Five lessons from Kidspot

Here at SmartCompany we’ve tracked the rise and rise of parenting and pregnancy network Kidspot for a number of years.

We first talked to founder Katie May back in 2007, when her then-two-year-old site was growing aggressively and she was able to share some brilliant marketing advice.

The company became a stalwart of our Smart50 lists in recent years, ranking 18th last year with revenue of $7 million and average annual growth over the previous three years of an impressive 68%.

So news that the six-year-old company has been snapped by News Corporation in a $45 million deal comes as no surprise.

Kidspot is a great business based on one of the most influential categories of consumers – mothers – and it always stood out as a great fit for media companies trying to add traffic and communities to their digital businesses.

But the road to this big pay day has not been easy and it’s worth looking over Kidspot’s history to extract lessons that all entrepreneurs can get something from.

1) Great ideas don’t have to be complex

May started Kidspot.com.au after failing to locate a jumping castle for her young children. As a marketing executive at jobs giant Seek, she couldn’t understand why there wasn’t a simple place to find these sorts of things, so she wrote the business plan. There’s a good reason why so many businesses start from personal experience. All businesses must fulfil a customer need and what better way to recognise an unfulfilled need than to have it yourself.

2) A great idea might only get you so far

About a year after the creation of Kidspot, May realised she had a problem – her directory was a bit too good. “Unlike jobs – the industry I previously worked in – there is a limit to how many listings a given category needs. Mums don’t need to choose from 250 clowns in the birthday party category, unlike when you’re changing jobs and want to feel like you’ve seen everything,” she told us in 2009. The business adapted by adding more content and expanding its forums for parents and by ramping up its advertising offerings.

3) Get bigger without getting bigger

Whirring away in the background of Kidspot is one of its smartest creations – the SheSpot advertising network, which brings together Kidspot and its wholly-owned site Birth.com.au and a range of female-focused sites, including Mia Freedman’s Mamamia, plus Best Recipes and Easy Weddings. The network gives Kidspot (and indeed all the network members) clout in the competitive advertising market that they could not have on their own. This might sound like a lesson only applicable to media companies, but there are many examples where businesses could offer to sell complimentary products alongside their own and expand their product range without making huge investments.

4) Stand out from the pack

This lesson was hammered home to Katie May in April 2009, when the GFC struck Kidspot. Revenue fell 30% in April 2009 and 60% the next month. “It was devastating to put in similar efforts and have a dominant market position but not be able to fully monetise it,” May said last year. The solution was to use her biggest weapon – the community she had built. Kidspot broadened its advertising solutions to include research and market insights and clever word-of-mouth campaigns, where community members sample a product and give feedback on it. Kidspot argues this allows brands to talk directly to consumers in a way few other media companies can offer. But more importantly, it allows Kidspot to stand out from the media company crowd.

5) Avoid the earnout if you can

Katie May has voluntarily signed on to work with News Corp for at least the next 12 months, but the $45 million deal provides no earnout clause, which means the pay-day is not contingent on how the business performs in the next few years. Avoiding an earnout is not easy, but if it can be done, it’s a big win for the seller.