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Entrepreneur Profile: Markus Frind

In its January 1 issue, Inc. magazine has a profile of Markus Frind, the Vancouver entrepreneur who with a staff of one (himself) built the most-trafficked dating site in the world generating the most ad revenue of any dating site.

In a lesson to all folks hoping to build the next social network anything, he did it by keeping it simple. The site was free and, once he had enough members, he exploited the nascent Google AdWords to generate revenue from ads. Ads for his biggest competitors! And he did the whole thing by himself — still does — and now makes $10 million a year.

Money quote:

Amazingly, Frind has set up his company so that doing everything else amounts to doing almost nothing at all. “I usually accomplish everything in the first hour,” he says, before pausing for a moment to think this over. “Actually, in the first 10 or 15 minutes.”

To demonstrate, Frind turns to his computer and begins fiddling with a free software program that he uses to manage his advertising inventory. While he is doing this, he carps about Canada’s high income-tax rate, a serious problem considering that Plenty of Fish is on track to book revenue of $10 million for 2008, with profit margins in excess of 50 percent. Then, six minutes and 38 seconds after beginning his workday, Frind closes his Web browser and announces, “All done.”

Realize that Frind is the only employee of his company. It’s not like he’s outsourcing any of the work or essentially not managing a hard-working staff. The entire workload of his company is less than one hour per day total. And, just so you can really go green with envy, the reason why he only has a profit margin of 50% is because he pays himself a salary of $5 million a year.

There’s a secret to Frind’s one-hour a day, ten million dollar a year job, that may not be translatable to other start-ups, but it’s worth deconstructing. I have seen a similar formula employed by about half a dozen entrepreneurs I’ve worked with. More after the break.

The secret is to find a business start-up that only requires front-loaded work and a market underserved or totally ignored by the big folks. And then let the underserved market generate all the content (like Hot or Not). Most of all, keep it simple. Let the users do one or two things. As long as you can find users who are perfectly willing to do those one or two things, there’s no need to pull your hair out trying to improve your product.

However, Frind’s greatest idea — or just plain unbelievable luck — was to essentially build an “entry” site for his competitor’s sites. That is, Frind’s dating site, Plenty of Fish, is a bare-bones site designed for people not ready for the real thing. Why is that brilliant? Because he has a built-in advertising base: his biggest competitors. And that’s where all his advertising revenue comes from:

Rather than try to compete directly with Match, the industry leader, he created a website that cost almost nothing to run and was aimed at the sort of people who wanted to browse a few profiles but weren’t ready to take out their credit cards. In doing so, he had found a way to reach a large, underserved market. Even better, he had created a perfect place for paid dating sites to spend their huge advertising budgets.

And the final element of success: if you’re succeeding, do nothing. Seriously, any attempt to “improve” your product means you’re committing yourself to a lot of hard work that may fail:

Frind is aware of his site’s flaws but isn’t eager to fix them. “There’s no point in making trivial adjustments,” he says. Frind’s approach — and the reason he spends so little time actually working — is to do no harm. This has two virtues: First, you can’t waste money if you are not doing anything. And second, on a site this big and this complex, it is impossible to predict how even the smallest changes might affect the bottom line. Fixing the wonky images, for instance, might actually hurt Plenty of Fish. Right now, users are compelled to click on people’s profiles in order to get to the next screen and view proper headshots. That causes people to view more profiles and allows Frind, who gets paid by the page view, to serve more ads. “The site works,” he says. “Why should I change what works?”

I have put that statement, “you can’t waste money if you’re not doing anything,” on my wall.

Seriously, Frind has succeeded because of a rare coincidence of synergies.

  • A clearly identifiable underserved market.
  • Near-zero operating costs that allowed him to offer his product for free.
  • A product that is completely user- or customer-generated.
  • Targeting a market segment that “is not ready” for the products offered by his competitors, making his site the best advertising vehicle for his competitors — in other words, he built an “entry product” to his competitors’ products.
  • Keeping it simple.
  • Staying with free or inexpensive tools.
  • Building a product that doesn’t require tweaks, upgrades, facelifts, or improvements.

    A business like Frind’s really only comes around a few times each generation. Most shoestring and bootstrap ventures are going to require a lot of work and tough decisions — and changes and long work weeks.

    However, Frind is exactly the kind of entrepreneur that the Shoestring Venture series is all about. He could literally be the cover guy for the book and the following paragraph from the article could easily have been one of the first two or three paragraphs in our introduction:

    But if Frind’s methods make him unusual, he is also a man of his times. In the past few years, a new technological ecosystem, built around Google’s dominance in Web search and its decision to offer powerful software tools at no charge, has changed the economics of doing business on the Internet. Web analytic services that used to cost thousands of dollars a year are now free. Competitive data, once available to only the largest companies, can be had with only a few clicks on Compete.com and Quantcast.com. And advertising networks, especially AdSense, have made it possible, even preferable, for Internet entrepreneurs to bootstrap their businesses without hiring a sales force and without raising much money. Websites that venture capitalists would have spent tens of millions of dollars building in 1998 can now be started with tens of dollars.

    And there you have it. The Shoestring Venture credo.

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