Mint.com: The Future of Web-Based Business?

Earlier this week, Intuit, the software company that owns the popular personal-finance software programs Quicken and TurboTax, agreed to pay $170 million in cash for Mint.com, a two-year-old startup whose free tools allow chastened customers to manage their personal finances online. Some critics, such as Web entrepreneurJason Fried, view the deal as a defeat for upstarts: A wounded incumbent that charges hefty fees for its services is taking out a free competitor for a relatively small sum and increasing its market power. (Last year, Slate's "Shopping" column tabbed Quicken.com and Mint.com as the best online tools for keeping track of personal finances.) But the all-cash deal, which will provide a hefty payday for the company's founders and venture capital investors, represents a triumph of a new business model. Indeed, the sale of Mint.com may be the first big payoff for a Web 2.5 company.
Web 2.0 refers to the generation of companies and services built on the wreckage of Web 1.0.

In the 1990s, hundreds of billions of dollars were spent building the physical (fiber-optic cable, server farms, payment systems, software) and mental (marketing, hype, promotion) infrastructure of online business. Many of the companies that created the broadband ecosystem wound up going bankrupt. But they left behind a platform and user base that could be tapped into by new companies, which could gain scale without having to make massive investments. YouTube, MySpace, Facebook, Skype, Twitter, Salesforce.com, blogging software, and, above all, Google.

The first generation of dot-coms burned through cash rapidly because they had to spend a lot of money building and running their businesses—marketing and advertising to get the word out, not to mention software, consultants, and programmers to run online systems and analyze the results. Thanks to Web 2.0, many of these costs have plummeted. Many of the basics are now essentially free, which means a business built on the infrastructure laid down by the first two generations of Web companies can gain scale on a shoestring budget, all while giving away its products and services for free. Call it Web 2.5.

Yesterday, at a panel I moderated in San Francisco, Donna Wells, Mint.com's chief marketing officer, stunned a room full of digital marketing pros by noting that she really didn't have much of a marketing budget. Mint.com has gone from zero to 1.5 million users in two years with no ad campaign, save a mid-five-figures sum spent on search engine terms. Rather than purchase traffic, it has pursued the same type of strategy that food trucks and online magazines do: Using free social media and piggybacking on popular new communications technology. Mint.com has more than 36,000 Facebook fans and 19,000 Twitter followers, a well-trafficked blog, and a popular iPhone application.

Mint.com, which advises customers on how to pinch pennies, does some penny-pinching of its own. It uses Wordpress (free) to run its Web site and blog. To analyze traffic partners, conversion rates, and other essentials of an online business that generates its revenues through lead generation, it uses Google analytics (free and sufficiently simple that Wells' marketing staff can use it without the help of software experts). Wells referred to a bunch of other services it uses to keep tabs on its site, such as ClickTale and Crazy Egg and Compete, as "virtually free"—costing a few hundred dollars a month. Mint.com's main market research tool is Zoomerang, which helps companies conduct online surveys and collect user feedback. The cost: about $700 per year.

Mint.com has benefitted from a cultural shift as well as a technological one. During the free-spending housing bubble, a Web site that encouraged people to manage spending, comparison-shop, and save was definitely out of step with the prevailing mood. But once the financial and housing markets tanked and the nation went into recession, the zeitgeist shifted. Shrinking top lines have caused people to focus on the bottom line, and the savings rate has spiked. Third homes and luxury goods are out; coupons and growing your own vegetables are in. Saving is the new borrowing. Thus considered, Mint.com, which launched in September 2007, timed the market perfectly. It hit the Web at a time when more Americans suddenly had the time, inclination, and motivation to manage their financial affairs more prudently. And it gave them a way to do it without having to spend a dime.