Economy

Essential Baby grows up

SmartCompany /

Australia’s largest parenting and baby site began before the dot-com crash, but survived and prospered. Essential Baby’s entrepreneurs share their secrets with EMILY ROSS.

By Emily Ross

Opportunity: Australia’s largest parenting and baby site, EssentialBaby.com.au, began its journey months before the dot-com crash of March 2000. It started out as “an experiment”, says co-founder Kylie Little (right).

With a low-cost model, and thousands of hours from Little and business partner Deirdre Walker, they gradually built up an online community of women and solid advertising revenues. So coveted is the Essential Baby audience (average age 29) that Fairfax Media bought the site in a $4 million deal announced in January 2007.

On a global scale, Sydney-based EssentialBaby.com.au ranks as one of the most successful parenting websites in the world. It has 120,000 unique visitors per month, a very healthy 10 million page views and a membership of more than 100,000.

Its growth, particularly more recently after major site upgrades, reflects the power of the Essential Baby forums as a place where women meet to discuss all matters family. At peak times, an average of 800 people are in Essential Baby forums, overseen by a team of 30 volunteer moderators.

Co-founder Kylie Little likes to think that the popularity of the forums has been about getting the right topics to keep the forums lively. Fertility, sex, marriage, working mums versus stay-at-home, caesarian versus natural delivery, breastfeeding versus bottle feeding, what kind of car do you drive, all continue to spark debate.

The idea for Essential Baby started milling around in Little’s head as she began contemplating starting a family. She was feeling burnt out from her role in a music distribution business and, at 30, she wanted to run her own business.

Little and her husband David Kelly would spend hours hatching plans for new ventures, drawing on coasters at the local pub. Little developed a baby gift kit (ideal for new mothers) and had some success placing it in retailers such as David Jones. A friend had developed some software called SiteSuite that he wanted to test, and offered it to Little to try out selling her wares online.

Walker had been working with Little as an account manager. The pair had met at school in Newcastle, NSW and had remained friends ever since. Walker liked the idea of a website for Australian mums (remember this was the dot-com boom era) so she left her job too and went into a 50:50 partnership with Little, in lieu of a salary.

The business started out in the second room of Little’s Bondi home. Essential Baby went live on September 1, 1999. The site ran on basic PCs and was hosted by SiteSuite. Neither Little nor Walker had ever used the internet before they started the site.

As well as selling the gift kits, Little invited all manner of women to contribute to the site and the end result was the first version of Essential Baby, a combination of an online store for babygoods and maternity wear and parenting experiences and tips. The main content on the early site were the diaries that volunteers posted on the site (early blogs if you like) where women told of their fight to get pregnant, raise their babies, survive the IVF process and so on.

On its first day, an order was placed at Essential Baby for a pair of maternity trousers from a woman in Hong Kong. Little was so excited she ran around her house “thinking we were going to be rich”. However, it took another two weeks for the next order to arrive. In the early months there were only “trickles of traffic”.

Reality sets in

In its earliest incarnation, the site had limited functionality, did not have a registration system or the ability to host forums. The SiteSuite software was standardised and Essential Baby needed customised software. “We were growing into a community and we suddenly needed all these extra features,” says Little.

Just months after the site went live, the tech wreck of March 2000 devastated their plans. “We said, OK, that’s it,” says Little. But their venture was not a write-off. Retail sales continued to cover the operational costs of the site and would be critical to the survival of the site particularly after the dot-com crash. Essential Baby ended the first year with revenue of just $30,000.

Within 12 months, the site had to be rebuilt. Luckily Walker’s husband had the skills to do this. A registration system was included so that users had to register if they wanted to use certain parts of the site.

The all-important forums were introduced. The upgrade also included more space on the homepage for advertisers, better registration systems and more links. Once the forums were introduced the traffic immediately improved.

Neither Little nor Walker received a salary until 2004. Both women were being supported by their husbands’ day jobs. When the business needed funds they would both pitch in. By 2003, Little’s house was overrun with boxes. An Essential Baby shop opened in Bronte (a beach suburb near Bondi) in September 2003. There was room for an office and storage space out back.

Word-of-mouth has always been the most powerful marketing tool for Essential Baby. Active message boards and fast responses to community questions built credibility. Comments were never stale. Online polls were also useful to generate publicity in the mainstream press on topics such as maternity leave and childcare. With time, Essential Baby became a regular commentator on all matters baby.

By early 2004, the online advertising market was gaining momentum and Essential Baby’s long-term sale and marketing manager Denise Shrivell’s relentless cold calls, meetings and emails paid off. The site began hosting blue-chip advertisers such as Johnson & Johnson and Vegemite.

The business partnership shifted after Walker had her second child. Walker has not been actively involved at Essential Baby since 2005. They restructured the business with Little buying out a percentage of her equity.

Little planned to relaunch the site, and spoke to a range of venture capitalists and technology consultants about her next move. Their advice was that she would be mad to sell a stake after all that hard work, because the return on investment would be so low. “We would have been giving away the company for a couple of hundred grand,” she says.

Little decided to borrow $300,000 from the bank, $130,000 for the website upgrade, the other funds for working capital. The 2005 upgrade and relaunch in April 2006 was a tipping point for Essential Baby. Again, the more professional, polished look at the site worked to improve the environment for advertisers and offer more interactive advertising opportunities as well as improving navigation so the site was easier to use. Forum use surged and there was triple-digit growth in advertising revenue for the year.

Little began thinking about the next step for Essential Baby, whether it would expand its retail operations. While hosting her eldest daughter’s birthday party, she spoke to a parent who worked at Fairfax Media, who was editor of the Sun Herald newspaper Phil McLean. They chatted about the progress of Essential Baby.

To empire build, or not to…

As Little’s retail plans developed, she had found the premises, drawn up the plans, done the financing… she decided it was time to seek some advice about the next move. “I was feeling tired and I wanted to know if this was the smart thing to do,” she says.

Little started to think about selling the business. She determined that her plans for retail expansion would not work with her overall five-year plan for the business. She decided to call McLean in August 2006, who introduced her to executives within Fairfax Media (which had been buying up sites left, right and centre).

Fairfax Media executives offered $4 million for the site, with a deal for Little to stay on for 12 months in the role of general manager of Essential Baby. The sale was announced in January 2007. The deal also includes earn-out payments based on the site’s success over the coming years.

There has been no major celebrations after the sale. “You think that handing over a big cheque will change your life, but it doesn’t,” says Little. “Some money turns up in your bank account and that’s it.” One of the terms of the sale was the closure of the Essential Baby retail store, in line with global trends that recognise the true value of parenting sites being in the community rather than selling baby gear. And Fairfax Media is not planning to go into the maternity retail sector.

Essential Baby is still run as a small business unit within Fairfax, with the same people making all the day-to-day decisions on the site. An average of 500 new members sign up every week.

Little’s short-term goal for the site is to create more revenue streams for Essential Baby and “make myself redundant”.

 

EssentialBaby.com.au will be featured in “50 Great E-Businesses and the Minds Behind Them” by Emily Ross and Angus Holland, (Random House, September 2007).

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