BuddyTV’s Andy Liu on the One That Got Away, and What He’d Ask the God of Business

Andy Liu knew something most people didn’t. When I asked him to name his favorite Seattle-area company that he’s not involved with, he said “Picnik” without hesitation. “That’s the one I’d want to be in,” he said. “I’m a big fan.”

That was on February 26, three days before Picnik, the photo-editing site, announced it had been acquired by Google in the biggest story of the year in the local Web startup community. But then again, Liu would know about these things ahead of time. He is a noted entrepreneur and angel investor, and the CEO of Seattle-based BuddyTV, all at the baby-faced age of 33.

BuddyTV has been a darling of the local Internet scene as well. Founded in 2005, the startup was backed by Charles River Ventures, Gemstar-TV Guide, Madrona Venture Group, and others. Its TV fan site draws about 6 million visitors a month, and has been ranked in the top three fastest-growing websites in the U.S. for the past few months, by comScore. BuddyTV offers TV-related news, articles, games, videos, and fan gossip.

“Our grand vision is to build the most compelling fan experience for any TV show,” Liu says. That means if you’ve just watched an episode of “24” or “American Idol,” say, you’ll go to BuddyTV.com to hang out and chat with other fans and read posts about the shows.

Yet this is clearly a challenging time—and a crossroads of sorts—for the startup. To date, its business has been 100 percent dependent on advertising revenues. In the current recession, the company has been forced to look at other revenue streams—things like virtual currency, virtual gifts, micropayments, subscriptions, and lead generation. In short, getting users to pay for something they’re used to getting for free. (Sounds familiar to the struggles facing journalists on the Web.)

“We’re at a place where we don’t need financing,” Liu maintains. “We can choose our own destiny.”

To understand what that destiny is, though, it helps to know Liu’s background. A Seattle native, he worked at AT&T and Boeing (and a few other places) before he founded and ran a startup called NetConversions for five years, through the Internet boom and bust. He turned the company profitable and sold it to aQuantive in 2004. The price was several million dollars, and he made enough to embark on a new career as an angel investor. But before doing that, while still in his late 20s, Liu took a break to travel the world. While he was in Peru—he doesn’t know “if it was the mountains, the altitude, or the beer”—the idea came to him for BuddyTV.

Liu and his co-founders had a thesis: people were watching TV in a different way from ever before, and the social Web was starting to take off. “Let’s do something super different. Let’s be in a space with slow-moving competitors,” he says. Thirty days after leaving aQuantive, in 2005, he started BuddyTV.

The first year was rough. Liu says the group’s thesis was probably correct, but the execution was wrong. The company’s first product was a social, interactive TV site, where consumers could interact with stars in a show. But nobody did it. While maybe 500 viewers would take part, tens of thousands of fans would read the transcript of the session after the show ended. BuddyTV had found its true calling—as a TV content and fan gossip site.

By year two, BuddyTV had gained traction, and its advertising model was starting to work. In the past few years, the site has seen 300 percent annual traffic growth. But fast forward to today, and Liu calls the revenue situation “interesting and challenging.” He says there is still growth in advertising, but “some trends we need to test. In 2010, we’ll do a lot of that testing. We think we can overwhelm our users with value. We think they’ll spend some amount of dollars on the site.”

The big question is when, and how. In terms of virtual currency and subscriptions, Liu says, “It’s clear to us that certain market leaders have figured it out. But I’m not sure that model works in the publishing space.” (He might be referring to offerings from Zynga and Facebook Gifts, as well as Picnik for subscriptions.) He says he believes in micropayments, but he thinks a lot about how fast “direct user monetization” will ramp up, to “make sure we’re constantly on the growth path.”

There are plenty of other challenges too. “The competitive landscape is always shifting,” he says. “We either have to figure it out very quickly or do something about it.” One thing he’s referring to is online video: consumers are going to sites like Hulu and Fancast, instead of BuddyTV, to actually watch TV shows (rather than chat about them). Another question is whether, and when, to get into other forms of entertainment shifting online, like movies and gaming, and fan sites for those.

Liu has no shortage of peers and mentors to help him find the answers. He started angel investing about three years ago, and has backed 18 companies to date, including local startups Cheezburger Network, Bacon Salt, Judy’s Book, Inkd, and Shelfari. He is also a limited partner in Seattle-based Founder’s Co-op, a seed-stage investment fund.

So I decided to hit him with a big question. If he could ask the God of Business one thing—and one thing only—what would it be?

Liu thought about it for a minute. Then his answer spoke volumes about the intricacies of today’s consumer websites, and the whole field of online publishing. “The thing I’d want to know, the thing that’s bothering me, is how to build user monetization around a publishing site,” he says. “How long will it be before someone spends a dollar on the site?”

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One response to “BuddyTV’s Andy Liu on the One That Got Away, and What He’d Ask the God of Business”

  1. His question to the business Gods is an extremely important one. Even without having been directly involved in a publishing model, I have a strong intuition that

    1) Non-advertising monetization is definitely possible for publishing sites. I think Consumer Reports is a golden example of how to make it work today. They provide something of real value, they charge a reasonable fee for it, and people pay that fee. Of course, this is predicated upon your ability to generate data that someone else can’t or won’t generate at a lower cost (assuming comparable quality).

    2) People hate typing in their credit number into a form. Hell, in 2010, people hate even typing in their email address into a form. We’re just done with that. I think that the emergence of a clear winner in the micropayments space is a prerequisite for the direct monetization of published content. Once that is in place, then sure, I’ll sign up for it and pay $0.25 to read an article that sounds potentially interesting. If this kind of model were in place, I’d probably end up paying at least $20-$30 month on published content, or more in the realm of business content. In turn, I’d expect the quality of business journalism to be higher than what I receive for free, but I think that’s entirely possible, if journalists had the same resources that, say, ecommerce sites have.