It shows you can still make money on the internet even if your product is full of shit.

I don't doubt their execution, but its domain(diapers.com) might have helped big time in their success.

Hands down, but at the same time if he hadn't run the site properly the domain would probably be linking to amazon.com or something by now.

The domain grab really was like the land grab of the west in the US, first come first serve and if you defended your property then you're now a millionaire!

What I personally find interesting about the story is the execution and optimization to get such remarkable margins in what should be a commoditized business:

"We built software with computational algorithms to determine what the optimal number of boxes to have in the warehouse is and what the sizes of those boxes should be. Should we stock five different kinds of boxes to ship product in? Twenty kinds? Fifty kinds? And what size should those boxes be? Right now, it's 23 box sizes, given what we sell, in order to minimize the cost of dunnage (those little plastic air-filled bags or peanuts), the cost of corrugated boxes, and the cost of shipping. We rerun the simulation every quarter. Using the right box probably adds close to 1 margin point."

1% is incredible - that works out to being 890K+/year (though that might depend on what their "null" case is/was).

I remember being shocked that "packaging" was a four-year bachelor's program when I went to my university. After some examination of the curriculum, I was convinced. (Though I still don't know what you do for a PhD....)

Anyhow, my point is that rather than stunning innovation, that sounds rather like Packaging 101. However, I'm sure that's because that's the summary for the journalists and I wouldn't be surprised that they are doing actually innovative stuff beyond a journalist's grasp... because as we should all know by now, getting past a journalist's level of knowledge is not a challenge.

Not exactly rocket science: http://en.wikipedia.org/wiki/Economic_order_quantity

> The year we started, our gross margins were 4.6 percent. Today, they're in the teens.

Does this mean that they earn 8.9 million every year? Or the headline mentioning "89M $" is already a "clean income" figure?

I read the 89M as a topline gross revenue -- so 11.57M if that "teens" (i.e. 13%) figure applies to the past year. He's more or less admitting he can't scale while retaining that, but it's still a nice chunk of change to reinvest into growth.

Thanks

Sounds like fun. I wonder though: if all he wanted to do was maximize his net worth, would he be better off hiring a statistics graduate student who knows R and training his replacement so he could go start another company?

No, since maximizing net worth involves much more to do.

Please elaborate.

Throughout the story I kept wondering 'how old is this company?'. Till the end I could not tell.

Founded in 2005

http://www.crunchbase.com/company/diapers-com

Wow I learned so much more from crunchbase than that piece. This is very rare: I usually really dig pieces written by the founders.

Just in this case the writing was very scattered and repetitive.

Most of my questions like what were they doing before diapoers.com; how they got the domain; what venture did they do before remained unanswered.

Very true. Likewise, throughout the story I kept wondering how did they start? Till the end I could not tell.

Heh, reminds me of Ashton Kutcher in the movie "A Lot like Love". His startup (which ultimately tanked in the movie) was an online diaper store.

Sounds like this guy sells a lot more than just diapers (such as car seats), the title might be a little misleading.

Pretty interesting story, thanks for posting.

It's one of those meme title formats - a flat out lie too.