Learning what works with vertical networks

Proformative is an early success story, achieving profitability after three-and-a-half years. When CTO Greg Stout and his partner John Kogan created the vertical network for chief financial officers, “we started as a LinkedIn clone”. It has changed its business model several times.

Proformative attracted $1.8m from Mike Maples’ Floodgate venture capital firm plus more from other investors. “We needed the money to learn how to make it work,” observes Stout. “For the first five years it has been about getting the people collected, giving them what they need and want and then giving people who want to get in touch with them a way to do it – but not in such a way that it is overt or ugly. The site is precious. It is all about trust.

“Once we had established trust we could find ways to get sponsorship for certain activities such as webinars,” he continues. “In reality that’s a lead generation business. Sponsorship is the biggest revenue stream, though other streams such as corporate learning are growing fast.

“Neutrality is key,” according to Stout. “We diligently monitor content. If someone tries selling, we pull their comment off the site. People don’t want that. They just want the answer. That’s what has made the best vertical networks so successful.”

Spiceworks has been through the learning process and established three primary revenue streams suited to its specific market vertical. It sells display advertising, offers sponsorship of marketing platforms and provides premium IT services such as a hosted helpdesk, mobile device management controls and an app centre.

But size is not everything. The Edmodo vertical network (marketed as the Facebook for schools) is well-established (2008), well-funded, has 44m registered users and a powerful board including LinkedIn CEO Reid Hoffman. But it appears not to have attained profitability yet.

For more read – Vertical social networks are the greatest threat to LinkedIn.

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