How To Build a "Lifestyle Business" with 30 Million Visitors Per Month: The wikiHow Story

12/16/11Follow @wroush

In Silicon Valley, there is no more pejorative term than “lifestyle business.” It’s usually applied to companies that do well enough to earn their founders and employees a living—sometimes a very good living—but that will never make anyone mega-rich. Venture capital partners, who have to weed out all but the fastest-growing companies if they’re to have any hope of making the Forbes Midas List, often dismiss these less meteoric players with a phrase like “It’s probably a nice lifestyle business, but it just won’t move the needle for my fund.” Even many startuppers, who often work insane hours on the assumption that their options will turn to gold when their company is acquired or goes public, seem to reserve special pity for lifestyle entrepreneurs who haven’t won Sand Hill Road money and aren’t perpetually “killing it” or “crushing it” in the way Silicon Valley culture demands.

Well, I visited a Web company recently that occupies a lovely cottage near downtown Palo Alto, has grown to 12 employees without raising a dime in outside funding, and attracts 30 million unique visitors a month to its website. For comparison’s sake, that’s more traffic than Groupon, the New York Times, Match.com, Zynga, or Yelp can boast. If that’s a lifestyle business, then I’ll have what they’re having.

WikiHow founder and CEO Jack Herrick

The company is wikiHow, which, as the name implies, is a crowdsourced encyclopedia of instructional articles on everything from how to kiss to how to perform CPR on a dog. (As it turns out, those are pretty much the same thing.) It was founded in 2005 by a former management consultant, serial entrepreneur, and rock climber named Jack Herrick. If I were making a list of unsung heroes around Silicon Valley, I’d nominate Herrick for his success building a huge media property without help from the venture industry, and for assembling an amazing online resource for readers without polluting it with acres of advertising. One hundred percent of the company’s revenue comes from unobtrusive Google AdSense text ads, which makes wikiHow one of the many companies that owe their existence to the search and advertising giant; more on that below.

“I hate the term, but yeah, that’s what we are, a lifestyle company,” Herrick confessed to me in a recent interview. “Somebody needs to create a better word. I think it should be ‘awesome company.’ One of the reasons I have the best job in the world is that we are not venture financed. It just gives us so many more degrees of freedom. We can decide not to have a sales force, we can decide we don’t need to grow revenue 100 percent this year. We can figure out what is the most important thing in our mission, and focus on that.”

The mission at wikiHow is simple, and as breathtaking in its ambition as Google’s: “We want to cover everything and have it be universally good,” Herrick says. And the site has made impressive progress in that direction. It features more than 129,000 user-contributed articles in seven languages. Obviously, it’s not nearly as comprehensive as Wikipedia, which has 3.8 million articles in 282 languages. But you won’t find Wikipedia articles on such indisputably helpful subjects as How to Deliver a Baby, How to Remove Odors from Your Car, and How to Accept Criticism with Grace and Appreciation. If there’s anything Web audiences seem to love more than seeking advice, it’s giving it—and wikiHow taps both impulses with more sincerity, and far less junk, than any other how-to site I’ve seen.

Back in July, just days before its acquisition by Autodesk, I profiled a maker-focused how-to site called Instructables. I called it “the rare crowdsourced site that actually turns a profit,” which brought an e-mail rejoinder from Josh Hannah, a friend and former business partner of Herrick’s who now works at venture firm Matrix Partners. Hannah called wikiHow “the even more rare profitable crowdsourced site that has 5x the traffic.” That might be a bit of an exaggeration: WikiHow’s U.S.-only traffic is only twice that of Instructables’, according to Compete.com, and both sites are far outstripped by WikiAnswers and eHow, Demand Media’s how-to juggernaut. But it’s true that wikiHow appeals to a broader audience than Instructables. And its articles are certainly more thorough, and more human, than those at content farm eHow—which, interestingly, Herrick used to own.

And therein lies a story. But before I get to that, I want to rewind all the way to 1991, when Herrick was finishing his B.A. in history at Stanford. He told me the whole tale during a long interview on the front porch of the “WikiHaus” on Emerson Street in Palo Alto, a couple blocks north of University Avenue.

Herrick went straight out of school into a management consulting position. “I didn’t like it and I was really bad at it,” he says. Luckily, at age 23, he discovered rock climbing. “It was one of those random days that changes your life,” he says. He quit his job, emptied out his savings account, squeezed all his possessions into the back of a pickup truck, and moved to Yosemite Valley.

It wasn’t a reckless, Into the Wild-style adventure, but it did shape Herrick as a future entrepreneur. “I was not a good athlete,” he says. “I was kind of a klutz. Also, I was afraid of heights. It was a bad combination. But climbing is one of those sports that rewards effort. It’s also a very cerebral activity—the most important muscle you use is your brain.”

Herrick became so absorbed in the sport that he ended up living out of the pickup for two and a half years. “I climbed Half Dome and El Capitan and ended up trailing all around the Western U.S. and Thailand and Nepal,” he says. “Through that process, I really learned a lot more than I’d been learning in my job. For one thing, you always partner with at least one person when you go after a summit, so I learned how to pick people and recognize talent and determination and shared values. I also learned about what you have to do to accomplish a goal. Climbing is 99 percent misery—it’s a lot of frustration and fear. It’s dehydration in the summer and freezing your ass off in the winter. It’s a lot like entrepreneurship.” In fact, it was during his rock-climbing phase that Herrick would meet the co-founders of two of his four future startups.

And there was one more aspect to this life that would stick with Herrick. To stretch out his savings, he tried to make do on $10 a day, with the exception of travel expenses and books, which he considered off-budget. Herrick marked off an area in the pickup that he called his “knowledge box,” and filled it with a rotating collection of new and used hardcovers and books borrowed from public libraries from California and Utah and Wyoming. “I had spent years at Stanford doing academic learning but for the first time, with my knowledge box, I was learning cooking and rock climbing and doing all of these things,” he says. “That started my interest in lifelong learning.”

Eventually, Herrick put his pitons away and went to business school, at Dartmouth. He went back into management consulting for just long enough to confirm that it wasn’t his scene. By then it was 1999, a good time to start something new, and with Dan Frank, one of his climbing friends from Yosemite, he started an online restaurant supply company called Big Tray. More or less overnight, the company won $10 million in venture funding and acquired 40 employees. “It was the sort of thing that only happened in 1999,” Herrick says. “It was a good story and a bad story. Let’s just say it was the best executive education that $10 million could ever buy.” When the dot-com crash hit in 2001, the company ran out of capital and ended up selling for pennies on the dollar. (Herrick maintains that “if the investors had put a little more cash into it, it would have been a good deal for them. Not the next Amazon, but the next Zappos.”)

Herrick took a year after the sale to do the “decompress, dot-com-bust, travel around the world, climbing-surfing thing” with his girlfriend, who is now his wife. Next came Luminescent Technologies, a UCLA-born semiconductor company. While he was there, he reconnected with another old climbing buddy—Josh Hannah, who was working at the time on sports betting sites Flutter.com and Betfair.com.

For entertainment, Hannah and Herrick “started goofing off with some ideas,” Herrick says. “In the process, we started talking about old sites from the dot-com era that were looking dead or almost dead. EHow was at the top of the list. I knew the original founder, Courtney Rosen, and I really liked the idea of a how-to manual. I think one of the best things you can do is learn new skills. Reading those books in my knowledge box had changed my life. EHow was an early attempt to do that online.”

Hannah and Herrick did some poking around, discovered that eHow was on its last legs, and bought it for a mere $100,000. They hired a former Big Tray engineer named Travis Derouin to rewrite the site’s code, took down the pay wall, and started adding new articles. “It was like a microcap turnaround,” says Herrick.

But the company immediately ran into problems with quality control. “We were paying people to write articles, but the economics are such that you have to pay a very small amount to make the math work,” Herrick says. “It was hard to get the quality we wanted for $15 per article.” Meanwhile, Wikipedia was on the rise, and was paying its contributors and editors nothing. “I though, ‘Geez, I should try that.’ We wanted eHow to be the single best resources for getting started on every topic, and I realized that with the eHow method I wasn’t going to get there. So I launched wikiHow and said ‘Let’s see if this wiki method can work.”

At the same time he was building up wikiHow, Herrick kept buying content for eHow; wikiHow was like its crowdsourced, underground cousin, using the same open-source wiki software that powered Wikipedia. At first, Herrick says, the project was “an obvious failure. Almost no one was writing. The home page was vandalized every day. The content was junk. But you could see, despite all those problems, that the wiki method was working. You could come back to an article over months and see the improvement process happening. It wasn’t much, but it was going in the right direction. And I fell in love with the wiki method.”

We’re now in 2006—a time when investors were starting to regain interest in Web content companies. Old-media companies were realizing they needed to have a new-media play, and “we started to get lots of offers to buy eHow,” Herrick says. But he didn’t want to sell unless he could keep wikiHow for himself—and most suitors, naturally, balked at that idea. “Most people said, ‘No way, I’m not going to let you compete with eHow after I just paid lots of money for it.’”

The first potential buyer willing to bow to Herrick’s terms was Demand Media, which didn’t mind spinning off wikiHow, since they didn’t see it as much of a threat. “I think they looked at it and said, ‘This is junk anyway. There’s no way this one guy and this one engineer are going to be able to beat us,’” says Herrick. “And it was true—I haven’t beat them. But it’s not the same game.”

The game at wikiHow is really about community. When Herrick says he fell in love with “the wiki method,” he really means that he was falling in love with wikiHow’s contributors—he just didn’t realize it until later. “What I know now is that the treasure is the community of people who gather around to work on this,” he says. “Wikis turn out to be all about people.”

The WikiHow archive is growing at a rate of around 50 percent per year; it passed the 100,000-articles mark last March. And the secret to that growth is that it’s a high-touch operation. Herrick says he made a point early on of reaching out to all of the site’s contributors, even after they multiplied into the thousands. “For the first two years I looked at every single edit on the site,” he says. “If it was even halfway decent I sent a note saying ‘Thank you for your edit.’ I got to know the people. It’s now gone way beyond the point where I could greet everyone who comes in the door, but I personally know the major contributors.”

But why does crowdsourcing work at all, considering that nobody who writes for wikis gets paid? One theory, proposed by NYU’s Clay Shirky, is that productivity increases have left the general population with a cognitive surplus. Herrick thinks that writing and editing for sites like wikiHow provide a more fulfilling way to invest that surplus than, say, playing Farmville or World of Warcraft.

“How rewarding is it to plant virtual strawberries?” he asks. “Killing orcs is great, but at the end of the day, what have you accomplished? With wikiHow and Wikipedia, at the end of the day you have accomplished a lot. You’ve met other people with similar interests and you’ve shared that interest with a gazillion people.”

If cognitive surplus is one fuel feeding wikiHow, another is AdSense. Google’s pay-per-click, keyword-based advertising program is a godsend for high-traffic sites like Herrick’s. “It allows us to run our business without really worrying about anything else,” he confesses. It’s an amazing luxury, when you think about it—has there ever been another time in history when a single company’s invention provided a livelihood for so many others?

Of course, if you really wanted to build a big business, you probably wouldn’t want to depend solely on the ads Google sends your way. Instructables, for example, has a sales staff that works with big brands to set up sponsored campaigns and contests. But fortunately, Herrick doesn’t want to build a really big business. “I certainly want wikiHow to be a nice, profitable, healthy business, but squeezing every last dollar out of it has not been on my priority list,” he says. WikiHow even lets registered users opt out of seeing the AdSense ads. (And registration is free.)

The hidden benefit of being a lifestyle business, in Herrick’s view, is that it actually gives wikiHow a much longer runway to accomplish its goals. “The thing with us is that it’s going to take us decades to do what we want to do,” he says. “Our mission is laughably ambitious. The idea that 12 people could attempt such a thing is pretty ludicrous. If there is any chance of us being able to pull it off, it will be because we can take our own sweet time,” rather than operating within the 7-to-10-year time horizon of a venture fund.

And Herrick thinks there’s plenty of work left to do. It takes only a few minutes of browsing the site to discover that there are many subjects nobody has written about. There’s an embarrassing shortage of content in all non-English languages. There isn’t much video or other multimedia content. And the quality of most text articles “is good, but not as good as it could be,” Herrick says. “I can imagine much better.”

Herrick says he worries that wikiHow will eventually have to start paying people to round out the unfilled corners of the site, and that AdSense won’t generate enough revenue to fund freelance contributions plus the development work that will be required to keep the site up to date in a world of mobile devices and HTML5.

But so far, he hasn’t been tempted to go out fundraising—or to consider acquisition offers. “One data point I have never told anyone outside the company is that we actually did get an attractive offer from a big, public Internet company,” Herrick says. “We turned it down. I thought about it a lot, and did a lot of soul searching, and I think I made the right choice. But it wasn’t easy.”

What made the decision a little easier than it might have been, Herrick says, is that selling eHow was “a very nice deal.” Exactly how nice, he didn’t say. But because he’s had past successes, “I don’t have to get to that first piece of liquidity,” he says. “So it’s not like there’s any massive hurry to do anything. I just think we can make [wikiHow] better, and I want to keep trying.” Which sounds like a pretty worthy lifestyle to me.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • Scott

    Dear fellow entrepreneur,

    There is a huge ecosystem out there that does nothing but move entrepreneurs away from building business that can grow and flourish to crafting empty shells that can be inflated and sold. The big law firms have their “entrepreneur universities” to teach you how to get your company ready for funding. Business plan competitions, local economic development agencies and angle groups all do the same. This entire infrastructure is all aimed at getting you ready to sell (out) your company to VCs. By the time you have twisted and bent your company so many ways you will have changed from focusing on your old customer (the one with the pain that you have an unique solution for) to your new customer (the VC). It is the job of VCs to buy and sell companies, not to build them. And certainly not to solve customer’s problems. That is the reason why VCs have a 90 failure rate (by their standards). Think very carefully about that. If they fail to fund over 90% of business plans that they see and 90% of the businesses fail then why on earth should you bend yourself to their needs. Sure, if they do take the company public then you might get rich, if they haven’t kicked you out and the stock doesn’t tank before you call sell your shares. If getting rich gets you out of bed in the morning then go work for wall street, do not kill yourself building a product into a company.

    There is a radical solution out there. Find a customer with a problem, create a solution you can build with your resources, sell it to the customer at a profit and build a profitable business. That may mean cutting down on the scope of your first product to what you can deliver. Say you want to build an electric car company. That would take billions in VC money. Before you get past your first round of angle funding what ever brilliant insight that you may have had will be crushed by the twisted needs of the VC. Do not go there. If your idea to too large, find a piece of it that you can build and sell with your resources, then make and sell that product to start and build your company from there. That might only be new type of suspension rod in the car example, but if you can make it and sell it for a profit then you build from there.

    You say you are an early stage entrepreneur and not interested in the long haul? No worries. There is always someone there to buy a profitable small business. Rinse and repeat on a larger scale. That is what the whole lean start-up thing is really all about.

    Yes, I guarantee you that the VC infrastructure will laugh at you, but what is wrong with solving problems and creating jobs? Does this sound more like your father’s company or your grand father’s company? I hope so. They built companies that employed our neighbors, paid the taxes that build our infrastructure and educated us. It is time we stand-up and do the same. “Occupy Sand Hill Road” would be a silly exercise. Ignoring distractions is always the best course. What we really need is to occupy main street. Occupy main street not in protest, but in progress.

    Find a problem, create a solution, build the product from your existing resource, sell at a profit and build the company! Only take money from those who love you – friends, family and founders. Listen to your customers and then listen again and then listen some more to your real customers. Take pride not in how many share you have, but in how many people you employ. Be proud, be VC free, be a real entrepreneur.

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