What is Stack Overflow's business model?

Question

I once answered a question that asked how Stack Overflow makes money, but that was before the time of VC.

Now, Stack Overflow has cash, and they have an ever-growing list of employees, but where's the business model?

The Experts-Exchange team took the time to answer its own Q&A about its site (since it wasn't included in the roundup by Fortune magazine), and just about the only dig in there that halfway has merit is the business model dig:

We switched to a premium model to keep out of the Venture Capital business (been there, done that, got the t-shirt). Companies like StackExchange couldn't do it without the VC cookie jar. Where's the model? Huh, Spolsky? (I’m sorry. Did that slip out?)

It hurt, but I can't help but wonder if they're on to something. How would Stack Overflow Internet Services pay back the VCs? Ad revenue alone? There is only one 'paid' product, Stack Overflow careers, but it doesn't seem like that could sustain a business as large as Stack Overflow (Joel once mentioned on his blog that his jobs board brought in an extra million a year in revenue).

So what does Stack Overflow do when the VC cash runs out? Is this a get-big-and-take-the-company-public maneuver? Is that the only viable business model for Stack Exchange?

Edit: With the size of Stack Overflow's team, it isn't a stretch to say that payroll is at least $2 million a year, probably as much as 4 when you think about benefits (average 120K for a developer in New York City; x2 for benefits/taxes/all-that-other-good-stuff). Office space can't be cheap, so how long does $6 million last before you need another VC infusion?

Answer 1

Four ways:

1. Job listings (e.g. the traditional classified ad model)
   https://careers.stackoverflow.com/employer/about-listings

2. CV Search (e.g. the new-fangled and IMO vastly superior dating model)
   https://careers.stackoverflow.com/employer/about-search

3. Traditional, but respectful (e.g. no animation or flash or pop-anything) display advertising on SO, SF, and to a lesser extent SU. https://stackexchange.com/about/contact

4. Stack Overflow for Teams

It's not difficult to do the math here yourself and estimate how much we are making. Also, remember half the team is remote, and does not live in NYC.

Answer 2

Why not sell a private, hosted version to individual companies?

I can imagine the organization that I work for benefitting from SO functionality with data secured and visible only to its employees.

Answer 3

There are currently two products that SOIS, Inc. sells:

• Careers
• Advertising

Having hired an ad ops campaign manager, I'd presume that SOIS, Inc., being one of the #200 sites in the world, can command quite high advertising rates. I'm sure that as other SE sites grow, advertising slots will also open up on those.

In addition, I think that at this point, SOIS, Inc. is still in the early stage and is probably still examining various other revenue models. For example, I think that SE Chat, if needed for revenue purposes, could be licensed. And I'm sure they have more ideas up their sleeve that could build on the wide user base they're currently establishing.

Answer 4

Joel's right -- you don't have to pay back Venture Capitalists. You can go broke leaving them holding the bag and walk away from it to get another job at some other company, like the idiots EE's VCs hired back in the last century. Or go back to blogging and speaking at seminars.

Nobody at EE ever ignored SO, let alone laughed at it. In fact, before SO got started, Jeff was asked why he was such a hater, and his responses showed how little he knew about EE, but EE gives him credit (although they know Joel does all the heavy lifting and Jeff is the mouthpiece) for actually getting off his duff and building something he thinks is better. But there's a difference between getting a whole bunch of people to sign up and play and having a business plan that's based on something more than stealing underpants.

Joel IS ducking the question -- not because he doesn't know the answer, but because he DOES know the answer. He knows that wht Marcus posted about his revenue stream, and knows the implications for his website.

People who think geeks buy things should talk to anyone who runs a casino during CES. Geeks show up in Las Vegas with two things: a crumpled shirt and a crumpled $20 bill... and they leave with both. They don't buy things from ads, and don't spend any money they don't have to -- and the people who place advertising know that. Sooner or later, the advertising has to pay off -- or an advertiser isn't going to buy. Besides... SO gives ads away. That tells you exactly what SO thinks advertising on its site is worth.

Answer 5

Most people have answered:

1. ads (which show you stuff to buy)
2. careers

I would add:

(3) lead generation: for each stack, there are companies that want you to become their customers, and will pay Stack Exchange every time they drive a new customer to their site. For example, GitHub, MSDN, and Red Hat may not necessarily want to show you ads to get you to buy stuff, but they would like Stack Exchange to get you to come to their site and sign up so they can later market to you.

(4) brand awareness. quick... which company sponsored Watson versus Human in Jeopardy this week? If you can answer this question, you now understand brand awareness.

Answer 6

Listen, The Hyphen Site just drew attention to themselves and got a tiny bit more relevant for a while. The fact is, their business model is basically trying to get people to pay for an answer that MAY be there. It may work as long as they are listed on Google, etc., but it doesn't scale (to people who are smarter than that) and it is probably not going to last: if Google and other search engines decided to exclude The Hyphen Site, their revenues would drop like a stone.

Let them do their thing. Stack Overflow makes money in the following ways for now.

1. Ads for the relevant audience, which can fetch a premium for being targeted by keyword. The psychology is, Stack Overflow is helping you, so you are more inclined to click the ads -- especially if they fit with the message of helping you (by giving you the developers some tools). So I expect Stack Overflow ads to convert better than your average site.

2. Jobs site. Stack Overflow should really beef this up and make it more of a cash cow, in my humble opinion. Look at Craigslist: they generate the majority of their revenue from charging for a few sections, most notably job posting. I would suggest letting each user put up a resume for example, and charging a monthly fee for recruiters and other companies browsing this site to see the resumes, and purchase credits to contact the actual users with job offers. Just a thought.

Answer 7

Just as an update since the existing answers are a little out dated. They now also make money from a newer service called Stack Overflow Enterprise. This is a private version of Stack Overflow that companies can host on their own servers or Stack Overflow can host. The amount depends on how many users you have, I am assuming, since it does not have a pricing page.

Answer 8

In this podcast I think Joel said, that last year's numbers were ...

• $44 million from Jobs (careers)
• $28 million from Teams (software to Enterprises)
• $16 million from Ads (mostly for Azure)

... so about $70 million.

I think that their plan (the opportunity they perceive) for future growth is various flavours of Teams -- i.e. licensing the software to companies etc. for their private/internal Q&A.

And that they also intend to continue "public Q&A" -- which I think of as being "pro bono".

Answer 9

Right off of the bat, I'd suggest selling the user data to brokers, plus paid job listings and advertising. Add in PPC ads and it's the Facebook model.