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How to Create Revenue From a Free Service

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How to Create Revenue From a Free Service

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OpenChime.com co-founder and CEO Erdem Kiciman faces the same problem that many online startup businesses face -- how do you make money when you offer a free service?

The Chicago-based site hooks up businesses with people looking for services, like plumbers or handymen.

And while Kiciman doesn't want to specifically comment on the company's revenue strategy -- he's fiercely adamant that the site remain free -- he does say that they expect the site to eventually become profitible.

The reason they're able to be patient is due to an influx of venture capitalist funding from Lightbank -- the same firm that backed Groupon -- allowing the company time to experiment with advertising and revenue plans.

Kiciman and his business partner, Kale McNaney, created OpenChime in an attempt to streamline the task of finding services. They launched the company in January, 2011, sparked by their own frustrations with fruitless Yellow Pages and Google searches.

"I got tired of trying to get ahold of local services and would end up booking the first one I spoke with," Kiciman said.

Users of the site can enter the type of service they're looking for, their area, and some specifics about the service request and OpenChime does the rest. The site contacts nearby businesses and returns a personalized response to your inbox including quotes and contact information. According to the website, the average OpenChime user spends less than a minute submitting their request.

"When I looked at the local service market I realized that the Internet hadn't quite affected it as much as it could," Kiciman said.

The company saw some early gains but soon hit a wall.

"It was a very typical startup business problem. How do you get consumers to use [OpenChime] before businesses sign up, and how do you get businesses to sign up before consumers start to use the site?" Kiciman says.

Within three months of launching, Kiciman and McNaney began seeking venture capitalist funding.

"When we discussed funding we decided we shouldn't even take any money if we didn't know what to do with it," Kiciman says. "We wanted to be self-funded until we needed [investors]."

OpenChime's partnership with LightBank provided a stable bank account and also allowed Kiciman and McNaney to hire a COO and a developer.

A more indirect benefit of receiving venture capital is the validation your company receives.

"When you're a self-funding startup, it's hard to get called back," Kiciman says of OpenChime's humble beginnings.

And these days, OpenChime is definitely getting called back. Kiciman says the site has logged days with tens of thousands of dollars worth of transactions between consumers and local service providers.

Now if they can just figure out how to make some of that cash flow their way.

Related Topics OpenChime
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