Startup Review

Rotten Tomatoes Case Study: SEO drives traffic growth

written by Nisan Gabbay, posted on September 24th, 2006

Why profiled on Startup-Review.com

Rotten Tomatoes is one of the leading movie sites on the web, ranking number 6 according to Nielsen NetRatings for the week of August 20, 2006. Rotten Tomatoes was acquired by IGN in June 2004 for approximately $10M, when it had 5.2M monthly UVs (according to ComScore) and was generating ~$200K per month in revenue.

Rotten Tomatoes is a great story of a company that started out as a hobby, raised a little funding ($1.01M) during the boom, hunkered down during the bust, and managed to make a nice return for its founders and investors. I am personally a big fan of the site and always love to discuss companies started by young entrepreneurs from UC Berkeley (my alma mater).

This is also the first case study I have done based on an interaction I had with a reader of Startup Review. I spoke with Patrick Lee, the ex-CEO of Rotten Tomatoes, because he commented on the Flickr case study. I greatly encourage any reader who was part of the founding team and/or early employee at a successful Internet company to contact me if you’d be willing to speak about your experiences for a few minutes.

Interviews Conducted: Patrick Lee, ex-CEO of Rotten Tomatoes, 2000 - 2005

Key success factors

Innovative product

When Rotten Tomatoes launched in August 1998 it was the first movie review site to aggregate critic reviews and provide consumers with a composite review score of a movie. This feature was called the “Tomatometer”, which is the percentage of reviews that are rated “fresh”. Coupled with creative branding, it was a winning web product that people “got” immediately. Within a few days of launch, Rotten Tomatoes got great publicity as a cool, new site from web reviewers which drove its initial traffic growth.

Over time, other sites mimicked the Rotten Tomatoes aggregate review score, but they were the only major movie site to provide this feature for almost two years - long enough to capitalize on the initial buzz that the site generated.

Focus on search engine optimization to increase traffic

The Rotten Tomatoes team observed that most people searched for movie reviews by searching on the movie name or actors in a film, not for a movie review itself. Furthermore, searches for movies occurred in the greatest quantities around an anticipated release or controversial movie. Therefore Rotten Tomatoes architected the site to give each individual movie its own Rotten Tomatoes mini-site to boost natural search rankings. This was the primary method for how Rotten Tomatoes grew its traffic, as other online advertising and marketing methods could not provide sufficient return to justify the expense. Even as Rotten Tomatoes rolled out more community features like forums, blogs, and friend features, these were not the major drivers of traffic. As primarily an information service/content site, natural search rankings were the key to growth.

** Update to original posting **  Please see comments from the Rotten Tomatoes team in the Comments sections for greater detail on their SEO strategy.  Almost 70% of incoming traffic was/is from search traffic, emphasizing the point that a loyal community may not be enough to achieve mass scale for an information service.

Product and brand dedicated to movie reviews

Patrick credited the decision to stay focused on movie reviews as one of the key strategic decisions that Rotten Tomatoes made. While many people advised them to branch into other categories early on, the focus on movies helped them build the best possible product for that category and establish their brand. They only launched the game reviews many years later to prove that they could move into other categories. Even within movies, Rotten Tomatoes focused on the reviews, and licensed or partnered with other companies to provide other movie-oriented data (cast/crew, show times, pictures, etc.) or services.

Launch strategy

Many of the articles I have referenced below provide a great historical context on how Rotten Tomatoes got started. Their initial traffic came as a result of mentions as a cool new site on major Internet sites and mainstream press. As stated above, continued growth was fueled through SEO efforts.

Rotten Tomatoes acquired movie review content through a mix of automated and manual procedures at the start. As the site became more well-known, movie critics began submitting their content directly to Rotten Tomatoes.

Exit analysis

Rotten Tomatoes was acquired by IGN in June 2004 after being courted for nearly a year. The decision to sell was a difficult one for the Rotten Tomatoes team, as they recognized the improvement in the ad market and continued traffic growth of the site. Had they waited another two years, there is no doubt that the purchase price would have been higher than $10M, given recent precedent transactions for top tier content sites. So why did they decide to sell?

The executive team felt that while Rotten Tomatoes could continue to increase its value, they also identified other potential entrepreneurial opportunities. In particular they saw great opportunity in the China Internet market and thought they could get a higher return on their time by starting a company there, rather than slowly increasing the value of Rotten Tomatoes.

While they recognized the improvement in the online advertising market, in early 2004 it was still hard to predict the boom that we have today. Coming off the ad market downturn due to 9/11 and continued terrorist threats, the team was uncertain how quickly the ad market would grow. After seeing their revenues drop from $50K per month in the boom to $5K per month during the bust, they were all too familiar with how events beyond their control could affect their business.

After devoting approximately five years to Rotten Tomatoes, the team was happy to reap a good, but not phenomenal return for their efforts and move on to the next thing. They also managed to make a return for their investors after some pretty lean years.

Food for thought

This case study got me thinking about several things.

The team could have sold Rotten Tomatoes earlier than 2004, but they felt an obligation to their investors (mainly angels they had worked with before) to make a return. They turned down many offers that would have netted their investors $0.10 to $0.25 on the dollar, but instead decided to ride out the downturn. Most entrepreneurs face the decision of taking money from friends to get their businesses started, and this does raise the bar in terms of the level of commitment required. Once you take that money, you are signing up to a serious commitment to make a return. If it is only your time and money, you have more flexibility in terms of exit options. I suppose this is rather obvious, but I think many people rush to raise money without fully understanding the consequences of that decision.

Rotten Tomatoes is also a good example of a site that was able to effectively compete with sites having much stronger distribution and resources. While Yahoo Movies still generates more traffic than Rotten Tomatoes, a relatively simple product innovation was able to create a sustainable business and a formidable competitor to the much larger Yahoo and IMDB. Even after the major sites mimicked Rotten Tomatoes, the site continued to grow. The main reason for this was search. Search levels the playing field for smaller sites. If you have a content-oriented / information service site, you are probably best off focusing your time on SEO, because natural search rankings will prove more defensible than having the best feature set. Thus, while it might be more fun to build cool features for a content site, investing time into SEO will likely provide a greater return on your limited resources.

Reference Articles

There are some very good articles written about the Rotten Tomatoes story. The best of these I have listed below.

Q&A with Senh Duong, April 2005. This is a great interview with the founder of Rotten Tomatoes, Senh Duong, chronicling the ups and downs of the company. Also gives insight to some revenue and traffic metrics.

SF Chronicle article, April 2000. This is an old article that has some good facts on how the site grew in popularity in the early days. Note that the numbers for UVs are incorrect in the story.

This is the best article that I find regarding the exit, from local paper East Bay Business Times (July 2004). Has a few interesting facts on where Rotten Tomatoes derives its revenue and the motivation behind the IGN acquisition.

World of Film Reviews Changed by the Internet, The Hollywood Reporter, February 2006 has some good commentary on the Rotten Tomatoes product and a few other players in the industry.

Questions for Startup Review readers

What do you think were the keys to the success of Rotten Tomatoes?

Rotten Tomatoes feature innovation provided them a 2-year window before they were copied by competitors. How long can a feature provide competitive advantage in today’s web environment?

What are other examples of content sites that had an explicit SEO strategy that worked to increase traffic?

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