Tom Ryan, CEO of Threadless: Social Web Commerce and the Atrium Platform

Benzinga Radio spoke with Tom Ryan, CEO of the online art and apparel outlet Threadless, on growing the social retail and design outlet and the movement toward social web commerce. Threadless has recently debuted a new project called Atrium that allows companies to utilize crowdsourced art and design to further their businesses. Ryan also discussed the expanding "social-ness" of commerce and how he has utilized that phenomenon in his company. Finally, we asked him what advice he would give to entrepreneurs looking to grow successful businesses in the world of social media. Full transcript below. Benzinga Radio: Tom, thanks for joining us today. Tom Ryan: Thank you. Let's talk a little about Threadless. It seems like you've successfully crowd sourced clothing design here. Tom Ryan: That's right. We invite anyone in the world to submit a design to our website and our community of 1.5 million users. They then vote on the design for one week, and we take the best design as chosen by the community and we sell them as T-Shirts and other products and we pay the winning designer a cash fee. How much do you pay the winning designer? Tom Ryan: We pay the wining designer $2000 cash and then we pay them an additional $500 Threadless credit or $200 cash if they would prefer that over the credit. That's for the initial run, if we reprint the design because it's very popular then we pay a reprint fee and that's $500 each time we reprint it. That sounds like a pretty serious incentive to submit a descent design. Tom Ryan: It's definitely well above market rate, for graphic art on T-Shirts particularly as they get reprinted it can become quite a significant sum. But we find that people are not just submitting to Threadless for the potential cash, but also for the ability to advance their careers through submitting and getting critiques from their peer group, forming friendships online, and just the joy of creation and sharing their work. So people don't just vote, they comment and interact with each other as well? Tom Ryan: That's right. The artist's submit designs and then our members vote on the designs as well as provide qualitative feedback, so they provide comments, there is even a function of our site called the critique section where users actually go and provide constructive feedback to an artist so that if the submission isn't quite as good as it could be, they can take the feedback in a constructive way and then resubmit their design for a better chance of winning. What kinds of participation do you see in terms of the amount of artists that are submitting designs as a part of the entire community? Tom Ryan: We have received hundreds of thousands of designs in the ten years that we have been in business. The artist community is about 150,000 people and the entire registered member community it the entire 1.5 million so about 10% of the registered are actually submitting designs and the rest are voting or are otherwise participating on the site. You don't need to register to buy so there are a lot of shoppers who haven't registered with member accounts but are buying from us actually. Do those artists tend to come back with several designs over long periods of time? Is it an ongoing community or is it something that you see a lot of turnover in that area? How does that work? Tom Ryan: I think that there is definitely a diversity of artists that submit to us. They range all the way from complete amateurs to the sweet spot being art students. People looking to make a career of the visual arts to professionals who moonlight and may have a gig somewhere, as in a creative or an art director, but they want to peak their chances on Threadless by sharing a great piece of artwork that they've created. Generally speaking people tend to submit multiple times. There are people who have submitted many many times, and they have never won, but they get a lot of value out of the process besides the cash and the potential glory. Tom, it seems like this is an extremely social process and that is not necessarily something that you associate with T-Shirt design. Do you consider Threadless to play a part in the social media explosion that we are seeing these days? Tom Ryan: We were a social site before the rise of the big social networks today like Facebook and Twitter, and our site and what we do has been social since the beginning when it was founded in 2000. The first thing our artists do when they submit a design is they tell their friends to go vote on their design to increase the chances that their design wins, and users on the site share their content across the web. They used to email it around and they post on various sites, now they use all the social tools which make sharing content so easy - so even if no one buys a T-Shirt from us there are still lots of people who are exposed to the designs that are in the running and they make great shareable web content. I'd say that T-Shirts are actually more social than you'd think. We believe that in addition to the great word of mouth that we've achieved over the years through the artists and members online that the T-Shirts that our artists make are great conversation starters and they also just help increase the offline word of mouth. The first thing that somebody says when they see a Threadless T-Shirt is they ask them where they got it, so there is quite a social aspect just to wearing a T-Shirt because it is a personal choice to wear a piece of artwork on your chest and that usually starts a conversation. And that's a feature that has long dominated retail in general, not just of this idea of online social clothing. But I'm wondering, we see all of these social media companies coming out of this social media explosion, and one of the things that they really have to focus on is innovation and differentiation. You've been around for ten years doing this - what do you see Threadless doing going forward and continuing to innovate at the forefront of the social media revolution? Tom Ryan: Well, we've got a really interesting new project that we launched about five months ago called Threadless Atrium, and the idea was that crowd sourcing for artwork is this massive idea that we had helped to pioneer but we used it for a relatively narrow purpose of creating and selling T-Shirts just on Threadless.com and we think that there is a much bigger opportunity for us to provide more opportunities for more artists, and for us to bring crowd sourcing of more artwork and community based design, as we call it, to all the different companies and industries that want to use community based design to further their businesses. We've launched this Atrium business that does just that. It is a web platform that allows us to quickly launch design challenges with partners and key industries and we enable them to run design challenges where we are soliciting artwork from our community and we are essentially bringing the art community, the web service, our brand, and know how and the partner is bringing their audience of voters and customers to buy the products that result from the challenges. One example is the entertainment licensing industry which we think is a really exciting one. We have a partnership there with the biggest player in that space, which is Disney, and we are running design challenges with Disney's entertainment properties like TV shows, films, and games. Some examples of challenges we've run include the forthcoming Mupets movie that's coming out in November, the Tron movie that came out recently, and the Fineus and Ferb TV show. We run challenges inviting our community to reinterpret artwork from these shows and then we take the winning artwork and create products which can be sold not just online but also offline through channels where Disney's products are most typically sold, so that's just one example of what we are doing with Atrium that we think really has huge potential for bringing crowd sourcing of artwork to companies in all sorts of industries. That's really interesting, because you come from that industry background with your work at EMI back in the day. Tom Ryan: Exactly. My background was just more than the traditional music space and in fact one of the industry categories we have been looking at is music: How can we reinvent band merchandise and music industry artwork to really come up with better community driven artwork that can enhance a bands career? For the moment, the one we have focused on and launched are the entertainment category, as I just mentioned, causes, where we are working with charitable organizations to solicit designs for their causes and fundraise for their product. As well as consumer products, we have a variety of different partnerships with senior product companies including thermos, which makes water bottles and we are selling those through offline retailers as well. We are also bringing community based to design to large retail partners who want to do what we do in their setting. So I think the opportunity fort his is quite large, at the same time we want to make sure we are focused on opportunities that are exciting to the artist community and also result in products that people find exciting and want to buy. So we are not opening this up as a white label platform or anything, we are trying to do this in a very deliberate way in categories that we think work for all parties. How long have you been at Threadless and how did you make the transition from the music industry to clothing and art? Tom Ryan: I have been at Threadless for three years and a few months. I joined in May of 2008 and my background was as an entrepreneur in the internet music business. I founded an early online music site, which merged with Emusic, which is still in business today and focuses on indie music downloads. So I worked in digital music for most of my career and was introduced to the Threadless founder by a mutual friend when the founder was looking for someone to come on and help him run the business. I had always been a fan of Threadless and always thought it was a very interesting idea and saw a lot of potential for it to move in this new direction that I just described. I also saw a lot of analogies between what I was trying to do helping musicians promote themselves and make a living on the web, as we are doing with visual artists. Community is vital for both of those industries. What do you have your eye on in terms of that whole concept? Are you on Google +? Tom Ryan: We experiment with every social media service very early. In fact, we have several people who are dedicated to building out our efforts across the social web. Our philosophy is that we have a potential to grow our community of art enthusiasts and artists and that many of these people whether they are a part of this community today or in the future don't exist on Threadless everyday. They are spending their time increasingly in a variety of places across the web and there is so much innovation across the web that it makes sense for us to experiment with a lot of the new services. So we are among one of the earliest companies to experiment with all of these services and we invest very heavily in them. One example is our early experimentation with Twitter. We worked very closely to build a Twitter presence early on and we also had a connection at Twitter. So the company flew out there and gave a presentation on what we could do for the Twitter team in early 2009. And they made us a suggestive user when that feature existed and it really helped us in acquiring what is now 1.6 million followers on Twitter. The increase happened all at once. Through experimenting with Twitter and working together, we built one of the first applications that had to do with the creation of content called Twitter Cheese, where people could actually submit slogans using Twitter. We used these slogans to create products using what people tweeted. What insights are you taking from the major social trends on the web right now that you are trying to incorporate into your business? Tom Ryan: We are constantly trying to make it easier for our users to share information, comments, etc. We focus heavily on allowing our users to engage with each other and our company. We are in the process of designing portions of our website to have more of a community aspect. We believe that creating the ability for our site to work easily with facebook and twitter and other sites. So we are working on some developments there as well. I was actually going to ask you about that. Can you elaborate further on the socialness of Threadless? Tom Ryan: Right, so we built Threadless before these social media sited existed, so as a result we built it our way. So we have since then connected with these sites and are in the process of coming up with new innovations that we feel represent a more modern way for us to design and allow our users to interact. This is a very interesting conversation, because I am sure a lot of people look at threadless and would categorize it as retail business. It's t-shirts. But its clear from this conversation that its more than just that and you focus on the socialness of the site and the way that you bring those artists together with a sense of community aspect. At the same time, we have seen a lot of companies in the retail business struggle with rising input costs due to the cost of raw commodities. So I would love to get your thoughts on that and how it is affecting your business. Tom Ryan: Certainly these rising costs have affected all companies in the t-shirt business. At the same time, it has not been a huge problem for us, because we are finding that we are able to create a whole range of additional products that are not subject to cotton and other commodity price increases. And even in our core business, we have been growing in the states and growing rapidly internationally. In fact, over half of our revenue is coming from outside the states. So it has definitely affected us, like it has everyone, but has not been a big problem. That's interesting that you have found so much success in international markets. Where do you see people using and enjoying Threadless the most outside the US? Tom Ryan: Well, across the three segments of our community, our artists, our members, and our customers we have a very internationally diverse base. So last year, for example, we shipped to customers in over 150 countries and well over 50 percent of our traffic comes from outside the US. All in all it's a highly international business. Where do you see Threadless in five years? Could we see a public Threadless or part of a larger company? Tom Ryan: For the moment we are focusing on continuing to build our core business. We are doing a lot to make it a better experience for our international customers and community members. We are also really excited about the Atrium business. We think that can be a multiple of the size of Threadless quite quickly given the interest that we have from large partners that want to tap into the power of community based design. We think we are at the start of a new and exciting development with Atrium and are excited about continuing with Threadless as well. What sort of advice would you give to people who are looking to get into social media? Tom Ryan: I think there is a lot of opportunity for building businesses in specific categories, whether those be in content, commerce or other categories that can accelerate very rapidly through the rise of big social networks like facebook and twitter. Zynga and Groupon also prove how fast you can build a really massive business in specific categories. I think there a lot of niches and specific categories that have not been tapped yet.