You would think question and answer sites are hard to monetize. Read how David Karandish built Answers.com to be a profitable $200M+ company … Note, the much-hyped Quora doesn’t monetize at all yet.
Sramana Mitra: David, let’s start with your background. Where does your story begin? What is the back-story to the Answers.com story?
David Karandish: I was born and raised in Saint Louis, Missouri. I went to Washington University in Saint Louis and studied computer science and entrepreneurship. While I was in high school, my friend Chris and I started working together on a bunch of entrepreneurial ventures. We did that through college, graduated with a degree in Computer Science, and then ultimately started this current company.
Sramana Mitra: What timeframe are we talking? What happened after that?
David Karandish: I graduated in 2005. After college, I took about a year off and was on the Martha Stewart Apprentice season and did that as a fun venture into the world of reality TV. Immediately after that, Chris and I put together a business plan for helping consumers make good decisions online, originally in the shopping space and then, over time, we put up a lot of different types of content.
Sramana Mitra: How did you get the business off the ground?
David Karandish: We took every penny we had and put it into the business. We brought in an angel investor who came to speak to one of our entrepreneurship classes at Washington University. With that, we went to a local bank and got a small credit line; then used that to fund the launching of the company. It was a combination of self-funding, angel, and bank funding.
Sramana Mitra: We’re going to drill down a little bit into that. Between self-funding and angel investment, how much time went by and what did you accomplish in that time?
David Karandish: We basically started it once we got the funding. We came in with an idea and a business plan. What was different from some of the other pitches that you might see out there is that Chris and I had been working together for five or six years. We had already shown our ability to learn Internet marketing, get websites to rank on the search engines, and promote a website online. So when we came in with our concept that eventually led to Answers.com, we already had a track record of showing how we’ve done that in the past. Here’s how we’ll apply that now. I think for an angel or VC type of investment, obviously there’s always risk in any kind of investment, but we had reduced a lot of it by being able to spend that time in both high school and college learning how to market and do online promotion.
Sramana Mitra: Were the two of you already running some sort of a business while you were in high school and college?
David Karandish: Yes, in our first business venture, we started out doing web page design in high school. That led us to do some custom programming and Web page development. We were both self-taught computer programmers before we went to study computer science at Washington University. When we got into school, we started doing online retail. We did a lead generation website. We tried a whole bunch of things. If I was going to give one piece of advice to current or future entrepreneurs, it’s don’t try to wait until you have ideal business conditions, the perfect climate, or really even the perfect idea. We started promoting websites online and learning that whole industry even before we had the right idea, before we even knew exactly what we wanted to do.
Sramana Mitra: You were developing a lot of relevant skills and you had a co-founder with whom you have developed a working relationship, and that’s what you went with to these angel investors who came to speak at your class in school and proposed this new company.
David Karandish: Exactly.
Sramana Mitra: When was Answers.com launched?
David Karandish: The history is kind of interesting. We launched what was at that time our parent company, which was called AFCV Holdings, an Internet holding company, in 2006. In 2006, we noticed that people were starting to spend a lot of time online. They were going from checking the weather or checking a sports score to now starting to transact and using the Internet as a place to help them make a decision about something that they wanted to do. If we want to be able to help consumers make good decisions online, we have to develop some technology that helps us figure out what kind of content to show them and what the analytics look like to track all the key metrics that could help us scale.
When we had our lead generation company in college, one of our biggest challenges was the fact that we would market the website to various consumers and we had a hard time tracking where did they go on the website, what did they do, and what ultimately happened to those leads. So at that time, there were a lot of analytics companies. You saw Urchin, which later became Google Analytics, guys like Omniture doing some analytics, but for us, we looked at it and said we’ve got to be able to track a lot of the key metrics and key performance items down to a very finite level.
Our first product before we ever launched our website was really this online analytics and tracking software that allowed us to look at every single click, log-in, comment, post, or share, and use that to determine what people are doing and how to optimize the experience.
That was the technology that we first launched with. To get it off the ground, we started doing some partnerships. We first partnered with the guys from Yahoo. Pretty soon thereafter, we partnered with the guys from Google. We were focused on how you aggregate a large audience of consumers and help them make good decisions online.