How 2 Founders Bootstrapped Art.com to $200M/Year Before Selling to Walmart
Who is Josh Chodniewicz?
Josh Chodniewicz, co-founder of Art.com, met his future co-founder Mike Marston at a young age and later teamed up during Marston's time at Virginia Tech, where Marston studied computer science. The duo leveraged their shared interests and skills, with Chodniewicz's entrepreneurial spirit shining through even in his early years.
What problem does art.com solve?
Art.com provides an easy way for customers to find and purchase a wide variety of art online, solving the problem of limited local selection and convenience. By offering comprehensive selections and customization options, art.com effectively fills the need for quality wall décor without the hassle of visiting multiple stores.
How did Josh come up with the idea for art.com?
Back in 1994, the internet was still in its infancy, and Josh Chodniewicz didn't even know what it was until his friend Mike Marston called him from Virginia Tech and told him it was going to be huge. Intrigued, Josh bought a modem and the two started brainstorming potential online business ideas. After passing on books and music, they decided posters and prints were perfect for the online market where people had limited local options for art.
They observed the struggles people had finding specialty posters, like a Boston Red Sox fan living in Texas trying to find team memorabilia. This made them realize the potential of a single online source for a wide variety of posters and prints. To validate their idea, they leveraged early internet marketing strategies, like pay-per-click advertising on Yahoo! Overture and an extensive affiliate program with 750,000 websites.
Throughout this process, they encountered challenges like low repeat sales and ineffective advertising expenses but refined their approach by focusing on profitable marketing channels and banding together for logistical efficiency. This experience taught them the importance of perseverance, innovation, and leveraging the right partners to bring their vision to life.
How did Josh build the initial version of art.com?
Josh Chodniewicz and his co-founder Mike Marston began the development of Art.com in the mid-1990s, starting with a mere $35,000 from their own pockets. Initially operating from Chodniewicz's parent’s basement, they launched the site with 3,000 scanned images and built an early version of their own search engine and affiliate program, which eventually included 750,000 websites linking to them.
They also negotiated performance-based listing fees with eBay and formed partnerships that allowed them to sell more items on the platform than any other company in 1998. The entire development process was a bootstrap effort, so they had to be highly strategic about marketing and operational expenses. Their frugality and innovation helped them grow gradually until they purchased the Art.com domain from Getty in 2001 for $618,000, supported by a loan from Getty that they paid off in seven months.
What were the initial startup costs for art.com?
- Self-Funding: The founders bootstrapped the business with $35,000 of their own money.
- Angel Funding Attempt: They unsuccessfully tried to raise $250,000 from angel investors early on.
- Seed Round: They raised a $58 million seed round, 10 years after starting the business, which was more growth capital.
How did Josh launch art.com and get initial traction?
Affiliate Programs
In the early days, Josh Chodniewicz and his co-founder Mike Marston developed one of the first affiliate programs to spread the word about Art.com. They contacted website owners through platforms like WebRings, which grouped sites by specific topics like Star Wars. They offered these sites a commission of 25% per sale, thereby incentivizing them to link back to Art.com. This way, they avoided upfront costs and only paid commissions after making sales.
Why it worked: This approach worked because it leveraged the existing traffic of niche websites, which meant Art.com products were advertised directly to interested audiences. Additionally, it reallocated marketing costs to after-sales, which was crucial for a bootstrapped company with limited capital.
Metrics:
- 750,000 websites linked to Art.com
- Grew from $800,000 to $2.4 million in revenue within two years
Search Engine Marketing
Art.com was one of the first companies to use Yahoo!’s Overture pay-per-click service. By negotiating and paying fractions of a penny per click, they targeted a broad array of search terms. With millions of SKUs, they could capture a vast and varied audience by leveraging the long-tail effect, ensuring even niche searches could lead to conversions.
Why it worked: In the nascent stage of the internet, keyword ads were very cheap but still effective. Art.com's strategic use of long-tail keywords ensured they were capturing traffic from a wide range of interests, turning low-cost clicks into paying customers.
Metrics:
- Invested in search engine marketing led to high volume, low-cost traffic
- Boosted early traction and incoming revenue significantly
eBay Partnership
In 1998, Art.com formed a notable partnership with eBay. At that time, eBay charged a listing fee, which was not viable for Art.com’s vast inventory. They managed to negotiate a deal that waived listing fees in exchange for a commission on sales. This arrangement allowed them to list millions of products at no upfront cost and relist automatically upon each sale.
Why it worked: The partnership leveraged eBay's established platform to gain visibility, and the focus on paying commissions rather than listing fees kept costs aligned with actual sales performance. This symbiotic relationship filled eBay’s content gaps while driving sales for Art.com.
Metrics:
- Sold more products on eBay than any other company in 1998
- Over 10% of revenue at its height came from eBay listings
These initial strategies and tactics helped Art.com grow sustainably and effectively in its formative years, setting a strong foundation for future scaling efforts.
What was the growth strategy for art.com and how did they scale?
Affiliate Marketing
Early on, Art.com leveraged the power of affiliate marketing. They built their own affiliate program in 1997, obtaining 750,000 websites to link to them. They targeted niche groups like Star Wars fan sites via WebRings, offering commissions for every sale. This attracted website owners to promote Art.com products, amplifying their reach without upfront costs or major financial risks.
Why it worked: The affiliate program capitalized on the vast audiences these niche sites had, effectively targeting potential customers who were highly interested in specific types of art and posters. The high commission of 25% ensured that site owners were incentivized to promote Art.com, leading to an extensive network of promoters.
Search Engine Optimization and Pay-Per-Click (PPC)
Art.com was one of the early adopters of Yahoo!’s Overture, which was the precursor to modern PPC advertising. They negotiated to pay fractions of a penny per click, focusing on a wide array of long-tail keywords. This allowed them to drive significant traffic at a very low cost.
Why it worked: By leveraging long-tail keywords, they captured specific searches that had low competition and high relevance to their products. Their early adoption of PPC gave them a competitive advantage and a cost-effective way to attract highly targeted visitors.
eBay Partnerships
In 1998, Art.com negotiated a special arrangement with eBay to list their products without upfront listing fees. They agreed to pay eBay a commission only when a sale occurred. This strategy allowed them to flood eBay with listings, paying eBay only when they profited from a sale.
Why it worked: This partnership allowed Art.com to maximize exposure without financial risk. Given that eBay was a growing marketplace, the partnership not only increased sales directly but also boosted brand visibility.
Customer Retention and Repeat Purchases
Art.com initially struggled with the problem of low repeat purchase rates. They eventually expanded their offerings to include photo framing services and fine art prints. Despite the inherent challenge in their industry, expanding their product line encouraged previous buyers to come back for additional items.
Why it worked: By adding complementary services like custom framing, Art.com made it more convenient for their existing customers to complete their art buying experience in one place, thus encouraging repeat business. However, framing was not as successful initially because they realized customers preferred to choose their own frames, necessitating change in their approach.
What's the pricing strategy for art.com?
Art.com primarily sells posters and framed art, employing a model with high (65%) margins that focuses on immediate profitability from customer acquisition through pay-per-click and affiliate marketing; prices range from around $10 for posters to several hundred dollars for framed prints.
What were the biggest lessons learned from building art.com?
Lean Operations Matter: Art.com started with just $35,000 and bootstrapped its way to success. Keeping operations lean, especially in the early stages, can help sustain a business when external funding is hard to find.
Adapt and Innovate: They were early adopters of affiliate marketing and leveraged creative partnerships with platforms like eBay to drive revenue. Always be on the lookout for innovative ways to reach your audience and leverage existing platforms.
Persevere Through Adversity: Despite challenges like the dot-com bust and difficulties in raising capital, perseverance and continued belief in their business model helped Art.com grow into a substantial company.
Customer-Centric Focus: Understanding customer behavior was crucial, as seen when they shifted their strategy from pre-framed products to allowing customization, which significantly boosted sales. Always listen to and adapt based on customer feedback.
Strategic Acquisitions and Partnerships: Acquiring competitors like Allposters.com and forming strategic partnerships with companies like Yahoo and Amazon helped Art.com consolidate its market position and expand its reach efficiently.
art.com Acquisition: How much did art.com sell for and what was the acquisition price?
Walmart acquired Art.com in December 2018 for approximately $315 million, incorporating it into their e-commerce platform to strengthen their home decor offerings.
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More about art.com:
Who is the owner of art.com?
Josh Chodniewicz is the founder of art.com.
When did Josh Chodniewicz start art.com?
1994
What is Josh Chodniewicz's net worth?
Josh Chodniewicz's business makes an average of $8.33M/month.
How much money has Josh Chodniewicz made from art.com?
Josh Chodniewicz started the business in 1994, and currently makes an average of $100M/year.
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