StackOverflow | Greg Young

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I am a bit odd. I will rarely if ever answer a question on StackOverflow (SO). If I do its because I didn’t have any other easy way of answering the question. This is entirely by design.

StackOverflow is not a new business model. I was involved at one point with a company with a similar business model. Experts-Exchange.com. Did you know it has the dash because it is also ExpertSexchange.com? I have heard rumours that originally the domain name was that :)

At Experts-Exchange, users are awarded points for answering questions asked by other users or writing articles the general community values as resourceful. This results in a competition for obtaining more points to achieve various experts’ certifications.

Sound familiar? It started in 1996. It went defunct and was basically built up from community around 2000-2001. It was a community site at that point, and it grew rapidly as such. Everything was free and community driven. I won’t go through all the history here, you can read about it here. At one point you were actually paid to answer questions! EE screwed up really bad. Many of us saw it coming a long ways off. Legacy code, alienated community …

I was very active on EE back then. I acquired 2,782,577 points. Yes thats right and at 500/question (with bonuses the max you could get was 2000/question but you rarely got that). I probably answered 3000-5000 questions and most questions were multiple posts trying to help people out. They don’t have them any more but I would not be surprised if I had 10,000 posts. Let’s do some quick math assuming 5 minutes per post thats 50,000 minutes of my time. Or roughly a half year full time weeks of work. I think the time is actually higher than that though.

The idea of the business model is to pay people in imaginary currency and sell what they do for real currency. Best is if you can make your imaginary currency seem like it has some value.

What’s really great is that the Intellectual Property that you pay people imaginary currency for has value not just to the person they are helping but as a searchable help database over time. For the one person that was directly helped often another 100 will get their answer from the answer originally given.

There are some issues with the business model. First I need to get experts (few) to start answering the questions of the askers (many) and I need to build up a reasonably sized database of previous answers. This is not a small task. SO is using the same model that EE used, Community. They are making it “community driven”. This gets people involved. There are no costs for answers everyone is relatively happy. This builds the critical mass.

Generally speaking the growth would follow a pretty stereotypical S-Curve.

Scurve

This is where things start to get fun. In order to move up the S-Curve you have to keep capitalizations to a minimum. It may start with something small let’s say some ads (you know to help support all our infrastructure). Or we are building off this side business (job ads). Nothing too big, if we do too much it will slow the growth thats what needs to be avoided.

The whole point here is to make as much money as possible. If the goal were to build up community you wouldn’t need to set them up as a centralized broker of the information, it would be distributed. But this is a truly community centric viewpoint and there isn’t a good business model here.

As you get to the top of the S-Curve when growth starts slowing this is when you start to apply the pressure. You can be more aggressive at this point as well because your community itself has huge value just because creating a new one would be such a massive undertaking. EE did this. Milked the cash cow. The biggest most controversial change was when they put up the answer block and moved to subscription based models.

Would a VC give SO millions without looking at capitalization strategies down the line? I think not. The only thing they have of value is your brain and the intellectual property you assign them rights to use. They are not innocent nor do they give a flying @#$! about the community. They only care about keeping the community happy enough that they keep giving them intellectual property for imaginary currency so they can sell it for real currency.

Monopoly