Four college students, whose only goal was to take their fondness for playing pranks into cyberspace, launched the site last July. There was no real business model to speak of. Just dudes, all avid readers of the humor rag The Onion, looking to have some fun.
But the buzz on the site spread through America's dorm rooms and workplaces like an e-mail virus. Two weeks after Justatip's debut, the server that the founders were renting for a mere $50 a month crashed from all the traffic, forcing them to upgrade to a $600 monthly Web-hosting contract.
Although a few banner ads helped pay the bills in 2000, those revenues all but dried up in 2001. Justatip, which oozes snarky, frat-boy humor, had pretty much turned into a $7,200-a-year hobby. By the middle of 2001, co-founder Howard Lerman, 21, and his three fellow entrepreneurs realized that they had a big decision to make: sink more beer money into their baby, or find someone to take it off their hands. In the end, they got their beer money back -- and then some.
DEAR BOSS, YOU STINK. On July 2, publicly traded Traffix (TRFX
), a database marketing and management company, bought Justatip, guaranteeing that anonymous e-mails condemning people as nose-pickers, or alternatively, praising them for virtues such as excellent penmanship, will continue to be sent for some time to come. What it took was a larger company that could see a way to turn Justatip's helpful advice -- such as, "Your hairpiece looks ridiculous, and it distracts and repels those around you" -- into a money-maker.
"I think we had a feeling that it was a lasting idea," said Lerman, a Duke senior majoring in history and economics. "When people keep coming back for more, that has value. We just needed to find someone who had the resources and the business savvy to [keep it going]."
The Vienna, Va., native and his main collaborators, Duke student Alex Sundstrom and Princetonians Tom Dixon and Sean MacIsaac, collectively received a cash payment of under $100,000 for the site, says Josh Gillon, general counsel and executive vice-president of corporate affairs at Traffix, which is based in Pearl River, N.Y. Gillon says the partners will also get payments for one year, based on how many names their site generates for Traffix's direct-marketing databases. And they're racking up consulting fees for adding new tips to Justatip.
"Guys were coming up with things on the Internet with no business models whatsoever and asking for $50 million," says Gillon. "But these guys were not working to make a million dollars. They were just looking for some way to keep it going and participate in the upside. I really see it as a success story."
CLASSIC DILEMMA. Lerman and his buddies' modest expectations may have saved the site from oblivion. At least 555 Internet companies have gone belly-up since January, 2000, with 330 of those failures in the first half of this year alone, according to research firm Webmergers.com. Although Justatip didn't sell for the millions some dot-coms with flimsy business plans scooped up during the Net's halcyon days, its survival is remarkable, given the vengeance with which many sites are being killed off.
Indeed, the dot-com train wreck derailed many a company seemingly better positioned for success. Even WebVan, which became one of the more high-profile e-biz flame-outs, after burning through more than a $1 billion, had what seemed a sounder plan for making money: selling and delivering groceries.
In order for Jusatip.com to stay afloat, Lerman and his co-founders had to confront the classic small business dilemma: Go it alone and face the consequences or sell to a larger player and lose control of the company. The entrepreneurs reckoned they had a clever concept, but knew they lacked the necessary financial or technical oomph to carry it further.
True, Justatip also happened to be at the right place at the right time, with a database-marketing company on the prowl for a new way to beef up its listings. But Justatip had another very valuable thing going for it: the attention of the 18- to 24-year-old demographic, the one that makes advertisers drool. "Everyone wants to believe right now that the value of eyeballs is zero," says Tim Miller, Webmergers' president. "No one can tell me that anybody who develops some sort of brand or loyal following has no value."
ITCH ALERT. Justatip is not the only anonymous tip service in cyberspace. Gentlehints.com and Coworkerhints.com are other examples. But unlike Justatip, which is free, other sites often charge a fee. Gentlehints.com, for instance, wants $12 to send someone with an itchy scalp a letter and a bottle of antidandruff shampoo is included.
Eric Kintz, managing director of Roland Berger Strategy Consultants in San Francisco, says Justatip's creators made out pretty well, given today's climate. "It sounds like a pretty smart deal," Kintz says. "In most cases, people would have just sold the domain for what they could get. As a founder, you have to believe in your idea and make sure that the upside is higher than what you would get up front."
So far, Traffix has done little to Justatip's content. But the company, which has a database of more than 25 million names thanks largely to its GroupLotto.com game, a site with a daily drawing for up to $10 million in winnings, has added revenue-generating features to Justatip, including new banner ads. Traffix also installed a tool that captures data on Justatip users. Essentially, by sending a tip, tipsters agree that any information Traffix gathers from them can be sold to marketers. So far, Justatip has generated 100,000 names, but Gillon says he hopes the site will collect at least 500,000 names in the next three months.
Justatip will be an important source of direct marketing leads for Traffix, whose clients include banks, discount-shopping clubs, Internet service providers, and cell-phone companies, Gillon says. "We found that Justatip has clever content that consumers would find attractive," says Gillon. "It has a viral aspect to it. You send me a tip and I will not only send one back to you, but I will likely send it on to a third party."
HOSTILE ENVIRONMENT? The appeal of Justatip, however, is lost on some workplace experts, who believe it can promote mean-spiritedness at best, and a hostile work environment at worst. "Anonymous tips dilute the nature of what is being said, and they can raise the anxiety level of the recipient," says Bruce Sanders, a consulting psychologist with Assessment Resources in Vacaville, Calif. If you've got a problem with a co-worker, even one as prickly to handle as body-odor, it's best you raise the issue with a manager who can assess the situation, rather than sending an anonymous tip, Sanders says. Of course, the supervisor should always discuss the issue with the employee away from the watchful eyes of coworkers.
If you're clashing with the boss, then it's time to muster the courage to deal with the issue directly, rather than doing it anonymously, says John G. Clemons, vice-president of internal communications at Nextel Communications, the wireless company. But be prepared to provide your boss with specific examples of what is causing the conflict, Clemons says. It's probably best to leave bad breath out off the list.
There's little evidence, however, that the site is being extensively used to solve pressing workplace problems. Jarret Siegel, a finance professional in New York City, says he's logged on to Justatip to send tips to friends about being slobs. But Siegel, 24, says he would not dare fire off a tip to a coworker. Says Siegel: "With e-mail, there is just too fine a line between just joking and hurting someone's feelings."
These days, Lerman and his pals are coming up with a new site called Ratensee.com. When they launch it, which they hope to do in the very near future, friends will be able to rate each other on topics including fashion sense and "How hot is your significant other?" Lerman describes it as an "interactive slam book." The results will be available the next day online and Traffix will use the personal info captured on the site to add to its databases. Of course, Traffix will likely be conducting a survey of its own: Just how hot an acquisition has Justatip been? By Eric Wahlgren in New York