SitePoint Podcast #164: Lifestyle Business with Scott Fox

Episode 164 of The SitePoint Podcast is now available! This week Patrick O’Keefe (@ifroggy) interviews Scott Fox (@scott_fox) about his book Click Millionaires (http://www.amazon.com/gp/product/0814431917) and how you can take what you love and make it a business.

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Episode Summary

Patrick and Scott about his book Click Millionaires, the online community, and how you can take what you love and make it a business. They also cover a few news stories of the week.

Browse the full list of links referenced in the show at http://delicious.com/sitepointpodcast/164.

Interview Transcript

Patrick: Hello, and welcome to another edition of the SitePoint podcast. This is Patrick O’Keefe, and I am joined today for our interview show by my friend, Scott Fox. Scott is an Internet lifestyle entrepreneur and he focuses on online small business, social media marketing, and e-business start-up strategies. He is the author of a few books, including “Internet Riches” and “e-Riches 2.0,” but his latest book is “Click Millionaires,” and again, it’s focused on lifestyle entrepreneurship. He also blogs at scottfox.com, and is a podcaster and he’s on social networks and all that good stuff as well. Scott, welcome to the show.

Scott: Hey, Patrick. Thanks for having me. It’s great to talk to you.

Patrick: It’s great to have you on as well. I’ve known you for a few years now I want to say, and we share a publisher, AMACOM, the American Management Association, and I think that’s all the appropriate disclosure.

Scott: Okay. I think we’d talk anyway, even if we didn’t share a disclosure.

Patrick: I think you have a really interesting background and I think you’ve made a number of different career changes, changes of course in your life, to do different things that have interested you or that you’ve found and were passionate about. I just wanted to ask you to talk a little bit about your background, starting where you’d like to start and how you got to today.

Scott: Okay. Well, I guess today’s the most interesting part, at least to me, because that’s what I’ve been working towards all these years. Today, I’m an author, and like you said, this is my third book, “Click Millionaires,” and it’s really about how to build a lifestyle that at a minimum makes you money, but even more importantly, makes you happy.
That’s what I’ve been working towards my whole life as well. I’ve had spurts, as you know, Patrick, but if the audience is interested why I have the credibility to write these books, because I’ve tried a lot of different things. I was a psychology major, undergrad, put myself through college, but then I went to Wall Street and I did very well there and made some money that enabled me to do more things.
Then I was a lawyer in the entertainment business. I got into television and radio, and then I got into the Internet and I’ve started a bunch of dot coms and helped celebrities and big companies build their online presence. In all this experimentation, I guess I’ve probably walked away from more interesting and high paying jobs than most people even have. But all of that has led me to living in a lot of different places, trying different industries, and trying a lot of different website strategies.
All that together has led to this new book, “Click Millionaires,” and the online coaching forum that I run at ClickMillionaires.com, where I try to help other people find their own potential to get out there and make some money and hopefully have a good time doing it and really find the work that they were born to do.

Patrick: Working in different roles, as you mentioned, on Wall Street and as an attorney and in an executive context with companies that people would know, why do you think that you continued to change course? My guess, and what I think you’re going to say, is that it’s the constant pursuit of freedom and the freedom to do what you like and enjoy, but that might just be part of it. So what’s led you to say, ‘I don’t like this anymore, I’ve done this, I want to move on to something else?’

Scott: I think you caught me. I think that’s about right. Well, let me say this. A lot of people have jobs and they’re fine with jobs and they like jobs. They like going to a job and they work for somebody else and they make a certain amount of money, they have a clear career path. That’s fantastic.

Patrick: Yeah.

Scott: No disrespect to that, but I found early on that I wasn’t one of those guys, and every job I had, even though I did very well, I always felt a little bit like a square peg in a round hole. I just didn’t like getting up early, I didn’t like having other people set my agenda, I didn’t like having to wear a certain kind of clothes. All the stuff that corporate America or the corporate world in general worldwide forces you to be a cog in a machine, and that works great for lots of people. I just didn’t get that big of a kick out of it, honestly. So freedom, yeah, I guess that’s what it boils down to.
Time and again, and I’ve done well at these jobs. I’ve been senior executive at Fortune 500 companies, I’ve worked with celebrities. I’m not trying to brag. I’m saying I’ve tried a lot of stuff, and every time, after sometimes as little as a month, and I’ve never held a job for longer than four years because I get tired of it and I find that I want to do something that is more where I set the pace and I set the goals.
I think a lot of people are that way, and that’s why I try to share my journey in my books.

Patrick: I think that’s an interesting cycle, and I think it’s a cycle I see not just in the, not the everyday person, but the everyday nine-to-five person who’s at their job who maybe they get a check, they don’t love it, though. They want to find something that they’re passionate about that they can build a living doing. I think that’s what your book speaks to by and large, but also with very successful, well known people I think follow this trend where they find a job, of course we all work a job, but it just depends who’s the boss.
When we say “job” though, going to work for a big company or going to work for some personality or some alluring opportunity, we see a lot of big entrepreneurs who go take a job somewhere. Their company gets acquired by this big company, and they’re like, “Well, I’m going to go do that for a while. I’m going to go try that.” It’s a different challenge, it’s a different experience. Then a couple years in, they’re back to starting another company. So I think that’s a natural trend we see in people that just have that entrepreneurial spirit, especially once they’ve had one big hit, then they can go back and forth pretty much as much as they like because the first hit generally makes them a fair amount of money.
That’s one of the things also that you see a lot with start-ups that get acquired. The company’s trying to make sure the founder stays a part of the deal and locking them in contractually to stay at the company for a certain amount of time, so they don’t just acquire the company and then the founder leaves.

Scott: That’s right. That’s the funny thing is companies really need and crave that creative, independent spirit, but then once you get inside, they do everything they can to make you show up at a certain time, in a certain place, dressed in a certain way, with the same people every day at lunch. Do all the same stuff over and over. It is a tension, absolutely. People come and go. I think that’s what exciting about this stuff and why you and I both do what we do and a lot of the SitePoint listeners, too.
You find the Internet is, actually, I’m in my mid-40s now, so I remember when the Internet was only for techies. I got in early because I was at Stanford along with the founders of Yahoo, before Google even started and eBay. All of that came out of Palo Alto when I was there. It was only a few of us at the time who realized that the Internet was not a techie thing anymore. It was starting to be a platform for personal expression. This is long before blogs and all this stuff. This is before there were even images on webpages. Graphics weren’t even available.
You see that this distribution was just, oh my goodness, anybody can reach anybody. It’s an opportunity for creative expression. For me, I’m a creative person, but in a business context. That is what got me excited. I remember logging in back in ’93, ’94 and showing my friends and my parents, look, I can telnet into a library in Africa. They’re like, “So? What are you talking about?”

Patrick: Why would you ever want to do that?

Scott: Right, but do you realize this connectivity? It means everybody can get online and do anything. Today that just seems obvious, but I guess that’s the motive that’s driven my Internet-related career anyway for the last 15 years.
That’s why I write these books, because I think a lot of people, still, if you’re outside of Silicon Valley and you’re not a developer, active on SitePoint or something like that and you’re not seeing this, it’s very mysterious. How do these people go on the Internet and make money? Okay, this is not a get-rich-quick thing. You’ve got to really work and have some good ideas. But it really is, it’s a platform for creative expression, and it means you don’t have to work for the man if you don’t want to.

Patrick: Right. So the book is “Click Millionaires: Work Less, Live More with an Internet Lifestyle Business You Love.” It already has seven reviews on Amazon, five stars, even though it just came out. It’s brand new.
I would like to think that you’re one of the few authors at AMACOM that actually has more Amazon reviews than me. You’re one of those people that I have to be below on the AMACOM list. It’s awesome, congratulations. I know the “Internet Riches” book just has so many reviews. I don’t even know, it’s over 100, 132. Of course “e-Riches” has a bunch as well.
Just to get into the book a little bit. Lifestyle businesses, I know what it means, but how do you define that as the author of the book?

Scott: That’s a good question. I actually picked that phrase on purpose because if you hang out in Silicon Valley with venture capital folks or investment bankers like I used to be, lifestyle business is a bad word because it means that the person, the founder, is more interested in their lifestyle than the business, which means that they’re not going to raise a bunch of money and then try to go public and kill themselves working 100 hour weeks and hiring everybody and sacrificing everything. They’re actually going to prioritize their lifestyle, which is, as a financial investor, not what you want to see the founder doing.
My point is you don’t need those guys anymore. You see more and more companies bootstrapped. 10, 15 years ago, you needed to raise millions if not tens of millions of dollars to get online. Today, as you all know, SitePoint’s full of folks, get on WordPress and bang, you’re up in an hour. It’s not magic, but it’s a place to start. You don’t need all that capital.

A lifestyle business to me is one where the entrepreneur can prioritize their lifestyle goals first, and money is part of that. Money, to click millionaires, money is the gasoline for the journey, not the destination itself. Yes, you need money. You’ve got to pay your mortgage, you’ve got to pay your student loans, whatever. You want to live a nice life, absolutely. But I don’t think that you need to spend all your time and effort trying to create a billion dollar company and be the next Facebook. How about creating a job you actually like? As Seth Godin says, “How about creating a job where you don’t live for those two weeks of vacation because you actually like the other 50 weeks? Create a job like that and maybe make $100,000 a year. Is that so bad?”
The median income in this country is less than $40,000, so that’s a huge step up for most people. In fact, if you can get to $100,000, you can probably get to $200,000 or $400,000 or whatever after that. That’s what I’ve done personally, and that’s what I’m trying to help other people realize they might be able to do as well.

Patrick: It’s funny you mentioned how investment bankers and those types of people don’t like the term business lifestyle entrepreneur, and then you mentioned Facebook. It flashed to mind Sheryl Sandberg, who’s the COO of Facebook, and the recent comments she made in the last couple months where she said that every day at 5:30 she leaves. She goes home.

Scott: Yeah, that’s right.

Patrick: She goes home and she has a family and she pays the proper attention to that part of her, that personal life. She talked about how she was afraid to make that disclosure and afraid to tell people, not only because it’s frowned upon in Silicon Valley and in start-up culture in general, but also because being a woman, she faces a little different challenges than the average white male club or whatever they call it out there. There’s a lot of white men around. So being a woman, not only that, but also having a family and having that balance, it’s just something that’s not encouraged. I think that’s unfortunate in some ways because it is unhealthy at times to just sit behind a computer all day, which is what a lot of people end up doing, myself included sometimes. It’s all about balance.

Scott: The amazing thing about that story to me was not only that she admitted it, which is great, but first of all, I bet you she goes right back to her Blackberry as soon as the kids are in bed. She’s probably taking a two hour window.

Patrick: I think she did mention that she answers emails after the kids are in bed.

Scott: Yeah, of course she does. I’ve been a senior executive at those big companies, and it just does not stop. If you get paid six figures, you’re on 24/7 these days, and that’s all there is to it. That’s the other piece, the other shoe that has to drop. But the other piece is it’s really sad that it was such big news. I’m on her side, as you are. It’s like, good for you, Sheryl. In her case, she’s getting more than well paid for her time, so she’s going to be done permanently whenever she wants. She’s got plenty of money.
The fact is, most people aren’t in her situation. She’s obviously supremely talented as well as having great timing to be in the right place at the right time with the right connections. Good for her. That is lightning in a bottle, right? How many people can replicate that? I don’t care how smart you are, there’s a combination of circumstances there that’s going to be impossible for very many people to replicate.

What I’m trying to do is help people find . . . I don’t want to sound so get-rich-quickie, but a success formula. The book lays out seven principles that I figured out from working with all the entrepreneurs and small businesses I’ve worked with over the years. Things like recurring patterns, and if you can set up your business around these principles, you have a much better chance at making it. Again, you’re probably not going to start Facebook, but then you’re also going to be able to go home at 5:30 every night and maybe put the Blackberry down. That’s the trade off that people have available to them today.

Patrick: Speaking to that, most people who probably are interested in doing something along those lines and having more freedom are people who have a job. Is it fair to say that most lifestyle businesses start as part time or not even part time? The time I have after work to start something up, rather than just quitting your job cold turkey and diving in?

Scott: Yeah, I think that’s the right way to do it. In my books and in the ClickMillionaires.com forum, I talk a lot about, again, because I have a financial background, I talk about a portfolio approach. This is just what venture capitalists do. They don’t take their $100 million and put it all into one company. They make ten bets of $10 million or 100 bets of $1 million. A couple of those really pop, and the rest, they go out of business. You can do the same thing with your time. I would start, just as you said, Patrick, a couple hours after work here and there on a project. Get that going, learn the ropes, learn how to build a blog or how to podcast or whatever angle you want to take, which we of course talk about in the books. You can invest yourself in different ways and spread it around a little and try a couple of different things. Because if you quit your job, mortgage your house, put everything on the line on one idea, especially if you haven’t done this before, that’s dangerous. I wouldn’t recommend that to anybody. You don’t see professionals doing that, either. They hedge their bets and they play it smart. That’s why my books have sort of get-rich-quickie titles, but our publisher recommends that because it gets more attention and shelf space at Barnes & Noble, I guess.
You can see that starting slow is the way to do it. Then you invest in a couple things, pick the winners, invest in those more, double down, just like you would in Vegas. You get good cards, you double down, and the other ones, you fold your hand. That’s a way to get going part time as opposed to all or nothing.

Patrick: It’s funny that you mention that about the publisher. Managing online forums, everything you need to know to create and run successful community discussion forums.

Scott: There you go. Great book, by the way.

Patrick: We had community, discussion, boards, and forums all in the same thing. Thank you very much.
In doing that, what is your general recommendation for starting to make that money? Do you start by finding the passion and trying to cultivate an audience, and then after you have a reasonable audience, you start to monetize? Or should you be monetizing, however you can do that? You outline a few different ways, but obviously, the web offers a lot of opportunity for monetization. Should you be trying different things out from the start, or should you wait a while?

Scott: The thing that needs to be found today – actually, this is probably the number one mistake that I see new business entrepreneurs do. They tend to look for products and try to sell something first. What you really need to do today, products are almost unlimited. Supply is unlimited. Everybody’s one or two clicks away from Amazon.com, which carries more items than any store ever did in the 20th century. Probably all the stores put together.
The trick today is to find demand. That’s the thing you need to find first. Find a need where you can help people. If you can figure out a need that isn’t being served, whether it’s on a hobby basis or something in your business that you’ve learned about, or it’s something in your background, I don’t know, you speak a language or you’re from a certain religion or something like that, or something you see your kids or your kids’ school or a school you went to, find a problem. If you can find demand, then you can build a community, an audience, by serving the content needs or the product needs of those people. That’s what you need to find first these days.
It’s all chicken and egg obviously. That’s where I would start, looking for demand. If you can find a need, then you can solve it. It’s really hard to create a need, right? Sequoia Capital is a big VC firm, I was just reading about this morning, they backed Yahoo and a whole bunch of other people, made lots and lots of money. What they do is they don’t look to create markets. They find new markets that are already emerging, and then they put a bunch of money in and try to grow with the market. That’s what you want to do.
You can do it on a smaller scale. You don’t need the billions of dollars those guys have. Find something around your life, at your grocery store or your school or your alumni association or your church. Everybody that’s listening to this has hobbies, expertise, connections, relationships, interests. Somewhere in there there’s an opportunity for you to help people. That’s what I would look for first.

Patrick: Yeah, and need can come in many forms. It’s not just the needs that you would think of being in a store, like a product, like you said, or some sort of professional service, but just if you do something that you enjoy and other people enjoy it, and you might have a lot of experience with it. You might know every NES game for example, Nintendo game. You might be passionate about potted plants. You can do a lot with the tools out there right now.
One thing that came to mind when you were speaking is, I don’t know if you’re aware of this, but there’s such a thing as video game commentators. I don’t know if you’ve heard of this or not. Basically what they do is they record themselves playing video games, and then they talk about what they did. Some of these guys have a tremendous amount of views on YouTube, and of course with that, they are in the YouTube partner program, which has advertisements on their videos. Some of these guys, I don’t know the figures exactly, but from what I’ve read, from what I’ve seen and from what I can guesstimate, they make a reasonable living just off that. Then from the audience also obviously comes other opportunities. A lot of the major YouTube personalities, and YouTube’s an easy example of this because there’s so many popular YouTube channels that have branched out into their own websites, distribution deals with other companies. Even TV shows, in some cases.
You don’t have to go that big, but if you have a reasonable sized audience for your videos, for your content of what you’re writing and sharing, reviewing, sharing tactics, tips or whatever, you can monetize that. There’s opportunities there if you’re providing quality content and people enjoy it and they laugh and they spend that time willingly with you.

Scott: Yes, and they tell their friends, which is the key to these things, that’s right, and the book is full of examples like that. I agree, because all of those niches are available to you. The YouTube example in the book is about RCPowers. They do remote controlled airplane videos, and they’ve got a six-figure business going with these two minute videos of this guy Dave flying airplanes around in the park. That sounds like a totally obscure niche, but it’s a big business for them and it’s leading to a lot of other, bigger businesses.
We’ve got examples like Al Peterson, who runs a business-to-business newsletter in the radio industry. That was the business he came out of. He retired from that and started a newsletter around it. Or Kristen Espinasse, who runs a French word a day blog from a vineyard in the south of France. She figured out that, hey, Americans all want to practice that French that they took in high school, so she started a blog about it. Just silly little niches. The book’s full of examples like this.
That’s what I think is really interesting is that all these niches combined with the ability to serve the needs in different formats. Like you said, video games seem obvious, but YouTube videos about video games, or like this, a podcast that serves the interests of developers. Once you find a need, there are all these different ways that you can express it online. You can blog it, you can newsletter it, you can podcast it, you can video it, you can do mobile apps. There’s all these different ways to serve those needs.
Even if it seems like a niche that you like is already full, like you’re really into fly fishing and there’s tons of blogs about fly fishing, well, how many podcasts are there? What kind of apps could you do? There’s all these different ways to express it. Again, I think the Internet is a platform for business creativity, and that’s what I write the books about.

Patrick: Yeah, one thing among many things that I agree with you on among many, many things.
One thing I saw, because I couldn’t get through the whole book, but reading a good portion of it, was that you don’t discourage people from jumping into a niche that’s full. I really think that’s a good thing. I get that a lot with online communities and forums. They’re like, ‘Well, there’s all these forums for this already.’ This forum has 50 million posts, whatever it is, and there’s a ton of these other ones, too, and I can never be a part of that. Well, my thought is there’s always room for something that’s good. Who’s to say, like with my communities, I run one of the larger martial arts communities in the world. It’s not the largest, but let’s say top 10, top 15, top 20, whatever it is. I don’t care about being number one. That’s not what my aspiration was, to be the largest. Mine is to understand our atmosphere, our environment, the way we talk to one another, what our niche is, and then to pursue that vigorously. There’s plenty of room from 2 to 20, from 2 to 10, depending on the niche, to jump in there and have a really great, quality offering that people enjoy that isn’t the largest in the world.

Scott: Absolutely. I couldn’t agree more. I think that’s another symptom of, I guess I’ll make up a new word, ‘banker-itis.’ The financial people, they think you have to be number one, and that makes sense because if you take investor money, you’ve got to be the biggest, the best, make the most money, maximize shareholder return. If you’re not number one, we all know there’s a big cliff from the first biggest property to the second, to the third, and after that, there isn’t a lot of money when you get into a big industry. Ford, GM, Toyota or Hertz, Avis, Enterprise. There’s all these, the first three or four players make all the money.
But that’s only if you’re trying to return money to shareholders. If you’re just Patrick or me, I run clickmillionires.com, it’s an Internet marketing forum. Gee, the world needed another one of those? No, but the world needed a good Internet marketing lifestyle business coaching forum that is expressive of the way I look at things, because I’ve got some expertise and I personally help people. That’s differentiating, and I don’t need it to be the biggest, just like you don’t need your karate forums to be the biggest, because we’re helping our people. That loyalty and the relationships you build there can actually, maybe you’re not going to be a billionaire, but it can make real money and a real lifestyle for you.
It’s the highlight of my day is to go onto my forum and talk to my members. It’s fun for me, and I get paid. That’s a win-win.

Patrick: Definitely. You mentioned how when you got started on the Internet, it was before images and what-not. I’m not that far back. I can’t claim that far. We had images by the time I made it in the late ’90s. I got started seriously working with websites in the fall of ’98 and started registering my own domain names in 2000. What amazes me sometimes, and I’m sure amazes you similarly, is the landscape of tools and how much it has changed. These days, we have people who talk about, the word I hear a lot is ‘killer’. This is the Facebook killer, this is the Twitter killer. Also, Facebook vs. forums, Twitter vs. Google+. Why do we need this when we have this, or what should we use?
To me, that’s so totally wrong and backwards, because 12 years ago when I started, none of this stuff existed. We didn’t have any of this. There was no WordPress, there was no CMS software. There was maybe massive enterprise stuff. Even the forum software space, the biggest players now are phpBB and vBulletin, both pretty well known in that space. vBulletin 1.0 came out that year, phpBB 1.0 came out that year, these major software applications that people use now were just starting. There just wasn’t stuff out there. UBB was a big community application way back then. It’s just crazy how easy it is to have a nice website, no matter what your ideas for it. WordPress can do a lot, forum software can do a lot. There’s other platforms, and it’s free, low cost. I guess this is more of a statement, but it’s crazy to think how far the tools have come from when we logged on first.

Scott: It’s unbelievable. That’s the beauty of it, I think. I guess that’s why I started writing my books. People ten years ago, it was this long discussion, people saying how do I start a website or how do I raise money for a website? It was really a big deal. You needed technology expertise, you needed lots of money, lots of time. The recurring expense, even hosting was expensive. Now, that’s all basically dropped to zero. That’s why I started writing books. It’s like, hey, everybody else in the world outside of Silicon Valley, you can do this too, all the things you’re scared of.
I write my books for two audiences. One is the people who are new to technology and still think that it’s expensive and scary and difficult. It’s not, it’s not, it’s not. Then the other audience is people who are already technical, maybe like a lot of the SitePoint audience, very sophisticated technologically, but maybe don’t have so much business expertise or have the confidence or experience in order to launch businesses. That’s what my books are about. You put those two together, it’s like, hey, the technology is usable, it is affordable. That takes the risk out of the equation, so here’s some strategies you could use to help yourself figure out what you could and should be doing.
That’s the exciting piece here. As the tools have gotten easier, it means that I think we can have a more inclusive society. You’ve got people online more and more, you don’t have to know the right people or have gone to the right schools or look a certain way. You don’t even have to speak English anymore or live in America. You can build stuff worldwide. That’s what I’m excited about is seeing the Internet, to get a little utopian for a second, it can bring us all together. Kumbaya.

Patrick: Right, tear us all apart, bring us all together. The way I’d describe it is it’s everything good made better, everything bad made worse.

Scott: I suppose that’s true. There are both sides.

Patrick: It’s just a platform and it accentuates us, whatever way we want to take it.
I want to talk about maybe a contentious topic a little bit. Online and with this ease of platform and the ability for it to give everybody a voice, there is sort of an overload of experts, in a way. I don’t know if that’s how I want to term it exactly, but it’s almost like there’s a rejection of experts, and I think people are maybe more suspicious of experts than ever before, just because everyone is, or not everyone, but a lot of people are calling themselves an expert. There’s plenty of examples. We’ve all seen the social media experts, social media guru, it’s a joke at this point. No one who’s actually a practicing consultant with a lot of experience with lot of clients calls himself a social media expert, just because in this space, it’s such a term that makes people look at you like a pariah almost.
In the book, you talk a little bit about being an expert and how that is maybe an easy thing to become, and how if you just read some information, gather some knowledge, and then write about what you read, that people are going to start to look at you as an expert. I was curious to get your take on this topic. For example, I’ve been managing online communities for 12 years. If someone reads my blog for six months and they write what I say in a different way, what does that make them? Are they an expert, should they call themselves an expert? Is someone who mimics what you write about, are they a lifestyle business expert? What’s your take on that?

Scott: I think there are a lot of people calling themselves experts, probably too many. Unfortunately, our language just doesn’t have a good word for these degree of experts. That’s why we use the word ‘guru’ a lot, which is actually, as you know, a religious term. That’s an odd use for that word even. But we don’t have better vocabulary. Maybe we need to invent some.
Anyway, I think that there’s a glut of experts, yes, but it doesn’t mean that anybody can’t be an expert. As you say, I lay out in the book 10 steps to becoming an expert in 30 days, which is kind of offensive to people who have Ph.D.s and stuff, or 12 years of managing communities.
The problem is that an expert is a relative term. I’m not saying you’re an expert to everybody, but if my nephew started mimicking your blog for six months, would he be an expert to you? No. Would he be an expert to someone who’s six months behind him? Yeah, he would be. That’s the trick and the challenge for people online today is that it is easy to position yourself as an expert because there’s always waves of new people coming online. There’s an opportunity, I think, and this is why I talk about this in the book.
If there’s a field that you’re interested in but haven’t had time to explore, say you’re really into marine biology or exercise equipment or patio furniture, whatever it is, you can attack that by reading a bunch of RSS feeds every day, and pretty soon, you will be ahead of the person who isn’t focused on it. You can grow that into an expertise, which again, may not compete with someone who literally has a Ph.D. in the topic or decades of experience, but yeah, I think it is enough to call yourself an expert relative to the audience you’re targeting. That’s the key.
It goes back to that serving the need thing. Who’s the audience? If you’re trying to compete with Patrick, who’s published a great book about managing online communities, and attack the same audience, you’re not going to win. Patrick is clearly the expert.

Patrick: Flattery will get you everywhere, Scott.

Scott: Well, you’re clearly the expert there, right? Maybe it’s a kid in the Philippines who’s targeting an audience of other people in Manila who haven’t read your book and don’t have your experience, yeah, he is going to be smarter than the average person there. That’s what I’m trying to say is there’s a relative expertise.
There’s this phenomenon that I think is really cool that I talk about in the book, like a just-in-time expert or a co-learning expert. We’ve all seen these. Darren Rowse was the first one. I remember reading ProBlogger. I learned a lot about blogging because Darren would blog about how he blogged, or John Chow or Pat Flynn. They reveal everything, and you can learn with them. They’ll say, ‘This week I screwed up. I lost money because I did this.’ Okay, they don’t have a Ph.D. in this, but who does have a Ph.D. in this? This stuff is all new.
That’s what I’m talking about is relative experts and sharing your knowledge can be, I think, a valid path to expertise that doesn’t require formal education. You don’t have to have a Ph.D. from Harvard anymore to be an expert.

Patrick: Okay, yeah. I think, to use your terminology, get-rich-quickie, obviously some of the way that things are expressed might be taken that way. I think of you and someone like Gary Vaynerchuk and maybe Chris Brogan as being all different sides of the same coin. You communicate similar ideas, just in different ways and for different audiences. So that’s interesting. For me, I get people who will be in, like I just handed off phpBBhacks.com to a member of the community after 10 years, 11 years of managing it.

Scott: Congratulations.

Patrick: Thank you. It was a tough decision, but it was the right one for that community, because the people I would have sold it to would have ruined it, so I wanted it to live on.
That’s beside the point. My point that’s relevant is that I would have people who would come to me, or people I would invite to become, let’s say a moderator. They would say, ‘I don’t know as much as Jeremy,’ who’s the guy I handed the site over to, he’s a genius. As far as phpBB goes, there’s not a better mind, in my opinion, that knows the software better, as a better programmer with it. To compare yourself to him is crazy. He’s an insanely high standard, really. People will still need you for other things that you know. People still need to know how to install phpBB sometimes. People still need to know how to change a super-small thing, install a style or a template. These are all more basic things, but you know them and you can help other people do those things. I think that’s what you’re saying as well.

Scott: That’s right. A lot of people are intimidated, or unfamiliar even or new to the world of online business. That’s really who I’m writing for, like I said, it’s somebody who’s new or somebody who’s techie already and knows the tech, but doesn’t have the business strategy. I’m a business strategist at my heart. I help people with the strategy and figuring it out. If you’re intimidated and think, gosh, I really love palm trees, but I don’t know much about them, so what? You can start anyway. That’s my point.

Patrick: I get it, I get it. That’s a good way to look at it. We all have an opportunity and an ability to teach someone else something.

Scott: You said that very nicely.

Patrick: Kumbaya.

Scott: There you go.

Patrick: One of the models you discuss a little bit in the book is premium membership communities, which I, of course, have an interest in as someone who loves the community space. You’ve helped other people start some. You obviously have one yourself, clickmillionaires.com. I wanted to ask you a couple questions about running a premium membership community, as much for my knowledge as anyone else’s, really. One of the ones you helped start was billoreilly.com, right?

Scott: Yeah, that’s right.

Patrick: That’s the website for Bill O’Reilly, the political commentator here in the U.S. on Fox News. He’s got this massive following. He’s a controversial figure, sometimes controversial, however you want to put it. He has a website, BillOreilly.com, where he charges for membership ranging from $4.95 a month up to, he has discounts for 90 days and a yearly membership. You get things like access to private member-only forums, you get access to him, supposedly. You get a special email address that only goes for premium members, guaranteed to at least review the email according to their website. You get access to his radio show and his Talking Points Memo, and so on and so forth.
Premium membership communities, I don’t know how to put it, I don’t want to say they’re hot, but they’re definitely increasing in popularity. It seems as we see a lot of people launching them, a lot of personalities launching them, people who have a strong personal brand, a strong interest in a particular niche, and people wanting access to them to learn more about that niche.
Back then, when you were developing that site, it was a little more rare. Was there pushback on that? Was it a unique idea? Where did the motivation for that come from to charge people to talk to one another and to get a little more access to Mr. O’Reilly?

Scott: That’s a good question. That was in 2002, so it was a long time ago by Internet standards. The idea of a premium paid community was certainly not unique or original to us, but it was one of the first ones for a broadcaster. I should just say I worked with Bill for a long time and I have great respect for him, but I didn’t take that job for political reasons. It was business. I saw a real opportunity for a broadcaster. This is a guy who’s got two million people who watch him on TV every night, and you can send those people somewhere. It’s still a mystery to me why every TV show does not have its URL in the run at the bottom of the screen 24/7. This is free advertising. Why doesn’t Modern Family send everyone to a Modern Family community and charge $5 a month? There’s money sitting on the table for every broadcaster.

Patrick: But they all have a hashtag.

Scott: Yeah, they have a hashtag, but what do they do with it? It doesn’t make any money. Again, I’m a business guy. I do this stuff because I think it can make money, not because I’m money focused, but because money allows me to live the lifestyle I want to live. In fact, I donate the profits of my books to charity. This is all, I’m trying to help people with this expertise.
Anyway, back to O’Reilly’s site. I worked with Larry King and Glenn Beck, and broadcasters have this opportunity. The idea of a premium membership community was unusual, but it’s exactly – this is the opportunity and one of my favorite ones in the book. It’s in every one of my books, I run a couple communities now. They allow people to get closer to something they want to get close to. That’s what you see in the entertainment business, whether it’s music or television or film or fashion or any sort of business like that. People want to get closer to the stars that they value, and the Internet allows a way to channel that. Communities are a great way to do that.
All the stuff you’re reading there on the O’Reilly site, that was all stuff that I helped Bill set up almost ten years ago. It’s been running smoothly and making lots of money ever since. I’ve applied those lessons to other communities, and I think that’s an opportunity anybody listening here has to do themselves.
Like you said, you don’t need to be the biggest community, but if there’s something unusual that you can package, especially if the audience wants to talk about it, then you can create a community. Then it’s another step up obviously to be able to charge money for it, but I absolutely think it’s a big opportunity and continuing to grow. People still are just beginning to recognize the potential of that business model, I think.
We should mention something else. With the new book coming out, clickmillionaires.com, it’s currently $39 a month, but we’re changing that. Actually, there’s a free version of ClickMillionaires that’s launching next month. Anybody that buys the book is going to get access to the free community that is a forum-driven lifestyle business coaching, just like we do on the paid level. We’re calling that the Masterminds level. There’s going to be a free version too. I see value in both models is my point.

Patrick: Right, that’s actually something I was thinking about as I was listening to you talk about premium member communities and billoreilly.com is that you don’t have to necessarily make it all or nothing. There’s plenty of communities out there that started as free or are free, mostly, but then they have a premium level or something extra.
With ClickMillionaires.com, how are you differentiating that? What are you offering for the extra payment?

Scott: That’s the interactivity and the personal touch that I think is important. In my case, I’m the personality. People read my books, that’s my primary marketing funnel. They come in and they want my advice. If you want just general advice, you can go to the free forum. If you want to talk to me personally, then you come into the Masterminds forum. There’s a lot like what I did for Bill. There’s private webcasts, and I call them video office hours. People can come in and talk to me. We have private member chats and activities that are exclusive to the members, but you get more of me and more support and more coaching from my expert friends if you’re at the paid level.
But the free level is a completely legitimate place to be, too. We’re planning on making that a big success, and that’ll be supported by ads. That’s the typical upgrade path now, I think.

Patrick: How much will you be charging for that?

Scott: It’s going to be free.

Patrick: No, for the premium level.

Scott: Oh, the premium’s $39 a month.

Patrick: Okay, cool.

Scott: That’s what it’s been for a long time.

Patrick: In your case, it sounds like a lot of that value is access to you, because you are a consultant or could be a consultant, and people would want to pay you for individual attention at a rate that’s tremendously higher. Well paid consultants, if you don’t know, they can get paid hundreds an hour, some of the bigger ones thousands an hour, tens of thousands an hour. It’s really access to an individual. That’s what I see with a lot of the premium member communities, whether it be like ProBlogger.com, we mentioned Darren Rowse started that. The Third Tribe is obviously a popular example, Brian Clark, Darren Rowse and Chris Brogan and Sonia Simone started that. Now Chris, Brian and Darren have fallen back a little bit from what I’ve read. It’s Sonia and Chris Garrett . . .

Scott: Chris Garrett, right.

Patrick: . . . running that, so that’s the tricky part of this, right? If you build it around your personality, that’s where a lot of the value is. If you get sick for a week, a lot of the value goes down the tubes a little bit. How do you mitigate that? Do you do other things to try to encourage value? How do you ensure you continually deliver value to people who do pay?

Scott: That’s a good question, but there’s an assumption in there is that I’m the only one, right? What I’m really after is a community, and you’ll see that. Actually, clickmillionaires.com has been running for almost three years on a private, paid basis. The community there, I could disappear for a month and the people would be fine. They really are friends and they really help each other, what we’re calling the Masterminds level now. Of course, I’m sort of the godfather of it, but I see myself more as the host of a party. This is true for the free version of clickmillionaires.com and for the paid one. I set the tone and I make sure I have some moderators. They help me make sure everybody behaves and everybody’s nice. The bottom line is it’s a community, it’s not just a one-way broadcast channel, and that’s how I think you continue to provide value is that you ask your members to help. That’s something you’re really good at with all your moderators in all your communities. You get people involved and you give them activities. You have to have a steady stream of things to do.
The number one thing is I think you just have to pay attention and keep listening to what they want, what they find interesting. Just this week, I posted yet another thing about Twitter, and I got almost no response. I keep trying this, and my community, they just don’t care about Twitter. Why? Because they tend to be real business people, not social media consultants. Twitter’s a great tool if you’re online during the day and you want to chat, but these folks are running real businesses and they’re not tweeting. Every time I post about Twitter, I get nothing, so I’m going to stop. I’ve got to change direction and post about other things. There’s plenty more to talk about on the Internet, clearly.

Patrick: Right. As we’ve discussed, you’ve published three books now, all with a major publisher. As an author myself with just one book out there, so I’m two behind . . .

Scott: We’re waiting for the next one.

Patrick: . . . also, like I said, we share a publisher, AMACOM. Not a major, major publisher, but pretty big. Big enough to get us in bookstores is one of the ways I like to describe it. I was in every bookstore in the country. There’s value in that. They can get me there.
I definitely understand the value of traditional publishing, but you see a lot of people going non-traditional, especially people who have an audience already built up of some kind. After your first book, you certainly have an audience of people who knew you for that particular niche, and having read your work and go to your website and follow you wherever you are. Why is it that you have personally decided to stick with the traditional publishing model so far? Have you considered going non- traditional?

Scott: Yeah, absolutely. The bottom line is it’s a business decision, and for me, being a published author, the American Management Association is a big, prestigious publisher, relative. It’s not the biggest, as you said, but it’s certainly the real deal. Frankly, it comes down to competitive advantage. If you look at me and the other folks in my space, a lot of them publish e- books like crazy or podcasts like crazy, but they can’t all get books in bookstores nationwide, and I can, again and again. That for me was the decision. It’s a marketing expense, essentially, to work with a publisher. They have of course great editing and the copy design. You’ve seen the new book, the art is beautiful. They do a good job, and they do a lot of things that I can’t do. I like being a solo printer, but it helps to have a big organization behind you. That’s what I found interesting.
Do I think self-publishing is an opportunity? Absolutely. There’s lots to be done there, and I do some of that and I’ll be doing more. I think the times are changing. There’s a mix of opportunities, and you’ve got to look where you can make the biggest dent in the universe. For me, that was with a traditional publisher again.

Patrick: I like how you termed that, ‘marketing expense.’ It’s almost suggesting that you could make more money without them, but that it’s worth making less money to have a process that is a little more streamlined, and also, let’s just go out and say it, being in bookstores is the tremendous value here. That’s the marketing expense, being available to someone where you can say, hey, where’s your book, Scott? Well, you can just go to Barnes & Noble on Peachtree and pick it up today.

Scott: Right, and there’s three of them next to each other, sitting there.

Patrick: Right. And I might have signed them when I was in town last week.

Scott: Right, that’s good. It gives you a lot of credibility that most people can’t access. It’s a good decision. Ten years from now, everything really, really is digital? I don’t know. They’ve been saying that for 50 years, everything’s supposed to be paperless. But we’re getting there. Then, the decision might be different. That’s how I thought of it for this book, anyway.

Patrick: How do you think something like Kickstarter is changing this dynamic? Obviously, Kickstarter’s getting a ton of press right now, hot start-up. There’s tons of cool people doing really cool things at Kickstarter. That ties in with your book, certainly. Lifestyle entrepreneurs, tons of them are using Kickstarter as a forum to get funded, to get money, to really do something they love, but they need money for it, and now they get that money. For book authors in particular, I joked once that I think Kickstarter just might be the publisher of my next book, because if I can get a certain amount of money through Kickstarter, where, of course, I will have it copy edited, I’ll have a professional person lay it out, do the cover, it seems like it’s an attractive opportunity. What do you think about Kickstarter for book authors?

Scott: I love it. I think Kickstarter’s fabulous. It’s actually in the book. It sounds like you didn’t get that far, but there’s a chunk . . .

Patrick: Sorry.

Scott: That’s okay. It’s 300 pages, right? There’s a chunk about Kickstarter. I think it’s fabulous, again, because in the touchy- feely way, I’m into human potential. Kickstarter is a way that people in niches can monetize their dreams and take a crack at it. And that’s what I think this whole game is about.
Kickstarter can help you, whether it’s a book, or – the example in the book is a guy that wanted to design a pen, or a statue of Robocop. I grew up in Detroit, so I contributed to putting up a statue of Robocop in my hometown. It’s crazy stuff, right? Yesterday I put $100 in to help back a new film. It’s exciting, the potential that that offers. I think it absolutely applies to authors as well, sure.

Patrick: My book came out in April of ’08, so we just passed four years. A lot of different things have changed, a lot remained the same. One thing I’ve kept an eye on is how a lot of people have promoted their books to get more sales. I kept an eye on what Chris Brogan did with ‘Trust Agents,’ what you did with ‘e- Riches’ and what you’re doing with this book, and other people and their books and how they promoted it. I was curious, just with all these different tactics, one of the things I’ve seen a lot of is bundling the book with a certain number of copies with some sort of bonus, or buy 1,000, I’ll speak at this event, you have to pay the travel expenses, that sort of thing. What is the one – and I hate when people do this to me – what is a thing that you’ve done that you’ve said, ‘That really did increase my book sales.’

Scott: It’s a hard question, as you said. I think the main thing that I’ve done is have a useful message. I know that’s not what you wanted. You wanted me to say . . .

Patrick: That’s not what I wanted at all. Thank you.

Scott: You wanted me to say some Twitter tool or some hack of Facebook or something. Having a useful message, I really try to write to people who aren’t being spoken to. A lot of people in the world think they got left behind by the Internet revolution, like, it’s over, they missed it. There’s an opportunity out there still, and that’s what ‘Click Millionaires’ is about and my forum and everything. I think if you write a really useful message, people share it. That’s the trick. All this other stuff, it can certainly make a difference, but the difference between a bundle of this and a bundle of that, I don’t know. I don’t try to play those games that much. Maybe I should.
I’m really trying to share a message and I’m trying to help people. There’s something that they’re missing, and a lot of people are insecure about their capabilities or their education or their technology prowess. You don’t have to be that way anymore. That’s what my books are about. That’s probably not the answer you wanted.

Patrick: That’s good, that’s good, though.

Scott: Helping people. Let me give you an example, actually. I’ve got a better one for you. Picking the right marketplace. If you write a really broad book, you’ll get more customers. If you write something really narrow, it’s narrower. Having a message that’s targeted to an audience that wants to hear it, it isn’t too big, isn’t too small. That’s how you get books sold.

Patrick: Yeah, you don’t want to be as small as forums, but lifestyle entrepreneurship is just big enough to be a better book.
I thought we’d talk about a few news stories on this show. I’d like to get your opinion on a few stories that I’ve seen and that you’ve shared with me as well. The first one, since we’re talking about book publishing, I’d like to tie right into Amazon banning Kindle Store spam. That’s the terminology used by Laura Hazard Owen at paidcontent.org. This was actually first reported by Seth Godin at the Domino Project, which is the Amazon imprint that Godin founded, talking about disrupting. He got an email from Amazon which basically says that, and I’ll quote here, ‘some types of content, such as public domain content, may be free to use by anyone or may be licensed for use by more than one party. We will not accept content that is freely available on the web unless you are the copyright owner of that content. For example, if you received your book content from a source that allows you and others to redistribute it and the content is freely available on the web, we will not accept it for sale on the Kindle Store. We do accept public domain content; however, we may choose to not sell a public domain book if its content is undifferentiated or barely differentiated from one or more other books’.
So basically, the Amazon Kindle Store has, I don’t want to say filled up, but there’s certainly a lot of books that are repurposed content, content from Wikipedia, content from some marketplace you buy and can re-use and other people can re-use, and so on and so forth. Amazon seems to be cracking down on that in a way. According to the article at paidContent, Nate Hoffelder at The Digital Reader mentioned that Amazon had banned undifferentiated public domain works before, but they seem to be going at it a little more seriously this time.

What does this matter for the Kindle Marketplace? On one hand, it’s going to thin it out a little bit and hopefully let some of the original content go to the top.

Scott: Yeah, I think it’s good news for consumers, for Amazon itself, and even for authors. It sounds like they’re going to be stricter about what they let in. They’re going to weed out a lot of the junk. I think that’s good.
The trick is we’re in not just a long tale, but the longer, longer, longest tale. Amazon can stock a billion books, more than anybody could ever use. As an author, I know that it’s tough, because people come out with e-books that have similar titles to my books, and that’s competition I don’t want or need. Or I go looking for something, and I can’t tell is this the one I wanted, or is that the one I wanted, because the titles are very similar, especially if it’s republished, repurposed, public domain or private labeled right content. It’s not really helping anybody, so I think it’s good news.

Patrick: I think it’s good as well, and I’ll confess along with that that I actually haven’t dumped into the Kindle reading library quite yet myself. When I read a book, it really tends to be a printed book. How about yourself, do you have a Kindle?

Scott: I don’t have a Kindle, but I have a tablet, and I read things on my Android phone and stuff like that, sure.

Patrick: Is that something you do more? Are you one of those people who all you’re reading is now on some sort of tablet or some sort of mobile device?

Scott: I’m about 50-50. My wife has gone completely digital, but I’m still, I have such a backlog of real books, and people send me real books because I’m an author and I blog about books sometimes. I get real books, and like you, I like to hold them sometimes. And the batteries don’t run out.

Patrick: It sounds like it’s a real sentimental thing, we like to hold the books.

Scott: It’s pretty silly, but . . .

Patrick: There’s a real tactile thing to have a book and reading it on paper and shutting off your device. I totally get that.
I wanted to talk about also with your background the Facebook IPO, which is something I’ve followed a little bit. I didn’t buy any stock. I kept an eye on it, and of course now it’s trading at about $32 a share when it opened at $40 and went up to about $42, $43 on its opening day before falling down. There’s a lot of controversy surrounding it. There is talk that some of the elements of the process itself behind the IPO were not fully disclosed, that people who had more money and more power had more information. There’s a big surprise, right? Than the average investor. So now you have what was a big hyped IPO is now mired in controversy.

Scott: Yeah, it’s a real shame. Obviously, Facebook is a strong company and it’s going to make money, and it’s a class-defining, revolutionary platform. It should be nothing but positive, but unfortunately, it got gummed up. It sounds like, as you said, I used to be an investment banker, so I have some insight into this, but I didn’t buy any either because it didn’t smell quite right to me. I can’t say I’m always good with stocks or anything, but it’s a complex enough story and there was so much pressure on this from the media and the banks themselves. They so need the IPO market to take off again, because then they all get richer. Everybody had so much riding on this, it doesn’t surprise me at all that it got overcooked and that maybe there was some chicanery with the information not being distributed fairly.
What’s disappointing to me is that the retail investors, it sounds like they’re the ones that got screwed. There are so many people that are interested in participating in the Internet revolution, and they just are for whatever reason in their own lives, they’re not ready to go and found a start-up or join me and you and become a podcaster or whatever, hang out on SitePoint. They think they’re going to get a piece by putting their hard earned money into this stock. That’s disappointing, because clearly the Internet has tons of potential. It’s a shame if such a category-defining company like Facebook if this ends up being a footnote and leaves a bad taste in everybody’s mouth. It’s a shame.

Patrick: Yeah. Like you, I feel that Facebook will be fine long term. You have to look at, if you’re those people who bought it at $40, you have to look at it as long term.

Scott: Yeah, and hope it turns out.

Patrick: You can take a loss, and maybe you have other gains you want to offset by taking that loss for tax purposes, sure, but otherwise, you’re probably wanting to be locked into Facebook because like you said, they do make money. This isn’t like, I don’t know. There’s different IPOs that have come out, and there’s nothing like Facebook that have come out recently. It’s a unique, unique situation. It’s one of the most visited websites in the world, second to Google or something like that. It’s just crazy. People spend tremendous amounts of time on it. A tremendous chunk of the world is on it. It has over 900 million members. They’re going to be okay. The question is how soon and how long will it take them to be okay?
People will make a comparison to like a MySpace, and that’s fair in maybe some ways, mostly unfair. But it’s true that it is a website, and if there’s another hot social network that comes on, it won’t happen in a day, it won’t happen in a week, but it’s possible that people could move on to other things.
For me, it becomes a matter of why is Facebook different? I don’t know. Has Facebook become so ubiquitous? You turn on the news, you see Facebook. They’re not talking about Facebook, it’s just on the screen. You talked about [inaudible 55:08], they have the Facebook logo, facebook.com/thehost, it was some CNN show, just the regular news day, too. Not even a dedicated, Anderson Cooper-type of show. Just the newscaster had a Facebook page on the screen. It’s everywhere. Does that say that it’s going to be around for a long time?

Scott: I think it is. It’s really deeply ingrained in the culture now. The problem is that that doesn’t translate directly into stock price performance, and I read something this morning that said that some analysts think that the real price for Facebook stock should be about $13. Wow, that’s going to hurt a lot of people. A lot of people got hosed, and that’s just not right. That’s disturbing to me.
I think that the company is going to be around, but it’s funny I got this one right. My mother-in-law wanted to buy some, and I said, ‘I would wait on that. It just doesn’t smell right.’ It turns out if I can buy some at $13, I’ll go in big. I’m not buying at $30.

Patrick: I don’t know, I really hope it doesn’t fall to $13.

Scott: I do too. I don’t wish any of those folks ill, but it’s the estimates. They had material, non-public information that wasn’t shared appropriately, apparently. That’s not right.

Patrick: Yeah, so we’re looking at lawsuits probably for a little while here.

Scott: Oh yeah, absolutely.

Patrick: I did read an article by Dan Frommer on ReadWriteWeb, and he had a breakdown of Facebook’s revenue. It’s really two categories, advertising and payments & other, payments & other being things like the Facebook credits system which people use to pay for in-app purchases on Facebook apps, like a Farmville game or something like that. In 2011, that breakdown was 85% ads, 15% payments & other. So far, Q1 2012 was 82%/18%. Payments & credits as a percentage of their revenue actually seem to be growing versus advertising. I found that to be interesting that advertising revenue, though the vast majority, I’m not trying to make anything out of it that it’s not, is advertising revenue, 82%. 18%, up from 15%, up from 5% in 2010, up from 2% in 2009, is a growing share. I just wonder if maybe, I don’t know, if some people are underestimating the power of Facebook apps. Maybe there’s some sort of e-commerce angle there that will continue to grow and become a more meaningful part of their revenue.

Scott: Yeah, I couldn’t agree more. That’s the business everybody wants to be in, isn’t it? Don’t you want to be PayPal? I want to be in the middle of every transaction.

Patrick: That’s a good point. Apple certainly wants to be.

Scott: Yeah, exactly. They say that’s one of the big assets that Apple has that hasn’t even been completely exploited yet. They have everybody’s credit card numbers. Payment processing is one of the next big frontiers, absolutely.

Patrick: That’s one of the things that when Apple was reaching out to, for example, newspapers, that was such a big thing was that newspapers, we’re a subscriber business. We know our subscribers, we have their names, their addresses. We don’t want you to have all that. Some compromises have to be made, I guess.
So finally, I’d like to talk a little bit about Yahoo and Yahoo’s direction, because Yahoo is a company that I have – I don’t know how to describe this – I guess sort of a soft spot for, because when I got going on the web, ’95, and I got professionally into it in ’98, and Yahoo was a big part of my web usage.
I even based the initial idea of iFroggy sort of on Yahoo, in being a web portal. iFroggy.com was initially a web portal. I covered everything I could cover as one man. I would’ve been 16 then, or no 15, I was 15 years old then. I had iFroggy sports and I would write sports articles, and there were legitimate syndication like iSyndicate . . .

Scott: Yes, I remember them.

Patrick: Remember that? I had headlines from them and what-not. I did what I could. Eventually, I shifted to the network model of that just being sort of the banner brand, but still, Yahoo was part of my inspiration. I loved Yahoo. I still use Yahoo, part of their products. They just are getting beat up. It’s not new. It’s been going on for years. Just continually beat up. They seem like they’re late to the party, they lose out on this acquisition, they’re just not close enough to do this one big thing and someone else beats them to it. It’s not even just that, it’s the lack of stability. Its CEO, obviously, Scott Thompson just left, was fired or whatever for lying on his resume. They just can’t find the organizational stability.
We were talking a little bit about this off the air pre-show, talking about Yahoo’s direction and how Jason Calacanis, a well- known web entrepreneur, just wrote an email about what Yahoo should do. You said, ‘I sent a letter to Terry Semel back in 2001 when he was the CEO of Yahoo, outlining things like this’. He was the new CEO of Yahoo at that time. It was an unsolicited letter, you said. What did you write to him?

Scott: I guess like you, in my case, I used to have a soft spot for Yahoo. I’m pretty over them by now. When Yahoo got started, I was in graduate school at Stanford, and it was on the student servers when I was there, back in the early ’90s. It always felt like a local company to me. They just so lost their way. I continue to be mystified why they avoid the portal objective. What’s wrong with being a portal? They are a portal, and they have been for so long. They just haven’t had a clear mission for so long. They’ve got all these, especially in sports and finance, they’ve got all these great news teams. Calacanis laid out a great collection of activities that I endorse as well which involve a lot of video and mobile and so forth. What I recommended to Terry, and I didn’t know him, I was just so annoyed by their failure to grasp their potential, was to do a lot of what Calacanis recommended and what continues to be obvious to me, which is that they are a media company. They have big services businesses on the technical side that I don’t know so much about, but I have a long time experience here in Los Angeles and in the entertainment industry and working in media and Internet crossover businesses. What I said to Terry literally 10, 11 years ago, was hire a bunch of people and dive into the media business. It’s not rocket science. They have the traffic. People want to be entertained. Hire a bunch of people. The key to my pitch to him was not only should you do that, because that’s fairly traditional, you should incentivize those people and give them a revenue share and actually pay the writers based on their own success. Make it a pass-through organization.
I think they would have exploded. I think that would still work. Maybe the web has evolved beyond that simple approach, but for 2001, that was pretty advanced stuff. Of course he never wrote me back, but I cared enough and I was mad enough at their failure to recognize their potential that I did write that letter, that’s right.

Patrick: The real question is, did Calacanis find a copy of that letter somewhere and then write an email based on it?

Scott: I don’t think so.

Patrick: [inaudible 62:03]

Scott: Jason’s plenty smart to come up with his own material. His outline is a good one.

Patrick: I’d like to quickly walk through what he laid out, since you guys are in pretty good agreement. His first step that he had here was ‘accept that you’re a portal. Be that one trusted brand and unified experience that people turn to when they want a number of different things, like photo sharing, search, content, email, stock quotes’. Be that. Stop trying to chase other things and focus on what you guys are already strong in. He mentioned how YouTube is now two times the size of Yahoo in the U.S. That’s crazy.

Scott: Yeah, that is crazy.

Patrick: Think back a decade. That is nuts. YouTube is not only one of the biggest websites, they’re the second biggest search engine, aren’t they? I think I read that.

Scott: They are, yeah. That’s right.

Patrick: Be that portal, focus on your strengths, and tie it all together in an interesting and creative way.
The second one is another thing that you pointed out, and he puts it as, ‘Post the top 100 content creators in the world.’ Go to those strong people that are in a specific area, he mentions Peter Rojas for technology, and that’s an example of something he did when he was at Weblogs Inc. He had Peter Rojas, and he got him from Gizmodo and gave him Engadget, and gave him an aggressive package and stake and all of that, and built what was at one point and may still be the most trafficked tech blog in the world. Then he mentions do it again, get Rojas again, but that’s just an example, obviously. Take these people who are strong, who are well known, very good content people, very good reporters, and give them a brand. Give them a place to call their own. Give them a stake, give them a great salary, let them own their stuff.
Yahoo has all this cash, right? They have this cash that they could use to build out this amazing content army.

Scott: I think they have this money, and again, I guess my theme for the show, I didn’t think of it before, banker-itis. I think they’ve lost their way because they keep trying to swing for the fences and come up with something new when they already had a really good business, very highly trafficked home pages and services, Yahoo Mail. It’s not as sexy as Gmail, but it’s used. It has a massive user base. If you can use that to introduce people to new products and new advertisers, growing that business may not be as sexy as Instagram or something that Facebook’s doing, but it’s a real opportunity for them and they’ve continued to muff it.
Ten years later, is it savable? Gosh, I hope so. We’ll see what Ross Levinsohn does. He’s a smart guy. Quite notably, he’s a media guy. That’s I think the direction they should take. When you’ve got those eyeballs, that’s what I would focus on.

Patrick: One of the things that is interesting about this is there’s a lot of people out there who would look at writers as sort of a commodity. If you build too strong a brand around a writer and they leave, you’re hurting. One of the more recent, super- visible examples of this was Michael Arrington leaving TechCrunch, because he was so tied to their brand. They’re still around. Engadget’s still around post-Rojas, post-Ryan Block. They’re still strong brands. Sometimes I feel like that’s something bigger companies and organizations really fear is someone building too strong an individual brand, whatever it is, getting too many Twitter followers on their personal account. Having too much tied to them that they can take with them.
I guess that’s a fear you have to get over if you’re going to have really strong content, because strong content comes from strong people, and those people build their own followings.

Scott: That’s right, and you need to have a deep bench. The Lakers are scared about losing Kobe Bryant, right, but that doesn’t mean they stop playing. You’ve got to build a bench. I think the Rojas or Arrington, their faces aren’t familiar to the audiences. Their writing, maybe. You can lose them, you’ve got to build a bench.
As you suggest, that’s a management challenge, and that’s hard to do. That’s not easy. I don’t know what Yahoo has been doing otherwise. Let’s go, let’s do something. That’s a lot of the excitement I think around Thompson’s departure and Ross’s arrival is that, hey, maybe they’ll actually pick a direction and execute instead of just muddling around.

Patrick: Right, and the third point from Calacanis is video, video and video. That’s pretty . . .

Scott: Self-descriptive.

Patrick: Yeah. Just go into video. He mentions that Yahoo should go after content providers and offer them a better ad split than YouTube does. Offer them 70-30 versus the 55-45 split that YouTube apparently offers members of the partner program. It’s about making the competitors feel you, making them feel that you have a formidable presence.

Scott: Yeah, and that’s another symptom of banker-itis. They really don’t want to give up. It’s not just the credibility to these rock star journalists, they don’t want to share the money. They’re so concerned about keeping the money, which is understandable. These are financial investors. I’m not saying they’re wrong, but somebody with a bigger vision needs to come along and say, just like Jason did here, hey, how about increasing the revenue split? People will notice and react to that. Or as I said to Terry Semel literally 11 years ago, hey, how about sharing the profits with the writers?
Same kind of idea. You’ve got this cash flow. A million dollars is nothing to a big company like Yahoo, but it would really make somebody’s day if they’re an underemployed journalist. That’s a lot of money to an individual.

Patrick: Right, and speaking of cash, Yahoo just sold its stake in Alibaba for $7 billion.

Scott: They’ve got some cash.

Patrick: That’s even more cash ready to go.
The fourth point in his email is two headquarters, two presidents, two missions. You mentioned Yahoo being strong, having that strong services business, and Calacanis mentions that they should just split those companies off into content and services. Not spin-offs, but just organizations of the company and give them each a head. Let the content be based in LA, out where you are, and let the HQ for the services business be where Yahoo is right now in Sunnyvale. Just divide those companies up and let them compete a little, a little friendly competition. Let them be the greatest they can be individually.
That seems like a pretty good, general idea. Even though when I think of Yahoo, I don’t think of the services, it’s very true that they do have all of these services. And this is a bad example, but how often have I come across a small e-commerce shop and seen it’s run by Yahoo Stores or whatever they call it now. It’s not necessarily the greatest thing in the world. Maybe they could innovate a little bit there. Generally speaking, when I come to a Yahoo Store, I’m not usually impressed visually, yet a bunch of people still use it.

Scott: Absolutely. I think that’s the diagnosis of all of Yahoo’s businesses. It’s not real sexy, it’s not the coolest, latest thing, but a lot of people use it. That’s how you build a real business. A lot of people using stuff, absolutely.

Patrick: The fifth and final one is mobile first, which doesn’t need a whole lot of explanation. Mobile usage is growing. If you look at your stats for your website, your website analytic software, Google Analytics, whatever you use, and look at the mobile traffic over the past year or two, you can see most likely a gradual gain.
I just recently looked at the traffic for KarateForums.com, and a little over 10% was iOS, which is Apple’s mobile operating system on the iPhone, the iPad, the iPod Touch. I’m not really mobile optimized on it too much just now, but they were able to use the website. I’m going to focus on that a little bit more when I can, but that’s a substantial portion of the traffic. It’s actually ahead of Apple’s desktop operating system.

Scott: That’s interesting.

Patrick: I get more Apple mobile traffic, just barely, than Apple desktop traffic.

Scott: That’s only going to increase, to your point.

Patrick: Right, it’s only going to go up. It makes sense that they would go in that way. I haven’t even had a chance yet to really look at Yahoo Axis yet, which is some sort of browser that they’ve recently launched. It’s more of a browser add-on for the desktop. I think it’s more of an integrated browser experience on mobile platforms. I don’t know if that really adds in there or not. It seems like a weird play right now for them to just randomly launch a browser/browser add-on. Maybe it ties in there somewhere.

Scott: I hope so, but clearly, that’s something they didn’t just code this weekend. It’s been in development for a while, and probably their tech team is probably just throwing a hail mary, saying, hey, look, we’re still here, too, before these media guys take over.

Patrick: Yeah, who was the CEO when that started? Bad joke.
In conclusion, Calacanis mentions that Levinsohn should be judged based on three key aspects over the next five years. Number one is percent increase in video views, number two is the number of high end contributors that he brings to the company, and finally, the average tenure of high end contributors and can you keep those talented people that you bring.
That’s an interesting way. Most CEOs are probably judged on revenue or sales, but in his case, it’s the people you bring in and the number of video views that you increase. That’s a unique thing to judge a CEO on, am I right?

Scott: Yeah, I think so, but I think it’s the right metrics. Again, I think Calacanis is thinking outside the box here a little, which is great. He’s thinking like an entrepreneur or a business person, not a banker who’s trying to maximize profits and so forth. He’s thinking about how do we get this stuff done, the metrics that we need, at the operational level? Not at the board level, but how do we actually get the video views up? If you get the video views up, everything else starts to fall in line, and that’s driven by having the good content creators and contributors in house. That makes a lot of sense to me.

Patrick: Yeah, and really, the thing about Yahoo that I’ve felt for a long time, and I’m sure I’m not saying anything that’s novel or interesting, but they have these strong brands in certain areas. You touched on this, the great news reporting. Speaking of the entrepreneurial spirit, I’ve been watching the stock markets since I was 10 years old. I’ve had stock since I was 11. Yahoo Finance is a site I’ve always used. As good or as bad as Yahoo’s done, up or down, whatever they’ve done, I still have my stuff on Yahoo Finance. That’s always been a really strong product to me, Yahoo Finance. Yahoo Sports is another one, just a really strong product. They have this team of reporters, they pump out a lot of great stories and news. When I need sports scores, I still go to sports.yahoo.com/mlb. I have it ingrained in my brain. It’s silly, also, but fantasy sports, fantasy baseball, fantasy football, that used to be the place people would go to do that stuff. It’s a big business, fantasy sports now, and they are still looked at as one of the leaders. Obviously Flickr, of course is still, as much as people want to say it’s dying, Flickr is still a massive, vibrant, photo sharing community, even with Yahoo being hands off. Those are four examples of great content areas. I don’t know, maybe it’s just a case of they need to focus down a bit.

Scott: Yeah, I think that’s right. They’ve lost so many people at this point, like my friend Jimmy Pitaro who used to run the news and finance sites. There’s a bunch of good people there or were, and I don’t know who’s left. That’s one of the things that Ross has got to be doing right now is looking over those resumes and trying to figure out who’s a keeper. They’ve been so picked over that you need the executives to execute. I hope that they do pick a few things and do it well.

Patrick: Well said. Well, Scott, it’s been great to have you on. I’ve really enjoyed talking about not only your book but also the stories and getting your perspective.

Scott: My pleasure. It’s been a lot of fun talking to you, Patrick. We’ll do it again soon.

Patrick: Of course. How can people find you online?

Scott: Okay, well, clickmillionaires.com. The book is called ‘Click Millionaires,’ it’s about building a lifestyle business that you love, not just to get rich, but to do the work that you were born to do. That book is at clickmillionaires.com, and that’s where our coaching forum is, too. There’s a free version of that, and I’m there and I’ve got a team. We’ve got people from all over the world. The free version is opening in just a couple weeks, and the Masterminds level is there already. If you want to join us, we’d love to meet you.

Patrick: Right, and Scott also blogs at scottfox.com, on Twitter @scott_fox. Beyond that, search for Scott Fox.
Of course, I am Patrick O’Keefe of the iFroggy Network. I blog at managingcommunities.com. You can find me on Twitter at @ifroggy. You can follow SitePoint at SitePoint.com. Visit us at Sitepoint.com/podcast to leave comments on this show, and to subscribe to receive every show automatically. You can also email us, podcast@sitepoint.com, with your questions for us. We’d love to read them out and give you our advice. The SitePoint podcast is produced by Karn Broad.

Thank you for listening, and we’ll see you next week.

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