Thursday, December 2, 2010

Weedmaps: Now Taking Investors

By David Downs
Thu, Dec 2, 2010 at 12:11 PM

Yelp for pot web site is having a historic fourth quarter. The twelve-person Orange County concern just went public through a de facto reverse merger with LC Luxuries. Now renamed General Cannabis, CANA trades at $4.05 on the pink sheets and — unlike its publicly traded pot peer “Medical Marijuana Inc” — CANA has a business model and actual revenue to report.

“Medical Marijuana Inc. is a very dubious stock,” says Weedmaps founder Justin Hartfield, now Chief Web Officer of General Cannabis. “What we are trying to do is bring legitimate and real numbers. We're going to be reporting every quarter even though we're on the pink sheets and not required by law. We're going to do it anyway to build confidence in the company and build confidence within our shareholders. And the only reason we can do that is because we have real earnings. Weedmaps is generating profits. True profits.”

Weedmaps grossed $400,000 off 50,000 paying users in September. Those users are a fraction of a national audience that reviews dispensaries, seeks specific strains in their area, and posts to the Weedmaps forums. is part of constellation of “thousands” of pot-themed URLs Hartfield has bought up. The Computer Science graduate from University of California, Irvine got the idea three years ago after his first trip to a dispensary.

Irvine is not the East Bay, but what place is? - Justin Hartfield
  • "Irvine is not the East Bay, but what place is?" - Justin Hartfield

“It's a lot like the first time you step into a coffee shop in Amsterdam,” Hartfield said during a phone interview from Amsterdam, where he's on a business trip that includes the High Times Cannabis Cup. “There's not some sketchy drug dealer with a bunch of drugs coming over to my house. It's really safe, it's cheap enough, and it's quick and easy.”

Hartfield already ran a search engine optimization company called Saddleback SEO, helping clients achieve higher rankings on Google. Hartfield partnered with friend Keith Hoerling to build out a Yelp for pot in two weeks in 2008, and Hartfield used his knowledge of SEO to scoop up tons of search traffic.

“It was 100-percent search-engine-based. That was what I did in a previous life. And we based our business off of it. We love Google,” he said.

Most people use the site for free, but like Craigslist or Yelp, Weedmaps charges dispensary owners for prime placement, review rebuttals, and advertising. User payments became so torrential, credit card processors assumed fraud. Weedmaps had to create its own merchant-processing account to deal with payments, and spin-off “Cannapay” now does billing for two-dozen other businesses. It may become a credit union. Weedmaps' free iPhone app also gets 700 to 800 new downloads a day and has been downloaded over a half a million times.

In 2011, General Cannabis will use its digital footprint to launch more goods and services to a national market worth tens of billions of dollars. Weedmaps plans a dispensary deals section like a Groupon for weed, and they have something called Weedmaps TV. “Suffice to say a 24-7 content channel dedicated to marijuana,” he says.

Blue Knight, goodnight.
  • "Blue Knight", goodnight.

Weedmaps TV could nab advertisers shut out of traditional TV or radio, where FCC censure threatens stations who take pot club ads. Other potential advertisers include related industries like Chronic Tacos in Irvine. “We're going to reach across verticals and go into head shops, hydro stores, lawyers, and doctors.”

The only barrier to growth Hartfield sees is a legal one. Though fifteen states now have legal medical pot, some newly elected state governors ran on anti-medical marijuana platforms.

“There's a lot of stigma, there's a lot of misinformation, what it really is is propaganda that the government has been feeding the citizens since the Marijuana Tax Act in the '30s. Slowly but surely people are learning for themselves.”

General Cannabis has partnered with NORML to politicize Weedmaps' userbase as well as rapidly develop NORML's own online technology. Hartfield is anticipating a 2012 legalization effort in three states. “Those three are Oregon, California, and Colorado. I suspect at least one will pass.”

Legalization will poll at 48.2 percent in California by 2012, he predicts, and a state pot tax law could pick up the last two percent.

Weedmaps' biggest haters often come from the medical pot community itself, though. Some perceive Hartfield's young, bold approach as a threat to hard-won patient rights. Weedmaps sites like and don't exactly legitimize medical use. Arizona medical marijuana campaign manager Andrew Myers notes that national support for medical marijuana has peaked and begun to erode, even as full legalization's supporters grow.

Skin, please.
  • Skin, please.

“It's like a Stockholm Syndrome," says Hartfield. "The police have finally given a small loophole to these sick and dying patients. As a function of being sick and dying, you really care about where your medication is going to come from and making sure you have it tomorrow. So if anybody tries to claim the system you're using, the loophole you're using, is anything but a loophole, there could be feedback.

“I'm not saying we need to abandon medical marijuana. We need to keep medical marijuana and we also need to have legalized marijuana,” he says.

Weedmaps also drives down medical pot prices, he says.

“There's always a backlash especially with a model as disruptive as Weedmaps,” he said. “We list everybody's prices. It's all searchable. You know which strains cost how much and where, and the people that want to keep their margins high could have a problem with that, if they don't understand that we're expanding the pie for everybody. There's always naysayers, right?”

So why didn't Google or Yelp beat Hartfield to the business?

“I'm sure Yelp is kind of scratching their head going, 'Why couldn't we?' Really, they couldn't, dude. Yelp is more for restaurants, Google is making so much money they don't want to concern themselves with this little, tiny marijuana market. Weedmaps is so niche specific that we don't see Yelp as a competitor and vice versa. We're really focusing on strains and patients searching for particular strains.”

A fresh infusion of capital from public investors will make that happen, said Hartfield. “People are always asking, 'How can I get involved with Weedmaps?' We never really had a good vehicle until now,” he said. “We're really happy to get it all wrapped.”

Core Business Name:
Number of URLS owned: thousands
Employees: 12
Headquarters: Irvine, CA. Gross: $400,000
Paid userbase: 50,000
Database architecture: Joomla (from Microsoft, Google, eBay)
Serving: HTML5
Developing in 2011: embeddable widgets, location-based services, single sign-on across site.
Stock Ticker Symbol: CANA

[Note: Medical Marijuana Inc.'s Bruce Perlowin says the company had lacked a business model, but should have revenue soon. It launched two hemp-based, multi-level marketing products in the fourth quarter.]

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