How does an idea on an overseas trip turn into a business that was sold to Home Depot?
In 2008, Ethan Anderson launched RedBeacon, which allows you to compare prices, ratings and appointment availability for home service providers. About 3 years later, he sold it.
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Hey everyone, I’m Andrew Warner, the founder of Mixergy.com, home of the ambitious upstart and home of the infinite tech trouble, it seems like. Today’s guest was good enough, after we had some tech trouble last week, to come back. And now we’re doing this interview, not on Skype but on GoToMeeting. Thank God for backup systems because I felt like everything failed at the time, personally. In this interview I want to find out how an idea that happened to an entrepreneur on an overseas trip became a business that was sold to Home Depot. In 2008 Ethan Anderson launched RedBeacon which allowed you to compare prices, ratings, and appointment availability for home service providers. About three years later he sold it.
Today he’s building MyTime which lets you book appointment with thousands of local businesses, like housekeepers and dentists, and they just recently launched MyTimeFavorites which will allow you to book appointments with companies that haven’t even signed up for MyTime, and that way you get the convenience of booking with them online. Ethan, thanks for doing this interview.
Ethan: Thanks, Andrew. It’s great to be here.
Andrew: So a lot of difficulty in running a business. Frankly, you can see even my little operation here is having a lot of tech trouble. You had a lot of challenges building it up. You finally sold. What’s the payoff? Do you remember the day that you sold it? Did it feel as great as I imagine?
Ethan: Yeah. It’s always to me incredibly exciting, and you feel like you found a great home for a company that you worked so hard to build and one that makes a lot of sense. That feels really wonderful. To me it’s kind of talent acquisition, I feel like, where no one fails any more, (?).
Ethan: Usually, what happens your app gets acquired, your users are left in the lurch. And the years of hard work that you put into it go for nothing except proving yourself as a hard worker. And so I was really thrilled that Home Depot is probably the best home that little RedBeacon that I could imagine. What they’ve done with the store integrations, what they’ve done with leveraging their own service professionals who shop at Home Depot and customers who shop at Home Depot and making RedBeacon a part of that shopping experience is something I could never even have imagined the day I came up with the idea.
Andrew: And the idea that you sold the company, and you could point to Home Depot and, “It’s there. It’s now part of that big organization.” And everyone, your mother, my mother, everybody knows what Home Depot is.
Ethan: Great. Of course. I love that you can walk into the store and see the signage and the kiosks and the store associates will talk to you about it. It’s even kind of a fun thing. Each of the Home Depot/Nascar have the RedBeacon colors, the RedBeacon logos throughout. Pretty cool.
Andrew: So then what’s the difference between RedBeacon and MyTime? I was trying to describe them in the intro, and I looked at it and said, “Anyone that listened to that would say Andrew usually does his research”, but I can’t tell the difference between these two introductions.
Andrew: So what is the difference between MyTime and RedBeacon?
Ethan: Let me start with little RedBeacon and then I’ll move into the current startup that I’m working on, MyTime. So RedBeacon was about getting bids or price bids for home service jobs specifically. When you need to have a complex job done on your house, it almost never gets fixed right. Every business that you call quotes you very different prices because of their qualifications. They usually come on-site to make a final determination. So what RedBeacon would do is it would simplify that process for you. You get four or five bids from plumbers, electricians, (?), you know, typical kind of home service workers that come to your house to do the job, right?
Ethan: You could take photos. You could describe the job. They could ask you questions about it. And then what happens is you have four or five choices that have the price, the bid that they’re going to charge. You have profiles of the business, ratings and reviews, backgrounds checks, a service guarantee from RedBeacon to make sure that you know we’re standing behind the job, and you know, then you select somebody. When you select somebody, the service provider pays RedBeacon 10% of the job. Actually, it went up; it was initially 10%, now it can be 20 or 30% depending on the type of job. MyTime is the mirror opposite. MyTime is actually a site that has jobs where every single service is fixed price. You know exactly what it’s going to cost ahead of time. The consumer buys the service from My Time, we’re actually the merchant of record, but we book the appointment for you with the merchant because we’re connected to their calendar.
So I’ll give you an example. Let’s say that after the interview you decide, “That was a really great interview, the best I’ve ever done, and I’m going to reward myself with a massage.” You can go onto MyTime, see who’s available in your area right now, even filter down by Thai massage or deep-tissue, whatever you want. Right? You see the beautiful profiles, the business- same thing, kind of ratings and reviews, information, but you see the price ahead of time.
You see the availability ahead of time, and when you choose a time and price combination you purchase it, we charge your credit card, it shows up on the merchant’s calendar, and they get a notification that you’re coming. So, it’s a little bit different and it solves a lot of the, I would say, business challenges that I think we faced with RedBeacon as we were growing that business.
Andrew: All right, I want to hear about those business challenges as we build up. By the way, you mentioned a massage; I’m looking at my hair, I feel like it’s a haircut that I need, and I could do that too, right?
Ethan: You can. Yeah, haircuts…
Andrew: And I book a specific time on MyTime for the haircut.
Ethan: Right, you could. There are a couple of things you can do. One is, if you don’t have a person you go to today, you could filter down by the day and time and location that you want to go. You probably would select “men’s haircut,” but you know there’s a lot of different choices. You could do “blowout,” “no blowout,” I mean there’s all kinds of different things you can do. I’m sure you don’t color your hair, but if you did…
Andrew: I feel like maybe I should start.
Andrew: But if I wanted to, I could pick that out and discreetly set up an appointment with them for a specific time.
Ethan: You’re actually… I mean, you can’t underestimate the convenience of being able to book and pay for that haircut on MyTime versus calling the businesses. Half the time they put you on hold or don’t answer at all. Finding out who’s available, how much they’re going to charge, who’s good, who’s not, all of that’s taken care of for you. So it’s… The experience that we’re really trying to model is something like Amazon. It’s a retail experience that should be as seamless as that.
Now the second thing, just to say quickly, is, let’s say you have somebody you go to. Most people have, you know, they go to the same person every month, right? You add that person to your “Favorites” page, and then the person, the hairstylist, lives there, on that “Favorites” page. There’s a tile, and you click a “Book” button, and it opens up their schedule instantly, within seconds, and then you choose the time that you want. It’s already configured, we know which hairstylist to go to at the salon, we know their price, we know which service you want, so all you have to do is click “Book,” and then the time you want, and then it’s done.
Andrew: And if they’re not on the service already, you guys will do what?
Ethan: Then what we’ll do, we’ll actually call the business, and ask… We’ll print a free profile for them. This is one of the big learnings I had; you actually have to build a profile for them, for these local businesses, because they tend not to be as tech-savvy as you and me, so we hire ODesk workers who are specially trained in profile creation, and less expensive. They will create the profile and send it over as a link: it says “Claim Your Profile,” they click on the profile, and if everything looks good, they click “Approve.” Then they go live on the site.
Ethan: So, if your business isn’t there, though, we don’t want you to have to wait for that process to happen, so we’ll concierge it for you for free. We’ll call the hairstylist at a salon and say, “Andrew needs to make an appointment. He’s expressed a preference for Saturday afternoon, what do you have available?” Then we’ll let you know, and then we’ll confirm it for you. Hopefully that only happens the first time, but you’ve provided us with a warm lead. We’re grateful for that, we signed up a salon and the hairstylist, and we throw you a $10 credit for your next booking.
Ethan: So, I kind of joke that you could get $10 off any business in America. You should never, ever pay full price again. You can always get $10 off any business with MyTime.
Andrew: It’s like you’re creating Open Table for all the services that I want to use that use dilapidated call answering machines that I have to deal with. I’m obviously getting very carried away with the product here, usually I talk about the business and rarely do I get this interested in the product, and that’s why…
Ethan: That’s a good sign.
Andrew: I wonder if the hipster place that I go to that shaves the bottom of my neck here will sign up. I’m going to try it and we’ll let you know.
Ethan: We’d love to have them on.
Andrew: So, let’s see how you got here. I mentioned at the top of the interview that this idea came to you when you were on a trip overseas. You were in Japan. What were you doing there and how did this idea come to you, the idea that eventually became Red Beacon?
Ethan: Right. I had a Japanese friend from business school, and it was the five year Harvard Business School reunion, so I went back. I was a Google product manager at that time, kind of I was feeling antsy, had been at Google for a while, I really want the experience there but was feeling antsy that I want to do something entrepreneurial. And, I felt like going back to that reunion was actually a good kick in the seat of the pants, because my classmates had done some pretty amazing things, [??] in my class, [??] in the academy, just really incredible people. I sort of felt like, I work for a great company, and I love my job, but I need to get out there and improve myself, beyond just working for a company.
So, I started talking to some of my classmates, and this guy from Japan had created a really interesting company. It was a mobile first application, in that it allowed small businesses to summon workers. Let’s say that you need…you’re a restaurant, you need an extra dishwasher. Or you’re a retailer, and you want someone to help stock the store. All these little things, made…they would push out the notification to this app – it was, like, 100,00 Japanese 20-somethings, who had this app on their phone – they would get the push notification, they’d respond “yes,” I’d like to do this job, and then an hour later they would show up. In Japan it’s totally different than the U. S. Much, much less regulation. There’s no workers’ comp, there’s no payroll taxes for temporary jobs, it’s like, you just show up and do the work, it’s totally fine.
When I went back to see if I could recreate that business in the U. S., I found out that heavy bureaucracy and regulation in this country made that almost impossible.
Andrew: What do you mean, what kind of obstacles were there?
Ethan: I mean, everything from sexual harassment to workers’ comp to the right to work. In this country you have a work authorization. Payroll tax withholding; all of that became our responsibility; you had to be a full-on temp agency.
Andrew: I see. You fully were hiring these people; it wasn’t this set of freelancers who were just using the app to find work.
Andrew: That’s a big responsibility.
Ethan: And I noticed, by the way, that one of our companies in our space called Task Rabbit, a few weeks ago, launched Task Rabbit for Business. And sure enough, they provided all of those services that I didn’t want to provide. I didn’t want to be a temp agency, and I guess Task Rabbit – I think they’ve raised, like, $20-plus million – could afford to build the infrastructure to do all those things that I felt like were going to be just not worth it.
Andrew: I was shocked when I saw that, too. They even list all the things that they’re going to take off your plate. All the regulations that you’re talking about that businesses don’t want to do, they say that they’re going to do it.
Andrew: So, how far, Ethan, into this idea did you get before you realized this is just not going to work in the U. S. with all the regulations?
Ethan: I hadn’t left my job at Google, it was probably two or three weeks into it as I started to really do the due diligence on this idea that all this stuff came up. But I didn’t let go of the idea. I thought, this is still a really interesting idea. I just can’t do that exact one. It kind of morphed into the idea of you can be a consumer, and need a service provider. You might need a plumber, because your hot water heater broke. Or you might need a handyman, because something in your house, a window, needs to be replaced. Whatever it is, right? And that’s actually where the name Red Beacon came from. I thought of it kind of in my head as, there’s an emergency, I’m going to summon help, I’m going to put up my red beacon like the bat signal, and they’re going to come running to take care of my problem. And it’s all going to be through mobile.
As it turns out, we built it on the Web first, and then we built mobile later, but I kind of, in my head, I always imagined it as a really cool mobile app. It’s back in 2008, so it’s a little bit early for mobile, which is why we started on the Web.
Andrew: You had a great job at Google. Was it tough to give that up, the salary, the protection – frankly, I walk around San Francisco now, and I see the prestige that goes along with working for Google. That couldn’t have been easy to shed.
Ethan: For me it was. I don’t know, I think if you’re a real entrepreneur, then you’re not looking for those creature comforts. It wasn’t like I didn’t enjoy the great food; I actually think that Google’s food is better than most restaurants you can get in San Francisco. It is pretty amazing, when I go back to visit friends and have lunch there – it actually is better than I remembered. But that’s not really what life is about.
It’s not about trying to live the easiest life, how to live the one where I’m the most comfortable and do the least amount of work, and get the most benefit for it. Engineers, we like to chew on glass, we like to create things that everyone says was impossible to create, just because we can, because we have the vision to do this thing. Once I had locked on to this vision, I was hungry, and that’s all I wanted to do.
I ended up going a year and a half with no salary, and put in $50,000 of my own savings. I wasn’t super-rich. I mean, I was at Google, but I was there at post-IPL, so it wasn’t like I was one of these, you know, multi- millionaire early movers. So, it was, you know, real risk, real pain, to kind of do that, but you know, I just lived very leanly and we kept a lot of equity.
I brought on two co-founders from Google’s vaults, so there are three of us. We lived very leanly. We all put in $50,000 into the company to keep it going. We paid ourselves nothing at all, and eventually, we decided to enter TechCrunch50, which was a big decision.
At that time, Andrew, TechCrunch50 was really important. It was, in a way that I don’t think any of the startup conferences are today, because they’ve all been diluted. There’s so many of them now. But back then, it was like, you know, mint, yammer, it was like, you know, it was like, it got so much publicity–1,000 startups from around the world would apply to get in–1,000–and then, you know, 50 would be selected. So, even the selection process was tough. I mean, you had to get through; they had to weed out 1,000, to 50.
And we were so excited when we got the notification from Heather Harde, who is the CEO of TechCrunch that we were in. I mean, it was like, oh my God, this is–jeez, we’re in to TechCrunch 50. You know, and I will tell you that there was not one moment that we thought we were going to win, not one moment. And even when I was on stage and they were narrowing it down from five people, to four people, to three companies, to two companies, I’m standing there on stage. In my head, I’m thinking, oh, it’s pretty awesome that we’re the runners-up to TechCrunch 50 when there’s two left.
It wasn’t until they said Red Beacon that it even became like, I even realized that it was even possible and we’d won. Really.
Andrew: I remember when you won. I remember the excitement around it, because I think Mint happened the year before, right?
Andrew: So, they had a track record of picking intelligently and all the attention was put on TechCrunch 50 at the time.
Ethan: It was, everything–I mean, we had–to be honest, you know, we haven’t gone into this yet, but the Home Depot acquisition happened because of TechCrunch 50, and I haven’t really talked about this.
Ethan: It just hasn’t really come out.
Andrew: Why? How does TechCrunch 50 lead to Home Depot even knowing you, let alone acquiring you?
Ethan: Well, as it turns out, the Home Depot online team was watching TechCrunch 50.
Ethan: They were reading TechCrunch, and they said, wow, somebody in the home services space won, like, this is really interesting to us because, you know, we’re this old-line retailer from Atlanta, and somebody into home services is, like, has this vision to kind of really be disruptive to the ServiceMagics and the Yellow Pages, and everybody else that’s been out there before them, in a new, much more technical way. Like, we’re doing algorithmic matching, and you know, we’re kind of taking the more Google-y approach to it than probably some of these companies that were started in the 1990s were.
And they came out and they met us, they met me. I had breakfast with them. A year, you know, over a year, year and a half before the acquisition even took place, and they were just tracking it closely. I didn’t know how serious they were. I mean, I think that, you know, lots of companies talk to you and lots of companies sort of express intentions, want to work together, et cetera. So, it wasn’t something I’d ever thought about until one day they showed up and they were committed to buying the company. Andrew: Wow.
Ethan: I mean, really committed. It was like they decided that they wanted it, and so we didn’t shop it around. There was no process, there was no investment bankers. It was no second bid. It was, if you guys want this, you know, there’s probably a price which RBC and we will accept, which is pretty high, you know, given that we were probably going to raise a series B. And they got there, and, you know, we were excited about their promises of integrating it and really carrying it to the rest of the country, which is something that is hard to do.
Andrew: Jason, the co-founder of TechCrunch 50, must be insanely proud to know that this, that the conference not just led to investors contacting you, but eventually, a sale. Which also reminds me that Jason invested in a company called Thumbtack. I was having dinner with the founders recently at their house, at their apartment here–
Ethan: Oh, cool.
Andrew: And the way that they described their business sounds just like what you were building. I don’t even see much of a difference, except in the way that they get companies on board, in the way that they get customers. Companies and, you know, the end user. What do you see there?
Ethan: Well, I think they are similar. I think Jason would have invested in RedBeacon, but we didn’t have the opportunity because we only did one round at seven and a half million dollars, and there’s no room for angels. Because remember, we had sort of done the seed round as founders, like, saying, there is no outside capital. And we did the one round of seven and a half million.
It didn’t make sense for somebody to come in with, like, $25,000 and get, like, a hair of the company, right? It’s like, why would you do that, as an angel? So, he went with Thumbtack instead.
By the way, Jason’s also an investor in [??].
Andrew: Oh, I didn’t know that. Okay.
Ethan: Yeah, so, he’s hoping that lighting will strike twice, I guess. But, you know, I don’t want to speak too much about Thumbtack. I will say that they had a different approach. They had an approach of an open directory, and it was highly saleable, so it was great in that sense that they get a lot of traffic from SEO, but it wasn’t about the… I think Red Beacon probably monefies better because we have this algorithmic matching, we’re giving you four bids, we’re charging 10% of the service provider initially, and, as I said, later it’s under 30%. They’re making money on the transactions.
I think Thumbtack was good at: Hey, look! We have this really open directory of tons of businesses a la Craig’s List and you can contact them and they can contact you and you can browse categories and things like that. But then I think that they’ve had to adapt their model over the last year or two, because they had this traffic but didn’t really have the business. Frankly, now it looks a lot more like Red Beacon. Right? It’s more lead-gen.
Andrew: Much more. You go to their site, you type in “I need a gardener.” They ask you a couple of relevant questions, you hit submit, and then they send it out to gardeners who then bid on your…
Interviewee: Exactly. That’s what Red Beacon was. That’s not what Thumbtack used to be, but it is what Thumbtack has become.
Andrew: So what about the issue of getting, the chicken and the egg issue with a business like Red Beacon, where you need to get customers but at the same time you need to get businesses and neither one’s showing up unless the others are there in large amounts?
Ethan: Sure. We did something that we called ‘The Wizard of Oz Strategy’. We’re very public about this. The first time you came to Red Beacon and you requested something… Let’s say you needed a carpenter to build you a fence in your backyard, okay? We don’t have any carpenters so what happens? Our wizard team calls, goes on to yelp! Or goes on to the Yellow Pages, looks up highly rated carpenters, starts calling them and says, “Are you available to do a fence-building project on Thursday around 2:00? If so we’d like you to bid on this.” They’d say, ‘Sure.’ That’s what they do for a living.
They bid on things. That’s totally normal for them. Then we’d send them a link to the job, they’d click on it, they’d see the full job, they’d put their bid in, but it wouldn’t let them submit their bid until they’d signed up. So we used a real job that they could get as a carrot to get them to sign up. That’s how we solved the chicken and the egg problem. And I’ll tell you what, within two months we had 100% of jobs getting bids and the average was over 4.
Andrew: How does it spread beyond the people that you guys can contact directly?
Ethan: Well, we launched city by city. And one of the things that’s interesting is, how many plumbers do you think needed to be on Red Beacon to service a city the size of San Francisco?
Andrew: Good question.
Ethan: It’s not like… The same plumbers can bid on every job. Right? That was the thing that was so startling about Red Beacon. You actually didn’t need as many service providers as you think that you do. Whereas Thumbtack, to go back, they had, I think, several hundred thousand businesses on it. I was like, ‘Wow, how do you meet that many?’ It’s about the consumer traffic and it’s about how many consumer requests you’re getting every day and closing. Does that make sense?
Andrew: Yes. My sense with them is they want that many on there because each one is another door from Google to their site. And then once they get that person there, the question is can we get that user to bid on getting even more, to apply to get even more bids, and that’s how we get that user locked in.
Ethan: Right. Right. But it depends on what your business model is. The Red Beacon model was a consumer requests something and we want them to choose somebody. For that to work, what you need is… We did data analysis and more than four bids did nothing. You weren’t more likely to close the job if you brought in 10 versus 4. So if we brought them 4 super high-quality businesses that were priced competitively, that were highly weighted and reviewed and that would do good work when they went, then you only need 4 businesses. So what we learned is that we needed to get 20% of our businesses to win 80% of the jobs.
Why? Because they really gave a crap about Red Beacon. They showed up on time. They never flaked. They did good work. They never cheated. They had good prices. Because they were getting a lot of jobs. They were making tens of thousands of dollars by using Red Beacon and they didn’t want to shoot that goose that lays the golden egg. Whereas, if we brought somebody new on, okay, now there’s a whole training and hand-holding process; the quality could be variable, we don’t know yet; he hasn’t built up a reputation. It’s not that we don’t want new businesses, but I’m saying the goal was not to bring as many new businesses as we could.
Andrew: Right. That makes sense. By the way, everything that I just talked about Thumbtack, I think it’s public, but basically I got it from a competitor of theirs over drinks. I didn’t hear it directly from them otherwise I wouldn’t be revealing it. They will be doing an interview here so we can find out more about them. So now you’ve got the strategy for bringing service providers on board, how are you getting the traffic, the people who will eventually be buying from these service providers?
Interviewee: Right. That was challenging. With Red Beacon, it was a lot of AdWords and Facebook ads and things like that. That was a huge tranche of the traffic which was expensive. I’ll be totally honest, while I was there we never figured out how to make that ROI positive. I mean we could bring traffic there, and we could get revenue but it was actually less revenue than we were actually paying for that traffic. So that was tough. So then we started looking at distribution partnerships.
We did distribution partnerships with a number of companies including Yahoo, where it was actually built in the Yahoo search. We’d get the top search results and it was ?? We’d put in there so there was NBC, ABC, Fox, and they had widgets on their websites, SF Gate. We did so many different distribution types of deals. We tried social that was difficult. Frankly, one of the things that was so great about Home Depot buying the company is that 100,000 plus people coming every week into a Home Depot store in America. And so all of those people are getting exposed to Red Beacon at a time that they are very interested in some kind of home service thing.
Andrew: When you did the distribution though, you had to pay upfront right?
Ethan: No. 100% of them were all paid for performance.
Ethan: Yeah. Even the Yahoo one, which was pretty amazing.
Andrew: Wow. With guarantees?
Ethan: There were no guarantees.
Andrew: Who’s your biz dev person?
Andrew: You were the one who worked out the deal with Yahoo where there was no guarantee, just share of revenue? Wow.
Ethan: They brought them onto a co-branded Yahoo Red Beacon page, which is basically the Red Beacon page with a logo that was co-branded and that was a 50% ??.
Andrew: That was impressive. Now I’m looking at your background, and I don’t see biz dev experience in your background.
Ethan: Well, what entrepreneur is not naturally a sales person, a business development person? At its heart, being an entrepreneur, you never stop selling. You’re selling investors on the dream. You’re selling employers on the dream. You’re selling partnerships. You’re selling the media and the press. You’re selling customers. It’s like we’re always selling something and so if you don’t have that built into you innately, then you better have a co-founder who does.
Andrew: I see. And you are the guy, out of the three of you, you were all three engineers, weren’t you?
Ethan: No. I have an MBA from Harvard and a non-technical undergrad Economics and Public Policy studies from Duke.
Andrew: I see.
Ethan: My two co-founders were both CS. One was from MIT and one was from Princeton in Cambridge. So they were very technical, more so than me. I was a product manager at Google so I had a real passion for the product and a good product sense but not in terms of RC coding ??.
Andrew: All right. So you got a way of bringing people in the door and you got a way of bringing service providers in. Then I guess we hit on the issue that you and I talked about before when we started this interview which is you work hard to bring a customer into the door and they may not think of you again, maybe not even ever in fact. Can you talk about that?
Ethan: Yeah. Yes I will. One of the things that probably is obvious in hindsight, and I think a few people did warn us about this is that people don’t need home services that often. I mean how often are you remodeling your home and how often do you not have somebody already? It’s not that people don’t need a handyman on a regular basis, but they already have somebody and what Red Beacon was good at was bringing you new people. We’re bringing you bids from four different people each time that you use it and so that contributed to a lower lifetime value of a customer. What is the definition of LTV but how much you monetize times how many times you have a sale each year times the life of that customer, maybe plus some sort of referral like if they were referring some other people and there’s some sort of ??.
I mean that’s basically what LTV is. And so Red Beacon was tough because there was almost no referrals despite our best efforts and I think that’s because people probably might not want to talk about their plumber. Who wants to talk about that? But even if they did, they’d probably want to talk about the plumber to their friends not about Red Beacon. They’ll be like I have a great plumber for you. Yea, he’s fantastic. Let me give you his, that’s what will happen. And we be like, no, no tell them about Red Beacon too.
It wasn’t something that people wanted to go tell everybody about. So ?? was pretty low and then people didn’t need the Red Beacon service all that often so at six months or nine months goes by you may have very well forgotten about it probably because you’ve goggled it and put in an ad word and maybe it didn’t even registered too much that you are using Red Beacon. It wasn’t a destination. Right?
Ethan: Angie’s List, who’s in our space, has been building up a brand for ten years and spending tens of millions of dollars a year on advertising in radio and television. So they have done an admirable job of creating a brand. And so some people do probably think of Angie’s List when they think of pump services, but Redbeacon hadn’t been around long enough, or had the money to invest in building a brand like Angie’s List.
Andrew: Also, Angie’s List locks people into a membership, so you feel like this membership gave you the value of . . . right?
Ethan: Maybe. It’s basically Yelp, user generated content, ratings, and reviews.
Andrew: Isn’t there a membership there?
Ethan: It is, yeah. It’s ratings and reviews behind a wall of garb and Paywall. You can’t crawl it, you can’t access it, you have to be a member. So, they get no SEO value, of course, because it’s locked. In a world of Yelp, it’s hard for me to understand how Angie’s List survives. I know that the subscription model is gold because people get lazy, inertia carries them through when it renews, and they just stick with it.
Andrew: The subscription model also seems to help, because all I see when I go to CNN is commercials for ‘Buy gold! The world is ending! Buy gold!’ or ‘Angie’s List’, and it’s regular people talking about how they’re on Angie’s List together, and giving each other recommendations. I guess, because they charge all this money, they can afford to just bombard the airwaves with commercials.
Ethan: Yeah, exactly. I looked at their 10K, and it looks like about half of the revenue is coming from advertising from the businesses to be on top of the search results, and less than half is coming from the membership.
Andrew: The other thing you told April in the pre-interview, is you guys hired an offshore call center to badger your customers to select a service provider, well, to remind them. I think ‘badger’ is her word. What happened there?
Ethan: One of the other things we had learned, as we’re trying to figure out how to make the company profitable, is that the drop-off rate was substantial. When somebody put in a request for the service, and the time to come back to RedBeacon to look at your bids. A substantial drop-off, much more than half. We’d email them, we’d even text message them, and it didn’t seem to be enough. So then, we got this crazy idea of why don’t we have people call them, ‘Hey, we have these bids for you. What happened with your job? Do you still need this person? Let me tell you about who came back with bids, and how great they are. Would you like to select one of them?’
Andrew: Did that work?
Ethan: Yeah, it did. It probably increased the conversion rate upwards of 30 percent, from where it used to be, but it didn’t work enough to the point where the company was profiting yet. A lot of these learnings, from RedBeacon, colored my views, and the business that I wanted to create with MyTime. Whereas, a lot of the problems of “I don’t need to ever come back, because I don’t get home services that often”, “I’m not going to book the same person, because I have a direct relationship with them now, so you’re cut out for the future” and the experience of the drop-offs from having to come back to get your bids. All of those problems have gone away with MyTime, because we signed up the businesses ahead of time, the calendars are connected, so you complete your transaction in that one session.
Prices are there ahead of time, so you know already what it’s going to cost and if you see somebody you like, you click on it. It goes into a shopping cart, you purchase it and it’s booked. And, this is really important; we want you to come back to MyTime when you re-book them. We don’t want you to call them directly. So, we don’t charge the businesses for repeat bookings, otherwise the business would tell the customer not to use MyTime again, right? It goes into a favorites page, where all of your businesses are on one single page.
You manage everything there, the re-bookings, the reminders to re-book, cancellations, all of that happens right on your favorites page. At some point, we’ll make that a public page for you, so that your friends can come and see all the businesses you go to. I’m going to mark it right now for a house cleaner. If you live in San Francisco, I’d be really interested to see who you’re using, because if you’ve been using them, and they’re on your favorites page, I wouldn’t mind booking them.
Andrew: I get that. I would feel that way, too. Right now, I’m looking at your hair and my hair, and I’m saying, ‘That’s what I’m going for with my hair. This hipster place that I’m going to needs to do that.’ I would definitely go to your place.
Ethan: You need to get them on.
Andrew: Yes! Who did you talk to, before launching MyTime, to make sure that the product made sense for people other than you?
Ethan: Right. I think everybody who has ever used OpenTable, everybody who’s ever used Kayak or Expedia to book a flight, everybody who’s ever used Uber to get a car, they understand the value of pulling out your phone, or going to the computer and booking something online, when you want to do it. Everyone knows how frustrating it is to call a business, get put on hold, get no answer, have them call you back, right in the middle of a meeting they finally get back to you. It’s so annoying. It drives me crazy. I’m too busy for this. I get no pleasure in talking to the secretary. It’s not something I look forward to, at all.
Oftentimes, frankly, I do things late at night. I’m a hard worker and get home late. There are still things that need to get done, so I go online and do them, then. In this world that we live in today, work and play, vacations and non-vacations, travel, and everything gets blended together in a way that it probably didn’t, years ago in our parent’s generation. We need things like this.
Andrew: I kind of feel like a lot of what we use, I imagine the rest of the world is going to use and then I get disappointed when they don’t. When Zaarly came out, and they were going to do grocery shopping in Washington D.C., where I happened to live at the time, I thought, ‘This is going to take off like crazy, because who wants to go grocery shopping?’ I’m busy; I’m working all day long. I just want to use the computer. I don’t want to wait in line at Trader Joe’s, etc. That didn’t work out for them, because, I guess there weren’t a lot of people like me, who are maniacs, who wanted to work all day and then go home and forget about doing anything. So, did you even need to test it, or were you feeling so sure you were on the right track and you were going to launch it anyway?
Ethan: It’s interesting. Something like grocery shopping, I don’t have a good intuition for because I don’t necessarily know what I want. It’s usually more like, I’m walking up and down the aisle, and I say, ‘Oh, yeah. That looks good. I’m going to grab one of those.’ Or I want to look at the fruit and vegetables, and make sure that it’s fresh.
Andrew: That makes total sense. I never would have imagined that anyone feels that way. When I think about it, I guess there are people like that.
Ethan: I go back to Zip Zap Salon, in the lower Height, to get my hair cut. I’ve been going to the same guy for 11 years. I know exactly what the hair cut is going to be, I know what it’s going to cost, there’s no variability there. He might have an off day, but if I call him or book online, it’s not going to affect that. If I need a massage, and I’m looking for a deep-tissue massage or Thai massage or something, it doesn’t have the same variability as grocery shopping. I have a better sense of what it’s going to be. By the way, not every business works from MyTime. Almost none of the RedBeacon businesses work. We’re probably not ever going to have plumbers, electricians, roofers, or services like that, because they’re not fixed price and they’re not fixed duration appointments.
Andrew: I see.
Ethan: I don’t think restaurants will work. How do we know what you’re going to eat once you get there? Not to mention, there’s Open Table who dominates, but even if they didn’t, I don’t think it’s a good fit.
Andrew: OK. What about validating your idea with the service providers? Did you take it out to them, and see if they would be interested?
Ethan: They loved the idea.
Andrew: How did you do it? What was your process?
Ethan: I understood one of the big pain points, from my RedBeacon experience, was open appointments in their day. It’s not like Apple, who says ‘I’d love to have another half-million customers this month to buy and iPhone. That would be awesome.’ It’s not like that for a local business. It’s, “My day has a 3-hour block where I’m not working. That’s really annoying because then customers come in again. I’d love to fill those 3 hours with somebody, so I’m not just sitting there idle, and making no money.” So, MyTime is phenomenal in that regard. They say, “Let us be a retailer for you. Let us distribute those open appointment times, to new and existing customers, who can fill those times that are open.”
And if you’re already booked, we won’t show those because we’re synchronized with your calendar. Then, we went even further. We said, we’re going to dynamically price, aka discount, your hard-to-fill time slots. We’re going to do what United does, in the worst possible flight that nobody wants to take, and that one is way cheaper than the popular flights. It could be half the price, or maybe even less. We’re going to do the same thing for you. It’s worth it, because you don’t want to sit there idle. You want the chance to get a new customer, and you want to be working and making some money during that time slot.
Andrew: Was there a way of validating your assumptions, because it seems like there are some inherent assumptions in here. It’s OK if there’s no validation. I don’t want it to be an egg-head interview where you feed me this lean start up process, because that’s what we’re supposed to do. I’m sensing that, maybe, the service providers don’t even want to use the internet, don’t want you to sync with their calendar, don’t trust calendars online because they have paper calendars. Maybe they like the idea of making money when they’re not working, but they hate the idea of discounting their stuff ever, because it sends the wrong message. I don’t know what kind of (?) could be in their minds. Were you validating it with them, or did you just say, “I’ve been in this space long enough. I know what to produce. If I create it, they will follow me there?”
Ethan: I didn’t do too much validation, other than having talked to a lot of people, over the last several years, in the local space that I was in. I didn’t do separate research for this. But I will say this, there are some of those businesses like you described. These are people who don’t do email, they don’t have a computer in their office, they don’t check their cell phone during the day, and they’re not good fits for us. And they probably won’t be on MyTime for a while, at least until their children take over the business or something.
Ethan: But, I will say this. The trend is in our favor. These businesses now, most of them have Facebook pages, most of them have web sites, almost all of them have e-mail, most of them have cell phones, and they use apps. Right? So the trends are in our favor. And, by the way, you don’t have to discount. That’s an option. I call it “Dynamic pricing”. You can flip that on or off. It’s kind of like a happy hour, is how they understand it. It’s like happy hour time.
Ethan: And they like it.
Andrew: As a user I could see the value of it. If I was going to go get a haircut in two days, but I see that some barber is free later today and would give me a little bit of a discount if I do it, I’d hustle over.
Ethan: Totally. Yeah, they like it.
Andrew: When you and April talked, you said that you launched with fifteen hundred businesses. How do you launch with that many businesses on a new platform?
Ethan: We started signing up businesses even before the product was done. Back in August of last year, almost a year ago, we started the sales process. And I’ll tell you what I knew; I didn’t know how to build an efficient sales team because at Red Beacon I didn’t have to. Remember I was telling you that you could have 15 or 20 plumbers and they could serve the whole city? You can be inefficient if that’s all you have to acquire.
Ethan: Right? You and I could do that in two afternoons. The MyTime sales team is like a well-oiled machine. We brought in a sales director from Trulia, we scoped out sales for [??] , we’ve got monitors on the wall. The sales people know they have to make a certain number of calls every day. We know the average number of decision makers reached. We know the number of decision makers converted. They’re commissioned and comped based on that. It’s a real sales organization. It’s not big, it’s not like we have hundreds and hundreds of people yet, but it operates like a big company.
Andrew: I see.
Ethan: In terms of sales team.
Andrew: So how’d you learn how to do that?
Ethan: I had to learn, I mean, everything. All this stuff is out there, in this day and age. I mean, you talk to experts, our sales director had some experience in it, I asked other people like H. Craig from Betaworks, “How did you do it?” and I talked to his guy. I went over to Zoze and I talked to their sales director and asked, “What do you guys do?” It’s like anything else, if you don’t know it, you make it your business to learn it. And I realized that with MyTime, I had to make it my business to learn how to build a sales organization and a sales team. And we have really great people now. They really know what they’re doing, and the merchants love them. Sometimes they’ll go get a MyTime service, right? And they’ll be like, “Oh, do you know Graham? Do you know Becca? Oh, he’s great! She’s great! I love her!” They know them by name. It’s great. It’s really cool.
Andrew: And apparently they know you by name, too. Apparently someone called up from Mytime, called up a service provider, who said, “Hey, is this Ethan Anderson’s start up?”
Ethan: Yeah, he said, I forget how much he made, something like $45 or $50,000 at Red Beacon, he said, “If you’re starting this company, I want to be on it.”
Andrew: It’s great to have a good reputation. There’s a note here that I wasn’t sure, I probably should have asked April about it, but we’re here so I’ll bring it up directly to you.
Andrew: You said, something about the Google Video story, making sure all pieces of the product are consistent. Do you know what that refers to?
Ethan: Yeah, I’d love to talk about the Google Video story. If I had some free time, I’d like to write a book about the Google Video story.
Andrew: I would love to read that.
Ethan: Why did Google Video [??] Google is a very powerful organization today, don’t get me wrong. But this was like, the height. This was when Google the hottest company in the universe. Google video lost to YouTube, it was unheard of. How could Google, with all its resources, the best engineers in the world, all the press, darlings, everything, how could they lose to YouTube? And, my conclusion is that Google Video tried to be everything to everybody, and the pieces didn’t go together, at all.
In fact, the pieces of Google Video were diametrically opposed to one another. Google Video was trying to serve premium content providers like CBS, NBA basketball, and Charlie Rose. And what do these people want? Well they want the things that iTunes content providers want. They want DRM protection, they want a store where you have to purchase things, they certainly don’t want to be next to pornographic or other copyrighted infringing material that users uploaded, right? We couldn’t really advertise on Google Video, because there was a lot of infringing content that could be uploaded through the UGC or User Generated Content portion of it there as well.
Ethan: Right? Now, let’s look at the other side. If you’re YouTube, what do you want to provide to your users? Well, you want a super-easy way to upload content. So they built an HTML uploader which was awesome. You click a file, hit submit, and the file just shows up. There was no screening at YouTube. Google Video screens every single video. Thousands of videos. There’s a long delay. It took you three days, or something, for your video to go live. YouTube would be live within minutes. YouTube built all these social features.
Social features today are taken for granted, trust me. In 2008 they were not taken for granted yet. Ratings and reviews, embeddable widgets where people embedded on their MySpace profiles, which got them lots of distribution, commenting, play lists, all those things, YouTube came up with these things. And of course you might know and everybody knows that it was tons of infringing content.
Of course, they would take it down if somebody submitted a DMCA request, but it was all there. And that’s how YouTube grew like lightning, but Google Video is basically in conflict of itself at all times.
Andrew: Because Google video is trying to make Charlie Rose happy who does not want embed his videos, he wants to sell his videos and they are trying to make Andrew happy who does want embed his videos and wants everyone to spread his videos and those two people can’t be serviced by the same product in the early stages of a company at the same time and that’s the challenge.
Andrew: And you are in there. As the guy in there did you notice that this was happening? Was it painful for you?
Ethan: Yeah. It was very difficult. I mean I think we were watching YouTube and trying to chase the hottest thing so you know they would come out with something and then four months later and it’d be like we have to ??.
Andrew: Do you remember something like that? What was it comments?
Ethan: Yeah. You know, I was actually, not that it was all myself in any way, but I was actually the international product manager. It was my first job at Google. I had a number of roles that they offered to me, and I took this job to internationalize and launch Google Videos in other countries. I was actually spending a lot of my time in Europe and Asia launching the product internationally, translating it, dealing with copyright and privacy things there, getting contact providers to get on board, marketing it.
So I wasn’t as influential as you might say on the core product development. It was out of my hands a little bit. But I saw this, was concerned about it, and I think everybody saw it,. But what was happening is videos is a marketplace as much as eBay is a marketplace and at some point in technical terms the corpus of video content was so overwhelmingly large at YouTube, that it was getting to the point where nobody could catch it anymore.
Ethan: Even if we did all of the right things from that point on and we were perfect and we never made a bad decision, it was too late. Everybody was uploading their videos there and everybody was going there to watch the videos, and they had just won the game and there was no catching up. And by the way it’s not like, I’ll tell you something interesting. In my opinion, it’s not like face book. Face book could still lose in the sense that everyone could decide there’s a new hotness in town and they are going to move their social network over there. YouTube can’t really lose. You know there are billions of hours of content on YouTube servers right now. They have an incredible infrastructure for serving it and hosting it. It’s fast. It’s cast all over the world. I mean it’s almost at this point impossible to recreate. I think YouTube will be here for the rest of our lives.
Andrew: Yeah. It is a very defensible business. Internally though, I’ve been looking at some messages from my audience, entrepreneurs who are wrestling with inner doubt and when I ask them why they often will say I had this one big failure or this failure at a company I worked for that I was marginally associated with, it makes me feel like I’m very vulnerable, like I’m going to fail, or I’m made to be, or I’m a failure. Why didn’t this make you feel that way? Why didn’t you say hey you know what I was with all of Google’s power, with all of Google’s strength? I competed against its sub start and I lost. Maybe I just don’t have what it takes. I’d better not risk it on myself.
Ethan: You know, I don’t think in general I don’t have that kind of mentality. First of all, I didn’t really internalize all of the ?? Google Video myself. It was a massive organization and you know I was a, you know my first job as a ?? at Google internationalizing the product so I don’t think that I, I learned a ton and I was crushed. Yes. You know I couldn’t go, like Hunter? You know Hunter, right?
Andrew: A little.
Ethan: Or you know of Hunter. Yeah. He was also a ?? at Google video. He was able to brush it off and go over to YouTube. He went to work at YouTube and he spent the rest of his career at Google there. He did really well. He became Director of Product Management and for some time was leading the product at YouTube. You know, I actually couldn’t do that. I felt like I had been punched in the gut that Google had bought YouTube for $1.65 Billion. This company that I thought about for the last year working seven days a week to try to beat them to suddenly be like, hey guys what’s up. I’m going to come help you guys now build your company? It was like, I couldn’t even do it. I was like let me work on something else. You know what I mean?
Ethan: So it’s not like it didn’t affect me. I don’t know if I blamed myself for the entire failure of Google Video but it definitely affected me. It did hurt a lot.
Andrew: And you are the kind of person who can, can you brush it off too like Hunter? How do you disconnect yourself?
Ethan: Now I could, but I couldn’t do it right away. Hunter was able to say, ‘The queen is dead, long live the queen’ [laughing]. I couldn’t do it. Now, it’s fine. It’s been years. Right? But I couldn’t go the next week and say, “Let me help you to succeed now”.
Andrew: How do you do that? I want to end this interview, with the strength of mind. I want to understate it, the ability to not internalize setbacks, to not take other people’s setbacks and make them your own, and then define yourself by it. It’s a huge strength. A lot of people don’t have it. How do you do it?
Ethan: Cognitive dissonance.
Andrew: What? Oh, cognitive dissonance.
Ethan: I think that entrepreneurs have cognitive dissonance. I think that they see the world through their own lens, they rationalize things in weird ways, it kind of wows them to keep going forward. Where other people would be emotional, or it would stop them, or cause them to be uncertain, or feel like they’re riddled with indecision and self-doubt, I think entrepreneurs don’t even think about it. We’re probably horrible people, in a relationship.
What makes a successful relationship with somebody is that you reflect, you think about the failures and you work them out. I think entrepreneurs are like bulls. We say, “I’m not even going to think about that. I’m on to the next thing.” We just forget about it and move forward, which, obviously, is terrible for a relationship. You probably accumulate baggage over time that causes it to fail. I’m sure, if there was a study, entrepreneurs have a higher divorce rate, it has to be.
Andrew: I can imagine. Did you ever see the 60 Minutes piece with Arnold Schwarzenegger, after he wrote his book about . . .
Andrew: He’s got it, like you wouldn’t believe. He can say, “Yes, I slept with the maid. I had a baby.”
Ethan: He says, “Yeah, I cheated on her, and yeah, I didn’t tell her, yeah, and I just kept going. I pretended it wasn’t happening.”
Andrew: It’s nothing to emulate, but it’s an exaggeration that shows how that process works, “just move on”.
Ethan: I remember, the 60 Minutes interviewer was just aghast. I think she could barely contain herself.
Andrew: We all were. He knew he was doing it in front of a national audience, a huge audience, but that’s who he is. He can just move on. Alright, the important thing here for us, is congratulations on RedBeacon, number one. And congratulations to us on MyTime, because all of us who are really busy people, who use services that will go and get our grocery and will try to shave a minute here, a minute there, because our time is valuable, now have an opportunity to stop going to Yelp and then calling up those companies that we need a haircut from, like me, or need a massage for our girlfriends, or wives, or husbands. Just go to our website, and book it online. We do it now with restaurants through OpenTable, we can now do the same thing with everyone else on MyTime. You’ve got a great domain. Mytime.com/favorites is where you guys will be my valet. You will go call up these people for me.
Ethan: I’m looking for your hipster hair salon.
Andrew: I have to do it. You mentioned it in here. Now, I’ve got to go back in the transcript and get the name, because I was focused on the interview and didn’t write it down. I appreciate you doing the interview, and building the site.
Ethan: Great. Thanks Andrew. It was great to be here.
Andrew: Thank you all for being a part of it.