Questions From a Reader

William is an undergrad at the University of Portland studying finance.  In his entrepreneurial class, they’re required to construct a business model for a potential start-up.  He and his partners are creating a business called RecipeKey, which offers personalized recipe searching similar to KitchenPC.  The other day, William sent me an email with a few questions about KitchenPC and I’ve decided to answer them as a blog post.  Enjoy!

It seems like you put a lot of hard work into KitchenPC.  What reasons did you have for stopping?  Did you just lose interest or have something else come up?  Or did your users not see it as a “must have”?

First off, I wouldn’t say I’ve stopped working on KitchenPC.  I’ve been working on the project in one form or another for about ten years now, and more seriously for the last six.  During that time, I’ve taken a few breaks here and there, especially when I get to the point where the project starts in evolve into something else.  I haven’t been actively working on the code the last few months, and no new features have been launched, but the site is still alive and well, with many visitors every day. Just last week I went to lunch with someone interested in the site and we bounced some ideas around.

Did you ever make money off of KitchenPC, or was it just a side project?  Would you ever consider going back and putting more work in and trying to develop it into a successful business?

I haven’t made a dime off KitchenPC, and it really hasn’t been my intention to do so.  At this point, I’m more interested in building a successful product that people are interested in using.  While it’s true that many types of businesses require revenue to stay afloat, a small consumer website is usually not one of them.  I have no employees, and I can afford the costs out of pocket.  I currently pay Rackspace about $70/mon to host the two servers that KitchenPC runs off of (a web server and a database server), as well as a couple bucks to Amazon for content storage.  The development costs were light, since I did all the coding myself.  I did outsource the design (HTML, CSS, graphics, etc) to a Polish company, and the cost for that was about $4,000.  Overall, KitchenPC was a very cheap company to build.

Since revenue isn’t required to stay afloat, the primary goal becomes building a product that people want to use.  Once that is successfully achieved, perhaps a way to generate revenue could be considered, especially if costs go up considerably.  However, this has not been successfully achieved.

Let’s say I decided to offer a Freemium model for KitchenPC.  Let’s assume I had some great features and charged $5/mon for them, which I’d say is about the most anyone would be willing to pay.  Most Freemium companies have a conversion rate of between 1% and 10%, with the average being around 2-4%.  With KitchenPC’s level of traction, I’d assume the bottom end at around 2%.  I’ve had about 2,000 users so far create accounts, so 40 of them paying would yield a monthly revenue of around $200.  That would yield a net profit (if you assume I work for free) of around $130 or so.  Not really a venture worth pursuing.

Another idea might be advertising.  Let’s assume I can get $1 per click, and 1 in 1,000 visitors will click on an ad.  KitchenPC averages about 622 visitors per month, or 0.622 ad clicks per month.  At 62 cents in ad revenue per month, making KitchenPC an ad driving business seems even more futile.

Looking at these numbers, I think we can agree it seems silly to worry much about a revenue model before you have a successful product to sell.  Right now, the only thing that matters is building a great product, and my focus is 100% on that.

The second part of your question; would I consider putting more work in to develop KitchenPC into a successful business.  I’m not of the opinion that my lack of success is tied to the amount of work I put in.  I spent a year on the site full time, working on the site 15-20 hours a day for months at a time.  I did as much research as I could, iterated, spent thousands on usability testing, running ideas off real customers, sending out surveys and polls, and everything else I could think of.  I worked a lot harder on making KitchenPC a successful site than I did at any project at Microsoft, but was still met with lukewarm reception.  A lot of people do love the site, but still most of the major site features go mostly unused.  The work I put in to the site was definitely not worth it for the level of success I achieved with the product, however, it was definitely worth it for the experience and growth as an entrepreneur.  In other words, I don’t think I would quit my job again, use up all my life savings, and work harder on a better version of the same site.

I think at the moment, it’s moved more into the realm of being a side project.  I have a few ideas on iterations I can explore, so it’s somewhat possible that I might stumble across a formula that demonstrates enough traction that would cause me to consider quitting my job and working on it full time again.  I’d rather lessen my risk by working on the site during my spare time to test the waters with a few ideas, rather than diving in and going all out again.  Luckily, I have a fantastic code base and a lot of cool technology that can be used in various ways.

Thanks for reaching out to me, William, and I hope my answers have helped!  The experience you get from building a company, iterating on ideas and working with customers is incredibly valuable and worth the time spent.  Best of luck with RecipeKey, and let me know if you need any beta testers.