ChaCha CEO: We Are Masters of the Pivot

If you follow the venture industry long enough, you eventually develop the cynical habit of presuming any startup you haven’t heard about for a while is quietly on its way out.

That would have been my first assumption for ChaCha  – a company with the novel idea of getting actual human beings to help answer online queries. The company got a fair amount of attention six years ago when it secured $6 million in an initial funding round led by Jeff Bezos’ Bezos Expeditions.  At the time, it was one of several search startups to raise early stage funding in a bid to secure a sliver of a vast and growing market long-dominated by Google.

Since then, ChaCha never emerged as a force to keep Googlers up at night. Nor, for that matter, did any of the other companies that started up around the same time, such as Powerset (a natural language search company acquired by Microsoft), Hakia (a still-private provider of semantic search technology), or Spock Networks (a people-focused search site bought by Intelius Networks). As of December, the top four search engines still commanded more than 95% of the search market, according to ComScore, with Google alone securing more than two-thirds.

Yet ChaCha has managed to stay in the game.  To date, it’s raised a total of $82 million, including $14 million in a new funding round announced today led by VantagePoint Capital Partners and Rho Ventures.  It has revenue, too – about $12 million last year, mostly from banner and text ads.  Traffic also rose about 70% last year to around 45 million monthly unique users, the majority on mobile devices, says ChaCha CEO Scott Jones.

When asked how the Carmel, Indiana-based company has managed to stick it out for so long, Jones’ answer is tongue-in-cheek.

“We are masters of the pivot,” he says, pointing to numerous times in which the company has shifted course to stay relevant and reduce operating costs. Moves include raising its profile on social networks, which now account for the bulk of users; expanding from its core Q&A focus to short content  and quizzes; and adapting to a major change in Google’s algorithm a couple of years ago that threatened to derail a core source of traffic.

However, ChaCha may have to give the most credit for its durability to the rise of the smartphone, which has brought heightened consumer demand for fast, accurate answers to basic questions. That seems to bode well for ChaCha, which has provided answers to more than one billion questions since its launch, and accumulated a massive database along the way.

“A lot of companies like Google and Bing would like to put an answer at the top of the site, but it’s a hard proposition with just algorithms,” Jones says. “Injecting that bit of human intelligence and common sense combined with the algorithms goes a long way.”

The key challenge, Jones adds, is providing the correct answer right off the bat. While on their computer screen, people may be willing to scroll through a few search results to get to the right one, mobile users have lower tolerance for that. Thus, to get repeat engagement from on-the-go users, a service must deliver the correct answer right away most of the time, and preferably almost all of the time.

How close is ChaCha? Jones claims the service delivers the correct answer to a question 73% of the time, and with the new funding he hopes to take it to 80% or higher.  Purely algorithmic solutions, meanwhile, tend to top out around 55%, he claims.

Image courtesy of ChaCha.

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