Raising money

October 12, 2007



Alternative Ways Social Networks Are Making Money

October 9, 2007

Social Networks are often criticized as having a hard time at being profitable. Most are supporting themselves in one of two ways, traditional online advertising, or a subscription model. But I wanted to briefly take a look at some other ways that social networks are trying to increase their revenue streams.

Virtual Gifts
The next largest monetization method taking form behind advertising and subscriptions are virtual gifts. With the massive success of virtual gifts in foreign markets (i.e. Cyworld) a lot of US properties have started experimenting. Most notably Facebook recently launched their “Gifts” area where people can send gifts to others for $1 a piece. Social Network HotorNot has even completely abandoned their subscription model that has made them millions year after year in exchange for a virtual gifting system. Virtual worlds are most suited for this type of system, but traditional SN’s are finding a place for it.

My guess is that this type of monetization will only be lucrative for extremely large social networks. With the very low cost of virtual gifts you have to produce many transactions for it to be worth it in the aggregate. The only communities to support this level of transactions are those in the top tier with millions of users

Survey Network
A monetization model pioneered by social network, Xuqa, survey’s are proving to be very profitable for a number of online communities. In a social network like Xuqa where there is a form of social currency that users collect, people can take surveys or sign up for other offers to receive more of the virtual currency. Xuqa has expanded their survey system into an ad network model called Peanut Labs where other publishers can sign up to monetize their site in the same format. According to Peanut Labs each survey response pays out $3 and affiliate leads payout between $.50 and $15.

Unfortunately this system is only structured for those communities that deal with virtual currencies, but can be a very viable source of revenue.

Photo Printing
With most social networks naturally being a place where users upload a lot of photos, many have experienced with providing printing services for a cost to their users. Most social networks outsource this and take a cut of the action. The most recent entrant on to the scene that helps with this is moo.com. While it is something that is easy to add and doesn’t interfere with the user experience, photo print revenue sources are still not substantial to make much of a dent.


I recently saw one of the founders of Cardvio demo their product at a Boston Web Innovators Group and was impressed with their technology. Cardvio is a system that lets you create your own card online and send it via snail mail. Social networks are a logical place to include this service considering it is usually where people store pictures to create cards, and the connections to the people they would want to send them to. Doesn’t hurt either when you have small features like Facebook’s birthday reminder.

While another easy add on similar to photo printing, this might be icing on the cake for social networks but by no means a main revenue source.

Product/E-commerce Affiliate Programs

Most online retailers such as Amazon offer affiliate programs that allow social networks to promote items next to people’s favorites. This has been around for awhile, but really hasn’t caught on or proven itself as a significant revenue stream. The downside to these programs is that it usually does interfere with the user experience, making it a tough cost-benefit decision.

I still think that there is room for innovation in monetizing social networks via E-commerce, but the current affiliate program structure just isn’t producing massive benefits.

Data Access

A very interesting revenue model that has appeared in micro niche professional social networks is charging for access to the data a community has created. For example, Sermo.com, a community for doctors charges companies such as hedge funds, and drug companies $150,000 a year to have access to the data being created by the community. Another example of this would be ActiveRain.com who isn’t charging to consumers yet, but will likely in the future, for content created by their community of real estate professionals through a portal called localism.com

If you know of any others, please leave them in the comments. In my opinion online communities and social networking is the future of the internet just like search was back in the late 90’s. Old revenue models are trying to be squeezed into a new medium, just like banner ads tried to be squeezed into search engines. There will continue to be innovation until a lucrative revenue model is created. My guess is that it will once again be a new form of advertising that takes advantage of the massive amounts of user specific data that social networks contain.


The Battle for the Consumer Online

October 9, 2007

Quick, name the competitors of U.S. News & World Report. Time and Newsweek, right? Would you believe Consumer Reports?

These are hard times for newsmagazines, and many of them are tweaking their offerings, looking for new ways to thrive — or just to survive. But U.S. News wants to take on a new role, as a definitive source of information and ratings on a range of expensive consumer products.

The first step in that strategy went public Friday on a magazine Web site (usnews.rankingsandreviews.com/cars-trucks) and today on newsstands — rankings, reviews and information on nearly every model of car, truck, minivan or sport utility vehicle available on the American market.

In the 1980s, U.S. News discovered a popular audience for authoritative-sounding statistical rankings, beginning with the annual report on colleges that is widely second-guessed — and even more widely read. It later did the same thing with hospitals, graduate schools, high schools and even places to retire.

The magazine wants to extend that practice to mostly high-end goods, starting with the automotive rankings, followed over the next few years by detailed rankings of things like video cameras, television sets and digital music players. This is less about selling particular issues of the magazine than about driving traffic year-round to Web sites with vastly more material on those products than will fit on printed pages.

The plan is a gamble on where U.S. News’s future lies — a future that its owner, Mortimer B. Zuckerman, describes in terms of shopping as much as news. In an interview in his office on the East Side of Manhattan, Mr. Zuckerman repeatedly cited market research showing that most Americans do research online before making big purchases.

After two decades of rankings, “we have branded credibility,” he said. “You’d have to be blind not to see what is the economic strength of the franchise.”

Building credibility in a new area, however, may take some doing. In its automotive rankings, U.S. News assigns an overall numerical score to each vehicle — along with subscores in a handful of areas — and offers quick, easy-to-use comparisons of that grade to all the others in its class.

But the central feature, the score, is not the product of U.S. News’s own detailed analysis of a car or truck. Rather, it is an analysis of other people’s analyses.

The magazine has searched the work of dozens of automotive reviewers at newspapers and magazines, assigned a numerical value to each review (a process U.S. News describes as complex, rigorous and top secret), and then aggregated those into final scores. The Web site offers a description of each vehicle, sprinkled with snippets of quotes from those reviewers, so that it reads as much like a Zagat’s restaurant blurb as something you might find in Consumer Reports.

“The goal is to take as much subjectivity out of it as possible,” said Rick Newman, a deputy business editor and writer who runs the magazine’s automotive coverage. “You read a car review, all you’re reading is some guy’s opinion. What we’re doing is taking all the credible information that we think is out there. The end result certainly smoothes out a lot of the opinions.”

Roberta Garfinkle, a senior vice president of TargetCast TCM, an advertising buyer, called the single-focus issues and the Web site “an excellent way to draw some advertisers into the franchise that normally would not be there,” like autos and luxury goods.

“They’ve got to try something” to set the magazine apart from its peers, she said. A magazine’s reinventing itself used to be seen as a sign of desperation, Ms. Garfinkle added, “but it’s what everybody has to do now to survive.”

Newsweeklies, like newspapers, have been bleeding revenue for years, and analysts, along with current and former executives, say that U.S. News breaks even, at best. (As a privately held company, it does not release financial information.) It had $126 million in ad revenue in the first half of the year, compared with $224 million for Newsweek and $252 million for Time, according to the Magazine Publishers of America. Paid circulation of U.S. News is about two million, while the two others are above three million.

U.S. News already stood apart from Time and Newsweek in 1984, when it was bought by Mr. Zuckerman, a big real estate developer based in Boston. It had a smaller staff and so, making a virtue of necessity, it offered less straight news coverage of recent events and more news analysis. And it had almost none of the lighter content, like sports or entertainment, that its competitors put in the back section of each issue.

Mr. Zuckerman brought in new editors and strengthened the emphasis on analysis. He mandated a new “back of the book,” made up of practical advice for consumers on personal finance, health, technology, travel and education, an approach that grew indirectly into the rankings.

The strategy worked. Readership rose and the magazine became highly profitable, according to analysts and former executives.

But over the years, a lot of other magazines made similar changes, with more analysis and “news you can use,” while U.S. News experienced rapid turnover among top editors. By the mid-1990s, many people at the magazine were suggesting that Mr. Zuckerman’s attention had moved on to his other pursuits — New York’s Daily News, The Atlantic and, of course, his real estate business — and that U.S. News had lost much of its innovative edge.

“If Mort is engaged again,” said Thomas R. Evans, who served as the magazine’s president and publisher in the 1990s, “it’s a good thing for the magazine because the guy just sees the world better than other people do.”

U.S. News says that at least one early sign of its online experiment is positive: at the outset, advertising on the automotive rankings site, which has thousands of pages, is sold out.

In the printed magazine, “we used to get 500 pages a year of ads out of Detroit, and now we’re down below 50,” acknowledged Mr. Zuckerman, who writes a column for U.S. News and has the title of editor in chief.

When it came to rating hospitals and colleges for a mass audience, U.S. News all but invented the field, but any number of Web sites, magazines and newspapers rank cars and electronics. Rating consumer products “is crowded territory,” said Lee Rainie, a U.S. News managing editor in the 1990s, “so it will be tougher to establish the kind of authority” the magazine has with colleges. Current editors at the magazine agree.

To be successful, U.S. News has to find a broad audience that is not comfortable with magazines aimed at enthusiasts, and wants some of the nuts-and-bolts practicality of Consumer Reports, but without the online subscription charges. “They probably should have done something like this a lot sooner,” Mr. Evans said.

Job-Search Sites Face a Nimble Threat

October 9, 2007

Among the hottest Web sites of the past few years were job-search sites such as CareerBuilder.com and Monster.com. Helped by lavish advertising, they became household names. Newspapers, eager to tap the fast-growing online-ad market, teamed up with them.

Now, the hottest names in online recruitment are increasingly specialized job sites. That poses a threat to the growth prospects of the broad-based online job boards and their newspaper partners, analysts said.

In August, the number of unique visitors to CareerBuilder — which is jointly owned by Gannett, Tribune, McClatchy and Microsoft — dropped 2% to 20.2 million, while Monster.com’s traffic rose 4% to 16.3 million visitors.

By contrast, technology-focused Dice.com saw its traffic jump 34% to 998,000. At Healthcaresource.com, which posts health-care jobs, traffic rose 36%.

Of the broad-based sites, Yahoo‘s HotJobs posted strong growth, with traffic rising 53% to 11.7 million visitors, boosted by recent partnership deals with more than 350 newspapers.

“Advertisers are increasingly looking for more-targeted audiences and better-reach sites where they can find candidates that are more qualified,” said Eric Yoon, chief executive of JobThread, which sells recruitment ads on dozens of targeted Web sites. In some of these cases, the cost of placing an ad is a fraction of a post on the big job boards.

Unless the newspaper industry and the big job sites figure out how to fill this burgeoning demand, they could lose market share, said Gordon Borrell, Chief Executive of Williamsburg, Va., research firm Borrell Associates. The market is valued at $5.9 billion but is projected to increase 25% to $9.7 billion by 2011, Borrell estimates. That growth is expected to come both from big companies already advertising online as well as small and medium-size local businesses that mostly don’t use the Web.

The big jobs sites are growing at a steady clip and they say they are making efforts to expand into both international and more-targeted markets. They have allied with newspapers as a way of gaining a local sales presence and a stronger brand name. The New York Times has been a partner of Monster.com, a unit of Monster Worldwide.

“Those have been successful partnerships for newspapers by giving them access to both a national audience as well as leveraging their own local sales and local audience,” said Randy Bennett, vice president of audience and new-business development for the National Newspaper Association.

Some employers complain advertising on broad-based sites generates too many unqualified applications, analysts said. New York online marketing firm 360i, for instance, said it has posted jobs listings on CareerBuilder and HotJobs with little results. “When we are looking for somebody to put a post up there…you get a fair amount of response, but not the quality,” said 360i Chief Executive Bryan Weiner. The firm hasn’t succeeded in hiring any senior-level staff from the broad-based sites.

“Obviously when you are going to a site that has a much larger user base you can get more applicants. You have more to choose from.” said a spokeswoman for CareerBuilder. CareerBuilder and Monster both note that employers can set multiple filters to weed out unqualified candidates.

“To ensure we always have the best talent in every region, across the county, Monster has relationships with several niche sites that target specific demographics. We also have added visibility in the regions touched by the local media outlets we have forged relationships with,” a Monster spokesman said.

Some Web concerns are taking steps to be more targeted in their approach. HotJobs has built an application on social networking site Facebook and is including tools on the site that enable people to email or instant-message a posting.

Yahoo is creating systems so recruitment ads on HotJobs could appear on other Web sites, using techniques that target the ad according to a person’s interests. For instance, if a person registers on an online profile as a nurse in the Southeast, that person could see ads related to the nursing profession. “This is enabling advertisers to go more into the niches…these people are out there on the Web in all sorts of places,” said Kevin Krim, vice president of product at Yahoo HotJobs. “We can reach out to them there with display advertising.”

Newspaper companies are starting to make other investments, too. The New York Times has invested in Indeed.com, a site that lets visitors search for jobs on all the sites that appear on the Web.

One possibility for broad-based sites is to partner with their niche rivals. The difficulty, analysts said, is such an arrangement would hurt the broad-based sites’ revenue because niche sites can’t charge as much for ads. “The larger boards need to be careful because to some extent they could cannibalize themselves [by investing in or working with the emerging sites],” said John Janedis, a publishing and advertising agencies analyst at Wachovia Securities. “Everything is on the table now. We’ll see how it plays out.”



Young Millionaires Who Made It Bigger

October 5, 2007

By Kristin Edelhauser Chessman

What do Sir Richard Branson and Michael Dell have in common? Aside from their obvious success and wealth today, they were both recognized by Entrepreneur magazine as “Young Millionaires” in the late ’80s. When we first interviewed Dell, he was 23 years old and fresh out of college. He spoke about the struggles of running a $6 million business while attending school, but said the rewards were more than worth it. And you can bet that today, as the world’s second-largest PC maker, he’d say the exact same thing.

Our past Young Millionaires have plenty in common; for instance, many of their ideas were initially greeted with skepticism. That’s what happened to California Pizza Kitchen founders Larry Flax and Rick Rosenfield, who told us in 1986 that people thought they were crazy for going into the restaurant business. Yet today, CPK is an industry leader with more than 210 locations in 29 states and eight countries.

Liz Lange, 40
Founder of Liz Lange Maternity
Featured in November 2001

Then: In 1996, prospective retailers told Lange that pregnant women wouldn’t spend money on her sophisticated maternity wear. Ignoring them, Lange borrowed money from friends and family and opened a small office in New York City, where she sold made-to-order clothing to women by appointment. Thanks to word-of-mouth, Lange’s business started booming, and in 2001, she reported $3 million plus in sales.

Now: Lange continues to prove those retailers wrong. Today, the Liz Lange Maternity Collection, which celebrates its 10th anniversary this month, can be found at Lange’s three Liz Lange Maternity flagship boutiques, and her secondary line, Liz Lange for Target, is the exclusive maternity line at all Target stores and on Target.com. Though Lange wouldn’t release sales figures, she says the company has grown in huge multiples since 2001. Lange adds that her constant activity, which includes lecturing around the country, writing her monthly column for Prevention magazine, and spending time with her family, suits her perfectly. “I’d be very bored without it. I’ve always dreamt big, but never thought it could be like this,” she says. “Not a day goes by that I don’t get stopped on the street or receive an e-mail from someone telling me I made a difference in their life.”

Larry Leight, 54
Co-founder of Oliver Peoples

Featured in October 1989

Then: How many companies can say their second year of sales surpassed their first by 400 percent? Not many. But Oliver Peoples, which began selling antique eyewear in 1986, reported that statistic to Entrepreneur back in 1989. “The business has been a giant success, and we’re still young!” said Leight. In 1987, Oliver Peoples created its own brand, Oliver Peoples Eyewear, and named Leight the chief designer.

Now: Oliver Peoples is now preparing to launch its 20th anniversary campaign and showcase its new collections. Since we last spoke with Leight, he’s been named one of the top nine American designers by Conde Nast Publications and Ford Motor Company. Though the company has changed, it’s continued to grow dramatically. In fact, Leight says the company continues exceeding sales projections each year. Perhaps the most important business lesson Leight has learned is to not give up. “Even if everyone is against you, if you are passionate about something, you have to fight for it,” says Leight. As for the next 20 years, Leight hopes to continue designing expressive, stimulating eyewear that will appeal to the brand’s global clientele.

Richard Allred, 44
Founder of Toes on the Nose
Featured in November 1999

Then: Sometimes you have to test out more than one path before settling on a career. That’s what Allred learned after graduating from the University of Southern California and getting involved with real estate. After he realized it wasn’t the right path for him, Allred decided to take a leap of faith and gather $110,000 from friends and savings to build his company, creating Hawaiian-print clothing. When interviewed in 1999, Allred’s 7-year-old company was expecting to double from $5 million to $10 million in sales that year.

Now: When we last spoke with Allred, he said he hoped his casual, classic surf clothing would become timeless fashion. Now, with 33 employees and about eight years under his belt, Allred can be confident that Toes on the Nose has done just that. Though Allred prefers not to release his total sales volume anymore, he says the company has been focusing on expanding internationally and has established beneficial partnerships with International Marketing Group. “We’re doing a lot. We’ve leveraged our brand in different marketplaces, which has allowed us to grow with the help of other peoples’ expertise,” says Allred. But more than anything, Allred says the last 15 years have taught him the importance of a good internal support team. Since his marriage and the birth of his daughter, Allred has been forced to learn how to delegate and trust in others’ abilities.

Tony Hsieh, 33

CEO and Director of Zappos.com
Featured in November 2003

Then: It all started in 1999 when Nick Swinmurn made an unproductive trip to the mall in search of shoes. Disappointed by his lack of purchases, Swinmurn got the idea for Zappos.com, a one-stop shop for men’s, women’s and children’s shoes. But first, Swinmurn needed financial backing. He persuaded Tony Hsieh, who had earned $270 million from selling LinkExchange to Microsoft in 1998, to jump on board. “On the surface, it seemed like the quintessential poster child for a bad dotcom idea,” said Hsieh four years ago. But after recognizing the $40 billion market, Hsieh saw potential. By 2003, the company was projecting $65 million in sales.

Now: Potential was an understatement. This year, Zappos.com–which is derived from the Spanish word for shoes, zapatos–is projecting $800 million in sales, bringing the company that much closer to its original goal of achieving $1 billion in gross merchandise sales by 2010. But not everything has remained constant with the company, starting with its image. “Back in 2003, we thought of ourselves as a shoe company that offered great service. Today, we really think of the Zappos brand as about great service, and we just happen to sell shoes,” says Hsieh. Zappos.com has expanded by adding apparel, handbags, sunglasses and watches to the site, and is promising more to come. Another key change: Founder Swinmurn left Zappos in 2006 to start STAGR, a website focusing on customized apparel.

Julie Aigner-Clark, 41
Founder of The Baby Einstein Company
Featured in November 2000

Then: From the beginning, Aigner-Clark’s business ambitions have been focused on her family. They started with her infant daughter, Aspen, in 1995, when Aigner-Clark realized there were no age-appropriate products for sharing her passion for art and classical music. So the former teacher took matters into her own hands and created her first video, Baby Einstein, featuring captivating pictures and mothers speaking different languages. After pitching her idea for two years and not making any progress, Aigner-Clark got her big break at the American International Toy Fair in New York City, where buyers snatched up her product. By 2000, the company had reached sales of $10 million.

Now: In 2001, Baby Einstein was acquired by The Walt Disney Company, who continues nurturing the brand and has seen sales climb past the $200 million mark. As for Aigner-Clark, it’s been a bittersweet transition. “It’s not as if my ‘baby’ grew up and went to college; it’s as if my baby was picked up by an alien space craft and beamed to another planet,” Aigner-Clark says. Perhaps the best lesson she’s learned through it all: “Don’t take anything for granted. Enjoy the moment. Recognize the beauty and good fortune. And take pictures.” This ambitious mother of two, who was diagnosed with breast cancer in 2004, shows no signs of slowing down. She recently started a new business, The Safe Side, a nonprofit that deals with children’s safety, and she’s gone back to her roots by teaching literature two days a week.


Apple, Target, Facebook Tops for College Students

October 4, 2007

By Beth Snyder Bulik

They love Apple, shop at Target, use Facebook online and are split on whether they adore or despise the Geico cavemen. They wish they were better at sports, watch TV more often than surf the web and view a lot of YouTube videos, but generally don’t create them.

Meet the next generation of leaders and consumers: today’s college students. Anderson Analytics’ third annual fall brand survey of college students queried their likes and dislikes as well as brand affinities and media consumption of the 18-to-24 set and came up with plenty of lessons for marketers.

Women and social networks
While Facebook ranked as the most popular website among this demographic, social networking is twice as popular with young women as young men. MySpace, which was No. 1 last year, ranked No. 2 with females but dropped out of the top five for young men. That means marketers using social-networking sites to target young people are reaching far more females than males.

“The gender differences here are significant,” said Jesse Chen, lead consultant for Anderson’s GenX2Z youth-research group. “It’s the opposite of what we see when looking at use of social-networking sites for business purposes among adults, where men are far more likely to use sites such as LinkedIn. Among this younger demographic, it’s the women who are the über networkers.” Which also raises an interesting question: As these women age, will they change the networking dynamic between women and men in the future? And will new LinkedIn-type competitors rush to fill that need?

Tom Anderson, managing partner Anderson Analytics, offered anecdotal evidence of his own LinkedIn list of 800 with many more men than women. “We’ve seen older adult women tend to be more careful with networking and sharing information. Obviously, that’s not the case for younger women,” he said. “As these women age, I think the disparity will go away. … The question is what kind of choices will be available for them?”

While the college group is one of the smallest demographically in the U.S. — about 18 million projected by the U.S. Census this year vs. around 80 million baby boomers — it is one of the most influential. And the one paid most homage by marketers.

“They have huge impact on what their parents buy, and then they have their own money, more than any other generation before them, and of course they are the consumers of tomorrow,” Mr. Anderson said, adding that marketers also target the 18-to-24 crowd to reach society at large. “In America, everyone wants to be younger, so we look to younger people. We think they’re happier than us and we want to be like them, resulting in a younger-targeted marketing message,” he said.

Not surprisingly, the brand that ruled with this group was Apple. It ranked as the No. 2 overall best brand by 17% of the students; ranked Nos. 1 and 2 as most anticipated products with iPhone and new iPod versions; ranked Nos. 1 and 2 in product recommendations with iPod followed by Apple products in general; and ranked No. 6 in most popular commercials.

Love and hate for lizard
As for commercials, the ads these kids love are also some of the ones they hate. Geico ranked No. 1 on both the best and worst list of commercials — 25% ranked it good, 26% ranked it bad. Axe Bodyspray, iPhone, Burger King and Apple also made both lists.

While their preference for technology was apparent, particularly among men who ranked Digg and Engadget among their top 10 websites, they didn’t make the leap to consumer-generated media. Only 8% said they uploaded videos to YouTube. And in fact, 64% don’t make videos at all while another 14% who do make them said they don’t share them with anyone. While 75% surf social-networking sites and 71% read news online, only 14% said they wrote their own blogs.

Other than online habits, there were plenty of other disparities between the sexes. More than 71% of the young women recently read a book for pleasure vs. 55% of men, while more than 55% of men played video games alone vs. just 21% of women. But even togetherness didn’t up the video-game-play time: Only 17% of women said they had recently played a game with others, while more than 40% of the men had.


A Marketplace with a Mission

October 3, 2007

By Laura Tiffany

Etsy.com founder Rob Kalin hasn’t just created an online marketplace for crafts; he’s built a site that creates entrepreneurs and strives for a sustainable future.

After speaking with Rob Kalin, the founder of handmade products marketplace Etsy.com, it’s apparent that like any true entrepreneur, his company isn’t just a means to a paycheck. It’s a mission: A mission to change the way commerce works; a mission to promote sustainable products; a mission that, much like eBay, is creating an exponential number of entrepreneurs in its wake.

EBay is an apt, but ironic, comparison. It was frustration with the online auction giant that first inspired Kalin to create Etsy in 2005. As a woodworker, he was looking for a place to sell his wares. “I [felt] like eBay [had] grown to the point where it’s this faceless corporation, and I wanted to create a company that would have a handmade feel to it,” says Kalin, 27. He and a group of college friends holed up in his Brooklyn apartment for six weeks before launching the initial beta version of Etsy.com, with Kalin on design lead and his co-founders, Chris Maguire and Haim Schoppik, handling programming.

A little more than two years later, Etsy has 100,000 active sellers and 500,000 members. More than 1 million items have been sold through the site, which has become synonymous with handmade goods. Part of the site’s attraction is its simplicity. With just a few steps, a crafter can set up his or her store with a subdomain and list items at a set price. Users pay 20 cents to post an item for four months plus 3.5 percent of the selling price.

And the site already has gained cachet in the crafting world. It’s not considered unprofessional to forego building your own website in favor of having an Etsy store; in fact, some crafters who already have established websites build a presence on Etsy, too.

This rapid growth has proven to be a challenge. Etsy now has 47 employees; building the engineering team was so difficult that Kalin opened a new office in San Francisco to attract talent. While rejecting the idea of bringing in an outside CEO to manage Etsy, he has hired a financial person. “We have a really good advisory team, but I also want to keep that experimentation and I don’t want to feel like I have a formula for how things work,” he says.

For the Long Haul
Kalin applies his deep interest in sustainability to his company, not just the products that are sold through it. He views Etsy as a long-term commitment, not as a ticket to dotcom 2.0 wealth, and treats his employees like a community. He pays them a fair wage and provides good benefits and profit-sharing, as well as a casual work environment. “I wanted the company itself to be a community, based on how much we see each other but also because we do have this common purpose,” Kalin says.

This sense of community also pervades Etsy on the user end. The forums hum with Etsy members answering other users’ questions. The latest feature on Etsy, The Storque, is an online magazine written by members. And Kalin hired five of the top Etsy sellers to run Etsy Labs, a community crafts center that shares space with Etsy’s 7,000-square-foot Brooklyn, New York, headquarters. “It’s been incredible,” he says. “Two nights ago at 11 p.m., there were 10 people sitting around cutting patterns, learning how to make their own skirts and shirts.”

For Kalin, it all ties back into his bigger mission: helping to build a sustainable future. “[An item] has this whole other layer of meaning to it if you know who gave it to you, who made it, or if you made it,” he explains. “When it breaks or needs alteration, you can fix it or you know somebody who can fix it. Instead of living in this utterly throwaway culture where if something doesn’t work or doesn’t fit, you just get rid of it.”

Kalin and the 100,000 Etsy sellers aren’t alone in this mission to create. The Craft & Hobby Association charted a 3.3-percent annual increase in the crafts market from 2002 to 2005. The association also says 4 million people each year discover crafts. This all bodes well for Etsy, which should bring in more than $2 million in sales this year.

Right now, Etsy’s engineering team is catching up with the site’s growth, but Kalin’s mind is always racing ahead, thinking of new features. He sees a huge opportunity in internationalization, where Etsy will be served up in local languages, showing items in a user’s native currency first.

“I think there’s still 99 percent of the world who doesn’t know who the hell we are,” says Kalin, in a very glass-half-full manner. That just means Etsy is still on its way to becoming the sustainable world marketplace that Kalin has always envisioned.


Dorm Room Dreams

October 3, 2007

By Sarah Pierce

Sure, there are plenty of college students that charge $5 for a cup at a keg party. Rarer are the students that see opportunities in their collegiate surroundings and start successful businesses aimed at serving other co-eds.

From the educational to the entertaining, these three companies started by twentysomethings are making it by “real world” standards. Read on to find out what inspired them and whether being a student has been a burden or an asset to their growing ventures.

Who: Joe Leary, 21; Peter Handy, 21; and Dan Abrahamsen, 22
What: Moving and storage company aimed at fellow college students
Year Started: 2005
Startup Costs: $30,000 self-funded

Moving On Up: It was in the back of a dirty U-Haul truck where inspiration struck Joe Leary and Peter Handy. Handy had enlisted the help of Leary and a few other friends to help him move his belongings at the end of his freshman year. They found few options for storing their belongings over summer break and instantly knew they could cash in on helping other students facing the same problem every year.

“We were pretty blown away by the demand that took place our first year,” says Handy, who recalls the excitement of seeing the orders pour in slowly turn to fear. “We had to basically close the order process down on the website because we had such high demand. We wanted to make sure we could serve our customers the best we could our very first year.”

To prepare for the next year, they hired professional moving companies and launched a new backend of the website to provide better customer service. It was a smart move that helped push their first year’s sales of $50,000 close to $200,000 the following year.

Successful Students: According to the trio, being full-time students has actually made it easier for them to run their business.

“Probably the most advantageous aspect of being a student entrepreneur has been being here among our own customers,” says Leary. Most students don’t know he owns the company, so he’s able to get honest feedback from them about what they like and what needs to be changed.

“We get a lot of support from the university, which is very helpful,” adds Handy. BoxMyDorm is now the official moving and storage company for the student body at Penn State and serves a select number of other college campuses. But the box doesn’t stop there.

“We have a very aggressive growth plan,” says Handy. “You’ll see us next year in a lot of new places across the country.”

Mi Maestro
Who: Archie Jeter, 26
What: Live, interactive Spanish classes taught by Latin American tutors via virtual classrooms
Year Started: 2006
Startup Costs: $15,000 from an angel investor

My teacher: Archie Jeter is no stranger to Spanish classes. In addition to his college courses in the U.S., he spent a semester abroad in Madrid, Spain. It was in Guatemala, though, where he learned to embrace the language.

“There was something special about the immersive style of teaching that takes place in Latin America,” says Jeter, who spent two months in Guatemala before his senior year. “I saw how much everyone enjoyed learning–and how fast they learned Spanish.”

As a self-described “internet nerd,” Jeter began wondering how he could connect people in the U.S. that want to learn Spanish with the unique learning opportunities in Latin America.

The answer was Mi Maestro, a site that provides live, one-on-one tutoring with a native speaker located in Latin America. Mi Maestro students book the classes based on their own schedule and click on a link when they’re ready to begin the lesson. Once inside the virtual classroom, they have access to a chat feature, an interactive white board and a video window where they can see and hear the tutor in live video and audio.

Double Duty: Jeter wrote his business plan, pitched the idea to investors and analyzed the Latin American market to choose the best location for teachers–all while doing an internship and completing his senior year in a master’s program at Florida International University.

“It was what I wanted to do and I had a lot of passion for it, so I made the time and made it a priority.”

Final Connection: For Jeter, learning Spanish from a native speaker is crucial to fully understanding the language. “Learning a language is more than just learning words or grammar; it’s actually learning the culture,” he says. “Through Mi Maestro, you’re able to make a real connection between the two.”

Who: Ricky Van Veen, 26; Josh Abramson, 26; Zach Klein, 25; and Jacob Lodwick, 26
What: T-shirts with humorous, tongue-in-cheek sayings aimed at twentysomethings
Year Started: 2004
Startup Costs: $4,000 self-funded

Wearable Wit: What began as a fun side business for Ricky Van Veen, Josh Abramson, Zach Klein and Jacob Lodwick is now a successful company that has people wearing the friends’ jokes. The team sat down in March 2004 to sketch out 10 shirt designs with the goal of selling the shirts on CollegeHumor.com to fund the then-fledging site. The funny T-shirts were an instant hit with the CollegeHumor fan base.

Tees with ‘Tude:BustedTee‘s shirts range from the topical–“Leave Lindsay A-Lohan”–to the old-school, with inside jokes only their targeted age demographic would understand. A picture of a Nintendo cartridge that says “Blow Me,” for example, is only funny for those who owned a Nintendo and remember having to blow the dust out of the cartridges to make them work.

“Culturally speaking, our humor is very on point with our age demographic, which is 18 to 28,” says Josh Mohrer, director of retail.

That sort of focused marketing is what makes BustedTees so successful–not to mention they’re just plain funny.

Graduation: BustedTees now sells about 1,000 shirts a day and can be found in retail chains like Urban Outfitters. But it was the acquisition by IAC last year that really pushed the small side venture into a bona fide company.

The interactive conglomerate acquired a controlling share of Connected Ventures, the four-company group started by Van Veen and Abramson that includes CollegeHumor, BustedTees, video-sharing site Vimeo and a second T-shirt business called Defunker.

“Despite being owned by this big company, we’ve really retained our personality in a big way,” says Mohrer. “This company has always been run by and for 20-year-olds, and to change that would be a mistake.”


Get in Good

October 1, 2007

By Guy Kawasaki

After 20 years, I’ve finally figured out that it is much easier to make a sale, build partnerships, create joint ventures–you name it–with people you already know than it is to do business with people you just met. The key is to establish a relationship before you need it. And the key to that is mastering the art of schmoozing.

1. Understand the goal. In his book The Frog and Prince: Secrets of Positive Networking to Change Your Life, Darcy Rezac gives the world’s best definition of schmoozing: “Discovering what you can do for someone else.” Great schmoozers want to know what they can do for you, not what you can do for them. If you understand this, the rest is just mechanics.

2. Get out. Schmoozing is an analog, contact sport. You can’t do it alone from your office on the phone or via computer. Force yourself to go to trade shows, conventions and seminars. Get out there and press flesh.

3. Ask good questions, then shut up. The mark of a good conversationalist is not that you can talk a lot; it’s that you can get others to talk a lot. Ask questions like, “What do you do?” “Where are you from?” “What brings you to this event?” Then listen. Ironically, you’ll be remembered as an interesting person.

4. Unveil your passions. Talking only about business is boring. Your passions make you interesting. Good schmoozers unveil their passions after they get to know you. Great schmoozers lead with their passions. (In case you ever meet me, my passions are children, Macintosh, Breitling watches, digital photography and hockey.)

5. Read voraciously–and not just business publications. You need a broad base of knowledge so that you will have access to a vast array of information during conversations. Even if you are a pathetic, passionless person, at least be a well-read one who can talk about a variety of topics.

6. Follow up. In my career, I’ve given away thousands of business cards. If all those people called or e-mailed me, I’d never get anything done. The funny thing: Hardly anyone ever follows up. Great schmoozers follow up within 24 hours–a short e-mail will do: “Nice to meet you. I hope we can do something together. I loved your Breitling watch. I have two tickets to the Stanley Cup Finals if you want to attend.” Include at least one thing that shows the recipient isn’t getting a canned e-mail.

7. Make it easy to contact you. Many people who want to be great schmoozers don’t make it easy to get in touch. They don’t carry business cards, or their cards don’t have phone numbers and e-mail addresses. Even if they do have the information, it’s written in gray 6-point type. This is great if you’re schmoozing teenagers, but if you want old, rich, famous and powerful people to call or e-mail, use 12-point font.

8. Give favors. One of my great pleasures in life is helping other people; I believe there’s a big Karmic scoreboard in the sky. God is keeping track of the good that you do, and she is particularly pleased when you give favors without the expectation of return from the recipient. The scoreboard always pays back.

9. Ask for favors in return. Good schmoozers give favors and return favors. But great schmoozers ask for favors to be returned. You may find this puzzling: Isn’t it better to keep someone indebted to you? No, because keeping someone indebted puts undue pressure on your relationship. By asking for and receiving a return favor, you relieve the pressure and set up a whole new round of give and take. After a few rounds, you will be best friends, and you have mastered the art of schmoozing.


Asia’s Young Entrepreneurs

August 21, 2007

By Brian Bremner
Asia is home to the fastest-growing pack of economies on the planet, including China, India, and a resurgent Japan. Less appreciated is the growing and dynamic entrepreneurial class of young managers cropping up in the region who are starting to make their presence felt. This new generation is globally aware, extremely Internet savvy, and willing to pounce on a smart idea even if it means grueling hours and financial risk early on in life.

For the past month, BusinessWeek.com has set out to find the most interesting examples of this new breed. We asked readers to nominate standout young entrepreneurs. Our editors reviewed the nominations and narrowed the field to this group of 20 finalists. Take a look at them and their businesses, and at the end of the slide show, we’ll ask you to vote for the biz whiz you think shows the most promise. Browse through, cast your vote, and BusinessWeek.com will report the results.

Arif Ayub

Karachi, Pakistan
Age: 23

Ayub launched Softflux back in 2000 as a one-man operation. Today the IT solutions firm offers everything from Web development services to high-end management consulting to help companies boost their profitability and the productivity of their mobile networks. It has roughly 70 employees and development associates in Beijing, Dublin, Romania, London, and Silicon Valley. Softflux’ clients include a variety of Pakistani banks and pharmaceutical companies, and Ayub plans to expand the company’s operations globally in 2007 and boost annual revenues to $120 million by the end of the decade. He is also the founder of Saltflow, a private-equity firm specializing in tech investments.

Bellamy Benedetto Budiman

Founder & Designer: Neuro-Designs

Jakarta, Indonesia
Age: 23

Bellamy started Neuro-Designs back in high school when he realized he had a knack for design and started doing freelance assignments. Today, the firm handles Web, print, logo, and multimedia assignments, as well as design consulting, for various clients in Indonesia. It has formed alliances with other design firms, photographers, and printing companies to better serve its clients. Neuro-Designs is also an active supporter of Godote.com, an Indonesian design community.

Surya Budiman

Chief Technical Officer: PT Asia Lintas Media

PT. Asia Mobile View
Jakarta, Indonesia
Age: 25

After studying data communication and software engineering in Australia at Queensland University of Technology, and doing a stint with an IT company in Singapore, Budiman decided to run his own show in early 2005. Result: PR Asia Lintas Media, a system integration and IT solutions outfit with special expertise in satellite communication networks. Budiman is also playing a big role in the development of another company called PT Asia Mobile View that is providing content services such as news, music, and video streaming to Indonesian cell phone users.

Sasikanth Chemalamudi

CEO: Habits

Hyderabad, India
Age: 23

A graduate with honors from the Birla Institute of Technology & Science in Pilani, Chemalamudi turned down an offer from outsourcing powerhouse Infosys to pursue his passion for entrepreneurship. He co-launched Habits, a creative learning resources company that encourages more creative thinking with the aid of educational materials such as musicals, plays, and interactive games. Habits is also involved with projects in rural India to encourage self-employment.

Rama Krishna Gaddipati

Co-founder: Bridle Information & Technology Solutions

Tenali, India
Age: 24

Bridle is a mobile applications and services outfit—and that is a good space to occupy given the explosive growth of mobile telephony in India. And Bridle co-founder Gaddipati (the 2001 winner of the Intel CyberFiesta national software development contest) may already have a hit on his hands. The service is called SchoolMATE, and it is a comprehensive student analysis system that allows parents to monitor their child’s progress at school. The service feeds information on conduct, examinations, and report cards to subscribers, and employs technology such as mobile text messaging, the Web, and e-mail. The company has gained about 70,000 subscribers in Hyderabad and Vishakapatnam in India.

Dinesh Goel

Director: Blue Ribbon Industrial

http://www.geetanjaliwoollens.com (int’l marketing site)
Indore, India
Age: 24

A recent business school graduate from Thunderbird’s Garvin School of International Management, Goel took on a major operational role with his family-run, $10 million-a-year wool products business started by his father and uncle. It’s a tough business, and the price competition is fierce. Still, since signing on as a director and key executive in February, Goel has boosted production at the company’s two manufacturing facilities by 50%, and sales are improving. He is focusing on product innovation and also looking for retail tie-ups to get wool products directly to consumers faster.

Christian K-L Yau Heilesen

CEO & Founder: Funmobile

Hong Kong
Age: 22

Heilesen hit the ground running when he arrived in Hong Kong in 2002 from his native Denmark. (He is of Danish and Chinese descent.) A year later he launched Funmobile, initially as a game developer supplying mobile phone companies with content for their WAP (wireless application protocol) portals. Funmobile has since expanded overseas to developing, licensing, and distributing games, music, graphics, news, and other services sold directly to mobile phone users in Australia, Belgium, Singapore, Malaysia, Thailand, Britain, and the U.S. Today, the Funmobile group of companies employs about 185 employees and is global in reach.

Nguyen Minh Hieu

Director and Co-Founder: DreamViet

Hanoi, Vietnam
Age: 25

After spending about a year as a financial analyst for a U.S. investment firm in Vietnam, Hieu decided to strike out on his own and launched DreamViet. His vision is simply to create the best Internet company in Vietnam. The flagship product is an e-commerce research and technology guide Web site at http://www.aha.com.vn. It provides search tools to research and buy consumer electronics. DreamViet also provides Web site development advice and services for Vietnamese merchants.

Darshan Hiranandani

Director & Chief Executive Officer: Hircon International

Dubai, United Arab Emirates
Age: 24

Darshan started working for Hiranandani Group, India’s leading real-estate group and the family business, while attending high school and college in India. His deal-making synapses started firing early, however. When he was 17 he launched a go-kart track called Hakone and a family entertainment center in Bombay. He currently serves as president of the Bombay operations of Hiranandani Group. On top of that, he led the conglomerate’s expansion into Dubai, where he founded Hircon International. That company is involved in helping develop the “23 Marina” Project, which, when completed in 2008, will be the world’s tallest residential tower. In the first two years of operations, Hircon has generated more than $100 million in revenues. In Bombay, Hiranandani has projects under way that involve 300 million square feet of new developments.

Mao Kankan

Chief System Architect & Chief Executive Officer: Majoy Entertainment

Age: 23

Chinese gamers’ appetite for cool, interactive games via personal computers is pretty much bottomless. But Kankan created Majoy Entertainment in 2005 to offer an entirely different gaming experience. In Majoy’s role-playing games, participants actually gather in the same physical location and use an array of wireless digital devices to interact in a virtual gaming environment. It sometimes gets rough. Players often try to “kill” each other with digital tools such as infra-red toy pistols.

Vikas Kedia

Founder & Partner: MobiTrail

Bombay, India
Age: 25

The next big platform shift in online gaming will be to mobile handsets, and Kedia thinks his company is positioned to capture that growth. This 25-year-old programmer based in Bombay is founder of MobiTrail, which develops and delivers games to mobile phone users. Its games and applications can run on networks using J2ME, Symbian, and BREW operating systems. The company is developing some hot games of its own and has such clients as Reliant Online Gaming in India and Hong Kong-based Mobile2win, as well as other international customers.

Atul Prakash Khekade

Co-Founder: Innovation Trip

Bombay, India
Age: 24

Khekade launched his first business, a Web technology and software applications company, at 17, and has written a book on graphical user interfaces. Now the University of Mumbai-trained engineer and scholarship recipient is trying his hand at the business tourism market. Last year he co-founded Innovation Trip, which sets up U.S.-based workshop-and-trip combos for senior executives in the developing world interested in the latest best-business practices in the States

Kentaro Iemoto

President & CEO: Clara Online

Tokyo and Nagoya, Japan
Age: 24

Iemoto has packed plenty of drama into 24 years. Consider: At 14 he was diagnosed with a brain tumor, underwent surgery, and spent several years in a wheelchair. He pulled through, and in junior high school, at 16, he launched Clara Online with $9,000 in seed money. Today he is a well-known figure in Japanese technology circles. Clara became the first player in Japan to offer Linux-based virtual private servers connected to broadband networks and leased out to clients. Iemoto now manages six data centers in Tokyo, Nagoya, Osaka, and Seoul from offices in Japan and Taiwan. It’s hard to imagine anything slowing him down, but a newborn baby has Iemoto thinking about work-family issues for his 38 employees. At Clara, they all have the option of taking annual child-care leave.

Victor Lang

Senior Partner: Global Futures Educational Consulting

Hong Kong and Chicago
Age: 22

It’s your world—fix it! That’s the kind of youthful zeal driving Global Future Educational Consulting, which provides educational materials for those interested in learning about international conflict resolutions and diplomacy. The company’s core service is hosting simulated U.N. conferences where students role-play as ambassadors and debate the issues of the day. Hong Kong native Lang splits his time between Chicago (the company’s U.S. office) and Asia. This year and next, Global Future will host “model” U.N. confabs in Chicago, Hong Kong, and Bombay.

David Lee

Chairman & Co-Founder: Team & Concepts Limited

Hong Kong
Age: 25

Lee learned something about adversity early in life. To help the family’s strapped finances, he hawked oranges on the streets of Hong Kong at age 7. Tough times, though, spawned a burning desire to succeed. In 2003, Lee and friends launched TnC, an information technology service that offers an array of online services for event planners. The company manages membership databases and online registration, sends e-mails to conference participants, and provides companies with interactive editing tools to update their Web sites. Earlier this year, it rolled out a beta version of EditGrid, a spreadsheet service where users can upload and host a spreadsheet on the Web, share it with colleagues and friends, and collaborate with other users on the same spreadsheet in real time.

Ario Pratomo

Founder: PT. Unique Kargonize

General Sales and Service Agent (Cargo) for Etihad Crystal Cargo
Jakarta, Indonesia
Age: 23

Pratomo has been on the fast track since he graduated early from Edith Cowan University in Australia at the age of 20. While working at Speedmark Indonesia, a freight forwarding company, he helped design a new operating system to improve the speed of bookings and tracking shipments. He was then asked to create a service agent company called Unique Kargonize to sell cargo space for a unit of Etihad Airways, the Abu Dhabi-based carrier. He is a logistics whiz to watch.

Vishal Sampat

Founder: Convonix

Bombay, India
Age: 24

Sampat caught the entrepreneurial bug early in life. While still in his teens, he launched his first venture, a streaming online music radio service featuring Indian tunes. His latest venture, launched in 2001, is Convonix. It is an Internet marketing firm with more than 35 employees that helps clients enhance their online traffic and get better placement in search engine results. The company has also developed its own Web analytics and campaign management programs

Hendy Setiono

Founder: Baba Rafi Indonesia


Jakarta, Indonesia

Age: 23
Baba Rafi Indonesia founder Setiono is a 23-year-old in a hurry. Back in 2003 he launched the Kebab Turki Baba Rafi fast-food chain, and it now has 65 outlets across 10 cities in Indonesia. Its kebab sandwiches, as well as chicken and beef burgers, are sold in a variety of restaurant formats from portable booths to shopping center outlets. His company is also branching out to franchise business consulting. Setiono is the recipient of the Indonesia Small Medium Business Entrepreneur Award (2006) sponsored by the government.

Eric Tsai

CEO: eriQoo.com



Age: 21
Talk about a global mindset. Tsai was born in Taiwan, attended high school in the U.S., and picked up a degree at Sophia University in Japan. (Yes, he’s fluent in Chinese, Japanese, and English.) He blitzed through both high school and college and managed to graduate two years ahead of schedule. Tsai was then hired as the youngest fixed-income analyst on the payroll at Credit Suisse. Now, Tsai (together with 10 former Sophia classmates) has just launched a beta version of a new portal called eriQoo.com, available in both Japanese and English. (The formal launch is in September.) Tsai hopes to establish it as the can’t-miss site for all sorts of industry, brand, and product popularity ranking data provided in a reader-friendly format. If it attracts enough traffic, Tsai thinks the online advertising will follow.

Divyank Turakhia

Co-Founder, President & Director: Directi Group


Bombay, India

Age: 24

Turakhia tried his hand at Internet consulting in high school at age 14 and, two years later, launched Directi Group with $600 borrowed from his parents. In the first month of operations, the business managed to generate enough revenues to return the borrowed amount and get the company rolling. Today, the company is debt-free, has more than 1 million customers for its array of domain name registration, Web hosting, and site building services, and employs more than 250 people. It is one of the fastest-growing domain registration companies in the world. When Turakhia isn’t running the show, he pursues hobbies such as sky diving, paragliding, and flying airplanes.