasing the ratio of full-priced to discounted items. The men’s site Park & Bond, on the other hand, was Gilt’s first exclusively full-priced venture. To sell its move up-market, Gilt Groupe borrowed some gloss from the glossies, tapping Ruth Reichl, Gourmet’s raven-haired high priestess of haute cuisine, for Gilt Taste and partnering with GQ for Park & Bond. “They really went after people, really recruited, really made a big deal [of marquee hires] to the press, dangling stock options,” said one former employer. “I have to ask was any of that done with a sustainable business in mind.”

The reaction was mixed. “I understand there’s foodies out there, but then why did Harry & David go bankrupt last year?” said a Gilt Groupe fashion vendor. “They had people who had bought their shit at Christmas every single year for like 20 years and they still go out of business for specialty food.”

Park & Bond “was a huge, huge bomb,” one former employee said. “That whole part of the business is essentially being picked apart and sort of let go.” The departure of Park & Bond president John Auerbach was announced at the same time as the layoffs (Gilt said he left to pursue other projects). “Everybody knew Park & Bond was in trouble because they were trying to be aspirational, and being aspirational as a retailer is dangerous,” explained one Gilt Groupe vendor. “They were trying to buy these $10,000 jackets because ‘we need to be high-class, we need to be ultra-luxury.’ Well, that’s cool if that’s your goal, dude, but if it doesn’t work it doesn’t work.”

Not all the Gilt Groupe’s reaches were met with as much skepticism. Jetsetter, the luxury travel site, gets rave reviews from customers and does 40 percent of its revenue in full-priced offerings. But Gilt City, which bills itself as selling “experiences” and therefore overlaps with both the Jetsetters and Groupons of the world, failed to get much traction beyond a few core cities. Along with closing six markets as part of the layoffs, the company announced Gilt City president Nate Richardson would also be leaving.

Some of January’s fat-trimming was more literal. A tipster to New York spotted a new sign in Gilt’s normally generously stocked pantry: “Gilt has made a New Year’s Resolution to cut the following items from our purchasing diet across all locations: all fruits, all yogurt, all cheeses, Thomas’ English muffins, granola and health bars, Rice Krispie treats, Poptarts, and Pellegrino.”

When asked, Mr. Ryan cheerfully dismissed speculation that Park & Bond would fold into Gilt Man and rumors of Gilt City’s demise and promised all the remaining verticals are here to stay. “Park & Bond is doing very well, although not as well as we had in the budget,” he said. Mr. Ryan said the problem was merely one of single-digit inventory write-downs: “We bought more than we could sell.”

One former employee implied that missed projections were more than a miscalculation. “I think the feeling among the staff was that the revenue projections were pretty wildly irrational,” the source said. “I was not convinced that Park & Bond was being set up for success. I thought, if we make these revenue projections, it will be a miracle.”

According to the source, either the “premise was framed incorrectly” or the strategy was simply, “Let’s do this so that we can say we did it—on the backs of a lot of selfless, really talented people,” the source said, citing long hours and staffers' commitment to the project.

Gilt Groupe President Andy Page responded to that idea by email, citing the changes inherent in a dynamic company. “Our performance is based on actual results, not what we forecast—especially for a new business. We reforecast every month, for each of our businesses, and our investors have visibility into that process. The way we demonstrate our ability to start a full price business is to create a successful brand, sell a tremendous amount of product and delight our customers. We did all these things. Park & Bond is the fastest growing business in the first 6 months compared to any of our other properties, but it was still over resourced.”

The same former employer disputed claims Gilt Groupe has been making to the press for years that the company is immune to industry-wide concerns about sourcing inventory. “It’s all spin and its all calculated to have a successful initial public offering, the people who have made it be damned,” the source insisted.

“I currently have visibility into our sales through June and anticipate having more access to product than we require,” Mr. Page replied by email. “That is for several reasons including our relative competitive positioning (more brands using us exclusively) and the volatile holiday season which left brands will a strong excess on hand.” He added that Gilt’s position in flash, “is currently the strongest it has been since I joined the company almost two years ago.”

For now, Mr. Ryan seems content to watch the industry shakeout from his Park Avenue perch, a familiar scene from his DoubleClick days. “I’ve watched this movie since 1996 where an area gets hot. In 1997, we had 37 competitors in ad-serving. Five years later, we were down to about five.”

The story had an portentous ring, especially when Mr. Ryan added, “We bought a bunch of them and a bunch of them went out of business.”

ntiku@observer.com, ajeffries@observer.com

A version of this piece appeared on page A1 of the February 1st, 2011 issue of the New York Observer.

CORRECTION: An earlier version of this story said the Lot18 office has a fireplace; that is incorrect.

The flossy, flossy.

You know Gilt Groupe is in overdrive mode when even its verticals are diversifying.

Jetsetter, the travel site Gilt Groupe founded in 2009, must have liked the looks of Airbnb's numbers,  since it just launched its own foray into the vacation home  rentals market with Jetsetter Homes. As The Next Web notes, Homes starts off with collection of 200 curated and verified villas in exotic international locales. Since this is Gilt we're talking about,  the pricing is "exclusive," with some options offered in the company's customary flash sale style, depending on availability. Although in the case of these homes, we imagine the scarcity is more than just manufactured.

The booking site, which comes with international inventory, benefits from Jetsetter's emphasis on luxe photography,  "including our revolutionary 360-degree tours which transport the user into palatial homes and fabulous infinity pools around the world," says Jetsetter founder and CEO Drew Patterson.

Hopefully, Mr. Patterson learned from Airbnb's mistake and invested in some hefty anti-vandalism insurance. I mean, have you ever tried getting graffiti off an infinity pool?

Paul Hurley - Image via Inc.

New York based e-tailer ideeli was just picked as the fastest-growing company on Inc Magazine's annual 500 List, with an eye popping three years sales growth of 40,882 percent. Of course, if you looked at Betabeat's traffic growth since we started back in March, we could claim a pretty impressive 300,000 percent growth, but hey, it's all relative. Since Silicon Alley is home to both ideeli and Gilt Groupe, which pioneered the online flash sale, we wanted to chat with ideeli CEO Paul Hurley and get his take on how this rapidly evolving industry will look a year from now.

Q: What are the big things happening in flash sales?

A: Well in a few years you won't be using the word "flash sale." Real-time buying will just be part of ecommerce.  And of the people in our category who are pursuing that market, we are the fastest growing. This isn't just about a 24-hour sale. It's tapping into bigger trends in retail and media. How do you find and engage customers in the real time universe of the web.

Q: So right now you're focused on growth over profit?

A: These are very, very large marketplaces. Originally I was intrigued by the way brands could find and engage audience online. But in 2009 we pulled a monster pivot from a platform that helped brands find and engage audience online to a flash sales site that moved their excess inventory. The new business turned out to be a far better way to engage with the real time customer.When we look at our customers, we can map it out, slower growth would be very profitable, but we’re looking for the operating leverage of scale.

I’m not an apologist for Groupon, but these are such huge marketplaces and such big disruptions, you want to grab as much as possible. 80 percent of U.S. households have not heard of flash sales. Everyone you and I know has, but not casual web users.

Q: How will you defend you business if a massive online retailer like Amazon gets into the game?

A: You never want to count Amazon out and we’re a paranoid bunch. They bought a couple companies in Europe and started Myhabit in U.S.. But there are two things: One, operationally this is very very difficult to run. And two, the big advantages we have, is that there is a whole different set of concerns, with the shopping experience, where a key portion of the value is related to the emotional engagement. Last week I went on Amazon and bought a grill brush. It took me ten seconds to find the best one, and I don’t care if that brush is two seasons old, I don't feel embarrassed. the products we're selling, there is a lot of emotion and attachment to trends, to fashion, to cache.

Q: How is the bleak economic picture affecting your business?

A: Recessions are very good for businesses like ours, because there is so much excess product available, and people are looking for good deals. Most of our market is aspirational consumer, we do big brands but not couture. Partly what happened at Gilt was they built a brand around the promise of luxury discounts, and that is not a scalable model. We have a much larger target market of lower end shoppers.

Q: So Gilt is not a competitor?

A: We don’t compete with Gilt, they are whole different animal. Our competition is more from folks like Rue La La and Haute Look. But frankly, this market is so big, growing so fast, it's wide open right now, no one player can suck the air out of the room.

Q: And you're planning to stay in New York?

A: Absolutely. Even with the higher cost of rents here, it's worth it. In a high growth business like ours, what matters the most is access to great talent, and New York has that in spades.

Modern love?

Kevin Ryan may be moving away from the flash sites that put Gilt Groupe on the map, but the sales device seems to be working just fine for Fab.com. After a smooth landing on a successful triple pivot [Ed Note: our bad, original idea plus two pivots does not equal three!]--from a daily deals site for gay men called Fabulis, to a flash sales sites for gay men, to a flash site for design for everyone, regardless of gender or sexuality--GigaOm reports that Fab.com has grown 800 percent since May. It's only been ten weeks, but the site is already approaching the 500,000 user mark. The key, according to CEO Jason Goldberg,  lies in part with a little feature they like to call the "inspiration wall."

The wall was initially put up in April to keep users sticking around the URL when it transitioned from a social networking site into flash sales. The feature lets users shares pictures of inspiring designs they find online, have stored on their computer, or feel like uploading from Instagram. Now users can upload products on Fab to their wall in the same way. Others can see their choices and follow a user whose taste they admire. Most anything on the site can be shared through Facebook, Twitter, Tumblr, Google+ or email. Mr. Goldberg says Fab has ten times more Twitter activity than other flash sales start-ups.

Betabeat first noticed Fab when one of our friends shared it on Facebook, and Mr. Goldberg concurred that most users have been added from social sharing rather than direct traffic. Old-school email, however, has proved more profitable,with visits via email yielding four times the amount of revenue.

The biggest driver of revenue, though, came courtesy of the wife of one of its investors. The power of Demi Moore's Twitter stream is not to be trifled with people.

Today Ideeli announced a $41 million raise, led by Next World Capital, nearly doubling the money they have raised so far. It plans to use the funds to, "Support its phenomenal growth trajectory through a variety of new initiatives, including category expansions, partnerships, technology enhancements, marketing campaigns, attracting key talent and enhancing the ideeli member experience."

The new cash is about half of the roughly $80-100 million Gilt Groupe was rumored to have brought in during a raise this February.