Mattress start-up Casper recently raised $55 million to take on the sleep industry with a new Web-based model. Yet you're just as likely to see its ads in subway stations and on taxis as in your Facebook feed.
Even though Casper's mattresses, which range in price from $500 for a twin to $950 for a king, are only available online, the New York-based company is spending a good chunk of its fresh capital to reach consumers offline.
That's in part due to the astronomical increase in the price of marketing on Facebook and rising competitiveness for Google search terms. In the second quarter, the average price of a Facebook ad soared 220 percent from a year earlier, while the number of ads delivered shrank by 55 percent, according to the company's 10-Q.
"Strategies that worked four or five years ago on Facebook certainly don't work today," said Philip Krim, co-founder and CEO of Casper.
While Casper is still investing on Facebook, Twitter and across the Web, mostly through re-targeting (CNBC saw several ads like the promoted tweet below while reporting for this story), Krim's 10-person marketing team has to get creative. Its competitors, ranging from bed makers like Serta and Sealy to retailers including Sleep Train and Mattress Discounters, can easily outspend the upstart.
Casper's offline campaign started with subway and taxi top ads in New York after the company raised its first big round of funding a year ago, led by New Enterprise Associates. Then, following its June financing (at a $500 million-plus valuation) led by Institutional Venture Partners and including participation from Leonardo DiCaprio, Casper hit the ground in San Francisco with a similar strategy.
Subway station ads include humorous illustrations of all types of creatures, for whom Casper claims to provide "the perfect mattress." For example, an ad with dinosaurs describes Casper as "the perfect mattress for paleos," and one with a squirrel and pigeon eating pizza promotes it as "the perfect mattress for locals."
Taxi ads are more straightforward, showcasing the Casper logo. Krim says it's all still very experimental with the goal of creating awareness.
"It helps spread the word that there's a new alternative to a store on every corner that tries to get you to spend a lot more money than you have to on a mattress," Krim said. "Our industry has seen so little innovation for decades. The more places we can tell our story the better."
Casper's appeal, in addition to the allure of supporting a new brand in an old space, is the simplicity. Mattresses, made of latex, memory and support foam, get delivered to your door with free shipping and returns. Meanwhile, customers get a 100-night free trial and 10-year warranty. There's also a 0-percent financing option through Affirm, Max Levchin's online finance start-up.
On its website, Casper says it can profitably sell mattresses at highly competitive prices, because it doesn't have to endure the costs of big showrooms, sales people and excessive inventory.
Even though the company delivers anywhere in the U.S. and Canada, the offline ad campaigns are thus far limited to New York and San Francisco. Krim wouldn't say when Casper may shoot for a third market.
One way the company is trying to find an online niche is through a new sleep-focused publication called Van Winkle's, run by an in-house editorial staff and former founding editor of Gawker.
Van Winkle's has only been live for two months, but Krim said traffic is exceeding expectations by many, many multiples."