The secret behind Like.com's revenue engine

CEO Munjal Shah reveals the real strategy behind making money off of visual search

Like.com CEO and founder Munjal Shah was one of the presenters at The Funded and Vator’s Juice Pitcher event last week. Munjal’s presentation, which was a frank and detailed outline of Like’s strategy to generate revenue, was a nice complement to Mint CEO Aaron Patzer’s, another detailed summary of how Mint grew its company and what it cost.

Like.com has had great success so far. To date, it’s generating more than $20 million in annual sales with more than $100 million products sold off its platform. The $20 million comes from leads it collects from its retail customers whenever a consumer browsing on Like.com clicks through to the customer’s Web site.  Like has raised $51 million from investors Menlo Ventures, Crosslink, Bay Partners, Blue Run Ventures and Leapfrog Ventures.

But it wasn’t a slam-dunk and obvious service from the start.  To jog your memory about Like’s history: it launched originally in April 2006 as Riya.com – a tool to organize photos. Six months later, or November 2006, it changed to Like.com, a shopping engine using visual search to search within a photograph.

Here are some of Munjal’s strategic points about how Like and how entrepreneurs should think about making money, not necessarily in the order he presented them:

How do you move revenue?

The best way to grow revenue is to think about it every day. Like.com’s team focuses on revenue with “religious” zeal. Daily revenue reports are sent to the entire company as well as investors. “You can’t move a number you don’t focus on every single day,” said Munjal. “If you want to move revenue, you got to look at revenue; You got to know what it is; You got to focus on it.”

His biggest advice is to work on generating revenue every day and focus on it early. Many entrepreneurs say they’re not thinking about generating revenue for a year. If that’s the case, focus on revenue prior to that year because it’ll take a year before you iterate enough to a point the revenue model works.

One key to generating revenue is to track every release on the Web site. Many people just collect “data,” which doesn’t provide even information. Two points of data actually result in information. But there’s more to just data. There’s knowledge, which means making correlations, and there’s wisdom, which means knowing what event/release caused a certain result. Building a warehouse of “data” isn’t as important as building a warehouse of “wisdom,” said Munjal.

How do you know a revenue model works?

The best way to know if your revenue model works is to count the steps to monetization. When Like.com started as Riya.com, there were several steps to monetization, and branches off that step. Essentially, there were many assumptions in place about what the user would do and how eventually they’d end up in a place where Riya could monetize them.

That’s an “oblique” business model, said Munjal. What that leaves entrepreneurs with is hope for a “miracle.”  Munjal thought face recognition would attract users. Then the users would upload photos. Then they’d tag the photos.

Then they’d either make them public on Flickr (and there’d be a Riya version of Google images) or keep coming back to Riya where Riya would then advertise to them. Given the multiple steps to revenue, the company changed to Like.com, which had a much more simple monetization plan. At Like.com, as soon as a person clicks on a picture from a retailer, Like.com gets paid a lead generation fee. As Munjal puts it, get a business model that reflects the shortest distance between two points – getting a user in and monetizing them.

Symmetric vs. Asymmetric business models – which one are you?

Munjal says there are more asymmetric business models online. Asymmetric models are those where the people using the product aren’t the ones paying for it. Companies with asymmetric models include Google.com, Facebook.com, eBay and Like.com vs symmetric models, which include Amazon.com, Salesforce.com and iTunes. Recognize which model you fall into and realize that asymmetric models dominate the Web, but the challenges include satisfying users and paying customers.

Avoid Death Valley

Death Valley is where most Web 2.0 companies reside. In Death Valley, sites generate a low volume of traffic and have an audience with little commercial intent. Make sure you're not one of them.

Make sure you either have a low-trafficked site with high intent, like Like.com or Billshrink.com, or a high-trafficked site with low intent, like Facebook and online games' sites, or high intent and high volume, like Google.