An office overlooking the Newport Beach harbor on the Balboa Peninsula holds the headquarters of a company that wants to change the face of online shopping.
Verb Technology Co. (Nasdaq: VERB) this month is rolling out what it calls Market.live, an online version of a shopping mall combined with television shopping, à la QVC.
“We’ve created a new form of shopping that combines entertainment, live events and shopping,” founder and Chief Executive Rory Cutaia told the Business Journal.
“People want to be entertained. They no longer want to look online at static images and read reviews. They want real-time entertainment. They want to ask questions. They want to laugh. They want to have fun. They want to talk to other shoppers. That’s the future of online shopping.”
$100M Raised
Cutaia’s pitch has found backers.
Verb has raised almost $100 million from investors, including Cutaia, who estimates he himself has invested “north of $4 million.”
The company’s sales are expected to grow 67% to $17.6 million this year, followed by another 62% growth to $28.4 million in 2023, according to the average estimate of three analysts.
However, Wall Street remains skeptical of the company’s prospects.
The company’s shares have taken a shellacking, falling from an all-time high near $40 each in 2018 to around 60 cents and a $65 million market cap as of last week.
“There’s a ton of money waiting on the sideline,” Cutaia said. “As they discover our story, we think they’ll come here.”
Audition Booths
Cutaia was a practicing lawyer representing entrepreneurs at a New York City law firm before he started the Telx Group, which he sold for $218 million in 2006.
After retiring, he said he got bored, so he went into private equity as a partner at Corinthian Capital Group Inc., where he was co-founder and CEO of Allied Fiber Inc., which built a nationwide fiber-optic network.
The private equity industry didn’t captivate him, so in 2012, he founded a company that supplied shopping malls with video audition booths where customers could film themselves for talent shows like “American Idol.”
The company, then known as nFusz Inc., was publicly traded on the over-the-counter market. When talent shows started losing popularity, Cutaia could see the handwriting on the wall.
He made an unusual video for investors.
“When it became apparent that the business was never going to be more than a mom and pop in a mall and wasn’t going to scale to where we wanted it, I created a video where I explained, ‘I’m sorry, the business that we invested in won’t be what we wanted.’”
He told investors that he had another idea, one that would take about 18 months to come to fruition, by developing underlying video technology from the audition booths for use in customer relationship management software. He told investors that he wouldn’t declare bankruptcy so they wouldn’t lose their money.
“Within minutes after the video aired, I started getting phone calls and texts and emails from people who loved the honesty. We ended up raising millions of dollars within a few days.”
The company changed its name to Verb Technology in 2019, when its sales were $9.1 million.
CRM Side
The company now has two lines of businesses.
The one generating the most revenue is a software as a service (SaaS) offering, called VerbLive, which helps sales representatives make videos to send directly to potential customers.
Among its features, VerbLive allows users to place interactive icons that appear on the screens of viewers, “providing in-video click-to-purchase capabilities for products or services featured in the live video broadcast, in real-time, driving friction-free selling,” according to the company.
“They just click right in the video and boom, they’re able to purchase that product,” Cutaia said. “It’s reducing the number of clicks to get to the buy. Customers don’t need to go to a website. By eliminating friction from the sales process, you increase your sales conversion rate exponentially.
“It’s the same principle as the checkout counter in the supermarket. The stores place things there that are impulse buys. If you can leverage that impulse to buy that we all have, then you will get the sale that you otherwise wouldn’t get.
“People don’t answer phones anymore,” Cutaia added. “They’ll watch videos.”
The competition facing the livestream selling platform is fierce, including heavyweights like Shopify Inc., the Canadian-based web retailer with a $42 billion market cap, and Zoom Video Communications Inc., which has a $34 billion market cap.
“We believe VerbLive represents a unique solution that combines the best features of Zoom and Shopify in a single application, offering users a more friction-free and effective selling experience,” the company’s annual report said.
Verb has built a “good size patent portfolio” that makes it difficult to replicate its technology, Cutaia said. The Social Selling News website ranked Verb as the No. 1 direct selling app.
Capital Needs
The big question for investors is whether the company can start generating profits before it burns through its cash, which was $25.9 million in 2021. Auditor Weinberg & Company wrote in the company’s annual report that there is “substantial doubt about the company’s ability to continue as a going concern.”
Cutaia said the company had $16 million in cash as of late May and its development costs have dropped with the launch of its newest offering, Market.live.
“I think we should be in good shape,” he said. “We can raise money whenever we want. We have no concern about meeting our capital needs.”
Virtual Shopping Mall
Cutaia is most excited about the company’s newest product, Market.live, which he said analysts haven’t yet calculated into their revenue models.
The company describes the offering as being “akin to a virtual shopping mall, a centralized online destination where shoppers could explore hundreds, and over time thousands, of shoppable stores for their favorite brands, influencers, creators and celebrities, all of whom can and will host livestream shopping events from their virtual stores.”
Thus far, the company’s signed up more than 200 vendors such as Babylonstoren, a South African wine farm; Celeste Sol, a fine jewelry boutique; and Wander Beauty, a cosmetics brand that’s one of the biggest sellers on HSN.
“There will be thousands selling their merchandise,” he said of the Market-live platform.
Currently, Verb is in a soft launch where it’s onboarding about 10 companies a day. It plans a grand opening kickoff July 26 with a three-day festival.
“It’s better than going to a mall,” Cutaia said. “There’s actually a person that is standing there telling you about the product and you are actually communicating with them.
“It’s a very social experience, you don’t have to leave your house and it’s 24/7. It’s like QVC.”
In fact, the company’s hired executives from QVC, such as former producer John Rizzo, who is now Verb’s senior vice president of content and brand partnerships.
Influencer Partners
Verb also has a program to work with talent agencies that represent internet influencers who want to generate extra revenue by selling products.
“They can come onto our platform, and we’ll marry them with a brand,” he said. “People get hooked on personalities and will follow them wherever they go.”
The company recently announced a partnership with the Tube Wearable Waistband, a brand featured on the NBC shows, “The Biggest Loser” and “Ninja Warrior.” It’s also working with sports teams like hockey’s Pittsburgh Penguins.
Verb says it is building a distribution channel that cuts out the middlemen. The firm collects about 10% to 15% of the sale, which he said is lower than the 60% collected by QVC.
“When you have thousands of stores on the platform and all are doing livestreams all the time and we’re getting paid by every one of them, there’s an unbelievable potential.
“This livestream shopping is so gigantic—we don’t have to own all of it. If we own just a piece of it, we’ll be a billion-dollar company.”
A Software Company Finds Balboa Peninsula Perfection
When Rory Cutaia moved from his native New York City to Los Angeles, he wasn’t impressed.
“When I got there, it wasn’t what I thought—it was way worse,” he recalled. “I thought LA was Southern California.”
Then a colleague suggested he visit Newport Beach.
“I came down here on a weekend to look around—Newport Beach was what I envisioned as Southern California, not LA.”
He decided to move his office to Newport Beach’s Balboa Peninsula, which isn’t known for being home to many high-tech companies.
“It’s the perfect place for us,” said Cutaia, who is a part-time resident of Laguna Beach. “It’s really important that we provide an environment for our employees. It’s fun, nontraditional.”
Verb Technology Co.’s official headquarters is listed as American Fork, Utah, where about 150 of its employees work while the remaining 30 are in the Balboa Peninsula office.
“The office sits on the harbor and the beach is across the street. It allows us to attract great talent who don’t want the traditional office environment.”
—Peter J. Brennan
