A Lifestyle Business Can Kill You!

A Lifestyle Business Can Kill You!

Life Lessons from a Lifestyle Business

An Interview with Matt Haughey, Founder of MetaFilter

MetaFilter, started in the late ’90s as one of the original group blogs, grew into a small but active community site. When AdSense came out in 2003, it suddenly started accruing revenue. By 2005, Matt was making double his salary and was able to quit his day job to focus on MetaFilter full-time.

In 2012, a reconfiguration in how Google ranked pages caused MetaFilter’s revenues to drop overnight. During the next few years, Matt struggled to keep MetaFilter afloat. Just over a year ago, Matt stepped back from his day-to-day role. Indie.vc caught up with him last week to check in on how things have been going.

Matt on April 28, 2016 at the XOXO Outpost in Portland, OR

After starting MetaFilter in 1999, when did it become your day job? When did you start hiring staff for MetaFilter?

November 1st, 2005 was my first day of working on MetaFilter full-time and it was probably only a couple months before jessamyn started volunteering. She wanted to help out and was the very best user on the site, having already helped set the early tone for Ask MetaFilter (the Q&A subsite).

I started paying her in early 2006. It was only her for about a year and, at first, it was just a contractor position. I wasn’t taking it seriously enough, still doing lots of web projects on the side. By 2007, it started to get more serious and we hired Josh, became an LLC and started doing payroll with real salaries. Hired Paul, too, to help me with development.

The revenue kept steadily growing and we were in the right place at the right time with blogs and Google and advertising. The question and answer area of MetaFilter was really taking off.

I would keep looking at the web stats. Ask MetaFilter quickly was on par with MetaFilter. But I’d think “MetaFilter is on the cover of magazines and things!” All of a sudden Ask MetaFilter’s like double the traffic, triple the traffic. Then all of a sudden, 90% of the traffic, and 90% of the money.

By 2009 things got super serious because money just kept growing. We became an S Corp, got healthcare and things got more stable. But I still wasn’t smart with money.

It was a real business from 2010 to ’12. People had 100% healthcare/dental/eye coverage and 401k’s and company matching and all that sort of stuff you can do when you have money falling from the sky. And then November 2012…

It’s funny. I was at the first XOXO, I give a talk about like “Hell, I don’t know, but it seems like the weather’s changing and this might be the sunset for blogs.” It was a really depressing talk. At the end I was like, “Maybe there will still be opportunities?” but two weeks later I woke up and the site was making half as much money overnight.

Matt’s 2012 XOXO Talk

It turned out to be Google re-jiggering things. I didn’t want to bother people but I knew Matt Cutts, head of Google’s webspam team. In like 2002, I was working for Creative Commons and talked to him occasionally about projects there. He was my only in at Google except for my account manager on the ad side.

Cutts said, “Oh yeah, I think you’re ensnared in this update. I see a couple weird things. But sit tight, and in a month or two we’ll re-index you and everything will be fine.” Then like an idiot, I made some changes but just waited and waited. I didn’t want to bother him because he’s kind of a famous person to me and I didn’t want to waste his time. At the time Google paid someone to answer his email. Crazy, right? He just got thousands and thousands of messages a day.

MetaFilter’s Ad Revenue

I kept waiting. For a year and a half, I waited. The revenues kept trickling down. It was this long terrible process, losing half overnight but then also roughly 3% a month for a year and a half after. It got to the point where we couldn’t pay our bills. That’s when I reached out again to Matt Cutts, “Things never got better.” He was like, “What, really? I’m sorry.” He looked into it and was like, “Oh yeah, it never reversed. It should have. You were accidentally put in the bad pile.”

Two weeks later traffic went back to how it was. But in those two years, the ad revenue market had changed. Even with the traffic, we were making half as much money because the market had kind of died in the interim.

You mentioned making a lot of money from 2009 to 2012. You were a business that was built solely on a different platform that you didn’t control. How did you make a lot of money, treat your employees well, but not save for a the rainy day?

I would say early on it was a pretty healthy mix of revenue at the start. Some revenue came from Amazon. Any mention of a book or something got associate fees. I was represented by an ad company that was specializing in banner ads on blogs. Then Google. Those things were kind of even. They were 30% or so of income each.

But by 2010 or ’11 it was like 95% of the money was coming in from Google, and other ad companies were dying or being bought out. I remember showing friends how my revenue was from a single source, going, “This is nerve wracking,” and them going, “Oh my God, you should never be in this position. You should diversify. Burn money on something else in the hopes that someday it pans out, like try something else. This is terrible. The day they turn it off, you’re dead.” And then that’s what happened.

Did you try to diversify and work on something else?

We tried little things. We boosted the Amazon stuff a little bit. In 2010, the iPad came out. Make an iPad magazine was a popular idea at the time and we spent some time and money on paying another company to build an app. Then again, nobody ever made much money on an iPad magazine, so it’s probably a good thing that I never went too far down that path.

I think I knew the writing was on the wall before 2012. I saw it in the abstract. We’re going to hit a wall someday. Someday this is all going to go away, and then one day you wake up. Oh, shit. Today’s the day.

ask.metafilter.com’s Traffic

But I thought it would be a slow descent, not a wall. Early on, I got advice from a friend who was making a lot of money on a big web property. I remember asking him, “What do you do when it starts making serious cash?” He just said, “Plunge it back into the business. Pay people crazy amounts. You’re either going to give it away as taxes back to the government, or you could give it to them. Don’t be a jerk and hog it all yourself! If you make a million dollars, don’t keep $900,000 of it and pay $100k to employees. Pay them as much as you possibly can and it’ll help the business and be your way of re-investing.”

And that’s kind of what I did. Staff got paid well. We had benefits galore. I think I tried to spend as much of the money as possible on the business in this way. Everyone had nice chairs and dual monitors and new iMacs.

I would say definitely the biggest regret is not having a stockpile. I read somewhere that I should have 6 months of expenses in the bank but it seemed impossible. Ideally, you can sleep at night if you have 6 months of salary in the bank for everyone. I don’t know why I didn’t make that a priority. At most, we always had one or two months of payroll sitting in the bank, and that was it.

Why didn’t you think about having a savings account? Keeping a savings account is plunging it back into the business; it’s making it sustainable.

I didn’t think of it that way, stupidly. I don’t mean to sound like a goofy politician but I came from meager means. My parents always had shitty small businesses that never made much money. I didn’t have any adults, like country club adults, around me to to tell me, “Oh, you should have a lawyer for that, you should incorporate as this in this state and you could avoid this tax.” I didn’t know anybody like that. I was financially illiterate until my early 20’s.

I felt like I stumbled around getting conflicting advice from people. It took me years to find people that taught me about real business adulthood. It felt like being at a kid’s table until then.

Getting a really good accountant, getting a good business lawyer, having some sort of business mentors in your life is amazing. My parents were not it, and none of their friends were. It took me years to find a good investment person who knew great accountants, lawyers, and everything. My shit was in order by 2011, but only because I’d stumbled upon a good network of people that knew things I didn’t have access to before.

It’s easy to say in hindsight that if I had known any of that stuff in 2005, things would’ve been drastically different. But weirdly, people hardly ever write about it honestly online: how to be a business-y adult, or when they do write about it, they write for an audience of people who already know. People tend to talk about it in a shorthand. Because everyone knows this, right? Wrong.

If you have no idea what an S Corp is, there’s not a lot of hand-holding help for you out there. I was a stupid, bumbling idiot combined with money. My spirit animal was Kenny Powers instead of Warren Buffett.

The one year anniversary of you stepping down from MetaFilter just passed. How did that come about? How’d you decide to leave and how did it survive you leaving?

In 2014, I realized I was completely burned out. I was working 40 hours a week in the trenches moderating the site but then also running the organization around it too. Before I oversaw the site and there were 6 employees that did the moderation work, the day-to-day grind. After I took on one of those roles and then also did everything else — it ended up being 60 or 80 hours a week of work. I became miserable and anxious for a couple years.

Then a company approached me and said, “Oh hey, do you want to run community for this other site that’s big and popular? We’ll just buy you and make that happen.” That was their first step but I knew it was outrageous. The deal never worked out, thank goodness, but they gave me the idea. Maybe I could hire someone to replace my hours, and then decrease my daily involvement, and transition away. It was the first glimmer of hope that maybe I could go do something else instead of being miserable working 80 hours a week.

I realized early on with MetaFilter that it’s a weird beast, being a community site. It’s not mine, I just participate on the site. Yeah, I built it, but people there make it great — both the staff and the members. I felt like if I left, it would go on and be fine without me. There’s a great staff that has been there for years and years that know how to keep it up.

So after that other opportunity died down I emailed Stewart, the CEO of Slack. I’d known him for years. I said, “If there’s ever anything there, let me know. I really love using Slack and would love to help build it.” He eventually got back and said, “Let me think. If I see something I’ll send it your way.” Shortly after they asked me to join as a writer and I said yes.

I asked one of MetaFilter’s part-timers if they could work full-time and they said yes. I accepted an offer on a Friday and started work the following Monday for Slack.

How’d that work out? How has you leaving affected the site? How’s MetaFilter doing a year later?

My ultimate goal was for the staff to run it and keep it out of my hair. In my ideal world, they’d call me once every three months when something insane happened. And the staff has done an incredible job, going beyond my wildest dreams. They’ve taken everything off my plate. I’m lucky. I’ve been telling friends it’s like I own a restaurant in LA — I don’t get to eat there or have to run the kitchen anymore but I’m some sort of silent owner. I would love to transition my ownership legally to the staff somehow. Still working on how to do that.

Revenue went up by a bit after I left and they’ve stockpiled that cash. They’re only spending money on salaries. 90% of the cost of running the site is salaries, but those are fixed. It’s been stable. They have six months in the bank now, which is incredible. They’ve since added features to the site in my wake, which I love seeing.

Here’s another thing: community doesn’t scale very well. There’s a high human cost of running community sites. That’s what I realized myself. I was depressed and feeling overwhelmed and terrible and in therapy and every day I was just combing through the muck. It took sixteen years for me to get there, but it happened eventually.

It’s weird that there’s a time where we envisioned MetaFilter would run like Reddit, up and down votes and we wouldn’t have to have a human component to it, but that would kill the personality and the humanity of the site. It would just be mob rule and it would have all the problems Reddit has: terrible people controlling the conversation. It’s just really hard to run a human-curated anything at scale. I think that’s why I never wanted to do anything at scale.

Once a year some VC guy will see my name and email me and be like, “We should talk. Oh my God, you’re an underutilized business, I could flip this. This should be 10X, this, that.” But no one can answer the question: if you gave me $5 million to invest in MetaFilter, what would you do with it to make it better or worth more? Communities don’t respond well to rapid growth.

What advice would you have for someone starting their own company right now? New media companies are popping up everywhere like on Snapchat and Instagram. But they’re popping up on platforms and getting revenue from things they don’t have control over.

I built my own software so I had some control over the platform but I didn’t have control over where revenue was coming from. I thought about bringing sales internally to have more control over it, but that never was going to work for MetaFilter. We weren’t focused enough. If you want to sell ads, focus.

People building companies on Instagram or Snapchat… It’s not as bad as it sounds to be at the whim of somebody else’s platform. It’s where the people are. But still use basic good business advice of trying to diversify your income, and make sure it’s not coming from one source.

If you ever have any windfall of money, don’t spend it. Save it. Always prepare; try to get six to 12 months of money in the bank as soon as you can. Going through the “make half as much money one day” thing totally recalibrated my life. I live within my means; try not to splurge too much. If money ever comes in, it goes to savings or retirement accounts. It doesn’t go to jet skis and boats and huge vacations and stupid shit like that.

People are going to a small number of platforms; that’s an acceptable drawback that we’re just going to have to deal with. Some things just have to be on Instagram or whatever. You’re not going to get the same kind of audience if you’re on your own site even though you control it.

My dream when I first saw the internet in the late ‘90s? I’d left a science background to do web stuff. I’d just gotten a master’s degree in soil chemistry. My other soil science friends were like, “What the fuck are you doing taking a web job?” I would say, “Someday I’d like to screw around on the web and live in the middle of nowhere and have a fast internet connection. If I made a hundred grand a year that would be like heaven.” They were like, “Yeah, right. That’ll never happen.” That was always my goal.

I remember telling friends when they came out with a web product, “You should charge $50 to install it, or $10/month.” As they were racing to raise money, I was telling them, “Your only goal should be, if you can make 10 grand a month, just do that. Why do you have to raise 20 million?”

[Indie.vc]

May 8, 2016 / by / in , , , , ,

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