The Naked Truth is over. Every terrace of the Olympic Sculpture Park was packed. All the panelists were mobbed. And we announced our big news: that Redfin was profitable last month, all while maintaining our 97% customer satisfaction. The business has been growing by leaps and bounds, in part because the real estate market has had a small rally this summer, but in part because we’ve started to figure out how to prosper in down markets too. What has made the difference for Redfin hasn’t been any one breakthrough that we could have pinned our hopes on, but a combination of small adjustments:
- Giving consumers a choice of real estate agents, and unlimited home tours.
- Publishing real estate agent reviews, which increased demand 36% in a single month.
- Simplifying the real estate agent choices we offer consumers, which increased demand a further 16% in a single month.
- Generating referral revenues from customers in outlying areas that we can’t afford to serve ourselves.
- Figuring out Google optimization, which drove a 300% increase in traffic year over year, though that growth is now slowing.
It’s nice to wonder how much more profitable Redfin can be once the market really recovers. But since real estate is a seasonal business, we’ll have plenty more ups and downs in our fortunes along the way.
The difference now is that even if Redfin goes back down, we’ll always know that we can go back up. And knowing that is a huge salve for what’s most unbearable about startup life: the aching possibility that it can never work, that the game is so stacked against you it doesn’t even matter what moves you make. Well, Redfin has plenty of problems, and we could still easily fail, but we know now how we can win, too.
Wait, What About the Naked Truth?
And we’ll keep on trying to learn from others, like the entrepreneurs, journalists and investors who attended the Naked Truth tonight. We’ll post the Naked Truth video some time on Friday, but for now here’s what struck us as most interesting about the event.
Picnik’s Jonathan Sposato – wearing Gucci wrap-around glasses and a seersucker suit – said that partnerships only generated 16% of Picnik’s traffic, and that subscriptions accounted for 80% of its revenues. (I was surprised by how much Picnik’s margins seemed to be affected by photo storage, a feature I never cared about as a premium subscriber.) What really impressed me about Jonathan’s overview of Picnik – I have always been opposed to ads on Redfin, and more interested in subscriptions – was how important that 20% of ad-generated revenue was to Picnik.
And I learned a lot about ads. Urbanspoon’s Ethan Lowry – - who said that Urbanspoon employed only three people full-time when Michael Arrington picked out a fourth Urbanspooner in the crowd (“she’s part-time!”) – said that Citysearch’s local salesforce got top-dollar, whereas Adsense and iPhone ads paid much lower rates. The closer ads are to a point of purchase, the higher the rate; the best rates come from local restaurants hoping to get a reservation directly from the ad.
As a buyer of ads, Animoto’s Brad Jefferson explained that you can’t buy traffic until you understand how much revenue it will generate; at first, pay advertisers based on the revenue they generate, then later based on impressions or clicks. It sounded so obvious when he said it, but we paid for traffic in the early days without knowing diddly about what it was worth to us.
Michael Arrington said that TechCrunch makes its money mostly from events, not ads. Damon Darlin said the New York Times has avoided events so that it doesn’t become a cheerleader for the businesses it covers.
Twitter and Growth
Fred Wilson said that Twitter hadn’t chosen a revenue model because it was focused purely on growth — a luxury that it seems Twitter alone can afford to have right now — and Michael Arrington said that Twitter was like YouTube, which sold for a high valuation because Google had to evaluate it revenue potential in lieu of actual revenues.
Fred then claimed that his own blog got as much traffic from Twitter and Facebook as from Google, whereupon Michael Arrington told Fred he was wrong about his own blog. Which is why we all love Michael Arrington.
Fred Vogelstein said that startups could generate less revenue because they spent less money. Fred Wilson said that companies focus on revenues too much in lieu of earnings.
Ethan noted that a $5 iPhone application that sold to all 40 million iPhone owners would still only have a total possible market of $200 million. Fred Wilson shot back that iPhone developers will make far more money now on the new ability to charge for upgrades and transactions.
And Then The Fur Started Flying
Damon Darlin showed Michael Arrington his notes for their hotly disputed interview about bloggers’ accuracy and speed. Fred Wilson told Michael Arrington that his complaints against Seattle were a “crock of shit” but then — because Arrington gets blamed for everything — everyone pretended that it was Michael who had called out Fred (when all Mike said was: ”Name another big Seattle hit besides Amazon and Microsoft?”). Damon Darlin compared me to Steven Spielberg. I told Fred Wilson my blog posts took forever to write; he said, once he started writing, his never took more than 30 minutes. (How on earth does he do that?)
Thanks to everyone who came to the event, to our fantastic panelists who traveled from far and wide to participate, to our sponsors Madrona, Fenwick & West and Square 1 Bank, and to Angela Cough and the rest of the Redfin crew here who put it together. And thanks most of all to our wonderful clients, to this community, to all the hard-working folks of Redfin, past and present, who got us to this big milestone!