Sitepoint: Ideas = exchange = business

Web 2.0 pioneer Mark Harbottle, 35, is changing direction, and has has started another business, 99designs.com, from an idea that grew out of his forums. By AMANDA GOME

By Amanda Gome

Web 2.0 pioneer Mark Harbottle, 35, is changing direction. After putting in a general manager to run his fast growing company Sitepoint, he has started another business, 99designs.com, from an idea that grew out of his forums.

He tells Amanda Gome how he is building his new start-up, the hot new trends he sees in the offing, and where to from here. 

Mark is willing and keen to share his knowledge with you. Got some questions for Mark? Email them to feedback@smartcompany.com.au.

Amanda Gome: How did it all come about?

Mark Harbottle: We started Sitepoint in 1999 to provide useful resources to people who make their living building websites. We monetised it by selling educational products such as books and videos. We sell advertising space mainly to hosting and software companies.

Then our community forums grew into some of the biggest in the world for web designers and developers. It now attracts three million people a month. We have 250,000 registered forum members and about 480,000 newsletter subscribers.

Why have you put a general manager in Sitepoint and what is your involvement?

You can’t be everywhere doing everything. I have a great team and I sit on the board and attend management meetings as an adviser. My interest is in starting up new things. (Sitepoint’s revenue is almost $7 million.)

How long after you started Sitepoint did you know it was going to be a success?

I think all businesses by their very nature are in a state of flux, so it can be dangerous to consider yourself or your business as a success – things can change very quickly. The second you rest on your laurels you stop growing, and if you’re not growing you’re going out of business.

Having said that, I’ve always aimed to remove myself from the day-to-day running of Sitepoint – I thought if I could do that and business continued to prosper, then we’ve got the business model and our systems right. That happened for me about five years after starting the business, which was a few years ago now.

Your latest business involves crowd sourcing. What is it?

It means drawing on a large group of people to help you produce a result rather than just relying on a consultant or freelancer.

The new idea for your business grew out of your forums?

Yes. Designers started the competitions in the forums. Designers would say ‘a friend wants a logo for a café – let’s post it up and see who does the best’. So it was started by the designers just for fun, to test themselves and compete. There was no prize money at the start. The people cottoned on and began to post requests to get designers to do things for them. They also realised the designers needed an incentive, so they began to offer prize money. In 2005 it twigged that this was a new business.

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So what were your first steps?

We started charging for clients to list their design requests. We built software to make it easier for clients to upload briefs rather than just post in forums, and for designers to upload the design. We continued to build the software based on feedback. We realised then it needed a brand new website and its own business. We moved it into 99designs early this year.

Was the reception good?

Some designers didn’t like change, but two days later came back and said it was awesome.

How are design agencies reacting?

Some designers frown and think it will put Australian designers out of business. But the freelancers love it. Not just for the prize money – some don’t even look at that. But they look at the pitch and if they have an idea they enter.

Why is it working?

Because it’s risk free for clients and we have got a critical mass of designers. We are also focused on looking after designers. (You probably have to side with one of the other – clients or designers.) Although the money comes from the clients, without the quality designers they won’t get the response they want.

What’s the average prize money?

About $US280. The prize money pays for copyright for that design to move from the designer to the client.

How is it going?

Revenue is approaching $1 million. We grew 50% last month. We already have 17,000 registered users and we have 1500 designs submitted every day. That’s about one every sixty seconds.

Why did you call it 99designs?

That is on average the number of designs submitted, so clients would see 99 designs before they had to chose from one.

Is it a global business?

Yes. Most customers are from the US, Canada and the UK. About 5% are from Australia.

What did the site cost to set up?

Less than $50,000.

What’s the business model?

Right now we charge a listing fee to put a brief online. It costs $39 to upload a brief on to the site. Once the design is chosen, the designer is paid directly by the client. But we are moving towards a different model. All of the prize money is paid upfront from the client and we charge a small percentage (10% of the prize money). That reduces the risk for the designer and guarantees they are going to get paid. While 99% of people pay, you always get the 1%.

How many page views do you get a month?

About three million. When we launched the site there were 200 comments in the first half of the day saying how we can improve.

Why is it working?

There are benefits for clients and designers. Clients get lots of designs to choose from; sometimes hundreds. More minds produce better outcomes and it is very cost effective. The average cost of a logo is $US300.

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Designers also find it beneficial because it acts as a lead generation. They also love to compete against each other to produce the best design and they get to pick which projects they work on. Younger designers also get to work with better designers and can build up their folios.

I met with a freelance designer earlier this week in Melbourne and he makes his living from 99designs. He wins one out of every five contests he enters and he pulls in a stack of clients off the back of the contests.

You also have another business trading websites.

Yes, it’s the realestate.com.au for websites. There are a lot of people selling websites, so we set up a marketplace where they can trade. We’re selling $4 million worth of transactions of third party web sites a month through this online marketplace. About 25% of sites listed sell in 30 days or less or they don’t sell. They could be crap. We are now building a quality control into the system. The way we monetise that is we charge for a listing fee, $49 for over $10,000 in value.

Again we are changing that model and moving towards a success based transaction fee like eBay. We have got to monetise some of that $4 million.

New trends?

Hosting. Traditionally people get their sites hosted by external third parties. If you have rented a single server at a hosting centre and your web site outgrows it, you have to move to a new server and get the web developers involved. But Google and Amazon will now host your server with real time hosting. So as the site traffic grows, you don’t have to upgrade every six months.

You also pay by the minute; so if you have massive spikes you pay a bit more but it’s better than the site going down because you’ve got too much traffic, or slowing down and people can’t get what they want. It is about 10% cheaper for us to use Amazon for hosting and we get three or four dedicated servers for the price of one.

If you’re talking about technical issues, one of the trends I see shaping the web over the next few years is the rise of web application infrastructure as a pay-per-use service, which is something we’ve embraced in a massive way at Sitepoint and 99designs.

Amazon’s virtualisation platform and Google’s new AppEngine platform allow developers to write web applications faster and better. Writing a fast, scalable and complex web application has never been easier or cheaper. The uptake of these platforms by startups and other innovators looking to build not just cheap but smart apps has given us a glimpse of what will be possible as more providers come on to the scene over the coming years.

What do you believe are the two most important elements to getting an IT project in on time and budget?

I’ve never been able to bring an IT project in on time. I tend to focus on the quality of the output and what we’re building rather than the deadlines. I think deadlines are important, but they can limit your ability to produce the best outcome possible.

Plenty of people have good ideas and good sites, but unsuccessful businesses. What’s different about your model that made it a success?

One thing that we’ve always focused on is our users and our customers. A lot people think that once you have an idea and a website you’re in business. I tend to focus on how we’re going to get people to the site first, then I worry about what the site needs to do to keep them around.