StackOverflow gives up a hope of making money, goes to VCs instead

A while ago I was writing about StackExchange, which is a platform to create simple web 2.0 questions-answers community sites. StackOverflow was the first community site created by Joel Spolsky using StackExchange. I sometimes browse through another StackExchange offspring – OnStartup Answers, which is themed around startup industry. Ironically, one of the questions asked on the OnStartup Answers was the following: Do owners of sites like OnStartups.com and Startups.com have any revenue off of these websites? I was skeptical about it and got slammed by fellow OnStartup lovers. Meanwhile, Jason Cohen, a co-owner of the OnStartups himself wrote that the site “is like blogging. It’s almost impossible to make money off ads and blogging, even with thousands of readers (you need many 10s of thousands). But blogs can be a fantastic way to drive traffic to other things that do make money, like a startup or like consulting time.

So guess what happened. Joel started looking for VC money to fund his StackOverflow project. Funny enough, he also wrote in that post that it is a sign that you should NOT be looking for VC money “if there is any other way to raise the kind of money you need, for example, by selling actual products to customers“. In other words, he doesn’t think that he can make good money by selling actual products (ads or whatever) off StackOverflow and decided to go to VCs. This is exactly the answer the OnStartup lovers didn’t like.

It is not necessarily a bad business model for Joel and StackOverflow. This is the way to do things in Silicon Valley – you get a site off the ground, get funding, grab the audience, do IPO or sell to a strategic investor, and then you walk away smiling. Webvan, anyone? ;-)

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4 Responses to StackOverflow gives up a hope of making money, goes to VCs instead

  1. Jason Cohen says:

    If you think StackOverflow doesn’t make a lot of money off ads, you’re wrong.

    You don’t need insider info to figure that out. Look at the number of daily hits they have (which they publish on their blog) and multiply by their CPM (which their ad salesmen are happy to quote you), subtract a heavy charge for bandwidth, subtract some salaries for the employees (who are publically listed so you know how many), and you’ll see they’re making good money.

    They also have the job board system. You can do the same type of arithmetic and see that’s a money-maker too.

    You can make money with QA sites and advertising, you just need a lot of traffic, which is very hard to do. My advice to most people trying to do a QA site — even to myself and Dharmesh as you quoted — is that it’s too hard to make money with ads.

    But that doesn’t mean SO isn’t, or that this is the reason Joel is seeking VC.

  2. Bob Walsh says:

    Hi Oleg,

    I think you missed the point of what Joel is doing – going after VC money to scale SO, not to generate monthly revenue from it.

  3. […] I decided to estimate what kind of revenue StackOverflow actually generates. Apparently, it’s enough to try to go to VCs, but not enough for a self-sustained growth. Luckily, it is relatively easy to […]

  4. […] But even these slide shows are better than some. The popular South Park ‘Profit’ meme better resembles the business plans of many start-ups. The meme pokes fun at the sometimes ludicrous actions of companies and the distant correlation they have with the bottom line. I remember one aspiring entrepreneur who I questioned about how he planned on making money. His reply? Eyeballs! Just get enough eyeballs on the screen and it would equal profit. This is sometimes true. Sometimes. […]

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