Articles
The
Real Online Wealth
by Jason
Kelly
7/01/2000
Note:
This article first appeared in the June 2000 issue of Woman's Own magazine,
which is why it focuses on women. However, the observations apply equally
to men.
If millions are being made quickly anywhere these days, it's online.
By now you've either read or heard about fortunes arriving in neat stacks
with "dot com" printed on the wrappers. People are selling
things, writing things, and recommending things on the internet. Some
of them are making good money at it and, by nearly all counts, the future
looks brighter still. Research and analysis firm IDC expects 144 million
Americans to be online by 2003.
You may look at such statistics and wonder how you can capture some
of the booming industry for yourself. Do you need millions of dollars
in startup capital? Do you need to live in Silicon Valley and work across
the street from Yahoo? Do you need an Ivy League MBA? The answers may
surprise you, and you'll be happy to know that the most important characteristic
of successful women entrepreneurs is something you probably have.
Childfun.com
The last thing I expected to hear when calling the office of a successful
online business was the sound of children. But that was the background
noise at ChildFun.com as I spoke
with the owner, Jenny Wanderscheid, a 29-year-old mother of three children
ages seven, five, and two who started the website from her house in
Mankato, Minnesota to help other stay-at-home mothers. The home page
immediately asks the question, "Who says parenting can't be fun?"
Just a few years ago, Jenny's husband, Rick, was working eighty hours
a week building telecommunications equipment in a local factory. Jenny
wanted to take some pressure off her husband who was earning all the
money to pay down their mounting credit card bills, but she refused
to turn her children over to daycare. To earn money from home, she tried
several business opportunities out of the classified ads and briefly
experimented with making barrets. Nothing worked.
In 1997, Jenny went online and found a smattering of websites
with tips for stay-at-home mothers. She collected those links on a homepage
called "Tigger's Place" after her nickname, and hosted the
site on a local service with a crummy address ending in /~mrsrickw
instead of a traditional dot com address. The site was so amateurish
that visitors couldn't even click the links. "You had to highlight
them with your mouse, copy them, and paste them into your browser,"
she remembers. "It's so embarrasing to think that I called it a
website." More mothers learned of Jenny's fledgling page and she
soon counted between 1,000 and 2,000 visitors a month, every one of
them copying and pasting the links to visit Jenny's recommended sites.
Then one day, the first sign of ecommerce showed up. "I saw an
ad for eToys showing that they sold Tickle Me Elmo dolls. I thought
that would be a good item for my audience so I called eToys and asked
how I could point people to the toy. They sent me a link and I put it
on the page, never even realizing that I'd get paid for the sales."
That link produced a $500 check in just three months. "That was
around Christmas time, so we spent the money on the kids and a heating
bill. After that, I told Rick that we should get one of those domain
name things. We could make serious money at this, like $200 per month
for groceries!"
Ah, the innocence. The money needed to register the domain name æ
better known as the ubiquitous dot com address æ had already been spent
on Christmas presents and the heating bill. Not to be deterred, Jenny
sold plasma from her own blood twice a week at $20 a visit to raise
money for the address. So much for the theory that you need millions
of venture capital dollars to succeed online. If it took selling plasma
to purchase www.childfun.com, I shuddered to think what Jenny went through
to pay for marketing and advertising. Donating organs?
"Of course not," she chirped. "I've never paid for
traffic. I considered it here and there, but I'm such a cheapskate that
I decided against it and I don't think it's hurt the site one bit."
Neither do I. In December, 1998 she counted 20,000 visitors. In February,
2000 she counted 100,000. ChildFun.com now includes more than 1,000
individual pages of articles on childcare, handcraft ideas, a list of
product recalls, seasonal songs, and family life cartoons. One year
ago, Jenny sent her main email newsletter to 250 subscribers and thought
that was a huge number. Today, it goes to more than 11,000 people. Jenny
will earn over $100,000 in 2000, more than Rick who still works at the
telecom factory. The money comes from ad revenue, which Jenny earns
by displaying banners on every page, and affiliate programs like that
initial eToys link. Jenny finds products that appeal to her audience,
then joins the affiliate programs to earn commission. Two-thirds of
the site's revenue comes from ads and one-third from commerce.
"The site has pushed us into a new tax bracket," she says.
"We've paid off all our credit cards and old bills. Only the mortgage,
car payments, and a home improvement loan remain. We bought some toys
to celebrate, fun stuff like a fishing boat, police scanner, CD burner,
and a camera. The income from the site grows every month but my workload
never increases."
Just how much work is that? Depends on the month. "When
I was first starting," she says, "I worked my butt off. I
was writing articles, getting articles from other mothers, taking care
of the kids, learning how to design, and everything else. Today, it's
more relaxed. I design everything in Claris Homepage and spend
about 60 hours per week on the site. But in January, I worked maybe
a total of two hours the whole month. When people emailed to ask if
they'd been taken off the list by accident, I was honest and told them
I was just lazy and hadn't sent anything."
Jenny operates ChildFun.com from a desk against one wall of her living
room. Neighbors have no idea that a booming internet business hums across
the phone lines from the ordinary starter home containing three bedrooms,
a garage with two cars, and a Hewlett-Packard Pavilion storing the site
files.
It also contains a two-year-old girl named Cassidy who made it clear
with a few shrieks that I should end my conversation with her mother.
"All right, all right!" Jenny said to her, then back to me,
"It looks like I need to start some real-life child fun now."
Lovestories.com
When we say the word "connect" in reference to
people, romance is sure to come up. What more basic connection is there?
From the very first clicks of the web æ a medium that is all about connecting
æ dating and love played a part. Almost everybody today has heard of
a couple that met online. Even Tom Hanks and Meg Ryan met online, at
least in the romantic comedy You've Got Mail. So it was no surprise
to me when I found a woman who succeeded in an online business that's
all about love.
If ever there was a business conversation that put a lump in my throat,
it had to be the one with Alanna Webb. I reached her in Broken Arrow,
Oklahoma, where she lives in the spare bedroom of her parents' home
and runs Lovestories.com from
a desk by the bed. She's 39, worked as a chemical engineer earlier in
life, and ended up back home with her folks after being jilted by a
man she met on America Online.
In a soft southern accent, enough to turn me to Jell-O, Alanna told
her story. "I met him in an AOL chat room and fell in love. After
months of writing back and forth, I packed my belongings and moved to
Jersey to be with him. When it didn't work out, I was so sad that I
returned home to live with my parents. I didn't want to go back to engineering.
So much had fallen through in my life that I decided to finally pursue
what I'd always wanted to do, which is write love stories and romantic
poetry."
That's when she started Lovestories.com, a place where she not only
posts her own work, but the work of thousands of other writers. She's
expanded the site to include lovegrams, her online romantic postcards.
The poetry section serves up 200 new poems each day by poets who have
established free accounts at the site. The accounts limit the number
of new poems to five per day per poet, and allow readers to comment
on each poem and send email to the writer. Alanna runs contests daily,
weekly, and monthly and all winners receive prizes. The daily winner
is chosen by the site's poetry editor, the weekly winner by visitor
votes, and the monthly winner by Alanna and the site's sponsors.
That's the basic plumbing of the place, but doesn't speak to the
spirit of it. "The site is really a celebration of romance and
how it shows up in every minute of our day," Alanna said. "Men
think of romance on February 14; women think of it in the shower, in
the car, at work, in the kitchen, in the store, and everytime we see
pictures of flowers on a billboard. Being a woman is being romantic."
Beyond the poetry and contests, visitors to Alanna's site find horoscopes,
recipes, and personal stories from the heart. For instance, on the day
I visited Lovestories.com, this story from a woman called "bblues"
appeared on the opening page: "We went to high school together.
I had a crush on him, but he didn't know this, not until 10 years later
at our 10-year class party. A friend told him that I was attracted to
him. He asked me out! Two months later, we got married and have been
happily married for 12 great years!"
 I
was amazed to learn that Alanna herself designs and maintains the entire
website. "I taught myself hypertext markup language by reading
Laura Lemay's book Teach
Yourself Web Publishing and now I program my own site
in Windows Notepad. I work hard, but it's my passion so it doesn't seem
like work." Then she laughed. "Besides, what other office
would allow me to work in my pink longjohns and hug my puppy every few
minutes?"
The work has certainly paid off. Lovestories.com was rated
by Web Guide as the most thorough love poetry site online, ahead
of even poetry.com. There are 15,000 subscribers to Alanna's daily poetry
email list and another 17,000 to the weekly romance email list. The
site welcomes more than 500,000 visitors per month.
All of this began with $25,000 of Alanna's savings, spent over a
period of six months on hosting fees, paid advertising, software, clip-art,
and her own living expenses. She was profitable within one year. By
the second year, she earned as much as she'd ever made as an engineer.
This year, her income from Lovestories.com will exceed six figures and
is growing by a larger amount every month. Almost all of the revenue
is from the banner ads she places throughout the site.
 Lovestories.com
has attracted so much good material that Alanna decided to self-publish
a book called Bytes
of Poetry in November, 1999. It contains 115 poems written by
eighty poets ages fourteen to sixty-five. Alanna is proud that her site
"created a whole body of material that didn't exist before. That's
what I wanted to do, provide women with a place to express the emotions
of love."
I asked Alanna for her advice to aspiring
online entrepreneurs. "Just be passionate. Even in this dot com
mania, following your heart is the key to success. I think women make
good webmasters because they are passionate. Sometimes that's
viewed as a weakness in business but, online, passion is what brings
a website alive and sets it apart. In a way, the web was built for women
to run businesses from home. They don't need to hide their families
anymore. My puppy running around the house doesn't interfere with email
or the website."
The Women's Forum
One thing I noticed at ChildFun.com and Lovestories.com is that both
post a masthead at their sites from a place called The
Women's Forum. The masthead includes a dropdown list linking to
other women's sites. After visiting a few others and seeing the same
masthead tying them all together, I became curious. What was this forum
all about?
My search took me to San Francisco, where I discovered The Women's
Forum headquarters and its delightful co-founder, Jodi Turek. She and
Mark Kaufman, who is now her fiance, began the forum from a kitchen
table in 1996 when they saw online demographic studies saying that only
30 percent of people online were women.
That seemed odd to Jodi, 31 at the time. Before founding The Women's
Forum, she had scrutinized the female lifestyle as a reporter specializing
in women's health and other women's issues. She concluded that women
would dominate online due to population demographics. She also knew
that, offline, more advertising money was spent pursuing female consumer
dollars than male, so it made sense to her that it would eventually
be that way on the internet too.
"What we found," Jodi said, "was that the online community
for women at that time consisted of two components. First were the corporate
sites like iVillage and Women.com. Second were the grassroots sites
run by individual women who were passionate about their topics. We were
intrigued by the second category and studied it. We saw so much energy
just waiting to be harnessed and taken to another level. We asked, what
if we became the supporting structure to help these businesses grow?
They could compete with and beat the corporate competitors."
That idea gave birth to The Women's Forum, which currently consists
of sixty partner sites covering topics like childcare and romance æ
the two sites you read about earlier æ and others including "20ish
Parents," "Better Bodies," "Frugal Moms," and
"Making Friends." Each site is maintained at its own web address.
The Women's Forum connects the sixty at www.womensforum.com and through
the masthead linking every partner. The sites send each other traffic,
exchange ideas for features, and point out new revenue-making opportunities
to one another.
"None of our partners have made a million dollars yet,"
Jodi told me, "but many of their sites are easily valued at more
than $1 million and the women themselves will be worth at least that
within a couple years or so."
Media Metrix conducted a custom roll-up traffic study and concluded
that the sixty sites are collectively visited by 1.6 million people
each month. Internally, however, The Women's Forum puts that number
closer to 2 million. Jodi says the discrepancy is due to the fact that
many of the partner sites are too small to make the study's radar screen.
Regardless of the actual number, there's enough traffic to have generated
$1 million in revenue for The Women's Forum in 1999 and Jodi expects
that number to quadruple in 2000.
What's earning the money? Ads. Lots of them. "We provide the
partner sites with banner ads," Jodi explains. "We track the
number of times the banners are displayed, charge the advertiser, collect
the money, and split it 50/50 with the partner sites. It works well
all around because the women running their sites don't need to find
advertisers. They just drop in the banners and focus on running a good
site. We benefit because we've got a critical mass of individually-run,
personable sites that attract a lot of people. That gives us the clout
we need to land big advertisers."
It sounded to me like a Web Ring, an online structure that groups
related sites with a banner that lets visitors click easily from one
to another. The only difference between a Web Ring and The Women's Forum
appeared to be that the forum tossed in an ad brokerage. I told Jodi
as much and received an immediate clarification. "The ads are just
the beginning. What sets The Women's Forum apart from other multi-topic
portals is the community that we engender among our partners. We have
quarterly conferences where everybody meets to get to know each other
better. We brainstorm new ideas. We hug. We act like women, I don't
know how else to put it."
But there's no doubt that ads are a key way to make money online.
The Internet Advertising Bureau and PricewaterhouseCoopers reported
that third-quarter 1999 online ad revenues weighed in at $1.2 billion.
That's 148 percent bigger than in the previous year.
And as for the increasing number of women using the internet, Jodi's
projections held true. While only 30 percent of 1996 users were women,
50 percent of 1998 users were. According to IDC media and eCommerce
analyst Malcolm Maclachlan, the number of women online in the United
States exceeded the number of men for the first time in 1999. There
were 38.5 million men and 39 million women. He expects to count 69.6
million men and 74.4 million women by 2003.
Which means the already happy story of The Women's Forum should get
even happier. Jodi's former kitchen table operation recently raised
$7 million from Vantage Point Venture Partners and now employs 13 people.
"We're finding new ways to move beyond our advertising foundation,"
Jodi said. "Very soon, our partners will be able to use The Women's
Forum to host their site, run chat rooms and message boards, and take
advantage of special affiliate programs that we negotiate with companies.
The special deals might be along the lines of a higher commission paid
on goods sold than what's available to sites outside the forum."
"At this rate," I quipped, "you can change your name
to The Fortune Forum. Everybody onboard is going to be a millionaire."
"Maybe," she replied, "but the future of The Women's
Forum isn't about creating the next millionaire, it's about bringing
business opportunity into living rooms. Our mission is improving the
lives of our partners by increasing their income each month."
The Knot
So far, we've looked at women who've bootstrapped their way from
kitchen tables and living rooms to build excellent sites that make a
good amount of money. They're still private companies, though. There
are public companies, meaning that anybody can buy shares in them, that
are doing even bigger business. I spoke with two women at the top of
such companies to get their thoughts on the business of succeeding online.
The first was Carley Roney, a 31-year-old wife and mother who lives
in Brooklyn Heights, New York. She started a wedding business in 1996
with her husband, David Liu, after the couple experienced the nightmare
of planning their own wedding eighteen months earlier. "We had
to talk to lots of people, learn tons of new information, and buy a
lot of stuff. We thought there should be an easier way."
They couldn't find one, so they created it online and called it The
Knot. Their website at www.theknot.com features articles about the
perfect wedding, a gift registry with more than 10,000 products, a wedding
gown search that scours 15,000 images to find the right look, a honeymoon
planner, and a set of tools that allow couples to set up their own web
page and receive email reminders of things to do as the wedding date
gets closer.
The whole idea is that The Knot provides in one place the three components
that Carley dealt with when planning her own wedding: people, info,
and stuff. Placed online, the three components become community, content,
and commerce. Couples, mostly the female half of them, find it easier
to plan a wedding at The Knot than they do using magazines and books.
"It's more successful than we ever thought it would be,"
Carley told me with a confident laugh. "People have converted quickly
from using magazines to using the net as a primary resource for planning
their weddings. It's easy to see why. A magazine provides you with static
information. Our website provides fresher information and also interactive
tools that let you actually complete a checklist instead of just create
one."
Completing those checklists translates into big bucks.
People plan to get married only once and they don't feel bad about running
up a big tab for the occasion. According to a 1997 survey of Bride's
magazine readers, the average amount spent on a wedding was $19,104.
With approximately 2.4 million couples getting married in the United
States every year, the numbers create a promising environment for a
wedding site. That's why The Knot is worth roughly $100 million.
The company has established several income streams, the most important
of which are advertising and eCommerce. "Together, they form two-thirds
of what we earn," Carley said. The other third comes from a variety
of activities like the site travel agency to help plan honeymoons and
a book deal with Random House.
With Carley and David still running the day-to-day operations of The
Knot, it's not easy raising their daughter, Havana, who will soon be
three. "This is a hard business, anything successful online is
hard. You've got to be a multitasker, somebody who can think about marketing
and financing and content all at once. There is no step-by-step growth
online. It's total growth all at once, with as much happening in seven
months as used to happen in five years. You need to be prepared for
a rocket-like trajectory. You've got to take risks and you can't be
afraid. There's too much competition online to be afraid."
Keeping on top of that growth requires a busy schedule. To reach
Carley, I had to go through a public relations office and ultimately
catch her on a cell phone between meetings at an investment banking
event in Aspen, Colorado. "I routinely work 65 hours a week,"
she said, "but that's way down from when we firsted started. In
those days I'd go in at 8:00 AM and stay until 11:30 PM, seven days
a week. That was hard."
Carley is a millionaire from The Knot, but it hasn't changed her life
very much. "I'm wealthy in experience," she says. "On
paper we've got millions because we own shares. It's nice to know that
our daughter will go to good schools, but that's down the road. We aren't
the types to go out and buy new cars. New cell phones are about as fancy
as we got! Once we thought we'd go to a spa, but we could never find
the time so we still haven't gone."
Her advice to you, the aspiring online entrepreneur, is simple. "Do
not build a website and assume that people will come. Nobody will accidentally
find you. There's no walk-by traffic. You need to have a plan to get
people to your site. To execute that plan, you need a good management
team. Many people never move beyond friends and family to skilled people.
It's a must."
Pets.com
Carley's observation that succeeding online requires an all-consuming
schedule bore itself out quickly in my next interview. I tried reaching
Julie Wainwright, CEO of Pets.com,
at the company's offices in San Francisco. She wasn't there. I caught
up with her at the Peninsula Hotel in New York, where we blasted through
a phone conversation minutes before she checked out and caught a ride
to the airport. Another moving internet target.
Julie's story is one of top-tier business success. She lives in Belvedere,
California with her husband and three dogs, an appropriate family composition
considering the name of her company. At the young age of 43, she has
already been the CEO of three high-tech ventures: Berkeley Systems,
famous for its flying-toaster screensavers and the game "You Don't
Know Jack," the movie store Reel.com, and now Pets.com.
There are few websites as adorable as Pets.com. The pet of the day
looks happy in a photo circle on the right side of the screen. The colors
and fonts are as excited as a new puppy. Even the menu bar across the
top joins in the spirit. As you move your pointer across the buttons
marked dogs, cats, fish, birds and so on, a cartoon of that animal appears
above the button. I'm sure everybody who's discovered this feature immediately
moves the cursor to every other button just to see what pops up. I did.
Behind the attractive presentation lies a powerhouse of an eCommerce
site. Pets.com sells more than 13,000 products delivered to your door
because, in the words of the site's slogan, pets can't drive. Well,
that's not the only reason. Another is that people spent $23 billion
on pet products and services in 1997, according to the Pet Industry
Joint Advisory Council, and Pets.com would like a big portion of that.
I'd say it's getting one. When Julie started as CEO of the company
on March 10, 1999, sales were around $2,000 per month. In the fourth
quarter of 1999, they added up to $5.2 million and that's still just
the sound of a starting gun. According to the U.S. Department of Commerce's
Census Bureau, online retail sales totaled $5.3 billion in the fourth
quarter of 1999. Huge? Not really. Department of Commerce Secretary
William Daley pointed out that online sales are just a sliver, 0.64
percent, of total U.S. retail sales. There's plenty of growth ahead
for internet stores, which is why investors in Pets.com, who include
Amazon.com with a third of the shares, say the company is worth $225
million at the time of this writing.
So how is Julie succeeding? "Well, it's what you'd expect. We
set out an aggressive hiring plan and got top executives. We had venture
money that we used to build our brand with advertising coordinated by
the TBWA/Chiat/Day agency in San Francisco. They came up with the sock
puppet you see in our ads."
That sock puppet dog is the perfect mascot for a site that
sells pet products. He's cuddly, cool, and like a pet himself. "Everybody's
seen him," Julie says. "He's so cute he was asked to be a
guest on Good Morning America and Regis and Kathy Lee
. We've received more than 10,000 emails and phone calls about him."
In addition to refining the sock puppet campaign, Julie worked during
her first year as CEO to set up direct distribution centers instead
of relying on middlemen. Now Pets.com buys direct from more than 200
vendors, a change that improved profit margins and vendor relationships.
With fatter margins in place, Julie and her team boosted sales by enclosing
Pets.com coupons inside shipments to Amazon.com customers. Julie's once
humble shop now employs more than 270 people.
If you've got the bug to start a business online, Julie suggests first
spending lots of time online. "Look around and see what businesses
are already there. See the size of their market, see if there are offline
competitors and see how much money those competitors have to spend."
There's an old business saying that you don't want to compete with IBM.
It's been changed through the years to refer to the top corporation
of the day so you might have heard a version warning against competing
with Home Depot, or Microsoft, or Wal-Mart, or McDonald's. Whomever
it is, Julie thinks there's truth in the saying.
"You need to find a niche and you need to find an advantage
that you can maintain in that niche." She suggests talking to people.
"Ask key online business managers where they see the online opportunities
today. Listen to them. Write a business plan and pitch it to a venture
capital company. If they like what you're pitching, you'll get wisdom
and cross pollination from the firm's other companies. You'll get managers,
money, and recruiting."
She emphasized that the key ingredient in the online business woman's
character is speediness. "Be a clear thinker and make decisions
quickly. You've got to be comfortable with technology, recruit a first-class
team, and make changes quickly. Always seek improvement, always change,
never slow down."
With that, she hung up and shot off to the airport for a flight home.
The Opportunity Awaits
I let the various conversations and pages of notes settle in my mind
for a couple days. I went around Los Angeles, watching women at various
stages of their day. Some drove BMWs while talking on the phone, others
dropped children off at school, one woman sat on the beach writing in
pencil, and two took turns drawing each other around a park water fountain.
Every one of them was passionate about something, and that was the
common thread I found among the successful online business women I spoke
with. Whether it's a young mom running a teeming website while her toddler
plays nearby, a former chemical engineer who still remembers the pain
of a broken heart, or the CEO of a public company out to change the
way you buy Alpo, all are passionate about the website that is their
business.
If you have a passion, the web awaits. You might take a route that
involves millions of venture capital dollars and puts you at the top
of a corporation. You might take a route that uses your own savings
and a modest beginning to grow into the way you always dreamed of making
a living. It doesn't matter, as long as you passionately believe in
the value of what you put online and convey that passion to your visitors.
Every hour of work you spend on your site will not be drudgery, but
joy.
There are fortunes to be made online. Yet there's more than money.
You can carefully choose where you want to be, how you want to get there,
and the people you want to help along the way.
What could be wealthier than that?
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