Internet Entrepreneurs Blog

I attended a talk at Fuqua yesterday by a serial entrepreneur named Jeff Johnston that was pretty interesting. I usually take handwritten notes at these events and eventually type them up and I think I’ll continue to post my notes to the blog for others to read. Anyway, here are the interesting things I took away from Jeff’s talk:

- Illiquidity is a huge issue for entrepreneurs. An entrepreneur may own stakes in 5 companies making him/her rich on paper but this doesn’t do anything for one’s own cash flow. Having an exit strategy in mind when starting a business is the best way to make sure you will have cash at some point in the future.

- Jeff helped found a market research company in his early days and said he found that to be extremely helpful in identifying market opportunities for new businesses. I imagine what happens is you are doing research for a particular company and hear feedback that is unrelated to the research at hand but that yields market insight into a new area of focus. Jeff didn’t give specific examples of ideas he got from market research but the concept makes sense.

- Jeff said his MBA was a key to his success. I’ve spoken with a number of entrepreneurs over the years and they often tell me an MBA isn’t necessary to succeed (maybe they’re jealous of or intimidated by the MBAs?). In fact, when I met with Steve Bigari and told him I was interested in entrepreneurship and was planning on getting my MBA, he looked incredulously at me and asked “why?”. Of course every entrepreneur thinks the path he/she took to success is the best one but it was comforting at least to hear an MBA said that he got value from his education.

Another great presentation at Fuqua, it’s awesome to be able to get so many perspectives from successful entrepreneurs like Jeff while in business school.

I joined the YPN beta a few weeks ago to try out on Singletracks. I set my site to display YPN ads half the time and Google Ads the other half of the time. Anyway, the ads I kept getting for days were for Vonage and golfing on Prince Edward Island, Canada (my site is about Mountain Biking). I also saw an ad for my own website! (I advertise on Overture) After several days of this I contacted Yahoo! and told them I was very disappointed with the targeting of their ads.

The response? You didn’t turn on ad targeting in your account settings. Well duh! I also didn’t add my own website to the list of blocked ads on my account settings. I chose the “Sports” category for my ad target and added my own site to my list of blocked advertisers. So this was pretty annoying but I did it anyway, hoping that the ads would improve dramatically. But they didn’t.

Now the only 2 ads I see are for Wrestling Singlets and (still) golfing on Prince Edward Island. I scaled back the ads to show only 20% of the time and waited a couple more weeks. Same ads, same crappy click-through rate (between 0 and 0.2%). Over the course of my trial (3 weeks or so) I’ve earned around $12. With Google I would have earned $200. So today I finally pulled the plug and stopped showing YPN ads. Hopefully things will improve once the beta is complete but it seems like there is a long way to go.

I know the metaphor of the online land grab in the late 1990s has been way overdone to the point of cliche but I think the metaphor can be extended in a more meaningful way. Typically the land grab referred to “cyber-squatters” who purchased domain names in hopes of selling them later to desperate companies establishing online identities. Today I like to think of online entrepreneurs as landlords more than speculative flippers.

I’ve had a fair interest in real estate for quite some time but I’ve always had a hard time reconciling my interest in real estate with my larger interest in e-commerce. Perhaps my interest in real estate came from my civil engineering studies in my undergrad days or from my summer construction jobs in the southeast. Recently, however, I realized what really attracts me to real estate and e-commerce is the ability of both to extract rents.

Real estate investors buy properties so they can take in rental income from renters. Eventually, the hope goes, a real estate investor will have enough properties to live comfortably collecting checks from the properties he has acquired over several years of wise investment. For me, e-commerce offers the same hope. If one can build enough sites bringing in advertising revenues, there is little left to be done but sit back and collect the checks. This oversimplification is, of course, ignoring depreciation, competition, etc. but you get the point.

Speaking of real estate, I highly recommend two home shows on TV these days. One is called Property Ladder and it follows amateur investors buying homes, fixing them up, and hoping to resell them months later for tidy profits. The second show is called Flip this House and it follows Richard Davis, a Charleston, SC real estate investor who has a team that identifies properties, fixes them up in weeks, and then resells the units. Richard seems to be the man and a fun guy to work with, probably my favorite show on television these days. Hey Richard, if you’re looking for an MBA with limited real estate experience (I did take a class called Real Estate Entrepreneurship), give me a call, I would love to work with you when I graduate!

I went to a presentation at the Engineering School featuring “serial entrepreneur” Scot Wingo, currently the CEO of ChannelAdvisor. He talked mostly about his background and the about the software businesses he has grown and sold in the past. I really enjoyed the presentation because Scot started out as an engineer doesn’t have sort of the “typical” business background.

One of the most interesting things Scot talked about was the emergence of major internet channels that control the way consumers find retail sites and make purchases online. Scot claims that roughly 80% of consumers come through one of three channels:

1. Search engines. This one is probably the biggest (I’m guessing) and probably includes both natural and paid search. It would be interesting to see how important natural search is compared to paid search for specific retailers and specific search engines (Yahoo! probably refers more paid leads than natural search leads, for example).

2. Shopping engines. These are sites like Shopping.com, BizRate, Yahoo! Shopping, Froogle, and others. I actually did some strategic analysis and research on shopping engines during my (unpaid) internship at ChannelAdvisor and I came to the conclusion that these guys have a pretty shaky business model at best (guess Scot didn’t get to read my report!). I came across a report about Google temporarily blocking one of the shopping engine sites (I think Shopping.com?) from the search engine due to a dispute of some sort. This is tough because shopping engines get most of their traffic from search engines but they’re also competing with the search engines’ own shopping services (Froogle anyone?). The other thing to note is that shopping engines are essentially performing paid search arbitrage. They buy clicks on search engines and then resell those clicks to retailers on their own site. It’s only a matter of time before retailers cut out the middle man and advertise directly and exclusively on search engines. Paid search just needs to become a bit easier to manage before this happens.

3. Marketplaces. eBay, Amazon, Overstock, et al are the big marketplaces online today and they are becoming more and more important in driving sales to online retailers. This is the area where ChannelAdvisor really shines today, and in fact this is where things all got started.

Scot also talked about some of the guerilla marketing his companies have done and the stories he had were pretty entertaining. Most of the things were pretty simple but they were things that I personally would have thought twice about doing since some of the campaigns were mildly destructive and/or illegal. I would love to slap singletracks.com bumper stickers on mountain bike trail signs but that seems a bit tacky and/or destructive. This, however, would be something Scot and his team would have NO PROBLEM doing.

Another interesting comment Scot made was regarding his choice of staring a business in the Research Triangle (Raleigh / Durham / Chapel Hill) instead of Silicon Valley with all the other tech companies. Scot said he felt like the Triangle keeps his company more grounded and insulates them from chasing the e-commerce “flavor of the week” that many valley companies tend to follow (example he gave included tagging and social networking).

Finally, the biggest thing I got from Scot’s talk was that starting a business is all about just doing something. Alot of the things I’m learning at Fuqua focus on the analysis portion of making decisions but Scot warned against analysis paralysis when starting a business. His experience has been that it’s best to just get started and make mistakes so you can learn by doing rather than spending alot of time and money just figuring out the best way to do something (which may end up being wrong anyway). I also appreciated his ability to do things without really worrying about the outcome, (like his guerilla marketing tactics) a lesson that many entrepreneurs can use.

Over the past year or so I’ve gotten many questions about how I built Singletracks.com. It appears that Singletracks is a modified forum program that allows users to register, post new topics (trails), and reviews (posts) of trails. Of course there are lots of add on features like wishlists, recommendations, etc. but at the core the site largely uses features associated with messageboard systems.

In fact Singletracks has been built almost entirely from scratch. The very first version of the site that allowed users to post their own trails was actually constructed using a Perl script for allowing users to create custom homepages. The concept has survived but all the scripts have been completely rewritten using PHP and MySQL. If I were to build the site all over again I would probably start with a messageboard script package to get the main functionality necessary to run the site.

One problem with using a messageboard application is the fact that it is tough to find a really basic bare bones set of scripts that doesn’t have alot of fancy bells and whistles. In fact, since messageboards are not exactly analagous to an information review system, you’ll find yourself making extensive modifications to get things organized and doing what you need them to do. Plus the templating schemes these days have gotten out of hand and you need to be up on the latest technology just to understand how they work (Smarty, BBCode, etc.).

The solution I’ve come up with is a set of PHP scripts and MySQL tables I’m calling the Information Review System (IRS). I’ve been using it myself for a couple of months to post some of my own review sites and it appears to get the job done. The basic scripts let you collect user information (name, email) and build user accounts that can then be used to post new information and reviews. The setup I’ve posted is organized geographically by default but one could definitely switch the country/state categories for other product categories (like media/genre for example). The owner of the script can also modify or delete listings easily using a simple web interface. Finally, the templating scheme is simple: an include file for the header and an include file for the footer. You can change these files all you want to “plop” the forms and outputs into any page format you like.

I’ll be working on adding more features to these scripts over the next several months and I welcome any feedback. Enjoy.

My mom recently had a business question for me regarding the number of her books, Surprised by Prayer, she should purchase from her publisher at wholesale prices. The current printing has been discontinued and a bargain version of the book is expected to be printed in about a year or so. Mom’s plan is to sell the books at speaking engagements she does in the southeast and she estimated that she could sell around 100 books a year at these engagements.

The most interesting thing about this whole situation is this is the first case I’ve been able to apply some of the things I’ve learned at business school to a real world situation to come up with a solution I felt confident in. During my internship I ran into a lot of gray areas and I know this is how things usually are in the world of business. Often the numbers you need to make a decision aren’t available or they’re not as definitive as one would hope. But in this situation, my mom provided me with all the numbers I needed to use to come up with the solution.

I calculated the net present value of the investment in the books based on different proposed retail sales prices (discounted from the cover price) using various discount rates to take into account differing levels of risk for the project. It was also important to consider the time horizon for the book sales; 30 years of speaking engagement sounded a bit daunting but 10 years sounded doable, especially since she enjoys it so much. With all the data, I plugged in the price the publisher was offering and provided my recommendation.

As a part of my recommendation, I suggested attempting to negotiate the wholesale price of the books since the publisher didn’t seem interested into holding on to them. My mom was a bit uncomfortable with the prospect of negotiating so she asked if that was the best price they could offer; the publisher came back with a price 36% lower! When you’re talking thousands of books, that’s quite a large savings.

In the end, one of the most important factors was the sentimental value of the books. Once the books have been sold, they’re all gone, never to be found in new condition again. From a business perspective, it made sense to buy all the books, and this fit perfectly with our desire to maximize the number of books to keep for the family for future generations. Too bad few business problems are this easy to solve!

Another recycled school paper… This time I’ve decided to post one of my essays from my Harvard Business School application in 2004. I was able to get an interview with Harvard but alas, they did not admit me (their loss!). I realize that my description in this essay may sound a bit oversimplified but my word limit was tiny (400 or so?). I’ve got some more thoughts on this subject that I’ll put down in a future blog entry.

Starting a new business is an exciting experience, but one fraught with potential risk and opportunities for ethical compromise. The competitive landscape of today’s business world is cutthroat and demands owners take every advantage possible. In starting our by owner vacation rental directory, Safarium.com, my partner and I were faced with an important question: to spam or not to spam?

Most Internet users are familiar with spam, the unwanted advertisements for “amazing new products” and “unbelievable business opportunities.” However, many do not realize that spam comes in many varied forms and flavors. For instance, in promoting our mountain biking trail information website, Singletracks.com, my wife and I took to competing mountain biking websites and sent carefully targeted messages to users asking them to check out our new site. We figured mountain bikers would be glad to know about our site and wouldn’t mind that we had sent them an unsolicited commercial message. This turned out to be correct for a while, until we were reported to the SpamCop.

SpamCop is a website that Internet service providers and individuals can use to report unwanted emails. One of our email recipients notified SpamCop of our transgression, and SpamCop in turn notified our web hosting company. In the end, our hosts told us in no uncertain terms that they would not tolerate spam and they would terminate our account if we spammed again.

Fast forward four years to a new website, Safarium.com, and a new web hosting company. My partner and I were beginning to have doubts about our business and wondered how we could increase traffic to our website. We were offering free one-year listings while other sites charged upwards of $100 and we were confident that property owners would greatly benefit from our service. My partner and I knew that our competition was bombarding property owners with unsolicited messages and we sorely wanted the same exposure. Besides, it was cost effective and we were offering a smoking deal to our customers. But somehow, this all seemed too familiar…

After mulling the issue for several weeks, my partner and I sided against spamming. Today our site boasts almost 100 properties in 19 states and we are proud that we made the ethical decision against questionable business tactics. We’ve even made a name for ourselves through adding features to prevent our property owners from becoming victims of spam. In the end, our decision has given us the pride and resolve to continue running our business with ethical and moral conviction.

Web sites that have horrible content or a complete lack of content have much higher advertisement click through rates (using adsense or affiliate links) than sites with useful, interesting content. Makes perfect sense, right? If an internet user mistakenly wanders onto a site or a page that sucks, he or she will use almost any exit available (a well positioned ad) to find the information he or she was looking for in the first place. It’s why these ad-only sites are able to flourish; just buy a domain that will get a decent google pagerank and plaster the site with ads for related products. If your site isn’t “sticky,” who cares! In fact, this is exactly what you want!

I found this phenomenon to be true on my own website in a couple of instances. In the early days before we had bike trails in all 50 states, several of our state landing pages were blank and we filled the space with affiliate links to guidebooks that covered that state. Lo and behold those pages had the highest conversion rate even though we didn’t have a bit of content! Nice.

More recently I’ve found that the conversion rate on our fairly new gear review section of the site has an above average click-through rate, probably because we don’t have much original content yet. I’m almost dreading the day when our users want to hang out there; how will we ever make any money if no one wants to leave!?

The stickiness curse is real and it’s unfortunate in its effects. Quality content providers don’t make any money and the scammers win. Unfair…

So I have most of my domain names registered with Yahoo! (or whatever third party registrar they use) and up until recently I have been satisfied with the pricing, the easy to use domain control panels, etc. A few months back one of the domains I registered, remlyrics.com was up for renewal (although I didn’t realize this). Yahoo! took the liberty of re-registering the domain for me, a nice service that most users will appreciate.

Unfortunately I had previously decided NOT to renew the domain since I hadn’t really updated the site and I was hosting it on my singletracks.com hosting account which was skewing some of my webstats (not to mention hogging bandwidth I desperately needed). It was my bad for not realizing this would be auto-renewed (prolly in my user agreement somewhere) so I resolved to make sure I didn’t have the same problem next year.

The Yahoo! domain control panel actually has a nice little link to use for canceling your service for a particular domain. I clicked the link and found a form to send outlining my reason for canceling, etc. I filled out the form and wrote that I didn’t want to drop the domain immediately since I had just re-upped for another year. Instead I just wanted it to fall off once it was up for renewal since I didn’t need it anymore (slim chance that someone would read this but I figured it was worth a shot, I really wasn’t that concerned either way). Anyway, I submit the form and get a message: 406 Not Acceptable. I had never seen this error code before (perhaps Yahoo! invented this one?) but I guessed it was a glitch that would be fixed in a day or so.

I’ve gone back to the page several times and keep hitting the same response. It’s as if Yahoo! is saying to me in a computer-sounding voice: “SORRY, YOUR REQUEST IS UNACCEPTABLE. I MUST NOW TERMINATE YOU…” (not sure how to enunciate computer voice?). Anyway, it’s pretty convenient that the cancel service page isn’t working but the purchase additional domains form works just fine. The real thing that makes me mad is that there is no form or contact email on the site to report problems like this (again, very convenient for the yahoos). I did find a phone number eventually but I don’t have the time nor the cell phone minutes right now to wait on hold to cancel a single domain name renewal.

Anyway, back in the day Yahoo! used to be the heat but clearly they’ve become overly focused on the bottom line, so much so that they make it nearly impossible to cancel a $10 a year service. Troubling…

The name of the game in business today is ecosystem creation and it’s amazing how many companies just don’t get this. In this day of open source software, global project collaboration, and the like, it’s amazing that more companies aren’t viewing their businesses as ecosystem providers.

One of the best examples of a corporate ecosystem is eBay. eBay loves to tout the fact that hundreds of thousands of people are making their living exclusively through the site. People are selling handmade crafts, scrounging for sweet threads at the thrift store to resell on the site, and devloping software and services to help buyers and sellers, large and small. By providing these services, eBay is becoming an indispensible product to thousands if not millions of loyal customers/users. By opening their product, eBay has expanded the business and made their service even more useful. Brilliant.

Another example of this new economy thinking comes from Cisco. Cisco made a tough decision early on to focus on creating an ecosystem business instead of closing the system. Instead of offering training, certifications, and installation services, Cisco chose to support third parties in building their businesses around Cisco’s business. Imagine choosing networking equipment from two vendors: one vendor provides just the equipment and another is your only source for the equipment, the installation, and the support. Clearly it would be easier to go with the one stop shop but what if these guys lock you into a system that’s expensive to maintain? You’re pretty much at the mercy of your supplier at this point and the one stop shop isn’t looking so hot anymore. Clearly this has worked well for Cisco as they continue to dominate the networking business.

In my own entrepreneurial ventures I’ve come across a few companies that I wish would embrace the ecosystem model so I could build a business around thier businesses. Take for example VRBO.com, a vacation rental by owner listing service. Paul and I created Safarium because VRBO was (and still is) doing a terrible job with their site and we knew we could offer a better service to both owners and renters. Clearly our site hasn’t caught on as well as VRBO and I tried to think about how we could join ‘em since we can’t beat ‘em.

Leah and I came up with the idea to offer a VRBO/online marketing service for vacation home owners so they could essentially “outsource” many of the mundane details of building and keeping a rental listing online (you know, mailing keys to renters, collecting payment, uploading photos, etc.). Unfortunately, VRBO has a very clear policy against “property management” companies from listing on their site (not sure why, who are they protecting?). But their core (paying) customers are very wealthy and probably don’t have the time or the inclination to learn how to create their own listings online so they continue to pay exhorbitant fees to traditional property management companies. By opening up their ecosystem, VRBO could benefit from savvy marketers who can reach new and profitable customers.

Another company I would love to see “open up” is Active.com. I would kill to have a feed of their mountain bike races (filtered by state if possible) to list on Singletracks.com for my users. Users would benefit from having the information in one place while Active would benefit from the registrations I send their way. Seems like a win-win huh? Instead, others try to build their own race listing services and only capture part of the information (type mountain bike race into google and see how many random sites come up). If Active.com were to step up and say, “we are the place to find out about and sign up for races,” I’m sure many of us would agree that makes sense and we would gladly link to their registration forms. With the proliferation of web services today it really doesn’t make sense to keep things like this closed.