Startup Review

Wallstrip Case Study: Delivering content where it is consumed

written by Jay Parkhill, posted on July 31st, 2007

Why profiled on Startup Review

Wallstrip, which produces short online video pieces covering stocks, is a fascinating and unusual business. Born of the blogosphere, founded by a venture capitalist who says he never intended to run it as a long-term business, funded with seed capital and sold less than a year later, the company fairly screams “test project”. The fact that it was sold to CBS for $5M (as reported by Techcrunch) a mere nine months after launch proves that the test was successful.

Investor/advisor Fred Wilson reports that he met founder Howard Lindzon on blogs, and Howard told me that he met the show’s producers Adam Elend and Jeff Marks the same way. Fred, Brad Feld and others invested $600,000 and the production team was sent off with a mandate to produce a short video every business day for less than $1000, and to cover high-flying stocks with humor.

Interviews conducted: Howard Lindzon, founder and Adam Elend, founder/producer

Key success factors

Build the distribution mechanism into the content itself

Adam stressed to us that it is not enough to create content, post it on YouTube and hope that people will like it. From the beginning, Wallstrip was designed around the idea that (flukes and one-hit wonders aside) content should reflect the community it is made for, delivered to the places where the community can already be found, and should encourage viewers to pass it around.

Wallstrip did this in several ways. First, it picked a single subject to cover: high-performing stocks. This was a conscious and careful decision. Focusing on one subject let the company target a specific audience, the online financial community. Their stated goal was to become an “instigator of conversation” about the stocks covered within that community.

Second, it enlisted a group of prominent financial bloggers from day one to comment on Wallstrip, the videos and the companies Wallstrip features. These people were able to deliver the message about Wallstrip with credibility to their own readers.

Third, Wallstrip made its content searchable. The company recognized that video is harder to search than text and compensated by focusing on stocks, where ticker symbols and other key terms can account for a big portion of search requests. Furthermore, the type of content that Wallstrip would produce would not go stale over time, unlike other stock news that is highly time dependent. Wallstrip videos can continue to be relevant for three months or longer.

Reaching the influencers, and building the content they like to see

Wallstrip focused on reaching specific groups of people rather than simply going after high viewer/subscriber numbers. In the interactive web’s syndication-based environment, traffic reports can show how many people viewed a stream, but very little about who those people are or even whether they watched the whole thing. Feedburner and other tools also help to aggregate the data, but there is no one-stop shop and information needs to be pulled from various sources.

Audience statistics, therefore, are fragmented and short on detail, making them hard for content creators to gather and use meaningfully. Wallstrip figured this out from the start and decided that instead of focusing on total readership, it would concentrate on reaching specific viewers - the “influencers” in marketing terms. To launch Wallstrip the team leveraged Howard Lindzon’s personal relationships to engage and involve approximately 10 bloggers (each with 3,000 - 10,000 readers per day) to write about Wallstrip. They not only helped the company reach out to wider audiences, but more importantly served as a sounding board for what the larger financial community would like to see.

As Adam put it - if the influencers (in this case financial bloggers) don’t like the content it’s a pretty good indicator that either (a) you are targeting the wrong audience, or (b) your content isn’t right for the audience you are going after. Bloggers are in need of quality content. If you can provide them with this content, then it is a win-win situation for everyone. Thus, the key is to understand what bloggers will find valuable. Wallstrip did a great job of incorporating feedback from bloggers into its content.

Exit analysis

It became clear to us that the Wallstrip team showed tremendous savvy and a remarkable ability to articulate Internet marketing strategies - and to carry them out. CBS will no doubt gain tremendously from the team’s expertise. CBS told Howard and Adam it liked the team- and especially the fact that they “knew how to get things done on the Internet” as well as the content and the communities Wallstrip built in its short history. The motivation behind the acquisition boiled down to three main things: 1) CBS liked the content the Wallstrip team produced and viewed it as a way to re-enter the financial news arena (CBS previously sold Marketwatch to Dow Jones), 2) they valued the online influencer community that had developed around Wallstrip, and 3) they valued the team’s expertise. The Wallstrip team felt that CBS would be a great partner because CBS understands that media distribution has evolved, as witnessed by their efforts to build a distributed content network. Wallstrip plans to leverage these automated systems and partnerships.

The return on investors’ capital in under a year is a solid result, noting that the $5M total payout didn’t make a home run for any individual. The compressed timeframe almost certainly also produced the “short-term capital gain” effect that Jeff Clavier has also griped about, where the exit comes within one year from investment so that the entire gain is taxed as ordinary income at the maximum rate rather than the lower long-term capital gain rate. Sour grapes for the professional investors, perhaps, but probably more unfortunate for the production team that saw a big bunch of its stake go to the IRS.

Food for thought

Wallstrip was founded to target a specific community with specific content. The company attracted the attention of top bloggers in that community, worked with them from the outset to develop content that appealed to them, and quickly built its name from there.

This is another way to say that Wallstrip laid out its business plan and then executed on it near-perfectly. They are probably among 5% of companies able to do that without iteration, re-starts and changes in direction. What helped Wallstrip to hit the mark so well?

I believe that foremost was its very tight focus. Wallstrip set out to accomplish a single, narrowly-defined goal: produce and distribute one short, humorous video clip per day on financial news. This let them research the audience carefully and custom-tailor the content to the audience, figuring out what the audience wanted to see and where they wanted to see it.

Many other factors went into the success. Adam talked extensively about the show’s intimacy and authenticity, the company worked hard on distribution mechanics, and judging from viewer comments host Lindsey Campbell is a huge draw, but I believe the real key was that Wallstrip knew its audience intimately, developed relationships with key people in that audience to help refine the content, and then gave the audience something it really wanted to see. It sounds simple in hindsight, but Wallstrip accomplished all these things better than most.

References articles and further reading

How Web Video Content is Different
Adam Elend’s blog

Confirmed: CBS Acquires Wallstrip
Mashable description of sale and estimated proceeds

Wallstrip Goes Through the Exit Door
Fred Wilson’s blog – insightful discussion of what Wallstrip did well

Wallstrip Cons CBS for $5 Million
Prohiphop – interesting discussion in the comments about valuation between a skeptic and Wallstrip principals

Ad Startups Turn Away from User Generated Video
Newteevee – Discussion of the value of professionally-produced video to advertisers. Doesn’t mention Wallstrip, but relevant nonetheless.

Another View on Vertical Social Networks
Brad Feld – Interesting take on Wallstrip as a potential vertical social network in the making

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