You probably never heard of Fanpop and you don’t know how big it is. That’s because Dave Lu and his co-founders are too busy working to talk up their success. Besides, tech entrepreneurs like you aren’t their target demographic and, as a four-man team, they don’t have the time to court your attention.
But this is a story you need to hear because these scrappy founders grew Fanpop to 100 million monthly page views and over $1 million annual profits. There’s a lot to learn from how they did it.
Watch the FULL program
Dave Lu, Fanpop
If you try an experiment with me, I’ll tell you a secret.
If you go to FreshBooks.com and create a brand new account, of course refer
to Mixergy when they ask you how you heard of them. But if you go to
FreshBooks and create an account, and send me an invoice, my email address
is firstname.lastname@example.org. Well if you use FreshBooks to send me an invoice, I
will respond, and tell you how much money I made with this ad. I know you
must be curious. I’ll answer the question if you invoice me.
The other thing that you’ll discover is that invoicing with FreshBooks is
dead easy. No more headaches, no more wasting time. You can create your
invoice lickety-split. Lickety-split, that’s the word I’m looking for,
that’s the phrase. Dead simple. Makes your company look professional,
because you can design it yourself. And best of all, you get paid quickly
with FreshBooks. Go to FreshBooks.com, create your account. Try it out on
me. Send me an invoice, and if you do, I will reveal a secret to you.
Second sponsor is Shopify. You know that Shopify lets you create beautiful
stores that help you sell more. But did you know that if you use Mixergy in
that referral box that says where you heard about them, that Shopify will
give you a way, way longer free trial. I’m not going to tell you how long.
You’ve got to try it for yourself. Go to Shopify. Don’t do it for the
freebie, do it because Shopify stores make you look great and increase
Finally, who’s the lawyer that tech startups trust? And I should also say
tech investors, because I’ve gotten emails from both groups, investors and
startups, and they’ve asked me which lawyer should I turn to? And I always
say Scott Edward Walker. He is the entrepreneur’s lawyer. He is the tech
startup lawyer. If you’re in the space and need a lawyer, go to
Here’s the program.
Andrew Warner: Hey, everyone. I’m Andrew Warner. I’m the founder of Mixergy.com, home to the ambitious upstart and the place you come to hear successful entrepreneurs talk about how they did it, and teach you, so you can go out there, build your own company and hopefully come back and do what today’s guest is doing, which is an interview where you teach others and help them grow.
So, what is Fanpop? That’s what I thought when a past Mixergy guest suggested I interview the founder of Fanpop. Turns out Fanpop is a collection of user generated communities that draw about 7.8 million unique users per month, according to Quantcast, and their internal numbers say that Fanpop does over 100 million page views per month. Best still, this quiet success story was built by a team of just four people. How did Fanpop do it? Well, to hear their story, I have with me Dave Lu. He is the cofounder and CEO of Fanpop.
Dave Lu: Hi, Andrew. Thanks for having me.
Andrew: So is Quantcast right or wrong? How did they do with the numbers there? 7.8 million.
Dave: Quantcast, the numbers are probably closer to, well, from our internal records, go to, like, Google Analytics, are closer to 14 million worldwide. So obviously Compete, Quantcast, and Google Analytics all have different numbers, but from what we can tell we’re closer to [inaudible] and so, like you said, we’re over 100 million page views a month.
Andrew: 14 million unique people every month are on your website.
Andrew: All right. Before I dig deeper into the numbers, I want to make sure that my audience understands what Fanpop is.
Andrew: So, do you have an example that will help illustrate what Fanpop is?
Dave: Definitely. So Fanpop is basically a platform that we created to allow users and fans of different communities to create a destination, or fan club, around their topics of interest. So, say “Glee” fans, or was we call them, “Gleeks”, or Justin Bieber fans will come on this site and they would create a fan club. And users would be able to generate anything from forum discussions to posting on a wall, to creating image galleries, video galleries, post videos, creating trivia quizzes for the other fans, joining question and answers, kind of like a Yahoo AnswersorAnswers.com feature, to doing polls. And a lot of this is basically giving users and fans a way to express themselves and their passion with other people who have a shared, or like, interest. And this is very different than existing social networks where people, generally they come together because they know one another already, they are in an existing social circle. Our site brings people together from around the world, only because of their shared interest or passion. They connect and become friends. We’ve gotten so much feedback from our users, that have met some of their best friends on the site, because of their love of “Gossip Girl” or whatever.
So it’s been really exciting to see, I mean, we basically built a platform on Ruby on Rails from scratch and we allow users to generate fan clubs. Unlike Google groups from the past, the Yahoo groups, and the old discussion boards, we give them a tool set and a feature set that’s a lot more broad and diverse, in terms of what people can do. And they are so fragmented, because there are 500 Google fan groups for “Glee”, whereas we only allow for one topic on the whole site, to have a fan club. So there are many “Glee” fan clubs.
Andrew: All right. So huge numbers. What I’m wondering is what it took to get there. Starting with how many million of dollars did you guys raise to build up this company?
Dave: Let’s see. No millions of dollars, more than thousands of dollars. We just raised a hundred grand from some friends and family, just to get started with. No of use had done this before. We were all rookie entrepreneurs. I started it with an old colleague of mine from Yahoo. We were both product managing the Yahoo Finance back in ’99. That was our background. And then we got an engineer who was a Stanford CS grad. And then found a guy who ran a website called “Cookingforengineers.com” and he was a CAL EECS grad. And the four of us together, since the founding in 2006, we’ve been running this site and we haven’t added any headcount since then.
Andrew: I know it’s a private company. What do you feel comfortable saying about revenues and profits in the business?
Dave: Sure, well, we are making in the seven figures and because we’re four guys and the overhead is very low, our profits are in the seven figures as well.
Andrew: So over a million dollars in profits for this four-man operation?
Andrew: All right. Now we’ve got a story that my audience is going to want me to dig into. Let’s talk about how you started.
Andrew: The company started in 2006. You said the two of you met at Yahoo. What were you doing at Yahoo before you launched the business?
Dave: So actually this was back in ’99. So I guess this was our first product management job. Then Internet was just getting started up. So we both were product managers for Yahoo Finance, on different sides of the Yahoo Finance business, and we were working with, basically, millions of users, because Yahoo Finance is the biggest finance site on the Web. And there, kind of, we learned some of our basic skill sets.
We went our different ways. I had, since then, worked at Sony and Apple, and went to Stanford for business school, and then worked at eBay. And after that joined Flip Video, that Cisco bought. And then, it’s like, “You know what? I’ve seen what a small company can do and with open source code that way it is, being as cheap as it is.” My cofounder and I were like, “We should be doing this on our own.”
So he was, at the time, at Ziff Davis running their gaming site. So the two of us, basically, brainstormed ideas and decided, ‘hey this is something interesting.’ And my experience at eBay was that I was running product strategy for the affiliate marketing group at eBay. And I saw that there were ways to generate off of affiliate marketing. Like, if you sell something at eBay or get somebody to sign up, you’ll get a bounty of $45 or $20. And then the AdSense side of it I saw, hey, people are really making money on AdSense.
So it was proof to me as someone who had a background from very safe, big companies, large companies, working at the Yahoo and Sonys, to going to safe schools, thinking, I don’t know if I can start a company because I don’t know if I can really make money on these things. But I was helping get checks written to these guys from eBay for hundreds of thousands of dollars a month.
Andrew: Give me an example of one of these guys who was doing $100,000.
Andrew: I’m sure there’s one that stuck in your mind.
Dave: Yeah. There were a lot of keyword arbitrages that people had portfolios to drive. But then there were other guys who actually ran quality sites. So, it was funny, one of the guys, we actually paid at eBay, I met at a wedding in Maui and he runs a site called Bens Bargains.net and he’s been around forever. I think he did it when he was at Cal. But we were paying him a lot of money. And I talked to him and he’s like, “Yeah, I’m working out of my apartment. I decided against office space, because I was kind of bored and lonely.” But he was making seven figures off of all the affiliate programs.
I know the affiliate market has shrunk, but it gave me the courage to say, “Hey, people can make money on the Internet without raising capital. There are ways to actually make money without transactions or whatnot.” So, I started a project, on the side, for digital SLR cameras, because I’m a photographer, just to see if you make money on it. And within the first month I made $1,000 on Amazon affiliate. You know, people would buy a camera, I’d get $50 for each camera. And then . . .
Andrew: Let’s pause here for a moment.
Andrew: This is a site called EOSRebels.com?
Andrew: EOSrebels.com, what was the website about? I know it’s about these SLR cameras, but was it a link farm? Was it a blog? What was it?
Dave: So he funny thing was, people really like my pictures and they would always ask me, “Oh, how do I take these pictures? What kind of camera should I buy?” So I had to sit there writing emails to my friends like, “Look at this, buy this.” So you know what? I’m just build a website as a project and put it up, one for my friends, but also, two, to see if I can monetize it. And it gave me exposure to using AdSense, using the affiliate programs, and getting a check every month. And I was like, “Wow, this is real.”
So I would add things like photo galleries and forums and all of a sudden people from around the world would just start pilling in and running photo contest by themselves. Honestly, I wrote the content, I put up the features, and then the users would start these things like, “Oh, thank you so much for putting this there. There’s no place like this out there.” And they would just run monthly photo contests. And I was like, “Wow, there’s a community here, a very niche community, but it’s still a community in a response to a need that’s out there for people who are looking for other, specifically, Cannon digital SLR fans.”
So then we thought, hey, maybe this platform could be used on a bigger scale.
Andrew: I’m sorry. I apologize, but I’ve got to dig into this.
Andrew: And I hope you’ve got a clear calendar here, because I’m going to go longer than usual with this interview, because I can’t let you go.
Dave: That’s fine.
Andrew: By the way, I should’ve known, when I couldn’t find lots of stories about you and I didn’t know about you, I should have known that you were unfunded, because unfunded startups grow very quietly, build up their business, build up their profits. They don’t have venture capitals who keep talking to the media on their behalf. They just very quietly build out their business.
Andrew: The problem is, we don’t get to read about these stories, and we don’t get to hear them, which is why when I get someone like you here, I want to make sure that I dig into every part and learn your evolution.
Dave: Well, thank you for showing us some love, Andrew. I appreciate that.
Andrew: Thank you. I love this story. So, the thing that I’m wondering is, how much time did you spend building EOSrebels.com?
Dave: Oh, that was literally like a side thing that I did, maybe it took a week or two.
Andrew: But the contest and the user submissions and all that seems pretty involved, right?
Dave: Yeah, but I didn’t do all of that. The users started taking over the forums and doing their own thing.
Andrew: Oh, it’s in the forums that they decided to do this?
Andrew: So you didn’t even need to write the software for it.
Dave: Nope. Nope, I just put up the content pages, static html pages and added Use It open source phpBB forum and then used Flickr galleries. So basically using whatever open source stuff I had there, I built this Frankenstein site and people would come to the site via SCO. And they showed up and would find it and they’d say, “Oh, look, there’s actually a community here too.” And then they would go in that way.
Andrew: What kind of SEO did you do back then?
Dave: Oh, I was not an SEO guy, so it was basically, if you have good content and you have good keywords, it usually ends up showing up. I just made sure the basic rules, proper H1 tags, proper keyword tagging, and repeating keywords on the page. I mean very simple stuff that I know a lot more about now than I did back then. But it was very much the prototype and the archetype for our model today.
Andrew: And so, you put the stuff out. I’m imagining that, at first you reached, out to your friends or maybe you want on message boards and you brought people in?
Dave: Yes. So, back in the day, I tried to not necessarily link bait, but I would go onto DP forums and other photography sites and would say, “Hey, if you’re looking for a community, check out this site.” I mean, I would send them to me friends, but that would be like at handful. But it really was going out there a just trying to find a community, to draw the right experts to come in, and then they would spread the word.
Andrew: How did you draw the experts in? I understand the casual user reading a forum message would say, “I’ll go click over.” But experts are harder.
Dave: Yeah. So I would just reach out to those bloggers out there and those people who run their own sites, letting them know, “Hey, there’s another resource out there for the beginners, people who don’t know much.” Because a lot of these sites were more for the professionals who were spending a lot of money and a lot of time on photography, but there were a lot of newbies who wanted to join the fold and actually get into the hobby. So I wanted to reach out to them and say, “Hey, there’s a new resource out there.”
Andrew: Okay. So you’re building this stuff up, you’re starting to bring in revenue. What I’m wondering then, next, is why didn’t you just stick with this? When didn’t you say, “I’ve got photography, it’s a small niche, I can grow it out, and I’m sure that beyond these specific Cannon cameras I can go to other cameras, other brands”?
Dave: Sure. So one, I’m a finance major so the scalability would be a problem. Two, I knew that the model itself, if proven, if you could actually capture the whole long tail of the different hobbies and interest out there, you could generate a lot more revenue and it would be a lot quicker if we could just create a platform. Given that I don’t have a programming background it would be easier to actually create a software that would actually allow you to do that.
We started looking at Drupal and other open source CMS programs out there. My cofounder and I were big “Office” fans, the TV show, and we decided to use Drupal to try another model. And we used quotes and other things to build a community for “Office” fans and we saw that take off too. SEO picked up and people started coming, and we saw that succeed too. So we’re like, “Maybe we’re on to something here. If we created a platform that just allowed people to throw together a fan club community very quickly and easily, that that would be able to grow and grow.”
So, it’s amazing what fan clubs become, because now we’ve seen things that we’d never guessed would have been big. From “Twilight”, which was a book series, and we were like, “Why is this ‘Twilight’ thing getting bigger and bigger on our site, what is this thing?” And then the movies came out and we were in position, because of the existing community from the book fans, to blow up for “Twilight” fan clubs when the movies were out. Same thing for Justin Bieber. There was this little YouTube kid that was climbing up our radar and then all of a sudden his fan club basically took over our entire site.
So for us it was a matter of, “You know, we’re not going to be in the pulse everything, and there are enough passionate communities out there of very niche topics from bands to television shows to books, that we won’t be able to identify, that hey, if we give them the tool they can be like us. We’re the ones who are kind of like the pseudo experts or really passionate people who will put together the beginnings of it, but you find other people who’ll come and join and start contributing to the community.”
Andrew: All right. What are some of the other ideas that you considered before Fanpop when you guys were sketching out different ideas?
Dave: Sure. Another big idea was a travel site that we wanted to work on, but we knew that probably would need a Ph.D. with a lot of data expertise and being able to run algorithms, and we thought, “Well, what’s the scrappiest way that we could do this with just the two of us and getting some engineers, that wouldn’t require a lot of capital?”
I think the big idea that we wanted to bootstrap this from the beginning, because we had of other friends who took venture money, we would focus on, “Hey, what is the leanest way we could do this and the simplest way without generating a lot of capital?” So we actually never spent any marketing dollars on the site. If anything we maybe designed some t-shirts and maybe tried some Facebook ads, but other than that, I mean, a lot of the traffic was all organic.
With the long tail topics, users generating the content, good quality content, we were able to draw a lot of traffic in. So, basically, what are ways that we can do this on the cheap? We knew that the ad revenues were possible, but it meant driving a lot of impressions. How do you drive a lot of impressions? Create a lot of content. And then the content itself in turn will create more SCO and create more traffic. So as long as we kept getting the right users on the site, who’d generate more and more really specific content, and very SCO friendly content, we could keep that cycle going. And now, over time, growth has gotten, obviously, bigger and bigger.
Andrew: So at first it was two founders, Dave and David, right?
Dave: Yes, and Cliff who you met, he was a player.
Andrew: Oh, Cliff, and Michael Chu came on latter on?
Andrew: Was David a developer himself? I know the two of you met at Yahoo Finance, no?
Dave: No. He was a product manager. We were both PMs at Yahoo with no CS background. I mean, obviously we learned some coding, UNIX and other languages while we were there, but we both don’t have programming backgrounds. In fact, he was in a Ph.D. program for music. So, very different, and I have a business background.
Andrew: So, if it’s two guys who are non-developers are going to start a company that counts on developers, what was your original plan for finding the development?
Dave: Oh, man. That process in the beginning was painful. So I would say that we went through probably two other developers before we ended up with Cliff, and we’re still good friends with one of them, because we worked at Yahoo with him. But the trickiest part of it is the two of us were really frustrated, and I’ve seen blogs out there. I came across one called Whartoniteseekcodemonkey@tumbler.com, so we know there’s a huge gap between business people and product people trying to find good engineers. And I think there’s a premium now in the Valley to find good engineers, but at the time we were really frustrated. We were like, “We need to find somebody to build this.” So we thought about outsourcing and going abroad, but I think, as project managers, we know it’s very difficult to manage a team abroad unless you have someone on the ground there.
So, we decided to look for someone local. We tried someone in Virginia. That didn’t work out. We tried someone local, because he was still working for Yahoo, we couldn’t work that out. We were basically on our deathbed thinking, “Okay. Well, it’s time to go back and get a job.” But a family friend of mine reached out to me and said, “Hey, you know that idea you mentioned to me before, I’m interested.” And from there we finally got him to get on board and start programming for us.
So he actually didn’t know Rails at the time. He knew more Java items books [sounds like] than that, but he looked at the different programming languages at the time and decided to learn Ruby on Rails. So he learned it right when we started it. So in a way we were sort of paying tuition, but he learned very quickly.
Then we brought Michael on board, who was this Cooking by Engineers programmer. And did his plight in PHP, and learned Ruby on Rails too, and they both feel in love with that language. And this allowed us to go really quickly and scale better than we thought we ever could because there was no proof that any Rails site could ever scale that large, but we were like, “Okay. Let’s see if we can do it.” And it worked out.
Andrew: What did the two of you have to offer developers? You weren’t paying a lot of money. You weren’t giving shares in a funded company. You didn’t have anything beyond an idea and one website that worked, not even really well, it worked well. So what did you have to offer? How did you make it work?
Dave: I think the dream is what we sold on. I think part of it was, though, the idea that Michael was working at INTEL, he had been there for seven years. I think Cliff had been working at big companies and he wanted to work on his own startup. And the proof that the idea could actually generate some money and we both had very strong product backgrounds working at big companies. I think that gave them a sense of safety or they felt like they had confidence in what we could build.
But , again, it was just an idea at the time. We were going to try to do it part time, but we realized that doing, and I’ve advised many friends on this who are doing startups part time, that if you’re going to spend the best hours of your workday working for someone else, then the quality of your own startup is going to suffer. Because, you know, we were working at night, after I’d come back from work, from 7:00 or 8:00 until 2:00 in the morning, going through product ideas, going through wireframes, sketching things out, writing business plans, this and that. But I realized, we’re so exhausted by that time and our best ideas are happening during the day, that we need to quit and commit to this full time.
So we decide, ‘Okay. Let’s quit our jobs.” My cofounder had two kids, a mortgage, and his wife was a resident at a hospital. He basically gave up a lot more than I did. I still had business school loans, but I was by myself so it was okay. But we thought, “This idea, we’ve tried it twice and the idea has proven itself to work, if we could scale this it would be great.” It was a window of how much does it cost to have six months to nine months of coding time. All of us had savings; we could afford to take sweat equity in the business and go, “Let’s just build this out, see how the beta turns out, and then we’ll see what happens then.”
So it was also a matter of if we take venture money in the beginning, because we got calls from Benchmark, I talked to Sequoia , all this stuff in the beginning, and it was like, “Let’s see how far we can get before we take money, because if we can prove that this makes money and that we can get traffic then our dilution will be a lot better than it would have been otherwise.” So we thought, yeah, let’s just wait. Before we knew it, we were profitable and they were like, “Oh, well I guess we don’t need the money then.” So it all worked out pretty well.
I mean there’s a bit of serendipity in this as well. So not everyone is going to have the fortune of a site that can generate through ad revenues right away or via SEO, get traffic. I don’t think the model works for everyone, but it worked out for us.
Andrew: We the opportunity that you showed Michael and Cliff, the two engineers, was it that, “Look, we one site that’s bringing in $1,000, if we launch ten sites that do similar numbers, we’ll be at $10,000, and if we can get to 25 we’ll all a decent enough way to live.”
Andrew: That was it?
Dave: So, basically, it was that it wouldn’t take much if we scale this to start making, I mean, obviously, I’m a finance guy so I was like, “Oh, here’s the model it looks great. If you multiply by 100 this $1000 we’ll be making decent money.” So, I think it was partly that, but partly the idea that we all had wanted to build something on our own, because it doesn’t cost that much money to build. If we can get to that point where we’re actually self sufficient, we’d all be pretty happy. Versus, working at our desk jobs in a cube, and no offense to anyone working at a cube job. But I felt like a lot of the big companies was at, one in particular, an experience a eBay, a director of mine said, “You know,” because I was trying to rock the boat a little bit and get things to happen, because I had just graduated from business school, and I thought, “Okay. I want to make stuff happen.” He said, “You know, maybe you wish us to settle down a little bit, because heck, if this place blows up tomorrow, it’s not like they’re not going to make millions anyway.” I said, “Well, that doesn’t make me feel like I’m contributing very much then.”
So that kind of flipped a switch in my head saying, “I can’t do this anymore. I have to work for myself.” And I found that the experience has been so mind blowingly, I don’t think I’ll ever be able to work for a big company again. If you want to buy us, I think sure I can work something out. But I’ve learned that when you’re working at a company you’re working at 50% to 80% of your potential. You’re doing the job that you’re supposed to do, but there’s so many others around you that want to slow you down, but also that you can delegate work out to.
When you’re doing your own company, you find that you can do 150% of what your potential is. I mean, I’m a finance guy, but I did the graphic design for this site. So the logo I made on Photoshop, because I’m like, “I’m not going to spend the money on it. I can learn it myself, and I’ll try to mess around and do it.” Same thing with, anywhere from the marketing to finding an accountant, this, that. If you’re scrappy enough, you find out that you are able to do a lot more than you thought you were. My cofounder and I we started focusing on the HTML, CSS and code, and we have some UI experience from we like, “You know, we don’t need to hire a UI design firm. Let’s try to build this on our own.” So, all of us, instead of hiring an assistant admin, our engineers are like, “No, we can probably do this. Let’s figure it out ourselves.” So we forced ourselves to learn. And the team of four that could have grown to many more just extended ourselves to learn about what we could do and grow that way.
Andrew: All right. I understand now the idea. I understand the team that you got together to build it out. What I’m curious about now is, what was in that first version?
Dave: First version was interesting. We started off with a few features. The idea was thinking, hey, there are a lot of these Digg and Delicious sites out there. They’re very, kind of, geeky focused. Our moms would never use Digg, our friends would never use Digg. So we’re like, “There’s all these sites out there that have features that are kinda cool, but normal people aren’t using them.” So we started off with forums, link sharing like a bookmarking feature, and at the time I think it was forums, links and there was one other feature. But it was just three features that we had in the very beginning and that’s the set that we started with. And then from thereon we started adding new features slowly but surely. Like anywhere from publishing articles to creating polls and whatnot. But as the site grew we would iterate based on what we saw our users doing. So, like I mentioned before on the Cannon, we saw people running contests. On our site we saw people creating these trivia games using a forum post. So I’m like, “Hey, let’s codify that and make it into a feature so that they can use that. Because if they’re looking for that that means that there’s something out there that doesn’t exist right now.”
So we would see how they would do things given the resources they had and it was like, “Okay. We need to make that better for them, so the experience is better.” So we would just continue to iterate new products and features based off of watching the user behavior.
Andrew: All right. Let’s stick with the first day.
Andrew: Who did the design that was live on the first day?
Dave: The four of us. Yeah, so the first six months we coded the entire thing, design everything, did the graphics, did everything.
Andrew: And how did it look on the first day?
Dave: You know, we actually have a fan club so you can actually find in the photo galleries, they have a museum based on our earliest looks. So it was not too far from what we have now, but it was a lot more focused on general topics. So, we were focused on things like sport teams to new mothers, cigars, wine tasting so we had a broad list of topics, but then slowly but surely the users started moving towards entertainment topics and more pop culture things. I think one of it is because a lot of it is more episodic. A TV show has a lot more things to talk about every week. A book series has more things to talk about. So they kind of latched onto that.
Andrew: I see.
Dave: So we slowly moved towards more entertainment focused topics as we grew. But in the beginning it was very much like, “Hey, do you like soccer? We’ll find out who likes soccer.”
Andrew: I read an article in which you’re quoted just two months after launching Fanpop, you said, “We have over 1,000 spots on the site.” So within two months you hit 1,000 spots. These were all internally generated?
Dave: No. No. No. We created ones for sport teams and we started seeding some of them, but there’s no way, we definitely didn’t create a 1,000. I think we might have created 100 just to start things going. But then users, I guess, just kind of started going nuts and they saw, “Hey, I can create a new fan club for the topic that isn’t out there yet.” So, I think they wanted to put their stake in the ground and say, “Hey, I created a new fan club.”
And for us, we’re all about the community of fans. So it isn’t about one person owning any community. It was kind of this, “Hey, as a group you guys all own it together.” So they all jumped right in a we started creating social capital and creating badges so that they could get recognition for adding to the content. So there was this whole competitive aspect too.
Andrew: I’ve got to slow down. This has got to be like “The Matrix” when a bullet goes through the air, instead of just seeing boom, seeing it zip by, they slow it down and watch what happens. We’ve got to slow it down like that.
Dave: Slow it down. Okay.
Andrew: So you launch, day one you have a few spots, sponsor what you call the communities on the site, you’ve got a few of these communities that you create yourselves, and you’re saying the people come and create others.
Andrew: What I’m wondering is if you launch 100 of these communities, how do you get anyone to notice them? How do get people to just see that there are others on the site? You know, I imagine you get 100 people on day one if lucky and that might each go to a different community and see there’s only me, and walk away and never come back.
Dave: Totally. I think in the beginning it was very difficult, because we thought, “Oh, man, what did we do? We quit our jobs and now we a bunch of empty fan club communities that no one’s at.” And it was hard because, somehow the Seattle Post Intelligencer and TechCruch started picking things up within the first six days. I mean, we’re like, “Dude, we don’t want any PR until we actually have some traffic. Because they’re going to come here, they’re going to see a bunch of empty rooms and think, okay, this house is empty. Why would anyone come here?” But, I mean, they saw the potential in it, but the little spike of traffic from those guys weren’t the type of users that we needed. We needed people who were very enthusiastic about knitting or crocheting, or whatever.
Andrew: So how did you get those people into the first 100 communities?
Dave: I think the first five or six months was really slow going. It was a matter, like I did for the Cannon site, reaching out to photographers and bloggers, going out there reaching out to some of these niche areas and saying, “Hey, come check out this community site with this platform that you can use for your readers and other people who enjoy the things that you do.” And just reaching out to all those guys to be, kind of, our proponents. And as we got more champions out there from different sites, they would drive more users so our site. And since we know a user has a lot more interests than one. They come in, they find the platform, and they start seeing the other opportunities, because they realize, “Oh, this platform can be used for this, but I also like these other things, so let me start building and investing in those areas.” And so slowly but surely we got more and more of those folks on.
Andrew: All right. I’ve got to stick with this too. All right. You’ve got 100 communities you build yourself. I see how you’re recruiting people almost one at a time from other communities that are related to the ones you have. Users come over to your site. You have just a few seconds to make an impression on them. You don’t just make an impression on them with your first design. You make an impression on them that makes them want to enjoy the site, and, more importantly, you convert them into hosts of their own communities. How do you, with very few skills in the early days, very little user feedback, how do you take someone through the process of stranger, to lover, to creator, to what is it? Someone who gives birth? To parent a new community?
Dave: Sure. I think a lot of it, for us, had been driving the community towards encouraging one another to do it, because it’s not just a competitive thing, but there is something about the recognition from their peers who are also experts or fanatics in that same topic, to say, “Wow, this person is a real fan.” I mean, there are very few places, I think, out there that these virtual type fan club type environments exist, where they can get recognition for loving a TV show. It’s like, “Okay. Most of my friends think I’m weird for loving ‘Glee,’ but when I’m with a bunch of other ‘Glee’ people . . .”
Andrew: But, there were no bunch of other “Glee” people. Think back to, here’s the thing, I do not want to be a little podcaster on my website. I’ve got to create a big mark on the world and the only way I’m going to be able to create a big mark on the world is if I get people like you, incredible entrepreneurs, to think back to what they did in the early days, and pull back the most useful information possible and then out to me audience. That’s why I keep pushing. So if you have people on the site; how do you do it?
Dave: Oh, gosh. I mean, honestly, in the beginning it was all really scrappy. We had to do link-and-bait. I mean, I think the feature set was there. Users wanted to find the communities, but to get them there we had to do anything form link baiting, like going out there to Digg, and just posting out things all the time, writing articles, showing other users the features that we had. And slowly but surely as they created it, and like you said, there were plenty of abandoned ones that were there, where people go in and say, “There’s nothing here.” But in terms of that magic formula, I feel like, I hate to say it, but time was a big part of that, because one, the SEO eventually picked up for these existing communities, but two, I feel there were enough believers in the idea that they stuck around with us, not just for the topic, but for the site.
I mean we had a small community of really passionate users that, they did anything from buying a shirt with our logo on it from Cafe© Press for, I mean we did it for our team, just to make team shirts, but we had people buying shirts for $70, and I was like, “Why would you buy a sweatshirt with our logo on it?” But I think they really loved the Fanpop concept and the idea, and they would work hard to start building out on each of these ideas. I think it was more of a, “This is a brand new site and we can take over this place.” And that slowly but surely created a large community. But they would work hard on each of the different topics and add content. And that content would start picking up an SEO. New users would come in and say, “Hey, there’s some legitimate people here who understand what I’m interested in,” and they would start adding too.
So I think there was a model of, if you can get those mavens who want to start something brand new, they bring on other folks, whether it be through SEO or by going out onto their existing forums or blogs and saying, “Hey, there’s something better out there. There’s an alternative.” And bringing them over. So I mean, to the best of my ability I can only say it was a matter of time and getting the right passionate people on the site that trickled over and got more folks on. I don’t know if there’s a formula for it though.
Andrew: Here’s something else that I noticed.
Andrew: 2006, lots of people wrote about you.
Andrew: More bloggers than I could list here.
Andrew: Including Guy Kawasaki, who just did a post on your launch and said, “Maybe one person in my audience will create a fan club for me on Fanpop.”
Andrew: So how did you get all that press in the beginning?
Dave: The Guy one was interesting. I just meshed emails with him, we had breakfast together. Guy’s a really nice guy. He’s in the Valley and I’m up here in the city, so I said, “Hey, I’ve started this company, would love to met with you.” And he was like, “Yeah, let’s grab breakfast.” So it was that easy, but the other sites, literally, it was because when we launched the site, somehow the Seattle Post Intelligencer found it. I think it was through someone’s blog or whatever, and then TechCrunch picked that up and then Matt Schul [SP]and literally before we knew it, we had all these sites hitting us within the first seven days. And honestly, I really didn’t want that, because we felt like were still trying figure things out. We were still beta. We were still tweaking things. It was literally the seven days after we started, then we got hit.
And we were like, “Oh, my gosh.” We have a server in my bedroom, and we don’t know if it’s going to crash yet, so it was like we were really scared. So, it was good and bad at the same time. But one thing I’ve learned since then is that a lot of that traffic that comes from those sites, a lot of the tech bloggers aren’t necessarily the users you want, because at the end of the day, they come, there’s a spike, and it goes away. So it’s great for a story in terms of biz-dev and venture capital. We started getting interest from investors and other folks after that. But in terms of growing the user base, it doesn’t really spike that much, unless some of the server stat [fits that demographic, but yeah.
Andrew: Here’s something that I noticed from the beginning. You touched on the words that were the buzzwords at the time that people were excited about. You were Web 2.0, you were community, you were social, it was like the words that were magic at the time and there weren’t many people who were using them; you guys were and you got written up because of that?
Dave: Yeah, I think we fit the model very well.
Andrew: How long did it take you to hit profitability?
Dave: It took about a year.
Andrew: A year?
Dave: Given us four guys and the growth insight it took about a year and we were good to go.
Andrew: And you had a model that said, basically, “If we could create 1,000 sites like my Cannon digital SLR, then we’ll be profitable.” Did the revenues grow with the site creation, with the spot creation?
Dave: Yeah, so it’s not linear with the club creation, because like one club could grow a lot, like the Justin Bieber club or the “Twilight” club. So as long as the right topics hit and those grow, then we’re fine. So that’s the stuff that generates higher page rank, higher SEO, more content, more users, that’s the stuff that really helps us grow. But by having more clubs created, more spots created, those things might eventually pick up on the radar and grow as well. So it’s a matter of having all your seeds out there and seeing what will pick up eventually.
Andrew: All right. SEO was a huge help. You guys didn’t buy any advertising.
Andrew: Who introduced you to search engine optimization back in 2006 when most people were arguing with the effectiveness of it?
Dave: Right. So one of the things when I was at eBay, we say a lot of guys who were really good at SCO stuff. We were paying affiliates who knew how to do it well. So when we were doing this site we also knew . . . I mean my partner Dave was at Ziff Davis, he learned a lot about getting people on the Ziff for using SEO. So we were aware that free traffic is good traffic, and it’s also when you do bang for the buck in terms of SCM and paying for keywords versus getting SEO, free stuff. I mean the SEO continues to come nonstop. SCM after you stop paying for it, it doesn’t come back again. So we thought, “We have a perfect platform for optimizing for search engines, it’s keywords, it’s topics, it’s user generated content. If someone writes a question with a lot of the right keywords, someone else out there is probably writing in the same question with the same nature language input.” So it made sense.
And we saw a lot of sites come up with this like HubPages, Squidoo. Everyone was thinking, “Okay. If we can get users to create it, well get a lot of traffic.” So we thought, “Well, let’s do that, but not have it, kind of, spammy. Let’s have people actually create a community around it.”
So we knew the basics. We would read articles. We went to the SEO sites. But at the time we were bootstrapped, so we didn’t pay an SEO consultant. And then we did bring in one, a friend of a friend came in and did an analysis, and he helped a lot. He was great. So that helped us too, but with SEO it’s a matter of time before you grow and grow into the site we’ve been today. So basically we have Google to thank for a lot of our traffic.
Andrew: Okay. I understand the model now. I understand how you got if off the ground. I understand where you are now. What I’m wondering now is, what were some of the additions that you added to site that had outsized results? As far as traffic or engaging . . .
Dave: Sure. So in terms of engagement we’ve done a lot of things like adding the social capital to the site. We saw that people really wanted the reputation with their peers so we would give them medals based on their reputation. And they would beg us for medals. They would say, “Oh, I just added all this stuff. Can you give me a medal?” We’re like, “No, you have to earn it. It’s based on the feedback from your fellow users.” So I think this social capital thing really helped a lot. Building this community where users are locked into one another. Now we’ve launched badges, and the users come back and they’re like, “Oh, if I show up on Valentine’s Day I get this special collector’s badge.”
So it’s trying to encourage users to want to contribute content, but to stay engaged with the community and stay engaged with the site. So we’ve learned that the SEO user, they come, they browse for a little bit, but it’s a matter of grabbing them in and bringing them into the community. So those users that we brought into the community, we get over 20 page views at a visit, over 20 minutes spent per visit. And these guys are hooked. So if we can get them to stick around, they’re like on crack. It’s crazy.
Andrew: How do you do it? How do you take somebody who’s going to hit and run and turn them into a fan like that?
Dave: The one thing we’ve learned is, the landing page is huge. If you know that your SEO is coming to a certain landing page a lot, you examine that, you see where they’re coming in and the entry point is everything. So, okay, they’ve come to see a question or they’ve come to see a picture or whatever. But once you’re there, you have them for that three second period. You better grab their attention quickly and get something that, “If I came to look for a picture about ‘Twilight,’ if there’s a ‘Twilight’ trivia question in my face, or there’s something else ‘Twilight’ related that is just like grabbing me, then I’m going to go down that rabbit hole and I’m going to continue down that rabbit hole.”
So with minor tweaks we anywhere increased our conversion by 40%, 50% just by adding the right content around the content they’re looking for. So you already know what this person is coming for, especially with our site, it’s very, very granular targeted. We know that they are very interested in the Justin Bieber or this actor or that actor. So if we know that, we’re like, “Hey, I bet you they love playing trivia games for this person or there’s a poll that they be like, ‘Oh, no I totally disagree with that.'” So then they start answering.” So everyone is really opinionated, right?
So our site allows them to go, “I’m not just a ‘Simpsons’ fan. I’m a Lisa Simpson fan. I’m not just a Lisa Simpson fan, I’m the fan of the voice of who plays Lisa Simpson.” Because we allow people to create fan clubs around anything. You’d be amazed at what they create fan clubs for, because they are not only fans of the show, they’re fans of the characters, the actors. They have fans of the couples on the storyline, and they just keep creating. And then they find other people who agree with them and they find those that disagree with them. So there are sometimes these fan battles, but we took that and we created, you know, versus categories. So it’s like this versus that, go ahead. It’s a battle. So it’s like, “Hey, we might as well see what they’re doing.” And again, “Oh, there’s all these couples that people are creating. We’ll create a couple category.” So it’s a matter of watching how the users behave and building on that. But again, that rabbit hole thing works really well, because if you can get them to come jump down that hole, you’ve got them for life.
Andrew: All right. Let me see how, because we’d all love to have a rabbit hole like that.
Andrew: So, assume I come to your site to find a “Twilight” picture.
Andrew: On most sites, I’d go, I’d see the “Twilight” picture, I’d go, “Oh, that’s great,” and then I move back to Google and search for others.
Andrew: Here I see a “Twilight” picture that I was looking for, because I’d come in from Google. I see a quiz that makes say, “Oh, no. I don’t agree with that,” and I click to vote on that quiz. What would I see next? How would you continue me down the path?
Dave: Oh, there are many other quizzes on top of that.
Andrew: So, I’d finish that and then you go, “Oh, here’s another quiz for you.”
Dave: Yeah. Oh, it’s a constant quest. So we have user generated questions. So they’ll go in, and once they’re down that rabbit hole, there’s like 4,000 “Twilight” questions. So they’re like, “Oh, wow. There’s all these users who are asking really good questions. I wonder who this user is? Oh, this user also likes the same character on ‘Twilight’ as I do. I’m going to go down that fan club. Oh, there’s another door. There’s another door,” and it has all this content and before you know it, they’ve registered. They’ve joined all the clubs, and they’ve started creating content and adding content, because they want their opinion to be heard too. So then they start earning reputation medals and whatnot, and they say, “Hey, I kind of like this place. I’m going to come back and stick around for a bit.”
And they make friends on the site. This is going to sound really strange, but we’ve had people get married from meeting on the site. I know it’s [laughs]. So we’ve had people get married meeting on the site. We’ve had friends get together from meeting on the site, and it’s really cool to see how communities have come together because of what we’ve done.
Andrew: All right. This is so interesting. How do you know, I wonder if I’m getting too detailed but I can’t stop; how do you know which to show and which quiz is just going to be too boring?
Dave: Well, we get feedback from our quizzes. So we know the questions that are good and the questions that are bad, because we’re user generated, a lot of the questions are just really bad, but then the ones that people actually participate more or they vote on. Then we know, hey, let’s make sure that the good stuff shows up first so that it’s quality filtered and then that will just grab them in, because we don’t want, you know, if it’s any random question that could be really bad, and they’re like, “Oh, this is really stupid.” We make sure that, hey, our top quality questions come up first and that brings them in.
Andrew: All right. Any issues with the revenue when you launched it? I know you had a vision for how the revenue would come in. How did the reality differ from that vision?
Dave: That’s a great question. I think because we based the idea on affiliate revenues, which meant driving purchases on Amazon or other sites, it was a lot harder than we thought, because we starting veering more towards entertainment, and DVD sales, and music sales, and other things. Not that big in terms of contribution to revenue. So then we thought, okay, maybe AdSense will help. AdSence was good, because of the CPM isn’t great unless you get a lot of clicks. Also, CPM for entertainment isn’t great. CPC for entertainment not’s great.
So we knew, “Okay. This is going to be tough. Now that we’ve veered towards entertainment, we need to make money somehow.” But, because of our traction and because of our numbers we started getting inquiries from folks like “Glam” and “Allway” [SP] and MTV and other guys who say, “Hey, we want to rep you.” And that’s how we started saying, “Okay, displaying advertising from premium is the way to go.” And so that part of it started growing for us.
So we didn’t want to hire a sales team, because we knew that with our numbers we couldn’t afford to pay a great salesperson. And even then a good salesperson with no numbers can’t sell. So basically the only route to go, in that in between period, and I think this is for a lot of publishers, there’s the beginning where you have to scrap it out and try to get some traffic, but once you prove that you have traffic there’s that gap where you can find right monetization from folks like these guys, who are looking for more audience, more pages, more impressions. And they say, “Hey, you have a quality site we’d like to represent you.” And they have a whole network of sites that they represent, but you get premium CPMs
So from there, once you do that, then the next step is when you get your comScore numbers high enough you can hire a sales person, grow your team out and then start selling for even more money. So for us, since we never really wanted to hire salespeople. We thought, hey, if there’s a way to outsource this, let’s do that. Our focus is on the product. Let’s get users to come and love the site, and we’ll worry about the monetization later. But we were making enough money that we didn’t have to worry about building up that side of the business.
So I think in terms of building a great product that gets users in, I think that will draw revenues somehow, if you can figure it out. So it’s like Twitter. They don’t make money, but they’ll figure it out.
Andrew: No, you guys figured it out a lot sooner. It was a key part of your development. You didn’t say, “We’ll figure it out in year two.” You said, “Day one, we’re going to go.”
Dave: Right. I think that was part of the fact that we were, I wouldn’t say risk averse, because we obviously started the company, but there was a slight risk of not knowing if there was going to be a revenue stream right away. So we started making money right away when we launched the site, but it was just not a ton of money. But we knew that there was a way to make money. I don’t think we would have started it without thinking that. I think, looking back, if I started another company today, I would probably think what are the exit strategies in terms of options of a company acquiring a company like you’re building or is this something that can grow that big in scale, to the point where you could sell it or go public with it.
So, I think, with ours we had to, kind of, pivot a couple of times and iterate and just grow into the more teen, twenty something focus site that we are now, which is not where we started. But that being said, there are a lot of display sells out there, because movie studios, CPG companies, all these guys are trying to reach our target demographic. So we were able to generate a lot of sales. So we are repped by a company called Alloy Now [SP] that produces “Gossip Girl” and it’s perfect for our site.
Andrew: Yeah, and you guys don’t need to have sales people then.
Andrew: I was on this site for, I think, a minute and I got a badge. Some dog popped up in the lower right and gave me the badge.
Dave: That would be our fanpup.
Andrew: Fanpop, okay.
Andrew: So you said earlier, you discovered medals early on.
Andrew: I’m wondering how. Today it feels like everyone on the Internet is offering me a medal for something, but you guys discovered it before the rest of them did. Where did the idea come from?
Dave: Well , to be completely honest, we played video games. [laughs] We were playing “Hall of Duty”, and you could see that people were leveling up and getting all these rewards, and it was kind of nice, it’s like, hey, I’m good at this. I’m getting recognition and I’m less of a gamer than the other three guys are. So they play games for a long time and a lot of these role playing games, and other stuff, they’d get medals in. It was very early on in the world of “War Craft” and other stuff. The gamers really had a sense of that, but they just never applied it to the social web.
So, we saw, hey, our users really are working hard. We should give them something for it. And on top of that that recognition makes them want to work harder and it basically becomes competitive. It’s like, “Hey, I want to chase that next one, I wanna chase that next one. So I’m going to keep adding and adding.” Because we weren’t paying our users anything, so what other better way to give it than virtual recognition. So the recognition from their peers was more than enough for them to keep going.
Andrew: Pandia.com in 2006, you did an interview with them and you said this, you said, “Essentially our site is a new type of search directory. Like the open directory Demoz it is edited by volunteers and like Demoz it gives you topic list of relevant sites and webpage. There are significant differences though, you have to apply to become a Demoz editor, anyone can contribute to Fanpop.” And you were saying in that section that you’re essentially, going back to that first sentence that I read, so actually Fanpop is a new type of search directory. So it sounded like, were you thinking of becoming a new search site?
Dave: Yeah. The idea originally, if you had the experts in a topic procuring all the content for you on the Web, then you should end up with the best quality content in one repository. So, for me it was, “Why do I as a person who loves the New York Nicks need to go look for all the best New York Nicks content out there? There should be a place that all the other New York Nicks fans, like myself, who’ve already procured all this great content, I’d put it together in one place.” So it was kind of like this mini Digg or mini Delicious.
Andrew: Sorry. So you’re saying it’s like a mini Delicious?
Dave: We felt like Delicious and Digg were nice that they could find links, but you couldn’t even talk to other people. So we thought, “There should be a community around this content sharing, and if the experts are all here, and finding the best content, and helping you discover the best content for that topic, then we should allow you to talk to one another as well, because we know that you probably have a lot of other things to share, opinions, thoughts, that you want to share with each other.” So we thought, “Let’s create a book marking guide for these different topics.” So it was supposed to be a way that these people who are very passionate and knowledgeable source the best content on the web for one thing. So it’s crowd sourcing content for very, very niche topics.
Andrew: I see. And it seems like that didn’t work out. I mean, not that it didn’t work out, it seems like the audience took you in another direction?
Dave: Yeah. I think it was more that once we realized, “Okay. They love helping each other find the best content, but they love talking about that content even more.” So it was a matter of, “Okay. Well, let’s give them features, which give them a different angle to discuss their favorite things.” So creating a poll lets them argue about who think is the best person or a trivia quiz like, “Oh, this is another way to test your knowledge. Are you really an expert in this topic? Can you answer my questions?” To just adding question and answers saying, “Hey, I don’t know who this actor was that was on the show last night.” “Oh, I do, here you go.” So it’s a matter of getting this community to really benefit one another in different ways and also to allow them to express themselves in different ways.
Andrew: Here’s why I ask that. Also going back to the early days, I saw articles where you created a bookmarklet for people to share links, you compared yourself or others compared you to Delicious. You were talking about becoming new search engine.
Andrew: It’s very hard when you have this image of yourself that’s over here and the audience has a desire to be over here. It’s hard to say I’m going to where the audience is, especially when this personal goal you have is so lofty. To be a new search engine is so much bigger in the world that to be a place where people get to talk to each other.
Andrew: To compete with Google is better than to compete with Yahoo Answers or whatever chat message board.
Andrew: So how did you allow yourself to go? Was there a battle? Was there just a movement? Was there a need for revenue?
Dave: [laughs] I think if you’re bootstrapped, you’re a lot more fluid, I think you’re a lot more willing to bend.
Andrew: I see.
Dave: But I think it was a matter of watching, I mean, as product managers, both of us were like, “You know if you have an idea and you force it, and it doesn’t work, continuing to force it down users thoughts isn’t going to make it any better.” I mean taking medicine and making a kid eat it isn’t going to make him like it anymore, maybe you have to add something to it, maybe you have to try a different medicine. But we knew that, hey, we were on to something and we saw traction in one area. It’s not to say that we didn’t think that we still could have the discovery process be there for different content, but we say that maybe there’s too many options out there or maybe people prefer to use Google or maybe people prefer to use Delicious.
But if we are providing a value or a feature to users that they didn’t have before, then that in and of itself is worth it to us, because then we’re like, “Hey, we’ve tapped into something in the human spirit that’s like, hey, I really want to express myself about this topic, but I have nowhere else to do it.” There’s a reason why they came to use so we’re like, “Hey, you know we should provide for this desire for them to express themselves.” And if it’s not a search engine, I don’t know that we were ever going to compete with Google. It was going to be more of an alternative to say, “Hey, we are finding the best content for you and instead of going to Google and searching by hand yourself, we’ve had people search for you already, and they’ve filtered everything out for you.” But it, kind of, grow in to communities really connecting instead.
Andrew: Well, most people who learn that lesson of listening to the community and listen to the audience, as opposed to chasing their vision alone. They learn it the hard way, because they tried something and it didn’t work and they learned to just be more flexible. Did you have an experience like that?
Dave: I think probably in the early days as a product manager at Yahoo, we tried to do a lot of things that we thought we knew better.
Andrew: Can you give an example?
Dave: So we wanted to charge for real-time quotes, back in the day, and we said, “Hey, we want to charge you for it,” and that was it. We’re just going to say, “If you want real-time quotes, you have to pay for it.” But that we was enough. Users weren’t okay with saying, “Okay. Well I’m okay with 20 minute delays, I don’t care.” But we had to build new features for them, anywhere from integration and making it worth it for them to pay for the premium quote, to using Yahoo Messenger, getting your real-time quotes there. Or I built out with my engineers a Java portfolio so that they could actually get live streams, so they’d have a tool. So it was like, “Hey, I’m going to charge you $9.95 or 20 bucks a month for this, we’d better provide you a lot more value for it.”
So it went from, “Okay. We’re going to force this and you’re going to have to pay for it,” to, “Oh, okay. Maybe we should step back and build something else for you and then package it again.”
So there are times when you think, “Hey, there’s no way they’re not going to pay for this, they need it.” They find a way around it. Just like with our site, they could use our site, they could use many alternatives sites. There were a lot of Web 2.0 startups going up at the same time, and if you see something that sticks, you’ve got to pivot and you’ve got to . . . ,
I really think that observing the user behavior can help a company succeed, because you could and try to force these things down, but again, if they’re not going to stick, that means other users aren’t going to stick either because the stubbornness is only going to force you to wait for type of user that you think is going to come. That may never happen. But if you have all these users that are already there, why not grab onto those guys and try to develop something for them, because clearly you’ve proven that some part of your model’s working. So you should try to build off of that.
Andrew: All right. You and I talked before this interview started about the lean startup framework and other frameworks that new entrepreneurs try to use as a step by step guide. What’s your feeling on that?
Dave: So, I’ve advised many friends who are starting companies and given interviews. At Stanford they taught us lots of these frameworks and I thought, these are great, and now there’s even more. I mean back in the day when we were doing entrepreneurship, it was a very different model, I think, than today, but I’ve seen so many of these models and these graphs, and other things, and it’s very academic. I think it’s great. But I see a lot of folks forcing the model to work for them. I mean, I understand it’s a good exercise, just like writing a business plan is a good exercise, but in terms of when we bootstrapped it, we didn’t have time to think about each of these steps. I think it was more of an organic.
You know, we observe what’s happening with our site. We know the opportunities that are out there. We look at our competitors. There’s a Poters Five Forces model you can force into this thing, but at the same time if you look at your product yourself, my cofounder and I we’re very product focus guys and we are look at what we think users need and when focus on that and then when we finally get some users on the site we can iterate based off of what they’re doing with the site.
So I honestly think that the lean startup, the agile development process, I agree that throwing up there sooner is better, because then you see reaction and feedback. At the same time there is value in a broader, kind of, bigger picture, “Okay. Well, what are the exits for this? How do you make money off of this? Who are the potential users and competitors out there that could threaten this?” Versus, “Okay. I had this idea, let me throw it up and then see what happens.” Because you could spend a lot of time coding these things that don’t work.
So I do think that there is a business aspect to it that you need to consider, but to be honest I’ve read a bunch of the books. I’ve read the “Founders at Work”. I’ve read a bunch of these stories that, I don’t know that if most of these guys, if they went back today and tried to stick those models that people are drawing in diagrams on to them, you know, Eric Reis, Steve Linke, these other guys, that they would necessarily be able to force a lot of these serendipitous moments that were there. There are inflection points that there’s no way we could have planned for. So I think the planning part is great, it’s a good exercise. But in reality, like I told you, if we didn’t change and we were stubborn and stuck to that plan, then that movement from wanting to be a kind of search alternative to being a community site. We would have been stuck there, and for all we know we wouldn’t have made any money, and we would have been done by now. It would have been a fun project for a year or two, and then I would be working at Google or Facebook right now. So, it’s very different.
Andrew: So you’re saying there are inflection points that you couldn’t have predicted, that you just discover by serendipity. I want to make sure that I’m understanding you right. When you were tossing up some ideas based on what the community was telling you, weren’t you essentially following the lean startup methodology where you were saying, “I think they want this quiz system. Let’s just build a quick quiz system. See if they like it. If they do like it, we’ll keep and we’ll grow it, and if they don’t then we’ll find out why they don’t, and we’ll chop it off.”
Dave: Right. Trust me, I’m a proponent of the lean startup model. And that’s exactly what we did. We see the feedback, we build, we try it out, and if it doesn’t work, it doesn’t work. But like what you said before, a lot of startups are taking what they did and forcing it into that model. I don’t know if you can force fit all these things into that exact model. But I’m saying that there are a lot of valuable points in that, but I think there’s also something to be said about, thinking about the bigger picture, versus trying to throw stuff and see if it sticks on the wall.
Andrew: I see what you mean. All right. Kind of like, I interviewed Neil Strauss, author of “The Game”, a book about how to pick up women. The difference between someone who reads that book and says, “Oh, I going to go and neg a girl. You know I’ll give her that negative statement and then she’ll love me because of it.” It doesn’t really work that way. It’s not following the book step by step and pulling out your cheat sheet every time you want to meet a girl.
All right. What about this? You guys worked really hard, you built up the business first, first year you weren’t profitable, you eventually get there, we talked about the millions that you made. What about that first million? What was it like to earn that first million? Remember?
Dave: Yeah, when I was doing our accounting it was like, oh, wow. We can finally say that we’re a million dollar company, and it was great. I think saying that with four guys, you know there was an article that I did for “Information Week” back in the day and it was about lifestyle startups. For some reason I hated that. It was like this backhanded compliment. It was like, “Oh, this is nice for you that you have this little startup.” And I was like, “It’s nice for us, but we’re making more money than the funded startups out there, and we didn’t take any money.” It was, for me, it’s humbling. It’s great that we were called a lifestyle startup, but at the same time it’s like, “Hey, we have 15 million users and we’re making millions and a lot of these startups that are taking tons of money right now and whatnot are not doing as well as we are.”
So, I was pretty happy that we were able to do this. Not just for myself, because hey this is great, but it’s also to prove to others that this could be done with not a lot of capital. And not every startup can do that, but I think, more and more, I see these young guys who are taking money from Y Combinator and other places. I do think that without some kind of experience it’s harder to do, but I would recommend it to a lot of friends. Hey, why don’t you try to go as far as you can with this without taking money, because you may be able to prove that there’s a model and that your evaluation will improve that much more, and so you won’t be diluted. So scrap it out as long as you can. And for all you know you’ll hit a point where you actually start making enough money that you don’t need the capital. So that’s what happened to us and I fully endorse bootstrapping to others, because by venture backed friends, a lot of them, they regret taking money and wish they’d didn’t.
But I think in this time when evaluations are so high and it’s easy to get cheap money, I mean, why not. You’ve got a runway that if your company doesn’t work out you can have time to experiment. But we were fortunate enough that we never had to do that.
Andrew: All right. The friend who introduced us, by the way, is Nori Yoshida. I’ve got to thank him for making this introduction. I wouldn’t have discovered the company without it. What was I going to say? The reason, by the way, that I don’t give the names of the people who introduce me up in the intro, is that I feel that I am introducing so many new ideas, not that I want to diss Nori or I don’t care about Nori. I’m really grateful to anyone who makes an introduction, especially Nori. But when we start the interview, if I say, “Well, it was introduced by Nori and I’m about to introduce this new company name, and I’m also going to introduce his cofounder and I also going to make sure that you understand who’s that name of the person that I’m interviewing.” It just gets too crowed.
Andrew: So, I always wanted to explain that. To explain why I say I was introduced by a past guest. Instead of saying I was introduced by Nori Yoshida, or whoever it is.’
All right. I don’t want to end it on that. Let’s end it on the best piece of advice that you could give to my audience. What would it be, beyond trying to build it without funding?
Dave: For all those folks who are afraid of taking that leap, I’ve said this before and I’ll say it again. My whole life I’ve done safe things, I’ve done the ivy league school thing, worked at big name companies, and just said, “This is the right path for me and I’m going to keep going down that path.” But is wasn’t until I took that leap, which was really scary, especially when you’re up there and safe, to take that leap, I liken it to “Indiana Jones and the Last Crusade”, when Indy had to step off on to that footbridge that he couldn’t see and it’s invisible, but until he just stepped out he couldn’t realize that, oh, it’s not that bad. And I think it’s like that. Starting a company from wherever you are.
I know friends at VC firms who’ve never started. They did the safe route, they went to VC, and I know they want to start something. And I know other folks who are bankers, who they hate their lives. I know it might seem scary, but you’re amazed once you do it. They type of people who will come out of the woodwork to support you, your friends, your family, random introductions to friends to interview you. Every little thing that comes along the path creates a save path for you to cross. You may fail, but you will find, if nothing else, that you’ll want to do it again. American Express today did an interview with small business, “How many of you, of the failures, would start a company again?” I think it was eight or nine out of ten said that they in a heartbeat would do it again. And I think it’s a matter of, when you can own it and you can passionate about it, and it’s your own baby, there’s nothing like. I’ve been fortunate enough to be successful with and I will continue to do startups until I can’t do it anymore. [laughs] But, it’s an amazing thing and I think that you shouldn’t be scared of taking that leap. I know it’s really scary, and I was scared, but you’ll be surprised how things can work out for.
Andrew: Well, congratulations on how well it’s worked out, Dave. The website is Fanpop. If you guys go to Fanpop.com I guarantee you’re going to win a badge within a minute. You’ll get a taste of what the site’s about. So check it. Thank you all for watching. Bye.
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.
Freshbooks – See how their invoices will help you get paid faster. When you create your new account, if you say you heard about them on Mixergy, you’ll be entered to win a free cake. This is open to Mixergy fans only and they’re giving away a new cake EVERY DAY, so your chances of winning are higher.
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.