Office of the VP for Communications – Keeping alumni and friends connected to U-M

An entrepreneur’s cheat sheet

The driving force

How money moves through the economy fascinates Derek Hoffman, ’03 (above, right).

It’s not surprising: His grandfather drove a Brinks truck. And as a teenager Hoffman looked to him as an early mentor in all things finance, from the machinations of Wall Street to the ins and outs of public companies.

After earning his economics degree at U-M, Hoffman worked in media investment, wealth management, and entertainment. These days he is co-founder and CEO of Wall St. Cheat Sheet, a massively popular financial news site targeting the mainstream, retail investor.

Wall St. Cheat Sheet logo

Launched during the economic meltdown of 2008, the site today counts more than 12 million unique visitors and 80-100 million page views per month, according to Google Analytics, demonstrating triple-digit percent year-over-year growth since 2009. Twitter followers number about 23,000; Facebook likes exceed 37,000. Website measurement site Quantcast ranks Wall St. Cheat Sheet as a top-150 site in the U.S. And, yes, the business has been profitable since 2011, exceeding its own founders’ expectations and hitting several internal targets a year ahead of schedule.

Wall St. Cheat Sheet has much to tell aspiring entrepreneurs, content providers, and new media strategists. This is a classic bootstrap operation: two brothers, two laptops, and a garage. No venture capital. No investors. So how did they do it?

The spark

It all started right around 2006-07. The Dow was at about 14,000. Everything was booming, real estate was awesome. At the same time, experts were decrying Wild West lending and warning about the dangers of credit default swaps. Hoffman and his brother, Damien, a Duke graduate with a background in law, public policy, and finance, were both rethinking their careers. They’d been business partners before (founding an independent record label), and as the economy went into freefall, they recognized an ideal start-up opportunity. As Derek tells it:

“People were angry and asking, ‘Why didn’t CNBC tell me to sell my stuff?’ There was a big distrust of the media, not to mention the banks and Wall Street. So we thought, ‘We should put out a newsletter to help out the average, mainstream investor.’

“We debuted in November 2008 and recently published our 64th monthly edition.

“We started by posting about six articles a day that spoke to truth, trust, and transparency on Wall Street. We were trying to call out any cautionary areas that needed a spotlight: AIG, Wachovia, Washington Mutual. We brought an objective, middle-of-the-road approach. All we’re trying to say is, ‘Here’s how to protect your wallet.’ So if you like to buy bank stocks, here’s what you should know about bank stocks. A lot of our headlines are questions to provoke the reader’s interest. We offer polls, lists, breaking news, hot stock analysis.”

Brothers Damien and Derek Hoffman, courtesy of Derek Hoffman.

Brothers Damien and Derek Hoffman founded the consumer-oriented finance website Wall St. Cheat Sheet in the midst of the economic meltdown of 2008. They quickly found an audience: Today more than 12 million unique visitors per month access their custom content. (Image courtesy of Derek Hoffman.)

The brand

Though launching a product with the word “cheat” in its brand could be construed as hazardous, especially in the finance space, Hoffman says “cheat sheet” is the best way to describe and differentiate the site’s editorial content in a competitive media marketplace. From his perspective: 

“The average reader may not have time for a seven-page Wall Street Journal article, obviously written for the sophisticated finance professional. So we offer a bulleted, shorter-form style ideal for mobile users. We’re very careful about not dumbing down the content. But you wouldn’t come to our site to learn about the bond market the same way you’d go to Bloomberg, for example. You’ll come to our site to learn whether Facebook is a buy or sell. Is it a hot stock? Why should you be interested in it? We look at not only what’s trending, but how can we provide something original and insightful.

“Our writers follow a stylistic form, a cheat-sheet framework that we use for picking stocks for our newsletter: What is the catalyst for this company? Is it a product; is it a newly developed service that’s winning in the marketplace? We’ll look at the financials, the debt-to-equity ratio. Do they borrow a lot of money? Do they have a lot of cash on their balance sheet?

“Other sites may provide six pages of analysis and jargon on a given topic. We’re more like a Beatles song: We have two minutes to capture someone’s attention.”

The business model

Many outlets in the financial space are built around a newsletter-subscription model. Others focus on search-engine marketing, buying ads all over the web. Wall St. Cheat Sheet does publish and distribute premium subscription newsletters across stock, gold, commodities, and ETF markets. But it also shaped its early business model around strategic partnerships and content development. Derek explains:

“Our goal was to do strategic distribution and hosting deals [with leading platforms in the finance space] that would allow us to build our brand, and grow and scale our business. We had our first distribution deals with MarketWatch and Business Insider. Then we started to see some organic growth in direct traffic and referral traffic through other blogs in the business finance vertical.

“In our space, number one is Yahoo Finance. Our goal was to be there among the Bloombergs, CNBCs, New York Times. If we could get into that category and prove ourselves based on our high-quality content, we would be able to grow our partnership. In time, our investment in quality has yielded very positive results.

“It quickly became clear: As we scaled content production, we also scaled traffic. We post about 110 articles per day. We are always looking at analytics. It’s a constant survival of the fittest regarding content. We also A/B test creative to see what works. Mobile drives 20-25 percent of our traffic so we’ve tried to make the mobile experience as user-friendly as possible. In the past year we’ve cut our bounce rate in half and doubled our engagement time. A year ago people spent two minutes on the site; now it’s closer to four.

“I think the success of the content is a result of the times. Personal finance and health care have been really huge. We look at what’s trending and help readers determine: What is this and how will it impact my life?”

Strategic partners

From the beginning, Wall St. Cheat Sheet has been savvy about personnel. Its board includes Bryan Goldberg of Bleacher Report and Larry Kramer, formerly of MarketWatch and now president/publisher of USA Today. Other board members bring legal, technical, marketing, and business development experience. A Medill professor who sits on the board is an expert in digital media. As for staff, COO Tracy Sigler, formerly of the Motley Fool, heads up Web operations, marketing, and analytics. Derek reports:

“We are a virtual company. We have no central headquarters. No central newsroom. My brother and I are based in Asheville, N.C. We have about 35 writers who contribute editorial from Michigan, New York, Pennsylvania, California, Massachusetts, Vermont, Maine, Missouri, Tennessee, and North Carolina. We created an eight-week training program where writers learn our editorial system. We work with agile software that allows us to manage our publishing platform—assignments can be drawn and delegated, filed for editing, and shipped out the door. It’s a system that works and we see very little turnover. We do lots of skyping and virtual water coolers.”

Forecasting growth

At its inception, the editorial engine drove the business. This year the focus is shifting increasingly toward advertising and business development. A new ad sales director is based in New York. An SEO consultant now focuses on best practices. As Derek tells it:

“We started with a subscription model, which helped us finance the business. We’ve always had a good performance track record with the newsletters.

“We didn’t have the money to buy ads all over the Web. So we have always focused on ad networks, specifically those that cater to luxury brands, financial networks, and banks and brokers. By doing a number of turnkey deals, we can focus on driving traffic through content production and coverage. Now we are going to focus on more direct relationships with advertisers.

“Our number-one priority in the next year is building out the advertising division, earning the trust of media buyers in the big agencies. We are thinking about custom campaigns, advertorials, sponsorships.

“In the beginning it was more of a ‘Here’s your playbook, a little one-pager on how you can play the economy.’ Eventually it grew beyond that to ‘What is your cheat sheet to Obamacare? Or the best five SUVs coming out in 2014? Or the 401K plan that is best for you?’ We have experts in energy, autos, technology. Just as we are in the finance vertical now, we are in the process of segueing into other verticals: ‘Auto Cheat Sheet,’ ‘Entertainment Cheat Sheet,’ ‘Sports Cheat Sheet,’ ‘Politics Cheat Sheet.’

“We recently changed our logo and revised our tagline. It used to be ‘We’ve got the word on the street.’ Now, it’s ‘Save time. Make money.’ That speaks to our goal of utilizing the brand to serve today’s media consumer in a wider facet of categories. It would be great to grow the Cheat Sheet into a household name.

“As for the economy, I’m an optimist at heart. I couldn’t be an entrepreneur otherwise.”

Top image: Brothers and Wall St. Cheat Sheet founders Damien and Derek Hoffman, courtesy of Derek Hoffman.

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