How ConsumerAffairs Survived Pivoting and Improved Profitability
The ConsumerAffairs website was originally founded in 1998 as a news resource for journalists looking for trends in consumer complaints. When I acquired it, the website enjoyed steady revenue from advertising networks but within six months of the purchase, the ground beneath my feet shifted. The advertising revenue model I had inherited began failing due to its reliance on organic search rankings. What I had embarked upon dawned on me like an earthquake: I had left my stable private equity position in Silicon Valley for a life of uncertainty as a start up rebel.
After the fallout, there was nothing to do except sift through the rubble of my new reality.
While meditating on why the Google gods hated me, I came to the realization that traditional advertising is innately interruptive to the user experience and we needed to reduce our dependence on advertising to improve the consumer experience. In short, we needed a different revenue model. This was the pivot or die moment I’d heard other CEOs grapple with. I, too, had to slay the dragon or face annihilation and humiliation.
It was a stressful time even though I had knowledge of pivoting and what it would entail. The Blockbuster story haunted my sleep. Why? Because Blockbuster failed to foresee the new trend of sending videos to customers through the mail and they lost their lead to a tiny upstart: Netflix. My task was to successfully change how ConsumerAffairs made money through product, pricing, costs, partners or acquisitions to avoid becoming the next Blockbuster story.
Related: 3 Signs You Need to Pivot
Solutions included using the same product to solve a different problem for the same customer segment, repurposing our company’s technology platform to be more marketable, and changing the revenue model. I knew surviving a pivot wouldn't be easy, but we didn't have an option. As algorithmic changes continued to impact traffic, the company had to find a pivot point and move quickly to prevent further dips in revenue.
For us, the process of pivoting involved evaluating and testing eight different revenue models over a year. We had high hopes for a mobile gaming product but upfront cost was high and the skill set alignment with our existing team was low. Helping auto dealers collect reviews from their customers and selling trust seals to local businesses were two other products that failed. In developing a local product, I discovered the hard way that low unit economics don’t support a direct sales force. In other words, selling something cheap is the same as selling something expensive and local businesses are harder to sell to than larger businesses.
What carried us through the pivot were three key factors. First, the faith in the discovery process that we could connect consumers and brands. Second, that brands are willing to pay for help with customer service and finally, the opportunity to learn from customers and additional customer acquisition.
1. Correlate profitability to outcomes.
For online publishers, profit must be correlated with user experience, not with advertisements that annoy users. Because traditional advertising is innately interruptive, optimizing an advertising-driven product model prevents a good user experience and ultimately a website’s ability to rank in search engines. Our own failure when applying the advertising revenue model indicated that we needed to pivot and prioritize user experience to allow ConsumerAffairs to get more referrals from search engines. It’s only natural to send users to a site that provides a happy experience.
The lesson for our own team is when positive outcomes for website users are not correlated with profitability, income tends to be tenuous and subject to change, which is exactly what happened. This correlation applies to any business regardless of online or offline operations (or in many cases today, both). The bottom line is success relies on providing customers with positive outcomes aligned with business objectives.
2. Be prepared for challenging times.
It wasn’t until we threw away the outdated business model that our business stopped being negatively impacted by poor user experience. The gap between revenue models provided an opportunity to discover that something else might be possible in our business other than advertising revenue. However, it was hell in the hallway while we tested new products and took the time to discover a winner.
At the end of the day only one revenue model stood out, and that was the ConsumerAffairs for Brands accreditation program that enables brands to interact with customers, use feedback and analytics to drive operational improvements in customer service and product offerings, and customer acquisition. It’s this new product and the ability to help consumers and brands in their time of need and point of connection that has enabled us to grow the business twenty-fold.
The original advertising revenue model is now only 2 percent of our revenue and despite the set-back of having to discover a new viable revenue model, we’ve grown the company at a compound annual growth rate of 91 percent since 2012 with more than 250 partner brands, representing 98 percent of our revenue.
3. Fail fast and stay lean.
One foot in and one foot out is not enough to get your business to the other side. Refrain from over-extending your business but at the same time trust the process. Let go completely and step into emerging paths.
Looking back, the silver-lining of losing one revenue stream facilitated the discovery of a new product/market fit where user happiness and success is correlated with profitability. Our customers -- consumers and businesses alike -- are happier and our success reflects their success engaging with the products developed during our pivot. Hitting on this new fit was like discovering a gusher of oil after tapping a new vein. In the process of letting go of that outdated business model and toning advertising down, we discovered something with great potential lurking underneath and that’s when something else became possible.