How does Q&A service ChaCha make money?

Bambi Francisco Roizen · January 17, 2011 · Short URL: https://vator.tv/n/15a3

CEO says revenue tripled in 2010; CPMs are $10 for text ads and $25 for mobile video ads

Q&A sites are getting a lot of attention in the past year. Last week, Formspring raised $11.5 million from Benchmark. In December, Twitter bought Q&A site Fluther. Last October, ChaCha raised $20 million, bringing total funds to date to nearly $72 million.  Last spring, Quora raised $11 million for a reported $86 million. And, at the start of last year, Google bought Aardvark. Other startups are emerging in this space, like Law Pivot, a Q&A site just for legal advice, which launched last August. Meanwhile, other lesser-known, non-VC-backed startups, such as JustAnswer, are making solid revenue by allowing experts to charge for providing answers.

In this interview, I talked to ChaCha CEO and co-founder Scott Jones, how his company is making money.

Here are the highlights:

- ChaCha is answering about two million questions daily on mobile. ChaCha serves two ads per question and answer. That means ChaCha is serving four million ads via text a day.

- The CTRs (click-through-rates) on mobile is 3% to 5%. This compares to the .5% average CTR for online ads.

- Scott believes the CTRs are higher because mobile is a "conversational medium," which means people are engaged with their phones as they wait for answers. About 90% of texts are looked at within three minutes, said Scott.

- CPMs (cost-per-thousand impressions) are $10 for text ads and $25 for mobile video

- The competitve advantage that ChaCha has over sites like Quora and JustAnswer and other Q&A sites is that ChaCha makes timeliness a priority. While sites like Quora and JustAnswer can provide "exceptional" answers, the problem is the user experience, said Scott. One may or may not get a good answer, but they'll have to wait often for hours. ChaCha strives to answers questions in less than a minute. If the criteria for being a great Q&A site is relevance, accuracy, and timeliness (answers within a minute), then none of the sites can deliver to that metric, he said.

To be fair to the other aforementioned Q&A sites, ChaCha clearly targets a different demographic, as it provides answers that are more about pop culture. People asking questions on Quora and JustAnswer are likely OK with waiting more than a minute to get an accurate answer. If one were to type in "How" in the search box on ChaCha, the automated pre-fill pops up the question, "How many songs has Lady Gag sold." If one were to type in "How" into Quora, the auto-fill pops up "How does Groupon make money."

(Note: See past interviews with Scott to find out what kind of questions ChaCha is good for and what is its demographic. Interview 1: Who's using the ChaCha Q&A site? Interview 2: How ChaCha achieved its network effect.)

 
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Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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