First Time Naivety

The feature article in the October issue of Inc Magazine was Start-Ups 2010: How to Launch Your Dream Company. One of the interesting things that they did was do sidebars of companies that haven’t met their initial expectations. So while the main focus was on the successes, they didn’t completely ignore the struggles, which is something I like because it’s an accurate portrayal of reality.

The one that really caught my attention of course was Finding an Audience Online: Getting attention online is easier said than done, according to start-up founder Greg Stallkamp of Holos Fitness.  This was one of those articles where the whole time I was nodding my head because he made all of the classic “first time website owner” mistakes – many of which I’ve made myself, all of which I’ve seen made, and most (if not all) of which I think are avoidable.

In fact, here’s exactly what I was thinking as I was reading it…(bold is the article, my comments are mixed in between, Fire Joe Morgan style)

The Passion

Greg Stallkamp was always a fitness freak. An avid triathlete, he trained at least five times a week and was always sharing advice on workout routines with friends.

The Plan

Three years ago, as Facebook and MySpace were becoming household names, Stallkamp, 32, saw the need for a fitness-based social network — a forum in which users could share training tips as well as marathon times.

OK.  It’s good that he’s following something he’s passionate about.  That’s a good start.  However, there’s a crap load of fitness-based-everything sites out there. Not saying that there aren’t opportunities, or that one can’t be successful in that field, but you have to have a better idea of what’s out there.  Even a few years ago there were fitness blogs, forums, social networks, e-commerce stores, etc etc.  There might be some niches where you can say “I’m going to make the Facebook of X” but not in fitness.  A few Google searches would have told him that.

Stallkamp pitched the idea to two similarly fitness-obsessed friends. They felt that, with a small initial investment of about $15,000, they could build the website in their spare time and that once launched, it would be sustained by its audience.

Why $15k? We don’t get their reasoning, but that seems like way too high. For under $1k you can get a vBulletin license with professional installation, hosting for a year, and have some money left over to spend on testing out some marketing. And that’s assuming you have zero technical knowledge – if you can install the software yourself it’s even cheaper. Or you could build a community using other open source forum or blog platforms, depending on exactly what you’re looking to do.

Also, if you have zero technical knowledge as it seems like these guys do, you probably shouldn’t be starting a site with three people, all of whom can’t set up a forum. One person, fine. But three? What exactly is everyone’s role if no one is doing development?

The Strategy

In addition to the social networking features that let amateur athletes connect and share information, Holos Fitness would also feature blogs by professional trainers offering tips on yoga as well as weightlifting. Revenue would come from targeted ads based on the information provided in members’ profiles.

The blogs are a good idea. The new vBulletin has that built right in. He should definitely go with vBulletin and be set up in a weekend.

Revenue from only ads is tough. Real tough. I know – I’ve tried.  In most cases, you have to have some other value-added revenue stream.

What Went Wrong

The efforts to get the website built on the cheap failed.

How? They had $15k…

Rather than using off-the-shelf or open-source software, the founders insisted the website be designed from scratch, which cost far more in developer time.

Oh I guess that explains the $15k.  What could you possible gain by building it yourself though? Especially when it comes to forums and blogs. The existing stuff out there is ridiculously powerful.  And even if you had a good reason, you’ve got to have a technical partner who is doing the development for nothing in the beginning. Really good development of a complex site like this is very expensive and will have a lot of ongoing expenses. Or you could just go with vBulletin, the software with a huge developer community that does everything you could ever dream of for a forum and more…

Additionally, they were unwilling to contract a developer for more than a month at a time, resulting in, over a two-year period, more than five developers quitting midproject to take better-paid or longer-term jobs.

This is just stupid. My guess is that $15k started to deplete real fast, they got nervous, and wouldn’t commit to finishing the project correctly. It also shows a gross misunderstanding of web development. Passing a large scale project from developer to developer results in tons of wasted time and effort and a piss poor hodgepodge result.  Again, a technical partner, or at least adviser, is really critical.

Eventually, Stallkamp quit his financial-consulting gig to work full time on the website, which finally launched in early 2009.

Oh man.  Really? Why? So you’ve got no revenue, your funds are depleting, and leaving your job is a good idea? Getting the site launched is only a small tiny part of the battle. Getting visitors and users and eventually revenue is a lot harder and takes a lot longer. It’s stressful enough as it is. No need to take away your steady source of income before you can replace it.

But the problems didn’t end there: Stallkamp was relying on word of mouth to popularize the website, but users were slow to sign up.

Ah, very common, very big mistake. Word of mouth is great. All of our sites have benefited immensely from it. Word of mouth, for the majority of sites on the web though, is very slow. It’s literally 1 in a 1000 of your visitors that like your site enough to casually mention it to a friend at some point, which may or may not result in said friend ever even visiting your site. Most people think their site is something special, that it’s going to set the world on fire. Even the “overnight successes” take years and years of work before they become “overnight successes”.  Plan for a long-term battle.  If you happen to be so good (or so lucky) that your site blows up overnight then that will be a good problem to have…just remember that the odds of that happening are very slim.

Lesson Learned

“There was a real naiveté on all our parts,” admits Stallkamp. “We thought we could get it running cheaply and in our spare time. And we overestimated how easy it would be to get people’s attention.”

Fair enough. Glad he admits to it. Like I said, I’ve been there and done that. Had he done a little more research and spoken with a few people who had done what he’s doing he would have saved himself a ton of headaches.

How He’s Doing

HolosFitness.com gets 6,000 to 10,000 unique visitors a month; it projects about $30,000 in ad revenue for 2010.

First thought – I doubt that with that amount of traffic he’s getting that kind of ad revenue, or really anything close to it. But let’s just say he is. That’s a great start. $30k a year for a forum is awesome. Now just start a few more of those and keep expenses low and you’re making a great living in a few years. Problem is, he quit his job and has two partners. As tempting as it is, you don’t need three people to run an online community. It can be a one-man job with the help of moderators for a long long time.

Also, now that I am able to take a look at the site, there’s absolutely nothing about it that couldn’t have been done with vBulletin of one of the many other CMS out there. Just saying.

As I said in the beginning, I’ve made many of these mistakes myself, particularly with SportsLizard in the early days.  To some degree, it’s part of the process.  Then again, a lot of this could have been avoided by doing some research, talking to some people who have started similar ventures, keeping expenses low by using existing software, and taking a patient approach that involved working hard to generate revenue and reach profitability while keeping the day job.

16 comments on First Time Naivety

  1. nethy says:

    Adam,

    I did quite a lot of work for a consulting company. You would really be surprised how many people with 0 understanding want to do some startup like this. They have an idea, but they aren’t the people to pull it off. Custom software, even if they had $150k to develop it, could even be a downside because it’s likely to be a buggier version of v bulletin.

    To me (and certainly you), you hear fitness community and you think of some basic questions you need answered:
    1. How is it different/better than existing communities?
    2. Why can’t they use facebook/forum farms/etc. they already use instead of what you offer?
    3. How will you get users?
    4. How will you make money.

    It’s not just about figuring out if the idea is good. It’s about figuring out if the idea is good for you. “word of mouth” or “advertising” isn’t really an answer either. You should be able to say “Advertising: Once we hit 30k members we can segment them by fitness category, location and age. I’ve spoken to local gyms that will pay $x per pageview if the data is segmented that way. Asense in our area pays $.000x per pageview…”

    Like you say, you need to justify custom development and you need to avoid bitching it up. Custom is not necessarily better. I’m sure they could have launched at least a v1 in a few weeks on either OS or SAS.

    I would actually recommend to anyone I put in this category to go and get something up on Ning/Weebly/Shopify or similar first. Get the first 10 sales/members/comments/whatever. Their idea will be at least 100% better and clearer by this time. If they want to hire a developer and spend the money great, the chances of wasting that money are way lower. Getting something developed by someone else can be something you fail at too. Not many realize this.

    * BTW, I do think there are opportunities for a developer-founders to pick off the market share of vbulletin-like forums with innovative approaches, it just needs to be the right people taking it on.

  2. nethy says:

    “botching” it up. Sorry. 🙂

  3. nethy says:

    Rereading that sounds harsh.

    It’s important to give credit for having a go. Failure is important and it’s important to be able to fail, start again, fail, and eventually succeed. That but gets left out of most stories.

    • Adam McFarland says:

      Totally agree with everything you said Nethy. I didn’t take it as harsh – just to the point, which was how I was trying to be with the post. He definitely does deserve credit for giving it a go. What I always find interesting is the allure of the internet to non-internet people. By “non-internet” I don’t even really mean programmers, I just mean people who aren’t into the web and web business at all. On one hand, the web is awesome because it gives anyone a chance to succeed. On the other hand, it baffles me sometimes the way people throw away money. Most other businesses start with someone who has experience in an industry (i.e. a chef who starts a restaurant).

  4. Darrin says:

    I seriously doubt they are making 30k a month. But if they are, they stil have to support 3 partners and cover the 15k+ invested developing. This site is probably not profitable yet unless they are doing high priced coaching or selling a product on the side.

    • Adam McFarland says:

      Darrin – thanks for the comment. It actually says $30k a year (not sure if you meant “year” when you wrote “month” or not). Even that seems unrealistic to me given that traffic and the types of ads I saw when I visited the site.

  5. Rob says:

    ~~ Not harsh Nethy, just realistic. I think I’m probably going to end up being quite negative about them though! ~~

    Wow, such a lot to have a go at here.

    First off, “communities” are always a hard sell. Combine that with advertising and you’ve suddenly got yourself two customer bases and two groups you have to sell on your idea and support. No thank you sir.

    Combine that with the ludicrous ideas about setup costs and the fact that the people trying to undertake this complex endeavour are non-technical (also, if they’re non-technical, why did they think they knew enough to not want to go with established forum software etc?) and you’re pretty much doomed.

    $30k/year REVENUE, not profit a YEAR. That’s crap. Plus I think it’s safe to assume they’re inflating that figure anyway. So take out running costs of the server, code maintenance, tax, marketing, other miscellany people don’t think about and I’d be surprised if they’re $10k up. That’s before salaries too.

    Just because something /can/ be done and /can/ be made profitable doesn’t mean it’s worth your time to do so. It might never become profitable enough, and it might be that you could have used your time in another, better endeavour. Hopefully they’ll learn next time!

    Who knows, perhaps we’ll all be proved wrong and they’ll succeed and it’ll all be lovely. Perhaps pigs will fly. Do we know their exit strategy? Were they planning on selling, IPO, or planning on running it as a “real” business that actually generates revenue? 😉

  6. nethy says:

    I think the thing to learn is that the idea, can be almost to irrelevant. What matters is people, execution and something I think I’ll call insight, though that might not be the best word.

    If it was some ex facebookers convinced they knew why facebook sucks for topical groups, I would be very interested in listening. If it was a couple of top fitness bloggers or internet celebs, I would also have my ears up.

    “Search Engine” doesn’t get you Google. What get’s you google is some really smart people that figured out (a) analyzing links is a really good way of quantifying authority (b) search engines are the key to the web, never compromise on quality and simplicity (c) rewarding advertisers for relevance will create a perpetuating process of increasing quality and higher demand.

    “Community of Friends” doesn’t get you Facebook. “Online bookstore” doesn’t get you Amazon. “Online Shoestore” doesn’t get you Zappos. Online detailing store doesn’t get you Detailed image.

    • Rob says:

      Here here. As we know, having been on the inside, it’s a lot to do with execution. I get really frustrated with friends when they say how they wish they’d “thought of facebook” etc. If ideas were worth that much value there would be an ideas marketplace. There isn’t.

      I can’t remember where I read it, but it was probably Seth Godin – he said that Ideas and Execution are like multipliers. A brilliant idea and poor execution is has a similar value to a mediocre idea with great execution. To reach the stars you need an exceptional idea and near-perfect execution.

  7. Adam McFarland says:

    Great conversation guys. I also wrote a post about the Derek Sivers chart a few months back http://www.adammcfarland.com/2010/07/16/the-idea-chart/ And I too can spend hours on Paul Graham’s site – his essays are always extremely thought provoking.

    • Rob says:

      Jeeze, yeah, we’ve had almost this exact conversation before!

      One other thing I did think about was if there’s a “failure bias” in the same way there’s a survivor bias. For instance, if someone fails by taking a certain path or approach we might say that can’t work. We should probably look to see if there are others who took similar paths and succeeded. Has anyone taken a similar path to Stallkamp and succeeded in their venture? As before, just because there is a possibility of success doesn’t mean that it’s the most economical or efficient thing to do. If his $30k / year is just a stepping stone on the path to something greater then that’s fair enough, but if that’s the endgame then it’s not really work the time.

      • Adam McFarland says:

        Funny how fast we forget about conversations 🙂 I went to look that post up and I thought it was a year or two old…not from July!

        I do think there is a “failure bias”. From my limited experience, there are people who run ad-based forums in both sports collectibles and cars that probably started that small and now make much much more than that. We’ve had forums that we’ve paid upwards of $1,500/month to sponsor and they had a lot more sponsors than just us. I’m sure it’s possible in fitness too, but it’s a long hard road. Many of the communities I’ve seen be really successful take years and years of growth. I also know that personally I don’t think I’d ever have it in me to run one of those types of sites.

        In general with Stallkamp I mostly had a problem with how much money they ran through, how inept they were at getting the site up, and how unreasonable their expectations were…not so much the business idea of a fitness community, although I think they should have done more research about what’s already out there.

  8. nethy says:

    Adam,

    It was probably you that turned me on to the Sivers post and I’ve just forgotten. I don’t ordinarily read his blog.

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