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Q&A Sites Struggle to Gain Traction as Viable Biz Models

Though a Surprising Number of Users Have Bought Into Quora and Others, Advertisers Aren't Quite Convinced

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In December, it seemed that Quora, a 6-month-old website that allows its users to ask and answer questions of each other, had begun to grow at a rapid pace. How quickly, no one outside the company knows exactly. Quora is mum on the size of its audience, leaving the void to be filled by estimates from services that monitor websites' traffic indirectly, the speculation of tech bloggers giddy with the prospects of a new sensation, and random cultural indicators, none more so than a Valentine's Day message from uber-pastor Rick Warren telling his Twitter sheep to direct questions that require longer answers to Quora.

Quora's attractiveness is due not only to its social-media pedigree, but to the niche feel of its audience.
Quora's attractiveness is due not only to its social-media pedigree, but to the niche feel of its audience.

Quora has become a PR machine, despite the fact that its founders don't say much of substance to the press, and a successful fundraiser, despite an apparent lack of revenue. Nearly a year ago, it raised $11 million at a valuation of $86 million, according to unconfirmed reports. Then there was a published rumor earlier this month that Quora had turned down offers of funding that would have valued the company at more than $300 million, presumably because its founders believe the company could fetch a better deal.

It's difficult to get lathered up about those kinds of numbers in our bubbly moment, when market valuations of even loss-making companies soar into the many billions of dollars. But there are two striking and concerning aspects of the Quora hype. First, it's not even remotely the largest of its genre. StackExchange, with 16 million monthly visitors, and Mahalo are believed to be bigger than Quora and the rest of a growing wave of relative newcomers that includes ChaCha and Aadvark. But then all those are rendered pygmies by older and less-hip sites, like Yahoo Answers.

Second, the fundamental concept on which it's based has been around for years, enough time to see some shortcomings in a model that requires a rather massive number of people with varying levels of qualification to help each other find information in an orderly fashion not common on the web.

Quora's attractiveness is due not only to its social-media pedigree, but to the niche feel of its audience, which happens to be the same quality that would prevent it from securing the budgets of advertisers that crave scale. Post a question on Quora now, and there's a chance it will be answered by a thoughtful human being, perhaps even a true expert. Post on Yahoo Answers, and, in addition to competing with queries like "Are dolphins really gay sharks?" "When is it OK to think your siblings are HAWT?" "Is it normal to have hair in my butt?" there's a good chance you'll be trolled.

Growing Quora to a level that it becomes meaningful to big advertisers entails the participation of masses more likely to be unmoved by its buttoned-down, text-heavy, inherently discursive proposition and less concerned with the quest for knowledge. In others words, the challenge before Quora and its brethren, as they strive to evolve from tech media darlings to a sustainable business, is how to get big without getting bad.

'Biggest site people don't know about'
Cluttered and confused as it may be, the Q&A sector is hot, the locus of an aching desire in the tech community to be the next big thing. Last month, I received an email from a PR person asking if I was interested in a briefing from the CEO of Answers.com, which, a little research told me, has gotten about as much press in six years as Quora has gotten in six months. She had noticed my byline on a story that included Quora in the headline. The next week I dialed in to a conference call with the PR person and Bob Rosenschein, who was calling from Jerusalem, where Answers Corp. has a substantial chunk its staff. Mr. Rosenschein immediately demonstrated himself to be more affable and engaging than many company heads, asking questions about my prior jobs and, in the course of a story about his near constant state of travel, mentioned waking up on a train and seeing a sign for the Siberian city of Irkustk. "Do you know the board game Risk?" he asked.

Turning to business, Mr. Rosenschein said, "Answers.com is probably the biggest site people don't know about." He is likely right. In December, 58 million unique users visited Answers.com, per ComScore, making it the 18th-biggest site in the U.S., and 32nd in the world.

Most of its large audience gets to the site through organic search traffic, not dissimilar from content farms like Associated Content, which sold for about $100 million to Yahoo, or to Demand Media, whose January IPO immediately made it more valuable on paper than The New York Times Co. -- despite the fact Demand's never turned a profit until this past fourth quarter. Those companies have cashed in by matching cheap content to large audiences by writing and editing for search engines. Answers.com takes that even further. Content costs Mr. Rosenschein just about nothing, since the site's questions and answers are created by folks who visit the site, not experts or professional journalists who need to be paid. (Answers.com has recently been advised by Patrick Keane, the former CEO of Associated Content.)

Answers brought in $15 million for the first nine months of 2010, compared with $14 million for the same period in 2009 (full-year revenue for 2009 was $20 million). Since changing from a subscription-based model several years ago, that money is coming mainly from two sources: ad networks and Google's AdSense. But in the third quarter of last year, Answers, a publicly traded company, reported some problems with AdSense that put a dent in its profits for the quarter. Basically, the number of people clicking on Google-served search ads continued to decline. Mr. Rosenschein is now looking to augment those sources by hiring a direct sales force to deal with ad agencies and advertisers. I was surprised that a site so big didn't already have one.

"I take some blame for that," he said. "We had a team a couple years ago. It might have been early for us because we didn't have audience size. As user-generated property there were still questions. I think we're now poised to do it better."

This is not dissimilar from what Quora must go through. To the extent Quora executives have said anything at all about how they plan to create revenue, advertising appears to be the key. To make any money that way, Quora will have to grow its audience by leaps and bounds that, by definition, involves bringing into the community a wider range of web users.

Quora's leadership recently hinted how it will manage quality as it grows. How answers rank on the site will continue to be determined by how many positive and negative votes they get, but the value of individual votes will be dependent on the voter's history on Quora. "Basically, if you want your vote to have more weight, the best thing to do is to write good answers," wrote co-founder Adam D'Angelo early this month on his site.

That's not far off from what Answers.com is doing now. Mr. Rosenschein plans to roll out a reputation-management system, or in his shorthand, REMUS (pronounced "REAM-us"), that will use statistical clustering to evaluate every user, question and answer for quality. Using factors like length, spelling, the use of naughty words, "it will increase the exposure of the good stuff and decrease the exposure of the bad stuff." Users will win higher reputation scores for participating and contributing the "good stuff." The company, which already has about 5 million registered users, will try to funnel users to sign up and identify themselves. That effort will lean heavily on Facebook Connect, which is interesting because Facebook, too, is rolling out a Q-and-A product that will make the massive social network with more than a half-billion users a direct rival -- something that should send shivers up the spine of everyone in the space.

Selling questions & answers
A few weeks later, it occurred to me I should have pressed Mr. Rosenschein harder on the contradiction of relying on Facebook, a rather powerful competitor, for growth. My follow-up email was met with a near instantaneous reply asking for a call the next day. First thing that morning I received an email from the PR person pointing to a press release containing the surprising information that Answers.com had been bought by a private-equity firm Summit Partners for $127 million. While the deal offered shareholders a 30% premium on the recent average stock price, it wasn't a blockbuster -- and it's also far less than recent valuations of Quora, which has far less revenue.

This time Mr. Rosenschein phoned in from Orlando, where he was on vacation with his family. He explained that the reason for the deal had to do with the high cost of existing as a publicly traded company, and insisted that it remained all systems go for the various initiatives we had discussed on the prior call. Of course, private-equity firms don't buy companies so that they may run as business as usual. Cost cutting results, typically. And in this case, the vision was, to put it mildly, unclear. Once the deal closes, Answers will be deposited into a Summit-owned holding company called AFCV. I asked Mr. Rosenschein what its sibling companies will be. He said he didn't know.

It's far from inevitable that Quora will turn out like Answers.com. True to the roots of its creators, a pair of former Facebook employees, Quora has adopted aspects of social networks, especially the ability to create a profile complete with a brief bio and a picture and functionality that allows you to follow others. This blogging-by-other-means quality has been especially attractive to a klatch of famous-on-the-internet folks, even if it hasn't really broken through among celebrities with wider appeal. (Over a week after his Tweet, Mr. Warren, who has nearly 250,000 followers on Twitter, had just 336 on Quora, fewer even than your decidedly less evangelical author.)

The other thing it has going for it is founders that fit the part. Mr. D'Angelo, with his boyish, T-shirted pallor, even resembles Facebook founder Mark Zuckerberg, making it easier to envision him as the next Mark Zuckerberg.

At my request, Patrick Hounsell, senior VP-general manager national media at Razorfish, characterized the advertiser interest in these sites: minimal. While social advertising of the sort allowed by Facebook or Twitter is all the rage, seeding brands in question-and-answer sites isn't. Although Razorfish has had a few client brands on Yahoo Answers' sponsored question site and found value in those programs, there's still a sense that marketers haven't really warmed to these kinds of sites.

"These are great forums to engage in dialogue with consumers, but it doesn't seem to have the scale yet necessary to drive tremendous impact," he said. "More importantly our clients just don't ask about them. Every day someone asks about Facebook or Twitter or Foursquare. No one ever says that about Yahoo Answers or Quora."

In our first interview, I asked Mr. Rosenschein about his feelings on the new crop of challengers. Ever polite, he is complimentary of Quora and StackOverflow, whose network of Q&A sites is divided up by interests. "As they grow, we'll see how they do with issues of spam, audience size and vulgarity. They'll have to deal with the issues of scale," he said. He acknowledged that the social DNA is a strength, but then added: "None of those features are so magical that other people can't do them."

This is clear from the sheer volume of sites out there all seeking to do pretty much the same thing. Will Quora be quickly snapped up by Google or another buyer who sees a strategic fit? Will all of them be simply knocked off the board by Facebook? How much can the market bear and how will it shake out?

Joked Mr. Hounsell: "These sites need a trade association."

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