How 99designs Built A $5+ Million Marketplace In 16 Months. – With Matt Mickiewicz

Posted on Jun 3, 2009 - 7:00 AM PST

This is a story of an overnight success that was a few years in the making. 16 months ago, 99designs launched and quickly became a marketplace that facilitated $5 million in design work.

What you’ll see in this interview are the steps the founders took to take it from an idea they discovered in an online forum to a profitable, standalone business. You’ll also see how they demanded that their business prove itself and earn money at every step.

99designs was co-founded by Matt Mickiewicz, who came to Mixergy to teach what he learned over the past 16 months as he built this business.

The FULL program


Video excerpts

About Matt Mickiewicz

Matt Mickiewicz

Matt Mickiewicz is the co-founder of 99designs, which connects clients needing design work such as logo designs, business cards or web sites to a thriving community of 36,749 talented designers. He is also the co-founder of SitePoint, online media company and information provider targeting the Web professional market, specifically Web Developers and Designers.

Excerpts: How 99designs was built

Andrew: Where did the idea for 99designs come from?

Matt: In the SitePoint forums.

So, SitePoint is an online media site for designers and developers and what was happening in the forums was that designers were playing “Photoshop tennis,” essentially holding a competition amongst themselves to see who could do the best design work.  So, on a Friday evening, someone would come up with a fictional project and over the weekend, 20 or 30 designers would compete to create the best design work and on Monday morning, they would vote and annoint one of them as the top designer, if you will.

So, eventually what happens is, some smart bloke came alone and said, “Rather than work on this fictional project, why don’t you build a new logo for my blog and I’ll give $100 to my favorite logo on Monday.”

How did you know this idea would be a hit?

We took it step by step.

First of all, we spun off the design contest as its own separate section of the site from forums, and saw it take off and grow organically in the number of projects posted. Then we decided, “well, if there’s a business in this model, then people should be willing to pay for it,”

So we started charging people $20 flat fee to post a project in our forums. It was very messy, it wasn’t a great interface, it was just vbulletin and that’s it. But people were willing to pay the $20 to post a project because they were seeing value out of it, and the designers continued to participate.

So we took it a step further and created a “contests” tab on SitePoint and built some very, very basic software around the design contests idea, something that was hacked together in a few months time by one or two guys basically. We increased the fee as well, to I think $29, and, because it got more visibility on SitePoint and we have a large amount of traffic on this site, about 3 million unique visitors per month, it continued to gain traction.

We didn’t get any push-back on the price increases, and it continued to grow and grow and grow.

Why did you spin it out into its own site?

Sometime in 2007, it struck us that for this business to really prosper, it needed its own separate brand. SitePoint was known as a resource for developers and designers. It didn’t make a lot of sense to a small business owner, say someone who owns a wine bar or a coffee company or a lawyer or real-estate broker on to come to SitePoint and run a design contest for their logo or their web page design or t-shirt, because the first thing they saw when coming to our homepage was our articles at at tech professionals. It took a leap for them to think that they should click on the “contest” tab and then go post a project to our community.

That’s when we decided that because there was this incongruity with the audience that we were targeting it would make a lot more sense to have a separate brand name. We chose the name “99designs” and launched in February of 2008.

Why did you start charging your users?

If there is a business for it, a certain percentage of the people have to be willing to pay, otherwise it doesn’t justify further investment in time and resources.

At the end of the day, any real business has to make money and by asking people to pay for something, even if it’s really crappy like a forum thread or some hacked together software, it proves that there is a market demand for it.  Because I think this is something that Eric Riese talks about a lot in his startup talks as well. That’s throwing something against the wall — even if it’s very early beta or alpha stage — and seeing if the early adopters are willing to open their wallets, take out their credit cards and make a purchase.

It proves that there is a business model.

Does your community ever feel betrayed because they created something and you jumped in to add a tollbooth?

Actually, it was their idea for the most part.  The designers wanted to prove that the business owners were serious about paying out a winning designer at the end of the process.  One of the early issues that we had in the community when it was was completely free, was simply project abandonment.  Someone would come to the site, they would post their project plus a prize amount, and then at the end of a week or ten days they wouldn’t pick a winner. That was really frustrating to the designers who participated, invested time and effort into it and then saw that nobody got awarded the prize money.

Why do you focus on designs? I’d love to use 99designs to hire developers and writers.

I think it’s really important to become known for one thing, and one thing only. And do that very, very well.

We really want to become known as the place to go to for graphic design and nothing else.  It keeps our community focused, our employees focused, and it keeps us in touch with our market segment.  If we tried to do many different things all at the same time, we’d have to address the needs of different groups,  market to different communities and deal with service providers in different categories. It becomes really, really complex, especially  when you are a small business with limited staff limited resources and trying to prioritize and execute on growing.

How do you know what to add to your business?

User feedback through UserVoice helps drive a lot of the changes and developments to the site

We also have our developers and the user-interface designers participate in the customer service process.  So, they’re in there one day a week usually, answering tickets, seeing the issues first hand, and then being motivated to resolve those issues for the next release of the software.

Full program includes

• How Matt kept his costs so low that the site was profitable on day one. And how you could use the same techniques.
• A view of how Matt deals with the controversy surrounding his disruptive marketplace. It could help you if your business shakes up a market.
• The inspiring entrepreneurial story behind 99designs, a company many of Mixergy’s past speakers and readers raved about.

Suggested comments

• Have you used 99designs? What’s your experience?
• I’m trying to expand the text excerpts here. Is it helpful to you?
• What points did I miss in either the excerpts or the full interview?
• What did you learn from this interview?
• I paid Mechanical Turk twelve bucks to transcribe this interview and it came out full of errors. Do you think I should post it any way?

Updates:

  1. If you want to a timeline of how this concept grew, check out Matt’s comment below.
  2. Thanks to Patrick’s comment below, I posted the full, raw transcript (but it’s full of typos).
  3. Catone on Hacker News and Dean Collins in the comments below, point out that, while 99designs was a separate company for 16 months, the first contests happened on SitePoint forums around 2002. I changed the first section of this post to clarify that. Thanks Catone & Dean!
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  • http://www.businesstribes.com/ Joseph Joel Sherman

    Thank you. I appreciate seeing the business grew by charging a small fee for each contest. It does not seem like rocket science, but he did it well and had a good team. I looked at the 99design website, it seems very simple to use.

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  • http://www.jermainelovepoems.com/ Love Poems & Love Quotes

    That's a nice overview on the video Andrew. This only proves that providing a service for designers pays off big time, especially if in its in demand. The designing business is BIG!

    Regards,
    Jermaine

  • angrydesigner

    I don't know why no one realizes how harmful this is to the graphic design community. We designers have gone to school to learn how to be the best that we can be and learn all the skills needed to design great work. Graphic design has been reduced in the public eye to be no more than simple use of photoshop filters and bad line drawings. If I remember correctly one of the founders of this 99designs was an architect. How would he like to start a company that rips off architects? He should know how much work goes into designs! Graphic designers come on to this site, put in hard work and LOTS of time and only one person gets paid in the end. How is that right?

    In an above comment someone said: “I really like the fact that the customer get to see multiple designs and choose the one he/she like instead of hiring ONE designer and pray that it would work out. That's what I call the future!”

    NO! We cannot let that future happen! Dont you see how unfair that is? You are essentially hiring each of those graphic designers (because they are creating work for you and putting in hours for your company) but only ONE of them gets paid!!! Any designer who participates in 99designs: you are only hurting the design community and yourself! Do not create precious designs you don't get paid for! It is unethical! And for companies and businesses participating: you are only fueling this new future of design, which yes, is cheaper, but is also highly unfair to the designers! Think about what you are doing! It is illegal! You are hiring multiple people but only paying ONE!

  • http://ChuckBrown.com/ Chuck

    Probably the best interview I've seen here yet! I'm sending the link to a friend now…

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  • willbo

    Great interview. Matt is obviously a very smart guy – I love the approach of going straight for the revenue. Introducing paid services AFTER your user base is established and has been using a free product for years is waaay harder than charging from the very beginning. Good on you Matt :)

  • willbo

    Does this also mean that RentACoder, eLance et al are all breaking the law too? If so, why haven't they been shut down yet?

  • http://www.shopfordesigns.com/ Steven Lee

    Would like to tell you that i

    have profile on another website. shopfordesigns.com

    There I have a nice profile with many wins. You can

    consider that site.

    ShopForDesigns does NOT charge any listing fees and

    has lots of talented designers too. You can get good

    designs at half the cost you are spending here.

    shopfordesigns.com has the same operational model as

    this.

    Since the site is new it has less number of projects

    so all designers will concentrate on your project.
    So you can try it…

  • jonchui

    Does this also mean that companies like AdHack (http://www.adhack.com) are also illegal? Basically, they do the same thing 99designs does, but connects ad creators with ad buyers. Cause honestly, when I first heard their idea I was quite excited and thought “what a great idea!” – I also met the founder, James Sherret, who has a track record of great startups. I don't think he would have done this if he had known it was illegal. Then again, the company is based in Canada… interesting.

  • marhamat

    I love it when the market speaks and people who are already doing what they love listen to the market. With the internet these stories are occurring more and more. It's a great to see creative thinking. Some may call it opportunism, but that's okay because it gets the job done.

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    Matt, I want to thank you for going the extra mile by giving us the links so even a newbie to this community can clearly understand the in's and out's of the business.

    Paul

  • 99hates

    99 designs is the worst site ive seen, Why? It promotes eliminating designers and spec work is not right, you are destroying hundreds of businesses by doing this and if businesses fail, then people lose jobs, if people lose jobs then the economy suffers, if the economy suffers then you could end up going out of business your self 99designs!

    This is not smart, sure you may think it is cool now but look back 10 years from now, will you be proud or disapointed of the move you made?

    This website needs to get off the web and in the trash. I dont recommend any ethical or wise person to do this, only idiotic people who rather get more for less which is not the best thing as you can see with what is happening now.

    Think smart, buy smart, smart is not always about what you save but how it impacts you in the future!

  • 99hates

    99 designs sucks

  • 99hates

    99designs is full of shotty designers

  • davidbaer

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  • http://www.aaronwulf.com/ Aaron Wulf

    Reading the comments below, I can understand why some people feel as strongly as they do about this. As Matt said in the interview, 99 Designs was/is destructive to the normal design process. But as someone who has been ripped off by designers in the past, I'm extremely pleased that the consumer now has some protection with sites such as his and Elance.com. Errors and bad work are bound to happen, but the cost-ratio is one-tenth the price when mistakes are made with overseas designers/programmers.

    I've often wondered how some of these companies hit the ground running from day one. Matt confirmed that they tested it on SitePoint before for quite a while, and only when it was ready and had enough momentum behind it did they move it to its own site. Makes sense. I'd think anyone else who doesn't take this approach would be bound to fail. Momentum is everything. Good tip to learn.

    I'm surprised though that they launched the site “ugly”, as he said, and then improved it based on feedback; this goes along with – yet contradicts – what I've heard from many people. So often you only have one chance to make a first impression, and with a product business, in general, if things are a mess to start with, you may very well have lost that customer for good. I suppose with a service industry it's the work that matters, but I am still curious about this.

    Great interview!

  • Mark Emst

    First time I saw 99designs around I felt inspired and thought what a good idea (I am an designer)
    Now the world can compete and even in far away poor countries designers can get a chance to get in contact with real businesses of the stronger economic side of town.

    Phase one:
    I gave it a couple of shots in my spare time for fun – did not win anything… no problem there…still smiling…

    Phase two:
    During the lookout for more competitions, I ran through a whole lot and suddenly it struck me (I might be slow) – this IS competition but it is in a sense like the old Roman way; there will be a prize but only for the survivor. smile stiffening…

    Phase three:
    99designs is seriously harming designers; and I can take it – but what about a designer on the poor side? can he afford loosing his valuable time again and again on rejections / corrections / suggestions from contest holders on 99designs that in many case do not even understand about design but merely goes for prettiness. Especially when the designer risk getting dumped in the final round. Loosing his time; what you know? that might be the day he did not bring food home to the family and did not do that other low paid local job but he bought into the seller of hope.

    Phase four:
    They might not know it (see it) but 99designs is seriously using the designers hope of fame/work/food to get rich and their own business running – That is clever, that is capitalistic, that is in my world unethical.

    I myself are in the area of outsourcing and could have been using 99designs, but never did we get people to do free work for us and then asked them to leave without pay. The day I would use 99designs is the day they change their business method (and it will cost them – yep! hard to be ethical)
    - they need to re-think their setup. (what about designers with portfolio, get invited by contest holders (based on their portfolio quality) who then have to paid 2-4 hours on each designer they invite per round and a final bonus for the winner). A pay of a minimum of that originate country was the least 99designs could do. But I guess the customers of 99designs are not willing to pay more now they got used to 295$ for a million earning size company logo eg. 99designs.com/contests/37129

    Exploit is a fast way to get rich but I guess it do not taste so good in the end – and someone did not get any food today because he was “stupid” enough to waste his time in the arena.

  • Bobby

    Andrew,

    I just joined mixergy today, and a huge reason was to watch this video. One bit of information that I was hoping to find was how much it cost to develop the site 99 Designs. Matt talked about how he raised the money, but did not mention how much it was. I would love to know what the investment was to build the initial site.

    Thanks so much! Great video :)

    Bobby

  • 99designer

    99designs- the best website, idea, project,business , profession , job EVER!

    i m really happy that it exists!

    one of the 99 designs designers.

  • http://mixergy.com Andrew Warner

    Thanks!

  • Johnny

    99designs is a beautiful concept. Creates a new market for designers that otherwise would have never been paid AND/OR rewarded.

    There's no gun forcing a designer to “work-for-free”. They do it out of their own free will. The reward isn't just money. They get fun practice taking on projects and designs that inspire them as they develop their skills alongside other establishing designers.

    There are people WILLING to pay a small amount and people WILLING to accept that small amount. In the end, clients will learn more about design and appreciate good design and designers will have gotten great experience in the real world. The relationship is relaxed-commitment, fun, and challenging. 99designs is only another new-age medium of bringing sellers & buyers together based on a compromise on price.

  • http://mixergy.com Andrew Warner

    You should see the appreciative email I got from the new designer who I
    hired through 99designs.

    I would keep working with him.

  • http://mixergy.com Andrew Warner

    You should see the appreciative email I got from the new designer who I
    hired through 99designs.

    I would keep working with him.

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