As I alluded to in my previous post (MadKast is stupid), a viable company is not what passes around for ‘entrepreneurship’ these days.

It is sad. Any Joe Blow with a computer and blogging software starts to blog. Good for him. He then starts to make money - even enough money to quit his day job and work on blogging fulltime. Good for him. But that is not a company. I would mark it as freelance work (you write stuff, people read it, and ‘pay’ you back in the form of clicking on ads). If you stop blogging, your company goes down the toilet in half a second flat.

If your ‘company’ does nothing while you go on a two week vacation - it isn’t a company then. Right now I can go away on a two week vacation. Sure I will have a lot of emails and work piled up while I am gone, but everything should hum along. My server admin will ensure the servers stay up (and check to make sure they are up). My managers will ensure every division is humming along, making progress (and money at the same time).

To me - a company can survive the loss of any one person (I have safeguards that if I was to die tomorrow, Enthropia Inc would still hum along). Sure, their might be a bit of a transition period, but my people know what is to be done. This post on entrepenurship by Glenn Kelman, CEO of Redfin is completely spot on. Nothing describes me better as point number one.

So think about it - are you really a company?

Been busy moving. Since 2001 I have not lived in any single residence for 12 months. Latest place lasted 8 months. Current place is planned for 1 to 12 months - hoping to move to Vancouver next.

But everything is set, and ready to go.

So - was going through my feeds, and I read that the first TechStars ‘company’ launched. This isn’t a company. It is a feature. Think Kiko (calendar ‘company’ sold on eBay), except 100x simpler.

I’ll copy what TC says:

With the widget, you can easily let visitors share your entire blog posts via email, mobile MMS, or through any of the social bookmarking services. The widget also maintains a list of emails and phone numbers you’ve contacted in the past to make sending new links to friends really easy. AddThis (which we use) has a similar widget, but focuses on an exhaustive list of social bookmarking services.

MadKast’s widget also offers an analytics package that tracks which posts are shared most often and what other blogs your readers are visit.

Huh? Sharing blog posts via a line of javascript is a company? No - its a bloody tool. Furthermore, the ‘analytics package’ that tracks which posts are shared most is so easy it belongs in the realm of captain obvious. And what other blogs your readers visit? That is pretty damn close to invasive when it comes to privacy (but also not all that complicated). In fact - how much data are they tracking?

What passes as a ‘company’ these days amazes me.

I’ve talked about before how direct ad-sales is the best way to truly maximize your revenue capacity. We own a lot of XXXX.org domains - we then get custom advertising for the site (often times contacted by advertisers to our high SE rankings), and make pretty damn good money. Recent case in point: Site with 100 impressions a day earning maybe $30 a month from AdSense is now doing $250 a month in a direct ad-deal. Time spent on it? 30 minutes. This also underlines the power of domains, but that is for another day.

The more interesting example I wanted to point out is our Blog Flux Directory. For about the last month Jacob had been managing our new self-serve ad-system. Basically any category/tag page can have top/skyscraper bought out. Direct link to your website. All ads would be vetted, so of course it would be relevant (and thus not a PR-based sale).

We released this system about 2-3 weeks ago via a massmail to our members (emails are key). We had about a dozen sales, each at a minimum of $50 a month.

This is a great start. I have a site that does micro-ad sales of roughly $15 a month. The site generates over $10,000 a month (with little intervention on my part). Blog Flux is not only bigger but also far more reaching in its scope.

But this is only the start. Sure we had people come advertising themselves (we have both blogs and commerce websites as advertisers). Our next job is now to go out and find specific advertisers for the largest keywords.

The point here is - we created an self-service ad system, we let our own users know about it, and have already started to make more (with revenue of $750, we have displaced roughly $50). $700 extra per month (most of them are subscriptions) that will keep recurring. Our CPMs are damn high, but I am sure our advertisers are also getting their return back.

Google Adsense is a nice base. But don’t let it be your flat base.

I don’t know what I used to do before Commentful (product of ours). The reality is that tracking conversations can be hard. There is so much information online that losing track is as easy as counting to 1-2-3.

So it boggles me when companies don’t use email to connect with their current/potential customers. Email is a fantastic tool - for those interested in your product, it lets them drop their email quickly and move on - they expect you to re-initiate the conversation with them. For those already your customer, it is a great way to re-establish your connect with them, and let them know what is up.

Case example: iBegin Source. Admittedly I failed at this recently - we had no way of letting people subscribe for updates (since fixed). Since day one we have been hard at working, tweaking the system, adding more data, etc. Superficially, it isn’t obvious to see - there is more accurate data, but it happens gradually. We started with ~11 million listings, and are upto ~12 million listings. That didn’t happen overnight - it happened gradually.

So - we had some stuff in the pipeline that we wanted to let people know about (you can see read about the upcoming updates to iBegin Source). At the same time, we require that you register before you can download (or purchase the data).

We sent out about a thousand emails. We got quite a few emails back. Most important - a few people let us know they were buying very soon. A few people even thanked me for emailing them, saying that they had forgotten about this and wanted to move ahead. That email address was essentially an invite - “come inside, lets talk.” But I had to take that first step - I had to open the door, come inside, and speak up.

Sending out that email was only positive. It let our current customers know what is going on. It reminded potential customers that we are still around (and getting stronger).

For all of the ’shift’ towards IM/private messages/etc - email will get more attention than either of them. And not using all that you have at your disposable (especially something as easy as email) is a foolish mistake.

Full disclosure can be really tricky when someone doesn’t want to be disclosed.

I myself am in a tricky situation. We sell business data to companies interested in the local space. We also cover interesting companies in the local space.

So - we have a customer who bought data from us months ago. This same customer put this website live about a week ago. I emailed him to ask if it is okay I disclose the connection with iBegin - he asked me not to (which is completely understandable - I would likely do the same). But now - I want to cover this website, but I can’t, because of this conflict - I have a business interest in them succeeding, but they have asked me to not to disclose our relationship. At the same time, I think they have a good product that the readers of this blog (about 300 subscribers) would find interesting.

So I’m stuck.

Plus - it is extremely interesting in what ways our data is used. I mean - in ways totally outside of the realm of ‘online local’ (and I’m not talking about direct marketing either).

Anyway the gist is - I like to disclose any relationship I have with any website/product I review. I just gave a specific example where such a conflict can arise.

The thing about local blogs is … unless you live in a city, you likely don’t know it exists.

The only reason I know of Gothamist LLC was because of their Toronto blog - Torontoist.

So with that in mind, I’ve been amazed at how established some local blogs are.

While reading about Bloggers Bring in the Big Bucks (to be honest, some of them were small-fry), I saw that Gothamist was mentioned. It was slightly confusing - the revenue says ‘monthly average of $50,000 to $60,000 over the past 12 months’, yet the first line says ‘estimated monthly revenues of $250,000′ But - with an estimated 7,000,000 pageviews a month (I don’t think even Yelp manages that), $250,000 a month sounds right.

Or to rephrase it - a local blog network that covers 14 cities generates roughly $3,000,000 a year. Hell, this would be a smart buy for a Yellow Pages company or a media company.

Next we have b5media acquiring Level9. Level9’s most popular blogs are their Starked blogs - which cover NYC, SF, LA, and DC. While the blogs veer into a broad category (eg NYC covers media, LA covers Hollywood, etc), the blogs still publish local content.

As an aside, JLA Ventures, the people behind Zip Local, are the investors behind b5media.

Lastly, we have Mediabistro.com purchased by Jupitermedia (the guys behind internet.com) for a cool $23 million. One of their most well known blogs are the Fishbowl blogs - covering NY, LA, and DC. Except they focus on media matters rooted around each city. And with only 600,000 unique visitors last year - they must know how to monetize the sites well.

So - three local blog networks, all kicking ass and taking names. Gothamist’s numbers are impressive, and Mediabistro got a nice buyout. How come we never hear about them from local analysts?

My last post on Wowhead.com, a World of Warcraft fansite going for $1 million got a lot of attention. Personally, I had come across Wowhead a few times, but had come away impressed.

I thought it would be interesting to chronicle which succeeded and why. I’m going to only be covering Allakhazam (the original), Thottbot (the upstart), and Wowhead (the golden boy). Other interesting sites are around (especially the site that proceeded Allakhazam)

Originally there was Gameznet (with its site eq’lizer). It was the pre-emptive EverQuest site. Allakhazam came after eq’lizer, and both were kept upto date manually. Users would send updates (screenshots) to the admins of the sites. They would extract the information and then publish it online. It was a tedious process, but both sites did a great job. Arguably eq’lizer was the biggest one (first-mover advantage).

Then came along Flashlink. It was a site way ahead of its time - subscription for access to content. While still a foreign concept to many today, back then it was unheard of. Flashlink went out, purchased Gameznet, and tried to impose a subscription model. This was right after the dot-com implosion, when CPM rates plunged to < $0.001. Subscription was the way to survive.

Allakhazam was forced to do the same. But while Flashlink imposed subscription on the entire site, Allakhazam only did it to parts of the website. So while Flashlink/Gameznet sunk like a stone, Allakhazam was able to weather the implosion of the dot-com boom. People left Gameznet and went to Allakhazam in droves - partial content was better than none. Allakhazam it/himself came across as a person - it wasn't a corporation you were paying, it was a hard working gamer. A fair enough angle.

Using EverQuest as his base, Allakhazam was also wise to realize that no MMO lasts forever. So whenever a major MMO came out, he was ready. Dark Age of Camelot? Check. Star Wars Galaxies? Check. Final Fantasy XI? Check. For every single one, he was the #1 database website. Sure there were others, and they might have had better coverage in certain sections, but his sites were far more complete than the rest.

Content was winning. Yet at the same time - all this content was manually submitted by end-users, and then manually inserted into the system by Allakhazam and his staff. Efficient? Not even close.

Then came World of Warcraft. Talk about being blind-sided.

Blizzard decided to open up the game to really embrace programmers (I argue this is one of the reasons for WoW’s success). Using LUA (a programming language), a programmer could write scripts that interacted in the game.

Thott was one of the early beta testers of World of Warcraft. As leader of Afterlife, one of the most popular EverQuest guilds, Blizzard had directly invited him/his guild into the game. Consider him a sort of celebrity in the game.

But Thott was also a damn good programmer. Seeing what LUA could do, he wrote a script which saved information on everything the user saw - items, quests, creatures, NPCs, etc. He then wrote a program that would connect with the Thottbot.com site, and upload this data.

The entire process had not only been simplified, but the middle man was cut out. Allakhazam depended on users to send data, the admins to verify, and then the data to go live. Thottbot’s system required no manual submission by the end-user, no verification by admins, and the data went instantly live.

Furthermore, the entire interface was not only simplified, but also made more intelligent. Instead of having a heavy website with lots of graphics and community elements, Thottbot.com was all about the data. The frontpage was simple a search form (just like Google), and the pages were as simple as you could get. Streamlined, and bloat removed.

One other big boost - Thottbot was packaged with Cosmos, which was the most popular add-on pack when the game was released (I don’t know about its popularity now). While Allakhazam had its existing userbase, Thottbot was able to hitch a ride on Cosmos and get a lot of traction quickly.

Thottbot quickly overtook Allakhazam, even while Allakhazam covered a half-dozen games and Thottbot only World of Warcraft.

Eliminating ‘waste’ won. No longer did the user have to manually submit, nor the admin verify. The steps from ’submission’ to ‘live’ was streamlined. And so was the site - bloat was eliminated, and focus (on the data) was awarded.

But Thottbot had its own faults. It completely removed any sort of administrative oversight, allowing stupidity to run rampant. Its backend was messing, requiring over one hundred servers to function. And while its design was functional and simple, it was ugly.

And so came in Wowhead. Reading over comments on why people like Wowhead, the same bullet points stuck:

1. Wowhead actually moderated comments. While Thottbot was littered with useless comments (this is all supposition, I’ve never played WoW in retail), Wowhead actively removed useless comments. Good idea - let all comments go live instantly, but remove the crappy ones.

2. Wowhead was aesthetically pleasing. It kept the focus on search just like Thottbot, but it was good to look at.

3. Wowhead was fast. The backend was intelligently designed. It didn’t need the huge server resources that Thottbot did. Google was built for speed, and Wowhead did that for World of Warcraft.

Evolution (via meta-moderation and design) won. While the user was still empowered, the admins still took an active interest, and moderated what they thought was crap. They took the best of Thottbot, found its biggest weaknesses, corrected them, and released.

And now they are $1,000,000 richer. Kudos to them - they built something wonderful.

For those that have read my about page, I used to be involved in the MMO (massively multiplayer online) space. Since quitting and focusing on (what I see as) more lucrative markets (local and blogging), I’ve still kept a good relationship with pretty much all the large players - while I tired of it, keeping abreast of news is interesting.

So today, after tucking the missus to bed and getting on the computer to catch up on some email, I saw an interesting email in my inbox (from a trusted acquaintance). Wowhead, a popular World of Warcraft website, was purchased for over $1 million.

Some quick background (hold on, it can be a bit confusing):

Before WoW launched officially, a lot of EverQuest players were invited to beta test. One of them was Thott, leader of one of the largest EQ guilds (Afterlife). Being a resourceful programmer, and utilizing WoW’s LUA programing interface, he wrote Thottbot. The program basically stored information on all quests/items/creatures/characters/etc that the user came across, and then uploaded it into a centralized system (Thottbot). Users around the world could then load up information, find out how to do quests, where to go, etc. Distributed with the most popular WoW add-on (Cosmos), the site was an instant hit.

Before Thottbot, the pre-eminent database site for online games was Allakhazam. It had the largest subsites for the (then) most popular games - EverQuest, Final Fantasy XI, Dark Ages of Camelot, and Star Wars Galaxies. Allakhazam was a subscription site, making money from people willing to pay for features like advanced search (incidentally, all the content on Allakhazam was actually user-submitted).

I had the mental fortitude to snap up Thottbot (for IGE) right before WoW came out of beta. I can’t disclose the details, but it was in the $xxx,xxx range. For the amount of traffic the site got, it was an absolute steal.

With Thottbot on the scene, Allakhazam greatly suffered. Why would people pay for a subscription with everything for free on Thottbot?

Another quick aside: for those new to MMOs, companies like IGE sell virtual currency and goods for real-world dollars. For all the (unwarranted) hype of Second Life, IGE et all are far bigger - they push hundreds of thousands of dollars worth of goods every day. A lot of players don’t like them - they believe virtual good sellers corrupt the ‘pure’ nature of the game.

Allakhazam.com was operated by a guy who used the nickname ‘Allakhazam’. He was one of the fiercest anti-IGE players around. I had once offered him $1 million (before WoW even entered alpha) - he wasn’t interested. Anyway, the site took a hit, and after a few years of struggling to survive, he eventually broke down. He sold out to IGE for roughly $7-10 million. The justification was that he sold the site to ‘Affinity Media’, which owns (but isn’t) IGE. Anyone with half a brain knew that they were the one and same.

So - with Thottbot/Allakhazam owned by IGE, they pretty much owned the WoW fansite market (and thus a huge audience to push their wares to). At least, if it wasn’t for Wowhead. A late-comer, the site was an instant hit, with its clean UI and fast loading speed (think of Thottbot as Altavista, and Wowhead as Google). You can see on Alexa how Wowhead has grown while the others have stagnated.

And so ‘Affinity Media’ has struck again. Verified by three different sources, the price was confirmed at over $1,000,000. The lower limit was 1 million, while the upper was $1.5 million.

And people thought running a fansite wasn’t worth it

UPDATE: Some people have asked for proof - I can’t give you that. But - I did confirm with another source. As far as I am concerned, this is solid. So Digg it.

UPDATE2: IGE has been ’supposedly’ sold off by Affinity Media. They used FUD when they purchased OGaming. They used FUD when they purchased Allakhazam. Just some more FUD - rest assured IGE/Affinity Media are still very connected.

UPDATE3: The FUD doesn’t end. Remember - I sold OGaming to IGE, while they claimed it was ‘RPG Holdings’ that purchased it. I’ve experienced it firsthand. I talked to another contact - it is a bit byzantine (how the site was ’sold’), but as it stands, IGE US LLC’s parent company is Affinity Media. Certain properties may have been sold, but not the company itself.

UPDATE4: The sale is confirmed:

News travels fast! We were hoping to have the time to put together a proper announcement about this, but it appears word is already out, so we wanted to acknowledge it: now that IGE is out of the picture, Wowhead has decided to become a part of the ZAM Network.

I leaked the sale before it was officially announced, so that shows I did have someone on the inside (my past with Thottbot etc just confirms it). All the same contacts are saying the same thing - Affinity is still very much involved with IGE.

UPDATE5: At the recent VRGood Summit, it seems Brock Pierce (CEO of IGE) talked about getting out of the game, with no mention of IGE having been sold from Affinity. Consider this sale supposedly happened over two weeks ago, seems a convenient thing to forgot. Not to mention walking around with an ‘Affinity’ badge.

UPDATE6: I’ve written about why Allakhazam, then Thottbot, and now Wowhead became the top dogs. More developer/design-focused.

The recently concluded TRAFFIC (in New York) conference had their domain auction, with the total proceeds exceeding $11,000,000. The two notable giants were creditcheck.com for 3 million (which I do agree with) and seniors.com for 1.8 million (which I don’t agree with).

There were some other interesting domains that didn’t sell (Scotland.com was priced at 3 million). Regardless, the real biggie was the one in my title - Blogging.com went for $135,000. Blogging.com itself is an actual site, thought Alexa/Compete don’t seem to think much of it.

So - $125,000 (lets give the site a value of $10k) - worth it?

iBegin Source has been a learning experience that has opened my eyes a lot - sales cycle, perceived value, etc etc.

We’ve had a lot of experience with doing small sales (< $500) - eg ForumTemplates (in the last 22 minutes the site has had five sales at $17.00 each). Automated processes, quick and detailed instructions, forum for general support (everyone can ‘learn’ together), etc.

iBegin Source has been a different beast. A few of the following points to learn:

1. Perception. Price in itself is a huge part of the perception. Would a Ferrari be a Ferrari if it was priced at $100,000? Whenever you sell something, you have a markup - the revenue on a sale minus the cost of good + cost of sales. So when people see $40,000/$1000 they think - “this can’t be right” or “they must just be resellers”. We are neither. We’ve invested a lot into this project, but - data sales is not the end all be all. If we don’t make a penny from sales, we are still okay. The reality is that we created this system as a way of powering iBegin city sites across North America. We have only ourselves to blame - our story (which is unique) isn’t published properly. Need to fix that.
2. People are demanding. For example geocoding - its an imprecise science. No one has 100% coverage (it is impossible - no central place for all geodata. Even the US government’s data is incomplete). Managing expectations is hard - I’m not saying bad data is okay, I’m saying that just like you didn’t expect to get 100% on every test you took, local data is so dirty and murky that the same rules apply here. The only solution? Honest answers. We had a buyer of Florida data point out an error we had. We immediately thanked him, and said we would get back to him. In 24 hours we had identified the problem (incidentally it only affected Florida), explained what had happened, and let him know we had fixed it.
3. The sales cycle is long. It can be very long. We have big (ie massive) who contacted us on the day we launched, and take weeks to reply. Various department heads ask the same questions. Sometimes the person him/herself asks the same question again. On the individual/start-up level, the same questions exist. A big question - can they trust us to be around in a year? Five years? (more on that in a bulletpoint below). We had one customer contact us within two weeks of us launching. Last week he purchased one state (an 80 day turnaround). He has promised to buy the full data, but I assume that will take another 2-3 months. So almost 6 months to go from initial contact to sales. That isn’t a small cycle (then again quite a few have bought without even contacting us, so there are two sides to every story).
4. Branding. This is different by perception - perception is more about the quality of the data, whereas branding is more about the quality of the company. Can we be trusted? If we aren’t funded, how are we doing this? Are we scraping results? (to answer those: yes, we’ve grown organically over many years, and no). This again points out ‘our story’ - it is unique, and we should be proud of it (not that we aren’t, we just don’t show it off). The old adage of “no one ever got fired for buying from IBM” bites us square in the butt here.
5. Flexibility. The beforementioned forum templates sales are easy - it is a design, and you buy in. Some customers asked that the header be customized, but that is all very easy to do. When it comes to business data - requests are all over the ballpark. From a single category in a single city (eg ‘Vegas Restaurants’) to asking to use data on upto a million domains (seriously), people have different needs. In most cases we have stuck to the system. Our entire pricing system focuses on efficiently handling scale and sales - 10 customers or 1000 customers, our internal backend works the same. In some special cases we do bend (eg using the data on multiple domains), but in almost all cases we stick to the system. In the short-term this may not be the best idea, but it lets us focus on the core data and the systems that deliver it. I believe this approach will bear fruit in the future.
6. Misinformation. iBegin does local - our internal motto is “We do Local”. That confuses people sometimes - why not focus on one thing? (because everything is related - by bringing it all ‘in house’ we can ensure much better quality and reliability throughout the entire site). Competitors haven’t helped - I’ve received some choice quotes from prospective customers where they were given totally incorrect information (the one that grates my nerves the most is that we crawl the internet for our information).
7. Proof. This one is the hardest - people want to see sites using our data. I’ve been shown some very interesting sites using our data, but they aren’t ready to launch. We launched less than 90 days ago, our sales cycles are long, and building a website with a ton of data isn’t easy. The one benefit we do have is some launched quickly (eg RestuarantReviews.com, and we have our own iBegin City sites to show off).

All in all - very different from our previous sales experience (through our customers and our own stuff, we’ve pushed over $20,000,000 worth of ‘goods’ over the years).

So with all this in mind, we are going to slightly change our approach. Sales cycle, proof, and (to a certain degree) branding & perception - those are things with don’t have control over. We know we’ve been around for a while. We know we are cash-flow positive. We know that this data is mission critical important to us. But we cannot prove that immediately. Over time, people will see that not only are we still around, but we are thriving. Our sales are already up - time will only help.

In the meantime? We focus on iBegin v3 and iBegin Partners - more on that soon.