Why Evite Lost Its MoJo — But Still Grew Sales To $21 Mil – with Harry Lin

Harry Lin is giving me a gift with this interview. In 2006, when he became Evite’s SVP and General Manager, he helped the company grow annual sales from $13 million to $21 million. The gift he gave me (and you) is to come to Mixergy and peel back that success to show us Evite’s vulnerabilities so we ambitious upstarts can learn what’s inside the minds of big companies like Evite, and how we can take them on.

What you’re going to see in this interview is why Evite seems to have lost its mojo and now looks dated. You’re going to understand why bigger companies can’t easily use those lean startup techniques that help younger startups stay nimble. But this isn’t a puff piece designed to inflate your chest by giving you empty confidence. We also talk about how, despite its stodginess, Evite managed to grow sales by $7 million a year and kept back a raft of anxious competitors.

Today Harry is the CEO of Lottay, the company that aims to make sending money a great gift experience.

The FULL program


About Harry Lin

Harry Lin

Harry Lin is the CEO of Lottay, the web site that allows you to give money through PayPal as a meaningful and fun gift. Previously, he was the CEO of Zig, the SVP and General Manager of Evite, and VP of ABC.com / Disney.

If you found this interview helpful, you should tell his company on Twitter.

Raw transcript


This is a raw, mechanical transcript.

All right, before we get started I have to tell you about my sponsors. And by the way, what a great interview you’re about to listen to. You’re about to be taken inside a big company to find out why they make so much money, to find out why they’re so inflexible at times, to find out how you can compete with them and to find out how you can partner up with them. I don’t think there’s anyone out there that’s taken you in and given you this kind of look. All right. But first the sponsors.

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Andrew: Hey everyone. My name is Andrew Warner. I’m the founder of Mixergy dot com, home of the ambitious upstart. And I don’t ordinarily like to have young internet companies here because I just don’t think there’s enough experience for us to go into and there are tons of websites out there that are covering the newest, latest and greatest website. My goal is to learn from experienced business people so that other entrepreneurs can go out and build incredible companies. And so I’ve got a guy with me here, Harry Lin, who is now at a young company called Lottay. Am I pronouncing it right? Lottay! Listen to me! I screwed it up again. Please, you say it.

Interviewee: Lottay. Just like the drink.

Andrew: Lottay. L-O-T-T-A-Y dot come. And before this you worked for evite. And I’m frigging fascinated by evite because it’s a powerhouse of a website even though, as you’ve said on your site, and as the rest of us know, there hasn’t been any new creativity, there hasn’t been much new on that website in years. In maybe a decade now. So I want to find out… I’m sorry?

Interviewee: Yeah, I was going to say it’s now at a decade. Yes.

Andrew: A decade. And it’s no secret. The people inside know it and talk about it. The people outside know it and talk about it. I want to find out from you what it was like to be on the inside. Now I’ve got to say too, before we even get into evite, which is the heart of this conversation, I met your company back when I was judging a…what was it? Do you remember what it was? I know you weren’t there at the time, right?

Interviewee: Oh. Tech Crunch?

Andrew: No. This was at a UCLA business plan competition.

Interviewee: Okay. Yeah, before I was there.

Andrew: Sorry?

Interviewee: Yes, before I came aboard, that’s right. Yeah.

Andrew: After I sold my company I became –and I had a lot of time – I became the guy to go to if you needed a competition for business plans. If you needed a judge for it. So in that week alone I was judging a competition at UCLA for Twist Up. And then Microsoft asked me to come into their office and judge. And what stood out for me with Lottay is the guys there took it seriously. A lot of times you go in and watch people go through their business plan, it’s like frigging watching somebody do their homework. Like there’s a teacher on the side grading them and if the teacher looks away, they’re really just going to go, “Uhh. I didn’t’ care about this anyway.” You know? I love seeing guys who just can’t wait to rip into the world, who say, “I’ve got this idea,” and the idea was pretty much thought out while they were in school, “I’ve got this idea. I’ve got to get out there and show it to the world.” So for people who haven’t been on your website can you tell them what it’s about?

Interviewee: Sure. It allows you to give cash as a gift but wrap it with a gift experience. Customized web page, photos, a card, personal message. But you are sending money to someone via PayPal.

Andrew: What do you mean by photos? Why would I need photos if I’m sending money to somebody?

Interviewee: Because you want to actually make it a gift. I mean, I can hand you a $5 bill and you might be happy but if I sent you a $5 bill on Lottay and said, “Andrew, here’s $5 for a venti espresso at Starbucks because I know you love those,” it adds kind of that cute virtual gift element to it. And so you’ve got the money right in your PayPal account –very convenient, very cool – but you’ve got that emotional connection which is what gift giving is actually about: an emotional connection.

Andrew: Where’d you guys come up with the name?

Interviewee: Well Lottay is a play on “latte” and “lottery”. So Andrew Elliot, the founder said that he wanted to be like the feeling when you put on a pair of jeans, stick your hand in the pocket and you find a $5 bill. It’s like winning the lottery! And lattes are sort of warm and milky and smooth and fun. So lottery, latte, Lottay. Plus the domain name is unique because it doesn’t mean anything which means we don’t have to be fighting for SEM and SEO placement.

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Interviewee: unique because it doesn’t mean anything, which means we don’t have to be fighting for SEO and SEM placement.

Andrew: [laughter] Very cool. I’m going to ask you more questions, ‘cause I’ve got them about where the money’s coming from, how are you guys going to promote it, and so on, but let’s talk a little bit about evite. Evite online invitation website, it’s owned by IAC, right? IAC, can you tell people a little bit about how big that company is?

Interviewee: Oh, it’s enormous. So IAC is the interactive conglomerate run by, founded by Barry Diller, former entertainment mogul. IAC owns Ticketmaster, Home Shopping Network, Citysearch, Match.com, ASK, the former Ask Jeeves, evite and I can go on and on, but that right there should tell you just how large IAC is.

Andrew: And they own College Humor, whose founder was here on Mixergy in the past, tons of companies

Interviewee: Yeah

Andrew: so how did you get hired on at evite?

Interviewee: Sure, so prior to that I ran abc.com, the television website for five years and evite was without a general manager. It actually had a staff but no one leading it and, which is indicative sort of how IAC was treating it, it was the orphan step-child kind of off in the corner, and they decided that they needed someone with a very strong consumer and brand focus who also understood how to run an advertising-backed business model. This is all exactly the things I was doing at abc.com. Also interestingly, this might be interesting to some folks, who don’t know, abc.com, given that it’s a television network and the kind of shows that are running on the network, was actually female skewing. So our audience was female skewing so like some of our shows were like a hundred percent female audience, right? Like The Bachelor, for example. Evite, very heavily female skewing. ‘Cause if you think about it, evites are for that kind of a social butterfly. Right? The alpha female who is the center of her social universe. So evite’s loyal audience is very female and so that was another nice match with me as well, too. Plus I liked the idea of trying to take something, this was me personally, why I wanted to do it, I wanted to take something that had sort of been hanging around, had been ignored, still had potential to be re-made, I thought that that challenge would be very, very interesting. And that was actually the main reason that I took the job.

Andrew: What was the potential that you saw there?

Interviewee: So what I saw was a classic, classic is another word for old,

Andrew: Right

Interviewee: but a classic web 1.0 brand that still had an enormous user base, and, and enviable loyalty among its users but had let all of web 2.0 pass it behind. And so one could argue that evite, back in the day, late nineties, was the first social networking application. I know it sounds a little bit like a stretch, but, but follow me on that. Right? Back in the day, because each social network was a party, so every party could be considered a micro social network. But what had happened of course, in the intervening years was that you had Facebook, My Space, etcetera and evite and IAC had done nothing with it. Yet it hadn’t died. You couldn’t go to kill it yet, you know, no matter how much, no matter how much it was ignored, it wasn’t killed. And so the potential I thought was that you could take that user base, you could take the rabid loyalty it had and you could take the brand equity, I mean everyone still knows what evite is, and with the proper innovation on the product side and some interesting marketing, and co-marketing and distribution deals, I thought we might be able to make evite into a web 2.0 social networking application platform. That was my grand vision. Anyway.

Andrew: I see. You know and I had a similar idea at the time, I guess at the time that you were working there I said, “what if there’s an invitation that when you R.S.V.P. you joined the party already? I mean you start having conversations with other people who are going to be there, you find out a little bit more about them, you’re able to follow up with them after the party, and so each party becomes its own social network.”

Interviewee: Yeah.

Andrew: Um, the reason that didn’t work, for me was because that wasn’t really my passion, I somehow got into that, just somehow fell down that rabbit hole. I was going to create Mixergy into a way of helping people build incredible companies and I said, “the way to do that is to organize parties. I said, alright, the way to organize parties, well there’s no good invitation system that does what I want it to do, well, I mean, I could do anything, why don’t I just go and hire a couple of developers and I’ll build this thing out and have it do it.” And then I got sucked into spending time and money into developing this greeting card business and, I mean this invitation system, um, and my background was that I had a greeting card company that I sold so I thought, “greeting cards, invitations, let’s jump into it.” Um, so I see, I agree with you on the potential there, um, why didn’t it work out for evite? Why couldn’t evite be taken in that direction?

Interviewee: There are two big reasons. A bunch of things, but the two big reasons are this. First of all, what I didn’t realize, I hadn’t done my homework before I took the gig, was that the code had not been re-factored since it was launched, so you’re talking about, I don’t even know what it was written in, frankly, you know, but it, the code, was built back in the late nineties, that was still what the site was running on and so a lot of very basic, simple things that you needed to be able to do, to do the kind of product
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Interviewee: …product innovation that we wanted to became 12 month cycles. Like if we wanted to expose parts of evite via an API so that people could build interesting things off it…well, first of all we didn’t have that capability. If we wanted it, that’d be about a year and a half. I’m like, “Oh my God.” Just changing something on the home page was a three month cycle because everything was this rats’ nest of code. That was the first problem and of course, the only way to solve that problem is you have to bite the bullet and you have to do a massive refactoring. You have to re-architect the site.

Andrew: The whole thing? From top to bottom?

Interviewee: Absolutely. Yeah. My understanding is that this is very similar to what happened after Fox acquired MySpace. When they…after they got it they sort of looked under the hood of what they had bought and realized, “My gosh! This is the same code as it was built on when it was like two guys in a garage kind of thing.” And evite was the same thing. And so, because product innovation was so key to realizing that vision that you and I have just described, that became a major hurdle right there. Now, time and money could solve that but now comes the second part. The second problem was that Evite is a part of an operating company that is publicly traded and we had a quarterly number to hit every three months. The expectation on profitability was about the only thing that mattered really at IAC. I don’t want to sound like I’m complaining because this is the deal you make when you run a publicly traded company. I mean, this is what you have to do. You work for your shareholders, you work for your investors. The problem, or the disconnect I should say, is that if you go back to the first problem I talked about we’re talking about investment. Investment doesn’t produce a goose in top line and bottom line profits. It doesn’t do that. Investment usually takes money. And so there was always major struggle between the proposition that we had to invest time and resources into this refactoring and re-architecting versus can’t we just drive more revenue and maybe you could lay off a few people to goose the bottom line. I’m exaggerating a little bit but those are actually the conversations you have at a company like IAC. So given the tension between those two I failed at convincing the corporation we needed to do that first thing. I did succeed, and I put in big air quotes, I succeeded in driving revenue significantly and keeping the profit manage going. It was about a 25% profit margin. And in the year and a half I was there we grew revenue by 50%. So I
am proud of that but the problem is we didn’t solve the fundamental dilemma which was that it’s still the same code base and the same…basically, the same product as it was 10 years ago.

Andrew: Let’s go even deeper. I want to make sure I understand the software. So let’s see what we’ve talked about. The code couldn’t change. You had to meet your expectations. Your profit expectations. What about this? What about the risk? When you’re a young guy starting out you don’t have much to your name and you’re launching a business, you can take all kinds of risk. But when you have a business that people expect a certain service from, when you have a business that’s successful, you have a lot to risk. You can’t just play around with different ideas. How much of an issue was that?

Interviewee: That’s a big issue. I mean, it’s very insightful. The metaphor I would use internally in our meetings, which I’ll share with you here, was this: the challenge was as if we had to overhaul the engine of a car while we were driving on the freeway at 60 miles an hour full of passengers. You can overhaul an engine of a car while it’s sitting in the garage and you’re not taking it on a trip. But the metaphor means that…

Andrew: Oh, one second. Hallo?

Interviewee: Hallo there.

Andrew: Hi. There we go. I’ll just get us back on video here and make sure people can see us clearly. So, yeah. You gave us the metaphor with the car and can you relate it back now to evite?

Interviewee: So the business situation was that we had 15 million users on evite. We also had a significant number of advertisers running paid campaigns on evite who expect a certain amount of delivery and impression and reporting on all that. That business is running, right? On the consumer side and also on the client side, client meaning our advertisers. We couldn’t just say, “You know what? We’re going to take a breather here for six months. Refactor the entire site, re-architect the entire site and then launch a whole slew of Web 2.0 product innovations.” You can’t take that time out with a business, all right? And that’s what it means to run a publicly traded, fairly mature internet company. And so maybe someone smarter than I am and greater than my team that I had there, maybe someone could have figured out how to do both things at the same time. I couldn’t. And so given again the nature of the company we decided that, Okay. We’re going to punt on the refactoring and the product innovation and we’re going to concentrate on delivering what the investors and the shareholders wanted. Which was top line growth and bottom line profits. And that’s what we did.

Andrew: Now, you guys did make a couple of changes to the user experience. I think there was the ability to open up an invitation. That was implemented at some point.
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Andrew: …The ability to open up an invitation, that was implemented at some point. There were a couple of things. Can you talk about what you did change?

Interviewee: Yeah, I’m smiling because, for example, what should have been the start up, if I had been the startup of say, Ruby on Rails application, changing it from a static HTML invitation to kind of that animated opening of a card… I don’t know two days of work maybe should have been. 6 month development and QA cycle on something like that. Why? Because every time we touched a single character of code we were actually touching the entire rats nest of the central application and, you know, so things would break all the time and that’s why things became so difficult. But, we did launch it because that was one of the product changes that was necessary. An invitation looked like it did back in 1997. Another one is we did launch a very, very basic SMS service where if you put in your cell phone number then all of your evite updates, in addition to having it on evite.com website, but, they were also sent to your phone via SMS. It’s a very small thing that was about a 6 month development cycle as well too, so- and there were a few other things but I would, you know they’re small.

Andrew: I did this conversation because sitting on the outside as an entrepreneur you always look at these big companies and you say, “they are invincible,” and now I know, now that I have gotten older, I know that they look at us as entrepreneurs and say, “those guys can do anything,” and we can see they’re not invincible. Obviously we can’t do everything, but we have a lot of power when we’re competing against them because we’re so agile.

Interviewee: Yeah, well I would say this given my experience, again 5 years of running ABC.com and a few years at evite, this is about what every startup should do. Every startup should embrace the fact that it is extremely nimble and it can experiment with very low risk, kind of to your point. They need to embrace that because when you are sitting in meetings were you are pitching a big company, and many startups, they count on some kind of a deal happening, you know, with big company XYZ. The thing that the big company guy is thinking when he is looking over at you on the other side of the table is he is thinking, “Damn, I envy you. I envy you because you are five guys working on Ruby on Rails and you can just go do that thing that you want to do; whereas, I’ve got 7 layers of management above me, 15 million stakeholders in my PNL, I’ve got people who are scattered across a matrix organization who I may or may not be able to motivate and incentivize to do what I want them to do. Oh, and by the way, I’ve got a certain business model I have to deliver on and that doesn’t allow me to do innovation or go off on tangents or anything like that.” That’s what the big company guy is thinking when he’s on the other side of the table. He envies you. The funny thing is most startup guys, because most of them don’t come from big companies and don’t have a lot of experience, they are thinking on the other side of the table, “Oh my god, I’m this little company with no resources who you know is trying this and trying that and you you’re big, you’ve figured it out. You can do anything you want.” That’s totally not what’s going on. [laughter]
Andrew: You know, you mentioned something that I wrote down here: incentivize people. I know as an entrepreneur what it takes to incentivize people you show them, you show them the future you paint blue skies you let them have options and shares at times. What’s the incentive situation like at a big company?

Interviewee: It’s very, very different, right. So first of all most companies don’t allow you to give any equity below a certain level, right? At the typical company you have to be director, vice president and above and even then, because the company is already publically traded and is owned by these large institutions, what you can give away is poultry, it’s almost meaningless. So, skin in the game is almost nonexistent as an incentivizing tool. So what are you left with? You’re left with a lot of sort of classical management tools. You know, if you are a good manager of a company you share a vision. Well, you have to have a vision. Do you have a vision for where your department or division, or product is going and you share that and hopefully that vision is extremely exciting and then you get everyone to buy into it. As a concrete example, at ABC.com, when I took over it was just an HTML site. It was kind of a marketing brochure where there was no video on it at all. And one of my ideas, which ultimately became the vision for it was that, hello, it’s a television network site, you should have TV on it, right? And so I was constantly selling internally to my team, but also larger in the corporation at ABC and Disney, I was constantly selling the vision that we need to actually be the TV network that’s what ABC.com- it doesn’t support the television network, because no one watches TV anyway, it needs to become the television network. That is an exciting vision. People on my team, my staff, they didn’t have any equity for Disney shares, or very few of them did, and again what they had was meaningless, but what they did have they had a common passion in realizing that vision that I kept talking about and so there’s just this sort of employee pride that we did launch the video player on ABC.

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Interviewee: player on ABC, and you know what, our video player is, at the time, second to none, it’s the best video experience out there. So it’s kind of classic management tools. I think, the other thing is though, this is a cliché, but it’s true, the kind of person who wants to work at a big company, tends to be different than the kind of person who wants to be an entrepreneur, right? You know, the kind of developers and engineers you get at a start up, they are thinking in a very different way and tend to want very different things then the engineers who want to work at a Disney or and IAC. You know, at a large company, things like stability, benefits, uh nine to five hours, you know vacation, that becomes more important than to the people who are looking at start ups where it’s much more about the flexibility, innovation and of course the skin in the game that may pay off really big some time. And as a manager at either one of those, you have to recognize that. So you can’t sell non-existent benefits, right? If you’re at a start up it’s not because you have the best 401K, you probably don’t even have a 401K, you know, whereas at Disney, I was touting the fact that it was a one to one match on your contributions and that meant a lot. And, but when you hire, you better make sure that you’re plugging in the right kind of guy. Do not bring a start up guy into a big company and don’t bring a big company guy into a start up. You know, it’s a rare person, I think that you find able, who able, who is sort of able to be very, very flexible on what they want and how they’re incentivized. So, that’s a lot of this, bringing in the right person, and then you sell them on what that kind of a company environment can offer them.

Andrew: Andrew S.G. in the comments is asking an interesting question, “why don’t you just re-build the site from scratch and have almost a second site that you transition people to?”

Interviewee: So that was actually our plan, that’s finally the plan that we came up with. It still required a chief architect, which evite didn’t have, because why would a site that is not about innovation have a chief architect? It will require some development, the kind of development skills that the engineers we had on staff, did not have, again why would we? We had maintenance engineers. We didn’t have, you know, real, true development software programming engineers, so there were, the shorter answer is that it requires the type of investment that wasn’t sort of readily available in the company, and so we actually did map out a budget and a timeline, and I thought a pretty good product description of what this sort of parallel evite was so your reader’s comment is totally, it’s astute, so yeah so we built up that sort of parallel plan, so in other words, like build a new car while you’re still driving in your old car, to go back to my metaphor. But it required investment and it took time. Did I get the green light? I’m trying to remember. Nah, I haggled a lot and eventually they said, “you know, we’d do it if you could get it down to about the quarter of the cost, a quarter of what you think it’s going to be,” and I think at that point I decided I didn’t want to work there anymore. [laughter]

Andrew: What kind of money was a quarter of the cost?

Interviewee: Well I had pitched about a million dollars in twelve months. So I, I thought it would take twelve months to do, and about a million dollars and resources, most of it people, you know. Uh, and so they wanted it done in less time, they wanted it done in six months and they wanted to spend only about two hundred and fifty thousand dollars.

Andrew: I see.

Interviewee: Honestly, I don’t think it could have been done on that, in that schedule.

Andrew: Why? If a start up who gets money from Y combinator, which is under twenty thousand dollar investment and a little bit of support over three months, if they can launch a website, why can’t you launch evite 2.0 with a quarter million dollars?

Interviewee: Oh, well, you could if, you could if the product spec and the scalability threshold was something like a start up. But, and maybe I’m, you could debate if I was right in this or not, but I said, “no, no, the threshold had to be the kind of scalability and the flexibility and the breadth and power of the current evite that had fifteen million uniques on it.” Right? You know. You also have to think, evite may seem real simple, but there are parts of it that are not quite rocket science, but pretty difficult problems to solve, for example, on New Year’s Eve, the amount of hits and calls to the server is intense, right? Because everyone is opening up their New Year’s Eve invitation because they’ve got to get to their party. You’re talking about maybe a hundred million, you know, calls, all happening like within a forty five minute time frame and then they all have to be updated because if someone says, “I’m coming, or I’m not coming,” that has to be updated so, again, it’s not quite rocket science level of problems to solve, but it’s not the same thing as if I handed someone very smart who knows ruby on rails can say, “here’s twenty thousand dollars, build me an evite.” Yeah, they could, but they’re not going to be able to build the kind of evite that I thought that we actually needed to launch.

Andrew: I see, this is so interesting. So then it, I don’t see how it could be done within a major company that has that many users that has that kind of intense use, how do you launch something from scratch? How do you use the lean start up techniques that Eric Reiss [sp] talked about here on Mixergy? How do you just release something crappy, get feedback and prove, and take your time at it? It’s hard and then, I guess what you would do, you would create a whole separate site, which is almost a whole separate business so that you keep from getting flooded with traffic and then you’d test an idea

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Andrew: and then you’d test an idea over a month and you improve and you improve and you improve and maybe after a year of testing small ideas, you end up with a successful site. But then at that point you might as well out-source all of that and out-sourcing all of that means waiting for Paul Graham to fund a company like that and then going in and buying that business.

Interviewee: [laughter] Yeah, that would have been the way. Yeah, no, I mean, which is why that kind of customer driven development, you never see that coming, at least, I don’t, you don’t see that coming from a big company. Right? Because there’s also very intangible things at risk such as brand equity, right? You know, so maybe if we’d called it, I don’t know evite beta dot com or just, call it something else, right? Release that crappy, minimal viable product version 0.0, right? And then you get the customer feedback, you iterate and you release slightly less crappy version, you know, dot 5, yeah, you could try that. Would a big company like IAC or a Walt Disney do that? No. They wouldn’t do that, you know. Start ups can and they should but a big company’s not going to take that risk.

Andrew: Was there anybody that was doing this well that you guys could look at for acquisition?

Interviewee: We looked at that all the time. We didn’t see anyone that did it very well. But you know that was, again, I left in November of 2007, though I have just out of curiosity kind of kept tabs on some of the evite alternatives out there, My Punch Bowl, Ping Socializer, Event Bright and some of that and I think the ones that are very direct evite replacements, they’re interesting but if I were a IAC I wouldn’t say that they’re worth acquiring. I think the more interesting companies are the ones that are part evite but part something else. You know, for example Event Bright is a very interesting start up, right? And I understand that the former CEO of Ticketmaster, a guy that I knew when I was at IAC, he’s now on their board of directors, Sean Moriarty, and now, Event Bright isn’t quite evite but it has evite-like stuff to it, you know, and that’s a much more interesting company and potential acquisition target and I’m sure they’re setting themselves up for something like that. But the direct evite competitors? I don’t think that any of them are worth acquiring.

Andrew: Who else was doing something kind of like evite but kind of something else that was interesting?

Interviewee: Um, well this is something that we talked about all the time which was the events features set within Facebook, so Facebook events, right? And the thing that kind of, one of the things that kept me up at night was that I always thought that given that the world is coming, you know the internet’s sort of becoming Google and Facebook, I mean, it’s really sort of amazing, right, it’s like that’s it, that’s the internet today, if Facebook decided ever to really put any thrust against the events set of features, evite would be wiped off the face of the earth in three days, kind of thing. Um, the good news for evite is Facebook has decided to do other things, you know, that’s not something they’ve really decided to concentrate on and I would imagine that there are many companies that are running sort of second rate products like an evite that tremble in their boots like I was thinking, “my God, if Facebook ever just decided to actually go after that particular slice of the market, we’d be out of business, you know, given the scope and the scale and the user base of something like Facebook.” But Facebook events is the one I always looked at.

Andrew: Yeah, they were, that did seem like the dangerous foe in the business. If they ever decided that they were going to flex their muscles, they were going to crush everybody, even people who were just bystandards, bystander, by—what’s the word?

Interviewee: Bystanders?

Andrew: Bystanders, thank you. Um, what about a Facebook app, though? Would you then create that second car as an app on the Facebook platform?

Interviewee: Maybe, but I don’t think it would have been the same kind of business. I mean, you have to understand, it might be worth a quick tangent about the business model, right? It was very classic, kind of 1 dot 0. Display advertising from branded companies, that’s what it was. Now, but it was a good business, this may shock some people, the CPM’s on evite are astronomical. So the effective CPM, when I left the company, we got, we’d driven it up, the effective CPM was just under ten dollars. And on certain pages, certain classes of pages, we enjoyed a one hundred dollar CPM, on all those ads, why? Because when you’re talking to Mr. CMO, and you say to Mr. CMO evite is the equivalent of sliding your advertisement flier into the envelope of an invitation, that a party host is mailing to her guests, where else can you get that? Oh, and by the way, it’s targeted, because you can stick a Gymboree ad into someone’s five year old toddler birthday party invitation, you can stick a Smirnoff Vodka ad into a, “I’m having a Girl’s Night Cocktail Party”, you know, invitation, and so we were able to enjoy incredible CPM’s. That was the business, meaning that, this is one of the things people hate about evite, everything drove you back to the website, right? Well there’s a reason why, it’s like, those pages were extremely great revenue. And so a Facebook app, while I think from the consumer perspective might have been a great product and a great way to go, you can see how it doesn’t match the business that was running, right? Those dot com page views
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Andrew: Those dotcom page views on e byte.com that was the business and that brings me back to my first point about the constraint we were laboring under. IEC’S like that’s your business. You drive that, keep that one going. We don’t care about anything else.

Interviewer: And you know what?: It’s beyond banner ads that you guys had, you had invitations that had the logo of your sponsor on the invitation. It was like a Smirnoff gir’s night out invitation or something like that.

Andrew: It was product placement.

Interviewer: Yeah. Within the invitation there was a product.

Andrew: Yes, yes. They paid a lot for that.

Interviewer: And there was also landing pages so, and there still is. So after you rsvp you are taken to a page where the top ten percent, maybe twenty five percent of it was a verification of your rsvp and the bottom of the page is a full page ad, and it’s a really targeted ad you know. Your rsvp’ing to go to somebodies party and then there’s a red envelope ad that says do you want to buy them one of these presents for the party.

Andrew: That’s the hundred dollar cpm. That bottom part of the page is the hundred dollar cpm pages.

Interviewer: Yeah I figured and incredible because your really selling them a visitor, not so much an ad.

Andrew: The click through rate is astounding too, you know. I mean if you just rsvp to someone’s yes, I’ll go to your son’s five year birthday party and then the ad that loads after that confimation stripe that loads at the top of the app loads is ten dollars of Toy’s R’ Us. You click on it. The marketers loved it. I wouldn’t say selling ad’s on evite was a cakewalk but it certainly was the proposition, the value proposition to the marketers was crystal clear. And so we just needed to drive more impressions and the business kept growing.

Interviewer: I have my first troll in the chatroom here, somebody just put an ad for a porn something or other in here. I’ve got to give somebody in the chatroom here power to get rid of these ads so that I don’t have to in the middle of an interview. Ah, screw it, we’ll leave it out there. I’ve got one other question about why things didn’t work out at evite the way we expected them to on the outside. And then I want to go into the revenue and how you increased it. My question to you is why we talked about how you guys implemented a system to where it looked like the greeting card was opening up on the screen. We talked about how long it took to creat. What was the reaction from the users?

Andrew: It was mostly positive. We tried to do some ab testing and I sound like a broken record here. But again, ab testing on a start up site is kind of a no brainer.Especially if you do experiment driven development or test driven development. You do these tests all the time. At evite given that it wasn’t set up that way, doing an ab test was enormously difficult. We tried to do it, we did do it and the response was quite favorable. People thought, you know your adding a little more, what’s the word? Your adding a little more dimension maybe, your adding a little more dimension to the virtual experience of the invitation. So it was positive.

Interviewer: But I don’t see it up on the sight anymore.

Andrew: I don’t know why they took it down, I don’t work there anymore so I don’t know.

Interviewer: Were there any features that you added that just confused people? I mean they’re expecting a certain interaction when they come to evite and I always feel like that is one of the barriers to change with a bigger company. There are too many people expecting too much of the same for you to adjust.

Andrew: Yeah, that’s the quote unquote burden of having a large user base. Right, I mean every start up wants that problem right? I love the problem of not being able to change my sight because so many people are used to it. But that is the burden of having a very loyal established user base is that even pretty small changes get pretty quick reactions. One of the things I’d actually do when I was the gm there was I’d actually read weekly summaries of all the customer service e-mails. Because that’s the best way to find out what’s going on, so I actually read these things and it was shocking. So we added a bunch of new things, I know we added a bunch of Ajax, ajax controls to the creation to an invitation because just before I got there it was just a bunch of form fields. Again, very web 1.0. And so we made it, it was a little more of a wizzy wig invitation creation interfacee. And so lots’ of ajax happening and a lot of the users freaked out about that. They were very accustomed, they made evites all the time, it was always form filled you know. Type tab, type tab and now we had all of this really cool looking ajax stuff happening right. This would fade in, you would click on this and suddenly a modal would light up. And they were freaked out by it. And objectively speaking it was a product improvement,but to these folks who had been using the product five, six, seven years it was a radical change. And so yeah there was a very interesting challenge when you are trying to innovate product and you know you have to innovate it and you know this is an improvement, but your users are used to doing it in a certain way.

Interviewer: Wow, you know, I understand and I feel your pain at the same time as a user when I am used to a site…

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Andrew: …and I hate to sound like this, like an old lady here, but if I’m used to hitting “tab” date, “tab” place, “tab” etc. and it changes a little bit, I get frustrated. I get frustrated like somebody’s trying to harm me. Even though they’re obviously trying to help me. And I could see on a bigger scale with people who aren’t as willing to see change as I am, it would get even…it would get a lot tougher. So we see this now: big company, stuck in its way, how do you increase sales the way that you did? How much did you increase sales by?

Interviewee: 50%. Five zero per cent.

Andrew: Five zero per cent. From what to what? We’re not talking about a start up that increases sales from $100 bucks a year to 1500. From what to what?

Interviewee: Yeah, so it was just under $13 million a year in revenue when I came aboard and when I left we were at $21 million a year in revenue.

Andrew: All right, how do you do that? How do you do that?

Interviewee: Yeah, so a lot of operating things that can be done. First of all, you have to take a look at the data and the analytics to find out why are you making so little money? So that was kind of my…it took about a couple months exercise really looking at certain things. Key things for an advertising backed business like evite are you look at sell through, right, because you should be selling every impression. There’s no reason that you’re not selling every… So we looked at sell through. Guess what? It wasn’t 100%. You take a look at effective CPM because ultimately that’s your big driver of revenue after sell through, after you get 100% sell through you need to increase your CPM. And the effective CPM I think when I went in there was four or five bucks. In my opinion that was too low. At ABC dot com, granted apples to oranges, but at ABC dot com we were doing an effective CPM of upwards of $10. So I thought a four or five dollar effective CPM was too low. And then you take a look at category of advertisers that you have. Do you have enough categories? What if you were, for example, only taking automotive advertising? Well, there’s a problem there. You should be taking packaged goods and other things so you take a look at category of advertiser. And again, there were too few categories of advertisers on the site. And then you look at how many advertisers per category. Let’s use the automotive example. When I came aboard I found out that in automotive on evite I think we only had two brands advertising. I forgot who it was. Like Honda and Toyota. It’s like, “What happened to all the other brands?” You should be pitting them against each other in a scarcity war to bid up the CPM on advertising impression. So you take a look at that. And then there are some really, really just operational things to look at. Like, are we delivering on every campaign? Are we over-delivering? Are we under-delivering and having to write money back to the
advertiser? Right? So these are the kind o0f things that, having run ABC dot com for five years, I sort of knew that these things have to be firing on all cylinders otherwise there are parts of the business that are broken. Okay. And every single thing that I just listed there was something broken with every single one of those so we spent the next couple of quarters fixing those things. So we got sell through up 200%. And one way to do…

Andrew: Let me go with you one step at a time. I’m a business nerd; I’m sitting here taking notes here. People I’m sure are watching me as we’re talking. I want to make sure to dive into each single one of these. First of all, you said sell through. What is sell through?

Interviewee: Sell through is what percentage of all the impressions you’re serving have paid advertising displaying on it.

Andrew: Versus remnant ads that are running?

Interviewee: No. Remnant ads are part of sell through. So sell through is if I serve 100 pages in a day and 90 of those pages had advertising on it, I have a 90% sell through.

Andrew: I see. So…go ahead.

Interviewee: There were actually, I think sell through was 70 or 80% which meant that for every 100 pages served on evite 20 to 30 of those pages had no advertising on it.

Andrew: Why? Why weren’t you guys at least running remnant ads? Why weren’t you working with one of the networks? It’s just one of those things that falls through the cracks?

Interviewee: Yeah, in a big company that didn’t have a GM for a while. So we put remnant in. So that was one of the things we did. I think it was advertising dot com but one of the remnant aggregators we worked with them. And it’s actually…when you’re a start up you don’t have any leverage but when you’re an IAC or evite you go to the remnant company and you go, “What kind of CPM am I going to get? That’s too little. I want more.” And then they serve you higher CPM. And even though it’s kind of – I’ll call it junk advertising because it’s remnants, you know “spank the money free iPod” that kind of crappy advertising – if you’re a big company you have leverage. So instead of a 50 cent CPM you might be able to get a 75 or 85 cent 4CPM. And at the scale, at the volume that evite was running at, a few cents difference actually made a difference.

Andrew: All right. I love this stuff. And as a business nerd I want to ask you why you went with advertising dot com?

Interviewee: That wasn’t my call, that was the sales team. So as the GM you work very much in partnership with the ad sales team. You ride them but you really… they do the work. They’re the ones who are out there selling the deals, closing the deals and so I went to them and I said, “We have a sell through problem. Let’s solve the sell through problem.” And they said, “It’s probably going to be a remnant advertiser.” And I said, “Sounds great. Go find the best one.” And then they brought me the deal and I said, “That’s not enough money. You can go get more money. Sell the IAC thing, sell the evite thing.”
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Interviewee: And then they brought me the deal and I said that’s not enough money. You can go get more money, you know. Sell the IC thing, sell the e-vite thing, and so they got more. So they’re the ones who chose ‘em and they’re the ones who drove it to where it was.

Andrew: OK. Alright. The next thing you talked about was effective CPM. You started out at four to five dollar CPM and you found a way to increase it. How?

Interviewee: Yeah. There’s several components go into whatever your CPM calculates out to be and the components are this. One is what is the CPM on the deal that you sell? So when you’re going to, I’m trying to think of a brand. When you go to Honda, you know, I discovered that what was happening was that the salespersons had the Honda account wasn’t actually selling them every time it came time to renew the account. They would essentially change the date on the renewal and then just sign it. It’s like no, no, no. A salesperson’s job is to sell, which means that if Honda bought those ads at a ten-dollar CPM, last quarter, they should pay $10.75 this quarter. Why? Because I’m a salesperson and that’s what I do. Right? I mean, that’s what you’re supposed to do. And so a lot of it was just pushing the salespeople to not just renew deals as is. What was to try to drive the CPM up on existing advertisers. Which went into the second thing, which was drive a scarcity war, right? So there’re only a certain number of impressions on e-vite. And if you’re Honda and Toyota, why are you two enjoying? You know, you’re enjoying half of the automotive impressions and you’re enjoying the other half of the automotive impressions. There’s no scarcity going on. And so we had everyone you should pitch Jeep and Chrysler and, you know, all the other brands, and you should be pitting them against one another to buy the automotive related advertising, right? What happens in a scarcity model? Prices go up. Simple economics, you know. But it’s getting the salespeople to do that. And so they started doing that. They started going after different advertisers in the same category, pitting them against each other to try and drive up the CPM on what was the same impression, right. So it’s the same impression. We’re gonna serve it anyway but now we’re getting more money for it. Another way to make sure you’re CPM goes higher is that you start to look at what your delivery is, and essentially what your delivery is. So for those who are unfamiliar with it, right. When you sell an ad campaign you tend to say to the average advertiser, Honda, between this day and this day we’ll deliver this many impressions and that’s how it’s sold. But of course you can never really get exactly that number of impressions. And there’s a whole group of people in a department. I always imagine them with their hands on little dials, watching the screen every day, trying to dial up the impressions or down the impressions. Their goal in life is to make sure that by the end of the campaign, the exact number of impressions that you sold to Honda is delivered. You don’t want to deliver more impressions. Why? Because you actually can’t charge them more for it. So good for Honda. They just got more impressions than they paid for. Guess what that means? Your effective CPM has dropped, right? Simple arithmetic, right? You definitely don’t want to deliver less impressions than you promised, because then you know what you have to You have to actually write a check back to Honda. Because Honda paid for this many impressions but you only delivered this many? You have to pay them that delta, you know. And so there’s this whole operations department trying to make sure that the thing hit, or that you delivered exactly the number of impressions that you sold. And I discovered that that was way out of whack. We were constantly over-delivering, right? And so that kept dropping the effective CPM, you know. And so that was a lot of operational tweaking and improvements. In one case it was actually getting rid of someone and replacing her with someone else, you know, that kind of stuff. But their goal became if we’re selling twenty thousand impressions to Honda, deliver twenty-thousand. Maybe twenty-thousand and one, but don’t deliver fifty-thousand, because their effective CPM has dropped.

Andrew: And there’s no software you could implement that would do that for you? Can’t use Open-X or something else to do that?

Interviewee: Given the, at an operation the size of IAC and all the sales operation was centralized, meaning that ads on e-vites were run and served and tracked by the same system that the ads on citysearch and match.com and ticketmaster, OK. So centralized operation for all the IAC properties. At an operation that large it has to be a combination of software and people. It cannot just be completely automated, you know. And maybe it can be. I shouldn’t say that. Maybe it can be. But at least the way I see it, it’s a combination of software and people.

Andrew: OK. All right. Is there anything else we need to know about e-vite before we move on? Anything you can offer us?

Interviewee: You’ve asked great questions about it. It’s a mystery, isn’t it, from the outside when you look at it? It’s, you kind of scratch your head over it dont’cha?

Andrew: What about this? Let’s say. Oh! Actually, no. I do have a couple of other notes. What about this? If somebody’s on the outside creating a company and wants to sell to e-vite or wants to partner with e-vite how accessible are guys like you inside to conversations?

Interviewee: Difficult to give a general answer to that. It varies very specifically by person and by corporation and also by what phase or situation or circumstance that company is in.
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Interviewee: I was very approachable. As I was getting towards the end of my tender I probably wasn’t very approachable because of how things were going. The [] guy who is there now, is a great guy. I had the feeling he is not interested in partnerships whatsoever right now because he is just trying to fix the basic thing. So it’s really hard to give a general answer. I would say to startups that need those deals, first of all [] system which is a cliché, but definitely be persistent. But here is the number one thing, and I have seen being when I have been in big companies and being pitched by wooed by startup guys. Here is the number one mistake they all make. They only really come at it from what is good for them. As Mr. Big company I don’t care what’s good for you. I don’t have any feeling for you whatsoever. What you need to do as an entrepreneur trying to get that deal with Mr. Big company or Ms. Big company is you need to think about, you put yourself in their shoes. What is it that he needs to solve. What is her big pain point. You know big company wants a big company guy. That’s where you need to be coming from and so when you pitch, when you propose, you have to be ‘I know what your pain is and I can solve it for you cheaply and quickly’ and if that’s not where you are coming from, you can forget it. It just is not going to happen.

Andrew: So what could somebody have done to get your attention back then?

Interviewee: That’s a good question. Yeah, let me answer it in the negative first because there was a very interesting, which I don’t want to name but there was a very interesting Silicon Valley startup that was pitching me a very cool, very cool real time synchronization feature that you would have matched your Evite with your Blackberry and your Outlook and all that. It was very cool. But see, it had nothing to do with my core problem. It was this very cool, not quite a bell and whistle but it was so ‘just feature’ and not my fundamental problem that even though they were smart and I believed in their product, they did a demo, was fantastic and I liked the guys, we had I don’t know a million meetings and never went anywhere.

Andrew: What was your core problem?

Interviewee: My core problem was that I couldn’t innovate on the product without this long cycle time and so if there was a [] I don’t know if the startup could have pitched me a solution to that, maybe they could have, I don’t know.

Andrew: [] of Cocodot, if he had Cocodot up and running at the time could he have come to you and said ‘look, I can’t give you [] at Evite but what I can do is give you a higher scale Evite so that you guys could maybe transition of your more elegant weddings to it and then funnel it down to the rest of your business or user base.

Interviewee: Yeah, that would definitely be something I would get the second meeting, that’s for sure. We definitely get the second meeting. I think there will have to be a recognition on for example cocodots [], recognition that I have got a business that is generating revenue and I have got a bottom line I am worrying about everyday and so, that is a great solution but I still need to be focused in on that part. So as almost that was part of the equation of whatever this total solution proposition was, sounds very interesting.

Andrew: Alright, what about a more generic approach, what about before you even need a sale, can an entrepreneur call someone like you and say, look I am in the space just as you are. I have got a list of everybody in this space and what they are up to. If we sit down for coffee I can go over my notes with you, it is a way of also introducing myself to you. Would that be something you would be into?

Interviewee: Yeah, and again the entrepreneur needs to ask this question. They need to look the person, the big company person in the eye and they could say I need to know what your biggest problem is because I want to help solve that. I can’t emphasize that part enough because when you are the GM or the VP or the President at one of these large divisions or corporations or companies, there is usually only two or three really big problems. There is not five or six things you are worried about at these kind of companies. There is really only two or three things that you worry about, and it is shocking to me how many entrepreneurs don’t even ask me what that is. That’s like, don’t you care, because if you don’t care then I don’t have time for you.

Andrew: And it’s not a mystery. From all that I am hearing from you here, you could have told me this stuff when you were working at Evite you could have said I need to reinvigorate Evite, I need to find a way to deal with Facebook or all that are like Facebook. You could have shared what your top issues were.

Interviewee: Yeah, totally, in fact they should straight out ask the person they are talking to in that coffee, you should have asked them. Phrase it however you want, but you know I tend to something like what is your biggest pain point this year and how can I help solve it. As simple as that.

Andrew: Okay, what do you think about couple of the startups that are gunning for the space, we heard about Eventbrite, I love Eventbrite, I have to get the founder of Eventbrite here on Mixergy, what about Cocodot, have you got any chance to look at them.

Interviewee: I have, and I had a very nice meeting with Sean. He basically asked for my feedback, this is even before they had launched. I gave my feedback, I want to be honest but

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Interviewee: I want to be honest, but careful about what I say, because I know he’s out there looking for money, etc. I would say this, it’s that anyone who’s directly, who’s trying to do directly what E-Vite is doing, faces one very big problem. And that big problem is that the core user base at E-Vite has their entire party history archived on E-Vite. They have their entire contacts list archived on E-Vite. That’s a massive barrier to switching because if you’re a party hostess, and look at Cocodot, and you say, “It’s beautiful, it looks better, it’s sexier, it’s easier to use, oh, but all my contacts are at E-Vite. And all my party history is at E-Vite.” You know what? You’ll probably just go back to E-Vite. Yeah, so.

Andrew: And it’s not just that your contacts are there because you’ve got your contacts in your address book. You’ve got your contacts in Facebook and the others. It’s the grouping of the contacts that’s really critical, right?

Interviewee: It’s your party contacts. That’s kind of the way I put it. Yeah. And don’t underestimate the archive power. This was a surprise to me when I came aboard E-Vite. I was shocked to find out that, after the invitations themselves, do you know what the most frequently hit section of the site was? It was your history of all your party invitations. So that’s very interesting that people were these hostesses, again, they’re mostly women, these hostesses just like to keep looking at their archive of all their past invitations. You know why? Because for them, it was a virtual, or online, repository of their social life. So they could see the party they threw back, you know, in San Francisco in the Haight in 1997, when they were single. And they saw all the people that were there, and what the party was about. And they could look at every party that they’ve done on E-Vite. Then oh, and then they got engaged. And then they got married. And then they had a kid. And now their having their third kid. And it’s very interesting that there is this virtual repository of their social life, their party life on E-Vite. Do not underestimate the barrier that presents to switching to another service. That’s what I would say.

Andrew: What about MyPunchBowl.com? They’re going for a slicker experience that’s a little bit less formal-feeling than, I think, Cocodot.

Interviewee: Again, I think MyPunchBowl and Ping and Cocodot, I think, objectively speaking, they are all better products and services than E-Vite. I totally think so. I just think for as a business startup, they face the challenge that I just described, you know.

Andrew: OK. One other one, Socializer. Socializer was trying to look just like you guys but add that friendster feel, that was started by the founder of Friendster. So, what was that like to battle against them?

Interviewee: Well, I wouldn’t really call it a battle. I mean, we looked at them, and we thought, oh, it’s a better E-Vite. I’m being honest when I say, I only really worry about Facebook Events. You call me arrogant, but I looked at it and I go, it’s better. No one’s going to use it, because the people who use E-Vite are just going to continue using E-Vite. And if you look at the traffic, I don’t know what third party traffic service you believe in, Compete or Conquest. But if you look at Ping, MyPunchbowl, Socializer, and any of the other ones, I mean, none of them have really, none of them, right? They’re all flat. And it’s not because their products are worse, I will go on record as saying that they’re all better products and services than E-Vite is. But they have this barrier that they need to figure out some way of overcoming. I don’t know how they are going to do it. If I did, I’d probably start one of my own.

Andrew: [laughs] All right. So why did you go and get a job at a startup?

Interviewee: Well, I don’t know if it’s evident in everything that I just told you about my experience that I see. But it resulted in a very high level of frustration for me. I mean, one of the things that I would like to say is that, no matter where you work, big or small. When you see the right thing to do, you should do it, because at the end of the day, that’s the only thing you’re going to have left is going to be your own integrity, right? What I really can’t stand is that we didn’t really do all the right things, because I know what the right thing to do was, and we just spent a half hour talking about what E-Vite really needed to do. We didn’t really do that. The revenue’s great, that was a success. But we didn’t really fix the real problem with E-Vite. I look back and like, damn, I didn’t do that. Where can you where you can you work where you can see the right thing and unfettered, just go and do it? Well, a startup, right? Because it’s your own, you’re starting it from scratch. And so, that’s why I wanted to work at a startup is I wanted to say, “I know there’s a ton of risk and you have no backing, you have no user base and all that, but at least I could do this thing where if I know what the right thing to do is for the product, for the users, for the technology, I’m just going to go and do it, because there’s no risk and no board and there’s no shareholders telling me to do something else”. So, that’s why.

Andrew: How did these guys win you over?

Interviewee: So, when I talked to the founder, who’s probably one of the guys you saw at UCLA, Andy Elliott. When I talked to him, I saw three things that convinced me. One was his passion and dedication…

The transcript for minute 55 till minute 60 is BELOW this line.

Interviewee: His passion and dedication is off the charts. And again that is a cliché too, at these pre-product, pre-revenue, pre-user startups, you are betting on the guy. I mean it is a cliché but [] true. Andy is a guy who will not take no for an answer. He is also a guy who this thing that he was launching was the most important thing in his likes, and is more important than his wife and his kid. And so that’s one. So I knew that okay, that gives you a fighting chance. Two, I actually like the idea. I think that this idea of replacing the gift card business which is a horrible business, when people give them they are terrible, you lose them, they expire, you are tied to one merchant, gift cards are awful but people buy them all time. So I thought this is very interesting. Well, give some money because that is really what they want, but [] experience. It also has this virtual gift experience, some similar to Facebook where you pay real money to send someone a jpeg, in this case we are paying money and guess what, you actually get the money that I sent you, in addition to the nice jpegs. I thought that was, in other words, the product is interesting, intriguing and has potential. The third and final thing that won me over is that Andy had built a very interesting strategic relationship with Paypal. And I [] this myself and I found that everyone at Paypal knows Andy, and they all love Latte, which is nothing, right, we are just tiny little company that has a few thousand users but everyone at Paypal that mattered, Latte was on their radar. And so again coming from my experience working at these large companies and knowing what it takes to get on the radar of a large established company, the fact that Latte was already kind of stuck in their brains, and that Paypal was trying to figure out how to exploit and leverage and grow Latte, and you have got a winning combination with these, for a company that is essentially pre-user and pre-revenue you have a
really good winning combination.

Andrew: What is the deal that you guys have with Paypal? I remember I am actually saying something at the contest but I can’t remember what the deal was?

Interviewee: You know Paypal, they are trying to establish themselves more as a platform, and so they [] sort of invited developers to build certain products off of their platform, some are B to B products, some are consumer products, and we are one of their favorite consumer products. So we get a lot of interesting insights, a lot of very interesting kind of looks under the hood that people on the outside don’t, plus we also get integrated into their marketing. And so there are people who are running the marketing of Paypal which has like 22 million users, other companies would die to get co-marketed with Paypal. I am sorry my phone is running, I am going to turn this off.

Andrew: We are going a little bit later that I expected, but I appreciate it. Let’s see KC Allan is saying that he is a fan of the idea but not the name, I don’t get the name, I think if you get used to it, it doesn’t matter what the name is.

Interviewee: I think so as well too, I think you look at some of the great start, does Ebay mean anything, I don’t know if Ebay means ….

Andrew: I remember the first days of Evite, there are a couple things I remember about them, like the founders of Evite were, they were just about making a big show about their name, I remember them there was just an article about how they would unfurl flags about Evite and they would just try to get the name out there, and still people didn’t know Evite was, if you would say go to Evite.com, they would say, what go to invite.com, and then within time, if you say I am going to send you an online invitation, people will immediately say that it is an Evite, even if it is not from Evite.com. So, all new names are a challenge, but a name like Latte, use it enough, by the end of this interview lot of people will just think of it as just natural. Sorry, what we were asking about, I forgot the question.

Interviewee: The relationship with Paypal, so I was just saying the final point on that, so we have actually been co-marketed by Paypal to Paypal’s users, that’s part of the relationship that we have with them as well.

Andrew: What is your personal vision for the business?

Interviewee: That it is a social giving and social payments platform, so right now its gifts, but gifts is one very small part of what I see larger as what I call social payments. Social payments can include five people go out to dinner and someone didn’t bring their wallets, they need to pay everyone back later.

Andrew: Would they just use Paypal for that?

Interviewee: You could but what Paypal lacks is, Paypal lacks a social connection. Paypal lacks that other part, Paypal is about as emotion satisfying, as a bank transaction, right.

Andrew: Which by the way is very emotionally satisfying to me…[laughs] ..we go out with friends its different.

Interviewee: Yeah, you know what I mean, and that is why I distinctly call it a social payments platform as opposed to just a payments form. There is a payments platform, it is called Paypal, but I don’t it is a good social payments platform, because a lot of this exchange of money, has very, very important social roles around it, obligations around it, that’s why we started with gifts, because gifting is social payment. I am giving you something of value.

The transcript for 1 hour 0 minutes till 1 hour 5 minutes is BELOW this line.
Interviewee: I’m giving you something of value but I’m not just sending you money via wire transfer, there’s something wrapped up in it, so that’s why we’re starting with gifts, but eventually the larger vision is social payments.

Andrew: Alright. Alright, well, thank you, thanks for doing this interview, I hope it won’t be the last interview, I, I just love the way you express these business ideas, I love going inside the company with you, I hope we get to do another interview soon, find out more about what’s going on with Lottay.

Interviewee: Thank you Andrew.

Andrew: And thank you guys all for watching, I keep asking for feedback, and you know what, by the way, Harry, here’s what happens when I ask people for feedback, they will apologize for two sentences and then they’ll give me the feedback. I go, “no, you don’t need to apologize, I’ve been begging for feedback, give it to me,” so no need to apologize, give me feedback, hit me with your best or worst shot, whatever you’ve got I want to hear about it and Harry, if somebody wants to connect with you, how can they do that?

Interviewee: They can just email me, Harry at Lottay dot com.

Andrew: Alright, Harry at Lottay dot com and check out the website we’ve been talking about, Lottay dot com, L-O-T-T-E-Y, no,

Interviewee: L-O-T-T-A-Y.

Andrew: L-O-T-T-A-Y. And of course I’ll link to it. Thanks Harry, thank you all for watching, I’ll see you in the comments.

Full program includes

– How you can approach a big company like Evite if you want them to buy you out.

– Why the Y Combinator approach isn’t as easy fit for a big company. (Listen to the great question from the audience on that.)

– The advantages you have over a big company. (And an honest assessment of the disadvantages.)

– Who Harry and the people at Evite were really afraid of. And why they weren’t so worried about their smaller competition.

This program was sponsored by

RichWP – Get a premium WordPress theme that you can customize easily so your web site can project the professional look that your business deserves. (And if you do, email me a link!)

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Grasshopper – Entrepreneurs (like me) love and use Grasshopper because it offers all the features of the big, expensive phone systems (like multiple extensions, music on hold and call forwarding) but it works with any phone and starts at only $9.95 a month.

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  • http://JRameau.com Coldice4678 Aka JRameau

    I seen a lot of mixergy interviews, I might have to put this one up there as one of my favorites. It gives you the inside-out look of a large website and being under the umbrella of a large corporation run by B. Diller. Plus this interview is definitely a practical guide on how to rethink your business so you can compete against the big dogs. No just resting on the idea of being small and nimble, but understanding why sometimes these archaic businesses can still retain their users and the barrier their users are confronted by moving to your platform. If you are not left with anything else from this interview, listen to his advice on how startups should pitch to larger business by explaining how they can solve their problems instead of talk themselves up. I think that methodology can and should be transposed to how startups related to their customers, “What is your pain point?” and then see how can you fix that problem for them.

    I really didnt understand the point of Lottay until he explained the social aspect of Lottay at the end. I can definitely see myself using the service to pay back some my friends after borrowing some cash at a restaurant.

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  • http://www.perezfox.com scottperezfox

    My first reaction is “wow, Harry talks like the quintessential startup business guy.” I'm smiling as I type this, but at the same time, Andrew, you should encourage your guests to leave the sales-pitch lingo at home. I, for one, am not sure what an “incentivizing tool” actually means.

    I do remember when Mixergy offered the invitation system. Your sister recommended that to me and I believe I used it once. These days there are a few competitors, but nothing viable to de-throne evite. For my last birthday party I used Facebook to plan the event, which in the end proved to be a whole lot of nothing — the same people came who I would have just called directly. Facebook, for all it's networking abilities, didn't have the power to draw the far-reaching “friends” to an event.

    There is a cheeky alternative called Manvite ( http://manvite.com/ ) that allows you to invite your boys around to have a BBQ, or watch the big game, etc. Very sharp. But like Harry was saying, evite is used mainly be alpha women planning events.

  • harrylin

    @JRameau. Awesome – glad it was useful. Rock on.

    Harry

  • http://www.lottay.com/ Harry Lin

    @scottperezfox. We thought Manvite was very clever. Early on in my tenure there, we did an all-staff brainstorm exercise for product line extensions and my team came up with some terrific ideas.

    EviteKids. An Evite laser-targeted at moms who throw their kids' birthday parties and arrange playdates and organize AYSO soccer tourneys.

    Evite After Dark. For adults-only parties. Sort of the opposite of Evite4Kids.

    EvitePro. A turbo-charged feature-laden professional service for corporate assistants, secretaries, party planners, event promoters, etc. We'd charge some sort of a fee for usage.

    EviteMobile.

    and pages and pages of other clever and interesting product ideas.

  • http://globetrooper.com/ Globetrooper

    Andrew, you asked Harry why Evite had to spend $250k on redevelopment when Y Combinator invests $20k in startups that do similar development. I had a think about it and came up with the following…

    YC only pays for living costs, not hourly development costs. Assume there are 3 developers in a YC startup and their investment of $20k lasts 100 days. Say these guys work 10 hours per day and are smart tech guys that would cost Evite $100/hour each (not just for wages, but everything a company incurs by hiring someone). That's 100 x 3 x 10 x 100 = $300k.

    The $250k doesn't look too bad in that context :)

    PS Great interview as always.

  • harrylin

    @Globetrooper . That's a fuller way of looking at it, isn't it? :-)

    As an average calculation for total employee costs at a large company, we usually took the employee's salary (e.g., senior software engineer @ $125,000 annually) and added about 25% for all “the other stuff” – health benefits, retirement plan, backoffice/administration-related costs, equipment and rent. If landed example engineer through a recruiting agency (e.g., a Jobspring or a NeoHire), add 20-25% of first year's salary as a fee paid within a month of start date.

    Eyeballs popping yet?

    I'm not justifying or rationalizing these costs, nor am I necessarily ridiculing them (every dollar against the employee provided someone else a job, in some ways). But this is how the Big Companies I've worked at think about their workers' costs.

  • http://globetrooper.com/ Globetrooper

    Good to hear from your Harry, and great interview.

    The point I was making is that you can't value a YC startup on its $20k investment. Nor can you value the contribution of the entrepreneurs using big company salaries. I suspect the $125k + 25% you mention is for a 45 hour work week in which ~10 hours is spent on HN/Fbook/TC/iphone/lunch/etc.

    In a typical YC startup, the guys probably spend 80+ hours/wk working on the business. Even more if you count the solving of business problems during sleep. You can't “hire” that intensity. But, if you could, it would cost say $500k per year. Hence my back of the envelope valuation of $300k for 100 days of startup-esque development effort. Which doesn't make the $250k look that bad if it would lead to a similar product (which is another question altogether).

  • harrylin

    Nice equations. (And, yes, would a similar effort result in a similar product? Who knows….)

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  • http://www.facebook.com/people/Jasmin-Hadzic/574042226 Jasmin Hadzic

    Great Interview!! Love it – lots of cool behind the scene information. Thank you both!

  • http://www.facebook.com/people/Jasmin-Hadzic/574042226 Jasmin Hadzic

    Great Interview!! Love it – lots of cool behind the scene information. Thank you both!

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