Capital Efficient Entrepreneurship: Bonanza Co-Founder Mark Dorsey (Part 3)

Sramana Mitra: How did you mitigate the constrained budget?

Mark Dorsey: I’m really proud of this. It’s something that we take a lot of pride in. We identified that we had a very rabid seller fanbase who were willing to do whatever it took to make our company the most successful marketplace online. Realizing that, we created a guerrilla marketing group. We called this group the Bonanza Action Club. We invited the top 50 members of our site.

Every week, we would give them a media objective. We wouldn’t spoon-feed them what to say. We would say, “Tell people what you like about our site.” We would task these top 50 sellers to go out and attack certain media targets where we can get good SEO on. The first week, we had these 50 sellers contact Tim Robinson of KING 5 News in Seattle. Within two hours of launching that, Robertson called us and said, “We want to do a story on you. Please have your people stop contacting us.”

We then realized how we had harnessed the power of our community. We saw what we had. Each week thereafter, we created new media targets. We would identify these targets as relevant media contacts who have done articles on eBay or done articles on Amazon or have a popular blog in that space. As a result of the Bonanza Action Club, Forbes, Business Week, and CNN did stories on us. When we first started the club, we had about a million page views per month.

One year later, we had over 100 million page views per month. The Bonanza Action Club was one of the most innovative, amazing marketing programs that you’ve probably never heard of. If you Google it, you would see that there’s a lot of great press about it. There’s also a lot of press on how these people are spamming everybody.

It was an amazing marketing idea that we’re proud of. We successfully took on the challenge of zero budget and created a plan that didn’t cost us a single penny. That gave us a tremendous amount of traction.

Sramana Mitra: So cool. Translate this incredible traffic that you’re talking about. What did that do to your revenues?

Mark Dorsey: For the first year, in order to get people to our site as easy as possible, we didn’t charge any fees. That was another challenge. Other companies that were coming on the scene would promise a free site forever. Anybody who has a little bit of intelligence knows that you can’t do something free forever. We were very transparent that we were going to start charging.

We made our rates public after our first year. We had the challenge of no money. We had just a small amount of money from friends. We had a tremendous amount of momentum. We were starting to get traction but we were running out of capital and we didn’t have any capital in our view for at least a year. We started having trouble in keeping up with the traffic. Our site would go down because our servers would get overloaded. We needed to buy servers. We blogged about it. We wanted to be transparent with our community.

We said, “We want to let you know that we’re trying our best to get more servers online. We’re doing everything we can.” One of our sellers responded by saying, “Why don’t you create a donation page and we will donate so you guys can get servers and scale the business?” When we researched that, we found that that probably wasn’t going to be so smart. We created a membership program.

If someone would provide $10 per month, we would put a badge on their profile that’d say that they were supporters of our site. We would provide them extra premium access. This was all on the fly. We call that our Silver Membership Program. We gave these members that badge. A lot of our sellers signed up for this, not because they wanted a premium product, but because they wanted to see us succeed.

They really were vested in our success. Enough sellers signed up within one week to enable us to buy the servers. It repeated itself until we were able to start charging. I’m proud to say that that the program has morphed into a revenue stream for our company where we provide five different tiers of this membership that provides various premium features.

Sramana Mitra: Awesome, awesome, awesome.

This segment is part 3 in the series : Capital Efficient Entrepreneurship: Bonanza Co-Founder Mark Dorsey
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