August 2008 - How the Web Works

As the founder of WebMD and current CEO of, Jeff Arnold knows a thing
or two about how to build a successful website.
Here’s what he’s thinking these days…

By Jack Gordon

How does a successful website work today? How will winning sites work tomorrow? Few people are better qualified to answer those questions than Jeff Arnold, CEO of HowStuffWorks. For one thing, exists in order to explain the way things function: cell phones, hurricanes, hybrid cars, black holes in the universe-you name it. For another, Arnold has built the Atlanta-based operation into an Internet powerhouse, one still growing by leaps and bounds.

Now a subsidiary of Discovery Communications, parent of The Discovery Channel, HowStuffWorks was an intriguing but small-potatoes operation-the brainchild of a university professor-when Arnold acquired it in 2003. At the time, he was CEO of the Convex Group, a media holding company looking for Internet ventures that could hit it big under the right management.

Arnold had good reason to believe he could make a go of a website. In 1998, he founded a little operation called WebMD. By 2000, with Arnold as CEO, WebMD had revenue of nearly $1 billion.

He bought HowStuffWorks in 2003 for a few million dollars. When he sold it to Discovery last December, the price was a reported $250 million. He retained not only the CEO job, but rights to expand the site to China, Brazil, India and Russia. The Brazilian site is already up and running. The Chinese site launched in June.

HowStuffWorks’ growth phase has just begun, he says. It not only will be a genuinely global presence, but soon may show the world a new business model for operating an advertiser-supported website.

Did we mention that Arnold is only 38? This is definitely a guy worth talking to, Electronic Retailer figured. So editor-at-large Jack Gordon asked him some questions about HowStuffWorks and how it, er, works.

Electronic Retailer: What is the basic purpose of HowStuffWorks, and how does it differ from, say, Wikipedia or Encarta?

Jeff Arnold: Our goal is to satisfy curiosity on the web. HowStuffWorks is where people can come to pursue their curiosity, whether it be about products, everyday matters, obscure topics or news-related information. We differ from Wikipedia in that our information is professionally researched and edited; you can trust that it’s accurate. We differ from Encarta in that we add entertainment into our articles; we give them personality, versus just providing encyclopedic information.

ER: You engineered the 2007 sale to Discovery Communications. What did HowStuffWorks and Discovery see in each other?

Arnold: Discovery wanted to own curiosity across all formats, and they saw HowStuffWorks as already owning it online. We had the potential to be the cornerstone of Discovery’s digital media strategy. As for us, we realized that to take it to the next level, we needed video. We wanted to add Discovery’s great nonfiction video to our site. What we perfected after we bought HowStuffWorks, before the acquisition by Discovery, was the art of doing content so well that search engines put us on the front page of results for a multitude of search terms. We’re one of the rare companies aside from Wikipedia that ranks very high on all kinds of topics. So we could approach a manufacturer or dealer of hybrid cars and say, “You should advertise on our site because we draw a wonderful target audience.” When you add all of those great Discovery Channel videos to that, the quality becomes even higher. Any news item can also drive interest to us. Somebody recently was attacked by a shark in San Diego. A lot of people Googled “shark attack.” If you do that, you’ll find us listed very high. And along with our articles, we have at least six Discovery videos on shark attacks. The same thing happens with product-related stuff. You hear that Apple wants to power iPhones with solar cells. So you Google “solar cells” and find us, with clearly written content and Discovery videos.

ER: Has traffic grown since Discovery acquired the site?

Arnold: When we closed the merger last December, HowStuffWorks was getting about 10.5 million visitors a month. In May, we had more than 15 million unique visitors and 80 million page views. So that’s about 50-percent audience growth in the first six months. As of June, we have 2,500 Discovery videos on the site. By the end of this year, we are expected to have around 30,000. We’re confident it’s a good strategy.

ER: You sell nothing directly to consumers on HowStuffWorks, right? But you do have a product-review section. How does that end of the operation work?

Arnold: Yes, we’re lead generators, not sellers. To be useful to consumers who are researching products, we try to take them in a logical path-from explanations to expert reviews, to consumer opinions to price. In 2005, we bought Consumer Guide. It’s a print-based business that has been around since 1965, a kind of for-profit version of Consumer Reports. They test products-digital cameras, sport utility vehicles, all kinds of things. We kept them in Chicago, and we treat them as a separate entity. That’s the basis of our product-review section. But our real value to retailers is as lead generators in the main parts of the site. It’s like a perfect storm: Can we write content about products and services that people want to read, that they trust, and that search engines will rank high? If so, then we can build an audience for a retailer on lots of different subjects.

ER: How is your editorial content selected? Do advertising considerations play a role?

Arnold: Our whole business is based on search demand. Our site is broken into 15 vertical categories: science, history, autos, food and computers, for example. Well, to be authoritative, what do we need to explain under “science”? What do we have to cover under “autos”? We create massive taxonomies. But then we prioritize topics within those taxonomies. We study search behavior and prioritize based on search demand. But advertising demand also helps determine what we write about within a taxonomy. If an auto advertiser says, “I’m interested in people who want to know about safety and trucks,” that might become a priority. We maintain a clear delineation between editorial and advertising, but we develop content to attract a target audience. Once we determine the content, the trick is to make the factual fun. Our editors are the key.

ER: Are online consumers changing their behaviors? Have you noticed any patterns?

Arnold: Yes. For one thing, the number of searches is going up dramatically. I’ve seen figures that say the number has doubled in the past two years or so, from 5 billion to more than 10 billion. But it’s not because of a huge increase in the number of searchers. For the most part, it’s the same people searching more often. Second, those people are searching in more sophisticated ways. Two years ago, 30 percent of the people searching a term like “hybrid cars” on Google or Yahoo would click on a paid-search result. That number now is below 20 percent. People want unbiased information. Also, few go beyond the first page of organic results.

ER: What’s next for HowStuff Works on the advertising side?

Arnold: I want to go beyond insertion ads-the way the industry works today-and more into integrated sponsorships. And I want to stop doing price-and-compare and pursue a whole new model. I want to go deep with the big brands.

ER: Explain, please.

Arnold: Right now we do well sending people into price-and-compare engines. I partner with, for example. When you come to HowStuffWorks looking for information about digital cameras, and you’re ready to find out how much a camera costs, tells you about a dozen different retailers. But I don’t think that price-and-compare is a good experience for the shopper. People recognize that information is the key in a buying decision, and information is what’s missing in price-and-compare. Also, when price is the only factor, then from the seller’s point of view it becomes a commodity game.

ER: What did you mean by “going deep” with big brands?

Arnold: Right now, I say to the camera maker or the automaker or whoever, “OK, I delivered the guy interested in digital cameras, the rest is up to you.” Instead, I want to go to brands like Sony and Toyota and say, “Look, let’s work together on what creative would give you the best qualified shoppers. Let’s merchandise your products with information.” I want to pick a partner for every given product category. If it’s electric drills, maybe I’d go to Sears and say, “Let’s integrate Craftsman drills into the site so you’ll get 100-percent share of voice around our articles on electric drills. We’ll create ads, we’ll share data, and we’ll both know if the customer ultimately buys.” I’d have to be very careful picking our partners, and I still need to separate church and state so that the actual articles about drills are useful and unbiased. But by partnering with someone like Sears, I think I can create a better user experience for a drill shopper than just by passing him off to a price-and-compare engine.


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