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Business

Learning a lesson from Classmates

There's no easy trick for making money on the Web, but Howard Baldwin finds a classical model like Classmates gives some inspiration.
Written by Howard Baldwin, Contributor

Back in college, my creative writing professor told us, "All the good plots have already been done by the Greeks." She wanted us to think about the importance of plot as it related to unique characters, but it turned out she was identifying a key tenet for success on the Web.

Just as no one would be interested in characters without a plot, no one would be interested in technology without good content. That's the underlying theme of Classmates, a Renton, WA-based Web site that's defying the trends of the last two years by being remarkably successful.

As a dot-com, the company is unique--it has real content, and furthermore, content people are willing to pay for. Though not every Web-based business is lucky enough to happen upon such a simple business model and tap into such a broad community, most businesses could stand to learn a lesson from Classmates.

Company representatives say they're on track to pull in $70 million in revenues this year. While 31 million people have signed up on the site, only 1.65 million have spent the $36 a year required to be a Gold member (renewal is $30). Members can send e-mail, set up a biographical profile, set up groups, and post messages. (Those who you don't sign up still can view information, but not communicate.)

In fact, when Classmates started, in the heady days of 1995, its business model required subscription fees, going against the trend of the time. Though it accepts advertising, that's a secondary revenue stream for the company. It's the content that actually makes the company money.

The siren call of content
On first glance, you'd think Classmates' content would be enough to ensure its success. Who hasn't wondered what happened to their first high-school crush?

But it's not just high school. We've all joined--and moved on from--numerous communities in our lives. There are even stories of people who have sought birth parents and abducted children on Classmates.

Even more than eBay, with which it's frequently compared, Classmates taps into a yearning that we all have--the urge to know what happened to the characters after the plot wrapped up. "People have a strong reaction to the Web site," says venture capitalist Marc Singer of BEV, one of Classmates' investors. "It helps people connect emotionally to their past."

What lies beneath
But if that were enough, similar sites would be doing just as well. And they're not. "Our next largest competitor is Reunions.com, an agglomeration of other failed alumni sites," says Michael Schutzler, Classmates president and CEO. "We think they have between 1 million and 3 million accounts, but even if we're off by a factor of five, we're still larger."

Schutzler attributes Classmates' success to something he thinks most people ignore. "The trick about the Internet is--regardless of whether you're a search engine or a community or a publisher--in the end, you're a software company, whether you like it or not."

Schutzler compares the concept with a magazine. "You put together interesting stories and pictures that people want to read. But at the end of the day, you have to put ink on paper." Then, you have to get the paper into the hands of the readers. You can have the best writers and editors in the world, but if you don't have a manufacturing and distribution system, it doesn't do anybody any good. On the Web, that means having a usable interface and reliable back-end technology.

In fact, that's where Schutzler marks Classmates down a grade. Asked what the site lacks, he says that the technology underlying the chat rooms and message boards could be improved. "We have not developed the best technology or taken advantage of the technology that's out there."

Back to basics
So what's the moral of the story? As with the Greeks, it's an old story: find something that people want, that they can't get anywhere else (at least easily), and they will pay money for it. Then figure out how to get it to them.

The twist that fooled a lot of people on the Web is that Classmates didn't come up with something that claimed to have rewritten the rules. It came up with something that played by the old rules. My creative writing professor would have approved.

Have you seen any other successful variants on the age-old theme of paying for information? TalkBack below or e-mail Howard.

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