SXSW Day One – Turning Projects Into Revenue Generating Businesses

The Turning Projects Into Revenue Generating Businesses panel was, for me at least, the classic example of choosing what panel to see based on how interesting the panelists were, rather than the subject of the panel.

I confess, I have no personal projects I’d like to turn into revenue generating businesses. I’m happy for the moment being a consultant and working wih the team at Optaros, and have no need to turn any of my hobbies into jobs.

But, I couldn’t pass on a panel:

I have to admit I didn’t know Shanalyn Victor before seeing this panel – but she’s the persona behind PixelGirl Presents and PixelGirl Shop (though those names will be changing – more on that below).

The panel started with slides from Ted talking about ways in which projects/sites can generate revenue, under the heading of “there’s nothing new under the sun” or “the new new economy is still the same old economy”:

  1. Advertising – the easiest way to make money (blogads) – examples included cuteoverload, gofugyourself, vampirefreaks.
  2. Affiliate programs – lots of talk about this 5 yrs ago, but no good examples of it anymore. [Someone from eBay’s affiliate program chimed in later to defend affiliates – see below]
  3. Direct sale – Jonathan Coulton as an example. Deviant Art – selling art from one member to another. Pixelgirlshop.
  4. Selling services. laughing squid, drop send.
  5. Subscriptions, virtual currencies, virtual gifts. It is surprisingly possible to get real money for virtual gifts. virtual flowers on – the story of the $10 flower. Dogster also has a virtual currency – “zealies” – it is really real to the owner of willy that someone gave them all these gifts.
  6. Microsponsors/donations – amazon tip jar. ze frank’s duckies. They will appear in particular episodes. Ze frank’s gimme some candy program – Jonathan Coulton’s using it on his site – monkeys, robots, bananas.

Then Ted asked the panelists questions:


1. Did you start your online projects with the plan they would become

Ryan: we do now, for any new project we start. We used to have a site with no revenue model but couldn’t do it anymore.

Pixelgirl: I didn’t – I started the shop just to help defray the cost
of hosting.

Tara: we do what we’re passionate about, and rent isn’t cheap in
SF – we see it as supporting our passions.

Gabe – think of it as a range. At the low end its resume-ware – you get useful experience – at the other end you might make some real money. If you’re comfortable with the whole spectrum it won’t matter.

2. Did anyone study business before starting one?

Generally no.

You have to figure out how to make money in order to make it work.

3. How much of the business anwers you need do you find online?

Tara: you need mentors. Especially if you’re not very interested in
the business side. Accountants are important – friends, and paying folks to pick up the gap.

4. One of our mentors told us that you’ve got to spend 50% of your
time selling- creating new customers, new audiences. Are you all selling 50% of the time?

Tara – everything we do is really selling – we may not be conscious of
it, but whenever we post/meet/talk we are selling.

Shanalyn – before you get really popular, you do need to spend time
and money to make people aware of your site – people will forget about
you quickly.

Tara – for us, plain old advertising is the wrong model. Don’t advertise, be part of the community you serve. Be involved, be part of the conversation.

5. How do you determine pricing? I needed to pay office rent.

Ryan: figure out what people will pay. Price so that the market
buys it. If they don’t, it is too expensive. Jason from 37signals’
advice – don’t offer too much for free, because if you do no one will
pay and you’re f*cked.

Tara: it is in part a question of what the market will bear. Do research – what other people are providing similar services, what do they charge, how is
what you’re doing different than them. If you’re a boutique, maybe you
can charge a bit more.

Shanalyn: don’t forget the value of your own time. I had to reprice
everything to reflect the time I was spending on it.

Gabe: how do you price something new? You try to identify some kind
of standard and add your intuition about what difference your new thing

Ted: on dogster, it was really difficult to get the first sponsor –
but once we had that first one it was a lot easier to get really good
sponsors. We tried other things – classifieds, geolocated ads – never took off –
too expensive, wrong solution, whatever – it was too hard to get the
connection to the audience.

Audience Questions?:

Attendee from Ebay – affiliates is 100+ million business for us – how
can you say affiliates don’t make money anymore?

Ryan: just do the math. Figure out how much you need to quit your
dayjob, and then do cashflow until you get there.

Tara – It is cheap to fail, so fail often.

8. What’s your exit strategy?

(Not sure who said this – Ryan Carson?): It’s a lifestyle business – it pays for our life. We won’t make millions out of it, but we make enough to live. We plan on selling webapps eventually, more from the point of view of not wanting to run it
forever. My belief is that the company should be built to be sold.

Tara: our company is us. There isn’t really a way to sell us
(legally). For me, I just want to do this as long as I can do this,
and enjoy it. The day I dread going into my business is the day I
allow it to vanish, and move on to whatever my passions move me to do.

Gabe: I’m not looking to sell. I have been approached by companies,
and when I do I meet with them – it’s good to meet with people. But
they don’t see the value of what I’m doing the same – not talking
about price, but about what they see as valuable about what I’m doing.

Ted we’re really not thinking about it either.

Gabe: One book everyone should read: The E-Myth: Why Most Small Businesses Don’t Work and What to Do About It

9. What did you sacrifice in order to be successful?

Ryan: we work four days a week, which I’m really proud of. We pay
full time salary for people working four days a week. You waste your
time if you work four days a week. We take pride in the fact that we
work as little as possible. What you sacrifice in running your own
business is peace of mind.

[Ok, so this is the point at which a lifestyle business starts to sound interesting – I’d like to get back to 5 days a week, let alone 4]

Tara: you sacrifice a lot of security, and especially feelings of
security. There are lots of times where Chris has to tell me
“chillax.” At first we were sacrificing our involvement in events –
things like barcamp, or whatever – but we realized that was causing us
to lose the things that made our work possible.

Gabe: two years without a salary. Spent a lot of my time working on
the site. A lot of watching. Not sure if that counts as a sacrifice
because I like it.

Shanalyn: there was a time with Morfia design when I could brag that I was working 20hrs a week. But now I can’t stay away from things – I work all the time. But I love it. I tried to take my laptop on my honeymoon. I’m obsessed.

Ted: don’t spend more money than you can afford to spend. Keep more
money coming in than going out. Given that your project is likely to
fail (be honest) be careful about how much you spend.

Tara: This is a good time to toss in a recommendation for open source – there’s a ton of great software out there that you can use without having to buy it or build it yourself.

[Can I get an Amen?]

Q: How do you popularize your site on a bootstrap budget.

Ted: You mean other than by building something people like? Word of mouth comes from building something that is really good – rather than “techniques” of PR.

Shanalyn: people love free stuff. Just giving away good work at the
beginning lets you build audiences – free desktops, free widgets, free
trials, discount codes, whatever. Free samples.

Q: How do you connect with people on a regular, repeat basis?

Tara: the old bad model was sticky pages. now everyone wants to build
their own social network – but why build your own community, rather
than creating yet another social network portal on your website.

Q. Do you ever feel compelled in whatever way, to say how
much money is coming in and out? (Smaller sites where you want to be
clear that the money goes to pay the server bill). Also, what about
failing. Everyone mentions failing – but what is an example of a time when you failed?

Carson – we had a service called flightdeck – for sending really large files. It was just too expensive and didn’t find its market.

Tara – I had a previous business in Canada – RogueStrategies – took
too many risks, moved the company for a single client which fell through.

Gabe – can’t think of any failures.

Shanalyn – I wouldn’t call them failures. I tried advertising on
pixelgirl presents, but it was too much work to be worth it. I list
things on my site that don’t sell,

Ted: Dogster – hit $40,000 in second year. Made over a million dollars last
year – lots of partners, lots of work, but it is getting there now.

Shanalyn – I didn’t protect anything in terms of the name. Turns out there is a pixelgirl trademark which belongs to someone else. Pixelgirlpresents will have to become something else – $100 for anyone who comes up with a good name for me.

Ted: Be sure to use the USPTO search for keyword term – it’s called TESS. Having a domain name isn’t trademark protection. Wed filed for a trademark dogster – literally someone came in a month later with a claim on dogster.

Q: How do you protect yourself, the brand and the idea?

Tara: There are also community marks, like BarCamp – this isn’t something that we push through the patent trademark office. It kills ideas and kills
innovation – it’s like the DRM of the innovation industry.

Ted: web businesses are very public. Your pricing, your products,
everything is out there for anyone to see. But I’m not concerned about
it – the execution is the thing. It isn’t about someone stealing your idea – no one else is as passionate about it as you.

Shanalyn: people download my site all the time, post it as
their own. People troll my site all the time, contact artists they
like, and try to sell their stuff directly. I sent them fake cease and
desist letters – generally they go away.

Gabe: theres a guy who’s copied my javascript, but I don’t worry to
much about it.

Tara: it’s not ideas, it’s the experience of it.

Ryan: now is the most exciting time to be alive and starting a
business – don’t quit, remember that all you’ve got to do is cover
your expenses.

Q. I’m getting to the point where I need to hire people – any advice?

Carson: Payroll is one of the most expensive things you’ll ever do.
Look at your cashflow – it’s when I’m either going to quit or kill
myself, then you hire. A lot people get VC for this, and it is a
horrible idea.

Shanalyn: start with contractors. Start with people who can do the
things you just cannot do.

Gabe: I haven’t hired anyone. That’s going to have to change at some
point I suppose. But only having yourself leads to certain efficiencies. I recall reading somewhere that eBay ended up letting the users do the rating for reputations because necessity made it the only way to effectively scale.

Tara: really really really make sure that your on the same level –
that it is clear what each of you gets out of the relationship, and that they have some of the passion you do. They’re not just looking
for a job.

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