I was at the Weedle offices last night and spent an enjoyable evening drinking their wine and learning about what their future plans are. For those of you who haven’t yet heard of Weedle, they are an Irish Start up lead by Iain MacDonald who successfully sold his previous company Perlico to Vodafone in 2007.
What Do Weedle Plan On Doing?
Weedle see a fundamental and universal inefficiency in how people find other people with particular skills. Regardless of if you are looking for drummer to join your band or you need a patent attorney the process that people go through today is lengthy, difficult and regularly produces poor results. Weedle is looking to solve this problem by creating a searchable social network focused on the skills that people have.
Weedle Homepage
The social aspect to what they do is critical. They believe that a person’s proximity to your social network is as important as they skills they possess. In fact they will only show reviews of people if the reviewer is someone you already trust. To some degree I buy into this, at least for common skill sets that are likely to be in my extended social circle.
How are they going to do it?
- Users create a profile focusing upon their own skills.
- Users expand their network by inviting people they know. They are incentivised to do so becuase the larger their network on Weedle the more likely that someone who is looking for their skills will find them.
- Weedle create a search engine where anyone can look for a particular skill in a specific location. Although anyone will be able to use the search, engine additional value is provided if you are logged in.
The Business Model
Weedle have grand plans and they are passionate about building a scalable platform that genuinely provides value. Some of the fundamental tenents of what they do is that they will never charge for position and they will never charge for anything that doesn’t add value to the platform as a whole. While I think this is admirable I question whether there is a valid business model that can underpin the platform.
I have previously spoken out about Irish tech startups that don’t have revenue models that hold water. In my view companies in Ireland that think they can grow a user base without thinking seriously about revenue need to check their atlas and see just how far away Ireland is from Silicon Valley. Simply put, Irish companies do not have access to the resources necessary for this strategy and by resources I mean captial, expertise, management team, etc. Even though Weedle has some serious financial firepower behind it, I would still hold the same reservations.
Their only disclosed business model so far is pay per click business advertising and I thought it would be fun to dissect it.
The potential revenue from PPC advertising on a site depends on 3 factors:
- How much advertisers are willing to pay per click.
This is a function of the content of the page and how far down the buying cycle the typical visitor is. So an advertiser will pay more for the keyword ‘buy lcd television’ than they will for ‘compare plasma & lcd television’ because the second keyword indicates that the user is still relatively early in the buying cylce.
- The percentage of visitors that will click on the advert.
This is largely dependent on how relevant the adverts are to the visitors frame of mind. An example of this is that Google can get pretty good click through rates as their visitors are actively seeking information on the subject matter, whereas Facebook gets poorer click through rates as their visitors are being interrupted from their social networking activities.
- The number of visitors and the volume of pages that they view.
Price per Click
This is all going to depend on how users use the service. If the platform ends up being used primarily for high end skills (legal, marketing, etc.) then Weedle should be able to get a lot per click; a ballpark figure of €1 would certainly be possible. However, if its primary use turns out to be for low skills or worse yet non-economically centered skills then their potential price per click could be as low as 10 cent.
Click Through Rates & Relevance
It is pretty easy to see how you can get the adverts to be relevant on a subject matter basis. For example, legal firms would advertise against legal skills and landscaping companies against landscaping skills. However, it would seem to be difficult to get them to match on social relevance. What I mean here is that visitors have come to Weedle specifically because they are looking to find people with the skills that they have that they are connected to. This makes advertising companies who are not part of the social network irrelevant and as a consequence click through rates will decrease.
Another concern would be that the better Weedle becomes at providing useful socially connected search results then the worse the non-socially connected advertising model will perform. This creates negative incentive for the company which is not a good thing.
So what sort of click through can Weedle expect on their search results? Very optimistically 5% and pessimistically 0.5%.
Volume of Visitors
How often do you need to find someone with a new skill? Pretty frequently for sure, but not on a daily basis. I would think on average about 6 times a year for the typical person. So if Weedle get a user base of a million people who use it 50% of the time, with average page views of 4 it would give them one million page views per month.
Potential Revenue
Based on a million page views a month with click through rates between 0.5% and 5%, and the cost per click being between €0.1 and €1, the potential advertising revenue is between €50,000 per month at the top end and as little as €500 at the bottom. Clearly this is a model that needs massive scale in order to be successful.
To put this into perspective, if Weedle is as successful as Facebook and expand to 400 million users then I would project the maximum PPC revenue at €20 million per month, which compares to Facebook’s €50 million. So why would Weedle earn less than FaceBook with the same number of users? After all, FaceBook adverts can’t be more relevant? The reason is that FaceBook users view a huge number of pages each and log on nearly everyday. Their average user spends 55 minutes a day on their site.
Conclusions
The guys at Weedle are a smart group that have built a tremendous amount of technology prior to launch and they clearly have to be looking at other revenue opportunities. Areas that I think would be worth exploring are:
- Providing company search results side by side with near equal emphasis to the people search function. Use a pay per lead or pay per position model.
- Close the loop by processing payment and providing escrow services for certain appropriate skill sets. (The Elance model.)
- License their search results to the major search engine. (The Twitter model.)
It’s great to see another Irish company setting out with properly grand ambitions, and we can’t wait to see how things turn out for them.
Update -15th of March 2010?
Weedle have just announce $4million in investment for US expansion. This is exactly the level that they need to be playing at in order to succeed. This is a huge milestone and massive success for a pre-launch company.
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