March 27, 2010
I found an insightful discussion about SO/SE (StackOverflow/StackExchange) business model and going for VC money on 37signals. It looks like everything has been said, and the outcome is just remained to be seen. Some key points well noted there were:
- A developer Q&A site cannot scale, since it’s a niche site.
- The clones of a Q&A site are too easy to build, expect a lot of competition.
- A Q&A platform cannot scale, because it’s just too easy to build. What happened to forums (phpBB and vBulletin), will happen to social Q&A platforms. Expect a race to the bottoms.
- There is already a good competitor: www.qhub.com, wait for more to come.
February 23, 2010
While reviewing ad inventory on the StackOverflow, it occurred to me that it’s not easy to sell things to the programmers. If the visitors of your site are programmers, what ads are going to be most effective and perform better than the others? Currently, the only non-job ads on the StackOverflow are promoting SDKs, components, development and related tools, training courses. This is basically all you can try to sell to the programmers. From the top of my head I typed www.programmers.com into the browser and got a site with just the same sorts of ads.
Now, one would think that it’s not easy to sell these things to the programmers for a variety of reasons:
- There are many open-sourced and free alternatives.
- High piracy rate. Programmers (in general, but not all of them) love to find and download things they need without paying.
- A lot of programming is outsourced these days, meaning there are many programmers from India, China, Russia and other countries, whose buying power is reduced. In other words, there are a lot of customers who won’t spend an extra dollar unless absolutely needed.
- Build or Buy thinking, meaning that every time a programmer evaluates someone else’s software, he thinks “I can build it myself and it will be better”.
For me personally, these reasons are scary enough to keep away from programmers market as far as possible. I know there are people who built successful companies selling stuff to developers, like a code review tool or bug tracking system. Well, these people are very smart and lucky. I’ve seen dozens of companies that tried to sell components and crashed into the ground.
February 16, 2010
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? ;-)