Quora calls itself a startup building a continually improving collection of questions and answers. It was founded by former Facebook employees Adam D’Angelo and Charlie Cheever in 2009. Initially launched as a private, by-invitation-only initiative early last year, the question-and-answer site was opened to all in the summer of 2010.
Quora’s Business Model
Quora lets lets users post, edit, and comment on categorized questions and the answers to these questions. It expects users to use their real name on the site and register by connecting their Quora accounts with a Facebook or Twitter account. Various social networks help Quora to connect the users to people they know also using the service.
The idea is straightforward, but Quora’s financial model remains shrouded in mystery. There were rumors that the site was looking for ad revenues, but as yet, Quora hasn’t opened its site to advertisers. A year ago, Quora D’Angelo said that the company was focused on developing a strong product, and monetization would follow later.
Last year, Quora raised $14 million in funding in a round led by Benchmark Capital and was valued at $87.5 million. Recent market reports estimate that the site may be searching for additional funding, pegging its valuation at figures ranging from more than $300 million to as high as $1 billion.
Early competition for Quora included Mahalo, Aardvark, and Answers.com, most of which have since been acquired. Aardvark was estimated to have more than 90,300 users as of October 2009 and was acquired by Google for $53 million last year. More recently, Israel-based Answers.com, with 55 million users, was sold to investment firm AFCV Holdings for $127 million.
Earlier last quarter, Google announced an algorithm change to increase the quality of its search process and results, a move that has helped it push down the search ranking of lower-quality sites. Content farm Mahalo was impacted significantly: Mahalo announced plans to let go of 10% of its staff and temporarily halt freelance content production in reaction to Google’s change. The impact on Quora is less known, but given its higher-quality content, it may suffer less.
Yahoo! Answers and Wikipedia are bigger competitors that remain strong. Quora claims to compete with Yahoo! Answers on the basis of the quality of content. By restricting sign-ups to Facebook and Twitter accounts and by displaying the real profiles of its users, Quora has managed to ensure that users are qualified to give answers to the questions posed on the sites, or at least that readers have more information they can use to judge the quality of a response. Quora has not only entrepreneurs but also C-level employees posting answers on its site, which may help to make its content more reliable than that of Yahoo! Answers. Further, by keeping responses real time and in the form of a conversation connected through social networks, Quora has successfully managed to differentiate itself from Wikipedia.
According to comScore, last December, the site had 164,000 U.S. users, a tiny number compared to Yahoo! Answers’s 48 million monthly U.S. users in January. The HitWise graph below shows that the site commands a mere 0.00025% of weekly U.S. Web traffic. To justify its skyrocketing valuation, Quora is faced with the tough challenge of being able to monetize its content and continue to grow while ensuring it maintains its current standard of high-quality content.
We’re back to the giddy “valuation without revenue” days of the late nineties, and it makes me just as queasy today as it did in those days. As you know from my writings, I am a believer in meticulous business-building, and I have a general distaste for speculation. The current industry is full of speculative investors and entrepreneurs, and the media continues to fuel the trend and the hype. The ending, as we know from earlier instances, is familiar and inevitable.