Chess.com's Meteoric Rise: From $55k Domain to $500M Online Chess Giant

In 2005, when Erik Allebest and Jay Severson founded Chess.com, they could not have predicted the astonishing trajectory their venture would take. Fast forward to 18 years later, and Chess.com is generating around $100 million in annual revenue, boasting over 100 million users, and employing over 400 remote workers. With 280 million+ monthly website visits, 250k+ new accounts created every day, and 10 million games played daily, the story of Chess.com is nothing short of remarkable.

Erik Allebest, an Orange County native and a graduate of both BYU and Stanford Business School, has always been passionate about chess. Prior to Chess.com, he started two other chess-related businesses – a chess-teaching company and Wholesale Chess, an equipment business. To acquire customers for Wholesale Chess, Erik used a combination of SEO and paid search, but soon found himself in a race to the bottom, competing with countless others for Google AdWords supremacy.

Frustrated with this approach, Erik decided to pivot. He realized that the best way to sell equipment was not to focus on selling it at all, but rather to create an online chess community that prioritized discussion over equipment sales. After selling Wholesale Chess for $2.5 million, he bought the domain Chess.com for $55,000 and teamed up with his college buddy, Jay Severson, to build the world's best online chess community.

Initially, Chess.com was designed as a place for chess enthusiasts to connect and discuss their favourite game, similar to MySpace. However, user demand for the ability to play online chess was overwhelming, and when other companies refused to partner with them, Erik and Jay decided to build the technology themselves. They launched a subscription product that taught people how to play chess online, and the business became profitable almost immediately.

What set Chess.com apart from its competitors was its invaluable domain name. This SEO advantage propelled the platform's growth, allowing it to reach one million members by 2010, 20 million by 2017, and over 100 million by 2022. The Chess.com app also climbed to the #2 spot in the Top Free Games section of the US iOS app store.

Chess.com generates revenue through a freemium model, offering free access to its main features while displaying advertisements. Users can pay to remove ads and access additional features. This business model is remarkably resilient, as neither AI nor well-funded competitors can disrupt it, given that the rules of chess have remained unchanged for over a millennium.

Three key competitive advantages make Chess.com unbeatable:

1. The Name: Chess.com is the obvious choice for beginners looking to play online chess, and it continues to rank as the top search result for "chess."
2. Distribution: Chess.com dominates online search results for chess-related queries, receiving over 280 million monthly visits. Despite this impressive organic reach, over 80% of its traffic comes from direct sources, indicating a sticky product and a loyal following.
3. Network Effects: As the go-to platform for amateur players, Chess.com enjoys unmatched player liquidity. With around 10 million active members every day, finding a game is a breeze, regardless of skill level or preferred time control.

Partnerships with Twitch streamers, like world number 5 Hikaru Nakamura, have also contributed to Chess.com's explosive growth. By allowing famous streamers to use their platform, Chess.com has tapped into an engaging, exciting audience that wants to play chess after watching these live events.

As Chess.com continues to focus on building a great product, creating engaging content, and honouring the 1500-year-old legacy of chess, there is no doubt that its dominance in the online chess world will only strengthen.

With a tried and tested business model and an array of competitive advantages, Chess.com is poised to continue growing and thriving for years to come. Their commitment to fostering a sense of community and providing a user-friendly platform for chess enthusiasts worldwide has cemented their place at the forefront of online chess.

The success story of Chess.com serves as an inspiration for entrepreneurs and startups, demonstrating that with the right approach, a domain name, and a powerful combination of distribution and network effects, it is possible to turn a niche passion into a global phenomenon. As the company continues to expand, innovate, and reach new milestones, the world of chess will undoubtedly be all the richer for it.