This post written by Kevin Roose was originally found at http://fusion.net/story/54990/guy-got-ric h-using-jet/
Tech start-ups mint new millionaires every day. Many of these people are young Stanford and MIT graduates who live in Silicon Valley and spend years building their companies while subsisting on ramen noodles and Red Bull. Typically, they’re not funeral industry workers from Central Pennsylvania who spend three weeks learning to game referral competitions.
But there’s a first time for everything.
First, some background. There’s a new tech start-up called Jet.com. Maybe you saw it on the cover of Bloomberg Businessweek. It’s a membership-only online shopping club, similar to Costco, that says it will be able to charge between 10 and 15 percent less than other e-commerce sites by, essentially, cutting its margins to nothing. Jet hasn’t launched to the public yet. But it’s already one of the most-hyped start-ups of the year. It’s raised a staggering amount of money—more than $200 million, at a valuation said to be close to $600 million—and when it does debut (“very soon,” according to the company’s placeholder site), members will sign up to pay $49.99 a year for the privilege of shopping there, and Jet will make some of those millions back. Or it won’t.
The specifics of Jet’s business model aren’t important, for our purposes. What’s important is that, in the run-up to its launch, Jet ran a contest to try to get more people signed up for its “Insider” program, which entitled them to a free 6-month trial of the site and other perks. To stoke interest in the contest, the company offered 100,000 shares of Jet stock to the person who could sign up the most new Insiders, and 10,000 shares to the nine people with the next-highest numbers of sign-ups. (The company didn’t indicate how much 100,000 shares was, relative to its total number of shares, but one person familiar with Jet’s finances said that the winner’s stock could be worth between $10 million and $20 million if everything goes according to plan.)
Eric Martin is not a greedy start-up bro, nor an inveterate gambler who can’t resist a sweepstakes. He’s a modest, soft-spoken 28-year-old who lives in York, Pennsylvania, a city of 40,000 located roughly 25 miles south of Harrisburg. He has a wife, two young girls, and a job as an “ancillary product specialist” for Golden Considerations, a funeral insurance company. (Basically, he’s the IT guy.) His life is stable but unglamorous. He plays online poker, but not for money. He goes to church on Sundays. He ran for Congress in his district in 2012, but lost in the Republican primary, finishing with only 3.3 percent of the votes.
One day last month, Martin was leafing through his father’s copy of Bloomberg Businessweek when he saw the cover story about Jet. Cool idea, he thought. After skimming the article, he went to the site, and signed up for the Insider program. There, he saw the contest, and the grand prize of 100,000 stock options. After reading the contest details, he was skeptical about his chances. After all, it was already January 15th — the contest had been going on since late November, and was only three weeks from being over. There were already more than 200,000 people signed up for the Insider program, meaning he’d be fighting his way through a big crowd. Still, he encouraged his wife, his brother and sister, his parents, and his in-laws to join, using a special referral link that was attached to his account.
Jet set up a leaderboard listing every Insider who was eligible for the contest, ranked by the number of referrals they’d generated. And when his family members started signing up, Martin noticed something odd. A single referral took him from a ranking of 232,582 to a ranking of 13,767. A second brought him to 7,518. A third put him in 5,232nd place. He was moving up the charts quickly, which meant that the contest was far less popular than he’d assumed. What if all those thousands of people weren’t competing for the grand prize? What if he could win 100,000 shares of the year’s hottest tech start-up simply by elbowing a few dozen people out of the way?
Using a 30-day free trial of a statistics app he’d downloaded, Martin plugged his numbers in, ran some calculations, and tried to roughly estimate how many sign-ups he would need in order to win the contest. The answer he got was shockingly low: if his math was right (and if there was no statistical outlier at the top of the leaderboard), he would need just 2,000 referrals to place himself near the top of the leaderboard.
Martin had plenty of experience corralling groups of people, thanks to his run for Congress. And 2,000 was a vanishingly small number of sign-ups, in the grand scheme of things. So he decided to jump in, and spend the next 22 days of his life signing up as many Jet Insiders as possible.
First, he tried buying a Facebook ad containing his unique referral link, as well as a brief description of the contest. But the Facebook ad didn’t move the needle much. He thought about placing an ad in Jet’s Google search results, but when he checked, he found that several other contest participants were already advertising there.
Instead, Martin took his campaign to so-called “rewarded advertising” sites like Swagbucks and Gifthulk. He knew about these sites from his sisters-in-law, who used them to earn gift cards and other small rewards in exchange for taking surveys, signing up for mailing lists, and doing other mundane Internet errands. And he knew that if he paid Swagbucks and Gifthulk to offer their users “swagbucks” and “hawkcoins” in exchange for Jet.com sign-ups, he might be able to growth-hack his way closer to the top of the leaderboard.
“One of their most important demographics is mothers,” Martin told me of the sites. “They’ll do a survey in exchange for a one-month trial of cosmetics … I don’t even remember all the stuff on there.”
All that mattered was that these sites had users who were, as Martin puts it, “trained to sign up for things.” Martin’s first campaign on Swagbucks cost about $3,000, and netted him roughly 2,000 sign-ups in a matter of days, vaulting him to 7th place on the leaderboard. Around that time, Jet began sending regular updates to the top-ranked Insiders, which contained the first names and last initials of the other front-runners, along with how many sign-ups each one had gotten. The first-place Insider, Martin learned, had generated more than 4,000 sign-ups.
At this point, Martin had a choice. For the next week, he could pay Swagbucks and Gifthulk a little more money to get enough sign-ups to keep himself somewhere in the top ten, and settle for the 10,000 runner-up shares. Or he could pay them a bunch more money, redouble his efforts, and try to lift himself into first place.
“I could probably have spent $3,000 or so and gotten into the top ten,” he says. “But the difference between 10,000 and 100,000 shares is pretty big.”
So he went all-in. For the next week, Martin spent thousands of dollars running paid campaigns on Swagbucks and Gifthulk. (He paid for it, in part, with his tax refund. “My wife was…nervous,” he says.) As the sites’ users clicked on his link, his referral total grew, and his rank kept climbing. He found another Jet Insider on Facebook, and compared rankings and referral numbers with him to get a better sense of where he stood. He checked the leaderboard obsessively. And eventually, on February 3rd, with three days left in the contest, he claimed the first-place spot.
Anyone who has bid on an eBay auction knows that online competitions don’t escalate in a linear fashion. They heat up in the last few days or minutes, with a flurry of people all trying to beat the deadline and usurp the winner. And so, as Martin stepped up his game in the hours leading up to February 6th, so did his competitors—several of whom ran expensive ad campaigns on Google to try to gain an edge in the standings. Every night at midnight, Jet would send out the top-ten list, and Martin would study it intently. There was Kyle T. from St. Petersburg, Florida, Collin M. from Boise, Idaho, and two guys from Tampa. All of these people were potential eleventh-hour spoilers.
Martin kept pumping money into his Swagbucks and Gifthulk campaigns, eventually spending $18,000 in all to put his referral links in prominent places on both sites. The money hurt leaving his pocket, but he consoled himself with the vision of start-up riches. “If this works out, it should be worth well more than my investment,” he thought.
The contest was slated to end at noon Eastern Time on February 6th. On the night of February 5th, Martin waited up until midnight for his daily update e-mail. But it never came. Out of desperation not to be eclipsed, he prepared a huge Facebook ad campaign that would blanket the entire country with his Jet referral link.
“I was crazy nervous that someone would come out of nowhere to win this thing,” he says.
But he never needed the Facebook campaign, as it turned out. The next day, the contest ended, and Martin had won with 8,167 referrals. After Jet.com had finished checking his paperwork and verifying the legitimacy of his tactics, it awarded him 100,000 common stock options. He went to the grocery store and bought snow crab legs to celebrate.
“You get this sense, like, oh, I could have some money now,” Martin says.
That’s understating it significantly. On paper, Eric Martin is now a millionaire, with a big stake in one of the most hotly anticipated start-ups in years. He likely won’t be able to exercise his options for years. And if Jet crashes and burns, they’ll be worthless, and his $18,000 will have been wasted. Even with boatloads of pre-launch buzz, Jet is still going up against Amazon, one of the most cutthroat competitors in the history of American capitalism. Much older and wiser businesses have died at Amazon’s hand, and Jet will need to prove that it can fend off attacks from the Seattle giant while building a sustainable business model.
“We’re taking a big swing,” Jet CEO Marc Lore told me. “You can’t do that without there being some risk.”
But if Jet does what its investors think it will, either going public or getting acquired for billions of dollars, Martin’s three-week referral sprint could have generated life-changing, generational wealth for him and his family.
For now, Martin has a big pile of theoretical money and a lot of hope. Tomorrow, he’ll go to his job at the funeral insurance company, fix some IT problems, and perhaps play a game of poker or two. In the next few weeks, he’ll speak with Lore and other Jet executives, and get early access to the site. He admits that he started participating in the Insider competition out of self-interest, but says that, as he’s learned more about what Jet’s trying to do, he’s gotten more supportive of the company’s mission. Still, he says in his typical, understated way, he’s trying not to get too far ahead of himself.
“I’m pretty much a realist,” Martin says. “Until I can actually see real dollars, it’s not going to hit home.”