Deal Radar 2009: Yola

Today’s post is about a company that could be helpful for start-ups or businesses on a tight marketing budget to get exposure on the Web without the high costs. Yola, previously known as Synthasite, is a free, do-it-yourself website creator. It operates on a brower-based Ajax platform and supplies users with simple instructions, tailored services, and drag-and-drop technology, making website creation possible for even the most un-savvy of computer users. Yola allows users to incorporate a variety of widgets including YouTube videos, Google Gadgets, and PayPal widgets without ever needing to see any HTML code. It also offers an online storefront, blogging, and simple domain registration.

The company was founded by Vinny Lingham, CEO, who originally hails from South Africa. Lingham is a World Economic Forum Young Global Leader. Global Leaders are a community of young leaders who share a commitment to shaping the global future. Prior to Yola, Lingham was the founder & CEO of incuBeta, a holding company that consisted of his previous startup, Clicks2Customers, a global performance search marketing agency that generates over $100 million annually in client revenue. In 2006, Lingham received the ‘Top Young IT Entrepreneur in Africa’ award. Brent Viljoen, CTO, is the company’s other founder. Viljoen brings over a decade of software engineering management experience to Yola. Prior to his involvement with Yola, he was a technical product manager at Clicks2Customers, where he met Lingham. Viljoen also managed the development of Portico, a rapid rich-Internet application development platform.

The company has raised a total of $25 million: a $5 million Series A from Columbus Venture Capital in November 2007, and a $20 million Series B from Reinet, a company created out of the restructuring of Richemont, the Swiss luxury goods group, in February 2009. Columbus VC remains a part of Richemont. The company does not expect to raise any more funding as it anticipates becoming operationally profitable with its current situation.

Before Yola was founded, Lingham realized a need for websites that were stifled by a lack of financial resources, technical infrastructure, and awareness. During his previous stints he recognized the increasing simplicity of Web-based tools and the rapid commoditization of integral aspects such as storage that previously made Web hosting an expensive proposition.

Although tools for people to build and publish their own websites have been around for some time, the current landscape is more dynamic than a decade ago, when end users needed to use complex programs such as Dreamweaver to build a page and had to manage publishing and hosting via sites such as Geocities. Now, the design, publishing and hosting functions have been integrated into a single tool.

Yola’s target market is fairly large. In the United States, over 50% of small businesses do not have websites, and the global number is much higher. Yola is capitalizing on this booming market by employing a freemium model, monetizing a free product with additional premium products and services that are needed by certain segments of the market. This enables small businesses that are strapped for cash to start using the products offered. Once they get their initial sites up and running, they are more likely to purchase the premium products. This strategy allows Yola to broadly infiltrate the market. The company also plans to monetize its offering and expand its user base through partnerships.

In addition to the free website building tool, Yola offers premium services that allow small businesses to build a more professional site. The Premium Styles Store allows users access to 18 new professionally-designed templates geared at different industries. These premium styles are $29.95 for a one-time fee per template. Yola Pro, a bundle of premium services, costs users $49.95 per year. These services include sites with 125GB of storage, a premium style, 100MB file uploads, HTML uploads, $50 in advertising and stock photo credits, and removal of the Yola footer that shows up on the free sites. Users can also purchase a personalized domain name for $19.95 per year.

Yola’s top target segment is SMBs that do not have the technical expertise to build and code their own site, nor the need for a complex, professionally designed site. Other key segments range from education to the arts. Yola penetrated its market though a mix of direct marketing, PR initiatives, word of mouth, and infiltration into the online community.

Yola believes that its VC backing helps to differentiate it from competing startups by giving it more to invest in critical resources. There are several competitors, but the demand for such offerings is still significant. Yola’s services are similar those of DevHub and WebHub. Other companies offer a more specialized service: WebJam helps users create a free social networking site, while concrete5 offers open source content management systems (CMS), so users can update data on their sites themselves. Others such as Jimdo are free to begin with, but cost users $5-$10 per month for additional features. Yola differs from its competitors through its partnerships and integrating several third-party services such as Picnik for photos and WidgetBox for widgets. Yola also has competition from industry behemoths such as Google and Microsoft. All these companies have recognized the demand for website-building tools from small businesses and individuals.

Being a private company, Yola was hesitant to divulge its financial information. In January 2008, it had a user base of 10,000, which reached the 1 million mark by January 2009. The company currently has over 2.5 million users and anticipates reaching profitability in 2011. It was recently named one of ‘BusinessWeek’s 50 Best Tech Start-ups.’

To bolster its growth, the company is using a variety of avenues, ranging from a unique resellers program to establishing an online resources center for SMBs that highlights the importance of a Web presence for small businesses and offers tips on how to establish it.

Recommended Readings:

Deal Radar 2009: Kaltura
Deal Radar 2008: BlogHer

This segment is a part in the series : Deal Radar 2009