Startup Review

MyBlogLog Case Study: Product progression and the widget

written by Nisan Gabbay, posted on February 26th, 2007

Why profiled on Startup Review

MyBlogLog was launched as a blog analytics service in March 2005, but became popular by creating online communities around specific blogs. MyBlogLog enables bloggers to connect with their readers on a more personal level by building profiles of readers and connecting them via social networking features. As of February 16, 2007, MyBlogLog had 70,000 registered blogs, approximately 14,000 of which are using its popular “Reader Roll” widget. The company was acquired by Yahoo in January 2007 for a rumored price of $10-$12M. The company was bootstrapped with no outside investors, resulting in a nice payday for its three founders.

Interviews conducted: Scott Rafer, CEO of MyBlogLog

Key success factors

Popularity of the reader roll widget

The popularity of MyBlogLog’s reader roll widget, a blog sidebar widget that showcases mini-profiles of the most recent readers, was the driving factor behind MyBlogLog’s success. The widget served as free advertising, driving near zero cost user acquisition. MyBlogLog is serving more than 2.5M reader roll widgets per day on 14,000 sites, as of mid February 2007. Fred Wilson has a nice post where he calculates the value of the widget at $300,000 per month in free advertising (using a $10 CPM and 1M impressions per day). I would argue that a $10 CPM is probably on the high side, but even using a $1 CPM at 2.5M impressions per day would still be equivalent to $75,000 per month in free advertising.

Equally important is that the widget communicates very neatly and succinctly what MyBlogLog does, enticing both bloggers and readers to register for the service. The widget also appeals to people on an emotional level. In my previous posts, I have touched upon how successful photos of people’s faces are to attracting a user’s attention, and this is another great example.

Team responsibility and authority clearly divided along three lines

Scott credits a big part of MyBlogLog’s success to how the team operated. Each member of the triumvirate had responsibility and ultimate authority over their respective areas of expertise. Eric Marcoullier was responsible for product, Todd Sampson for technology, and Scott for overall business decisions. Interestingly enough, Scott did not think that the reader roll widget would be important to the company, never mind the key driver behind the company’s success, when the idea was first proposed by Eric. However, given that Eric had control over product decisions, Scott did not stand in his way. This is not to say that the team does not collaborate on decision making across their respective areas, but making each person the ultimate decision maker over their area paid huge dividends for MyBlogLog.

In our case study on Userplane, CEO Mike Jones gave similar credit for dividing the company along those three lines. Might we have stumbled upon the correct management structure for Internet start-ups – business, product (user champion), and technology equally represented? I think the key insight here is giving product (taking a user-centric view) an equal weight; in most organizations product is usually subordinate to the other two.

Identify problem area and solve through product marketing

Scott didn’t fully agree with me on this one as a key success factor, but I am going to propose it anyway because I think other entrepreneurs might benefit from this train of thought. MyBlogLog was founded in January 2005 with the intention of helping bloggers to better understand their readers. The initial product started as a way for bloggers to understand what links people were clicking to leave their sites. Scott joined MyBlogLog in March 2006, bringing the simple idea that bloggers would prefer to know who their readers are from a social context rather than have detailed, aggregated analytics on user visits. Scott proposed to simply show bloggers who each and every individual reader actually is, which in retrospect, is sort of an obvious insight. Later on, the reader roll widget idea was proposed by a couple of users and championed by Eric as a great idea.

The lesson here for entrepreneurs is that one should pick a problem worth solving and then rely on product marketing techniques to lead you to the right solution. If you truly understand the problem you are solving, what your users value, listen carefully to feedback, and don’t fall too in love with your initial product vision, you will have a much higher probability of success. I think that the MyBlogLog team accurately identified an unsolved pain and did well to pursue it through several iterations before figuring out the right solution.

I think there is a good framework for Internet entrepreneurs to follow when evaluating their opportunity:

1. Are you confident that a problem (or customer pain) exists?
2. Is that problem worth solving, i.e. will there be a lot of people that change their behavior in a small way, or a few people that change their behavior in a big way? Or stated differently, if you solve that problem, do you think there will be a large reward? (for those of us that are greedy)
3. Go try to solve that problem, but don’t assume that you know too much about the answer. Rely on users to guide you.
4. Make sure you have enough runway to iterate – probably 18 months is good.

Launch strategy and marketing

The key to MyBlogLog’s success in launching its social networking service was the fact that they had an installed base of thousands of bloggers using their analytics service. MyBlogLog was founded in January 2005 and launched its blog statistics service in March 2005. Thus, when they launched the private beta of the social service in July 2006, they had 14,000 registered bloggers whom they prompted to create social profiles. The product progression here is worth pointing out. MyBlogLog started with a product that delivered value to users without requiring network effects to be in place first. The social product would not have worked as effectively upon launch without it being pre-populated by profiles.

From there, MyBlogLog did well to get influential tech bloggers to use the service, people like Brad Feld and Fred Wilson. They also actively participated in blog conversations regarding their service by placing comments on other people’s blogs to drive awareness. The big win in terms of marketing and viral adoption came with the launch of the reader roll widget (please see above).

Exit analysis

Yahoo acquired MyBlogLog for a rumored $10-12M in January 2007. There is a great discussion on Don Dodge’s blog about the exit valuation for MyBlogLog and what Yahoo bought for that sum. While Don’s analysis is nice from a textbook-style approach to valuation, what really drives the purchase price is simply the price that the market will bear, and quite frankly valuation metrics don’t really come strongly into play. This is more of a three-way game of chicken between VC’s, Yahoo (and other suitors), and the entrepreneur. Had MyBlogLog had offers from VCs to invest at a higher valuation, Yahoo would likely have spent more to acquire them.

According to Scott, Yahoo’s motivation for the purchase was several fold. One, Yahoo execs really liked the product, plain and simple. It has a nice emotional pull that attracts people. A more rationalized justification for the purchase comes from how MyBlogLog will contribute to two big Yahoo initiatives around off-network distribution and social services. A key part of Yahoo’s monetization strategy is to build its capabilities in behavorial targeting of ads. MyBlogLog’s user profiles and rich cookies (100+ million to date) can be added to Yahoo’s ad targeting engine, thereby yielding increased revenue via higher click-thru rates.

When I asked Scott why they chose to sell rather than take VC funding, he had a nice quote for me: “eat when dinner is served” (a quote Scott had heard from the guys at Topix). The founders had invested about $200,000 in MyBlogLog in terms of hours of coding contributed, and Scott added $24,000 to help cover hosting costs when traffic started accelerating. A 50X return in two years time is hard to argue with. No dilution, no loss of control, and no uncertainty about future acquirers. Eat when dinner is served!

Food for thought

MyBlogLog is another company whose success in acquiring users came about through widget marketing. Other examples include YouTube, RockYou, and Slide. I think that we will continue to see more companies have success with widgets, although the bar for user attention will continue to climb. So what are some keys to getting widgets to produce results? For one, the widget needs to benefit the end user with a clear value prop. I think that many of the failed widget plays out there don’t provide enough value to the end user. Afterall, the user is trading real estate on their site to put up the widget, so as a widget provider you are not only competing with your direct competitors but also with all other widget providers and advertising options vying for that user’s attention. Second, the most successful widgets seem to be social in nature rather than informational. Pictures seem to draw people’s attention the most. In the case of MyBlogLog it was faces in a social environment starved for them. As Scott said, “something in our forebrain can’t remain indifferent to eye contact”.

Widget marketing will be an area that I will research more fully and perhaps create a separate post on. If you have any more ideas for how to make a widget successful, please contribute by adding to the comments below.

References and further reading

“MyBlogLog – Shoestring Web 2.0 Success Story,” Fractals of Change Blog by Tom Evslin, January 14, 2007
Exceptional post by Tom and well worth the read. Great discussion on marketing of a Web 2.0 service and a nice list of lessons learned from the MyBlogLog success.

“Interview: MyBlogLog co-founder, Eric Marcoullier,” Steve O’hear – The Social Web, ZDNet.com, December 2006
Interview provides a nice background of the goals of the company when it was founded and how things have since evolved.

“The breakthrough that is MyBlogLog,” Matt McAlister, January 2007
This post is extraordinary for no other reason that it has the most comprehensive list of links on what people have been saying about the Flickr/MyBlogLog acquisition.

“Yahoo acquires MyBlogLog for $10M – Has anyone done the math?”, Don Dodge on The Next Big Thing, January 2007
Nice discussion on how to value a company like MyBlogLog and speculation on what Yahoo saw as the long-term value.

“The Site, She Grows!”, The MyBlogLog Blog, December 2006
Has some nice stats on the growth rate of MyBlogLog. Nice commentary by Fred Wilson on the value of the widgets as an advertising medium, being valued at $300,000 per month.

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