Pearl raises cash, leads move to paid answers
(Reuters) - What types of online information services can make money by charging fees rather than relying on advertising?
That's the sort of question that one might put to the business-oriented question-and-answer service Pearl.com.
And the answer might be ... business-oriented question-and-answer services like Pearl.com, which just raised $25 million in a new funding round led by Glynn Capital, with participation from brokerage mogul Charles Schwab, lawyer Larry Sonsini and others.
Formerly know as JustAnswers, Pearl.com already boasts more than $100 million in annual revenues, said founder Andy Kurtzig. The company is pushing forward with a fee-for-service approach in a niche populated by both free and paid service.
The category leader, Yahoo! Answers, uses the freebie model, and had 53.6 million unique visitors last month, according to consultancy comScore. But that is down from 68.6 million users a year ago, a testament to the increasing amount of competition in the area. Pearl chalks up 7.4 million users, up from 4.7 million a year ago. Quora, a free site with 1.7 million, is among the fastest-growing of the sites, with over three times more users than a year ago.
Many seem to be carving out a niche within the sector. The top questions on Yahoo! Answers involve family and relationships; at another free site, ChaCha, users want to know about entertainment. Answers typically come from fellow consumers.
Quora, by contrast, tends to solicit opinion. One of last year's most popular questions drew on a much-discussed new book on childrearing, "Battle Hymn of the Tiger Mother," to ask if author Amy Chua was correct in her assumption that Chinese parenting is superior. Many questions deal with technology, such as why different inventions succeed and fail, or backstories on current Silicon Valley gossip. Industry experts often jump in—as author Chua did.
Quora's founders haven't identified a business model, and the $50 million in funding they just raised from Matrix Partners and others means it will be some time before they have to. Co-founder Charlie Cheever says the cash will go to building out the company's team.
Questions on Pearl tend to be more practical, with technology support and legal the most popular categories, closely followed by health and car maintenance. Pearl taps into its network of experts who answer online for a fee the user agrees to in advance, and that Pearl says is fully refundable if the user isn't satisfied with the result. The average fee is $30.
That's enough to earn a handful of lawyers and doctors who contract to work for Pearl $40,000 a month, Kurtzig said. Most respondents earn far less. One lawyer who declined to be named due to the sensitive nature of the questions he responds to said he makes as much as $15,000 a month, mostly during down time at his law firm.
He mostly answers contractual and general legal questions, but on one occasion was asked "What are the states where I can legally marry my sister?" The answer: none.
The company vets all its experts, including running background checks and making sure licenses are up to date, a spokeswoman says. Users have the option to subscribe to a monthly plan that allows for unlimited questions at varying rates depending on the category, usually around $30-$40.
Other companies are taking different approaches in finding a nonadvertising revenue stream. Mancx, for example, seeks to provide business answers—with an average pricetag to users of $250, it says on its Web site. Popular questions include referrals for services in other states or countries that the users might not be familiar with, or how to put together a business plan for a certain type of industry.
Others provide answers in very specific areas— Support.com for computer help, for example, and Hotmath.com for students needing help on math-homework questions.
Advocates for fees say it helps ensure more trustworthy answers, avoiding the self-promotion that often occurs on free sites. Boosters of the free sites counter that when it comes to professional advice, respondents answer for the sake of improving their reputations, an incentive to provide the best possible response.
Pearl's Kurtzig doesn't think of his site as a question-and-answer site, classifying it instead as professional services, an area he sees as ripe for online growth. He sees his competition not as other sites, but real-life appointments, such as visits to doctors, lawyers, and mechanics.
"I see the professional services sector playing out just like consumer goods did over the last 15 years," he said. U.S. online retail sales totaled $162 billion last year, according to comScore, compared to almost nothing 15 years ago, when the Internet was in its infancy and people mostly visited physical stores for purchases.
So far, Pearl has been just about breaking even, with revenue going into expansion. Kurtzig plans to use his new venture money to grow faster internationally, and perhaps provide a cushion should the global economy take a nosedive.