If you’re ready to give up on your web app after a year, there’s a good chance Neil Patel wants to make a deal to buy it from you. That’s because, after building CrazyEgg, his visual web site analytics package, he knows that it can take a long time — and some creative marketing — for a product to build revenue. Most people don’t have that kind of patience, so he can buy their sites on the cheap.
This is the story of how Neil co-founded CrazyEgg and why it seemed to flop when it launched, and what he did to build it up into a leading visual analytics product.
Neil Patel, Crazy Egg
Neil Patel is the co-founder of 2 Internet companies: Crazy Egg and KISSmetrics. Through his entrepreneurial career Neil has helped large corporations such as Amazon, AOL, GM, HP and Viacom make more money from the web. By the age of 21 not only was Neil named a top 100 blogger by Technorati, but he was also one of the top influencers on the web according to the Wall Street Journal. Continue reading on his blog
Why do I tell you about Scott Edward Walker’s posts on VentureBeat, or that he’s an active member of online startup communities? Because the average lawyer doesn’t have a clue about blogging or about online communities or any of the tools that an online business like yours depends on. If you’re a tech founder, you need a lawyer who’s engaged in your industry, because he’ll understand how to get things done. Talk to Scott Edward Walker of Walker Corporate Law.
And why do I keep saying that Grasshopper is a virtual phone system? Because as a business owner, you need more than just a phone number. You need a phone system that includes extensions where calls can be transferred easily and which will measurably help you increase sales. Grasshopper.com.
And of all the features I could highlight with Shopify, why do I say over and over that they make it easy to set up beautiful stores? Because next time you have an idea to sell something online, I want you to understand that it’s easier to set up a store on Shopify.com than to sketch it out on a useless napkin. Shopify.com makes it easy to set up an online store, and even your wannabe entrepreneur friend, you know the one who always talks about business but never launches one, even he can create a store instead of talking about it. Shopify.com.
Here’s the program.
Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. And a few weeks ago, I had the cofounder of Crazy Egg on Mixergy. I asked him why, out of all the ideas that he tried, Crazy Egg became a hit. He said, and here’s a quote, he said “dumb luck.” Well, I’m too curious to accept dumb luck as an answer. So I invited his cofounder, Neil Patel, to Mixergy to hear how Crazy Egg was launched, how it grew, why it was successful out of all the ideas, as I said, that they tried.
Crazy Egg is an analytics package that helps websites analyze their visitors’ engagement through heatmaps, and here’s Neil. Neil, welcome to Mixergy.
Neil Patel: Thank you for having me.
Andrew: Dumb luck. You know I can’t deal with that.
Neil: [laughs] I’m thinking, I’m like, “Wait, wait, wait. It wasn’t all dumb luck.”
Andrew: [laughs] You know what? He was telling me about all the different things you guys tried, and many of them failed before you guys discovered the lean startup methodology. And then he told me how lean startup methodology is shaping your current company, KISSmetrics. And I thought, why did Crazy Egg work? And that’s when he said dumb luck. And I want to dive in.
But before we dive into that, I’ve got to ask you this question, on a personal note. I asked you to do this interview about five minutes ago, and you jumped in and said yes. So first of all, thanks for being so gracious.
Neil: No problem.
Andrew: But second . . . I should let you say no problem before I interrupt. Second, let me jump into this question. Second thing is this. How do you find the time to do this stuff? To jump in on an hour Skype call with me out of the blue, to take a phone call for me. I’ve introduced you to people, and you’ll jump on the call with them, I think, within a day. Instead of saying, “Hey, great to meet you,” and wait for them to follow up with you say, “Andrew introduced me. Let’s get on a phone call for whatever time you need.” How do you do it?
Neil: You want the friend answer, or do you want the real answer?
Andrew: You know what? One of the criticisms that you’ve given me in the past is that these interviews aren’t useful enough. Give me the useful answer that’s going to make a guy like Neil Patel in the audience learn something that’s useful.
Neil: Sure. So two things. The friend part was, one you have a really big audience. Your traffic is growing, if you look at Alexa, Compete, so forth and so on. A lot more people know about Mixergy. So it’s stupid to turn down a press opportunity, right? And it’s a press opportunity, and it’s just not me going on Mixergy. I can say, “Hey, I’ve been on this website with Tony Shay and Gary Vaynerchuk and Tim Ferriss” and so forth and so on, right? So for me to be in that company, it’s a great thing to leverage. And I actually think this is more useful than saying, “Hey, I’ve been on ABC TV,” or “I’ve been on the Wall Street Journal,” because that doesn’t really do much for my business. But getting on here, I’ve actually seen people come after the show and hit me up and email me and wanting to get an SEO on. Or people going to KISSmetrics and signing up, saying, “Hey, I found out through Mixergy.” So, it’s helping my business. So, if you’re not going to make time for something that’s helping your business, then you’re dumb. It’s as simple as that.
The other portion of it was that I got back from vacation with my business partner, who said dumb luck, his wife, my sister. Booked a Carnival cruise that left Friday night, came back today morning. So my calendar was widely open until 2:00 Pacific standard time. So, you also got lucky on that as well.
Andrew: [laughs] Give me more. Because it’s not just today and it’s not just interviews where you’ve come through and spent time with people. I’ve seen this happen over and over again. I introduced you to the founder of WishList Member recently, and instead of emailing him back and saying, “I’ll check out your website when I have time,” or blowing it off until you’re ready for it, you said, “Let’s jump on a call.” You’ve done this for people who came out to Mixergy. You know what? I’m not even saying Mixergy. I just happened to know it from my experience. But I’ve seen it and heard other people do it. Tell me, really, how do you manage your time so well that you can do this?
Neil: Sure. So, managing the time is the hard part, other than just working a lot more hours. I’m not as busy as people really think I am. I focus on traffic acquisition for KISSmetrics, and I focus on deals. The programming and a lot of the other stuff, the tech support, all that, I don’t have to deal with it. Right? I’ve got a great team who’s helping out, and without that, I wouldn’t have that much time. I also work more hours than the average Joe. I work seven days a week. When I was on vacation, I was stressing out because I didn’t have Internet access for Saturday and Sunday. I did, but I wasn’t willing to pay, let’s say, 75 cents a minute. But I had my cell phone and I was continuing to check emails and answer and all that kind of stuff. But it’s like, it’s all about working seven days a week and really enjoying what you do.
The other part that gets to it, and what you were saying, hey, why am I helping you out, or why am I doing this. It’s a two-fold approach. As much as you actually feel I’m helping you out, you’re actually helping me out as well, right? And that’s the problem. It’s like, you’re just like, “Wait. Why are you responding to these people on time, and taking care of them or helping people out?” It’s because I do stuff for you, right? Let’s say you’re looking for certain unique type of people to interview on Mixergy in a specific category that you may not have some contacts with and I could potentially introduce you. I’ll gladly do it. Why? You’d appreciate it, right? If I don’t get anything back, I don’t care.
But the way most people are, and I would say 90+%, if I introduce you to someone, and then I need something and I ask you for a favor, you’re going to usually do it. And that’s what typically happens, right? So it’s like, I needed an introduction to someone who could help me with my blogging, and you’re like, “Okay, I’m going to introduce you to WishList.” And you did it, and it worked out, and the guy was very responsive and he was very helpful. And because the introduction came from you instead of me hitting him up from his website, he’s probably more likely to help me out than if I was an average Joe, right? I’m knocking on wood here that he hooks me up because I got the Andrew Warner introduction. That’s one of the real reasons I help people, and it always comes back. People just don’t realize it.
And to wrap it up, I know I’m rambling on, I learned this the hard way. I was at a poker conference with Warren Jolly. It was one of his conferences. It was on poker-related stuff. It was Poker Affiliate Conference or something like that. And there was this Russian guy. No one wanted to talk to him. He had BO from across the room. Everyone was literally like, “Dude, get away from me.” And he heard me speak about SEO, and he was like, “Can I get 20 or 30 minutes of your time?” Or something like that. So I’m like, “Sure, why not.” I didn’t want to, but I was like, “You know what? This guy’s a kind guy. He probably doesn’t know better.” I was like, “Someone needs to help him out. He paid to come here.” I just felt bad for him.
So I helped him out. And after I helped him out for 30 minutes, he went around and there was this dinner event. They have an awards ceremony. He went around saying how Neil Patel’s the best SEO ever. You’ve got to hire him. He kept on speaking to a lot of random people, and people started getting irritated. But there was this one person who was like, “Oh, introduce me.” So, they came over. I’m like, “Yeah, I do SEO,” blah, blah, blah. “Do you want to do consulting?” And believe it or not, within a few days, I had a contract from that person that he introduced me to, and he didn’t even know the other person he was rambling to, for $1.2 million to do their SEO.
And I’m like, “Oh s***. This is really worth it. I’ll help out people with BO or people who [inaudible 08:28].’ I’m like, you know what? If no one wants to help these other people out, it’s the little guys that are the new big. Because it’s like, there are so many more little guys, and when they speak and when they speak in masses, it’s when the important big people start listening, and they’re going to have to do what they say.
Andrew: Tell me a little bit about some of the things you have to blow off and push aside in order to make time to have 20 minute consultations with random strangers, or to pick up the phone and talk to someone just because a friend of a friend introduced you. What don’t you do?
Neil: I know this may sound bad, but you have to blow off family. There’s not enough time for everything. I’m a single guy. I’m not married, don’t have any kids. [knocks on wood] [laughs] But the cool part about being an entrepreneur, if your family understands it, you don’t have as much time to sit down at the dinner table and be like, “Hey, how did your work go Dad or Mom or your sister?” or whatever. It’s like, you’ve just got to work. And you’ve got to work you’re a** off, and hopefully you can work until 35, 40, but the thing it brings is money. It’s just like I spend most of my time working. I don’t go on vacations. When I go on vacations, I’m stressing about work.
That’s the main thing you have to blow off, and also, fun. I didn’t get to experience the things that most people got to experience when they were younger. I didn’t have all this fun in high school or college or get to party it up every night. It’s like, you miss that childhood. But I’ll trade it in all day long for security, right? Because I don’t have to worry for shelter or food. I’m not saying I live in a mansion, but it provides a lot of flexibility if you can figure out how to make money as an entrepreneur.
Andrew: The guy who said dumb luck, your cofounder, is Hiten Shah, your brother-in-law, married to your sister. He’s not blowing off family. He’s spending time with your sister. He has a new baby. The new baby is tweeting now, I saw.
Andrew: Is he putting in less time and effort because he’s married?
Neil: I wouldn’t necessarily say less effort. He’s just being a lot more efficient. He’s not taking as many meetings with random people. He tries to come home early. But my sister is very understanding, right? Like, Hiten, before they had a kid, would come home on most nights at 12:00, 1:00, really late at night, and this would just be a standard thing. His day that he gave to my sister was Friday. So Friday he would spend at home for a portion of the time. But he never ate meals at home, maybe other than breakfast. He was always gone, even Saturday and Sunday for the large part. Now that he has a kid, he is home, not necessarily all the time, but he’s home for a portion of the night, and he’s home on the weekends. So, he is starting to spend more time with family, but he knows it’s really hard to be like most fathers who have a 9 to 5 job. You work in the morning, you come home, you have the rest of the time to spend with your family. He doesn’t have that luxury. But when he does put in time, he’s makes sure it counts.
Andrew: Anything else that you blow off that most people do at their desks or during the day that you say, “No, that’s a waste of time. I need to focus on the things that matter.” In my case, it’s meeting new people. It’s finding ways to get the word out about our business. What is it that you blow off that other people spend too much time on?
Neil: It’s not necessarily blow off. I think entrepreneurs don’t necessarily blow off things, but they’re more sensitive to their time. They’re more efficient. So for example, one thing that I would do was use applications like RescueTime to measure where I’m inefficient, and say, “Hey, I like watching TV. I’m addicted to TV.” But the problem is that there’s just not enough time in the day for TV. So I will spend $148 and something cents every month for my Comcast bill. I get the lowest Internet, and I spend the rest on all the TV channels just so that I can get Comcast On Demand, and I can watch all the TV shows later on without commercials, and I can do it while I’m working.
So you do things to figure out how to make yourself more efficient. I also put programs on my Firefox browser. I don’t know what they’re called, but these plug-ins allow me to do stuff like block sites like TechCrunch, Facebook and so forth, so on, during the day. So that way, I’m not wasting my time on them.
Andrew: I did that. The problem that I had with TechCrunch specifically, but even Facebook, is in order to research people who I interview, I want to see what TechCrunch said about them. I want to see their family photos on Facebook and see what their passions are. But I see that that’s a helpful tool, to block out all the other sites, like Digg.
Neil: It is. I have all gaming sites banned. I had an iPad. I won it from 99Designs, a contest, right? And I started playing games on it, and I hacked it, right? Because you can get free games. And what I ended up doing was I started wasting, like, two hours playing games. I’m like, “Crap, this is unproductive.” So I gave it to my nephew. He’s like six months old or something like that. I’m like, “Here’s your new iPad.” Because at the end of the day, that’s an inefficient thing that’s slowing me down. People think it’s portable and all that kind of stuff. Yeah, but how many hours is it distracting you for? Same with my laptop. My MacBook, it has all flash gaming sites blocked, like Onward Games, Kongregate, and so forth, so on. Because people send these stupid links, like for desktop tower, and then before you know it, you’ve spent the whole day playing this stupid video game, right? The makers of it are smart, don’t get me wrong. But it’s just inefficient.
You just have to be really time conscious of what you do, and you have to learn how to be really streamlining with your work. So for example, I get a lot of junk mail from random people soliciting stuff. I have a canned response, that I just get tired of answering these people. But instead of leaving them hanging, I just say, “Hey, I get a lot of emails, blah, blah, blah. If you really want something from me, get an introduction from someone I know and I’ll respond.” Straight up, right? But if there’s someone genuinely asking me for advice, I’ll respond. If it’s someone asking me for advice but it’s something really stupid and it’s obvious, I’ll point him to my blog. Say, “Look it up.” Or I’ll point him to my question and answer section on Quick Sprout and say, “Hey, go post it there, and someone will respond, and if I have time I’ll also respond.”
Andrew: You and Hiten have launched, I think, about half a dozen companies together. It’s hard to really put a number on them, because some are side projects that end up being businesses, some are part of other businesses. What’s the responsibility breakdown between the two of you?
Neil: Sure. So he deals with management. He’s a lot better at it than I am. I’m really bad at that. It works out really well. I’m in charge of sales and marketing. And he does a lot of the marketing stuff as well, and he’s in charge of everything else. There are some things that we’ll work out together, like if we’re fundraising, we’ll both try to do it. But he’ll lead the KISSmetrics fundraising. That was literally all him. He did a great job with that. We just figure out. He’s just saying, “Dude, I hate this.” Then I’m like, “All right, then I’ll do it.” “Dude, I hate. . .” whatever it may be, managing team members, because I’m really bad at it, and he’s good at it.
He’s a people person. I’m not. I’m known to be cut throat, and some people hate me for it. Because I’m just like, “How much money are you making for me?” It’s as simple as that with me. And he’ll deal with all the other bulls***, which works out great. And it’s not necessarily bulls***, like, our team members are great in which they don’t have a lot of that bulls***. We don’t have holidays or any of that. We work to get people that are like us. It just comes down to, when you work so many years together, this is going to be our tenth year, in 2011, working together, that you just figure out how to gel together as entrepreneurs.
So it’s like, when he’s like, “Hey, let’s start a blog.” “All right. I’ll figure it out.” And then he doesn’t have to deal with it. He’ll put in his two cents when he has some words of wisdom to pass along, and calls it a day. Same thing with product. I know jack crap about how the product gets developed and the process and all that stuff. Lean startup, sure I understand that from the business standpoint, but I’m really terrible on the engineering standpoint understanding a lot of these metrics. Do you really need two people on a team to really do this? Not really, right? I have this theory, when you have business partners, stop focusing or trying to get better at what you suck at, and focus on what you’re really good at. Because what you should be doing is finding one thing that you’re better at than anyone else, become even better at it, and then find team members that can fill in the gaps and the voids that you’re missing.
Andrew: So what’s your one thing that you’re better at than anyone else and are going to keep getting better and better at?
Neil: I’m really good at making deals happen.
Andrew: Can you give me an example?
Neil: Sure. So I’m trying to figure out an example that I can talk about. Here’s one. My cousin, Sujan was an SEO. Still is. He works at Oversee.net, or he used to work at Oversee.net. He used to be in the travel space. He’s worked for a lot of other companies as well. This guy has talent. Is he the smartest guy to learn the business? Yet to be proven, right? But he’s really good at marketing it and building up traffic. So what I ended up doing was I’m like, “Dude, this guy has talent.” Hiten also knows him. Hiten’s better at giving him advice whenever he needs it, once a month or whatever it may be. I’m like, “We should start a company around this guy. We can go and raise capital, and we can just get this guy to run everything and to do all the work. And all he’ll be doing is buying out existing websites and growing them, because his strength is growing them.”
So what I ended up doing is I went out there, made a few phone calls and sent a few emails, and I raised some money. Got him a corporation set up, introduced him to my lawyers. They set up everything. Hiten and I took large chunks as founders. We gave him, as CEO, a bit more than what we got, and we gave the investors some, and he’s running it all. But I made the deal happen. I now have 20% in this business that, to be quite honest with you and investors know, that I don’t really do any work for. And this guy’s running it all, and it will probably be, I think it could turn into a $10 million business. Not huge, but I’ll made $2 million riding this guy’s coattail. Just because I was able to get him cash when he wasn’t. And I can teach him how to buy out other websites when he can’t figure out how to buy out websites. Because he’ll try to buy out a website that’s worth $250,000 for $200,000. I’ll try to figure out how to work a deal in which you’re trying to get it for $100,000, right? So not only are you building equity on the buy side, but you’re also building equity when he grows it.
Andrew: How do you get a site that’s worth $250,000, that an expert in the field who you entrusted to run your company can get for $200,000? How do you, Neil Patel, get it for $100,000.
Neil: Sure. So what I usually do is I’m a big believer in the numbers game. I literally hit up tons and tons of sites. And I break it down saying, “Hey, what is your revenue? What’s your profit?” A lot of sites will break down the profit, here’s this much and here’s how much we want. Then they end up breaking it down, but I’m like, “Wait, but I’ve got to pay someone to fill your shoes, don’t I?” And they’re like, “Yeah, you got to.” “All right then. That means that’s not the true profit.” And then you’ve got to break down the numbers. And the biggest thing you have to look for is distressed properties. Then you’re like, “Dude, you don’t want to do this. This is a pain for you, isn’t it? You’ve got this other cool idea over there. Why don’t you focus on that, and what I’m going to end up doing for you is taking this property off your hands. Let me know a price you think is fair. I’m really easy going. I’m not going to give you a ton of legal paperwork. It’ll be a few pages. Send it on over, and what I’ll do is I’ll buy it off your hands.” Now, because I focus on KISSmetrics, I don’t spend my time doing that, but I’ve taught Sujan to do that, who runs the company.
Andrew: I see. I guess at some point, entrepreneurs just get tired of their property. It doesn’t continue to grow. It’s just been something they’ve worked on for way longer than they ever thought, and it didn’t become as big as they thought, and you can give them the quick exit so that they can move on to do something better.
Neil: Bingo. And it really works. It’s just tedious and working out the numbers. Like, “You know what? You think this is a million dollar property? Here’s what I’m going to do for you. I’m going to give you $500,000 up front. If it is cracked up, and it meets these metrics, I’m going to give you $1.25 million or $1.5 million. That means that you could make, technically, another million more.” So you can do really creative things, because hey, if that property goes from being worth, technically, a million dollars to 10 million, I don’t care if I pay that extra $500,000 to own it, right? But I’ve reduced my risk by buying it technically for $500,000. You can do some really creative stuff like that that entrepreneurs don’t like doing, which works out well.
Andrew: I’ve got a lot of questions about those companies I would love to talk to you about, Twistup. If we have time, we’ll talk about Twistup and that company and all the other businesses, but I’ve got to get to the question that I started this interview with, the one that I’m curious about. Crazy Egg. Why don’t we discover how you ended up with Crazy Egg. What were you doing just before then that made you think of Crazy Egg? Where did the idea come from?
Neil: Sure. The idea came from a lot of different people, but the concept ended up coming over for, everyone was looking at the analytics. Google Analytics, it was Urchin at the time. ClickTracks was actually the most popular version, in which ClickTracks focused on site overlays. They renamed it. I don’t know what it’s called now. And everyone’s like, “Oh, cool, you can see where people interact.” No one did it in a good fashion. When you’re going through with your stats, you’re like, “Crap. I see all these numbers, but what does that mean on my website?” And it was so hard to explain.
It was like, “Can’t there be a visual format to show how people are interacting and engaging with your website and see how the numbers meet?” If I’ve got this much traffic from Google with this keyword, can I see it on the website and see where they click and so forth and so on? So, what we ended up doing was coming up with Crazy Egg. There’s a lot of iterations, like the developer ended up coming up with a heatmap and stuff like that. So there was a lot of cool things that happened over time. Another developer ended up coming up with our confetti feature. But the iteration just happened as we moved along and learned from our customers.
Andrew: But the original idea, was it your idea or was it Hiten’s?
Neil: The original idea was our idea, Hiten and I. Or we don’t exactly know because it was so long ago. But what it was is a site overlay. The problem with Google and ClickTracks and all these solutions at the time, you have an about button at the top and one in your footer, right? If your About button at the top got four clicks, and your one in the footer got two clicks, both Google, ClickTracks and all of them would show your site overlay as both links getting six clicks. And we were like, “Wait, this can’t be right.” So the numbers were off, because they would just combine all the URLs. So, can’t someone just show About links at the top, showing different numbers in the footer? Because then you actually see the value of footer links versus header links and so forth, so on.
So we ended up coming up with the idea of just doing a simpler site overlay that automatically showed you the difference in clicks between different navigation elements. Then it went from there to form fields and stuff like that to submit buttons to even a heatmap, right? But it all started from that.
Andrew: Neither you nor Hiten are developers yourselves. How did you get the first version developed?
Neil: We paid our designer, Ryan Nichols, and Ryan Nicholas contracted out of a developer. He did an awesome job. Didn’t really work out, that developer didn’t. And Hiten and I and a few others, we went on a hunt to try to find our own developer. We found a few, and we finally hit one that ended up created a product. We literally went to two or three developers before we had a, let’s say, somewhat working Crazy Egg. Not even a demo, but somewhat working. Like a lot of developers failed at it.
Andrew: The developer that you hired, was he a full-time developer or was he just contracted for this one project?
Neil: Contracted. We never really believed in full-time developers at that time. We were just like, we thought, and we were obviously wrong, that hey, after we get it built it’s done, and there’s nothing left to do. So we would always go for contractors.
Andrew: OK. What did that somewhat working first version look like? What was in it?
Neil: It was the site overlay, and that was it. And then later on we added the heatmap. We were like, “You know what? The site overlay, what happens if you can color code it? Red for being a good link, and blue for being a cold one, and all the in betweens.” And then we were like, “Oh crap. What happens if we can just color code the whole damn page and show all the hot spots, right?”
Andrew: So site overlay, you mean a screen shot essentially of the page and numbers on top of the links? That’s what the first version was.
Andrew: Were you selling it right from the start, or was it a freebie?
Neil: None. It was a closed beta. We were 9rules at this time, and lucky enough, 9rules had a really big community of bloggers, which actually helped later on with the launch of the product. They were a lot of our first early demo testers of the product.
Andrew: So you gave free demo accounts to people just to see how it would work out. Free beta accounts.
Neil: Yeah, free beta accounts.
Andrew: What’s 9rules?
Neil: 9rules was a network started by Mike Rundle, Paul Scrivens. I think Tyme White later joined, and then another guy, Colin something, Devroe or something like that. I apologize for getting his name wrong. But it was just this network of popular bloggers that would stick this little badge on their sidebar saying, “Proud to be a 9rules member.” And it was a closed community of bloggers that would just help each other out and become friends.
Andrew: I think you might, on one of your websites, still have that link. But essentially, all it was was you guys sharing traffic and maybe sharing ideas, but not splitting the business with each other.
Andrew: Okay. So, you gave it to them. It was somewhat working. What was the feedback that you got from them on that product?
Neil: They loved it. A lot of those community members were designers, so they were just giving a lot of feedback, they were telling us all the bugs. But they were loving it. It was like, “Oh, this is awesome. This is going to help me design better. Improve on the usability and really get this product out there.” For them, it was their way of showing all their customers. What I mean by getting it out there. They’re like, “Crap. When I’m doing a design, I can end up showing an existing webmaster or a website owner, ‘Here’s your Crazy heatmap before design, and here’s after. And here’s how we changed engagement with this redesign.'” So it’s worth more than just, “Hey, it looks pretty. It looks a lot better.” Well no, we actually helped increase engagement.
Andrew: Eric Stevens, the UI expert who sits and listens to people as they use his websites to figure out what problems need fixing, he sits with lots of people. But he says, after talking to even one, a big problem will start to emerge. And the rest of those people who you watch often will just reinforce that one big problem. What was the big issue for your website?
Neil: Which website? [laughs]
Andrew: For Crazy Egg. So all these designers are looking at it, and I can see that they love it, and I can understand why they’d love it. And I can understand that they’d have helpful feedback, but was there one thing that they all said, “Hey, Neil. This one thing is missing. Or this one thing would be very helpful.” Was there anything like that that stood out that you still remember?
Neil: Yes. At that time, they were saying, if we can drill down on the data, which is why in our site overlay, you can click on a little plus that breaks down the refers that cause that click. Because they were trying to figure out the traffic sources that were causing different engagements.
Andrew: So you just gave them a page with overlays of numbers on all the links, and they said, “All right. These numbers are great. I can see which about link is getting more clicks than the other. But I want to know where those clicks are coming from.” And that’s when you added the plus and let them see underneath it.
Andrew: Where was the revenue going to come from for that business?
Neil: Yeah. We always had the concept that we were going to charge people. We didn’t know how much. We literally based our pricing off of BasecampHQ. [laughs] It could be a smart idea. I always regretted it, because I wanted to add in the cents. I remember me and my business partner had a debate about this. We were like, “No, but why the cents.” But it was funny too. I’m not saying he was right or wrong or Basecamp is. Even to this day, our $9 plan, customers come back saying, “Hey, I’m on the $9.99 plan.” And it’s like, “Crap. If I got that 99 cents extra from every customer, that would add up to a lot of coin.” [laughs]
Andrew: Did you have a free version, too?
Neil: We did have a free version. Our theory was, with a free version, we’d get the mass adoption, and we would get so many people out there who would be using it. It’s going to spread, and it was going to make this a popular product.
Andrew: Okay. And that’s a theory. I’ll come back to finding out whether that worked or not and how well it worked. What was in the freebie, and what was reserved for the paid members?
Neil: Sure. We did it wrong at that time. The only difference that we limited was visits. But the thing is that it’s a testing tool, so you don’t need that many visits to get value out of it. So we limited it to 6,000. If we were smart, we should have limited it to one page instead of as many pages as you want or three pages. But there wasn’t too many limiting functionalities of it. We let you see the heatmap, the site overlay, and all that. Instead, we should have done things like, should you do the site overlay. . .’ and then we want to click plus and showed you. We should have showed you one or two referrers that caused the clicks, and then the rest should have been grayed out. Click here to figure out the rest of them, right? Like, we could have done a lot of interesting things like that.
Andrew: Why couldn’t you have done it afterwards, after you realized that that’s what you could’ve done?
Neil: We didn’t realize that until years later. [laughs] I wish it was that case. What we did was, we were like, “We should just remove the pay plan.” And when we removed the pay plan, revenue doubled within 30 days. Everyone was like, whoa. Premium is ridiculous. It’s not worth it. Paid is the way to go, and so forth and so on. But the problem with paid is, it doesn’t provide as much growth as freeing them. So we’re actually working right now to bring back the free model. The company will not be a huge company unless we have a free plan. Paid only limits your growth to a certain extent. You need to get mass adoption out there, especially with Google Analytics and other people being free. It is good to have a free plan in the marketplace.
Andrew: OK. What about the plan for marketing? We’ll get to how it shook out, but in your head, how did you imagine marketing was going to go?
Neil: We actually had marketing planned out pretty well. Our background is marketing. So what we ended up doing is we noticed that designers love this tool. Out of everyone, we thought they were going to be the early adopters because they understood it, saw how their customers could use it, and they’re willing to pay for it. And they were willing to pay paid for the highest plan, which is $100 a month, or $99 or whatever it is. So what we ended up doing, at that time all the galleries where CSS Gallery, CSS Beauty, CSS Fall, there were so many of these that showcased beautiful CSS design sites. And they weren’t getting advertisement.
So I had this crazy idea. I’m like, “You know what? What if I could hit up all these sites and buy ads?” So, Hiten took Crazy Egg, put a screen shot of a heatmap on the homepage. I believe it was WordPress’ heatmap, or a Crazy Egg heatmap. It was one or the other. Then had a email forum and said, “Sign up and we’ll let you know when we are rolling it out.’ And I’d popped up these ads all over the CSS gallery, and they were pennies on the dollar. And literally, we had 20,000+ email signups before we had our launch. And that’s what spurred our growth.
Andrew: And were they selling ads on those sites?
Neil: Some were. Most weren’t. I was just hitting them all up. And you always play the same ad game. Like, “You know what? I don’t know if it’s going to convert. I don’t have that much money. Start up.” Yada yada yada. And that was true at that time, right? Still is true. If you ever get hit up to buy an ad, “I don’t have money to buy an ad.” But you know, I actually negotiated with you on Mixergy. [laughs] And what I ended up doing was, I ended up saying, “Can we test out one month? I can’t afford too much.” And then I was like, “This is getting too expensive. I know you give discounts for yearly, but this is the price point that will make it worth it for me.”
And I’ll put it even under what it was technically worth, like way under. And sometimes they accept, and I’m like, “Woohoo, I got a steal.” And sometimes, they’re like, “How about $100 more?” I’m like, “Sure.” I’m like, “By the way, can we get a year locked up?” And I would get them locked in at that rate. I would get prime positioning, and I would just keep on cranking. Some of these guys are like, “Sure, I’ll sell you your ad for $1000 or $300.” No problem. I’m like, “That’s kind of pushing it for me, but I think I can make it happen. By the way, can you also showcase my site and a few of my other sites on your gallery, because I’m buying stuff?” “Sure yeah, no problem.” You just have to get really scrappy with negotiations, right? Hence going back to before when I said I love making deals.
Andrew: [laughs] So you’re buying all these ads, you’re shelling out money, you’re getting people to come in and not buy right away but to just give you their email address and a little bit of information beyond that. And then you’re going to sell them in the future.
Neil: Just email address. And I remember we used to log into this SSO thingy that would hit into the server, and I would type in some command a developer taught me, and I could see how many new email sign ups did I get for that day. And our goal was to get at least 200 email sign ups a day. So we were [inaudible 33:22] from relevant people who could be interested. And we did some fun stuff at that same time with the marketing, where I knew the heatmap was sexy and people were happy.
So Hiten linked it out to Mashable. Mashable loved it, they blogged on it. Got that post on Digg. Then I got the Crazy Egg homepage on Digg. I think then we got the homepage on Digg again, even though you’re not supposed to. And we did some fun stuff like that to really boost up the numbers, and then we kept on pushing forward. So that way when we launched, we had a big email list to push out to, as well as getting TechCrunch noise and all that kind of stuff. I remember at that time, Hiten had a good relationship with Mick Kobilowich [SP], who was a TechCrunch writer, is still maybe. But all that stuff really helped. Obviously when we launched, the numbers didn’t come out to what we wanted. We thought it was going to be this huge thing, but you can have tons of emails, and you won’t always make a lot of money. I think our first month’s revenue was only like $1,000 or $2,000.
Andrew: That’s what I was getting at. So you were buying, and this was your own money. There was no funding in the business. This was you guys putting your own money into buying ads, converting them into email addresses that you were hoping would eventually become customers. How much money did you put out?
Neil: Into Crazy Egg?
Andrew: Just in that initial push. And I know it’s been so long, and who remembers what you paid these CSS sites.
Neil: My guess is around $10,000, give or take a few thousand here or there, but somewhere around there. I know I did not spend anywhere near 10,000 on the advertisements. But not including product and stuff like that, I’d say we probably were at 10,000 or under on marketing.
Andrew: So Neil, as you said, you negotiated with me. You’re the first sponsor I think who ever negotiated a price with me. You tried to, and I said, “I can’t, because everyone else is offering more.”
Neil: It was worth it.
Andrew: [laughs] It was still worth it, even though you didn’t get the discount?
Neil: Yeah. Your ad drove users, because the thing is, I bought a lot of ads at that time for KISSinsights. Then when we stopped, we didn’t just stop your site. We stopped all ads, because we noticed we had a problem with the website on conversions. Not necessarily getting people to sign up, but from getting people to sign up and actually use the product. The thing about your ad was you broke down KISSinsights and how it worked. So through your ad, we actually got more users signing up and actually using the product, versus just signing up. Because it’s a freemium product, right? Everyone signs up. The problem is usage, because if no one uses it, you’re not going to upsell them into paid.
Andrew: You know what? That’s great to hear. I’ve got to tell you. I actually was hoping to do a sponsorship with you before your launch, back when Hiten was even throwing out, not free betas, but betas to friends. I said, “Let me send my audience over to KISSinsights.com/Mixergy and say, “You’ll only get this account if you go through my link.” And then, I thought we’d get more people go in there, and I’d get to show you what the numbers could be. I’m glad it still worked out.
The point I’m making is you’re a hard negotiator. I’ve known you now for years. You don’t like to spend a penny unless that penny is coming back to you with some friends. Here you are, you are investing in ads that would just help you collect email addresses with no direct revenue tied to it. Why did you do that?
Neil: So, I was foolish. When you hear all these stories about people converting at two to three percent, I was like, all right, cool. Let’s say conservatively we can convert at two percent, right? Two percent would have been 400 emails, something like that.
So, 400 emails, let’s say, that the average person was on . . . we had three plans at that time, $19.99. We introduced the $9 one later, but $19.99, $49 and I think $99 or something like that. Let’s say the majority go on the middle because it’s in the middle, right? The logic doesn’t make sense, but I also thought, hey, everyone’s going to center toward the middle, right? So, it’s like, if everyone is on the $50 plan, that would have been 20 grand in revenue, in monthly recurring revenue.
Andrew: I see. I see the math. I wasn’t doing it with you. I was actually thinking about, wow, things have just changed so much in the way that you think instead of following you in the math. But I understand the logic there.
The reason I’m saying things have changed so much is I just had Google’s Analytics evangelist here doing an interview with me. He used KISSmetrics as an example of people who do metrics well and people who test pricing really well. How much did this experience with Crazy Egg influence the way that you now price products and the way that you spend money on advertising? How did it influence you?
Neil: A lot because it taught me the value of marketing. In addition to that, it didn’t necessarily teach us a ton on the pricing right away. What taught us more, believe it or not, was Hiten’s interaction with Eric Ries and Sean Ellis. So, those two taught him pricing a lot better than what we learned from Crazy Egg in and of ourselves.
Like, I’m a terrible product person. If you ask me to buy a product or build a product, I’m not going to get it right. If you ask me to price a product, I know the formula because of what Hiten did with KISSmetrics. It doesn’t always work out sometimes. The data’s inconclusive and what we do at KISSinsights. But I can’t do that. That is not my core strength. I’m really bad at learning with that. I can tell you what it taught me about mergers and acquisitions, what it taught me about growth, and what it taught me about users and cancellations and stuff like that.
There’s some things related towards money, as in going into a bank account and coming out, I’ve learned all that kind of stuff. When it comes to before the money hits the account, like coming up with a price point, I’m really bad at that stuff.
Andrew: I see. Eric Ries is an advisor, and I think Sean Ellis is an advisor, too.
Neil: Yep, for KISSmetrics.
Andrew: All right. Sean Ellis is very tight-lipped. He will not say anything. He knows everything about your numbers and other people’s numbers. He was very generous to do an interview with me, but he’s not the kind of guy who’s going to sit and tell you what’s going on with his clients and his company’s businesses.
Let’s go back to yours then. So, you launch and what do you think when you finally emailed this audience and you tell them, “Ta da, we’re out here.” What do you think about their response?
Neil: A lot of them were happy, but they were signing up for the free plan. We didn’t realize that none of them were converting into pay. So, crap, how did we get people to convert to pay? And we couldn’t figure that out. Now don’t get me wrong, over the months the revenue grew from two grand to three grand to four grand, five, six, seven. It was a really slow climb.
The other thing we didn’t learn about at Crazy Egg and we needed to know this for a SAS space company, I think it was a constant contact CEO who ended up talking about how the first few years are really slow in a SAS company, and they are, like, even KISSmetrics. At first, things are going great, but the first two, three years are the toughest once you have the product launch. And after that, that’s when you start seeing the growth because the revenue numbers, reoccurring revenue and so forth and so on. You’ve got to stick it out for all those years. Like, no SAS space companies are not really meant to be run for a few years and they’re going to explode and you’re going to sell it for a lot of money.
But the cool part is, if you have money, you can find the SAS companies that have been running for a year or two, and the guys who are frustrated. And there’s a lot of them. I always hit them up and say, “Hey, I’ll buy out your company for X EBITDA” because it’s not much and I know in one more year it’s going to explode, and KISSmetrics can make all the cash from there because we’re venture backed, being involved in buyouts of companies and they’ve loaned us all and been paid.
Andrew: Have you done that already?
Neil: I put in a few offers. I haven’t found any takers.
Neil: I tried to put in an offer for Proposable. Have you heard of that? It’s the marketing proposal type of software. And I won’t get into their numbers, but you can assume, like I said, no SAS company is huge. If you ask them, I think there’s only one or two guys. You’re not talking about a company that’s doing six figures a month. I don’t know their revenue numbers to date, but I’m going to make the assumption that they’re not doing six figures. They’ve only been around for less than a year. This is the perfect time to acquire them because you’re going to acquire them for revenue or you’ll try to. And you get five to six X. If I hold on to it for two years, do better marketing for them, because I’m better than most of these guys in marketing, I can blow up the numbers and I think I’d have great ROI.
Andrew: Who would manage the product? Who would make sure that if there were bugs, if there were requests from users they were, that they would be incorporated into an upgrade?
Neil: Product manager.
Andrew: You’d hire somebody to figure out the code and to build it out?
Neil: Yes. And that’s what my business partner Hiten ends up doing a lot of that kind of stuff right? Because it’s like I have no clue what’s what. If you ask me what language KISSmetrics ran in . . . I actually got that question asked last week. And I was like, “I don’t know. Great question though.” I’ve been asked that a few times too like if it’s Ruby or C or PHP or something, right? But that’s the great part about having a business partner that knows stuff that you don’t, he can work on that problem and I can figure out the marketing and the growth part.
Andrew: Right. Let’s go back and, and ask, let’s pretend you can go back to the old you and say, “Look you have this product. It’s a good idea. You’re going to launch it.” What would, what, what advice would you give that old you, because a lot of us are going to be in that position where we’re about to launch something and I’d like to learn from your experience?
Neil: One is you have to give it time. Two is make sure if you have freemium that you know how to up sell them, like right away, like know what your freemium members, you’re giving them enough to be hooked on your product but you’re not giving them too much where they’re satisfied with it. You want them craving more, and that’s a really big mistake that we did not do. And the Crazy Egg team, you know, whoever’s working on it right now, they’re working on the freemium version, and they’re trying to, you know, figure out how to get a freemium plan back in and get people to upgrade, because when we have freemium, we’re getting tons of signups. We still are getting signups as paid but the growth isn’t there, right? Free and paid, there is a huge difference. Everyone’s willing to try something out without entering a credit card. But that would be the biggest piece of advice.
Three is technology is on our side now. So don’t try to be creative and be like, “I going to build my own server farm.” Right? We own 50 plus servers with Crazy Egg. We use our own servers, spent literally, maybe 50 to 100 grand just on servers. We probably had more than 50 at our peak. It’s, like, so much cheaper to do Amazon services than it is having your own server farm, right? And it’s not even as reliable as Amazon is. So it’s like don’t try to think that you’re smarter or better than everyone else or you know something that other people don’t because cuz it doesn’t really matter.
Number four, we got this one right? Be first in the marketplace. There’s ClickTale out there and there’s a few other competitors, Clickdensity, but because we were the first and whether we improve on our product or not and there’s people working on improving the product, being first really helps because when people think about heatmaps, we still get more traffic than most people in our space, so all people in our space. If your looking, not at Google Analytics, but if you’re looking at people that focus just on heatmaps and click tracking, not the mouse movement, but we get more traffic than anyone because we were the first to get the press and the TechCrunch. It’s better to go out early and get the press than it is to go out late when you have a great perfect product, right? Just get it out there and get some noise.
Those are the things I would say I learned the most. And the other thing I would also tell myself is focus on one thing. We’re doing KISSmetrics right now, and I’m happy because Crazy Egg will never be a huge company. But if I was sitting back in time, I could have told myself, “Hey Neil, just do one thing and do that one thing really well.” So if that one thing was KISSmetrics, I should have told myself, “Hey, Neil, don’t focus on Crazy Egg. Stop doing it. Can it and just go and create KISSmetrics and raise venture capital for it.” Right? But trying to have two, three, four companies out, that are all running at the same time, gets really tough and you get pulled in too many directions. And because of that, you can never put in the time and the energy each company deserves, so it’s never going to be big enough where it’s going to make you happy on the aggregate side or the revenue side.
Andrew: And you’re still doing it though, you’re still, you still have a hand in KISSmetrics, Not KISSmetrics, excuse me. Of course, KISSmetrics is the main product, but you still have a hand in Crazy Egg. You’re still buying other websites or looking to. You’re still helping other entrepreneurs build their companies in exchange for equity. So why not focus, why not say all this other stuff needs to go away, KISSmetrics is what’s going to get 100% of my time, and that’s it?
Neil: So I have a true case of ADD. KISSmetrics does get the majority of my time. If you’re talking about 40 hour work weeks, it gets more than 100% of my time. So let’s say keep the numbers simple. Let’s say I work 80 hours in a week, right? KISSmetrics probably is getting 70 to 75 hours of that 80, and then the other 5 hours are random. And what I mean random is just helping out other entrepreneurs. If someone from Crazy has a question, I’ll answer the question or whatever. I’ve actually got the process down where I don’t need to be involved in Crazy Egg or any of the other businesses.
The key I learned from this wise guy named Andy Loo, he taught me that don’t do other business unless you have a CEO to run them. If you don’t have a trusted entrepreneur in place, it’s not going to work out. So it’s, like, when you’re acquiring a company or doing something else, if you don’t know the person who’s going to run it, you just don’t do it because then it’s going to be a burden on yourself and it’s going to drag you away from focusing on one business. And that allows me to focus on KISSmetrics. So, you know, and am I spending a 100% of my time? No, but I’m spending, you know, 90 plus percent of my time on it, and at 90 plus percent the time is 70 plus hours a week, right? Investors are happy. It gets hard for an entrepreneur to do one thing for more than 70 hours a week.
Andrew: So you had the launch. It didn’t hit right away, but you spent time with it and in time it grew because you’re charging people on a monthly basis and you have old customers who still have their monthly payments coming into you and new customers who come in all the time and grow it. Was there any one thing that you did that juiced up the monthly registrations?
Neil: [laughs] Yeah, there is, but I can’t say on camera.
Andrew: OK. Are you sure?
Neil: Yeah, I’m sure. It’s nothing unethical, for all you guys who are listening. But there are some techniques that I’m not going to reveal because it’s going to keep on making me money hand over fist. But hey, Go Daddy does it too and a lot of other companies do it as well. So, all right, I can tell you one of them. When a credit card expires, if you look at the Go Daddy terms, or something like that, Alex Argar from White Pages actually showed this to me, He was registering for Go Daddy, and he showed me how Go Daddy actually says, “Hey, you know, for your convenience, when your credit card expires, we will put your new credit card expiration date in there for you, so that way, we will continue dinging you.” Its not really for your convenience. It’s so they keep on making a lot of money. We do similar things with Crazy Egg.
Andrew: What about for bringing in new people?
Neil: New people, the best thing that really helps is word of mouth. Speaking at conferences, getting blogging right, telling people about it, giving out freebies. If you want to get more mentions, get bloggers free accounts and say, “Hey bloggers, here are free Crazy accounts, blog on it.” Doing stuff like that helps with growth more than buying straight advertisements.
Andrew: You guys did a partnership, AppSumo bundled Crazy Egg with a bunch of other programs and he sold it, Noah did, for 25 bucks. This is insanely low. You guys must have gotten pennies off of that, right?
Neil: [laughs] Yeah.
Andrew: Why would you do that?
Neil: Noah’s an awesome guy. He’s a friend, so we did it, and it was good buzz for us too. He did end up doing it. And I was actually looking at the ad, and I was like, “Crap where are all these signups coming from. Oh yeah, it’s AppSumo.” I could actually see, App Sumo, AppSumo, and it was so funny too, because there were a lot of days when we were getting more signups from AppSumo than we were getting from the Crazy Egg website. He was driving a ton of signups in a very short window. A lot of it we did because of the buzz and the PR. I’ll take a, I forgot exactly what we offered. I know we had a loss on it, but let’s say it’s six months or whatever we offered, for a discount, just so we could do it and no one in our space is going to do it. We have other competitors, but if we were the first to do it, we’re the first. Some things you just have to do for brand building, than anything else. It’s worth taking some losses here and there.
Andrew: All right. Do you remember how much he gave you? He told me. I just don’t remember. It’s in the transcript.
Neil: Yeah, I don’t recall. But if I need to know off the top of my head, I would tell you.
Andrew: But we’re talking about . . .
Neil: He was very fair with his number. It wasn’t like we were earning $10 with every signup or anything near there. It was a few dollars, maybe even more than that, maybe up to $5. I don’t know. It could have been a dollar, or maybe five, somewhere in that range, maybe higher, maybe lower. But either way, we didn’t do it necessarily for the revenue. We did it more so for the branding because he’s getting on TechCrunch, Live Hacker, all these sites. That brings a lot of traffic indirectly. I know this may sound stupid, but you’re getting other, very smart consumers, signing up through the website because they forgot to click on the AppSumo link.
Andrew: I see, okay. So people who forgot to click on it when it was in AppSumo come back. Maybe people during the AppSumo don’t realize it or don’t care, because it’s not that much money to sign up for Crazy Egg. Did you see an uptick in sales afterwards?
Neil: Even better yet, I saw uptick in sales during the AppSumo process, because we could actually see all the referrals from AppSumo. We were getting more sales from random areas, and my bet is because of AppSumo and them getting the buzz. So it was worth it.
Andrew: Got you, okay. All right. I started off this interview saying that you had lots of different attempts or you started lots of different businesses. Some worked, some didn’t, as Hiten said in his interview. He focused on the ones that didn’t, because that was what I curious about when he and I did the interview. I want to know from you, more depth, why did this one work where all the other, or lots of the other ideas didn’t work? Like the web hosting site didn’t work, or the podcasting thing didn’t work. Why did this one work? What was it about this business?
Neil: You have a really good memory, by the way, to remember all of this. Congrats on that. This is going to sound stupid. Hiten and I have talk about this all the time. One, we didn’t have a ton of money, so we built something that was really simple and we just had to get it out there. Two, we didn’t have money, and I know I mentioned that at first point and it sounds really stupid. But when you don’t have money, you hustle to figure out how you can make money, and then, I know this may sound bad, but we still hustle. But we’re not as hungry as that first year, when we started when I was 16 years old, and I didn’t have money and I had to figure out, how can I make a dollar, how can I make it. You hustle your a** off for that first dollar, right.
At this point, I still hustle a lot and I probably work harder than most people. But I still don’t have that hunger that I did when I was dirt poor. I’m still poor. I’m not rich by any means, but I’m comfortable and that’s the problem. When you’re comfortable, you’re just not as aggressive than when you’re not as comfortable. Like, if I get everything taken away from me, Crazy Egg, KISSmetrics, all my investments, I can still figure out how to make a decent enough living where I can maintain my lifestyle. That’s the problem. I still hustle because I want more and more money. So the way I figured out how to hustle more was, like an airplane when you’re flying, when you first take off and you’re exhausting a lot of energy and fuel. You get to the point where maybe Crazy Egg or whatever it is, and you’re making some money, and then you’re comfortable. Then you’re like, all right, we have got to kick it up again. And then its like you’re cranking it up again, right, starting KISSmetrics. And then you level off, get the KISSmetrics to pop out. Technically, we’ll still on that with KISSmetrics or climbing up.
The thing is you have to keep on pushing yourself as an entrepreneur. So, the way I keep on climbing is I made a goal for myself. I’m 25 right now. How can I retire at the age of 35? So, I’m in uptick and I’m like, “All right. No more cruise sailing.” It’s just keep on, you know, pumping in the fuel and putting the engines on full thrust. So that way, by the time I’m 35, I don’t have to work anymore. And it’s my goal internally, you know, that I set for myself. And I know that if I slack a day or two, hopefully, I keep on going on these stupid Carnival cruises, right, that I had to go over the weekend. It’s like, “Dude, that’s two damn days of work that I lost.” Like, I had my cell phone but I wasn’t as efficient. So, it’s like there’s no time for that kind of crap. I’ll do all that stuff after I’m 35.
Andrew: Well, you said a few times, “Crazy Egg could never have been huge.” Yeah, I’ve “not huge” here in my notes a few times. Why not? Why couldn’t it ever have been huge? Why couldn’t it be as big as KISS, as KISSmetrics?
Neil: There’s one reason. How about this? I’m going to actually interview you? Why do you think Crazy Egg couldn’t be as huge as KISSmetrics? What’s the one difference, major difference in that . . . or how about this? What’s the one difference between Crazy Egg and all the other analytical solutions out there?
Andrew: I think you’re about to say that funding is the difference between KISSmetrics?
Neil: So the answer is Google Analytics, KISSmetrics, all these solutions are on all the time, right? When they’re on all the time, you keep on paying for it. With Crazy Egg, it’s a testing tool. You use it, you make improvements. You may make a few more improvements on different pages, but a lot of companies and businesses, even though you should always makes improvements and always pay for Crazy Egg, they’ll stop after a few months or whatever it may be, right? Some continue on, but there’s a large portion that’ll stop after a few months because they’re like, “Hey, I’ve already done all the stuff. I love the product. I just don’t need it anymore.
Our number one reason for cancellations is, “Hey, I don’t need it anymore.” Right? That’s why it can’t be huge is because, as huge as let’s say KISSmetrics, cause KISSmetrics you always need right where getting in revenue number, trying to pull in a lot of that kind of stuff and then a new version of KISSmetrics that’s launching in the next few months, lifetime value, all those kind of good data stuff.
Are you telling me you’re going to stop paying for a solution that’s breaking down your revenue and your lifetime value? You’re like, “No, I always need to know those numbers. It’s changing over time and so forth and so on. Because whether you’re doing anything to your website or not, a lot of business owners just want that data. Crazy Egg, you’ve got to run tests all the time. It stops, and then you’ve got to re-initiate it and all this kind of stuff. But we’re trying to make it easier. Don’t get me wrong, or the team who’s running it is trying to make it easier. But that’s a big problem in which . . . that’s what separates a $100 million company and a company that’s not $100 million.
Andrew: What I mean is, maybe, the form of analytics that you offered at the time was not enough. Maybe, it was completely wrong. But why not keep at it and improve? Why not say to yourselves the audience is using this for a limited time and then they don’t see the value afterwards. Let’s come up with something that they could see, that they could use after they’re tired of what we first offer, and then something else that’s always on. And then we see that getclicky.com is doing well. Screw it. Let’s copy them and add that in here. Why not do that?
Neil: So, we’re a big proponent of keeping products simple. When your users are happy with your product, why try to overbloat it? Sometimes, as an entrepreneur, you just need to come to a realization where this is a good product for what it is. People are happy with it. You can improve upon it, but you don’t want to make it a getclicky. I’m not saying getcicky is bad or a chart (________) or any of these other solution because that’s not what your customers are looking for. Our biggest competitor could be a ClickTale right, in similarities. But, you know, what our customer thinks is a biggest competitor to us, and I bet you, you know, ClickTale and some of these other guys, if they already haven’t done the surveys, you know who they’re probably going to say? It’s not Crazy Egg for us. It’s not ClickTale. It’s this Google Analytics, right.
The customer still needs a lot of education. They don’t necessarily understand. To some aspects they are right, to some aspects they are wrong. But why not just keep your products simple. And if it’s meant for a testing product, let it be. Start a whole new company, raise money and go at it from ground up and build a bigger business that way. And that’s what we decided to do. I don’t really see it as a wrong approach. I think it was smart to say, “Hey, this is what the product’s niche is. People love it. Let’s carve out a niche and be the dominant player in that niche and just try to make money doing that.” Yeah, we’re not going to get filthy rich off of it, but that’s okay. You know, there’s other companies to create that could be bigger. And that’s why I focus all my time on KISSmetrics, right. When people ask like, “Hey, you know, why not focus on Crazy Egg, you’ve started making money?” But, that’s not going to get me to my goal as an entrepreneur, right. So . . .
Andrew: I see. Right. Okay. If you would have started piling on all kinds of features on Crazy Egg, I wouldn’t have been able to tell people what Crazy Egg is, let alone understood it for myself. And this is a way of saying, “Keep things simple. If there’s more, if there’s something different, let’s move it on to a different product.”
Neil: And if you’re going to learn one thing from 37signals, learn that. Simplicity is the ultimate specification. Create many applications that do one thing really well and call it a day. Is BaseCamp ever going to be the biggest project management suite out there, revenue wise, right? They probably are the biggest, maybe user wise but revenue wise, probably not, right. There’s probably like a Microsoft product manager or something that gets a lot more revenue than BaseCamp HQ will ever generate, right, just because they’re better at sales and they can get into Expedia and get them to pay, you know, $5 million or some bulls*** for a contract. But, at the end of the day, BaseCamp has created a big enough business where they’re happy and that’s all that matters. Entrepreneurs try to create this big pie in the sky vision and all that, but sometimes, the companies aren’t meant to be that big. You got to realize as an entrepreneur, are your customers happy? Do they want any changes? If not improve on the product, how it is. But don’t go to a totally new direction when you’re happy with where it is, right? Because that’s what’s causing the recommendations and the word of mouth to increase. The moment I overbook the product I’m like, “Dude this is way too complicated. I don’t know how to use it or whatever.”
The biggest thing Crazy Egg and our competition and I think this is what actually helped us succeed. When they focus on features, we don’t focus on features. We just focus one thing, better tracking. More accurate data. And that’s still the one thing that the developers working on Crazy Egg focus on right now.
More accurate data collection and better data, right? If the data is inaccurate, all the rest doesn’t really matter. And all the other companies out there, they really heavily focus on features. But features make their product really complicated and then you get this CEO of a corporation or a small company. He’s like, “Dude, how do you use this? I got to pay someone to use it, right?” It’s almost useless it at that point. You might as well go into enterprise sales and charge thousands of dollars a month then.
Andrew: How much revenue is Crazy Egg bringing in now?
Neil: No comment. [laughs]
Andrew: That’s all right.
Neil: I bet you, you knew that I was going to say zero too. But I know you had to try.
Andrew: I knew, I knew that you weren’t going to. How about we end this?
Neil: How about this? I’ll tell you that it’s greater than a dollar a month.
Andrew: All right. Can you give me a sense of . . . is it greater than $20,000 a month? Can you say that?
Neil: No comment.
Andrew: No comment at all. All right. I’ve known you long enough to know that you’re not going to comment on that. I’m not here to push you to with a number.
Neil: I’ll help. It’s more than $100 a month.
Andrew: All right. [ laughs] Hey, let’s end on this. I could have sworn that I saw logos on your apartment wall from people who apparently buy your . . . what’s the story behind that?
Neil: So, I brought my . . . like I ended up living on my own. So, I’m 25 right now. I moved out of my parents place almost a year and a half, a bit more than actually . . . almost two years ago actually. So that means I was living at home with mom and dad till I was 23.
A lot of you guys will probably make fun of me for this. But because it’s the recession now, you better get smart. I’m living with my parents because I’m not making money right? I’m actually at their home like now. And I was like, “Crap, living on your own is expensive. Dude, you got to pay mortgage. You got to pay Home Owners Association. There’s the electricity bills. Cable TV bill. And like I have this philosophy if you’re going to do it, do it right. I don’t know how to cook. There’s only ketchup in my fridge. So I’m like, all of my expenses started going up, right. And I was like, “S***, you got to buy furniture.”
And I’m kind of picky, right? Like I’m not rich, but I’m not poor. And I’ve worked hard enough where I like nice things. Like I don’t need a nice fancy car or anything like that. But if I’m going to buy a couch, I’m going to buy a comfortable couch. If I’m going to buy a TV because I’m a TV addict. I buy the best TV. I have three TVs in my one bedroom condo. One in the bathroom that’s even like fog-resistant. But I’m like, “S*** this is all expensive.” But I want to do it up because it is going to be my only bachelor pad. Because I know if get married, at that point it’s not even what you want. And you’re probably getting married so you can just say, “Hey wife go decide on whatever you want to buy within this budget range.” Right?
So what I ended up doing and I learned a lot of this from Hiten. You know, it’s like, if you’re going to do it, live your life right now because I’m not when I got married. He married my sister and he’s under the financial boat with my sister. So I ended up doing, I’m like . . . I was at Jeremy Shoemake’s conference, a week retreat. And people felt bad that I lived across a crack park. David Shteif from Revenue Enhancement Group. So David’s like, “Dude, I feel bad for you. I’m going to buy you a TV.” He’s like, “Do you want me to help pay for your apartment?” I’m like, “Dude, I just brought a condo.” He’s like, “Let me buy you a TV.”
And I’m like, “Oh s***, what’s in it for you?” He’s like, “Nothing.” He’s like “Neil you’re an awesome guy. I’m going to buy you a TV.” David literally brought me a TV. He busted out his computer right then and there and started buying me a TV, right? He’s like, “Which one do you want?” So I’m like, “This s*** is awesome.” So I’m like, and I was at the conference, I’m like, “Dude this guy just got me a TV.” So someone else is like, George from (________), he’s like, “Dude I’ll buy you a couch.” Right? I’m like, “Oh crap. I bet you at this one event I can get all my s*** for free.” At that one conference, I probably got 20 to 30 plus grand in free furniture.
There was one company called . . . in New York. What was the name? I got the best s*** them. Dude, I should know this. Crap, what’s that biggest Facebook affiliate? Not MyAds. Dude, I’m so forgetting the name. So there is this one dude. And I was like I need bedroom furniture. He like, “All right, I’ll buy you all you bedroom furniture.” Not only that, he paid for bed sheets from Wynn Las Vegas because I liked Wynn. [laughs] And he had his brother-in-law paint a portrait of me and he sent it to my place. So I have a painting of myself holding up a black American Express credit card, right? But the idea came about like, all these guys are offering me free stuff.
They didn’t care because I bet you they’re going to call in on favors later on, right? Like, hey, man we need some SEO advice or whatever. And I don’t offer consulting. So they’re getting their money’s worth. And then they also got their logos on my wall. And I did a blog post.
And I just felt that, so I’m like, “Hey how about I do a logo on my wall.” And then it came to I was pitching like, “Hey dude. You want your logo on my wall. It’s going to get a ton of press. All these bloggers are going to cover it.” So forth and so on. And at the end, I probably got 40 grand worth of free furniture.
Andrew: And you now have logos on your living room wall of the people who sent it to you?
Neil: No, no I took off the ads after I took pictures and did a blog entry.
Neil: I’m like, “Dude, I’m not going to keep the ads up. I’m like as long as you got the press.” And most of them didn’t even care for it. So I was just like, “Yeah, cool.”
Andrew: They were just trying to build a relationship with somebody who eventually would do them some kind of favor?
Neil: Yeah. Like, oh, the guy who got me the bed sheets and bed. He also founded an affiliate company called RocketProfit. So he already had money, right? Most of the people who paid for this stuff were already rich. Big Door Media for Pete, Zango did what, $80 million revenue or something like that? A year high profit margins? Are you telling me Keith cared to sponsor some stuff, or a guy like Mark, who took a company public, really cared to buy bedroom furniture? It’s cheap, it’s pennies on the dollar, right? Do you think David Shteif, it hurts him to buy me a TV?
So, these guys did it one, to become closer to me, two, they just did it as friends. And three, I was like “Dude, I’m going to pop up an ad, and I’m going to give you something back, get you some traffic to your business.” I told him I was going to take it down afterwards, and he was like “Cool, dude. We don’t care.” They didn’t do it to get the press out of it. They just did it, like hey we’ve been friends for a while.” Or, “You’re just a good guy. I’m going to help you out.” When you ask me for something, I just do it. Like when I ask you for something, you do it.
Andrew: The first time that I met you, I asked you for a favor. I said, “Would you come and speak at one of my live events?” You didn’t know me, I don’t think, from Adam. I just happened to know that you happened to live in Southern California. That’s all the connection that we had. You came out, you spoke, you killed. The audience loved you. We went out for a drink afterwards, we were talking, and I finally got to know who you were. You showed me your phone and you said, “Look, this guy wants to buy me a computer” or “He did buy me a computer”, something like that.
No, he did. He bought you a computer already. And I said “Why?” And I expected you to say, I wasn’t sure, but you said, “Maybe some time in the future I might be able to help him.” And I said, “Will you?” And I thought you were going to give me some kind of, “Nah, these idiots. They wasn’t to give me stuff, I’ll take it. They don’t even know who I am. I’m building up a fan base with my blog, screw them all. Let them send stuff in.”
You got really serious. It was one of the few times when I saw you just get serious. You said “Whatever they need.”
Neil: Yeah, because there’s no such thing as a free lunch. For my birthday, and I’m not saying this to brag, I’m sharing this as experience. GMAC is a mortgage company. They got me a $20,000 birthday present. They knew I collected watches. They didn’t buy me this one. They were like, “Hey, what do you want?” And they sent me 20 grand. I was like, “You know what, the Patek Philippe sounds nice, but how about you just give me the cash?” I learned the hard way that material objects, like a watch, are useless. I appreciate the gesture, but dude, a f***ing calculator watch can tell you the damn time. You don’t need a $20,000 thing on your hand to tell you the time. And I got 20 grand.
I was like “Cool, free money.” And they took it. But obviously I know when they have questions or they need help with their mortgage business, I’ve got to help them. There’s no such thing as a free lunch. As much value as I’m getting out of them, they’re probably going to get more out of me, right? It’s the way the world works. Somebody’s going to give you something, expect that they’re going to get at least that much back from you, and if they don’t, they’re dumb.
Andrew: All right. I’ve got so many questions. I’ve got to have these interviews go on for five hours. I’ll ask this last question, then we’ve got to move on, because people are already telling me that my interviews are too long and that I’m doing too many of them. Don’t you ever feel that this is just a debt that’s collecting and hanging over your head? Maybe not exactly like having Visa and MasterCard, like having a big debt with them, but it’s even worse because at least with Visa and MasterCard you know exactly when you’re done. You know exactly what to expect, and you’re not going to have somebody come out of the blue and say, “Hey Neil, you’ve got to help me out here because I once gave you a TV.”
Neil: That is correct, but I try to pay most people back within the first 6 to 12 months, so debts usually don’t last that long.
Andrew: And you pay them back by helping them with SEO or some kind of marketing help, usually?
Neil: It can be really as simple as this. Someone bought me a TV for my bedroom, right? Or the living room, or whatever. He needed a good connection at this company called Infospace, a two bar affiliate, and he’s getting paid for affiliate connections. Let’s say he’s making a dollar per install. Because I used to know the ex-CEO, and I knew someone really high up in the company, I won’t mention the name, I was able to get an introduction to the right person to get him a higher payout than if he went with someone else. Let’s say he makes $1.50 now. And let’s say that money was making him 20 grand a month. I’m now making him an extra 10 grand a month.
He’s stoked, right? I’m usually easily able to pay these debts back with a quick phone call and just making a few introductions to people who can help these guys get paid more, or whatever, and a lot of times it’s the easiest way to pay people back.
Andrew: All right. Well, I consider this interview my payback for all that you’ve done for me. I’ve now given you an hour in front of my audience, imagine the commercial value there. I can now go to sleep without feeling like I owe you.
Neil: Technically, I owe you now.
Andrew: Yes, as a matter of fact, you say you have three TVs? My wife and I don’t believe in TVs, but we’ll take one. No, I don’t need one. I’m not serious. Neil, first of all, thank you for making all these introductions for guests. So many of my guests have come through Neil Patel, I’ve stopped even crediting you because it just takes forever to make sure, to do the interview and the research and then post it and give you credit. So I’m going to do it right now. Neil, thank you. A lot of my guests come from Neil. There’s a thank you for that. Thank you for coming in last minute and doing this interview.
What else can I do? Everyone, check out QuickSprout.com. Read his blog. You’re going to love his attitude. You think this is good? Read the blog, man. I can’t imagine anyone in my audience doesn’t read it, but if you’re the one person who doesn’t read QuickSprout, read it. You’ll love this attitude even more when it’s coming from him directly. All right.
Neil: Thank you very much.
Andrew: Thanks man. Thank you all for watching. Come back to Mixergy, give me feedback, but don’t tell me that this interview was too long, because I can’t cut this stuff off. This is too good. Bye.
This transcript brought to you by www.SpeechPad.com.
Shopify – Remember the interview I did about how the founder of DODOCase sold about $1 mil worth of iPad cases in a few months? He used Shopify. It’s dead simple and very effective.
Grasshopper – Don’t make the mistake of comparing Grasshopper with other phone services. Check out their features and you’ll see why Grasshopper isn’t just a phone number, it’s the virtual phone system that entrepreneurs (like me) love.
Walker Corporate Law – Scott Edward Walker is the lawyer entrepreneurs turn to when they want to raise money or sell their companies, but if you’re just getting started, his firm will help you launch properly. Watch this video to learn about him.