April 2001 Edition home

Got Profit: Local Dot Coms Buck The Trend By Making Money Despite the odds, three local entrepreneurs have developed profitable Internet companies. Some of them achieved their profitability almost by accident. By Cal Chang Yocum Special Correspondent The Triangle TechJournal: April 1st, 2001 www.triangletechjournal.com In the world of emerging Internet companies, the terms "profitable" and "out of the red" are rarely used when talking about dot-coms. But that's exactly how three Triangle entrepreneurs are describing their business-to-business and business-to-consumer Internet plays. MemoWare.com:  500,000 unique visitors a month When Craig Froehle isn't logging in hours to complete his PhD in business administration at the University of North Carolina at Chapel Hill, the 31-year-old is operating MemoWare.com, an online resource for owners of personal digital assistants (PDAs). Froehle developed the hobby website in 1996 as a way to share documents with the few fellow Palm Pilot fans that were around back then. MemoWare was in the black by its second birthday and now boasts on average more than half a million unique visitors each month. If the exponential growth curve continues, Froehle expects traffic to his PDA Website to double this year. MemoWare.com raked in $101,000 in revenue in 2000, with 85 percent from advertising and the remaining from content syndication. Froehle hasn't recruited advertisers since 1998 and says he restricts advertisers to PDA-related companies.   "MemoWare is such an established website in the PDA community that if you want to advertise to PDA users," Froehle said, "MemoWare will probably be one of your first choices." From documents that share worldwide ISP dial-in numbers to e-novels, MemoWare.com offers and supports more than 7,500 downloadable files formatted for the Pocket PC, Epoch and Palm operating systems. Users contribute to 90 percent of the documents in the library, and roughly 150 are added each week to this official Web content partner of Palm. The site's most popular categories include computers, medicine, novels, religion and miscellaneous. After doling out the money for his low operating expenses, "net earnings provide a generous supplement to my graduate assistant stipend," Froehle said. Net profit has increased in the range of 500 and 600 percent a year, since 1998. Not bad, considering the graduate student spends about 10 hours a week maintaining the Website, providing users with technical support and on business development, all from the comfort of his own home.  "The first-mover advantage," Froehle said, "has been useful for me simply because I [created a site like this] long before anyone thought about it." Although MemoWare's low overhead helps cash flow, Froehle believes his personal integration into and enthusiasm about the PDA community, and the site's simple and efficient design, all contribute to MemoWare's success. MemoWare has never been run with the primary goal of making a profit, Froehle said.  "The fact that it has happened, I think, is a testimony to patience.  MemoWare is running a marathon, whereas, I think, a lot of failed dot-coms tried to win a sprint." JollyRoger.com: Professor turns web entrepreneur In the same town of Chapel Hill, Dr. Elliot McGucken runs JollyRoger.com, an Internet portal for literary classics. The 30-year-old created the site in 1995 while he was a PhD candidate studying physics at the University of North Carolina at Chapel Hill. Needing an outlet to quench his literary side, McGucken put up poems on the Website. The site has since grown to include Great Books of the Western Canon, text on classical art, law, architecture and music -- and forums to discuss topics from religion to philosophy. JollyRoger.com generated $80,000 to $90,000 in revenue in 2000 and enough in 1999 to persuade McGucken to quit his day job as assistant professor of physics at Davidson College. Fall 1999 was McGucken's first -- and last -- semester teaching at the liberal arts college just outside Charlotte. "Throughout 1999," McGucken said, "the Website was paying me more than my job as a professor, so I decided it was time to quit." McGucken says his take-home pay in 2000 was approximately $40,000, after software, hosting and trademark expenses. The site derives 80 percent of its revenue from advertising and the balance from affiliate programs that can pay up to 15 percent commission. Banner advertising first appeared on the JollyRoger site in 1997. JollyRoger.com receives about half a million unique visitors, made up primarily of college and grad school students. They view some 7 million pages monthly. "A guy from England sent me 500 pounds, because he liked the site so much and didn't want it to vanish," McGucken said. JollyRoger's business plan is to make additions that McGucken doesn't have to update the next day, making the site cumulative. McGucken's business philosophy can be summarized by a handful of quotations from the Bible, famous philosophers and authors, including "A great fortune is a great slavery," and "We do not commonly find men of superior sense amongst those of the highest fortune." Over the course of five days, an average of 275,000 files are requested from JollyRoger.com. Marketed mainly by word-of-mouth from its growing community of readers, JollyRoger.com has garnered attention from the Wall Street Journal, the Los Angeles Times, the New York Times and Book Magazine. "With the classics, you're dealing with eternal brands and some of the best brands in history, such as Homer and Shakespeare," said McGucken. Like MemoWare, JollyRoger's success can be attributed to its low overhead:  McGucken works from his home and is the only employee. "In a sense, all my employees are dead so I don't have to give them stock options or anything," McGucken said, referring to the authors of the classics featured on his site. Despite the growing number of analysts and venture capitalists who shun revenue models based on advertising, both Froehle and McGucken believe it's a viable model, although it certainly has its limitations. E-commerce does work, as long as one has a product to sell that others wish to buy, McGucken said.  "Banner ad revenue supports thousands of smaller profitable sites which have high content-to-employee ratios." "Advertising-based, or sponsorship-based, approaches have existed successfully for years," Froehle said. "The fact that Web-based companies are having difficulties figuring out how to make Internet-based advertising successful is due somewhat to our lack of experience." ITParade.com: Making its way into the black Over in Cary, Robert Davie, is sleeping better at night since his online marketplace for information technology equipment, ITParade.com, made its way out of the red in February.   Davie, who is executive VP and founder of ITParade.com, wouldn't disclose the company's revenue or its net profit, but said he expects ITParade's revenue to quadruple in 2001, ending the year with a profit. Founded in 1996, before the term "b-to-b" was even coined, Davie saw the need for a used computer equipment exchange while he was at IBM working on the PowerPC Website. The PowerPC site generated 32 percent of all inquiries and 34 percent of all sales, Davie said. Currently 60 percent of ITParade's revenue comes from transaction fees, with the rest evenly split between advertising and subscriptions. Information technology suppliers pay a fee of $1,200 a year to take part in ITParade's dealer network, as well as a 10 percent commission fee for every item that's sold via the site. Non-suppliers, such as companies that have shuttered their offices and are shedding their routers, servers and mainframes, pay a smaller commission of 5 percent. "The company's future is in building revenue from e-commerce transactions," Davie said. There are 20,000 listings for information technology equipment on the ITParade site, which partners with Internet portal giant Yahoo's b-to-b site. "All our listings show up on their site," Davie said.  "About 10 percent of our revenue comes from [that partnership]." Although the company is seeing black instead of red these days, ITParade.com faced a string of difficulties similar to many other dot-coms. When the economy turned south and venture capitalists balked at business-to-business plays, ITParade laid off four of its underperformers, reducing its burn rate and workforce to a trim staff of eight. Davie found that the market nosedive, however, also contributed to the company's success. As start-ups close their doors, they're selling off any remaining assets such as technology equipment. Other emerging start-ups, with shallow pockets, then snatch up the equipment at a fraction of the cost of new equipment. The economy aside, ITParade's best kept secret may be its dealer network that's comprised of both dealers and buyers. The company, which raised about $300,000 in private funding from J.W.  "Wild Bill" Stealey, also has new software systems and deals with big household brands to add to its fortune. The secret is staying attuned to the industry you're in and not to Wall Street, Davie said.  "Once you take your eyes off the ball, you're in trouble." The other dot com entrepreneurs would seem to agree with Davie. "If you build and invest in infrastructure but then have no content of any real quality to offer over that infrastructure, what's the point?" Froehle asks. TTJ home

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Got Profit: Local Dot Coms Buck The Trend By Making Money Despite the odds, three local entrepreneurs have developed profitable Internet companies. Some of them achieved their profitability almost by accident. By Cal Chang Yocum Special Correspondent The Triangle TechJournal: April 1st, 2001 www.triangletechjournal.com In the world of emerging Internet companies, the terms "profitable" and "out of the red" are rarely used when talking about dot-coms. But that's exactly how three Triangle entrepreneurs are describing their business-to-business and business-to-consumer Internet plays. MemoWare.com:  500,000 unique visitors a month When Craig Froehle isn't logging in hours to complete his PhD in business administration at the University of North Carolina at Chapel Hill, the 31-year-old is operating MemoWare.com, an online resource for owners of personal digital assistants (PDAs). Froehle developed the hobby website in 1996 as a way to share documents with the few fellow Palm Pilot fans that were around back then. MemoWare was in the black by its second birthday and now boasts on average more than half a million unique visitors each month. If the exponential growth curve continues, Froehle expects traffic to his PDA Website to double this year. MemoWare.com raked in $101,000 in revenue in 2000, with 85 percent from advertising and the remaining from content syndication. Froehle hasn't recruited advertisers since 1998 and says he restricts advertisers to PDA-related companies.   "MemoWare is such an established website in the PDA community that if you want to advertise to PDA users," Froehle said, "MemoWare will probably be one of your first choices." From documents that share worldwide ISP dial-in numbers to e-novels, MemoWare.com offers and supports more than 7,500 downloadable files formatted for the Pocket PC, Epoch and Palm operating systems. Users contribute to 90 percent of the documents in the library, and roughly 150 are added each week to this official Web content partner of Palm. The site's most popular categories include computers, medicine, novels, religion and miscellaneous. After doling out the money for his low operating expenses, "net earnings provide a generous supplement to my graduate assistant stipend," Froehle said. Net profit has increased in the range of 500 and 600 percent a year, since 1998. Not bad, considering the graduate student spends about 10 hours a week maintaining the Website, providing users with technical support and on business development, all from the comfort of his own home.  "The first-mover advantage," Froehle said, "has been useful for me simply because I [created a site like this] long before anyone thought about it." Although MemoWare's low overhead helps cash flow, Froehle believes his personal integration into and enthusiasm about the PDA community, and the site's simple and efficient design, all contribute to MemoWare's success. MemoWare has never been run with the primary goal of making a profit, Froehle said.  "The fact that it has happened, I think, is a testimony to patience.  MemoWare is running a marathon, whereas, I think, a lot of failed dot-coms tried to win a sprint." JollyRoger.com: Professor turns web entrepreneur In the same town of Chapel Hill, Dr. Elliot McGucken runs JollyRoger.com, an Internet portal for literary classics. The 30-year-old created the site in 1995 while he was a PhD candidate studying physics at the University of North Carolina at Chapel Hill. Needing an outlet to quench his literary side, McGucken put up poems on the Website. The site has since grown to include Great Books of the Western Canon, text on classical art, law, architecture and music -- and forums to discuss topics from religion to philosophy. JollyRoger.com generated $80,000 to $90,000 in revenue in 2000 and enough in 1999 to persuade McGucken to quit his day job as assistant professor of physics at Davidson College. Fall 1999 was McGucken's first -- and last -- semester teaching at the liberal arts college just outside Charlotte. "Throughout 1999," McGucken said, "the Website was paying me more than my job as a professor, so I decided it was time to quit." McGucken says his take-home pay in 2000 was approximately $40,000, after software, hosting and trademark expenses. The site derives 80 percent of its revenue from advertising and the balance from affiliate programs that can pay up to 15 percent commission. Banner advertising first appeared on the JollyRoger site in 1997. JollyRoger.com receives about half a million unique visitors, made up primarily of college and grad school students. They view some 7 million pages monthly. "A guy from England sent me 500 pounds, because he liked the site so much and didn't want it to vanish," McGucken said. JollyRoger's business plan is to make additions that McGucken doesn't have to update the next day, making the site cumulative. McGucken's business philosophy can be summarized by a handful of quotations from the Bible, famous philosophers and authors, including "A great fortune is a great slavery," and "We do not commonly find men of superior sense amongst those of the highest fortune." Over the course of five days, an average of 275,000 files are requested from JollyRoger.com. Marketed mainly by word-of-mouth from its growing community of readers, JollyRoger.com has garnered attention from the Wall Street Journal, the Los Angeles Times, the New York Times and Book Magazine. "With the classics, you're dealing with eternal brands and some of the best brands in history, such as Homer and Shakespeare," said McGucken. Like MemoWare, JollyRoger's success can be attributed to its low overhead:  McGucken works from his home and is the only employee. "In a sense, all my employees are dead so I don't have to give them stock options or anything," McGucken said, referring to the authors of the classics featured on his site. Despite the growing number of analysts and venture capitalists who shun revenue models based on advertising, both Froehle and McGucken believe it's a viable model, although it certainly has its limitations. E-commerce does work, as long as one has a product to sell that others wish to buy, McGucken said.  "Banner ad revenue supports thousands of smaller profitable sites which have high content-to-employee ratios." "Advertising-based, or sponsorship-based, approaches have existed successfully for years," Froehle said. "The fact that Web-based companies are having difficulties figuring out how to make Internet-based advertising successful is due somewhat to our lack of experience." ITParade.com: Making its way into the black Over in Cary, Robert Davie, is sleeping better at night since his online marketplace for information technology equipment, ITParade.com, made its way out of the red in February.   Davie, who is executive VP and founder of ITParade.com, wouldn't disclose the company's revenue or its net profit, but said he expects ITParade's revenue to quadruple in 2001, ending the year with a profit. Founded in 1996, before the term "b-to-b" was even coined, Davie saw the need for a used computer equipment exchange while he was at IBM working on the PowerPC Website. The PowerPC site generated 32 percent of all inquiries and 34 percent of all sales, Davie said. Currently 60 percent of ITParade's revenue comes from transaction fees, with the rest evenly split between advertising and subscriptions. Information technology suppliers pay a fee of $1,200 a year to take part in ITParade's dealer network, as well as a 10 percent commission fee for every item that's sold via the site. Non-suppliers, such as companies that have shuttered their offices and are shedding their routers, servers and mainframes, pay a smaller commission of 5 percent. "The company's future is in building revenue from e-commerce transactions," Davie said. There are 20,000 listings for information technology equipment on the ITParade site, which partners with Internet portal giant Yahoo's b-to-b site. "All our listings show up on their site," Davie said.  "About 10 percent of our revenue comes from [that partnership]." Although the company is seeing black instead of red these days, ITParade.com faced a string of difficulties similar to many other dot-coms. When the economy turned south and venture capitalists balked at business-to-business plays, ITParade laid off four of its underperformers, reducing its burn rate and workforce to a trim staff of eight. Davie found that the market nosedive, however, also contributed to the company's success. As start-ups close their doors, they're selling off any remaining assets such as technology equipment. Other emerging start-ups, with shallow pockets, then snatch up the equipment at a fraction of the cost of new equipment. The economy aside, ITParade's best kept secret may be its dealer network that's comprised of both dealers and buyers. The company, which raised about $300,000 in private funding from J.W.  "Wild Bill" Stealey, also has new software systems and deals with big household brands to add to its fortune. The secret is staying attuned to the industry you're in and not to Wall Street, Davie said.  "Once you take your eyes off the ball, you're in trouble." The other dot com entrepreneurs would seem to agree with Davie. "If you build and invest in infrastructure but then have no content of any real quality to offer over that infrastructure, what's the point?" Froehle asks. TTJ home

April 2001 Edition home

IN THE BLACK: IT Parade.com, which sells used computer equipment, is gung ho about profits.  Pictured are Kara Stafkey, Ryan Jewell, CEO Robert Davie (with computer), Chris Constand (with computer), and Barbara Wendell in Cary.

LITERARY MAGNATE: Dr. Elliot McGucken of JollyRoger.com runs a tight ship and makes money on advertising by keeping his costs low and doing all of the work himself.

WHY IS HE HAPPY? MemoWare.com founder Craig Froehle makes money from his dot com -- thanks to his 500,000 unique users every month.