Growing by baby steps

As online communities grow, people are trying to figure out how to monetise them and what they are worth. AMANDA GOME talks to Brad Lauder, co-founder of parenting site The Bub Hub, about he is tackling this challenge.

By Amanda Gome

As online communities grow, people are trying to figure out how to monetise them and what they are worth. Brad Lauder, co-founder of parenting site The Bub Hub, talks about he is tackling this challenge. 

Entrepreneurs Brad Lauder, 37, and Hilary Lauder, 39, are the envy of many online entrepreneurs. They have built a large online community around a pregnancy and parenting information site.

But the Lauders have also made plenty of mistakes, including waiting far too long to monetise their site. 

Brad talks to Amanda Gome, and is happy to answer your questions. Email them to feedback@smartcompany.com.au before end of business Friday 13 June.

Amanda Gome: You started The Bub Hub more than five years ago. Why?

Brad Lauder: I started it with my wife Hilary after we had a baby and Hilary couldn’t find any information she wanted on parenting. She had come from Britain to Brisbane and wanted basic information. She is the nerd (with a background in web development and events organisation) and I am the mouth. It’s a good combination. She started in 2000, I left my job in marketing in 2001 to join her, and we started in Brisbane in 2002. But advertisers were not interested until we launched nationally the next year.

How many people come to your site?

We have 244,000 unique visitors coming every month and 3.2 million page impressions measured by Nielsen.

What is your business model?

Content is free and listing is free on our directory, but we charge for ads. Probably 250 of the 3000 listed in the directory advertise with us.

That’s quite low.

Yes. We need to be more proactive about reminding people to advertise. The renewal rate is good though.

How much did it cost to set up the site?

When we first set up the site it was just our time. Hilary did the website and taught herself those skills. It was very time consuming at first, but now we share eight days a week between us.

My quality of life is very good – I have a lot of lawyers and accountant friends so I know.

So how much is your revenue?

We went from $50,000 in 2004 to $112,000 then $200,000. Last year we did $300,000.

We have only just got a media agency to get advertising for us.

Why didn’t you put on an agency before, given your traffic is so high?

I was loathe to work with agencies. I didn’t want to give them a chunk of revenue for doing nothing. We put an agency on in September 2006, but it didn’t really work. In July last year we moved to a tier-one agency, MediaSmart.

What was the difference?

The people representing you get access to all the briefs, so if your company fits what the advertiser wants, you get the opportunity to participate. Also its staff turnover is lower and the service is better.

Is it more expensive?

Slightly more. (Agencies typically take a 35% to 40% commission on any advertising deal.)

What other mistakes have you made?

Another thing we did was care about small business. They don’t make us as much money but they have supported us for the first years. And we believe it is about building loyalty before you monetise it. We also do things where there is no return. For example, we include regional areas in our directories. In the NT there are three maternity stores and no one in the whole territory has ever advertised with us. But that was the right thing to do.

How much do advertisers pay to advertise?

The big advertisers pay costs per 1000 impressions. We then let the little guys advertise through a three star system. Three stars costs $800 a year and you get good representation through the site for that. With two stars ($500) you can make special offers but not go in our competitions. One star ($200 a year) is for people like lactation consultants and midwives.

How is your cash flow?

One of the big benefits of moving from a small to a large media agency is you get paid every month. Small business ads are booked three to four weeks in advance but income is received before the ad goes live.

How did you market The Bub Hub?

We were one of the few websites promoted and endorsed by parenting organisations because of our approach.

Because we have been around so long we do very well in natural search. So if people type in ‘maternity wear Brisbane’ we come up on the front page of Google. Also word-of-mouth has been enormous.

We also set up relationships with print publishers; we promote them and they promote us. We also attended the Pregnancy, Babies and Children Expos. We get a stand and hand out brochures; in turn we help promote the expo.

How else did you expand?

We added different sections on jobs and family travel. We also added forums and we now have 30,000 members with 1000 people chatting online at any one time.

What challenges did you face setting up forums?

Making it a safe environment. Thirty moderators help us and we now have a slew of rules to make it safe, but you still get less than 1% of people who post negative comments.

What do you think The Bub Hub is worth?

Well, we were offered $2 million to $3 million. We were approached recently to sell. But we didn’t think they offered what it was worth.

What reason did the would-be purchasers give for not offering more?

The EBIT wasn’t high enough. We also spoke to investors who wanted to take private equity and they kept talking about monetising it. But we haven’t built it in a revenue-driven way. Yet we’re still successful.

So you wouldn’t think to take equity?

We had a couple of approaches last year but they kept talking about money and we were not prepared to relinquish control of our baby, especially when we didn’t think the mums would react well. We want to monetise it the right way.

It’s all got ludicrous. Kidspot (one major competitor) got huge amounts of money but I don’t see how their model is sustainable. Kidspot spends a huge amount of money on Google words. They are in the paid results while we are high up in the free search results. While they have double our uniques, their page impressions are half of ours, so more people are going to Kidspot but to less pages.

Are you profitable?

Of course. Our costs are low. We work from home and have five people (not full time).

We were almost profitable by the second year. But our big mistake – as our accountants keep saying – is we did not monetise it sooner. We should have taken an agency on much earlier than we did.

Your plans for the future?

Hilary’s development plans are never zero. The system is significantly automated now, but as we add new sections she has to hard code those.

What makes you proud?

The way we built the directory. We researched it and added information whether it was commercial or not. Parents know if they have a question, they can get an answer.

We have helped a lot of people by providing a support network for people who didn’t know where to turn. One person on our forums tried to kill herself and we told the police who knocked her door down and saved her. The forums help them know they are not alone and to get the confidence to appeal for help. I said to Hilary the other day if it all goes away tomorrow, we can be proud of that.

Read more about Kidspot, online communities, longtail and monetising online