The DevHub story: firm finally finds a sustainable business, looks to expand in 2013
Following many failed business models, Seattle firm DevHub has found a sustainable business model that doesn’t rely on Google.
It was the fall of 2010 and DevHub was running out money. Which meant it was running out of time.
The firm had raised $2 million and had gone through a couple different business models. But nothing stuck long enough to sustain the business. The firm had regarding 10 payrolls left, and then it was toast.
Then the phone rang…
The beginning
Mark Michael, Geoffrey Nuval and Daniel Lee Rust knew they were on to something.
Their firm DevHub began in 2007 as EvoLanding, a service that could semantically build websites that would attract search engine bots and churn out cash.
Auto creating web sites that you couldn’t tell were machine generated was tough but they thought they had found a way to do it. Investor Rob Monster gave them a vote of confidence and seeded them with $275,000 to take their product to the domain market.
The next year domain owners, looking for an answer to declining parking revenue, submitted over 1 million domains to the platform. The growth was stunning, and five additional investors kicked in $580,000.
The results were good, too. Sites that got little traffic suddenly got a lot and started pulling in strong revenue from Google Adsense, affiliate links and other ad networks.
It wasn’t until the end of 2008 that the firm started noticing a problem. It noticed that, following a few months, some sites would lose their relevancy. They could grow a site with relevant content for a while, but then the automated tools would start to break down when it came to relevancy. With lost relevancy came lower search traffic.
Still, the firm marched on. In the beginning of 2009 the firm took a good look at what it had: a site creator that resulted in search traffic, good ways to monetize web visitors and access to good domain portfolios.
Develop with DevHub
The firm decided it was time to open its system up a bit. It opened up all of its site building modules to domainers through DevHub.com so they could make sites themselves. Sites with soul that they’d curate over time.
It worked. The firm became profitable (temporarily) later in 2009.
Toward the end of 2009 the firm took on an additional investor who injected $850,000.
But shortly following the 2010 Fresh Years’ bubbly had gone flat, the firm realized it had a bit of a problem.
It had given these great tools to domainers, but domainers weren’t finishing sites. They were basically creating parked pages on the system. 80%-90% of the sites were unfinished. Competitors offering similar site building solutions felt the same pain.
If sites weren’t finished and curated, they didn’t get good search traffic. And if they didn’t get good search traffic, they didn’t make much money.
Gamification
That’s when the firm got its next idea: add gamification to the web site building process. It would be SimCity meets Adsense meets WordPress.
As clients developed more of their web site they unlocked fresh templates, monetization options, etc.
When DevHub rolled out gamification in July 2010 it got a lot of tech industry press. But it also got a strong reaction from its existing client base.
“What the hell did you just do?” they asked, as co-founder Mark Michael recounted to me recently. The firm privately wondered if adding gamification, a hot trend at the time, was the right decision.
Gamification drove a lot of modest business clients to the site. They’d finish out sites, which was DevHub’s goal. But modest businesses didn’t add monetization to their sites, so DevHub didn’t make any money.
By this time money was running low. The firm had 30 employees and its burn was $150,000 a month. It had regarding 10 payrolls left, and then the bank account would read zero.
As the co-founders surveyed the situation, they didn’t see much they could do. At the end of the day all they had a web site creator.
“A freakin’ web site developer,” they thought. “There are 10,000 ways out there to build a free web site.”
An notable phone call
In October 2010 the phone rang at DevHub’s tenth floor office in Seattle.
On the other end of the line was a sizable North American telecom firm. It had 1.2 million modest businesses and it knew it needed to offer digital products to them. But how, and how at scale?
The firm called DevHub to inquire if it would white label its web site tool. Something regarding DevHub — be it the gamification, the ease of use, the press — had attracted the telco’s attention.
That first deal led to six figures up front and a monthly licensing fee.
Fast forward to 2013 and the firm has 26 private label clients paying a couple bucks per month for each site they launch. There are around 100,000 active paying sites on DevHub.
In most cases the clients (typically Yellow Pages operations) use the DevHub platform themselves to develop web sites for modest businesses. In some cases clients open the tools up directly to the modest business end users.
Finally, DevHub had found a predictable, recurring revenue base — that was not dependent on Google.
The future
With 26 white label clients, DevHub is ready to broaden its market.
It is reopening the DevHub platform directly to end users who want to create sites. It by now has one million domains on its direct platform that have been created over the years. Regarding 10% of those are completed sites in which the owners log in to make updates each month. DevHub hopes to grow that number while also charging for its platform.
It’s also offering a more affordable white label solution starting at $249 that is targeted at agencies and smaller web developers. Additionally, it’s expanding its services to mobile and Facebook.
It’s been a long journey, but DevHub’s core team has stuck to it. It looks like that’s finally paying off.
