What is Stack Overflow's business model? | Hacker News Reader

What is Stack Overflow's business model?

meta.stackoverflow.com

75 pointsevolve2k35 comments

Experts-exchange faces the same problem in StackOverflow that the proprietary UNIX vendors confronted in Red Hat and Cygnus.

The open source vendors were perfectly happy to turn a hundred billion dollar industry into a one billion dollar industry, as long as they sat on top of the smaller stack.

StackOverflow is clearly happy with a large piece of a smaller pie, and the "evil hyphen guys" are never going to be able to compete with that.

I'm not sure experts exchange were making that much of a killing selling access subscriptions? There's clearly a lot of ill will towards them, but I would imagine they are still in a pretty good place if they want to move to a more usable ad supported model they would hardly be starting from scratch.

Well they were making enough to survive for 15 years, that's more than most businesses can say.

I'm not so sure SO will lead to a smaller pie. The walled nature of EE limited its appeal to the largest part of the audience (the people looking for answers). So although their business model was more direct, they were basing it on a smaller corpus, with fewer viewers. An indirect (advertising-based) model over a much larger number of eyeballs could well make for a larger pie.

The challenge for SO is to see if they can maintain a high quality corpus as they scale, so people will keep producing and consuming their answers.

In my opinion, SO's main competition is technical forums and not EE. So while SO takes away from other Q&A sites, they're also taking forum traffic and monetizing it better.

Reading through the comments on Meta StackOverflow to the question, two things become really obvious to me.

1. I'm so used to the hyper-insightful Hacker News business users that the many of the SO responses seem very idealistic. In other words, I get the impression that a lot of them are coders who think the world 'should work a certain way' but have no real business experience.

2. SO isn't making much money and isn't too keen on telling what their business model, if there is one, actually is.

As to your point number 2, the top upvoted answer to that question is by one of the founders who clearly states the three ways that they are making money.

Yes, he says, 'here's how we bring in revenue, and you should be able to do the math'.

I'd say he avoided the actual question rather deftly, which is how SO is going to scale from a traffic and ad site to a site that brings in the kind of money that VC's want.

I think there is a real mistake in all of this discussion in conflating StackOverflow and StackExchange.

What StackOverflow did to Experts-exchange, StackExchange is trying to do to Demand Media/eHow, and they seem to be trying to do it the same way by building a better product and providing better answers.

StackExchange is trying to do to Demand Media/eHow

Not quite. They're pretty big on focusing only on topics where meaningful questions have right answers, as opposed to (I swear this is an actual eHow page) How To Pour Water Into A Glass.

You know, just last night I just looked up "how to flip an egg" and ended up reading a Wikihow article. I can flip pancakes great sans spatula, you see, but doing a decent egg over easy continues to elude me.

I could see someone trying to look up tricks to pouring water without spilling it, maybe. Never thought I'd say that, though.

There's almost always a Youtube video for things like that. It's actually pretty impressive how many useful "how-to" videos there are on there.

Developer recruitment is a $2bn/year market in the US alone.

SO's currently making about $150k/month from job listings on a tiny fraction of the market.

Do you have a source for that $2bn/year ?

Best I could do was this: http://www.linkedin.com/answers/hiring-human-resources/staff...

$2bn just for finding developers (that must include non-programmers) sounds plausible, didn't realize recruitment is such a large industry.

My own models based upon several sets of data (I run a startup in this space).

But roughly it comes down to 320k developers changing jobs every year * an average spend of $9000 on recruitment costs.

I do wonder whether Stack Overflow will become a victim of their own success. By providing a place to get answers from experts to technical questions, actually employing an expert is worth much less than before. In other words, Stack Overflow is turning knowledge into a commodity. This makes experts less valuable in the marketplace. It therefore makes running a job-listings page (or "elite CV service") less profitable.

Furthermore, since SO profiles are public, other job-listing companies in the market can easily leach off the reputation mechanism just by adding a "Stack Overflow profile" field.

Stack Overflow is a wonderful site, but I think their free services are a long-term threat to the profitability of their premium services. When knowledge is free, there's no reason to employ an expert.

That's only true if being a large repository of knowledge is all that's required to be an expert. I'd say that it's probably a necessary but not sufficient condition.

I think this goes back to the "bigger piece of a smaller pie" mentality. There's a huge difference between someone capable of looking up answers to things that have been done before (SO) and someone capable of generating novel solutions to problems (an expert.) What will diminish will be the demand for people excellent at memorization while demand for problem solvers will go up. Only time will tell if it's net-0 but I think this is a healthy direction for professionals and businesses.

Part of being an expert is knowing how to employ that knowledge. The repository is useless if you can't figure out how to use it.

There is a wealth of knowledge on Wikipedia for instance but that doesn't mean I wouldn't rather prefer to go to an actual doctor

Take 10 master wood workers and put them in a room, give a low-skill wood worker all the tools they need and the ability to ask any of the masters any question they like at any time and get the answer.

Do you think this will result in the same quality of work as if a master wood worker had done it?

Why would you imagine software to be so different?

Being able to get past any particular technical speed bump is a tiny part of what makes a more experienced developer valuable.

They also seem to be making money from inserting amazon affiliate tags to links pointing to amazon.

Example: http://stackoverflow.com/questions/90924/what-is-the-best-ph...

They have lots of traffic, they serve ads, they charge for job listings. It shouldn't take a rocket scientist to do the math on that and figure out how they make money.

Why not just limit your response to the first sentence? Moreover, I work with a rocket scientist and I'm not sure he could figure it out.

It's not necessarily trivial to monetize lots of traffic (see 4chan, for example).

This is an excellent point and SO has previously stated (Pre VC) that they've had issues with doing so in part because of the community.

I can specifically recall them describing how their attempts to do Amazon Affiliate sales of books on the site were being undermined by people removing the affiliate codes from the links.

Unless the links are being provided by a source that the user dislikes, why would anyone choose to strip out the affiliate part of the URL?

It doesn't increase the cost of the item (afaik), and provides the source with some revenue.

Or figure out how much they're NOT making.

I think their business model is to be a trusted source of information. My problems with Google and Bing are that for some topics the top results are mostly spam. I get eHow sites or other spam sites. What I want are trusted sources of information. Their business model is vertical search.

Their business model is vertical search.

That's not a business model in the strict sense -- this guy's asking, "how does Stack Overflow make money?"

That's not a business model. A business model would be monetizing being a trusted source of information. How do you do that? Google use adverts, Experts Exchange charge admittance, are there other options?

I didn't look up the technical definition of "business model" but it's pretty clear to me that their goal is to dominate vertical search and be a trusted source of information.

They are following the same path Google did. When Google started the didn't know how exactly they'd make their money. Their goal was to be the best (and least intrusive) search and monetize later. Being the primary, trusted source of information in a bunch of vertical search areas has obvious value.

One potential avenue is to become a sort of university. They know the areas that people are asking lots of questions about and could setup a course to cover the topic. They don't actually have to be the ones to setup the course. They have the information to sell to someone who would setup the course.

The preceding is just an example of how being the leader, that is having the information, is the business model (or goal if you will). Trusted information has value.

Having something of value isn't business model in and of itself.

If SO doesn't monetize their traffic somehow, they'll go bankrupt despite providing value to their users.

every one of our great investments elicited this question early on. i'm pleased to see that Stack is generating the same kind of questions

Does anyone know if they make money off branded tags? (see their android, flash, visualstudio tags)

Read this: http://meta.stackoverflow.com/questions/23955/adobe-sponsore...

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