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Date: Wednesday, 05 Mar 2014 10:54

So, you have the next WhatsApp that Facebook wants? Congrats! If that day hasn’t yet come, it may well, and it’s important to be as prepared as possible. Even if you want to sell but don’t yet have a buyer on the line, fret not, an investment bank (explained below) can help find you a buyer. If you’ve bootstrapped / self-funded your business, you’re going to be pretty much on your own in navigating a sale, without opting for outside help. Here’s what you need to know.

First, what do I know? I founded, and self-funded, a SaaS b-to-b subscription platform in the eCommerce space while in high-school, sold it at age 21 for $4M, bought it back in 2002 for $32k, hired a team and built it to $6M/year, then sold it again in 2012 to Answers.com. All of this was bootstrapped, self-funded, highly profitable, and debt free. Having had two substantial sales, I learned a lot.

1. Know Why You’re Selling (and your price)

This may or may not be an easy one. Maybe you have worked on a business for many years and are ready to move on. Maybe you’re seeing competition heating up. Maybe you have a financial goal in mind, and selling is the quickest and least-risky way to achieve that goal. Whatever the reason, be sure it’s what you want. It’s usually an irreversible decision!

Regarding price, there’s usually going to be a disconnect between what you want and what a buyer is willing to pay. A savvy investment bank, explained below, can help guide you to a reasonable valuation ask, which is usually based on a multiple of your revenues or profits, and that multiple often depends upon the nature of your business and your industry.

2. Hire an Investment Bank!

An investment bank is a firm of merger and acquisition specialists who will help you prepare your business for sale, find a buyer, negotiate a sale price and deal structure (cash, stock, and any earn out), navigate the due diligence process, navigate the legal docs (with an attorney), and get you through to a successfully completed sale.

Generally, one interested buyer offers the least amount of leverage for you in any negotiation. Even if you have an interested party, an investment bank will come in and learn about your business, create a pitch deck, go out to various companies that they think might be a fit to acquire your business, and try to drum up interest. If successful, you now have a bidding war, which can only benefit you.

Unless you’re a finance wizard, you’re going to want an investment bank on board to create an overview pitch deck of your financials (past and projected) for any buyer. What most sellers don’t realize, is that there is always a substantial diligence process after any initial sale agreement is signed, where the buyer asks the seller to produce mounds of documents about the business – they want to know what they’re buying, after all. An investment bank can guide you in this, minimizing stress (otherwise, get ready to be overwhelmed!).

Finally, once you get through the diligence process, a lawyer is needed to craft a substantial purchase agreement. Usually, the buyer’s lawyers craft the initial draft of the agreement, but your lawyers will review it and propose a series of changes, which will be a back and forth iterative process. It’s important that you be involved in the process as much as possible, and that you read the agreement in entirety and discuss it with your attorney, no matter how uninteresting that may sound. You’ll be very glad that you were fully informed about the contents of the agreement at the end of the day.

If you need a recommendation on, and referral to, a good investment bank, contact me. Don’t use a random broker, which is not the same thing!

3. Maintain Steady Revenue Growth

In the year leading up to any sale, and especially while negotiating a sale, it’s key to maintain steady month over month, quarter over quarter, growth in your revenues. If you have one bad month, a buyer might understand, if you have a good explanation. A series of bad months, and you may be out of luck getting the deal done. True or not, buyers view down months as an indicator of what’s to come. Of course, maintaining good records is also key to substantiate to the buyer that your revenues have been on track.

4. Prepare Yourself for Reality

Selling a business changes your life. Regardless of the financial terms, you’re no longer doing what you used to do, day in and day out. Have you thought about what you’ll do instead? This thought process can feed back into point #1, regarding your motivation to sell. Often times, entrepreneurs get so caught up in chasing an exit, and think that the exit is the key to happiness, when really, it was the day to day operation of the business that was so rewarding. Be careful here, especially if the financial terms don’t wow you, in which case you’ll have a trickier decision, balancing  the decision to sell with the day to day rewards and pastime that the business offers.

My own story of business creation, sale, repurchase, re-creation, and second sale, is pretty unique. I’m pleased with the outcome and the opportunities it created, but what I miss most about the business, is solving the day to day problems and to-do list items, innovating day to day solutions, and collaborating hand in hand with my team. It may sound silly, but that stuff of daily operational life is what I ultimately found so personally rewarding about business ownership.

Me? I’m on to bigger projects than ever before, solving real world problems at scale, investing in innovative early stage startups, helping those in need via philanthropy and social entrepreneurship, and selling was the key to unlocking those opportunities. I’m in building-mode now, and I look forward to those operational days again, grinding away, solving problems, and collaborating on innovation!

Author: "Scott" Tags: "Web Business"
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Date: Tuesday, 04 Mar 2014 23:00

Ideas abound! Everyone has them. They have them in the car, in the shower, or on a jog. Sometimes, they write them down. Sometimes, they fade away. Sometimes, they execute and hammer on them for years, becoming Tesla Motors or Facebook.

So, how do you decide what to work on? All too often, people decide to work on problems that matter to them, and about 5 other people. Or, they might decide to work on something that matters to everyone, yet they don’t know anything about it (perhaps, a business school grad chasing a big market). Likewise, they might decide to work on something that they know about, but that they don’t really care about and that doesn’t solve a problem for anyone.

The answer lies in the middle: work on things that you know about, that you care about, and that matter to a huge market of people. The first two make sense: work on what you love, and when you work on what you know about as an expert, you’re able to guide and scale the business much more smoothly and cheaply than if you’re relying on experts. The last point, market size, requires a bit more of a deep dive.

What matters to a huge market, essentially means: solving a real problem for a large group of people. The bigger the problem, the more likely people will choose your solution. If it’s causing a lot of pain for a lot of people, and your idea solves it, bingo. I can’t stress this enough: if it’s causing only minor pain or it’s just “cool” to a lot of people, beware.

Take Coin for instance, the device that combines all of your credit cards into one card. I love this product. I would buy it tomorrow. From a business perspective, though, what problem is it solving? Too many credit cards? I don’t really have that problem and I don’t know who does (perhaps George Costanza of Seinfeld, with his exploding wallet). It is a very cool product, but it’s an example of an idea that appeals to a wide market, yet doesn’t really solve a highly painful problem. It may well succeed, and I hope it does, but if it was sitting along side another idea that solves a more painful problem, I would pursue the alternate.

Ultimately, this is a doctrine that should be used as a reality check for all entrepreneurs. It’s pretty easy to get caught up and stuck on an idea that you’re super passionate about, only to discover months or years later that the market just isn’t there. If you’re not sure whether or not there’s a market or a painful problem, test (with a crowd funding campaign, survey, market research, etc) to validate early.

Work on what you love, work on what you know, and work on what matters. Solve the big problems!

Author: "Scott" Tags: "Web Business"
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Date: Thursday, 23 Jan 2014 21:39

I’ve touched on decision paralysis in a prior post, but since making good decisions is so important, it’s worth revisiting.

Following your gut seems easy, but when faced with big decisions, emotions and complex pros and cons lists often get in the way and wreak havoc. Decisions that are primarily emotional (regarding relationships, which house to buy, etc) are even tougher, since emotions don’t lend themselves well to logic.

To help cut through the haze and get out of your own way, the developers of ChoiceMap have created a simple but elegant tool. ChoiceMap lets you prioritize a variety of factors as to how important each factor is to you, then lets you rank each possible decision according to how well the decision aligns with each factor. At the end, the app tabulates the results, and presents to you the best decisions along with a percentage match score. The best part is: it’s you making the decision, not the app, but by breaking it down in this way, you’re able to cleanly separate out hundreds of individual decisions into what basically becomes a math problem.

I tested the app on a number of decisions as sort of a hindsight validator — in other words, decisions that I’ve made in the past and have been happy with, and found that it aligned very well. What you end up feeling after using it is a bit of, “well duh, that’s what my gut was telling me anyway.” So in a way, it’s gut validation. It’s a reminder to trust your gut, and it can be very helpful, especially in ranking the possible decisions.

Author: "Scott" Tags: "Web Business"
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Date: Wednesday, 16 Nov 2011 21:23
Even for Google, the old “if you build it, they wlll come” adage, fails. It’s not a strategy. If you want to kill Facebook, you have to do far, far more than simply setup good technology and tell a few people about it.

Google seems to think that’s the right approach, since it worked for Google.com: create a great technology, put it out there, and people will stop using Altavista, Go.com, Lycos, Yahoo, and you’ll win the game, which Google clearly did. But with search technologies, while there is some loyalty, it’s extremely weak. For social, and Facebook in particular, the loyalty is a virtually unbreakable bond, and it’s the social ties that bind. When your 250 friends and family use Facebook to keep up to date on each other’s lives 10 times a day, are you going to strike out and try to convince your network to jump to Google+ with you? Not likely.

Instead, Google+ needs a sneaky adoption strategy, and one that plays to its strengths. What Google+ did well from the beginning is what Facebook has never done well: allow separation between your circles, between your party friends, between you and your parents, and between your work associates. Because ultimately, we don’t always want to share everything with everyone. That could not be more true than for coworkers, yet, being social with coworkers is super important both for team-building and for your overall well-being, given that you spend at least 8 hours a day with your coworkers, and probably more time than you spend with your non-work friends.

So, one strategy is to leverage this, by making Google+ a place for coworkers to be social without being tainted by Facebook photos from last night’s party in Vegas. Push this hard as the main selling point and market aggressively to businesses as the social media solution. Google already taps into a huge corporate market with Google Apps, where Google+ could be pushed front and center. As you add more and more coworkers to your Google+ circles, the critical mass begins to build. This is more than a passing consumer curiosity, where you fire up Google+ for a few hours and bail, this is Google+ meeting your need for workplace socialization in a context that is separate from Facebook. Meanwhile, you’re changing your daily routines and becoming accustomed to using Google+ regularly.

Most everyone has a job, and if Google+ pushes hard for businesses and coworkers to use it as a team-building important socialization tool, then everyone will be on Google+. Sooner or later, people will start asking, “Why am I using Google+ to keep in touch with my coworkers, and Facebook to keep in touch with my friends and family?” Google+ does both well, to keep your circles separate, yet Facebook has only recently started to address the issue, and frankly, Facebook will not likely ever lose the ‘not safe for work’ stigma. If Google+ does both well, and if you want to do both, then you’ll start noticing that your friends have joined Google+ as coworkers within circles at other companies, you’ll add those people to your close friends or acquaintances personal circles, and you’ll encourage your pure-Facebook friends/family to migrate.

Certainly, this approach offers hope of undermining Facebook’s death-grip, far more effectively than “let’s hope everyone sees the light and switches over!”
Author: "Scott" Tags: "Web Business"
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Date: Friday, 10 Sep 2010 09:39

First off, I love Google Instant and I think it’s a big, big thing for Google for two reasons:

1) It shaves some amount of time off of each search — the time it takes you to hit enter or move the mouse over to the search button is gone. 1 second is 1,000 milliseconds. Let’s say this shaves 100ms off of each search. With Google’s 1 Billion searches per day, that’s a savings of 27,777 people-hours per day of searching. That means more queries, easier searching, better for all.

2) Since the results start to appear before you finish typing, less experienced searchers who might be using long queries (dog park etiquette for my dog fluffy) now get the results they want after typing only the first couple of words. Again, time savings, better usability, more queries, everybody = happier.

An article on FastCompany addressed the fact that Google Instant incorporates so-called “morals”: it won’t display search results instantly for most adult keywords, for example. After testing this, I found a few queries that Google does return, based on some more generic initial words. Here’s what most people apparently want to find:

this is…

how to please…

is sarah palin…


Kidding aside, I think this is a big change for Google and I’m glad to see a fundamental change in the search UI after so many years of the same old thing.

Author: "Scott" Tags: "Web Business"
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Date: Saturday, 03 Oct 2009 12:20

Thinking about selling stuff online?  As someone who derives most of his income from advertising, I don’t suggest it — it doesn’t sound like a very fun or profitable venture for most, and it sounds like a lot of work, daily grind, and expense (inventory) for very low margins.  On the other hand, if you have something unique to sell, or something you create, then that’s a different story.  Don’t get me wrong — retailers are my bread and butter, and there are several hundred online retailers that do things very well, but a lot that don’t.

Still, if you’re confident that you’ll do well, or you’re already selling online, here are some guidelines.  Having operated ResellerRatings for 14 years,  I’ve learned a thing or two about best practices in online retail.  If you plan to do any of the following, don’t even bother — you won’t last or worse, you’ll end up on the receiving end of some government agency’s angst, not to mention a public backlash:

1) Don’t list an item as in-stock if it isn’t.  I don’t want to hear that “yeah I don’t have it in stock but it will ship really fast from the distributor or mfg”.  If it isn’t in stock at your place of business, it isn’t in stock.  If it isn’t in stock but you still want to sell it, fine, display a prominent notice stating “ships within 1-2 weeks” or similar.

2) Don’t list one item, and sell another.  Classic bait and switch.  This applies to “grey market” goods as well.

3) Don’t call your customers after they order online to try to upsell them.  It’s really annoying and always pisses me off.  I bought online so I don’t have to talk to you.  And 3a) don’t sell an item at a loss, in order to make your real profit on upsold accessories, only to  cancel the customer’s order if they refuse to buy said accessories.

4) Don’t write fake reviews at review sites like ResellerRatings.  We’ll catch you, we’ll tell everyone about it, we’ll tell the attorney general in your state about it, and none of that will be good for you.  And 4a) don’t threaten reviewers who give you bad reviews — nothing good will come from that, instead, focus on getting positive reviews, and try to resolve the issues that a negative reviewer may be having.

And now a few do’s:

1) Do email your customer an order confirmation immediately.

2) Do make it easy to handle returns (requesting an RMA online and a shipping label, preferably), and have a friendly return policy (Zappos now offers a 365 day return policy,  free shipping both ways, no restocking fees).

3) Do ship the customer’s order within 24 hours, and send them the tracking id.

4) Do manage your reputation online, preferably at ResellerRatings.com.  You can post public replies, contact customers, get email alerts of new reviews, use our exit survey to solicit reviews at the point of sale (after checkout), and a ton more.

5) Do respond to customers who write reviews at ResellerRatings to resolve any issues that they may have.  They may well edit their review and you may well convert a critic into a loyal customer.

Author: "Scott" Tags: "Web Business"
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Date: Thursday, 01 Oct 2009 12:39

So you have a few ideas for new businesses to start — good for you, the wheels are turning!  How do you decide which one to pursue?  Some pointers, key things to look for:

-Make sure you’re passionate about the idea. It may be a good idea, and it may fill a niche, but launching a forum about shampoo brands may not be your cup of tea and thus, you’re not going to pour your heart into it.  I know you’ve heard this before but stop ignoring the advice!  You really have to love what you do to be great at it.

-Make sure it can be monetized. Sites that target big spenders (car buyers, digital camera/consumer electronics buyers, travelers, business owners, CEOs, IT pros, web developers, etc) will monetize far better than sites that target the general public, general interest people that are just browsing around, people looking at general news, people socializing and chatting about their favorite color.  Can it be easily monetized, say, with Adsense, or will you have difficulty finding advertisers, getting subscribers, etc?

-Evaluate the SEO value. Traffic from Google is free, so it’s best to design your business around this, and make sure to create a business that is likely to benefit the most from SEO.  Are people actively searching for content that your site features?  Dealighted.com features deals and coupons that are very recent.  People are aggressively searching for deals and coupons every day, and particularly, recent bargains and deals that expire, so the site’s SEO value and potential are high.  Contrast this with say, a very niche site about say, gardening, which people are still searching for but less aggressively.

-Will it run itself? If I opened the Scott Wainner school of business, lesson 1 would be: let the business run the business.  Don’t become a slave to your work.  I’m not, and you shouldn’t be either.  I work a lot because it’s fun and I like to grow the business, but I don’t have to.  That’s because I meticulously setup automated processes early on, and I created businesses that are primarily comprised of user generated content (dealighted = aggregated user content, TechIMO=a forum, ResellerRatings = user reviews of online companies).  The more day to day work your business requires to keep it afloat, the more you’re just going to be treading water.  When I work, I grow the business–very little effort goes into maintaining the existing revenue, traffic, and day to day goings on (though I also have a small team to help with the day to day, but we’re also talking about a fairly sizable business here).

-Does it fill a niche? Is there demand? Has it been done 50 times already? Don’t worry if you have competitors.  There’s often room for one more, especially if you can do it better.  But, do worry if the market is totally saturated with mature players, and you’re going to beat your head against the wall trying to gain traction.  Look for markets where there is demand that is not fully being met.

-Do you know how to set it up yourself, or will you require a lot of startup cash and third party help? This can be a big deciding factor.  If you’re a web developer trying to decide between setting up a user generated content site, or a tractor supply store, I’m going to advise the former — use your skills.

-How sticky is it?  Will people visit it once in a while, or daily? How fresh is the content? One of my gripes about ResellerRatings is that while it’s a hugely important resource and it will most assuredly make or break any online retailer’s reputation and sales, consumers use it more of a periodic tool than as something to check out daily.  That was one reason I created Dealighted, which people get addicted to and visit every day because the content is fresh, relevant, expiring, and has to be looked at daily.  That level of stickiness due to addictive, continuously updated content, is a very important consideration for success.

You can test out my sites against each of these.  With each successive creation (SysOpt, then ResellerRatings, then TechIMO, then PhotoPost, then Dealighted), I got smarter and smarter about what a new business should look like.  By the time Dealighted was launched, I had learned to incorporate every one of the above key requirements, and created a hugely successful site as a result.

Author: "Scott" Tags: "Web Business"
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Date: Wednesday, 30 Sep 2009 03:42

I’m not stupid, but I’m not Einstein either.  My secret has been that I have good instincts on what to work on, I have a good work ethic, and I’ve been at it for years (15 years now).  If I were to start a business from scratch though today, with no money or startup costs, it would take at least 1-2 years before it generated enough money to create an average, livable income.  Even I am baffled by that fact, but it’s true.  When I launched Dealighted.com, even with cross promotional links from my other sites, and even with some paid advertising promotion, it still took 2 years before it really took off.

What does that mean for you?  A few things.  First off, even though I have a pretty great track record, it will still take me 2+ years to get a new business going from scratch (unless it’s a whiz bang idea that fills a huge niche, or unless I throw money at it).  So if you’re less savvy than me, and you’re still new to the game of launching businesses and you’re still learning and experimenting, then you need to start now, make sure you love what you’re doing, and stick with it.  If it’s growing, even slowly, stick with it.  If it’s going nowhere, know when to bail — don’t squander your life on something just because you have already invested a lot of time in it. If it’s a failure, it’s a failure.  Point being though, just get it out there, get it launched, go, because you need all the time you can get.

Secondly, and I’ve said this in posts in the past, the most successful businesses have been created by one or two founders who knew how to do everything.. Not by a founder who got a VC, and hired a staff to build the business.  If you want to succeed, you really need to know everything about how to build and run your business, upside and down, in and out.  For my business, that means knowing a great deal about: development (Perl, PHP, MySQL), servers (Linux, Apache, setup, compiling and setup), SEO, web design, HTML, marketing, business development, monetization and all the options out there.  There isn’t anything I don’t know how to do on my sites — I don’t “need” to hire anyone to do anything, although I do have a team in place so that I don’t have to do everything every day and my time is freed up to come up with new features, new business, new monetization models, to grow.

I learned on the job.. Dabbling as I went along.  Don’t put yourself into a managerial role, afraid to get your hands dirty, afraid to learn, and thinking you’ll just “hire a web guy, hire a developer, etc”, because those guys aren’t passionate about what it is you’re trying to do — you are.  You need to a) learn everything you can, b) get your hands dirty, do the grunt work and the heavy lifiting, c) start now and be prepared for it to take time, and d) test, test, test, put new ideas out there, try different things, fight complacency and don’t rest on “good enough” when it comes to your business because as “good” as you think you’re doing, you’re probably doing 10% as well as you could be (I know I am).

Author: "Scott" Tags: "Web Business"
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Date: Monday, 17 Aug 2009 22:30

One of my biggest challenges that I deal with frequently is decision paralysis.  Most of the time, I make small day to day decisions easily and without fear.  But when the decision is big enough, the consequences of making a wrong decision large enough, and the number of different options I have is large, I go into over-analysis mode and can become incapable of making a decision.

To help with this, I read a book called The Paradox of Choice by Barry Schwartz.  It’s a very in-depth look at how choices affect us, how people make choices, and what we can do to improve the process.  It’s the author’s contention, and based on experience I now fully agree, that too much choice is a bad thing and leads to unhappiness.  If you only have to choose between A, B, or C, that’s fairly straightforward.  But if you have to choose between very comparable choices A, B, C, D, E, F, G, H, I, J, K, and L, a whole host of problems arise.

Study after study has shown that when presented with fewer options, consumers spend more money.  One study put dozens of jams in a display in the front of a store vs. just 6 or so jams.  Consumers bought more jam when there were only 6.  Consumers think they want choice, but when it comes down to it, choice is overwhelming and leads to no choice.

If you have to have the best, and nothing but the best will do, then you’re not going to stop when you’ve found an option that works, you’re going to have to evaluate every single option to find the best.  In doing so, not only does this consume a huge amount of time and is exhausting, but what happens is that by choosing option G, you start to think about all that you’re missing out by NOT choosing all of the other options.  That negative emotion then overpowers any happiness that option G can deliver.  So the option you chose now makes you unhappy!  If you could go to France, Italy, Germany, Spain, Hawaii, or Alaska, and you choose to go to France after much deliberation, you’ll be thinking about the great food that you missed in Italy, the warm sun that you missed in Hawaii, the beauty that you’re missing in Alaska, and so forth, so that your France trip now sucks a bit because of all the missed opportunity that you can’t help but think about.  You would have been happier if you hadn’t considered all of those other choices.

Then there’s the problem of adaptation which has to be factored into choice.  If you haven’t figured it out by now, that shiny new car that you just had to have 2 years ago is now boring, and that’s the case with everything we choose.  We adapt.  Things that we just have to have today, we eventually get used to no matter what.  That’s why people that don’t “get” this are in a never ending upgrade cycle, have $250,000 worth of cars in their garage, and are still unhappy.  So when making choices, you have to forecast how the choice will feel in 6 months, 12 months, not 2 weeks, and realize that new things that are amazing and exciting now, will be “just” comfortable or pleasant in a few months or years.

So after thinking about all of this a great deal, I’ve come up with a few tricks that have helped me make better decisions with less effort and end up being happier with the decisions that I do make.

Filtering Is Your Friend

A fantastic example of this is Olive Garden’s Neverendingpastabowl.com, where you’re presented with a whopping 42 pasta/sauce choices.  Do we really need 42 pasta/sauce dinner choices when we sit down to eat?  How ridiculous.  But… Through the magic of filtering, you only have to choose 1 of 7 pastas, then once you’ve made that choice, 1 of 6 sauces.  That way, you access all 42 options, but you do so in a way that isn’t as overwhelming as evaluating each of 42 options.

The same is true of cars.  Let’s say you know you want to buy a BMW 335i.  So you go to the car lot and they have every single possible combination of colors and options on the lot: blue ones, red ones, silver ones, 6 speeds, automatics, leather, fake leather, convertibles, coupes, sedans, and you have to look at every car on the lot, maybe several thousand, to choose one.  Impossible right?  But if you use filtering, you look at one category at a time: what color?  Silver.  Ok, you just narrowed it down several thousand cars.  What transmission?  Hopefully, you can narrow it down to just a few options this way.

Thus, I’ve found that the best way to make a decision is to constrain the number of options as much as possible, maybe down to 3, using filtering.  That way, I’m not even spending any energy evaluating all of the other options, and feeling bad about opportunities not chosen.  I use broad category filters to exclude possible options.

Not Deciding is Still Deciding: Know When to Take the Plunge

If you’ve narrowed your options down to 3 really great choices, you know that you would be happier with any one of those 3 options than doing nothing (but you’re just not sure which one), and yet you don’t choose any one of them because you can’t decide, you’re actually choosing option 4: to do nothing.  When I encountered this recently, I finally realized that I was going to be happier with any of the options that I narrowed in on than my current situation, so I was just going to make the best decision I could, comforted by the fact that any of the 3 options were better than option 4: doing nothing.

Go With Your Gut

We’re complex beings with complex minds.  We’re able to evaluate options on a level that goes far beyond pros and cons lists.  Quick: what does your gut tell you?  Usually, you can answer that question in seconds, or at least, know which way your gut is leaning.  You usually don’t need to spend a week researching and pouring over pros and cons lists, because something within you is able to take a complex decision and boil it down without any “thinking” required.  When we ignore our gut, we get into trouble.  Sometimes the gut does get confused though, but it’s much less likely to get confused if you’ve properly narrowed down your options because it can only give you feedback about a very small number of options at one time.

Become a Satisficer

Satisficers accept things that are good enough, while maximizers have to have the best.  A satisficer, looking at choices, A-Z, would evaluate A, B, then C, then D, and if D meets their criteria as good enough, they’ll stop.  A maximizer has to evaluate every option A-Z to make sure they aren’t missing out.  For a true maximizer learning to accept “good enough” is very hard, but maximizers absolutely fail to take into account the time and energy needed to find the “best”.  Even if there really is something better than that “good enough” option, the time, energy, hassle, and risk of decision paralysis from too much choice and not making any choice, outweighs any extra benefit of trying to find that best option.  This view changed my life quite a bit.  When I was shopping for something online, I had to have the best — I’d spend hours trying to read reviews, evaluate all the options.  Now, I strive to just stop when I’ve found something that looks good and meets my needs, and I’m happier for it.

Author: "Scott" Tags: "Web Business"
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Date: Friday, 17 Jul 2009 08:10

Photo: Charles Platiau/Reuter

If you follow the Tour de France like I do, you’ll know that there is some team rivalry going on between Lance Armstrong and Alberto Contador.  Both have a chance at winning the Tour, and both are on the same team, Astana.  Generally, a team designates a leader, then the whole team sacrifices themselves in order to shield the leader from the wind and help the leader win the overall race.  Early on, team director Johan Bruyneel designated Contador as the team leader, but quickly flip flopped on that, and has since refused to reaffirm that designation.  Instead, he has deferred his decision to a later time, when it becomes apparent as to whomever is the strongest (Contador, Armstrong or possibly, Tour of California winner Levi Leipheimer).  Bruyneel has made many statements to this effect and one article states:

“In a Monday press conference, Contador indirectly blamed Astana manager Johan Bruyneel for creating the tension, saying: ‘If my situation within the team were clear, there would not be any controversy over my relationship with Lance.’ Bruyneel accorded the team leader’s ’1′ jersey to the 26-year-old Spaniard but has repeatedly refused to declare him the undisputed leader of the team.”

Yet, when Linda Robertson of the Miami Herald decided to do a piece about Armstrong’s ego selfishly battling it out with Contador for #1 despite Contador being designated the “leader”, she apparently totally missed these nuances and statements that Bruyneel has been making on Versus TV and to various reporters for weeks now.  Even now, there is no clear team leader for Astana, but when they hit the Alps, it will become very clear.

Robertson writes, “There is the tactical maneuvering on the road, which we can see, and the tactical maneuvering in Armstrong’s head, which we can only ponder. Alberto Contador, the favorite, must not lose the mind games, or he will lose the Tour as well. But this year he [Armstrong] is in an unusual, awkward position. He is supposed to do what his teammates did for him: Sacrifice himself. Spaniard Contador, 26, is the presumed leader of the talented Astana team, but with a whisper of a lead over Armstrong and with two other teammates in contention, the pecking order remains open.”

Bullshit.  Armstrong is not Contador’s bitch — yet, anyway.  And 2 seconds lead certainly doesn’t make Contador any kind of “favorite”.  I called Robertson out on this, but her reply was that, “Contador was designated the leader by Bruyneel in an official statement released by Astana.” And, “Check your facts.”

I did check my facts, Linda.  Every Tour de France fan who has been listening to Bruyneel for weeks now, saying that it’s anybody’s race, and saying that Contador attacked Armstrong in Stage 7 as a rogue move, not part of a team plan, knows the facts — that the verbal statements, team tensions, and nuances, clearly contradict the team’s initial stance on Contador.  Let’s not bash Armstrong for doing what he’s supposed to be doing.  His ego has nothing to do with anything here.  He’s a bike racer, following his team director’s guidance.  I’m more confident that he will back Contador if ordered to do so, than that Contador will back him.

Author: "Scott" Tags: "Web Business"
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Date: Monday, 08 Jun 2009 19:44

Oh Tivo, how our love affair was so long and while it lasted it was pretty good.  But guess what: while your hardware/software is nice, your corporation blows, and DirecTV HD DVR is, while not perfect, so much better than you.

I bought a Tivo HD for a family member in December.  She didn’t like it.  I returned it to Amazon.  Tivo has been charging me $12.95/mo ever since for serivce on a unit I didn’t even own.  I cancelled in January but they kept charging me and they claim to not have a record of the cancellation then.  I called again today to cancel and was told that there would be an early termination fee.  How nice, an early termination fee on a box I don’t own.

Sounds like a cell phone company. But while cell phone companies sell a phone at a deep discount in exchange for a 12 month commitment to recoup their costs and make a profit,  Tivo just wants to piggy back on the ETF concept as a money making scheme.  Even cell phone companies don’t charge you an ETF or monthly service fee on hardware that you return!

I’m done with you Tivo.  I’m replacing my two Tivo’s with DirecTV HD DVR’s.  The new standalone HD Tivo blows: it’s sluggish (the HR10-250 was half decent, but is for DirecTV only).  I’ve got news for you scammer corps out there that use ETF fees to rip off consumers: your days are numbered.

Author: "Scott" Tags: "Web Business"
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Date: Thursday, 04 Jun 2009 23:10

I get this question from time to time, usually from other adults who aren’t Internet savvy and have absolutely no idea how it is that I earn a living from “some websites”.  “So you make websites for people?”… is usually the question I hear.  Kids are even more dumbfounded and think that what I do is magic.

The problem, I believe, is that people don’t understand the sheer numbers involved.  The basic premise is the creation of a website that people want to look at, and earning money from people when they do (either when they click on advertiser links, or view advertiser ads, or buy stuff direct).  That’s all well and good, but because visitors aren’t easily visualized, people don’t “get” how a few people visiting a website can translate into big money.

A visualization is in order.  Every month, 2 Million people visit our ResellerRatings, Dealighted, and TechIMO websites.  Here’s 1 million people:

That’s a lot.  Double that crowd to get the monthly visitors to our sites.

Or thought of another way, the combined populations of San Francisco, CA [800,000] and Dallas, TX [1,200,000] (every single resident of those cities combined), visit our sites each and every month.

San Francisco skyline through the Golden Gate Bridge by scrunchy17.
San Francisco, CA -800,000 people

Downtown Dallas by UrbanCyclop.
Dallas, TX – 1.2 Million People

What’s more, we don’t just get random people, we get targeted, highly sought after people.  People who are interested in shopping and buying consumer electronics and computer hardware.  People who earn high incomes and/or are well educated.  Advertisers pay us money to reach those people, whether via fees based on the number of times an ad is viewed (CPMs) or a fee per click on an advertiser’s link (CPCs), or a percentage revenue share when we refer people to buy stuff (CPA).

So what do I do?

I create reasons for people to visit our sites.  I create ways to compel people to visit our sites and to come back frequently.  I manage and build technology that makes our sites useful and worth visiting.  I create ways to make money from those people when they do visit our sites.  And I manage people who work with me to help do these things.

How do I make money doing this?

The sheer number and quality of people who visit, a clever business model to make money from them when they visit, and websites that don’t cost a lot to operate.

How have I been able to do this so well?

A lot of work, a lot of lists, a lot of good ideas to identify needs and meet consumer demand (and testing bad ideas), years of implementing those ideas, a lot of skill, and a bit of luck.  Read my blog and archives to get tips!

Maybe this will help you respond next time someone asks you what you do, or scoffs at your website or blog as not being a “real business”, and you can tell them that the Internet definitely did not blow up in the 2001 bubble like the media reported.

Author: "Scott" Tags: "Web Business"
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Date: Sunday, 17 May 2009 08:10

Recently I’ve been noticing some changes in basic email etiquette that I thought were interesting.  I’m a grandpa when it comes to the Internet, since I was launching sites in 1994 when the Internet was still very new.  Back then, most emails began with “Hi Dave,”, and ended with “Thanks, Scott”.  Since then, I’ve been in the habit of adding that “Thanks, Scott” at the bottom of every single email for the past 15 years, but I’ve noticed that the recent Internet newcomers who probably text more often than they email, don’t sign their emails at all – no name at the bottom.  It makes sense — I already know who the email is from when I see the from: name/address in my email client so what’s the point of being so formal with the name at the bottom?

A while back, I stopped signing emails “Scott” and switched to “S” – I just got tired of typing “Scott”, and I don’t use an auto signature.  But now I think I’m going to just stop signing my name altogether to friends/family/colleagues and only keep it on there for professional work emails.

I’ve also noticed that when you email or reply to a new professional/work contact, it’s customary to begin the email as “Hi Name,” on at least the first 2 or 3 emails.  Then, you can drop the “Hi Name,” and just begin your email without it to be less formal.  It’s funny, maybe I’m just noticing that etiquette, but I definitely like to drop the “Hi Name,” as early as possible because I just find it redundant and stuffy.

So if you sign every email you write to friends, family, everyone, consider saving yourself the time and omitting that ending signature. They know who the email is from before they even open it, and if they haven’t figured out who it’s from by the time they read down to your name, they have bigger problems :) .

Author: "Scott" Tags: "Web Business"
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Date: Monday, 11 May 2009 20:34

I’m in France this week, and took the TGV train from Paris to Lyon today.  That’s a distance of 290 miles, covered in 2 hours, at an average speed of 144 mph.  If you want to see what it’s like to go 144 mph in a train, check out my video below.  It’s so smooth, you can’t even feel the train start and stop and it feels like you are riding on a cushion of air. It’s extremely quiet, and you can sleep like a baby – the only thing that will wake you is the conductor announcing, “tickets please”.  I think if more Americans experienced this, we’d all demand that the TGV be brought to the U.S. and soon.  Being able to hop on a rocket between cities without hassling with the airlines is oh so refreshing.

TGV Paris to Lyon, 144+mph (note the cars doing 70+ on the highway):
[youtube asZHi9J1g_c nolink]

As a business traveler, I want to get from A to B cheaply and quickly.  Flying from San Francisco to Los Angeles takes about 2 hours when you factor in airport delays.  Now, if you dropped France’s TGV into California, it would take 2.5 hours, probably cost less, pollute less and use less gas, I wouldn’t have to deal with major security/weather/ATC delays, and I’d be able to work from the train with my laptop and EVDO Internet access.  I still can’t believe that in 2008, we can’t get Internet access on airlines (though it has been tried on a small scale).

Highspeed rail has been tried on the east coast with Amtrak’s Acela, but that train has has its share of problems, plus it’s slow (75mph-150mph) compared to Europe trains like the TGV (200mph+).  The engineers of Acela botched the design, creating the trains too wide, limiting their top speed.  California is planning high speed rail and finalized a high speed route this month, but again, they’re planning to design the system from scratch.  Why reinvent the wheel and create a buggy new system (e.g. like Acela) when a tried and true design exists in Europe that carries thousands of daily commuters around Europe, on-time, and very efficiently?

With gas prices being what they are, airlines raising prices and having financial troubles, and climate change at its worst, it’s time to look at this energy efficient alternative that other countries have embraced for years.

Author: "Scott" Tags: "Web Business"
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Date: Monday, 04 May 2009 05:39

There are two groups in the h1n1 swine flu issue.  Group A is panicking, flooding the ER’s, thinking they have the swine flu, fearing death, or avoiding all human contact.  Group B says the media is overhyping this, they are citing the 50M killed in 1918 compared to the 200 killed in 2009 by h1n1, they are ridiculing people who wear masks in public or on airplanes (plenty of evidence of this on twitter), and otherwise dismissing this virus as a joke, a non-event.

Neither Group A (the panickers) or Group B (the naysayers, the denialsists) is right.  Here’s why:

-A(H1N1) Swine Flu has killed 20 people, sickened 900 in 18 countries, and is being transmitted human to human.  For the first time ever, the World Health Organization raised their pandemic alert to 5 of 6 last week.  This has the potential to become a widespread pandemic, unlike bird flu, unlike SARS.  This isn’t like anything else most people alive today have experienced before.

-Even though there have been 900 confirmed cases worldwide, there are most certainly many more people who have a mild or moderate illness and that haven’t gone to a doctor or hospital so the number is definitely not 900.

-This thing went global 1 week ago, yet people are already calling the end game score.  Can you call a football game after 4 plays?  No.  The 1918 flu took 2 years to finish doing its damage of 50M deaths, not 1 week.  Experts say it is still far too early to draw any conclusions about how bad (or not) this virus will be and no conclusions should be drawn after 1 week.

-Some people are already in poor health, or have underlying disease like asthma or other respiratory issues, or they may be pregnant, very young, or very old, or they might be cancer patients on chemo with weakened immune systems.  To them, this is a very big deal to have a new highly contagious virus out there, whether it’s worse than the flu or not, so those people might be the ones out there wearing masks and very rightly so.  To them, this could mean pneumonia, bronchitis, trouble breathing, and weeks of illness, not just a couple days in bed.  Next time you think about laughing at or mocking someone wearing a mask and labeling them as a hypochondriac or a paranoid crazy, think about this.  Personally, I appreciate people who wear masks — if they happen to be infected, it’s less likely that the’ll cough or sneeze on me.

I’m really annoyed by these people who seem to take nothing seriously and just want to mock and judge others:

Me_sq75_normal

mathowie: Oh paranoid man wearing the surgical mask on our cross-countryflight, I’ll miss you most of all…

1 day ago from Birdhouse · Reply · View Tweet

Korey_pic_normal

koreyb: Only one swine flu mask on my flight home. Lol. No one wanted to sit next to him.

about 3 hours ago from TwitterBerry · Reply · View Tweet

And then there’s the opposite view:

Twitter_normal

tonymaro: One passenger on the flight wore a mask. Is he the smart one?

about 9 hours ago from TwitterBerry · Reply · View Tweet

-There are 300,000,000 people in this country.  226 cases of h1n1 in the U.S. as of today is not many.  Therefore, the odds that you’ll be infected if you take a flight or hang out around other people today are low.  That said, viruses spread exponentially and take months to reach their peak spread.  If the infection continues to spread, you’re more and more likely to be infected by someone as more and more people get the virus.  If you have mild sniffles and go to the ER, you’re overtaxing our already overburdened medical system and exposing yourself to other infectious disesase.  But if you have any underlying risk factors or other disease, and you have a fever/cough/etc then you should definitely call your doctor.

-The media overhypes everything.  That isn’t new.  The media performs a valuable service to us: alerting us to important issues.  The media’s volume shouldn’t sway our opinion. We must investigate, research, look to experts, and make our own decisions.  Just because  media speaks loudly about an issue, we can’t then assume that that issue must be BS.  Some threats that the media alerts us about are actually threats.  Not all hyped threats are harmless.

The bottom line is that we shouldn’t be panicking about this but at the same time we shouldn’t be calling the results of this possible pandemic after 1 week.  Neither is correct.  To all armchair medical experts: keep your conclusions to yourself, please, and restrict yourself to spreading facts from mainstream experts rather than spreading misinformation and your own hype.  We should all become part of the solution to slow the spread of the disease: extra gel/handwashing, if you’re sick STAY HOME, wear an N95 mask if getting sick would be very bad for you (the CDC actually recommends masks in areas where transmission of A(H1N1) has been confirmed).

Everyone has to decide on their own how to handle this, based on their own tolerance for risk, their own assessment of the risk, and their own personal situation.

Author: "Scott" Tags: "Web Business"
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Date: Saturday, 25 Apr 2009 21:29

State_of_Contextual_Advertising_Panel_For_Adtech_AdSpace by contextwebblog

Adspace is a new publisher-oriented conference operated as part of Ad Tech in San Francisco.  I was there on Wednesday.  It had panel sessions focusing on monetization, Adsense, affiliate marketing.  If you missed it, there are others coming up in Chicago (Sept) and New York (Nov).

I really like attending these conferences.  I like the different environment for one thing, and I sit in the conference sessions with my laptop open, and my mind open, listening to concepts and thinking about new ideas, and refreshing old ideas.  While there, I got emails from two industry partners telling me that they were attending Adtech — I didn’t know they were there, and we were able to setup impromptu meetings.  The way I look at it, if any of the discussions or meetings spark even one idea that’s worth more than the conference fee + my time, then it was worth it, and 9 times out of 10 that’s the case.

Adsense Updates and Microsoft PubCenter via Yieldbuild

Google unveiled a couple of Adsense changes.  Google is testing category level blocking, not just individual URL blocking, so you can block undesirable advertisers.  You also may have heard about their behavioral targeting program dubbed by Google as Interest Based Targeting (IBT).  IBT works by anonymously following a user as they go from a sports car site to a basketweaving site and instead of showing the user a contextual basketweaving ad, they show a sports car ad (knowing that the user likes sports cars).  This IBT feature is being slowly rolled out to publishers – you may or may not be benefiting from it as yet.  I heard conflicting info as to how well it lifts CTR’s and CPM’s — the Google rep said that it lifts CPM’s substantially while another non-Google speaker said it was only mildly effective.  I tend to believe the Google rep in this case because he has direct knowledge, and I have seen the positive effects of behavioral targeting elsewhere.

Both Yieldbuild and Pubmatic were discussed.  These sites work to generate the most revenue for your pages by automatically testing different ad formats and ad networks.  Yieldbuild claims “up to a 200%” revenue increase.  The downside of these is that you have to give them your username/password for Adsense and your other ad networks to work.  Even just a/b testing alternate Adsense colors/formats is worthwhile: we found a significant improvement using red color Adsense links over blue, on our sites.

One cool note about Yieldbuild, is that they give you access to Microsoft PubCenter ads, before PubCenter has officially launched to publishers.  Early anecdotal reports indicate that PubCenter might outperform Adsense:

“Our tipster says that he receiving from four times more in revenue Microsoft than Google AdSense. And the money isn’t the only advantage PubCenter has over AdSense. The advertisement themselves are are higher quality than Google’s ads, he says, and equally as targeted towards the content.” –techcrunch.com

We began testing Yieldbuild on our sites today and will report back with any results.

Site Performance

Chris Raimondi of FreePatentsOnline.com gave a talk about site performance.  What was particularly interesting is that he provided actual numbers to relate website sluggishness with traffic losses.  Here’s the low down:

  • 100ms delay (1/10th second) = -1% sales (Amazon)
  • 400ms delay (2/5th second) = -5-9% traffic (Yahoo)
  • 500ms delay (1/2 second) = -20% fewer searches (Google — Marissa Mayer)

A half a second delay loading your pages could mean 20% less traffic, folks!  So what can you do?

-Enable gzip on your pages. Gzip compression happens behind the scenes on the fly automatically to shrink your page sizes. Test to see if your URLs are gzipped. If they aren’t, contact your host or server admin to enable it.  Don’t just test one URL and make sure your js and css pages are gzipped too, not just php or html.

-Get YSlow for Firebug/Firefox and figure out what is taking the most time on your pages to load.

-Get Smushit for Firefox to compress images

-If you run a database driven dynamic site with PHP, figure out how to implement caching with something like Cache Lite.  Having your scripts load the same data from the db on every page view is inefficient even if you use MySQL query caching.

Audience Segmentation

This tip is really best suited for large sites, perhaps with at least 1 Million monthly page views.  If you’re using Adsense, chances are, advertisers are using site-targeting to run ads on your site specifically.  But unless you use Adsense channels to segment your users by interest or by demographic, and then make those channels available in your Adsense panel for site-targeting, advertisers are only able to run site-wide site-targeted campaigns.  Plenty of Fish founder Markus Frind realized that he needed to segment his 2B monthly page views by demographic — so, he setup Adsense channels by demographic: women, men, men 50-60, etc–he has a couple dozen channels setup.  That allowed advertisers to pinpoint their reach and target segments that would work best for their campaigns, and he saw his Adsense revenue shoot up.

If you run a forum, for instance, you could setup a different Adsense channel for each forum.  This would let advertisers target users on your tech forum site that were interested in monitors only, or printers only, etc, by running site-targeted ads in your monitors forum channel or printers forum channel.  This should allow you to command higher CPM’s.  The same is true for a site with different article categories, segment by category.  If you have profile data on your users (location, age), you can segment by those.

Author: "Scott" Tags: "Web Business"
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Date: Friday, 10 Apr 2009 20:46

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for yelp.JPG 4/10/2009: “The balance of power on Yelp is about to get a shake-up. The San Francisco consumer review Web site blasted out an email to its Elite Squad today with the news: business owners will be allowed to publicly post their response to Yelp reviews in as early as a week.” -SFweekly.com Is this big news?  For Yelp and Yelp businesses, yes.  I hate to state the obvious but once again, like with Merchant Circle, Yelp is behind the times here.  ResellerRatings has been allowing merchants to post public comments in replies to reviews for more than a decade.  There must be a balance between consumers and merchants.  Both sides should be fairly represented.

Author: "Scott" Tags: "Web Business"
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Date: Sunday, 29 Mar 2009 03:47

Straight from their blog. (heard about this at Sugarrae.com)

“Other sites give complete control to customers and their reviews. We give complete control to you, the business owner. Don’t like a review? Delete it.” -MerchantCircle.com

Wow. That about says it all. Yeah, other sites, like ResellerRatings.com, do give complete control to customers and their reviews and that’s a very good thing because it means that ResellerRatings actually has value. ResellerRatings doesn’t neglect merchants, however: we offer tools to let them contact customers to resolve complaints (since customers can edit their review at any time if they become satisfied), to post public reply comments, be notified when customers post reviews, and a whole host of other ethical tools and options. ResellerRatings NEVER removes a review upon request or pressure from a merchant. To do so would create a joke of a website, one that serves no purpose other than to stroke the ego of merchants. Reviews are only removed from ResellerRatings if they were submitted by non-customers or other similar reasons as listed in our public TOS, not because a merchant asks.

Yet, ResellerRatings is very important to merchants, because we rank very high (usually page 1) when you do Google searches for merchant names or merchant names + the word rating or reviews. So it’s win win for us and our policies. ResellerRatings helps consumers, and it encourages merchants to sign up and participate in order to satisfy any customer issues, even though 70% of the reviews at ResellerRatings are positive. There’s no need to compromise ethics on a ratings site and indeed wreck the site’s usefulness, to earn the business of merchants.

Author: "Scott" Tags: "Web Business"
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Date: Thursday, 12 Mar 2009 21:46

I used to like CNN and really, it’s actually a great resource for major breaking news.  For all other times, they suck.  Take today for instance. The market is up for the 3rd day in a row.  The dow is up over 9.5% in the past 3 sessions.  Our devastated economy may be in the early stages of a recovery.  Is CNN reporting this on the home page in big bold letters?  Nope.  Not one mention until you scroll down to the business section and see a tiny link to “A three-peat for Wall Street’s bulls”.  Apparently, “Mom patrols U.S. border from her den” is more important. But on days when the market is down, it’s front page news.

CNN homepage 3pm PT 3/12/2009:

Compare that to Marketwatch.com homepage 3pm 3/12/2009:

And the Wall Street Journal homepage 3pm 3/12/2009:

I’m tired of all this economy fearmongering by mainstream news like CNN.  Yes we’re in a recession.  Yes foreclosures are a mess etc.  But companies are still making money. Most people still have jobs.  The only people who should be spending less money out there are those who lost their jobs or their homes.  Everyone else should be spending, focusing on their unchanged incomes, but they’re not, because they only hear about bad news on wonderful sources like CNN and the good news is lost, so they fear, they hunker down, and they drive our economy further into the toilet.  News moves this market and the media has a huge role to play in boosting both consumer and investor confidence that yes, we can repair, recover, move forward and grow again.

Most investors out there are not pros.  They are John and Jane Q. Public with their 401k’s.  They need reassurance and confidence.  If they held $100,000 in stock last year and sold last week, they might have $46,000 now.  If they held through today’s 3 day rally, they’d have $51,000 today.  Everyone needs to gauge their risk tolerance and their asset allocation, being well diversified, make sure they have enough cash etc, but sell low and buy high is not a good strategy.  Selling when CNN gives you bad news and buying when CNN gives you good news is not a good strategy.  Be greedy when others are fearful!

Author: "Scott" Tags: "Web Business"
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Date: Sunday, 28 Dec 2008 21:45

I was on a Wikipedia page today and saw a huge “Please read this message from Jimmy Wales” banner at the top of the page.  His letter (dated 12/24/08) asks for donations to Wikimedia to support the site, and explained how they hoped to raise $6M to cover their annual expenses.

The Wikipedia donations page states that they’ve earned $4.5M of that $6M so far, but after analyzing donations that they’ve received just over a 30 minute period this afternoon (about $4,000, with many donors giving $100 USD!) and extrapolating that data out to one day, it looks like they’re currently getting $192,000/day in donations, or $70M/year. At $192k/day, they’ll hit their $6M goal in 8 more days.

Wales explains that, like a “national park or school, [he] doesn’t believe advertising should have a place at Wikipedia.”

“Do I like Wikipedia? Yes.  Is it valuable?  Yes.  Is it some kind of altruistic gift to humanity, or a public resource like a national park?  No.   Wikipedia is a community-built, privately owned, Internet resource.  Capitalism works.  Why not apply it to Wikipedia, if even in a very controlled way accepting limited ads from specific ad partners, and earn tens or hundreds of millions?  Why ask for charity?

If Wikipedia costs $6M to operate, and ads could generate $100M/year (probably far more actually), then why not take that $94M surplus and give it to social programs, schools, etc — pay to put Wikipedia kiosks in every school and library.  Become an organization that spreads charity and funds other programs, rather than just a charity that sucks resources to operate itself.  Wikipedia could do far more good in the world that way.

So here’s my takeaway from this:  a) if they’re doing $192k/day in donations, maybe this charity model will actually work for Wikipedia better than advertising, as a gimmick, if that donation rate continues, and b) Should other sites that help people consider a donate model — are you using a donate model and is it working?

I just don’t buy the whole donation thing.  Maybe it’s working for Wikipedia ever since they launched this new “give us money” campaign on 12/24, but it sure wasn’t working for them before that, and I can’t imagine that donations will prove to be a viable model as the only revenue model over the long term for any entity.   Maybe 1% of your users will donate, and if you get as many users as Wikipedia, that’s a lot.   But for most businesses, ads will squeeze $ out of the other 99%.

Author: "Scott" Tags: "Web Business"
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