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Explanation of how the informational Web site HowStuffWorks got started as a business - Strategies to Succeed in eCommerce. Also refer to media, awards, venture capital, e-learning, technology, incorporation, Marshall Brain, Ron Kurtus, School for Champions. Copyright © Restrictions

Case Study of HowStuffWorks eCommerce Site

by Ron Kurtus (18 March 2002)

HowStuffWorks Inc. is a media and e-learning company that presents material explaining how various devices work. It originally started as a personal Web site that provided free information, grew to become very popular, received venture capital and became incorporated. The business makes money through selling advertising and product sales.

Questions you may have include:

• How did the site get popular?
• How did the business get started?
• How do they make money?

This lesson will answer those questions. There is a mini-quiz near the end of the lesson.

Popular site

The HowStuffWorks Web site is among the top 500 sites in the United States. It became popular through appealing content, word-of-mouth advertising and good media coverage.

Started as labor of love

Marshall Brain created the HowStuffWorks Web site by doing something he was interested in.

Brain has a BS degree in electrical engineering, a Masters degree in computer science. He had been president of a software development firm and had written 10 books. At the time he started this Web site, he was teaching computer science at North Carolina State University.

Since he was always fascinated in how things work and seeking to provide materials to teenagers with similar interests, he put together a Web site of articles explaining the operation of various devices in January 1998. He published an email newsletter, and by June 1998, 700 people had subscribed.

Became popular

The site became extremely popular from media coverage and Web awards.

Media coverage

By the summer of 1999, the HowStuffWorks site started to get some media attention. This may have been as a result of press releases, a local newspaper covering things in the area or an article on new sites on the Internet. It is not certain how the media attention was generated for this site.

Web awards

HowStuffWorks also won some Web site awards, such as the "Coolest Site of the Week" and others. These awards were either given from word-of-mouth recommendations or from owner solicitation. Recently, interest in awards has waned, although press releases still are a way to get media attention.

Increasing rapidly

By December 1998 the site was getting over 94,000 visitors a month. Its popularity was increasing at a great rate due to the publicity, as well as the word-of-mouth referrals. Certainly, the site was a well-done product that fulfilled the need or interest of the viewers.

Becomes a business

By June 1999, Brain was getting so much email that he decided to quit his job and pursue the site as a full-time business.

He realized that he needed to generate revenue to sustain and support the site, as well as to hire people to help in maintaining the material. Brain was able to get an entrepreneur, Marco Fregenal, to invest in the company. By September 1999, the business was incorporated.

Business plan

Brain and Fregenal created a business plan, describing what they hope to accomplish and their financial model, which showed how they will make and spend money. It also contained predictions of the number of visitors the site expected each month.

Their plan to gain revenue was from:

1. Ads and sponsorships
2. Sales of products, including HowStuffWorks branded products

Venture capital

They then went out to seek venture capital, traveling to different places around the country. As they gave their pitch, they were able to hone their vision of the company and its potential. By December 1999, a venture capitalist from Internet.com agreed to fund the company with $900,000.

They then sought a second round of investors, such that by May 2000, they $4.5 million.

Purchases and hiring

With this money, they purchased equipment, rented space, formed a management team, hired 35 employees, launched an advertising campaign and started various projects.

They also have a Board of Directors of executives who meet monthly to discuss the progress of the company.

Because of the increased Internet traffic to the site, the company purchased their own servers and other necessary equipment to keep the site running smoothly.

The HowStuffWorks site gets over 2 million unique visitors a month.

Making money

HowStuffWorks Inc. has a number of revenue-making ventures.

Selling advertising space

The HowStuffWorks site now has a fairly large number of ads. Note that the revenue of banner ads and click-through ads has been decreasing. Advertisers have found they are not as effective as originally thought. Thus Web sites that have hoped to depend on advertising for revenue have been getting less than expected income from those ads.

Magazine subscriptions

They now have a site for kids called HowStuffWorks Express that also sells magazine subscriptions to the HowStuffWorks Express Magazine.

Books

They have HowStuffWorks books, with two books for sale, published by Hungry Minds (publisher of the Dummies series of books).

TV and radio clips

The company is also selling one-minute video clips of Marshall Brain explaining how things work to TV stations. Marshall Brain also has syndicated one-minute radio vignettes that they sell through Cox Radio Syndication. Both of these features also advertise the site.

Business site

They has a business spin-off called HowBizWorks.com, as well as one aimed at fitness.

Newspaper articles

Finally, they syndicate articles to newspapers, magazines and Web sites, including The Los Angeles Times, USA Today Online, and Plant Engineering.

Summary

HowStuffWorks Inc. started as a labor of love by Marshall Brain. Since it apparently filled a need or satisfied an interest, it became very popular. Good media coverage certainly helped spread the word. Brain formed a company and then received venture capital to turn the enterprise into a working corporation. The business is selling numerous items under the HowStuffWorks brand.

Answers to Readers' Questions

Do what you love

Resources

The following are resources on this subject.

Websites

HowStuffWorks

eCommerce Resources

Books

Top-rated books on eCommerce

Miscellaneous

Mini-quiz to check your understanding

1. Did a name like "Brain" help the popularity of the site?

2. What is needed to convince investors to provide funds?

3. Can a site survive on advertising revenue alone?

If you got all three correct, you are on your way to becoming a Champion in eCommerce. If you had problems, you had better look over the material again.

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Case Study of "HowStuffWorks" eCommerce Site