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Extrabux: From Campus Startup to Social-Shopping Goldmine

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For some young entrepreneurs, success comes and goes. For others, it just keeps on coming.

That was the case for 24-year-old Jeff Nobbs. Two years after launching from his dorm room at the University of Southern California in 2006, Nobbs and his co-founder entered the cash-back and coupon shopping site into the university's business plan competition -- a move that won them $25,000 and a stamp of credibility to raise more funds.

Extrabux, which gives participating customers from 1 percent to 30 percent cash back on their purchases, now works with some 2,500 retailers including Walmart, Walgreens, Nordstrom, Victoria's Secret and Kate Spade. The San Diego-based company has also raised more than $800,000 from family, friends and angel investors. It's profitable, cash-flow positive and with 150,000 members worldwide, it's on track to generate more than $4 million in revenue this year. That's a 400 percent uptick over 2011 levels, claims Nobbs.

"When you're a young entrepreneur, your competition a lot of times is more seasoned entrepreneurs," Nobbs says. "We spent a lot of time when we were at university just learning everything we could about the e-commerce space."

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So how exactly did Nobbs turn his campus startup into a goldmine? The name of the game is social shopping -- sales generated through social-networking platforms, discount-shopping sites and related media -- and it's hot these days. Consulting firm Booz & Company last year estimated that the global "social commerce" market will grow from $9 billion this year to $30 billion in 2015, with the U.S. share rocketing from $3 billion to $14 billion over the period. And those figures are estimates for the purchase of hard goods only, not services.

Nobbs, who earned a bachelor's degree in business administration, with a concentration in entrepreneurship, also credits word of mouth. Since shoppers can get extra cash back for referrals, each new member winds up referring another member on average, he says. "The business model is almost viral by nature."

Related: How Young Entrepreneurs Turned a Tweet from Richard Branson into $1 Million

But of course, launching Extrabux hasn't all been easy. "In 2006, when we were looking for our first big retailer partners, it was sort of the chicken and egg problem," Nobbs says. "Which comes first?" Big retailers required Extrabux to generate more traction, but it was difficult to generate that traction without big retail partners, Nobbs adds.

And while Extrabux never really landed a single big fish, over time the company managed to attract some guppies, which then began to reel in bigger and bigger retailers.

It was also tough to attract users at first, says Nobbs. "We've bootstrapped this business, with minimal financing, and so bringing eyeballs to the site without much of a marketing budget was also very challenging." But on Cyber Monday in 2009, Good Morning America cited the portal as the latest money-saving shopping tool. And that morning, Extrabux was one of the top search terms on Google, plus the mention led to more media exposure, Nobbs adds.

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Today, Extrabux users do all the work, Nobbs says. "Once we hit that tipping point, marketing became a result of providing a great customer experience," he adds. "Our users now do the marketing for us."

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