New Features And Tests On My Passive Income Business

In: How To By: Brian Armstrong

10 Feb 2009

This entry is part 10 of 17 in the series UniversityTutor.com

Hey Folks,

The past week or so I’ve been working on a cool new feature for my passive income business, UniversityTutor.com: MAP BASED SEARCHING FOR TUTORS!

This is using some Google Maps technology underneath to integrate with my site and hopefully it will make it much easier for people to find tutors based on their location.

Check out the screenshot below or click here to try it for yourself:

As you might recall, in the past I was using subdomains for each city to help people narrow their search. So people looking for tutors in New York City would visit http://newyork.universitytutor.com.

Here is an example of what it looked like:

It was more difficult to find tutors near you with this method. And it also had the unfortunate side affect that many metropolitan areas (which really should have been grouped under one subdomain) were spread out across multiple subdomains. With 1,600 cities in the database, I would have taken me months to figure out how to group them via endless googling. And even then it wouldn’t have worked very well, because you still wouldn’t have been able to search by zip code or street address, etc.

However, this old method did have an important SEO benefit because Google could index these pages better. They are largely text and having the city name as a keyword in the subdomain gave a huge boost in my rankings. This was currently driving about 500 people per day to the site (for free) just from search engine traffic alone. I obviously didn’t want to lose this benefit by switching to a largly AJAX & image based site.

In case you don’t know, Google has a tough time reading image based sites and figuring out what they are about so they tend to rank lower in search engines, everything else being equal.

So I decided to do both. I would keep the subdomain sites with their text content which were already ranking well in search engines. And I would set the homepage to use the new map based searching feature. I’ll probably put a big link on the subdomain sites to the “new map based view” so that people who come there from the search engine find out about the main site and hopefully bookmark it or remember it for next time.

Next steps? Keep evolving the business model!

The next step I’ve been thinking about is setting up a way for tutors to invoice clients and get paid through the website (right now they handle all payment with the client on their own via cash or check).

The current business model of offering a free trial and then asking tutors to upgrade to a monthly subscription is working fairly well (about 20% of tutors who go through the free trial end up subscribing for $10/month).

However, it’s still a tough sell and 80% of people don’t do it. I’ve discovered that people are psychologically very resistant to “paying” for a job (a job is supposed to pay *you* right). It smacks of a scam or some other internet scheme. Some universities have even refused to list my tutoring positions after seeing that tutors are charged a fee.

Yet people seem to be perfectly happy giving up a small percentage of earned money through a transaction fee. They have no risk to try it up front, and I only get paid if they get paid. It doesn’t FEEL like their money since they are just getting it (minus my fee) whereas ten bucks up front definitely FEELS like their money coming out of their account.

The other day I was checking out Guru.com’s business model and I think they may have nailed it. For new users who just want to try out the site for the first time there is zero monthly fee. It is a totally “free account” with no time limit or anything. For this they take 10% of any money you make. But at the same time, if you start earning a lot of money through the site and want to pay a smaller percentage then you can pay a small monthly fee (about $10/month) and the percentage drops to just 5%.

To me this sounds like the right balance. My guess is that the 20% of people who I’m getting to sign up right now are the same 20% who would upgrade to the “pro account” for $10/month. And the other 80% (who I’m earning zero from right now and quickly get kicked out of my site when their free trial ends) are the casual users who would continue using the site and pay the 10% fee.

Won’t People Pay Offline To Avoid The Transaction Fee?

Probably my biggest concern with this model (and the only reason I hadn’t thought about trying it until now) was the fear that people would just pay offline (under the table) to avoid the fee.

But I got a clue from Guru.com on this as well. Here is how they do it: the ONLY way to get reviews and build your experience on their site is to complete the transaction through their site.

Obviously, people are less likely to hire you for jobs if your profile on the site shows that you are brand new and have never done any work there before. But more experienced service providers can charge higher rates. This was a big key: show the number of hours this person has completed through your site as an indicator of their experience. And also only allow clients to leave reviews AFTER they’ve completed a transaction through your site. A tutor with several positive reviews and 50 hours of tutoring completed would be able to charge a lot more. Hopefully enough to make it worth it for them to complete the transaction through my site.

What do you think? Will it work?

I’ll be looking into this and testing it out. As always, I’ll share with you how it goes and keep you updated!

Finally, it sure feels great to be working on my business instead of in it. I was watching this lady have lunch today and it was obvious she was on her lunch break from Office Depot. She looked so drained, savoring every moment of her lunch break. I could just tell she must have been bored out of her mind stuck in that store all day working in a business. It made me realize how lucky I am.

Until next time, keep breaking free!
Brian Armstrong

This post is part of a series on: UniversityTutor.com

Tags: passive income business, university tutor

25 Responses

Creer un site

February 11th, 2009 at 4:13 am

Transaction fee : nice analysis, you will probably loose some, but people who want to evolve, will need to pay and the visibility should rapidly cover the fee…

Brian Armstrong

February 11th, 2009 at 1:06 pm

Thanks, hopefully I don’t lose any. For example right now on the signup page (http://www.universitytutor.com/tutor/new) it shows a free account and a pay account. I probably lose a lot of people on this page who see the free account only has 3 free contacts. If there is just a free account that you can use forever, maybe more people will sign up? I’ll find out :)

Mike

February 11th, 2009 at 12:34 pm

Brian,

I was getting worried not seeing any blog posts from you for a while – but glad to see your still working hard on your site! I love your concept and hope your site takes off hard, you’re doing a great job tweaking all the right things! SEO and website overall structure optimization is like a science, and when you perfect it, the ROI is fantastic.

Your new layout that focuses on the map functionality is great! Definately a lot more user friendly. The thing I love about your blog is that you document everything very well and not afraid to show your strategy behind it, very very valuable to myself applying the same strategies to my site. It’s always better to learn from others prior experiences than to go through it myself, right?

Also, I completely agree on how you tweaked your business model! Genious! This will certainly prove to have higher conversion rates, and your thoughts about paying up front vs paying after the service as a part of a small transaction fee is right on point. Also, the changes to showing the # of hours documented, reviews, etc are important to the tutors, and to have it through a tight process so that they can only have XYZ showed AFTER a transaction, is perfect and will certainly minimize if not straight-out eliminate the under-the-table problem.

I’m so happy I’m following your blog, I’m learning so much! Keep breaking free!

Brian Armstrong

February 11th, 2009 at 1:07 pm

Thanks for the kind words Mike! How is the redesign for your menu site going?

Tylor

February 11th, 2009 at 1:29 pm

Looks good! If you wanted a little user interaction feedback: my first intention, immediately upon landing on the page, was to start double clicking on my state and zoom into my area. I didn’t see any people and just thought that there weren’t any tutors. It wasn’t until I read the sidebar (which obviously was a last resort) that I saw that I needed to search first.

I just thought it might be helpful for you. It looks great.

I really hope that it takes off! We share very similar goals and I find it fascinating to hear your periodic updates on how things are going.

Brian Armstrong

February 11th, 2009 at 1:40 pm

That’s a very astute observation Tylor. Somebody else I saw use the site did the very same thing.

Hmm..tryin to think what might be the best way to counteract this. Possibly making the home page JUST a simple subject/location form (sort of like this http://www.tutorz.com/) and only showing the map on the second page? Or I could have a hover/popup on top of the map when the page first loads which gives the instructions. Will have to think about that one…thanks for the tip! I love user inteface design.

Matt Thomas

February 11th, 2009 at 7:22 pm

I think this sounds like a great idea. I think with any business idea, it requires some testing to see what kind of success it brings. I can see the risks you are concerned with (tutors being paid under the table), but it sounds that by implementing the technique guru.com uses, you won’t have t worry about that too much.

Both ideas are solid, and I like that you are still using the subdomain idea to continue to reap the benefits of SEO.

Brian Armstrong

February 12th, 2009 at 6:48 pm

Thanks Matt, agreed.

Nick

February 12th, 2009 at 1:28 pm

I think your structure is very sound and offering the tutors different ways to pay is good. My largest concern would have to be under the table payments. It would be very easy to build up some good ratings and feel that they have done enough to attract new students. Also, once someone’s got a few students, it would be very tempting to just keep quiet and just pocket it all. I don’t think most people would really care about building up a good profile, so long as a reaonable amount of money is coming in. It’s similar to contacting someone off of ebay before the auction ends offering a private deal.

If you can overcome these concerns, please let me know. I would be very interested to know what you think.

Brian Armstrong

February 12th, 2009 at 6:53 pm

I think you’re right Nick. For someone with lots of good review/ratings they may just decide to stop building their profile at that point. I guess this is ok – it doesn’t really hurt me if 10-20% of people decide to do this and would still probably be better than the existing system. Also, I suppose more experience tutors like that could upgrade to the pro account so they are only giving 5%, but they wouldn’t have to. We’ll see and thanks for the feedback.

Mike

February 12th, 2009 at 8:34 pm

Brian,

What about having a feature like oDesk’s searching tool that allows users to filter down tutors based on X criteria. Like, when I search for developers, I can search by # of hours logged, feedback rating, expertise in subject, etc.

I think it’s not really as big of a thing to worry about. That’s like saying after I hire my developer, I already have his email address – I could work with him under the table and not go through oDesk at all – however, oDesk has the random screen shot tool that I love which encourages business. Also, the developer can leave feedback/rating on MY profile as well to give me credibility as a buyer. I dont know if this helps, but I think most people are honest, and if they see a strong value in something, they will be willing to pay a small fee for it.

Brian Armstrong

February 13th, 2009 at 8:11 pm

I hope you’re right Mike. On a side note, been hearing great things about odesk. I think I’ll have to try it next time instead of eLance.com

I haven’t added ratings for students yet on my site, but this might be worthwhile.

Brian Armstrong

February 13th, 2009 at 8:20 pm

Looks like oDesk charges the same, 10% service fee

http://www.odesk.com/help/help/new_to_odesk/fee

Jay

February 13th, 2009 at 11:45 pm

Nick,

I think you have made a good point, this site needs to stick to its core business model of “Marketing these small Tutor Business Owners”. What other marketing services can you offer to these tutors. they surely don’t need you to manage there 20 bucks for 1hr of service with one client a week.

Also on your sign up page your registration button is below the fold “not a good idea” decreases conversions. Way to much useless information about your service. Keep it simple.

I also notice that if you picked and area you listing on the left ran of the page. My thought was that I would pick the top one and go down. Could you create a review and rating system that would make them more attractive to pick.

Good luck looks like fun!

Brian Armstrong

February 19th, 2009 at 9:54 pm

Thanks Jay, good thoughts!

Matt H

February 13th, 2009 at 6:31 pm

I have built a site with this same model in mind, you may be able to monetize this site using several different models.

1)Research Youth Camp directory sites – one model is to make the students become the member to view the tutors and that way you actually caputure the lead up front then distribute the leads to the highest paying tutor and so on….

2)again I can think of others but hate writing post please email me

Tylor

February 13th, 2009 at 6:55 pm

My 2 cents:

When you look (from the user’s point of view) at the freelancing site, it is a lot easier to pay through the site. It’s all set up already and takes only a few clicks to make a payment. It would be a lot MORE work to email someone and set something else up off site. Ebay is the same way. It’s a LOT easier to just pay through ebay. That’s why people love PayPal. It’s just so easy that no one cares about the small percentage they take.

I would be worried though, that your system requires too many steps.

1) Find a match
2) Set up a date,
3) teach/learn
4) Go back home
5) remember to login and pay

In this case, it’s just easier to scratch out a step by paying at the time of meeting.

Not to mention, if I didn’t read through the guidelines (which I never do), I would just pay on the spot anyway. Obviously not to hurt you or scam you out of some change, but because it is easier and I always go the easy rout.

Whatever you do, remember to SPELL IT OUT because people don’t read :) they just scan.

Brian Armstrong

February 13th, 2009 at 7:53 pm

You’re absolutely right Tylor that people will scan it. And there is a big difference here with ebay in that people are meeting in person. I might setup some online tutoring features as well which would facilitate this, but for right now it’s all people meeting in person.

I think to try and make it explicit I’ll do two things. (1) The tutors will have an “Invoices” tab when the login. At first it will be empty because they haven’t added anything. In keeping with the “useful first experience” model talked about in getting real (https://gettingreal.37signals.com/ch09_The_Blank_Slate.php) this will be a good place to add a little help screen. Something like “Invoice clients here to get paid. Only after paying, client’s can leave you a review and your experience hours will be updated on your profile”.

(2) I’ll create an FAQ for “how do clients leave me reviews and how do I gain experience?” which people have been asking about already.

Thanks for the tips!

Alfonse

February 14th, 2009 at 6:56 pm

Brian,

Just a little reminder of your core principle of “Breaking Free”. This business idea is essentially a C2C business model. You are connecting parents to tutors – nothing more!

It is extremely difficult to deal with and manage consumers. No matter how old they get they’re still babies. Unless you are ready to babysit your customers, I would not support the payment system idea. You may never “break free” from this business.

If you want to prove me wrong, try posting a phone number on your site and then see how many useless calls you’ll be getting about questions that could be readily answered on your site or through the FAQ. People don’t like to read. They generally ignore everything except for that thing that interest them.

Again, prove me wrong on this – just put a trackable link on your “terms and conditions” page and see how many people actually read the terms and conditions before they sign up. In my case, only about 4% actually read the T&C before signing up. The rest of them just click the button because they’re forced to click it before registration.

I had a consumer-based educational business before. Knowing that I don’t have the capacity to answer all they calls, I sent the calls to a call center and pay them by the second. All calls are recorded and forwarded to me for analysis. You will not believe the types of calls we got. Customers dont even read FAQ’s. They want to chat with you directly (for hours) …and they won’t even buy anything.

Anyway, the biggest risk (and biggest question) in this payment idea is:
1) Are you ready to personally manage payment disputes between each parent and tutor?
2) Are you ready to put your personal credit at risk for managing these transactions?
3) How will you deal with credit card companies and manage “Credit Card Chargebacks” and “charge disputes” AFTER you have taken your “huge” 10% and the tutor already escaped with 90%? If there’s ever any dispute or chargeback, the bank will take back 100% of the transaction + chargeback fee (usually $25) –> from YOU!
4) How about online fraud? Do you really want to put yourself in the middle of all this?

That is what Tutor.com, Wyzant.com and Brainfuse are all doing. NOT one of them is making any real money today….. Tutor.com basically lives on venture capital!

Anyway, I think I’ve said enough for now. I have been reading your blog for about a month now and I can identify with most of your comments. I just don’t want you to deviate from your or “our” common goal of breaking free – completely!

Having said that, here is a couple of sites and articles that I have been studying for awhile. They detail numerous types of business models that may fit your needs.

1) http://www.startup-review.com/blog/case-study-index/

2) http://digitalenterprise.org/models/models.html

Good Luck…..and keep breaking free!

Brian Armstrong

February 19th, 2009 at 9:42 pm

Wow…great comment Alfonse, I can tell you’ve done your homework. As for users asking dumb questions and not reading – totally agree here. My solution so far has been to simply not post a phone number, period, (I posted one temporarily for other reasons but it goes to a voicemail which just asks people to send an email and I don’t check it). I think you’re right it can be easy to get lost in a swarm of support queries.

I am also worried about payment disputes, charge backs, and fraud. I know these certainly will happen and I don’t want them to eat my time. I’m hoping to eliminate most of it by having the client manually approve each payment. Then, if tutor doesn’t get paid, provide steps for them to self resolve including accept cash/check if needed which would cut me out.

You’ve got me thinking though…perhaps my simple $10/month is best. Will have to think more about this. Thanks for your comments!

Breaking Free

New Features And Tests On My Passive Income Business

25 Responses

Leave A Comment

About this blog

Most Popular Posts

Brian on Twitter...