brooke07t7: Making Money With Website

Republicans are considering ways to trim the federal budget — and the funds that go toward public broadcasting are on the chopping block. Now it appears that certain public radio stations may be violating federal law to convince listeners to lobby Congress to stop these cuts.

Reps. Betty McCollum (D-MN) and Ed Markey (D-Mass.) already staged a silly press conference this week with Elmo, Grover and Big Bird dolls, along with someone in an Arthur the Aardvark costume, to try to embarrass Republicans into continuing to pay for public broadcasting. Of course, using these characters was probably not a good marketing idea to begin with, given the money-making powerhouse that Sesame Street represents and the enormous profits that have been earned through merchandising these characters.

Now public radio stations such as KCRW 89.9 in Santa Monica are sending out press releases with detailed information about the recommended spending cuts from the House Appropriations Committee in H.R. 1, the Full Year Continuing Appropriation Act. KCRW’s message comes from Sarah Spitz at kcrw.org and urges listeners to “take action in support of public broadcasting” by visiting another website. That website allows you to “Click Here to Write Congress” and asks visitors to “contact your representatives in Congress now and urge them to stand up for public broadcasting funding.”

What KCRW is doing, however, may violate the federal Anti-Lobbying Act. 18 U.S.C. § 1913 provides that “No part of the money appropriated by any enactment of Congress shall, in the absence of express authorization by Congress, be used directly or indirectly to pay for any personal service, advertisement, telegram, telephone, letter, printed or written matter, or other device, intended or designed to influence in any manner a Member of Congress, a jurisdiction, or an official of any government, to favor, adopt, or oppose by vote or otherwise, any legislation, law, ratification, policy, or appropriation, whether before or after the introduction of any bill, measure or resolution proposing such legislation, law, ratification, policy or appropriation.”

Under a prior version of the statute as it was interpreted by at least one court decision, this anti-lobbying provision applied only to federal officers and employees. But the law was amended in 2002 and now applies to anyone who receives federally appropriated funds including recipients of federal grants such as NPR. Such grants cannot be used to lobby Congress directly or indirectly, which would include trying to persuade NPR listeners to lobby Congress on NPR’s behalf. So if any of the funds received by KCRW from the Corporation for Public Broadcasting were used to pay Sarah Spritz’s salary in writing this lobbying appeal or to fund the facilities used to broadcast her message on behalf of the radio station, then KCRW has violated federal law. And if any federal funds were used to pay for this website, that is also a violation of the law.

This is not an isolated incident either. Both of the public radio stations in Washington, D.C., the nation’s capitol (WETA and WAMU) have postings on their websites telling listeners that they should call their congressional representatives to stop these proposed funding cuts.

The amended 18 U.S.C. § 1913 has gone largely unnoticed and has not yet been used to prosecute the recipients of federal funds (e.g., Planned Parenthood) who appear to lobby Congress regularly. But there is no question about the reach of this federal provision and the possibility that public radio stations such as KCRW may be violating the law in their lobbying efforts to stop Congress from getting rid of taxpayer funding for public broadcasting.

Will the Holder Justice Department do anything about this possible violation of federal law? Unfortunately, given its record over the past two years of politicized law enforcement decisions, that is very doubtful.

However, note to entrepreneurial lawyers: These possible violations of the Anti-Lobbying Act by public radio stations may trigger the qui tam provisions of the federal False Claims Act, which applies to every organization that receives money from the federal government. The FCA imposes civil liability and stiff penalties on anyone who defrauds the government by getting a false or fraudulent claim paid. Using federally-appropriated funds to engage in illegal lobbying activities may very well violate the FCA. Private parties can assert qui tam claims under the FCA and can recover up to triple damages and reasonable attorneys’ fee and costs.

So even if Eric Holder’s Justice Department doesn’t want to go after NPR, private parties and their lawyers may be able to do it and make a profit on it.

Marco Arment, the former CTO of the Tumblr blog platform, is best known these days for his time-shifting reading app Instapaper. But he could start a side-job as a financial advisor to start-ups. His motto: Get the money from your customers, not investors.

Arment’s more traditional take is built largely on the idea that if he puts out a good product, there’s no shame in asking customers to pay for it. And the more they pay, the less he needs to rely on outside investors. Arment said many developers are of the mindset that they need to amass a huge number of eyeballs through free services. But they don’t focus enough on building a solid product that can command loyalty and payment from consumers, and instead try to gain profitability through advertising and turning to outside venture capital.

By contrast, Arment says his efforts to monetize Instapaper have been successful because he was able to leverage the hard work he put into his paid versions and the good will he’s gotten back from consumers. And that has allowed him to avoid outside funding, something he plans on doing for the forseeable future.

Don’t Take Funding if You Don’t Need It

“If a service can be profitable and breakeven without VC money, you don’t need to take it,” Arment told me in an interview. “There’s no reason for developers to get a lot of users without charging. There’s another path. My goal is to spread that message: Charge for something and make more than you spend.”

Arment launched Instapaper as a free website in January 2008 and became profitable later that fall when he first began selling a paid iPhone app alongside a free version. He’s been profitable ever since. Arment won’t disclose his revenue, but he said he can cover his expenses and can afford to hire a couple more people if he needed. He left his Tumblr job in September to devote himself to Instapaper.

Though Arment maintains a free iPhone app, he said the focus of the company has been on the paid versions which are updated first (a new update is expected in the next month or so). He has yet to release a free iPad version and has only gotten three emails about the lack of it. Most seem happy to pay for the $5 iPad version. Between 25 and 33 percent of people pay for the $5 paid iPhone version. In fact, as an experiment, he pulled the free iPhone app from the app store for a week a little while back and found that only one person emailed. Sales of the paid version didn’t go up, but they didn’t go down either, he said.

“The free version isn’t really competing as much as I expected with the paid version; a lot of people go straight to the paid version,” he said. “It was only a week but the people who were going to the free version would not have gone to the paid version.”

Let Users Thank You by Paying You

That’s what’s allowed Arment to really focus on the paid segment. In fact, he still questions the value of the free version at times because it can leave a more negative impression for users with its limited set of features. Arment said his paying users have surprised him with their support. He started a $1 a month subscription plan in October that didn’t actually offer much in the way of extra features. It was more of a way to let users show their support for Instapaper. He said the response was overwhelmingly positive.

“That was a huge surprise to me how well it’s doing given there’s no real incentive to do it besides good will. But it ends up that good will is powerful,” Arment said. “It shows that people will pay for something they like because they want to ensure its future.”

Arment is testing the theory again with a new API that leverages his subscription plan. For developers who want to build apps with Instapaper integration, Arment said last month he will require their users to subscribe to Instapaper. Again, the response has been very positive, said Arment. Two hundred developers have applied to get access to the API. All this money-making has allowed Arment to sidestep venture capital money. He has had repeated offers, but Arment said accepting VC funding is akin to taking on a new boss, and the act of raising and maintaining money is a full-time job, he said.

Venture Capital Is Like Having Another Boss

“If you can go without funding, you can be a one- or two-person shop without a whole level of bosses,” he said. “You’re not worried about getting more money and getting diluted anymore.”

Arment’s approach doesn’t work for everyone. He was fortunate to be able to this as a side job and build it up while at Tumblr. And he acknowledges that the lack of funding could be a problem if he wanted to build a staff quickly. But he believes his experience shows that a more old-school approach to building a business and developing a following with consumers is a viable one for entrepreneurs that should be explored more. He may not the biggest company, but he can be a profitable one for a while.

“I don’t need the entire market,” Arment said. “I can get five percent of the market and be rich.”

Related content from GigaOM Pro (sub req’d):

Why Apple Hasn’t Sewn Up the Tablet Market — Yet

Lessons From Twitter: How to Play Nice With Ecosystem Partners

Rogue Devices: The Consumer Influence on Enterprise Mobility, Part 1

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brooke07t7

Saturday, March 5, 2011

Making Money With Website

Don’t Take Funding if You Don’t Need It

Let Users Thank You by Paying You

Venture Capital Is Like Having Another Boss

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