In the late 90s, Greg Flores ran a search engine and noticed that his users were looking for online music. This is the story of how that discovery led to the launch of MP3.com, a pioneering site that connected musicians and their fans.
You’ll hear how a few clues helped MP3.com’s founders predict the future of online music, and how they built a business to help create that future. You’ll also hear about how the music industry worked to derail MP3.com’s efforts.
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Finally, do you know why you should apply to the Founder Institute? Udemy got into the program and here’s an article about how it raised a million dollars. Founder Institute will help you raise money. These startups applied and TechCrunch wrote about them when they launched. Founder Institute will help you get press. Startups around the world applied and learned how to launch a business. Founder Institute will give you successful entrepreneurs as mentors. FounderInstitute.com. Apply now before it’s too late.
Here’s the program.
Hi everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. By now you should know what I do here. I interview entrepreneurs about how they built their business. I want to find out what worked for them, I want to find out about the milestones, I want to find out about the challenges, the setbacks.
I did an interview a few weeks ago and talked about MP3.com, the online music pioneer that launched in 1997, that went on to raise over $370 million when it went public. It got sued pretty brutally by the music industry. Greg Flores, the co-founder of MP3.com, saw that program and offered to do an interview about his experiences launching that company. I invited him here to talk about that and to find out about the companies he’s launched since then, including AutoSpies.com, Animusic, and The Art of Photography Show. Greg, welcome to Mixergy.
Greg Flores: Thank you. It’s good to be here.
Andrew: Before we get deep into this story, do you have one great memory of MP3.com? You guys had highs and lows. Share one of the highs with us.
Greg: I guess one of the highs was actually going IPO. On that day, everything that was going on in the dynamic market and you watch what the company’s doing and everybody is just extremely exuberant and happy for all of it that we had done up to that point. The team, it was just great. We had a little party and actually had water balloons there. It was just a very young, fun, exciting time, for sure.
Andrew: There are very, very few people who, first of all, launch business, and secondly, fewer still who launch businesses who do well, and fewer still who launch businesses who get to go public. Going public, how did it change your life?
Greg: It was one of those things where when we had originally started MP3, which was an offshoot, won’t go into all that detail unless you want to ask about that, but it started as an offshoot when we launched MP3. Michael and I had discussed whether or not we would seek outside capital. As you know, and other people know as well, when you seek outside capital, it comes with assistance and people who can connect you to all different kinds of things, but it also comes with certain amounts of control and expectations on the people that are giving you the money.
Given the fact that we wanted to operate in a nimble environment, we didn’t seek the cash initially at all. Even a year later, when we were contacted by Sequoia Capital, we hadn’t sought venture capital at that point either. It was very interesting that they contacted us and we went up there and talked to them and presented as well as other people. They wanted to go down that path of IPO. It was a whirlwind. We got the money on January 21st and we went IPO six months later. [laughs] It was a very, very quick transition.
Andrew: Did anything happen differently in your life? Did you go out and buy yourself a monacle, a top hat? Was life different at all?
Greg: [laughs] Yeah. It definitely changed, for sure. It was really good. My wife is fantastic and she grounded everyone, me and other people that were surrounding me, to the fact that it wasn’t real money. IPO is one thing. You see where you are and you see it on paper and you think, “Wow, that’s fantastic.” But you know that there’s a possibility that it’s not real. Yes, I did do some things, I bought some things.
Andrew: Like what? Then I promise that we’ll get off this and go into the story of how it happened. For example, what was one of the acquisitions?
Greg: I bought a car. I bought a Ferrari.
Andrew: All right.
Greg: That was one of the acquisitions. That was pretty cool writing a check like that. I didn’t have anything growing up, relatively speaking. My parents took good care of us, but writing a check like that was just an amazing experience. Again, I knew it was just stuff. It’s fun and exciting, but it’s stuff. People are what make it really happen.
Andrew: All right. Let’s go back. You talked about Michael, this is Michael Robertson, the co-founder of MP3.com.
Andrew: How did the two of you meet?
Greg: Back up a little bit, my wife had gotten offered the position to take over a real estate development office here in San Diego. I had been in the brokerage business. We were in Texas at this time, in Dallas. I had been in the brokerage business for 13 years prior to that. I had just left a year before to start my own company in Dallas. She was offered this position and we moved out here to San Diego.
I started looking at technology in the local area and saw that it was much more robust than Dallas was at that point. There was a ComputerCurrents newspaper insert that came out every Tuesday and I got one of these newspapers. I started looking through and it was an issue on the top 25 cool companies of San Diego. There were all these different types of businesses. One of the businesses was Michael’s business called FileZ. I called five or six different CEOs, talked to them about their business, was curious where they were going direction wise. I resonated with Michael immediately on his idea.
He suggested we meet the next day for lunch, so we met over in UTC at a little place and had lunch and talked about things. I was, again, interested in his vision. This was before MP3, that was not part of the equation at this point, but it was others things relative to the Internet that were growing. We got together, had lunch, and I agreed to come work. He said the only problem is that I can’t afford to pay you. [laughs] I worked for equity, for a small amount of equity for the first few months, then we built up and were able to pay ourselves salary.
Andrew: Okay. Can you tell me more about what it was about him and his vision? This was a time when everyone had visions of greatness in the Internet space.
Greg: I guess the things that we resonated with each other is that I had been in the brokerage business, like I said, for a long time. That was the traditional business world. The Internet and the ability to do something in the non-traditional, and the big words disintermediate and all the different things that we do relative to the Internet, was something that he was very in tune with. He and I were in tune with the fact that we could make a big change in something out there and fix some things that are broken for the average person.
Andrew: Ah, I see. Okay. That seems to be the big draw for technology companies in general. You can go and try to launch a restaurant franchise or try to launch even, I’m now in office space that’s all around the world, what is it? Regus. Those are all good businesses, but they don’t change the world the way technology companies do.
Greg: Exactly. Exactly.
Andrew: Okay. So, he hired you on, he gives you equity, you guys get started. What’s the first thing that you did together?
Greg: We had FileZ. He had had that before and FileZ was an Internet search engine, but instead of going and searching for websites, you search for files. You type in something, you were looking for a picture around Christmastime to put on your newsletter and so you’re going to search for Santa Clause and you would get results for a JPEG for Santa Clause or whatever it is that you wanted to include on your newsletter. Also, a shareware and freeware and demos and all those things were indexed in the web search engine as well. That’s where the income was generated.
We would put out search results related to software and we would insert commercial results in that and we got click-through on that. It was very early in the pay-per-click, we were inventing things. I’m not sure that pay-per-click had been done up to that point, so we were doing well collecting the revenue on the pay-per-click. It was my job to go and get the advertisers in those positions. So, sales.
Andrew: I see. How did you get them? Was this affiliate program deals or were you doing deals directly?
Greg: No. This was go directly to the companies and talk to the marketing person or the advertising person and get a budget against it. We had written, not me personally, but our engineers had written code for tracking. We were giving them quantifiable results probably for the first time in their experience of the Internet. They can see a click-through come through on somebody who had searched for a racing game and the person purchased the racing game at PalPost.com, was one of our participants.
Andrew: If I remember right, this was a long time ago, but I don’t think you guys were labeling those as sponsored deals. I don’t think you needed to do that at the time. Am I right?
Greg: At the time, we had the commercial results come up. . . No, we didn’t actually call that out, but it did look different. It was a completely different section in the web page. It was a la Google does now, where they have the sponsored results right at the top and then you get the general results and then more sponsor results potentially below. That’s how we did it.
Greg: We put sponsored in the middle. We had the normal index searches, sponsor, index searches.
Andrew: This sounds like FileZ.com was the main business, but you guys also owned, I’m looking here at a list that includes WebsiteZ.com and SharePaper.com. How important were those sites to your overall business? What was their relationship?
Greg: Yeah. WebsiteZ, it was a really neat search engine. It was the ability to go out and index and this was before Network Solutions put in controls against WhoIs searching. We indexed websites’ owners and we could tell who was purchasing what. You could do a search for Yahoo! on WebsiteZ and find out all the businesses that they are acquiring on the Internet and you could see a list of all the websites and you could possibly see what might be bubbling out.
Andrew: Ah, I see.
Greg: We used it internally. It was open public thing, but we used it internally to see what was potentially happening in the space. It started out as our own tool, we released, people could do it, eventually a few years later, Network Solutions stopped the WhoIs searching and the indexing and all that type of ability.
Andrew: I see. Was Michael at the time just tossing out different ideas and seeing what worked and doubling down on the ideas that worked and killing off, or letting languish, the ideas that weren’t?
Greg: Yeah, pretty much. It was really focused on things. We had FileZ, we launched WebsiteZ, and SharePaper was an acquisition to help us along the software world. Lars Mathiassen helped us with that because he was really in tune with the shareware and the freeware and all that because that’s what SharePaper did. He was in charge of that aspect of it to round out FileZ. Another thing that we were working on, that we were developing, was ShopZ, which was Shopping.com basically, where you do a search, we index actual results, click on those, and go to the website. That never went anywhere because the developer who had been working on it lost interest, I guess.
Andrew: I see. Okay. All right. We found out about where the revenue came from for FileZ.com. Where’d the traffic come from?
Greg: People just found us. Back in those days, the Z append on things gave it an underworld, underground. . .
Andrew: Kind of like Warez, with a Z at the end. . .
Andrew: You’re getting illegal copies of program.
Greg: That’s where it came from. That’s exactly where it came from. Tagging onto the Warez, with the FileZ, that’s how people found us.
Andrew: Okay. It was just type-in traffic? Was there anything else because you guys look like you were very creative at the time. Everything that I’m reading about the way that you built your business shows that you were scrappy. What did you do to get more traffic, to juice the traffic that was coming in already?
Greg: It was one of those things where the Warez sites would index us. They would include us in their search. Excuse me. One second, Andrew.
Andrew: Yeah. Let’s both. . . I’ll take tea and you take water for your drink. Oh, I see, you’re adjusting your computer. One thing that really helps is if you take the window that you’ve got my video in and just move it right underneath your video camera. That way, when you look at me, it’ll seem like you’re looking at the audience right in the eye.
Greg: Right. That’s better. Okay.
Andrew: I got that as a tip from the audience.
Greg: Right. The other thing that we did that was really key to growing the business was we would create the code for the search engines, so you could put the search engine on your site anywhere on the Internet. We allowed people to take that code, put it out there. The plan for that, too, was to expand it to where we would insert sponsored ads on those search boxes as well.
Andrew: I see.
Greg: What we did was we just continued to put the things up that we wanted them to come back to, which was websites and eventually ShopZ and SharePaper and those types of things would roll through there. The search engine box was one of the things that was really big in our growth.
Andrew: Did you have an affiliate program the way other companies did at the time where you paid per search, for example, or for anything?
Greg: No. We didn’t develop an affiliate program at that point.
Andrew: Okay. As I read it, you guys had the search engine, you were constantly mining the search results and you came across something. You made an observation. What did you see?
Greg: I started seeing people searching for Metallica and Madonna and the popular bands at that point. It was then that I looked at it and I wondered, “God, why are people searching for it?” I hadn’t even gone through the whole process for searching for a band because it was videos, it wasn’t even videos, it wasn’t that aspect of it, it was software and JPEGs and those types of things.
I get a search and found the MP3s and I was like, “Wow, that’s pretty interesting.” I downloaded a couple of the MP3s, was amazed at how quick it came down because we had the advantage of being on cable modems at that point. We were ahead of the curve on that. Came down quickly, quality was amazing. Did a little bit of searching, so then I emailed Michael with the MP3s that I downloaded, I said, “Hey, take a listen. What do you think?” He emailed me back and we got on the phone and said, “That’s pretty amazing.” That’s when we started down the process of seeing about acquiring the URL and all that good stuff.
Andrew: Okay. Why acquire the URL? Why not just make it a different section of FileZ.com since you already were getting index and had traffic?
Greg: The vision was to have it be a referral site. We wanted to have people come to MP3, because we knew that people were searching, and when you looked at our search results, there were a lot of people searching for MP3s. We said, “Let’s get the basic root of it, so that when people go to MP3.com, we can refer them to FileZ.” We wanted to make the revenue off of the click-throughs. That’s not exactly how it happened.
Andrew: I see. Okay. You understood, even back then, there was type-in traffic, that people wouldn’t go to a search engine and look for MP3s, they would just type in MP3.com and see what came up. You figured if they were going to do that, let’s have some of those people come over to our site, in fact, all of those people get redirected to FileZ. There’s where our bread and butter is, that’s what we want to pump up.
Andrew: I see. How much did you buy that domain for? Do you remember?
Greg: $1,500 at the time.
Andrew: $1,500 even back then was fairly low for a three-digit domain, right?
Greg: Yeah, it was.
Andrew: How’d you guys make that deal?
Greg: We contacted the person that owned it. It’s a gentleman by the name of Martin Paul. We emailed Martin Paul and we said, “Hey, we want to buy the URL MP3.com.” He said, “What for?” We emailed back and we said, “We want to set up an MP3 site.” He said, “What’s MP3?” Our question back to him was, “If you don’t know what MP3 is, why did you register MP3.com?” He said, “Well, when I registered a domain name a long time ago, InterNick [which was Network Solutions] gave me a handle.” Back in those days, it was your initials and then a number. He was Martin Paul and they appended a three to it, and he thought, “Cool! I’ll register my InterNick handle.” Only two people in the world that would generally know that would be him and InterNick and he registered it.
Andrew: I see.
Greg: He told us himself that his wife thought he was crazy for buying something so silly as MP3.com. That’s how we got it. We explained to him, we said MP3, what it is, it’s music and stuff like that. We want to set up an MP3 site. At this point, we really didn’t have a good strong base in even what MP3 was that much, so it was my task to go find a really good MP3 site that was legitimate, no illegal downloading, no posting of anything against copyright violation, and I found MP3ShoppingMall.
Andrew: What was MP3ShoppingMall?
Greg: It was an informational site basically about MP3 and the different players that were coming out and what an MP3 was exactly and who started it and all that good stuff.
Andrew: What was the shopping mall reference to?
Greg: I have no idea what his idea behind having shopping mall was. I guess the vision eventually was to have it to where you could go and purchase a la iTunes MP3 download type thing. He didn’t have that ability, I guess, to take it in that direction, or desire at that point because it was just unless you could get the content from the major companies, you weren’t going to get very far.
Andrew: Ah, I see. Okay. All right. Why buy that domain when you had an idea of redirecting all your traffic from MP3.com to FileZ?
Greg: We wanted to buy him. We didn’t know that much about it, so we bought him. We actually shut down MP3ShoppingMall and turned him on MP3.com, built out an informational site for us, do exactly what you did on MP3ShoppingMall, but do it for us and we’ll pay you X number of dollars per month to do that for us.
Andrew: Ah, I see. Okay. Then you said that things didn’t go exactly the way you envisioned. What happened? How’d you discover the new route?
Greg: When we launched MP3.com, we just turned the URL live and we had 18,000 visitors or so the first day. We were amazed at the traffic. We thought yeah, we’d get some traffic, but we thought we’d have to do a lot more work to get there. It was just simply because we weren’t indexed in any search engines, they were just typing in MP3.com in the URL box.
Andrew: Ah, I see. Okay, so they were typing in MP3.com, you got thousands of hits right away. I also heard that you got an ad sponsor pretty quickly.
Greg: Yeah. A company called Zing Technology called within 24 hours and said, “Hey, tell me more about MP3.com. What do you have going? We’re a company that makes codecs and players for MP3 and we’d love to advertise.” I had an advertising agreement, of course, right then. I sold him a $5,000 deal on the first day. That paid for the URL and they continued to be a sponsor for a long time to come.
Andrew: You bought the domain, soon afterwards, it was already profitable. It was an incredible business and incredibly fast. You know what I’m wondering as I hear you say this? Most people don’t know the numbers going back over 10 years. How do you remember 18,000 unique hits, I think you said, $5,000 ad deal, $1,500 which you paid for MP3.com?
Greg: Partially, it was such an exciting moment and different things. Things are changing. You realize it later on a lot of times, that things are in retrospect. Plus I told the story enough over the years, people ask the question, “Tell me about how you got started there.” That type of thing. The numbers are there pretty readily.
Andrew: Ah, I see. Okay. I’ll never forget my first big check. It came from Sony, it was for $7,500. It was like you were buying a few months at once. It seemed like all the money in the world to me. I couldn’t believe it. I showed off that check so much before I deposited it.
Greg: That’s great.
Andrew: Okay. You had this growth here. How did you nurture it? How did you grow it?
Greg: We kept listening to the customer base and that was the thing. In changing a dynamic or looking at what you’re going to do different, you look at the industry. In this case, it was the record industry when we started to focus on this. What’s broken about the music business for both consumers and artists? Then try to offer things that we believe intially are going to be in response to both of those needs. How do we connect musicians directly with their customers and how do we connect customers directly with good-quality music that they want to enjoy? In response to both of those, we would do things and we would create things for them, but we would listen to feedback all the time, too.
Andrew: How did you get feedback back then? Today, we have so many mechanisms for hearing from our audience, but back then, there was no Google Analytics, there was barely any analytics in the first place, people weren’t used to giving feedback, people weren’t used to having a voice. How did you get them to give you the feedback and how’d you listen to it?
Greg: We would put up things that say, “Give us suggestions.” Put up comment boxes. It was old-fashioned email sort through. We would go through email and look and see what people were talking about, what they were looking for. We would take those ideas, put them into a hopper, and decide which ones we thought would actually further the experience for both artists and consumers. The great thing about the Internet is that you can do anything on the fly. You don’t have to wait. You can just launch it, obviously not violating any rules or whatever, someone else’s copyright, but launch things out there, test them out. If they fall flat, take them off. If they do well, figure out how to do more of that.
Andrew: You’ve said a few times here, “Don’t do anything illegal. Don’t do anything wrong.” But, now that it’s been over 10 years, way, way in the past, and we talked about how you started by getting indexed by the Warez sites, can we talk a little bit about maybe how piracy helped and maybe in the early days you didn’t discourage it or encouraged it even?
Greg: We never encouraged it. It was one of those things where when we would make comments, and Michael was out there quite a bit talking about it and bringing out different ideas, it wasn’t with the intent to further something that people are doing that’s wrong. It was with the intent to say, “Look, it’s broken. Let’s figure out a new way of doing this because this is what they’re asking for.”
With that in mind, Michael and I went to New York and we met with five of the major labels and we went around and talked to them about MP3, said, “This train’s coming down the tracks. You’re standing on the tracks. We’d love to have you guys with us. Let’s figure out how we do this and go forward.” It was all very much closed doors, thank you for coming but go away. We’re never doing MP3, ever. The quality’s not good enough and consumers don’t want it. We knew otherwise.
Andrew: What kind of deal did you want to have with the music industry?
Greg: It was basically, we proposed to them, if they changed a dollar per MP3 for people to download, they would make infinitely more money than they’re making now on the current model, with the hits model and trying to figure out. . . Having 85% of artists come in and fail. 15% are winners and they make the money and artists are all kicked to the side of the road. It was early American Idol type thing. Let the public decide. Let’s put up all these MP3s and let them pick the winners for you instead of having an A&R guy that you’ve been paying all this money for all these years to bring you a 15% success rate. Let’s let the Internet do what it does best.
Andrew: I see. This is basically what Steve Jobs ended up doing. You guys were offering it to them back then. Why? Why offer it to them when you already had a model where you could’ve just stuck any advertising in the search results? Why did you want to go and figure out the music industry and try to convince them to do things differently knowing how tough they are to get to modernize?
Greg: The consumers were asking for that. The consumers wanted Madonna and Metallica and Michael Jackson.
Andrew: Couldn’t they find it in a search engine at the time anyway because people were listing it and you guys were a search engine?
Greg: In some cases, sure they could, but it was usually short lived. It was RAAA playing a game called Whack-a-Mole. You’d have it pop up over here and they’d hit that one and then somebody else would launch a new Warez site over here and they would have MP3s. It was a constant struggle and battle. What would come up one day wouldn’t come up the next day. It was even within hours sometimes, things would come and go. We knew that people wanted it.
Andrew: It’s funny. I was just living in South America for about a year and life is kind of like that right now. They don’t have access to Hulu. They don’t have access to Netflix. When they want to watch a movie online, they need to go to a search engine very similar to MP3.com, what you guys were, or FileZ, and they search for movies and then some of those movies work, some of those movies don’t work because they were removed. It’s just a game of Whack-a-Mole and a game of people who are dying to consume the moles. I don’t know what to extend that analogy.
Andrew: It’s funny that that still exists today. Man, what a terrible way to treat your customers.
Greg: It is. It is. Just to differentiate a little bit, MP3 never did a search engine and indexed any illegal MP3s on MP3.com ever. FileZ had the things, but it was one of those things where we weren’t indexing them on purpose, they were part of the crawl. When we would send out our bots to go look at the FTP servers, there were MP3s on those servers that people were maintaining illegaly.
Andrew: I see. What was MP3 if it wasn’t that search engine at all? I assumed that there was some kind of search on there, but if it wasn’t that, what was on there?
Greg: The initial thing was information about MP3s, then it morphed into connecting artists, allowing them to upload their own MP3s that they create in the studio or at home or however they want to create their MP3s, take it from their own CDs, rip them, upload them. We gave them artists pages a la Facebook, a la Myspace, or whatever. They would upload their information about the band, where they’re gigging, their music and those types of things and the consumers would come and download to discover new music. That’s what MP3 was and that’s what MP3 was morphing into towards the end even. It had become that exclusively until the lawsuits and those things. It changed a little bit.
Andrew: Why’d you decide to raise money? You said that they called you and you took the call. What was it about the funding that you needed?
Greg: It was the fact of having the connections and having the people who might be able to enable us to go connect with the labels and add some things behind it. We knew that given what we had experience before, that probably wasn’t it. It was mostly, at that point in time, the connection to be able to have the money that we needed to grow the business the way we wanted to. Plus, the intention where things were at that point and to try to get out quickly on an IPO to raise the additional funds so that we could compete with multibillion dollar businesses in the music business.
Andrew: What was the vision at the time for the business?
Greg: It was to connect artists with consumers. Instead of having Madonna go and cut an album, which that’s giant at that point in time, and then sell CDs, Madonna could come directly to the customer and give them what they’re looking for, even if it’s just in pieces. Maybe the CD model still existing, but she could give it individual thing.
We met Billy Idol in the early days. He was the first rock star that came walking into the office. I think there were eight of us in the company at the time. He was not happy with his record deal at that point in time. He was explaining and talking from an artist’s perspective who had tremendous success how bad it was in the business and how much he would love to connect directly with his consumers. That was the vision. It was not only connecting the individual artists who were up and coming, the independents, but it’s also getting directly to the majors that are out there and giving them the ability to connect as well.
Andrew: I see. As a small, bootstrap company, that would be tough. You wouldn’t have the reach, you wouldn’t have the credibility, you wouldn’t have the money to make the deals.
Greg: Right. That’s a big part of it. Also it was the ability to build all the infrastructure behind it. It takes a lot to build the different pages and to give them the ability to do what they want to do. And scale. You need cash to scale a lot of times.
Andrew: We talked a little bit about control earlier, you say that once you take on funding, the business changes a little. Can you continue talking about that?
Greg: Yeah. It can. We were in an advantageous position. We went in, we offered a certain number for a certain percentage of equity. They were a minority equity holder, so they couldn’t steer the ship. Michael maintained the lion’s share. I had some and other people had some as well that we held back. It gave us, still, the flexibility to do what we wanted to do without having this control factor. We didn’t experience it as much, but I heard and I talked to other people who went and raised funding early and I know that to be the case, different levels whether it’s Angel or VC or whatever it is, that you give up a certain amount of control. If you go early, you’re going to give up more control potentially.
Andrew: Okay. Is that the point where Robin Richards, who I interviewed here on Mixergy, came in? Or was he there before?
Greg: Yeah, he came in right after funding. MP3 had launched about a year and four or five months before that, so we were running MP3 and growing the business and doing everything necessary. Then we got the funding and then we brought in Robin.
Andrew: I see. The company was already incorporated? It was already a business, you already had shares before he came in?
Greg: Yeah. That was all part of the process. This all happened at the same time.
Andrew: Ah, I see. Before you took on funding, you guys weren’t really a corporation? It was a partnership?
Greg: We were set up as a. . . I’m trying to remember. See, I don’t remember that detail exactly. I’m trying to think. We had set it up. . . No, I think we were just basically an informal partnership at that point in time and then we went to the incorporation process and everything all at the same time.
Andrew: I think that’s what Robin told me. What’s shocking about that is you go into business with Michael, the guy who’s giving you shares in the business, you don’t have anything formal in place, there isn’t a company, there isn’t a stock options program. Why’d you take that risk?
Greg: It was something that you could feel. It’s one of the things I think you listen to people talk about what they invest in and they invest in people. In this case, I was investing in a person and ideas. We had a real good synergy. His ideas and my ideas worked really well together and so it was that. It was taking a risk on that. I knew I could spend some time and effort and a lot of time and a lot of effort and have it go nowhere, but I just didn’t ever look at it that way. That’s not what it was. It was we’re going to go and we’re going to change something that needs to be changed and we’re going to do it no matter what.
Andrew: I see.
Greg: So, people.
Andrew: Okay. What was the ownership breakdown between the two of you?
Greg: I don’t want to go into the specifics as far as what it was.
Greg: Michael had the lion’s share, I had a very minority portion. I was one of the very fortunate ones. That’s one of the things relative to the next thing I do if I go and do a complete startup from the beginning as opposed to working with companies from the outside is to make sure, as much as I can, that people within the company are taken care of. At MP3, we grew really fast, we recruited really fast. We were hiring 18 people a week at a peak point. It was all based on some salary, but what are the shares going to be here, some stock option grants, let’s build this company with that. Inevitably, that didn’t pan out. The people who helped the company really succeed, didn’t share in everything that they should have. That’s something, next thing I do for sure.
Andrew: I see that a lot. Okay. Now there are new people brought in, new money brought in, how’d the company change?
Greg: It was such a dynamic environment. It was interesting to watch the people come in and understand what was going on, whether they were engineers, accounting, marketing, or sales, or legal, or whatever. They have this same common goal. It was a passion that the music business was broken for consumers and artists and we need to make a difference. Everybody did their part to help make a difference. It changed, obviously, bringing in that many people, but worked really hard to maintain that connection between the vision and the goal and the people you’re bringing in really quickly.
Andrew: I know when you bring in even three more people to a company that’s small, it starts to feel a little more structured, it starts to feel a little more formal. You bring in even more people, it feels even more formal, more structured. You bring in money and professionals and in, man, people start to worry it’s going to be too ordinary, too corporate-y, or the culture will change completely. How did the culture change after you guys raised money and had new management?
Greg: It changed to a certain extent and I know what you mean, relative to structure, there were more meetings and more order and reports and things like that that you had to process and go through, but it didn’t feel like a negative impact on things. We worked, again, really hard to do things with the employees. Michael would hold a chairman’s chat every week and explain where the company was at that point, continue to press the vision, and then the department heads would continue to press the vision and the ideas, what we’re going forward. It was that connection to what was going on that maintained this “we’re going to change the world” environment that everybody shared. Even though it was in more structure, it was that vision of changing things.
Andrew: Okay. Then, I think you guys went with the. . . At some point, you guys had the locker, right? Where if I owned a CD, and this made a lot of sense, I owned a CD, I could just pop it in, I could prove to MP3.com that I had the CD. I didn’t have to rip the CD, I didn’t have to upload the CD, you guys already had it in your system for me, you knew that I owned it, you let me listen to it wherever I was. The music industry had a big problem with that. How did the company inside change in response to their reaction?
Greg: At first, it was one of those things where, just leading up to that point, everybody was working extremely hard to get everything set up in the database. We would have parties at night and people would sit there entering in the information from CDs to round out the database. This was everybody, all hands on deck. All sales, all marketing, all accounting, would sit there at night until early in the morning putting in these CDs. Leading up to it, we were all on board with this is what we’re going to do, feeling right in the fact like you just described it, we would require that you put your CD in your computer, we would verify it as digial “DNA,” and allow you to have it.
At first, and for a while after we launched it, people were using it and those types of things. Then the lawsuit started. It was one of those things where it starts out small then the majors come on board and it’s just this tumble effect. It was difficult to process all of what was going on when you’re taking a hit every day in the press, but it also created this dynamic of get out there, we’re going to take some arrows, and we need to be strong enough to withstand those arrows. The business is still broken for consumers and artists. We have to do this. We have to. Yeah, we’re going to take some arrows and it’s crummy, but we know we’re doing the right thing. It became a challenge to continue to explain to people what it is that we were doing and why we were doing it and why we weren’t breaking the laws as we understood at that point in time.
Andrew: Right. You guys, from what I remember, lost that lawsuit.
Greg: There were settlements on four of the five major lawsuits and one of them we lost. I think it was one of those things where they didn’t want to just give us a free pass on saying you settled, that’s it. We had to “lose one” to set a precedent the way they did it.
Andrew: Sitting on the outside, man, I don’t care so much even if my favorite team, I love the New York Yankees, I don’t care even if they lose a baseball team because it doesn’t impact my life that much, but man, when a lawsuit like that happens, when there’s even a lawsuit like that filed let alone when you guys lose, we on the outside, we were feeling it along with you guys.
Greg: I appreciate that. It was painful, there’s no doubt. It was a very difficult time. Since I was in charge of sales and generating revenue, it became much more difficult to get ahold of a Coca-Cola and have them agree to sponsor when you’re in the middle of this controversial lawsuit and what’s going on with everything relative to it. They’re on the outside looking at it from a business perspective, “Do we want to associate with this potentially negative thing?” It became more of a challenge.
Andrew: Hey, before we go on with the story, you were a salesman, you sold to big companies. Do you have any techniques you can teach us about that?
Greg: Relative to what I used to teach my team and going in and doing things, it’s nothing new that anybody that’s read anything on sales or understood anything on sales, but it’s very cognizant of listening to what the customer’s looking for. You go in with some ideas about what you think they might want, but if they tell you they want something different, be open to how you can deliver that something different. That was one of the main things was to listen. Because we were changing things and doing things on the fly, coming up with skyscrapers and banners and the different things that were so new to the business at that point, there was no limit to what we could potentially do. That was really helpful. From a sales perspective, that was really great. It’s mainly listen and respond to what the customer’s really asking for, not what you think they’re asking for.
Andrew: I used to hire salespeople, I think I learned this technique from a college teacher of all places, said, “Ask your potential salesman to sell you a pencil or sell you a pen back and see how he even sells that little thing.” The people who will ask you, “Do you even need a pencil? What do you write with right now?” are the ones who are the salespeople you want to hire. The ones who just start telling you about how great the pencil is or how terrific it is to buy from them are the ones who just don’t get the process. I understand listening.
What I wonder is, especially at a time like that when anything is possible, how do you keep a guy from coming back, demanding, or asking, a salesman from coming back to you and saying, “We want to take over the whole homepage. We want to create something that you guys. . .” that’s just going to distract from your business?
Greg: That did happen. That definitely did happen because potential sponsors and advertisers looked at it and they always want the best and the biggest and the brightest and those types of things. It’s being able to communicate back with them that in order for us to continue to function and do the business, you can’t take over everything, you can’t lose the message of what we do in the process. That doesn’t serve you because if traffic stops, that doesn’t really help you.
Andrew: Did you ever go too far? I know I did with pop-unders. Did you ever go too far?
Greg: I didn’t really feel like we went too far as far as could we have done a better job of delivering greater value in some situations? I think so. As far as the consumer, if you’re talking about the consumer response, did we go too far and make our consumers angry or artists angry? Not that we really felt really strongly about or that people expressed really strongly to us. Putting banners at the bottom or doing different things relative to placement and rotation and those types of things, we worked really hard to do a good job. Sometimes it didn’t go as well as we had wanted or expected for both of us.
Andrew: Do you have an example?
Greg: Yeah. Putting, I guess, banners toward the bottom of the page and having it run. Where it’s explained that this is the placement of it to the purchaser and it’s at a reduced cost per thousand thing, but it doesn’t really pencil relative to what they purchased on the top side of things. They didn’t do as well in those positions. In some cases, they did. In some cases, they didn’t. Sometimes it was creative, sometimes it was just whatever the general product was. Sometimes it was a placement. It was also an evolution in looking at what, again, we’re listening to customers, artists, and advertisers. Keep adding these things to the equation. What can we do to improve your experience and deliver on what you expect?
Andrew: Okay. In the end, you guys sold the business. Were you with the company when MP3 sold?
Andrew: Okay. What happened afterwards?
Greg: With MP3?
Greg: The one company that we symbolically lost to, I call it symbolically lost to, purchased MP3.com, Universal Music. Vivendi Universal came in and purchased us. I don’t know what their general intentions were at the outset, but a while later, they ended up selling the URL to CNET and CNET then launched it. There’s an MP3.com today on CNET which is independent-artist centric where you upload your music, do the same types of things. I’m just not sure they have any traction with iTunes and everything else out there that’s available.
Andrew: Right. How did you life change after the sale?
Greg: My wife and I took some time. Actually, she stayed at work for a year. I convinced her to take some time off and we did some traveling. Ever since I was a little kid and sold my first thing, I had the vision of someday wanted to travel and do things. I used to tell my parents, “I want to be able to eat steak every day while I still have teeth.”
Andrew: Did you get to do that?
Greg: We took some time to go do these things.
Andrew: What was it like? How long did you go and where did you go?
Greg: We went to Europe. I hadn’t been to Europe since the ’80s. I hadn’t traveled that much in my life at all, so we went to Europe. We went to Italy and spent six weeks over there. We’d been to Germany and Spain and we’d done a lot of the United States as well. Montana, Wyoming, Washington, everything in the west just about. We spent some weeks in New York State, all over the state, and up into Canada. Just a lot of traveling and spending time together and just having fun.
Andrew: Okay. How long did you go before you launched your. . . I guess it looks like AutoSpies launched the year that you left MP3.com?
Greg: Right, exactly. Don and I started AutoSpies. It was his original idea about what it might be. My wife was still working at this point in time so it was like, “Yeah, let’s do this thing. Let’s get it going.” That’s what I did right afterwards was jump right back into that.
Andrew: Don is Donald Buffamanti, who I think you met on MP3.com?
Greg: Yes, I did.
Greg: He worked for me at MP3. He was a senior business development guy. He’s an old Apple guy. He was the President’s advisor in Canada and he was connected to a lot of Canadian [??], early days of Apple back in the ’80s.
Andrew: What was the vision for AutoSpies?
Greg: AutoSpies, the general vision is to deliver inside information on vehicles allowing people to find out. . . The original vision was to allow people to find out, for example, if BMW was looking to move units, that there was what they call money in the truck on these units. You go to your salesperson, you find out from us that there’s $3,000 held back dealer incentive and you go to the salesperson or you go to the sales manager and you know that there’s sales incentive and you purchase it for part of that share. Say, “We know that this is your bottom line, but we also know that you have $3,000 in the trunk, so why don’t you keep $1,500, give me another $1,500 off the purchase price and I’ll buy the vehicle from you?” It’s inside information on what was going on. Don’s really good at seeking out and making those relationships to be able to find out that information.
Andrew: Okay. His job, I guess, was to get that information. Yours, I’m assuming, was to sell?
Greg: Exactly. Sales and looking at the consumer experience and the vision of what is AutoSpies? How do we get the delivery to the consumer? Then with the idea of, okay, there’s advertising around it, there’s advertising at top, there’s advertising contextually, different things like that. Then obviously going to the different potential sponsors and pitching the deal. Different from the perspective of AutoSpies started out as the idea of like a Consumer Reports where auto manufacturers weren’t part of the equation, because we wanted to have the unbiased opinion and be able to say whatever we wanted to say about anyone. It eventually changed later on to something a little different.
Andrew: AndrewSG in the audience is asking me to ask you how you got contact information for the bigger advertisers. It’s a good question. How did you know who to contact?
Greg: Yeah. It’s never been that difficult for me having come out of the brokerage business to find the right person within the corporation that you needed to get to. It’s, I guess, in fancy terms social engineering. You talk to somebody on the phone, you call them up, you talk to them, you find out who is the person and it’s easy to find out who the person is you need to talk to from somebody not in that department. You say, gosh, I’m talking to somebody in a completely different area and I say, “Hey, who runs marketing over in the group because I was trying to get them, I somehow go to you. Sorry. Who is that?” Then you find out who that person is. Then you start to work with the assistants if you have to go through the magic gatekeepers. You have to work your way into it based on what it is that you’re talking about, that you can fill a need that you think they have.
Andrew: Ah, interesting. I see. I used to do that as a headhunter. I worked as a researcher for a headhunter in college and if I wanted to find out who was working at the bon [SP] department of the New York office, I’d call the San Francisco office and chat with them and ask them who was in the New York office and they were much more willing to talk about it.
Greg: Exactly. That’s it because they’re not within that circle that they have to bear the brunt of, “Why did you give that person my name?” [laughs] You know the technique and that’s what I do. LinkedIn is an amazing resource today as far as being able to searches. . .
Andrew: How do you use LinkedIn today to find out who the right person is and to connect with them?
Greg: I start with the tops. I go and try to find out at the company who’s the market director, who’s the advertising director, who are those types of things. You go click on the company name and you find out who the employees are. If you have to work in the back door by finding someone who’s an associate in a different group or in a different area, you call that person up. You find a connection in the company. If you can find the main guy or main person, main woman that’s handling that situation, that’s who you want to talk to. You start there. If you can’t find it, you work your way through the system. LinkedIn has a tremendous amount of information. [laughs]
Andrew: AutoSpies now essentially has a blog format from what I’ve seen.
Andrew: It works on the same format as Jalopnik and other car blogs, but its traffic is lower than those blogs. Why is that?
Greg: I don’t know why AutoSpies hasn’t gotten the same traction relative to those things. It’s higher in other terms than other websites and Don knows the specifics on which ones it ranks higher than and those types of things. Also, what’s interesting is you’ll look at one source of information on traffic and it’ll come up with one thing, you look at another source of traffic information, it’ll come up with another thing as well.
Andrew: I think on any data site. . . It looks like we might have lost your video. Oh, there we go. It looks like on any data site. . . I need to have a cough button here. If I’m going to clear my throat, I can hit that.
Andrew: Can you hear me? We might have lost him. If we did, I’ll call back in a moment. Let’s see if we did. Hey, Greg, can you hear the audio come in on your side? No. It looks like we lost you. All right. We lost the connection. I’ll edit this all back together. The question that we lost the connection on was I was wondering how much of an impact did it have that those other car sites had a network of other blogs behind them?
Greg: Yeah, I’m sure that that’s definitely one of the things that affected what was going on. Don’s way more in tune. Relative to AutoSpies at this point, I’m not involved in the day-to-day operations so I can partially guess, partially know.
Greg: I’d rather him just explain it rather than me say, “Hey, this is what. . .”
Andrew: Okay. Fair point. What’s your connection to AutoSpies now?
Greg: . . .if a potential deal comes through that looks like it might be acquisition or something like that, then I help him go through that process at this point. It’s not a daily, hands on. . . He’s traveling and he’s running it and he’s gathering the information. He’s doing those types of things.
Andrew: What’s your role at the company now, day-to-day? We lost the connection for a moment as you said that.
Greg: Oh, sorry. I’m not involved on a day-to-day basis. Don’s brought me in a couple of times recently before the whole credit things happened on some potential acquisition or investment in the company, so I was helping him vet those deals and look at what was going on.
Andrew: Okay. The other two companies that I mentioned at the beginning of this interview are Animusic and Art of Photography Show. Actually, why don’t we talk about Animusic first since you launched that first and then talk about Art of Photography Show? What’s Animusic.
Greg: Okay. Animusic isn’t something I launched, it’s something I got involved in because I saw something cool. I was looking at different things on the Internet and had spotted this Animusic thing. I called Wayne, who’s the creator and founder of Animusic, he’s been doing it for a long time, asked him about business development, what he was doing to grow the business, those types of things. We hit it off. I like Wayne a lot, he’s a nice guy. Started working with him to help him on business development side of things but not for anything specific initially. It was one of those things where I just wanted to do it because I like the product.
Andrew: They do computer animation of music. I think if anyone goes over to Animusic.com, they’ll see a great video that explains what it does.
Greg: Exactly. It’s a DVD product at this point. We’re up on iTunes as well, so it’s available for download, but it’s DVD product. There’s been two produced at this point, number three’s in process. Distribution deal, we’re in the major stores and all that good stuff as well.
Andrew: I see.
Greg: It’s really cool, really amazing. The interesting thing about it is that the music and the MIDI inputs actually control the animation. Wayne has developed this over a long period of time and having that control mechanism in place is what allows Animusic to do what Animusic is.
Andrew: I see. Okay. If I’m watching a guide, there’s a little digital character on the screen who’s drumming, nobody animated that, the music animated that? As soon as the drumming came in for each beat, the character was made to bang the drum.
Greg: Exactly. Through a complex series of, I guess, algorithms, it calculates exactly what’s going to happen, when. The underlying processs of that impact happening is very much done by the computer calculation. The overlying, the way it makes it look beautiful and everything else like that, that’s all hands-on very labor-intensive work to make it look the way that it does. That object isn’t created and then animated, it’s all rendered in the process of the creation of Animusic.
Andrew: Is Art of Photography Show where you spend most of your time now?
Greg: Yeah. I spend a fair amount of time on Art of Photography Show, definitely. Animusic because it’s between products. It’s keeping the legs and Animusic one and two is part of the process, but because we’re between it and Animusic three is still in process, so once that comes out I’ll be more actively involved in Animusic again.
Art of Photography Show is something I’m focused on here in San Diego. I got connected with Steven Churchill, who created this six years ago, a couple of years ago because he’s a pioneer in the digital space. He created a series called Mind’s Eye back in the ’80s, ’90s that did very well and that’s how he found me, was through Animusic. We connected here since we’re both here locally in San Diego. Again, business development, sponsorships, advertising, business growth, planning, strategic ideas for how we grow this business going forward.
Andrew: Okay. What’s your role with that company day-to-day?
Greg: I’m the president of the company so my day-to-day is to work through the whole process of, like I said, advertising, sponsorships, going out directly. We’re a small company. Seven people work in the company. We all office at home, basically, so we’re virtual. We have a facility set up that’s at Steven’s home that’s set up to run everything as far as the show itself. It’s strategy, it’s how we grow the business going forward on everything. That’s my day-to-day.
Andrew: Okay. There they are coming to talk to me about the bad Internet connection here. I’ll be done with this interview in a moment and I’ll come out and talk. Thanks. Somebody in the audience said, “Hey, you had better Internet connection when you were in South America. Go back to a third-world country.”
Greg: [laughs] That’s funny. Where were you in South America?
Andrew: I was in Buenos Aires for about a year and did the interviews from there. Even in the early days of being in Buenos Aires, it took a while to make sure that the Internet connection was solid.
Andrew: I’ll have to talk to them and tell them what we need. All right. Thanks for doing this interview. How can people connect with you?
Greg: My pleasure. They can connect with me via email if they want to. It’s Greg@GregFlores.com. GregFlores.com is just a basic placeholder site. I don’t have anything up there. Yeah, that’s fine. They can email me. I’m on LinkedIn as well. Tell me why you want to connect and I can be open to that as well.
Andrew: All right. That’s great. Thanks for reaching out to me. I keep hearing more and more entrepreneurs reach out to me after they’ve heard my interviews. Somebody right now is listening to this interview and saying, “Hey. I’ve got more to add to this story. I think I should be profiled on Mixergy.” If you built an incredible company, come back to me and let’s schedule an interview. I want to find out about you and hope you can spend time with us the way Greg did today. Greg, thanks. Great story.
Greg: You’re welcome. I enjoyed it.
Andrew: Thanks. I hope to meet you in person when I’m over on the west coast.
Greg: Yeah, that’d be great. That’d be great, Andrew. Thanks a lot.
Andrew: Thank you. Thank you all for watching and listening. Bye.