About this transcript
To see the actual interview along with my cleaned up notes, go here. What you see below is the full transcript, but it’s not edited–so it’s full of mistakes.
About this interview
Matt Mickiewicz is the co-founder of 99designs, which connects clients needing design work such as logo designs, business cards or web sites to a thriving community of 36,749 talented designers. He is also the co-founder of SitePoint, online media company and information provider targeting the Web professional market, specifically Web Developers and Designers.
The RAW text
Andrew:Â Matt, what is 99designs.
Matt: 99designs is the largest crowdsourcing marketplace for graphic design in the world, itâ€šÃ„Ã´s a very disruptive business model and that turns a process of getting design done completely upside down rather than putting down a tender and picking the lowest bidder, or essentially holding a contests on open casting call, if you will, and designers are competing for your money [xx] fully completed concept designs.Â So, on an average, you might see 70 to 100 different designs options, custom built just for you.
Andrew: And the way it works is, if I need a design like a new logo, a new t-shirt, a new website, a new brochure, I go on there and I say this is what I need, this is how much Iâ€šÃ„Ã´m willing to pay and then people just start creating the work for me and I get to pick the one that I want and only pay for the one that I want, right?
Matt: Thatâ€šÃ„Ã´s exactly it.Â And you set the price, unlike the typical tender model, although the more money you offer, designers will participate and the better of a result youâ€šÃ„Ã´ll get.Â So, Iâ€šÃ„Ã´m like, E-Like or some of these other marketplaces where itâ€šÃ„Ã´s usually the lowest bidder that ends up winning the project, here we encourage the business owners to spend more money, to get more designers to participate and invest time in the project.
Andrew: All right.Â And my vision for this interview is to go through the biography of this business and then hit on a few points here that will help others who want to copy your success, learn from what youâ€šÃ„Ã´ve done.Â And I see youâ€šÃ„Ã´ve got that smile, you know thatâ€šÃ„Ã´s what I want.Â I always want to talk to successful people and find out what they did so the rest of us can build up even better businesses.Â But the first thing I want to ask is, how much money have you guys made from 99designs?
Matt: I donâ€šÃ„Ã´t like to talk money specifically but you can go to our homepage and see that weâ€šÃ„Ã´re paying out over $100,000.00 to designers every single week, because that would give you a hint of how much money is flowing through our pockets every month.
Andrew: And whatâ€šÃ„Ã´s your cut of that, Matt?
Matt: We take a listing fee plus upgrades plus 10 percent of the prize money plus fees to the designers if they wanted to pay out via something other than PayPal.
Andrew: Wow, all right.Â And, I think I saw that as of today, you guys are 16 months into the business, as of today, something like $5 million in business has flowed through the site, right?
Matt: Thatâ€šÃ„Ã´s right.
Andrew: That means $5 million paid by people like me, who have websites and design projects, who end up paying it to designers on 99designers?
Matt: Thatâ€šÃ„Ã´s right.
Andrew: OK.Â And the idea started off where?
Matt: In the SitePoint forum.Â So, SitePoint is an online media site for designers and developers and what was happening in the forms was that designers were playing Photoshop tennis, essentially holding a competition amongst themselves to see who could do the best design work.Â So, on a Friday evening, someone would come up with a fictional project and over the weekend, 20 or 30 designers would compete to create the best design work and on Monday morning, there were [xx] one of them as the top designer, if you will.Â So, eventually what happens is, some smart blog came —
into,” and you encouraged it. You may not have taken the first step there, but you encouraged it and built it into a business.. Am I right or am I wrong?
Matt: I wish I could say I was that smart, but it took me months to realize what was even happening, and many months after that to start profiting from it.
Andrew: So from my…[cut off by Matt]
Matt: It was very organic, I wish I could take credit and say I was trying to encourage this activity in the forums, but that would be a lie.
Andrew: Okay, so, alright, and by the way you can be completely truthful with me. I see that we only have 13 people watching us live, guys if you are watching this live and you are on twitter, please tweet this out, tell your friends to come watch the co-founder of 99designs here on mixerG, I’m gonna keep pushing him for deep information and, so. Tweet it out, lets get more people watching this live. Until we get more people its just you and me, right.
You got lots of different ideas going on at sightpoint, lots of different kinds of conversations, how did you know, matt, that this was a business worth growing up and building into something beyond the forums.
Matt: We take it step by step really. First of all, we spun off the design contests as its own separate section of the site from forums, and saw it take off and grow organically in the number of projects posted. Then we decided, “well, if there’s a business for it, business in this model, then people should be willing to pay for it,”
So we started charging people $20 flat fee to post a project in our forums. It was very messy, it wasn’t a great interface, it was just v-bulletin and that’s it. Uhm, but people were willing to pay the 20 dollars to post a project because they were seeing value out of it, and the designers continued to participate. So we took it a step further and created a “contests” tab on sightpoint and built some very, very basic software around the design contests idea, uhm, something that was hacked together in a few months time by one or two guys basically. Uhm, and we increased the fee as well, to i think $29, and, because it was all of a sudden gotten more visibility on sightpoint.com and we have a large amount of traffic on this site, about 3 million unique visitors per month, it continued to gain traction, we didn’t get any push-back on the price increases, and it continued to grow and grow and grow. Uhm, and then sometime in 2007 it struck us that for this business to really prosper, it needed its own separate brand. Sightpoint was known as a resource for developers and designers. It didn’t make a lot of sense to a small business owner, say someone who owns a wine bar or a coffee company or a lawyer or real-estate broker on, you know, coming to sightpoint and running a design contest for their logo or their web page design or t-shirt, because the first thing they saw when coming to our homepage was our articles, our tutorials, our blog content, etcetera. It took a leap to think that they were out to click on the “contest” tab and then go on to, uh, post a project to our community.
So that’s when we decided that because there was this incongruity with the audience that we were targeting it would make a lot more sense to have a separate brand name; and we chose the name “99designs” and launched in, uh, February of 2008.
Andrew: Okay, uhm, [echoing] I’ve got lots of questions about what you just said, but for some reason I’m echoing, can you lower the volume on my side, on your side please? [no more echo] Uh, okay, before I dig deeper into this, let me just, uh, go into some of the feedback we’re getting here. First of all, uh, Vasa–, Vasla–, Vaslosky[?] thank you for telling me that the reason people aren’t watching is apparently one…
Andrew: Clicks on one of the links at my site isnâ€šÃ„Ã´t working well, so we got two links, one isnâ€šÃ„Ã´t working, the other one is.Â So thank you for telling me that.Â The second Twit is coming in from Paul McGee who is telling people to come watch the co-founder of 99designs and SitePoint dot com.Â Thank you, Paul.Â Fossil Foundry telling people the same thing.Â Queen Win is telling people to come watch, where is that, where is that?Â Candyman is saying that he has a contest going on right now on 99designs.Â Please, Candyman show us what the design is, link us to it, let Matt and me see and everyone else who is watching us see what your contest is.Â And J Billings Lee, thank you for helping us get more people to come watch as I see that we are getting a lot more activity since I asked for it.Â All right.Â So here is one of the notes that I took when youâ€šÃ„Ã´re talking right there.Â One of the first things you did was, you saw that this thing was going on and you built its own little forum.Â You didnâ€šÃ„Ã´t blow it out into a whole business, you didnâ€šÃ„Ã´t decide that this was going to have its own domain Day 1.Â Is that the way you guys tests things on SitePoint when an idea seems to hit in the forum, you just create its own separate section?
Matt: Weâ€šÃ„Ã´re very, very conservative.Â Rather than blowing it out into its own business on Day 1, hiring half a dozen developers and designers to run this business, we decided to test and take it really slow step by step and validate the business model, validate our ideas and assumptions, which I know is something that Eric Reese talks a lot about around Silicon Valley and itâ€šÃ„Ã´s only when I heard him recently at the Web 2.0 [xx] that kind of hit and said, oh thatâ€šÃ„Ã´s what we have been doing all along.
Andrew: Yes, he has.Â How else have you guys been doing that?Â The lean startup idea is based on keeping things simple, testing, testing and building with your audience and I could how you did that here.Â How else have you done that at SitePoint?
Matt: Well, [xx] have been very active users of UserVoice dot com, which is a fantas —
Andrew: Did I just lose you?
Matt: — tic tool and [xx].Â But UserVoice helps drive a lot of the changes and developments to the site.Â So in the early days one of the big stumbling blocks of designers was getting the payment from the business owners who were just charging a listing fee rather than taking the full prize money upfront and it was ultimately between the designer and the business owner to arrange for payment once a winner had been picked.Â This was very problematic in several different levels.Â A lot of the designers donâ€šÃ„Ã´t have credit card processing facilities themselves, and further more a lot of them donâ€šÃ„Ã´t even have PayPal accounts because they live in Romania or Philippines or India or Pakistan or some of these other locales where they simply donâ€šÃ„Ã´t have access to Pay —
Andrew: Oh, Matt, we got such a bad connection for some reason here.
Matt: [xx] I know.
Andrew: Matt, before we continue, do you have anything else running in the background that maybe you can turn off, any other programs?
Matt: Shouldnâ€šÃ„Ã´t be anything else running but let me quickly check.
Andrew: OK, thank you.Â While you do that the other thing that I noticed, I am taking this slowly and going through every piece of the process here.Â And one step that I noticed that you had that most people wouldnâ€šÃ„Ã´t have jumped to is charging.Â One of the things that you guys seem to do is when you see an opportunity, you donâ€šÃ„Ã´t let it just grow and become this own little hippie commune, you always seem to charge.Â Why?
Matt: There is a business for it, a certain percentage of the people have to be willing to pay for it, otherwise it doesnâ€šÃ„Ã´t justify further investment in time and resources.Â At the end of the day, any real business has to make money and by asking people to pay for something, even if itâ€šÃ„Ã´s really crappy like a forum thread or some hacked together software, it proves that there is a market demand for it.Â Because I think this is something that Eric Reese talks about a lot in his dream startup talks as well and thatâ€šÃ„Ã´s throwing something against the wall, even if itâ€šÃ„Ã´s very early beta or alpha stage and seeing if the early adopters are willing to open their wallets, take out their credit cards and make a purchase.Â It proves that there is a business model.Â A lot of companies make the mistake paying six months, a year, several years and sometimes hundreds of thousands of millions of dollars and building something that they think is great [xx] the market once but ultimately people arenâ€šÃ„Ã´t willing to pay for.
Andrew: And you even start off with charging for forums.Â Donâ€šÃ„Ã´t you ever feel like well itâ€šÃ„Ã´s a simple â€šÃ„Ã¬ all I am doing is giving people access to forums, I am charging them 20 bucks to post something in this forum, they are going to —
Andrew: …see that theyâ€šÃ„Ã´re not getting enough value for their money, that Iâ€šÃ„Ã´m just giving them access to a forum that they could create anywhere else, theyâ€šÃ„Ã´ll just take their business and go somewhere else.Â Or worse, theyâ€šÃ„Ã´ll pay me twenty bucks for a forum post and theyâ€šÃ„Ã´ll hate me in the future because all Iâ€šÃ„Ã´ve done is given them access to a forum.Â I havenâ€šÃ„Ã´t given them real value here.
Matt: I think thereâ€šÃ„Ã´s tremendous value in connecting the business owners with the service providers.Â Just making that connection, making that introduction is worth $20, as we proved.
Andrew: I see.Â And thereâ€šÃ„Ã´s no concern that they might go over to another forum or take their business someplace else where they can do this?
Matt: The thought never crossed their mind.Â The idea was that if thereâ€šÃ„Ã´s a business in this people will be willing to pay.Â And itâ€šÃ„Ã´s something that the designers really liked as well.Â Because they knew that the business owners were serious about participating in the process by taking out their credit card, paying the listing fee at two site points, at the time show that theyâ€šÃ„Ã´re most likely going to pay out the winning design offsets.
Andrew: I see.Â And what about the idea…And by the way, Iâ€šÃ„Ã´m not challenging you here because I donâ€šÃ„Ã´t agree with it.Â Iâ€šÃ„Ã´m challenging you here because youâ€šÃ„Ã´re one of the few companies thatâ€šÃ„Ã´s able to charge people and youâ€šÃ„Ã´re doing it by charging for something simple at first and then building into a bigger and better product and I want to learn from you and thatâ€šÃ„Ã´s why I keep asking these questions.Â So the next question I have is, does the community ever feel betrayed that when they start to create something in the forums that they do to help each other, that you can jump in at any moment and start adding a tollbooth to it?
Matt: Actually, it was their idea for the most part.Â The designers wanted to prove that the business owners were serious about paying out a winning designer at the end of the process.Â One of the early issues that we had in the community when it was was completely free, was simply project abandonment.Â Someone would come to the site, they would post their project, a prize amount and then at the end of a week or ten days they wouldnâ€šÃ„Ã´t pick a winner, which was really frustrating to the designers who had participate, invested time and effort into it and then see that nobody got awarded the prize money.
Andrew:Â I see.Â So sometimes charging adds to the credibility and makes the product even better than if it was free.
Matt:Â Thatâ€šÃ„Ã´s right.
Andrew:Â What do you say to people who say that they canâ€šÃ„Ã´t charge online?Â They donâ€šÃ„Ã´t want to pay?Â What are they missing?
Matt:Â think they might be missing something that delivers a great amount of value.Â We only take a small, small percentage of the money that passes hand between the designers and the business owners.Â So weâ€šÃ„Ã´re only taking a small clip and providing most of the value to the design community.
Andrew:Â But on a philosophical level, are they making a mistake by assuming people donâ€šÃ„Ã´t want to pay online?Â Are they missing something that you are seeing that allows you to charge and them not to?
Matt: Itâ€šÃ„Ã´s a good question.Â I think that if you have a very valuable product and itâ€šÃ„Ã´s so innovative and so different and the value proposition is so great compared to everything else out there, the people will be willing to take out their wallet and pay.Â In this case, having a hundred logos for a $300 XXXX is such a tremendous value to the business owner and is so much better than anything else out there, that any fees or restrictions that we impose in the process is just like a tollbooth.Â Itâ€šÃ„Ã´s just clipping the ticket and the value far outweighs whatever amount we would take.
Andrew: I see.Â So if something is so valuable that it beats anything out there then people are willing to pay?
Matt: Definitely.Â And this is a very unique model.Â Itâ€šÃ„Ã´s very, very disruptive.Â Itâ€šÃ„Ã´s an incredible time saver for the business owner and it completely eliminates almost all the risk of hiring a graphic designer or freelancer.Â As weâ€šÃ„Ã´ve been building out this business, one of the horror stories that we hear over and over again is business owners who go down the traditional route of hiring a freelancer, a graphic design agency, they review their portfolio and the work that they get back is really unsatisfactory.Â But theyâ€šÃ„Ã´re still stuck paying a bill thatâ€šÃ„Ã´s often thousands and thousands of dollars.Â Thatâ€šÃ„Ã´s a painful experience for a business owner, especially ones just starting out.
Andrew:Â Ahmad Gupta who runs Photo JoJo and did an interview here with me once, I think this morning he either blogged or â€šÃ„Ã¬ I forget where he said, but he said, you have to ask.Â If you want something, you just have to know to ask for it.Â And Iâ€šÃ„Ã´m wondering if, when it comes to charging, most people donâ€šÃ„Ã´t charge because they donâ€šÃ„Ã´t think that they can.Â And if they just knew…
Andrew: — if they just ask for, if they just ask people to pay that that would be the most important barrier to getting — to earning money, to just — to just know that if you — sometimes just recognizing that you canâ€šÃ„Ã´t charge is enough to get you on the right track.
Matt: Then itâ€šÃ„Ã´s transport —
Andrew: — or is that intensifying it?
Matt: I think itâ€šÃ„Ã´s them [xx] we should ask for them running and we will take rejection if we find out that youâ€šÃ„Ã´re [xx] itâ€šÃ„Ã´s about failing cheaply and quickly as possible.Â Um, a lot of business —
Andrew: Have you guys — have you guys found out that — have you guys charge — charging for things in the past and realize the people werenâ€šÃ„Ã´t willing to pay for it?
Matt: Back on Sitepoint in the early days of 2000, 2001 we experimented with selling e-books basically PDS.Â And at the time the market simply wasnâ€šÃ„Ã´t ready for it and our very first product completely flopped after we had invested significant time and resources into producing it.
Andrew: I see and now it seems like you take much cheaper chances or you — you, make cheaper attempts at charging, you make cheaper attempts at building new products.Â It seems like you create a section on the form first that doesnâ€šÃ„Ã´t cost much to build out and only after you see itâ€šÃ„Ã´s improve or you spend the money.
Matt: Thatâ€šÃ„Ã´s right another one of our projects that wasnâ€šÃ„Ã´t very successful was the video tutorials that we have on sitepoint.com reproduce a number of videos on CSS, PHP and number of other web development technologies and we tried selling them online but we found that people, at least our audience wasnâ€šÃ„Ã´t ready or willing to pay for that type of content at this point in time.
Andrew: How long did it take you to realize that?
Matt: Probably less than three months.
Andrew: And why did you accept it instead of saying maybe our videos arenâ€šÃ„Ã´t good enough, maybe weâ€šÃ„Ã´re not promoting it properly.Â How did you know that it was time to close it?
Matt: We had given in a very fair — just the conversion rates that we were seeing were very, very low, I think even if you gets multiple of things well in the early days of our business model you will see some level of traction, even if itâ€šÃ„Ã´s very minor and we simply didnâ€šÃ„Ã´t see it in this case.Â And we decided the key to successively went down this path or to produce hundreds of thousands of videos much like a company by the name of lynda.com has and we found out they had — are great like upon us and that would be very, very difficult to get — had to head against them in their tremendous library of content.
Andrew: Okay, letâ€šÃ„Ã´s take some questions from viewers before I move on to the questions that I have here.Â The first one comes from Quinn Wayne, he wasnâ€šÃ„Ã´t to know about copyright infringement.Â A logo is more than a design, is 99designs is trying to solve that problem and I — I have to say I worry about that too.Â If I were to post a request for a design on 99designs, I wonder if the designers are using copyrighted material and what they are selling me.Â I wonder if there are any risks that way that I take on?
Matt: Itâ€šÃ„Ã´s a very fair concern most definitely when the benefits of our model is that everyone can see everything and because the designers are competing against each other they very quickly call out any foul play that happens, during this — in essence we have 35,000 eyes and ears keeping an eye [xx] all the submissions for us.Â And certainly we deal with any reported infringements very, very quickly.
Andrew: All right great question, [xx] is saying that he loves those video tutorials apparently youâ€šÃ„Ã´ve got to go to lynda.com now.Â Okay, we see another question from [xx] he wants to know how do you handle paying designers who donâ€šÃ„Ã´t have PayPal accounts or access to PayPal, how do you guys pay them?
Matt: We support any number of services including Western Union actually as one of the preferred means to pay some of the designers.Â So, we act as the middleman, we take the money from the business owners on their credit cards which is very convenient in hassle free and then we transfer that money over to the designers who have PayPal, Moneybookers, Western Union or even a wire transfer to provide tremendous value to the community that way while removing the hassle from the business owner side in having to deal with those payment methods.
Andrew: Okay, you mentioned several times here that this was a disruptive technology or disruptive marketplace.Â And I remember when you guys first launched it, how pissed designers were, they said in their own community the designers should never create anything for free and what youâ€šÃ„Ã´re asking them to do is, is create something for free, hope that one of them is picked and gets paid and in reality one will but the others will not get paid and will have done the work for free, whatâ€šÃ„Ã´s your response to that?
Matt: Certainly 99designs isnâ€šÃ„Ã´t for everyone but itâ€šÃ„Ã´s — unless it works —
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Matt:Â ..great number of people who choose to participate in the community, thirty-five thousand designers.Â And as you saw on Sitepoint, the designers were happy to do work for free, just to improve their skills, for the fun of it, and for the love of graphic design.Â What many people don’t realize is that the designers on 99 Designs are using the site as a lead generation tool, if you will.Â Fifty percent of the projects on the site lead to follow on work outside of our system.Â So, you might find a designer who did your logo for us through 99 Designs, and then hire that designer directly to design your website, your business card, your stationery, or your tee shirts.
Andrew:Â And you guys are okay with that?Â eBay wouldn’t allow me to go on eBay, buy something from someone, and then cut eBay out in the future, are they?Â Maybe they are; are you guys okay with that?Â That I can put up a request for a logo, find a designer who creates a logo for me, and then say, â€šÃ„ÃºScrew these guys at 99 Designs and their fees; I’ll work with him directlyâ€šÃ„Ã¹.
Matt:Â We’re entirely happy with it, in the way 99 Designs is a process where by you can audition a couple hundred designers very, very quickly, and find the ones that you like, and want to have an ongoing relationship with.Â And that’s one of the value adds that we provide to the designers.Â Many designers, for example, might not be great at marketing or selling their services, or writing proposals, or they might be in a location where they’re at a disadvantage, compared to a designer, say in a major city, like San Francisco, or New York, where they have access to a great number of clients.Â On 99 Designs, we essentially democratize the process.Â Allow anyone, anywhere in the world to compete based on their skill alone in any project that’s live on the site, at any given point in time.Â So, people are judged based only on the quality of the work they do; not based on their age, their location, their portfolio, how big their client is [unintelligible], or present well in a suit during a client meeting.
Andrew:Â You sound…you’re good.Â I’ve got to tell you:Â You’re one of the best salespeople I’ve ever heard, because I asked you the tough questions, and I think I might have asked you this the first time I interviewed you when you were just launching 99 Designs, and I knew it was a tough question.Â But to hear you come out with an articulate answer that makes a lot of sense, and it’s very convincing, I can understand why all that heat that you guys had in the beginning has started to die out.Â I’m sure that they’re always going to be people who disagree with your model, but I can see why getting out there, and being articulate, and having a strong answer, and not being defensive when I ask it, and other people do, why it helps you with your product, why it helps convince people.Â All right.Â I’ve got a list of questions, here, from before our interview.Â It comes from the pre-interview that you and I did by e-mail, and one of the things that you talked to me about was the importance of getting, of securing various domain names.Â Can you tell people about that?
Matt:Â One of the early issues we had was Sitepoint.com was that many of the variations in international domain names were taken by their companies.Â So, we spent a great deal of time, more than a little bit of money trying to acquire the international domain names, and it’s quite a hassle.Â So, before we launched 99 Designs, we spent a lot of time in making sure we had all the domain names lined up, to make sure that we could protect our trademark.Â Doing that before the site launched, and before there was the tangible business, made the entire thing a lot, lot cheaper.Â Once you put it on the web site on there, the people can see that’s having[?] a lot of traffic.Â All of a sudden, their asking price goes up.Â So [unintelligible] before you launched; it was very, very helpful.
Andrew:Â Yeah, I see that even on Twitter, you guys don’t have Sitepoint, you have Sitepoint.com as your name on Twitter.
Matt:Â Exactly, Exactly.
Andrew:Â Okay.Â So, get the variations of your names.Â It’s fairly cheap, do you remember how much you guys spent to get all the different 99 Designs.net, .com, .co.uk?
Matt:Â it was probably less than five thousand dollars.Â A few of them were owned by individuals, and we had to negotiate to acquire those domain names.Â Business on-line website that they could look at.Â We just looked like an average Joe, who was interested in the domain name when we could act very nonchalant, and we didn’t look desperate.
Andrew:Â All right.Â Okay, you also talked to me about the importance of focusing.Â You only do graphic design at 99 Designs.Â You’re not doing everything.Â Why?
Matt:Â I think it’s really important to become known for one thing, and one thing only.Â And doing that very, very well.Â Over the last few months, we’ve had multiple requests to branch out into all sorts of categories:Â such as providing quoting services, providing copy writing, even providing name…
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In contest it is really outside of our domain and we really want to become known as the place to go to for graphic design and nothing else.Â It keeps our community focused, our employees focused, and it keeps us in touch with our market segment.Â If weâ€šÃ„Ã´re trying to do many different things all the time we have to address the needs of different groups,Â market to different communities and deal with service providers in different categories it becomes really really complex especiallyÂ when you are a small business with limited staff limited resources and trying to prioritize and execute on growing.
Andrew:Â Â I see you know I would love to see you guys branch out into some of those areas you talked outÂ there are times when I go into I wonâ€šÃ„Ã´t say the names but other networks to look for press kits or media kits itâ€šÃ„Ã´s not as easy to take a shot on a stranger and only pay when you get the result and like it or only pay when you get the result and hope you like it as it is to work with 99 designs.Â Have you boxed yourself in at some point youâ€šÃ„Ã´re going to master design, youâ€šÃ„Ã´re going to do everything that you possibly can in the design space and youâ€šÃ„Ã´re going to want to branch out into coding into writing have you locked yourself in is that the problem?
Matt:Â The market of graphic design is so tremendously huge I donâ€šÃ„Ã´t see us hitting a wall anytime in the near future, itâ€šÃ„Ã´s a multibillion dollar market annually and you look at companies like logoworks.com which is now owned by HP.Â Theyâ€šÃ„Ã´ve done tremendously tremendously wellÂ serving the small business market and I think theyâ€šÃ„Ã´ve barely scratched the surface to be honest.
Andrew:Â Do you have a sense of how big logoworks is in revenue?
Matt:Â I do, but Iâ€šÃ„Ã´d rather not say, but before they sold to HP, they had something like 70 full time employees.Â Theyâ€šÃ„Ã´re model isnâ€šÃ„Ã´t very scaleable, they were relying on internal staff and a small number of outside freelancers to generate all the logo concepts.Â They were also limiting the number of concepts that business owners saw so for example for 399 you would only see 3 logos, where by on 99 designs you might see 50 or 100 or even 1000 in some cases.
Andrew:Â And the reason you know how much they made and you canâ€šÃ„Ã´t say is becauseÂ you guys at one point considered buying them so you were able to see their revenues?
Matt:Â No no nothing like that I think the information is confidential and never released.Â Iâ€šÃ„Ã´ve just had conversations with several people thatÂ were involved with that business and they shared some details with me.
Andrew:Â You mean some of the top people?
Matt:Â Some of the people that were involved in the acquisition of logoworks on the HP side.
Andrew: How did you know the people there?
Matt:Â I got lucky and just ran into them.
Andrew:Â OK Forest Gumping your way in, alright I wonâ€šÃ„Ã´t push to far. I think weâ€šÃ„Ã´ve given some information that people can useÂ to find out how they can know what their competition is making.Â Alright Jose from thegroup.com is tweeting out that 99 designs is an interesting idea of the future indeed.Â I would have thought that a designer like him would be threatened by 99 designs but apparently he is very supportive.Â Youâ€šÃ„Ã´ve also kept your costs down by using services like Amazonâ€šÃ„Ã´s S3 and EC2.Â Can you tell people about how you were able to keep your technology costs down by using Amazon and other services.
Matt:Â Computing is one of the best things to ever happen to start ups in the technology space, one of the most exciting things I would say.Â In allowing people to bootstrap businesses and then scale them up rapidly without having a lot of capital expenditures. Dedicated servers can be incredibly expensive, setting up new servers is very time consuming and the band with cost that most of the web hosting providers is still to this date 5 to 10 times as much as what Amazon charges.Â So Amazon is incredibly scaleable itâ€šÃ„Ã´s incredibly quick to ramp up and in many cases 70 to 90% cheaper.Â So for example our site right now is getting a new design uploaded every 10 seconds.Â We have 1.8 million designs stored, thatâ€šÃ„Ã´s 5 terrabytes of data.Â Trying to store that amount of data would require an enormous amount of servers, an enormous amount hard drives serving the amount of data over the internet in terms of band width costs would be incredibly expensive and because weâ€šÃ„Ã´re growing at 15 to 20 percent month over month weâ€šÃ„Ã´re
Matt: — write off capital expenditures [xx] with Amazon we can basically just launch new servers at the click of a mouse button and pay only per hour.
Andrew: And that was your plan to use them right from the beginning, right?Â You had no illusions that you are going to have your own hardware, nothing.
Matt: No, no illusion [xx].Â Amazonâ€šÃ„Ã´s definitely [xx] way to go especially weâ€šÃ„Ã´re building something thatâ€šÃ„Ã´s bandwidth intensive or storage intensive or something that you expect will get a lot of traffic which 99designs does.Â It actually gets more traffic than SitePoint.com now.
Andrew: Wow.Â OK, letâ€šÃ„Ã´s see what else weâ€šÃ„Ã´ve got here in my notes.Â Why were you successful when your competitors arenâ€šÃ„Ã´t nearly as successful, why is it that youâ€šÃ„Ã´re going up against guys who I think one of them has $3 million in investment and I hear more about 99designs, I see that you guys are doing more business than they are, why?
Matt: I think being first to the gate is definitely an advantage and when opening new markets such as crowdsourcing for graphic designs but the other big advantage that weâ€šÃ„Ã´ve had is a distribution channel offered through SitePoint.com.Â So, when 99designs was first launched, we used the full capacity of SitePoint.com to create traffic and revenue for the new business more profitable from day one essentially by using the free advertising space that we had around SitePoint through our e-mail newsletters, having links from around their forums et cetera to the site.
Andrew: And youâ€šÃ„Ã´re profitable from day one, right?
Matt: Thatâ€šÃ„Ã´s right.
Andrew: And thatâ€šÃ„Ã´s because the revenue is already starting to come in from SitePoint?Â You build your — you build 99designs.com on the cheap and so the cost were low, the revenue is there before you even build the business.
Matt: Thatâ€šÃ„Ã´s right.Â So we had a healthy revenue stream and we — the business unit is all by itself was profitable before we made the decision to spin it off 99designs.
Andrew: I love the user experience on 99designs.Â Itâ€šÃ„Ã´s clear, I know whatâ€šÃ„Ã´s going on on there, itâ€šÃ„Ã´s pretty tough concept to explain to people whatâ€šÃ„Ã´s going on in a service like this but you do a good job of telling it to them in a sentence and a couple of visuals.Â How did you design the user experience?
Matt: I canâ€šÃ„Ã´t [xx] for that person, we have like great designer on board by the name of Adam whoâ€šÃ„Ã´s responsible for the user interface work on 99designs and the goal is really to focus on our target market.Â The average project holder on 99designs these days isnâ€šÃ„Ã´t necessarily a test startup.Â We have realtors, insurance brokerage firms, wine bars as retail stores and retail businesses of all kinds can do logo work with their white page design work, their stationery or business cards done through the site.Â So, itâ€šÃ„Ã´s important to keep things as simple as possible so that the average Joe of the street who might not be familiar with terms like crowdsourcing would come to the site and immediately get what it was, what the value proposition is and how to use the sites to get the design work done for their company or business.
Andrew: Are you familiar with listening labs where you bring people on to your office and watch them as they use the competition, watch them as they use your service and then see where they stumble and redesign based on that?
Matt: we havenâ€šÃ„Ã´t done that to date.Â Itâ€šÃ„Ã´s definitely on our to-do list though.
Andrew: OK.Â Letâ€šÃ„Ã´s get some feedback here from people.Â Jose again from the group is saying there are millions of online businesses, having a logo helps them succeed, it creates more work for creators like him.Â So, why should they — why should they be upset with 99designs.Â Letâ€šÃ„Ã´s see, CrowdGatherâ€šÃ„Ã´s saying my companyâ€šÃ„Ã´s logo was designed on 99designs when it was SitePoint contest, now thanks to [xx] the whole world knows my secret.
Matt: Itâ€šÃ„Ã´s actually amazing that many of the people youâ€šÃ„Ã´ve interviewed are big, big fans of 99designs.Â Adeo from TheFunded is an active user and proponent of the site.Â Tim Ferris, obviously Marcus from UserVoice, [xx] big guys in Silicon Valley such as Philip Kaplan who used to run Fucked Company is one of our biggest advocate.Â So the word really had spread by word of mouth at this point.Â We have a great number of highly influential people with large personal networks who are going out there and telling their fans and their customers and their friends about it.
Andrew: Yes, I actually gave a talk at UCLA with Adeo Ressi of TheFunded and the talk was about how to bootstrap and one of his main points was to use services like 99designs and itâ€šÃ„Ã´s amazing that people donâ€šÃ„Ã´t realize that they could have this kind of work outsourced.Â Letâ€šÃ„Ã´s go back to how you guys started.Â Letâ€šÃ„Ã´s make sure that I got the full —
Andrew: [xx] here.Â So you see these happening in the forms, you jump on it and you start to encourage it, you create a separate area, after the separate area grows, you add a feed to it.Â After the separate area with the feed grows, you launch it onto its own site, right?
Matt: After that we still launch it as its own separate tab on SitePoint dot com, so it actually created a contest tab on SitePoint in our main navigation box which linked off to this area of the forms.
Andrew: I see, so itâ€šÃ„Ã´s just evolving on the site.Â So then it goes from having its own form to having its own tab and then what was next?
Matt: And we start building some basic software around it that wouldnâ€šÃ„Ã´t be based on vBulletin in the form of threads, which is a really awkward interface for this sort of process where [xx] interaction as well between the designer and the business owner and thatâ€šÃ„Ã´s one of the keys to success for this process, anyone thatâ€šÃ„Ã´s listening should realize that itâ€šÃ„Ã´s not just a hands-off marketplace, the business owners benefit greatly by being involved with the process providing daily feedback to the designers and to ensure that the outcome that they get meets their needs.
Andrew: I see a lot of that back and forth and itâ€šÃ„Ã´s kind of interesting for me too to see what other people are talking about so that I know before I post my design requests, what kind of interaction I can have and itâ€šÃ„Ã´s all public, right, I can see what other people [xx].
Matt: Thatâ€šÃ„Ã´s right.
Andrew: How did you guys build that out?Â That seems like a pretty intense project.Â I see all the different pieces that are in motion here; the payment process, the interaction, showing logos.Â How did you guys build that?
Matt: It was really done over a couple of monthsâ€šÃ„Ã´ time developing by a couple of programmers on our team but that wasnâ€šÃ„Ã´t the most complicated piece of the puzzle.Â By far the biggest challenge for us and one of the most requested things about design to me [xx] was taking the prize money upfront so I can mention previously for the longest time the business owner and the designers worked with each other directly to sort out the payment for the design work.Â By stepping in the middle, we obviously take on some risks.Â They also have, you know, the challenges of paying designers.Â There are all sorts of different means and all around the world really.
Andrew: So when we say that Day 1, the site was profitable, does that take into account the three months of development work that you had your guys do?
Matt: Definitely.Â One of the strong advantages that we have is our development team and our head office is based in Melbourne, Australia.Â So compared to Silicon Valley, certainly there is a cost advantage to be had as well as the benefits of the US dollar Australian dollar exchange rate.
Andrew: So youâ€šÃ„Ã´re saying to me that you made enough, first of all itâ€šÃ„Ã´s really interesting the way that you guys keep your costs low, but youâ€šÃ„Ã´re saying to me that you made enough money with 99designs the way it was on SitePoint dot com as a vBulletin system that you were able to take that money and fund your developers for three months and have them build out the actual fully functioning site?
Matt: Thatâ€šÃ„Ã´s right.
Andrew: Wow!Â OK, so it goes from a tab to a fully working site three months later, developed by your developers in Australia, whatâ€šÃ„Ã´s the next step?
Matt: So while we first initially build out the software it still lived on SitePoint dot com for a while before we spun it off as its own separate brand with a brand new looking field that you see now.Â So after the [xx] was build in [xx] user interface work, which was obviously very intensive but led to a great final output.
Andrew: Did you first launch it and then add the user interface or was the user interface part of the development process?
Matt: The user interface came next when we spun it off as its own separate brand in February of 2008.Â So initially the interface was very bare bones, the programming code was there, [xx] feedback system, the back and forth system, but otherwise as quiet and beautiful and functional as it now.
Andrew: What I want to make sure that I understand is that you actually launched it ugly and then you improved it, people interacted with it in an ugly way and then you improved it?
Matt: Thatâ€šÃ„Ã´s right.
Andrew: I see, OK.Â So you launched it ugly, then you improve the design, then people start using, I know that the No. 1 requested feature most recently was for you guys to take payment and ensure that the designers were paid directly from you and not [xx]
Matt: Thatâ€šÃ„Ã´s right.
Andrew: [xx] hope that someone who requested the design page but before that big request —
(file transcribed is mm10.mp3)
Andrew:Â What other requests were you hearing from your users that you built on?
Matt:Â I think there was a lot [unintelligible] from the designers to help them pick which contests to participate.Â It’s one of the great things that we developed was an icon system that appears at the top of each contest page, which says whether the contest is healthy, in a caution state, or there’s a warning.Â And that icon status is based on how much a project holder interacts with the designers.Â The designers often choose which contests to participate in, based on number one, the quality of the brief.Â Number two, how much interaction there is with the project holder; how active are they in giving feedback to every design that’s submitted.Â And third and last, consideration is probably the prize amount that’s on offer.Â But many people would rather participate in a $300.00 contest where the project holder’s on there everyday, rating designs, making detailed comments, as opposed to participating in a $1000.00 project, where the business owner’s completely absent, and they’re just hoping to swoop in on the last day and pick their favorite design.
Andrew:Â That’s interesting, actually.Â I love the little icons at the top of every project.Â They tell me whether somebody’s active, they tell me whether someone’s dependable.Â It gives me a sense of the person who’s posting the contest, what they’re like, of the person who I eventually hope to work with, and definitely expect to get paid from.Â And what kind of user feedback helped you design something that elegant, and that useful?
Matt:Â [unintelligible] comments from our designers, is by talking to them over e-mail through our support.Â One of their other biggest concerns was project holders that were absent during the process.Â This is frustrating for a designer to submit a design, and then lose out and not have the opportunity to revise their work, and try and meet the business owner’s needs.Â There’s a lot of revision and back and forth going on through the entire process, where the designers love feedback.Â They want to put additional time into improving their work in order to meet the needs, but if they don’t get that feedback, they often end up very frustrated, or even angry at the business owner for not giving back.Â I guess, a lot of the payment might not be money, but might be feedback.Â So, if you don’t win, one of the benefits that you’ve had from participating in the process might be the feedback that you got from the project holder, and how you could have done things differently, and how you could improve.
Andrew:Â And Matt, you personally were e-mailing designers and getting their feedback, or did you have somebody who was dedicated to doing that?
Matt:Â We’ve had a full time support person on business since day one, that’s now two people.
Andrew:Â I’m sorry to interrupt you, but this is really interesting to me, and I want to make sure that I fully understand this.Â You’ve got a support person who’s listening to the feedback from people.Â How does that go, how does their feedback end up with the designers who are going to redesign the site?
Matt:Â There’s weekly meetings, but also a lot of conversations happening on a daily basis.Â As a small business, there’s often bugs and errors, and odd, unique situations that come up which might not have been expected when we developed the software and the code, initially.Â So, it makes a lot of sense for the support person to interact directly with the lead developers, give them that feedback, give them cases where you know a unique situation happened where we need to adapt our code, or we need to adapt our processes where we might need some user interface tweaks in order to make things clearer.
Andrew:Â Are they sitting in the same room?Â Are the designers hearing the frustration that the support group is getting on a daily basis, or is it just the meetings?
Matt:Â [unintelligible] we’ve actually had…we actually regularly have our developers and the user interface designers participate in the customer service process.Â So, they’re in there one day a week usually, answering tickets, seeing the issues first hand, and then being motivated to resolve those issues for the next release of the software.
Andrew:Â I see.Â All right, let me take some more questions, or see what people have been typing at us.Â First of all, Jose from the group is watching us live from Logan Airport in Boston.Â I’m so glad that we’re able to keep you entertained while you’re waiting for your flight.Â He also created something called â€šÃ„ÃºEvil Businessmanâ€šÃ„Ã¹, which teaches designers how to be more like businesspeople.Â He talks a little bit about that in the comments.Â Let’s see, Fossil Foundry loves Sitepoint books.Â His wife says he owns so many that she thinks he owns stock in Sitepoint.