J.R. Johnson, founder of Lunch.com, is an experienced entrepreneur, who sold his last firm, VirtualTourist.com, to Expedia. Johnson's latest effort is Lunch.com (www.lunch.com), a web site which takes the concepts behind VirtualTourist.com beyond travel, and into lots of other subjects. We spoke with Johnson about his new startup, as well as had him fill us in on the story behind VirtualTourist, how he bootstrapped that firm, and his exit. Lunch.com is based in Los Angeles.
What's the story behind Lunch.com?
J.R. Johnson: Back in 1999, we started a company called VirtualTourist.com. It was a local, SoCal company right here in Manhattan Beach. It was user generated content for travel, but back in 1999, before we'd really seen the movement toward user generated content. Back at that time, I had people ask my--why would I ever want to read what other people are writing, isn't that what professional authors and journalists are for? Now, the pendulum has swung in the other direction, and user generated content is one of the things people think of most frequently online when they look for information. So, we started that in 1999, creating a travel guidebook written by tens of thousands of travelers, rather than just one or two authors. We structured it on how guidebooks were structured, and launched this in January of 2000, right before the Internet bubble burst. We ended up growing it through the lean years, at least for the Internet space. From our standpoint, our content was growing and getting better, and more and more people were coming on and understanding the power of good, user-generated content. We grew the company all the way through, turning it into a profitable firm all through cash flow. We never raised any professional money, and grew it up to where it was extremely profitable. We sold it in July of 2008, to Expedia. The reason we sold it, was we wanted to focus on what is now Lunch.com.
So what is Lunch.com about?
J.R. Johnson: What we learned with VirtualTourist, was if you build the right structure, and maintain the integrity in the community, you can create extremely valuable and high quality content. With Lnch.com, we wanted to take what we had created with VirtualTourist, and apply that to much broader subject matter. We wanted to get out of travel, into everything. Lunch.com was the platform to do all of that.
How long has Lunch.com been running?
J.R. Johnson: We launched in April of 2009, so it's coming up on almost a year. We spent a lot of time proving out the platform, to see that it works. The interesting thing about Lunch.com, is in all the time dealing with user generated content, we learned a lot about why people contribute content, and what makes it a good experience for contributors. We've seen a couple of things. People like to be recognized, being recognized as a kind of an expert with knowledge in something. That's obvious. The other piece, which is most important, is that most people contribute content because of the humanitarian aspect. By contributing content, they're helping someone else in the world. It's a really powerful motivator to share what they know and care about. Those are the two historical things that have really driven people to contribute content online. What we've done, is put something else into the mix. The third, and the most powerful motivator, is the idea of a similarity network. Every time you contribute content and touch Lunch 2.0--your profile, your interest, your preferences--we're able to create a network of people with similar ideas and thoughts on topics and issues. What this does, is it ends up helping you find information that is most relevant to you, from a similar network of people most similar to you. The idea behind this, as we talked about where user generated content started in 1999, it's swung in the other direction, where you're now inudated by content. The biggest problem we've seen is there's now an overabundance of user generated content, and what happens then is there's some distrust in the content you're reading, and whothat person is and what their motivation is. For Lunch.com, that's what the similarity network is designed to answer. The idea is, you don't need 800 review of anything, which is overkill, what you need is one review from one person much like you.
There is a lot of competition for reviews/etc. on the web, how do you hope to stand out?
J.R. Johnson: It really comes down to relevance. Looking across all the sites out there, none is built around a similarity network, providing the most relevant information for you personally. There are other review sites, which inundate you with user generate content from people you don't know. You don't know if you're able to trust the source, who has contributed, what their motivation for contributing is. In some cases it's because the content is anonymous, which reduces the level of trust--or even where there is a profile, you don't know how similar you are. That's how we're differentiating the site. The other piece that is really interesting, is people contributing in these silos, in these niche areas of content, are only a small slice of that person. Even if you spend time reading their posts to see if you can trust them, you don't have a full picture of who they are. No one lives in a silo, and they have many interests in wide subjects. So, a broader platform like Lunch.com gives a better picture of yourself, and a bigger picture of everyone whose content you're reading.
Let's talk a little bit about the revenue and business model behind the site--any thoughts there?
J.R. Johnson: We started with the idea that what we're trying to do, is create the highest quality contributions out there we can. If we can get the best content, and it's most relevant to you personally, that becomes the place where you are going to come for any type of user-generated content. Second, if we can filter it according to your similarity, that's the goal. When we have the best content out there, the business will be able to be monetizeable. Right now, we are just trying to get the best content across a wide variety of subjects.
Having successfully built and sold a company, was there anything you learned at VirtualTourist which you'd share with entrepreneurs reading this?
J.R. Johnson: I learned a lot, actually. I think the one thing that we learned was, we believed in our concept, and we just stuck with it. We spent a lot of time volunteering on it, because we believed in it. I don't know if that's a good thing to tell people, because there are entrepreneurs who might lock in on a concept which isn't necessarily working, and could work out disastrously for them--but, if you can see that small steps in the business are working, believe in what you're doing, and stick with it. Even early on, when we had no money and revenue, people were creating content, and contributing, and coming back to the site, because it was an extremely valuable site for travelers. We had to have the faith to believe in all this stuff we were doing, and that we would be able to make a business out of it. We had quite a few gut checks, where we needed to have the faith that business would come around. In 2000, 2001, and 2002, things weren't looking so hot for the economy, and specifically the Internet--we were still dealing with the aftermath of the Internet bubble. We came out of that, believing that as the space continued to grow, we could figure out how to monetize it and make money. We looked at the macroeconomics, and small pieces we were seeing that were success points in the business, and decided to gut it out and stick with it. I'm very apprehensive saying that, but in general, you've got to believe in what you're doing and stick to it, if you're seeing some success along the way.
Was there a turnaround point where you figured out things would work at VirtualTourist?,p> J.R. Johnson: There were lots of small points. We saw that people were using the site to contribute content, and every day, there was more content on the site, and it continued to improve in quality. Each one of those little things added up. There wasn't one huge "aha" moment on the web side of things, but from the business side, the biggest point was when we were finally able in early 2001 or late 2000 to get some paid links on the site. Those were from Overture, which was GoTo.com at the time, where we were able to put paid links in the content, which was a turning point for the business, and gave us the encouragement that we would be able to monetize it.
So did that end up being the main revenue driver for the site?
J.R. Johnson: It was a start, and we also started using Google paid ads early on, because those were easy to put in and we had a lot of long tail content, and their long tail ads matched up quite nicely. But, at the end, only a small fraction of our revenues came there, most of it was from our internal sales team.
So how did the sale to Expedia come about--did you look for them, or were they looking for you?
J.R. Johnson: We were the leader in the space for user generated content, and we were in constant contact with Expedia. We were friends with the TripAdvisor founders, which was owned by Expedia as well. They had sold TripAdvisor a few years ago, and we'd been talking over the years. But, we were building a business, not building to sell, and we were cash flow positive and growing. We sold the company, because we wanted to focus on Lunch.com, and saw where user generated content was going. We wanted to be able to do what we had done, on a much broader scale than VirtualTourist. In fact, we had tried to develop them side-by-side for six months, but it was too hard to focus on two different sites, so we decided to separate the concept and companies. That's another lesson--focus is everything. Without focus, you get spread too thin, and it's impossible to do anything. We finally ended up selling VirtualTourist to Expedia, so we could focus 100 percent on building Lunch.com.