Zazzle, the site that lets you custom-design and sell everything from T-shirts and sneakers to postage stamps and skateboards, is launching localized sites and offerings in Australia and Canada. The company has also expanded its existing UK site, which was launched in late 2008, to the greater European market by accepting payments in Euros. And for pet-friendly users, Zazzle has unveiled a line of custom dog apparel, letting sellers put the same designs on items for both dogs and humans.

Zazzle allows anyone the opportunity to become product designers and to earn money by selling designs on a variety of items displayed in custom store fronts, free of charge to the seller. Designs and images can be screen printed or embroidered on items. Sellers earn royalties from the sale of products they design and can also allow consumers to further customize their creations.

The design site has also unveiled a suite of new “seller-friendly” tools to spice up sellers’ offerings. Sellers can now uber-customize their online storefronts, creating a branded destination for their products. Sellers can also enable a a filtering mechanism to specify which designs can be featured in different products in various colors. Additionally, Zazzle has implemented a Flash-powered bulk image upload tool that is compatible with Macs and PCs.

It’s good to see that Zazzle is growing by expanding its reach and offerings. Earlier this year, the startup underwent a round of layoffs, letting 15% of the company’s staff go due to the sluggish economy. Competitors include CafePress and Spreadshirt, which both have an international presence.

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The company also lets private individuals and commercial organizations set up their own online merchandising outlets as resellers of the Spreadshirt service.

Spreadshirt says the financing will be used to develop its online platform and its push into the North American market, where its two main competitors, venture-backed CafePress (Foster City, CA) and Zazzle (Redwood City, CA) are based.

According to a January company blog post, 1 million t-shirts were sold in 2008 via Spreadshirt. They’re also open about the missed growth estimates put forward at the end of 2007: growth was at 40% for the year instead of the aimed-for 50-80%. As a result, the company was recently forced to do a round of lay-offs and reorganize some of its departments.

(Source: Deutsche Startups)

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Launched in 1999, CafePress enables its users to design, buy and sell expressive merchandise such as t-shirts, hats, bags, mugs, bumper stickers and the likes. CafePress handles the merchandising process and returns a cut of the revenue from sold inventory to its users. The company boasts serving a network of over 6.5 million members trading 150 million+ products, and also claims to receive 11 million unique visitors per month on average.

CafePress even made its first acquisition last Summer, and a significant one at that, buying Imagekind for $15-$20 million in cash and stock. The company has recently announced plans to expand internationally by taking its marketplaces to other English speaking nations like the UK, Canada and Australia.

CafePress claims to be profitable, which of course raises the question why the extra funding was needed to begin with. Most likely, the investors are providing CafePress with a safety cushion for the future consequences of the current economic downturn, as well as the necessary capital for the company to expand its base operations into even more countries.

For the sake of comparison: $28.3 million is only half of the backing that head-to-head competitor Zazzle has received to date, yet both Compete and Quantcast suggest that it receives twice as much traffic. Spreadshirt is another noteworthy player.

Update: CafePress has responded, saying that this story is incorrect:

We did not raise venture funding, nor have we raised funding from Sequoia since our series B in 2005. The Form D notice was filed with the SEC because we issued $8.29 million shares of stock back in July.

PEHub mistook a Form D notice which was filed with the SEC because CafePress issued $8.29 million shares of stock back in July.

Update 2: Dan Primack at PEHub explains what went wrong.

Update 3: Below is the SEC Reg. D filing in question, which does clearly state that the company sold $8.3 million worth of securities in July (page 3) to investors including Douglas Leone (a VC at Sequoia Capital) and OpenTable CEO Jeff Jordan. But as indicated above, this was actually an issuing of existing shares rather than a sale of new ones. The new SEC form that CafePress used does not make this clear. So much for transparency.

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Hype vs. Hesitate
Just as this week’s Pew Internet Study stirred a debate on the view of Web 2.0 in the US, Germany has seen similar arguments on the size of the phenomenon locally. For a long time, several indicators had hinted that Germany was falling behind in broadband penetration compared to other European countries like Sweden or Norway. But a recent OECD study painted a very different picture: looking at the total number of households (as opposed to per-capita penetration), Germany comes out on top in Europe with 14.1 million subscribers in December 2006 (followed by the UK at 12.9 and France at 12.7 million). So the crowds are here, but where can they go?

“Web 2.0” is a term that brilliantly translates around the world, but many of the sites that are commonly associated with it have a language barrier for international audiences (take MySpace for example: it officially launched its German version only in March of this year).

While English certainly isn’t foreign to Germans, it has still slowed their adoption – and network effects, which have been a driving force, are often tied to language and reach as well. What’s been the consequence in Deutschland? A mushrooming of German copycats that have localized and copied their US role models, sometimes down to the last pixel.

Copy/Paste Innovation
Whether you’re looking for social bookmarking, photo sharing, video posting or a college social network, Germany’s clever entrepreneurs have done the translation for you and some even fared quite well.

The best example by far is StudiVZ, whose name stands for “student directory.” Launched in October 2005, it now claims to house 2.1 million users. Despite a myriad of security problems and controversies, new users kept coming in, which only speaks to the universally strong demand for such networks among students. In January of this year, Germany had its mini-YouTube moment when StudiVZ sold for €85M ($100M) to the German media conglomerate Holtzbrinck Group.

If the screenshots look familiar, you won’t be surprised to hear that StudiVZ’s early versions of the site were using filenames like fbook.css or poke.php. (Facebook was in talks with StudiVZ but it walked away because of scalability and security concerns about the platform. Instead, Facebook is now working on its own strategy – let the battle begin).

Another success story is Xing (formerly OpenBC), a professional network like LinkedIn. In December 2006, it became the first Web 2.0 company to go public and is now traded at the Frankfurt stock exchange. Xing’s rapid growth among the German business community came rather unexpected after it launched in November 2003, especially in a country that isn’t typically known for its culture of business networking. The site now boasts 2 million members and about 13% of its users pay for a monthly premium subscription of €5.95. With revenues of €10 million in 2006, Xing’s performance at the stock market has been somewhat lackluster and the real test for the company will come as both Xing and LinkedIn expand beyond their original markets (LinkedIn now has 9 million registered users and $10 million in 2006 revenues; it recently raised $13 million more).

The Brighter Side: What’s next
Of course there are creative and innovative startups to be found (and growing any multi-million user base is a feat in itself regardless). For some inspiration, take a look at our previous coverage of Plazes (currently a sponsor) and SellABand; last week also saw the launch of MindMeister, a promising online mind mapping collaboration tool. Other notable services include blauarbeit.de, a growing reverse-auction site for jobs and services, and we have yet to wait for a successful US counterpart.

In short: Germany is buzzed right now and the biggest question for the startup scene is how the many look-alikes will develop over the next year. You’ll often hear that investors are hesitant to invest in ideas that “haven’t been proven in the US yet” but there are several other factors at work here: Germany is generally more risk-averse, the bureaucracy is more cumbersome, and entrepreneurial networks like Silicon Valley aren’t as strongly developed.

Nonetheless, the country’s business angels and media conglomerates (Holtzbrinck Group, Burda, Axel Springer) are eager to invest with rapid-fire pace at the moment but the majority of German internet users have yet to be convinced that there is a land beyond eBay, Google, Wikipedia and some online news sites.

Meanwhile, German and other European startups are in a prime position to tinker with mobile applications and I wouldn’t be surprised to see more innovation in this space soon. The continent is covered with advanced data networks and the UK has already seen the introduction of flat-rate data plans at reasonable prices. Germany’s market is sure to follow and the boon of the mobile web will start in Asia and Europe sooner than in the US. You also want to watch out for innovations around IPTV as subscriptions are expected to reach 2.6 million in Germany alone by 2010.

Until then, let’s see how Facebook and StudiVZ duke it out

Curious fact: Google’s market share for search is near 92% in Germany. And yes, it’s a verb here, too.

Gregor Hochmuth is an analyst and entrepreneur in residence at Hasso Plattner Ventures. He runs zoo-m.com and his own homepage at dotgrex.com.

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