Early in his career, Craig Donato worked for Excite, a pioneering search engine. When I asked him, “Why do you think Excite didn’t beat Yahoo?” his answer was, “Because we didn’t dare to play a different game….We were just trying to out-Yahoo, Yahoo and that just doesn’t work.”
Now Craig is the CEO and Co-Founder of Oodle, the ambitious underdog that’s building an online classifieds business is a world dominated by Craig’s List. As you’ll hear in this interview, he’s doing it by playing a different game. I invited him on Mixergy to talk about some of the game-changing ideas Oodle took on, like giving users analytics, partnering up with companies like Facebook and making classifieds social.
We also talked about the worries that entrepreneurs have to battle, the importance of culture and the heady days at Excite.
Watch the FULL program
Craig Donato, Oodle
Craig Donato is the CEO & Co-founder, Oodle, a search engine for local classifieds. Before that, he was CEO, Grand Central, an Internet service for B2B integration. Earlier in his career, he was SVP, Excite@Home, where he led Search, Community & Network Programming.
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Andrew: Before we get started, I want to introduce you to Haystack. Haystack is where you can find the right webdesigner for you next project. So let’s get take a look at it here! If we scroll through it, we can find lots of different portfolios. If there’s a company we’re interested in, we can quickly scroll through a bunch of their work and see if we like them or not. If we’re interested in them even more, we can click over and see their page, find out a little bit more about them, see each portfolio image in big so we can really decide if this is the right company for us, and if we want to follow up with them, there’s their email address and their website right on the bottom so we can contact directly. We can also go to the top; we can hit ‘save to favorites’, save it for later, and then keep clicking around. If you want to narrow your search down a little bit further, you can click on the city – I used to live in Los Angeles, so we’ll experiment by clicking on Los Angeles – and we could even narrow it by budget. We can click over here, we can say three to ten thousand dollars is our budget, and find companies that can do the work at that price. Of course, if there’s someone we like, we can click over, we can either save them to favourites or scroll to the bottom, get their email address, and contact them directly. Haystack.com, that’s where you’re gonna find the right webdesigner for your next project. Here’s the interview. Hey everyone, it’s Andrew Warner, founder of mixerg.com, home of the ambitious upstart and – there’s a lot of challenges when you build a company. When you read about it in business magazines, Craig, and I’m sure you’ve seen this – it looks like it’s an overnight success. There was one big problem, they overcame it, and then they’re incredible, they’re sitting on a boat somewhere showing off. Well, Craig Donato has been an entrepreneur working on Oodle for – is it four and a half years now, Craig?
Andrew: Alright. A young company, still a lot of ups and downs; we’re gonna be talking about some of the changes, some of the opportunities that you’ve jumped on and some of the difficulties you’ve had as an entrepreneur here in this interview. Before we get started, can you tell people what Oodle is?
Interviewee: Sure. Oodle is the second largest classified site on the internet, second only to Craigslist, and we have a little over ten million users and we’ve done that in under for years, which we’re pretty pleased at. It took Craigslist almost eight years to get that big. We power Oodle.com, but we also power classifieds for some really big sites on the internet, like Facebook and AOL as well as local media sites for cocksbroadcasting, Genroll, ABC Television, those sorts of things. Probably our secret sauce is making classifieds more social, which involves integrating things like identity – your Facebook profile, your Twitter profile – doing things like reputation, using things like advanced technology to moderate what’s going on so we can remove fraud and personal safety issues, and soliciting trusted advice and recommendations. If you’re looking for – if you’re looking at a car listing or a real estate listing, you can ask your friends, you know, if this is a good neighborhood, what are the schools like, rather than simply just getting information.
Andrew: If I feel a little bit pained as we’re doing this interview, let me explain why. In preparation for this interview I did a few searches online on Oodle.com, and one of them was for the car I sold before I came down here to Buenos Aires. A BMW X5, and it was selling for thousands of dollars more than I sold it for. And the reason that, and that hurt, and the reason why I didn’t do a search for it before, is I said ‘why do I want to deal with Craigslist? It’s just gonna be a mishmash of text, I’m not gonna be able to stick around how good the cars are that I’m comparing my own car to’, and I just decided not to even bother. Which is foolish of me, to not search, but for some reason I didn’t think to go to Oodle, even though I’m on Facebook, I didn’t think to go to Facebook Marketplace. How are you getting over the challenges of our habits, which is to –
Interviewee: I’m sorry, you broke up at the last moment there. What did you say?
Andew: How can you get past the challenge of people like me, who have a habit of just thinking of Craigslist as the only classified site online?
Interviewee: First off, we have to be a bit patient, right. We’re a small company, we don’t have a huge marketing budget so, you know, it’s all about coming up slowly and methodically. I should even step back and say that the classifieds business is a very difficult business because it’s al about the scale, right, so you can build all the great project features in the world, but if you don’t have scale, it doesn’t matter. And that’s true with any marketplace business. It’s particularly difficult with a local marketplace business, ‘cause we have to reach critical scale in Cleveland, in Miami, in Salt Lake City, and succeeding in Salt Lake City only modestly helps you in Cleveland. So it’s a very challenging business and it takes a long time to scale. You know, it’s very difficult to have a overnight success in local classifieds. So we’re doing a variety of things. We think about the chicken and egg problem, because in the marketplace it’s about: number one, do you have a critical mass of –
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Listings. And one of the ways that we jumpstarted that was aggregation. So when we go to Oodle we have something like we probably bring in 600,000 new listings every single day into our system. If you take out the sex, and the duplicate, and the fraud on craigslist, it’s approximately the same volume. Secondly, we realized that we need to not just expect consumers to come to us but we need to bring consumers to them. So we aggressively built out a distribution network. So we started with local newspapers and started working our way up. And we powered classifieds as I said in AOL, and Facebook and Walmart. We’ve got a really big distribution network which really helps us scale. And we’re seeing that as our distribution grows, so does Oodle. So even though we don’t do any marketing, Oodle continues to grow very, very nicely. So, that’s one thing. So we’re at a point now were we really achieve scale.
For example in the rentals category, we have about 1.8 million users. To put that in perspective, Rent.com and apartments.com really aren’t that much bigger than us. We’re probably a top 5 player, and at our growth rates we’ll be a number one, number two player next year. So we’re really tipping and starting to achieve critical mass. I’d say as we move forward, it’s all about differentiation and being something different. I was at [excite] for many years and one of the big lessons I learned was that you never take out a category leader by beating them at their own game. You need to create your own game.
You need to figure out what you are and why that’s different. And we’re not trying to beat craigslist. We’re trying to create a very different experience. One where, when I’m selling something I want to know who’s on the other side. I want to know something about them. I don’t want to invite some person I have no idea who they are over to my house to test drive my car. If I’m looking for a job. We hired someone recently. I was very reluctant, it was a marketing job, to put it on craigslist. I love craigslist, and I think it’s great. But I didn’t want to put it on because I’d get a thousand resumes and it would ruin my weekend because I’d have to sort through them all. I want to be conscientious and reply to everybody. So to put it up, of course I’d use Oodle. One of the things that happened with Oodle is it went out on my Facebook feed and my Twitter feed. And I started getting recommendations from friends, all referral-based. And it was wonderful, but it was different. And ultimately we’re trying to build a very different experience around trust and reputation. And I think increasingly that’s going to become relevant, and word of mouth will help it. Your product is your best marketing tool.
Andrew: Let’s go back actually, before we go deeper into the features that you’ve got now. Let’s go back to the beginning. You mentioned some of the challenges of the classifieds business. How did you convince yourself and investors, that this was a business worth pursuing? What were the opportunities that you saw?
Interviewee: So there are a couple things. First off the category is a very big category. It’s something like 20 billion dollars in advertising spend to promote classified listings. It’s as big as yellow pages. And it’s devoid of any real innovation. If you think about it, what’s really changed? Cars.com launched a bunch of great products but they haven’t really changed in ten years. Craigslist hasn’t changed in ten years. There’s really nothing going on. We really felt there was an opportunity on the consumer side to innovate. Moreover, we recognized that advertisers were growing up. A lot of these businesses were based on print models. And we thought ‘Gosh, this is going to be the only form of online advertising that’s not performance driven. Of course it’s going to happen. How do we think about doing more sophisticated models for advertisers. So one thing I believe is that if you’re going to do a start up, it’s great to look for the consumer problem, but you want to look for that business model disruption. It’s the classic innovators delmia problem. So how do you make sure there’s a business model shift that will prevent the category leaders from squishing you?
Andrew: The category leaders at the time were what? There were the newspapers right?
Interviewee: The big vertical players?
Andrew: The car sites that had all the car listings. And craigslist to some degree. And craigslist doesn’t count that much in a 20 billion dollar market, because they’re free. Right?
Interviewee: They’re nominally free, but we’ll go into that.
Andrew: Ok, but their revenues wouldn’t really go into the 20 billion dollars. They’re not that big a number.
Andrew: So what did you see that you were going to do differently from these guys who were already out there
Interviewee: From the advertiser experience?
Andrew: From a consumer, before we get into the perspective. From the consumer, what were you going to give them that was different? You weren’t at the time going to give them the ability to share with their friends, or to Tweet it out, or to post on Facebook; because those features weren’t really available yet. Those social networking sites weren’t there.
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Andrew: What did you say this was my opportunity to blow my users’ minds?
Interviewee: Right. So in the beginning…I was using classifieds. I had left my last job and was taking some time off. And I was…I’m actually not a very hand guy. I’m really bad and I come from a long line of handy people. So I was taking some time off and I bought a bunch of power tools and flew my dad out from New York and we were building a cabin up in the mountains. And as a result of that experience I started using classifieds a lot to buy stuff. Furniture, kayaking gear. All sorts of stuff. And I was just blown away how painful the experience was, right? It just was stunning to me like, “Gosh, there’s an opportunity here. If you could really take the pain out of this experience a lot more people would use the category.”
Andrew: What kind of pain? Give me an example of the kind of pain you have.
Interviewee: So for example, if I want to buy something. A car, right, I have to go look on all these different sites. And there’s constantly new cars being posted every few minutes and I have to constantly go back to those sites every few minutes to see if a new car’s listed. I was thinking, “Why can’t I just tell someone what I’m looking for and it can be emailed to me when it’s ready?” Right? Little simple things like that. It was striking that clearly a lot of the experience, especially, was focused on serving the needs of local advertisers but very little attention had been spent on the needs of solving the needs for consumers. Right? So the thesis when we launched was there’s all these classified sites out there, publishing publicly available listings, why don’t we create a buy side platform? Something that focuses on the needs of consumers. And it was heavily oriented around search. How do we show you all the listings that are out there? And how do we provide you the analytics around that? Things like alerts so you can tell us what you’re looking for; we’ll automatically notify you when new listings are placed. So that was the original thesis. And that worked really well until we got blocked by Craig’s List.
Andrew: So at the time you were going to do kind of what you did at Excite which is crawl the web, pull back as many listings as you can and then make them available on your site and that’s how you get around the issue of getting…
Interviewee: Yeah. And we added all sorts of value in the process. So if we saw a listing for a 2006 Camaro, we would include all the standard features, we could add attributes like the miles per gallon. We did a lot of work in there to make it a lot better, applying structure and technology to it but yeah. It was a very search oriented technology driven approach. Now, and that again, was a great experience.
Andrew: Let me stay with that. What percentage of your listings were coming in from Craig’s List back then?
Interviewee: You know, in merchandise it was probably a big chunk. But they were probably maybe 20% in apartments or cars.
Andrew: OK. And so then they closed you down. And then what do you do?
Interviewee: Yeah. So it was tough. We really needed to step back and think about what our model is. If your whole value is searching the open web and being comprehensive you can’t be a search engine and search 2/3 of the web. That’s not going to work, right? We stepped back and we really looked at the value…we were surprised in that first year, we had anticipated that on the free classified side of the business, the tools that were going to help what we call “private party”: people selling their car or people selling their futon. We expected there to be a lot more competition. We expected Yahoo, Google, eBay to be aggressively in that. And after the first year no one was really competing with Craig’s List. And we thought that there was a real opportunity to create a very differentiated experience around local private party, local community classifieds, right? So not a vertical shopping experience but a local community experience for classifieds. And we thought that there was a real opportunity there. Our traffic held up and we did…we thought it would be really hurtful to have Craig’s List taken out and we were like, “Wow. Actually our business is doing pretty well. How do we just really find that path?” And it was challenging. I mean, for a long time we thought that analytics, in terms of providing lots of structure and information around the listings, would be the secret sauce. And I think that was interesting but it really wasn’t a breakthrough feature. The social stuff has really proven to be more the breakthrough feature.
Andrew: What do you mean by analytics? You mean for example, if I were going to go and look for a car you would show me what that car should sell for?
Interviewee: We did a lot better than that. We had this feature where we had much better data than Kelly Blue Book. We would actually show you the historic price distribution in New York for y our car. We would show you the actual price distributions so you could see that the median value was 14 grand. But what you were exactly looking for, there’s plenty of volume in the 12 grand. And you could set up an alert and find out about it. Very sophisticated stuff. We had used some local kids from Stanford that were getting their PhD in econ to do all this crazy stuff; great, super cool feature. Didn’t breakthrough.
Andrew: That’s incredible because I would think people would want that data. People are data hogs, right?
Interviewee: Yeah me too. I thought that too but…
Andrew: We love twitter because it shows us the number of followers that we have and we want to increase it. And the same thing for MySpace…
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Interviewee: Yep. I agree and it will probably bring that feature back but it just goes to show you that you know that’s an incremental advantage and if you’re going to really break through and capture share it need to be a more disruptive value proposition. That was a cool feature but not enough to break through.
Andrew: And what were you going to do in the beginning to make the business different for the companies that were listing for local businesses?
Interviewee: We’ll all the stuff. For a long time we ,the only way you could get your listings into oodle was to to have us index those listings.so you know businesses that had a direct relationship with the local advertiser would feed us the listings or we’d crawl them. So it was a still search business for a long time. We didn’t want to let consumers begin posting on our site until we had enough traffic so we could make sure we provided a good experience. Getting, convincing people to post an ad on oodle and then having no one answer it really wasn’t something we wanted to do. So it was probable 18 months we hit about 5 million users probable about 18 months two years ago , people began posting directly on oodle. And thats when we started to have more of a direct relationship and as we started to kind of go down that path that kind of led us down the social direction because we started to confront all the problems with private party selling.
Andrew: Okay. We talked about how analytics didn’t really capture peoples imagination. What els did you think would work but didn’t work as you implemented.
Interviewee: well i guess i would say that first and foremost what i came away with was i could do all the great features in the would until i had scale none of it mattered. right so we did all the research on Craig list and we discovered that people had a love hate relationship with that product they love the liquidity i can go there i can find some great listings when i sell snaps up hate almost everything els about it.and you know my take away is at the end of the day until we have liquidity nothing matters so we became obsessed with scale. like how do we drive scale how do we get distributions deals how do we get listing in to our site what do we do to hit scale. and until then i think we wanted to continue to build product features but nothing can get in the way of kind of building that core scale. and you know now we’ve can start to kind of get to that level of scale we can kind of move beyond but until then none of it matters things like analytics doesn’t; matter.
Andrew: Scale is number one. What did you try to do to get scale that didn’t work. can you tell us a little bit about some the attempts.
Interviewee: We originally did allot of distribution deals with newspapers and ultimately those really didn’t pan out. I think their okay but they really didn’t move the needle. so we started doing different types distributions deals and started focusing on distribution deals with bigger brands like AOL or Facebook or MySpace. mainly because the newspapers for a long time were just interested in playing defense and we were trying to shake up the category and you know while they were wanting to work with us ultimately they were going to do it if it was going to take to drive share.
Andrew: And they were trying to create their own products too weren’t they. Many of the papers you approached.
Interviewee: Yes and no. I think ultimately they were just focused on how do they protect their revenue stream that they had. Classifieds represented something like 50% of the revenue for the local news paper and 70% of profit.
So they really need to ,they were really hunkered trying to figure out how to protect they revenue stream.
Andrew: Was MySpace the breakthrough deal?
Interviewee: It was a pretty pivitol deal for us. We had understood the value of social and its opportunity to really change the category for a long time but we also recognized that you couldn’t make classified a social network. it’s not enough of a habitual thing its something you occasionally do it’s not something you do every day. So it became very important for us to figure out how could we bring classifieds into community. We did things like military.com which we host classifieds for a military basis in the U.S. which is a community field. So we kind of earned our way there but we always have a strong thesis on this we spent allot of time trying to cultivate relationships with MySpace and Facebook because we belive into he blockbuster potential that they have to change the game for classifieds.
Andrew: Can you tell us a little bit about what that initial deal was like with MySpace? Did you have to pay them for distribution?
Interviewee: Oh I’m not allowed to talk about the details of that. But certainly apart of the lure was taking a product that didn’t monitize very well and helping them generate more revenue out of it and at the same time make the experience better for their consumers and more inline with their brand.
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Interviewee: in helping them generate more revenue out of it. But, and at the same time, make the experience better for consumers, and more in line with their brand.
Andrew: How could they generate revenue by partnering up with you?
Interviewee: Well, what we do, is there’s two types of listings that are on Oodle. There’s private party listings, individuals selling to each other. And then there are professional listings, listings posted by local advertisers – car dealers, real estate agents. And Oodle’s philosophy is that you don’t make money in private party. That’s an online conversation. You just facilitate it. But you allow local advertisers to participate in that conversation by including their listings. So, for example, if someone’s looking for an apartment, you’re probably unlikely to rent an apartment from someone you know. Maybe you have a friend that’s a landlord. But you need to figure out a way to get those listings into the environment, so, you know, we have lots of relationships with folks to bring commercial listings into Oodle, and thus generate good revenue.
Andrew: OK. All right. And so my guess is that probably the deal with them is an up front payment based on future expectations of shares of that revenue? You can’t say anything about it. OK. All right. How did you convince Facebook to work with you, when you were working with their competition?
Interviewee: Well, Facebook had its own classified site that they launched called “Marketplace”. And, I think at the end of the day, classifieds looks like a really simple business, and I guess you can get started in it very easily, but to do it well requires a lot of effort and technology. For example, anybody can do free classifieds and let people post for free, but it’s like going to a gunfight with a knife. I mean if you don’t have really good fraud and spam detection, you’re going to get creamed. You’re going to just get…It’s just not going to work. So you know, they get in, I think they were moderately successful, but they realize that to really do well, they needed to partner with someone. And I think we had a fairly good subject’s vision for what prospects could become on Facebook, and thought we were the best at doing it for them.
Andrew: OK. And so beyond spam, how else can you get creamed in this business?
Interviewee: [Laughs] Oh, gosh.
Andrew: Because you’re right. To an outsider looking in, it seems like Craigslist is doing it with what’s essentially a bulletin board system. How hard could this system be? But it must be hard. People like Facebook with technology, with the ability to stick with things, with money in the bank, still couldn’t get into the business, still couldn’t fight in this business. What are some of the problems with it that we’re missing out?
Interviewee: Well, going back, you’ve got to get scale. And so I think everyone, and this is a classic internet business mistake which is that everyone thinks about the business when it achieves scale. And they think about all the great things you can do with scale. The hard part is getting scale, right? And that is tough. And, as I said, in this category in particularly, because it’s local, it’s extremely difficult. It’s a land war, right? I mean it’s hard. And you know, I think we were very thoughtful about, not just about the product we were building, but the strategy of actually what it would take in terms of aggregation, distribution deals, and really doing that in an earnest way to reach scale. So our, the thesis for our business is to build a network, right? So that when a company wants to partner with you, they want to partner not only because you’ve got a really sophisticated platform, but because we also provide liquidity. So if someone posts on AOL, that’s circulated across our network. We can monetize more effectively because advertisers advertise across our network. So there’s inherent scale in the Oodle network that we can bring to bear with every new incremental partnership. So the more partnerships we do, the easier it is for us to do partnerships because we bring more to the table. So we were very thoughtful in our model that this wasn’t just going to happen. Getting there was 90 percent of the challenge. And you know, I think that’s a big part of why we’ve been able to make traction. I mean we’ve been really maniacal about the process.
Andrew: Can you talk a little bit about how, I know if I post a listing, it goes to Facebook and then it goes into my Facebook newsfeed. Can you talk about some of the conversions or some of the numbers that result from that? Do you have click-through numbers that you can share with us? Do you have a sense of how powerful that newsfeed is for you guys?
Interviewee: It’s important. I think it’s a couple things that we can do on Facebook which are a little different. So the newsfeed’s important, but there are lots of different things. So one of the challenges of commerce in a social network is that you’re mainly talking to people you already know, which isn’t necessarily ideal for commerce. So the first thing that we can do in an environment like Facebook is to create a public market where you can discover listings from people you don’t know. But you provide social contacts. So is this person is my network? Is it a friend? Is it a friend of friend?
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Interviewee: You can see their profile. So it’s about creating trust and identity. But you still need to interact with people who you’re not immediately friends with. So that’s kind of step one. Step two is getting people to talk about listings. So people talk about links. They talk about music. If they see a car listing or a home listing, how do you get them to talk about it? So if you’re looking at a job listing, you want to reach out to your network and say ‘Anyone know anyone that works here?’ or ‘What do you think? Would I be good at this job?’ Those kind of feed items are fantastic because the more that people comment; it actually makes a listing go viral. Right and it’s incredibly important. So we spend a lot of time on how do we help people through the discovery process on Facebook and then get them talking about the listings? I’m certainly, if you’re selling. If I’m posting a job I want it in my feed cause I can get referrals. That’s an important part. That’s probably the easiest thing to do because that’s what Facebook does. The discovery and the conversation part are probably the more tricky parts of what we do.
Andrew: I see. You’re saying that if I have an I-Phone 3G that I want to sale and I want to do it through Facebook just to my friends. I can reach my friends by just posting a message.
Interviewee: You can do that with a status update.
Interviewee: You can do that with a status update.
Andrew: Yeah, just a status update. So what you want to do to help us go further than that is if I see a new I-Phone 3GS and I’m considering buying it I can do a shout out about it or I can ask my network, ‘What do you guys think of this?’ or ‘Should I get the Android instead?’ and that helps me get a conversation going about this product that’s being sold in the marketplace.
Interviewee: Right. Say for example, someone might have a stroller and they certainly could send it out in their feed to their friends but by putting it in the marketplace they’re bringing it to a much wider audience of people that they might know. People might be talking about it like, ‘Oh, that’s a great deal.’ or ‘Gosh, should I get this stroller or this stroller?’ and as they do it provides viral visibility. All of those things are very, very important.
Andrew: Okay. All right and this is the big breakthrough for the business now. The way that you guys are standing out is by making classifieds insanely social, right?
Interviewee: ‘Cuz if you look at the problem, the problem if we step back. The innovation of Craigslist wasn’t free, right? Its community based moderation. So when I was at Excite we had free classifieds and it was clogged with spam and what Craigslist did, which was very impressive, is they came up with a community moderation model. So they created the first liquid marketplace where people can post for free. I think that works great. I think they are having challenges as it scales. Frogsters have discovered it and there are also some issues and it’s kind of an anonymous environment. So when we look at it I think that it’s, again people, there’s a great environment and should use it. But we want to create a different experience; one where you know something about the people on the other end. So, we attach as you post your Facebook, and you’re Twitter, and we track reputationals. So have you create. It’s all about to us it’s about trust and sharing, trusted recommendations and advice, sharing in very different ethos. I guess I would say is that I think share changes hands on the internet when usage patterns shift, right? And if you think about the classifieds world when Cosmic’s first came online everyone was obsessed with ecommerce. And what was birthed in the classified worlds were ecommerce vertical shopping experiences; Monster to find a job, Cars.com to find a car site. Then the world shifted and it became all about user generated content and local community and Craigslist just exploded. I think we’re actually poised right now for a third chapter which is the social web. It’s about identity and trust and new models and way of interacting and conversing with people. It’s not so much search driven, it is reference and advice driven and that’s the experience we’re trying to embrace and bring into classifieds. I think that if you can do that; if you can ride those big usage pattern shifts, you can drive major share change.
Andrew: Okay, let’s talk about some of the ways that you’ve done that. We’ve talked already about the partnerships with MySpace and Facebook. We’ve talked about the shout out’s. I can now have a conversation around products I see. What about Twitter? I see that you guys have gotten into Twitter a lot lately. Can you tell people how you’ve done that?
Interviewee: Oh sure. So there’s actually a lot of stuff we’re doing. So I’m trying to mentally filter what I can talk about and what not talk out because it’s a long list of product functionality here. So right now if you wanted to sell your car on Oodle, I think I’m speaking of exactly of the process log right now. You could post an ad for free. You can automatically connect that to your Twitter profile, your Facebook profile, and your MySpace profile. So what that means is that those listings will go into the marketplaces, your Facebook and MySpace, natively tied to your profiles; which is great. On Oodle you’ll see a little link that link off to your profile so people can understand information about you or automatically as you post more things over time, we’re tracking that and you’re building up a reputation in our service.
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Interviewee: You’re building up a reputation of your service if some one sees your listing and thinks that it is interesting or they want to ask their friends questions they could easily do that on twitter, on myspace on facebook. They can obviously comment on the wall and leave something for the people that are looking at it. That ‘s what is there now there is a lot of stuff coming. It is always interesting when you know you are on the right track with a product when there is positive feedback. So the more that you do…
Andrew: What kind of feedback are you seeing?
Interviewee: So little things like my product manager was selling his broken Iphone and the listing went into the facebook market place and a few minutes later he got an interest not from some one where he lived but from some one in LA that wanted to buy it. He sent them a paypal request and a few minutes later she friended him. A friend request came, she wanted to have more information about who this guy was before she paypaled him. So he friended her, she filled out the paypal request and boom he shipped it off. It’s like hmm that is really interesting. As you have both identities of buyers and sellers what does that mean really as it relates to local costumers? There are lots of things that one can do or what does it mean to bring a community notice to classified. So how do we get moms in Palo Alto, how to we help them effective get rid of their cleats? Which is a huge problem right? I am a cleat-generating machine each year I throw out pairs of cleats…
Andrew: How do you help them? How do you help them get rid of their cleats?
Interviewee: Well that’s the kind of stuff that we are thinking about. Which is how do you take affinity models people like moms and stuff that naturally are inclined to want to buy, sell and trade amongst each other and how do you enable that…this is a very fertile ground for innovation, I mean there is just so much but there is just not a lot that has been done…
Andrew: Can you tell me some of the theories that you have around it?
Interviewee: Sure. So one thing that we have noticed first and foremost is that as you increase affinity with classifieds the conversation becomes more symmetric so right now in a public market it is almost everyone selling things. One of the first things that we noticed when we ran the facebook market place was that there was a dramatic increase in the number of want ads, people asking for things, because I am more likely to ask when I have a feeling of who is on the other side right? So I for example want to buy something for my son I will ask my network for it, “Hey does anyone have one of these?” so that is interesting and I think that as we increase infinity that the conversation becomes more symmetric for both buying as well as asking for things. So there are some very interesting things that are related there. Similarly the community models as it relates to classifieds are tricky because they are very asymmetric. I don’t buy and sell with people that have kids my own age. I do it with people that have kids that are younger; if I am selling snowboarding gear I don’t sell it to some one that is also a really good snowboarder, I sell it to a novice. It is not necessarily to people you know but it is to people that you know something about so it is vey interesting socially because of that natural symmetry, does that make sense or am I way out there?
Andrew: Yeah but I would love to know how you all are planning on tackling that issue, I see the asymmetry and I see the potential here but…
Interviewee: Stay tuned; you will see a lot of stuff come out…
Andrew: Alright let me rave a little bit on your behalf here are some of the things that I love about oodle we have seen in past interviews here on mixergy people who were in the early days of social networking presented their new registrats with the abilty to suck in the addresses out of their address book and invite their friends the guys that got on to there quickly built up a huge network as they were able to spread not just to people that they could reach directly but also to those peoples friends. For example Otis of goodreads came on here and he talked about when you signed up for goodreads you said let me go through your address book and let me find other people on goodreads or find other people whose books you want to share and that grew fast. You guys when I listed my product with you I think it was an iphone 3g imedately let me one click add you to facebook which meant that you had access to all my friends on facebook and all my communications there, you let me sign up not using my email address but using facebok if I wanted to which I chose not to but that is incredibly helpful and then the other thing that you mentioned where some one worked with you listed a phone for sale and the buyer before sending money added him as a friend, I would have loved that on ebay. How many times do I go to buy something on ebay and I then get hit with an email from some one who says I sent you a thousand bucks I over paid you, please send me the difference and keep the money that you are entitled too…
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Interviewee: I mean little scammers like that because I don’ t know who they are. I don’t know their friends. I don’t know anything about them. Can get away with it.
Andrew: Yeah I know those are tricky problems, but yeah I mean, yeah absolutely, the social experience as it relates to buying and selling. And classifies in patricular is well suited for social in that it starts as an online conversation, but it almost always terminates into a face-to-face interaction, me picking up the futon, me interviewing for a job or talking to the landlord. So it’s a very very social experience. I think the challenge that we have is it’s not a viral experience, it’s a social experience. So how you get it to scale is really tricky, and you just need to be really thougtful about it. So we’re under no delusion that we’re Farmville and that it’s going to take off like wildfire, but we do see solid steady growth. And that’s what we need to focus on.
Interviewee: Alright, let’s go back in time, you mentioned several times that you worked at Excite. You worked at Excite, at one of the hottest companies of the first wave of internet companies. Can you tell us a little bit about what it was like in there? What it was like when the company was growing like wildfire and everybody was talking about it?
Andrew: Yeah it was crazy, I actually enjoyed it when it was a software company. I had done a lot of search technology in a previous job that was called Architect’s Software, so we would create search technology for websites and for companies.
Interviewee: This was in ’95?
Andrew: ’95 and about ten people, and pretty quickly after that we decided to build a search engine…we didn’t decide to build it, but we launched it…exciting…gosh, there’s lot’s to talk about there. I would say that it was really interesting to see it change from a very technology, you know back then the value was all about technology, it was really interesting to see. I remember it was a pretty geeky crew, and then all of a sudden one day I looked around and there were all these young people and it’s like oh my gosh we’ve become a media company! When did that happen? And it was really interesting to see that happen and for it to really go mainstream. I had never been, you know I had spent years building technology, I had never worked on technology that my grandmother could understand. It was really cool to actually experience the consumer side of things. I would say the one thing that most impacted me was having built software for so long was being in an environment where you could observe people using your product. So the actual active building the product is a converstation you have with your customers. It’s an ongoing dialougue. So having done product management for so long in a software world where you’re throwing it over the wall and thinking about release in six months, it’s an entirely different game. It is in essence a conversation. And you need to think about it that way. What’s the dialogue I’m having with my users? What are they telling me? What’s happening…
Interviewee: What would the feedback look like back then? Was it just the number of seaches and you get to see the seach numbers and the page numbers increase as you change things? Or was there a more…
Andrew: What they were searching for. How they’re using… we had, you know we were really maniacal about logs and checking the logs every day, and the product teams and the engineers were constantly minding it figuring out what people were really doing? What did they think they were trying to do? What were they having success with? What were they not having success with? So you know, this is kind of an inane example but we built our products based on what people were searching for. If a lot of people were searching for stock quotes, you know you built them a finance product. In those days it was really easy. But you know it was a very fundamental thing to me. I mean we take it for granted now, but back in the day…it’s an entirely different way to build a product.
Interviewee: You had shares in the company as one of the first ten eleven people in the business right?
Interviewee: Everyone in the company had shares, you guys went public. What was it like when everybody in the company was a zillionaire?
Andrew: When we went public, we went public, I think, at a modest price. The real run up happened, I think we went public in ’96, so I think the real kind of craziness happened in the ’98/’99 time frame…and it was crazy.
Interviewee: Were people…Was it fun?
Andrew: Yeah, it was great! Oh God, what a wonderful place to work.
Interviewee: Ha ha, what were some of the thi…how did people react to it? Were people going out there buying boats, buying jets in the company? Were they…
Andrew: No, actually I don’t know what it was. At least the core people there were really grounded, good people. I mean, the core Excite team are some of my best friends still and just good solid people. So no, the wasn’t a lot of that. It was a company that was very mission-based. We really felt we were doing something important and changing the way people could live their lives. So it wasn’t so much…it was just more the excitement of being in the eye of our tornado. You just wanted to go to work, you didn’t want to go home. You felt there was just so much going on and it was so much fun, and you…
Interviewee: What was…how were you guys going to change the world?
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Interviewee: Everything from, you know, again this was back in the early days; people they might have had a rare form of diabetes on didn’t know anything about it. And we could provide them with access to that information. We could enable them to talk to people. It they were in North Carolina and someone in Sacramento that had that disease. And you could start hooking people up. You know back in the day, this was a brand new thing, both in the way you were doing community and helping people find information. You were revolutionizing that and it was an immense thrill.
Andrew: I remember when I first discovered Excite, and you guys remembered my preferences, which I had never seen done online. I would say this is the kind of news I want. This is the way I want to see your home page and the next time you remembered it. I didn’t know what cookies were. It was incredible. Yahoo, meanwhile was very [indecipherable]
Interviewee: The personalization at Excite, my co-founder of Oodle, he built all that infrastructure. Personalization was a key theme for us. It was one of the big things we differentiated on. We found if you could personalize the experience, that was one the thing that had huge a resonate value. That if people came back to the page and it was customized and personalized, that had a huge impact in terms of retention and usage.
Andrew: Why do you think Excite didn’t beat Yahoo?
Interviewee: Because we didn’t dare to play a different game
Andrew: How do you mean?
Interviewee: The big lesson there is you know we were always one quarter behind Yahoo. We were just trying to out-Yahoo, Yahoo and that just doesn’t work. It never works. And you know, we didn’t dare to try to do
something different from them and you know, it was inevitably
Andrew: What do you mean? How would you out-Yahoo, Yahoo? Can you give me and example just so I get a clear understanding?
Interviewee: Out-Yahooing, Yahoo is we were trying to beat them feature by feature. So we would come out with a new community product called Excite Clubs and they would come out with Yahoo Groups, three months later. And we would come out with Mail or they would come out with it. And we were going back and forth, tit for tat on features. It was all very incremental. To try to change the game would be to try be something different. We had talked about it but we just didn’t do things like, how would you, instead of just trying to go tit for tat on search revolutionize community or the community experience? Really double down and try to play a different game. I think if you are the challenger, you have to play a different game. You cannot beat the contender at their own game. Especially in the internet which is a scale business. You have to play a different game.
Andrew: Was there someone internally who had an idea for different game to play and you guys just didn’t go for it because you were too busy competing with Yahoo?
Interviewee: Yeah. There was a time; I think it was in the early, I don’t remember what it was. We were really thinking about doubling down on community. A lot of the, again watching the conversation, community products were doing really well. We had thought about buying ICQ, which would have been really expensive before they were sold to AOL. Really doubling down on instant messaging and community and you know it was expensive. It was too big of a bet. And we didn’t make it. You know that one of the dangers of going public early, is we were very focused on what we needed to do to keep pace with Yahoo. It was a public company very early on and I think that was one of the reasons we kind of got caught in that rut.
Andrew: All right. And then after that you spent some time Grand Central as CEO. Can you tell us a little bit about that? What was Grand Central when you were with it, when you were running it?
Interviewee: So Grand Central was essential a cloud service before such a thing existed. It created a business level dial-tone for applications. So if you were a company and you wanted to hook your applications with your suppliers, your distributors, you could very, very easily to that. Rather than doing wiring all this business integration software. You could just plug in so it was really based on a big shift around web services, service oriented architectures and most importantly software as a service. Back in those days it was called ASP, Application Service Providers. So, you know, it looked like ASP’s were going to take off and web services and it didn’t really happen. So timing is everything. ASP’s at first, did real well, but that ecology really didn’t take off. It’s only just recently started taking off. Service service oriented architectures for enterprises, really big now. It took a while. I actually I think it’s really interestingly enough, it looked like it was going to take off, and maybe I’m reading too much into this but we saw a big shift after 9/11. So prior to that everyone was all about opening up their firewalls and connecting their systems with their suppliers and their supply chain and demand chain. And it seemed that after 9/11 it truly shifted all about security. And security companies suddenly came in vogue and it was about locking down and protection and all those sorts of things. And, again maybe I’m just reading a little bit too much in to it, but we noticed a real shift after that. I you know we had signed up companies prior to that like Wachovia, Saber
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, and [Eastmont Chemical]. We had done really well and we just really couldn’t break through.
Andrew: And this is, we all know Grand Central is the company that became your number for life, and was acquired by Google.
Interviewee: Right and the assets for our company got wound down and spun into that. I think the year I was given to them, I sold to them. So there was no relation between the two companies.
Andrew: If anyone has any questions about any of the companies we’ve talked about or anything we’ve talked about up till now, just put it into twitter with a pound mixergy attached to it and I’ll be able to read it. The final section of this interview, I’d like to spend some time talking about the challenges of entrepreneurship, and the importance of culture. Those are two subjects you told me before the interview are important to you. So let’s start with the challenges of entrepreneurship. We’ve talked a little bit about it now, but what have we missed.
Interviewee: I guess for me is, I went to Stanford business school, and there it was all about. It was almost like you were a [royal] wimp if you didn’t want to become an entrepreneur. There was almost a religion about ‘That’s what one needed to do’. And actually I think it’s not a career for everyone. There’s almost a bit of emotional unbalance required for being an entrepreneur. And I mean that in a couple different ways. First, it is simply an act, it is not about balance. It is an act of obsession. It is a Don Quixote like quest that you need to be on. And you need to be wired for that. The difference between succeeding and failing is 100% commitment vs. 98% commitment. 98 isn’t going to cut it Right? You’ve got to live and breathe this thing and you’ve got to feel like you’re on a mission. This is something important. Not only do I feel that way, but it’s something I’ve talked about with my wife and my family, and we all feel like we’re on this mission together. Secondly, it’s ready to be unbalanced thing. I mean it’s manic. The manic swings are unbelievable. On Monday you’re taking over the world. On Wednesday you’re dead. On Friday you’re taking over the world again. One of my sayings is ‘it’s never as good as you think it is, and it’s never as bad.’ It’s all about modulating the swings, both for myself and the people around me. It’s just very emotional intense, but it’s an act of obsession. And I think that some people love that and that’s what they’re about; and other people it’s not a good thing. For me it’s great, but I see a lot of people do it because they think it’s the right thing to do, and it’s not such a good thing.
Andrew: During the night now, you still wake up worried? Middle of the day now, you still have periods of ‘what the hell am I doing, this is going to end terribly.’?
Interviewee: Yeah, our biggest advertiser might go out of business. But I also wake up in the middle of the night going ‘Oh my God. I thought of something incredible we need to do.’ But it’s nonstop. It’s all I think about. It’s my favorite thing to talk about, my favorite thing to think about.
Andrew: I keep hearing that from entrepreneurs here. No matter where they are in life, they still will have this fear of ‘this is all going to go away’. Not all go away financially, but this company might implode tomorrow.
Interviewee: You have to be paranoid.
Andrew: And worried, and scared at times. Paranoia now has positive connotations because of the phrase ‘the paranoid survive’.
Interviewee: I think that’s right. I mean ultimately you can’t be complacent. You have to be scared enough to do something about things. Ultimately I’m the CEO right? It’s not about keeping people in their comfort zone. It’s about bending, stretching, doing what it takes to succeed. If you’re not scared, you’re not pushing yourself to do what it takes. Ultimately, fear is a very motivational factor. On the other hand, I think I’m very careful about not making decisions based on fear. Decisions that you make out of fear are generally bad decisions. But being fearful of what could happen? Absolutely, you have to be. Nothing I have can be taken for granted. I have to earn it everyday.
Andrew: You’re financially secure, right? It’s not about being out on the street is it?
Interviewee: No, but Grand Central didn’t go well for me, and I want to make Oodle is going to be a huge success. I built a [priat] from my dying hands and I’m going to make this company successful.
Andrew: Why? If the failure isn’t that you’ll be out on the street, what is driving you right now?
Interviewee: This is my child. This is my baby, right? I love building things.
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Interviewee:…this is my baby, right? I love building things, and I firmly believe in what I’m doing, and I love it. I love coming into work every day. I love the people I work with, and this is what I want to do. And I would get immense satisfaction out of making this successful. Obviously, if it’s financially successful, that’s great, but that’s certainly not what motivates me. I mean, I feel like, a mission or a quest here, I want to make this successful.
Andrew: Right. Let’s talk a little bit about culture. Why’s culture so important?
Interviewee: Well, I guess you have to step back. And I think people have a big misunderstanding of what culture is. I certainly goofed it for a long time. I thought it was this emergent thing, like a personality. And I think if you frame it as an emergent personality, you’re basically saying you don’t control it. And I met, when I came into Grand Central, there were some fairly significant issues there. I came in SEO, it’s a company I founded. Big culture issues. This guy I worked with, who was teaching at Stanford, said, ‘it’s really about social norms. You have to define culture as social norms. And it’s incredibly important to align the social norms with your strategy’. So, as an example, he said, ‘humans are herd animals, right?’ So he showed me an old Candid Camera episode. He didn’t think I even knew what Candid Camera is. Someone gets on an elevator, and everybody on an elevator is facing the wrong direction. What does that person do? They face the wrong direction. Right, you take your cues from the people around you. Because we’re social animals. So the question is, if you think about your strategy, what social norms do you need to set up? If you’re an innovative company, you better be tolerant of risk. If you’re a 24 by 7 mission critical company, that’s not what you want to be about, right?. It’s not necessarily the right or the wrong thing, it’s how do you align key social norms of your company so that they’re consistent with strategy? And, it was really eye opening to me. So, I’m thinking about what we needed. What behaviors we needed to have, key behaviors, and how do we do that? So, that’s was kind of the first piece. The second…
Andrew: So what are they? Sorry, go ahead. The second piece, then I’m going to ask you for more details on that first piece.
Interviewee: The second piece is, how do you actually spread those social norms? And I thought, oh gosh, you create a PowerPoint deck and have a company meeting. And this guy said, ‘absolutely not. Don’t even do that.’ First thing is, you just need to act them. So get your senior management team, believe them, and act them out. Right. Everyone takes cues. If you want tolerance of new ideas, be tolerant of new ideas. And the flip side of that is, if someone isn’t tolerant of new ideas, you have to shut it down. You cannot tolerate it. If it’s a key social norm, you cannot tolerate behavior inconsistent with it, period. If people can’t do it, they can’t be there. But again, you probably can only handle three or four key social norms. But you have to absolutely know what they are and then be absolutely ruthless about saying, ‘we don’t tolerate that behavior here’. And it really changed the way I view a big part of the CEO role and founding role, which is, what are those key social norms?
Andrew: What are yours at your company? What are important to you?
Interviewee: I’m a big believer in innovation, and change in the game, and you have to be tolerant of risk. It’s all about, it’s OK for people to make mistakes. It’s not about individual accountability as much as encouraging people to take the big risks, come up with the big ideas, hold ideas right in a meeting. Those sorts of things, so that we really can come up with great ideas and take chances. Secondly, a big one for us is, I’m a big believer that, in the wisdom of groups. That people come up with decisions better when they interact with them. So how do we create a collaborative environment? Then you know again, every one of these things has trade-offs, right? It’s not a positive or negative. I mean the challenges, you know, it kind of undermines ownership. You’re constantly collaborating, right? But we really try to watch that, because I really want to get lots of input on what we’re doing and really for people to all feel like they own it. Another big one for me is having people be friendly and nice to one another. I mean it sounds kind of you know, I think it sounds a little wimpy, but I love working. I love going to work everyday because I love the people that I work with, and I want to like them. And I want to have fun with them. And it’s important for me to hire people that I like.
Andrew: All right. I want to be fair with your time, but we got a question from Ben Fremer that I have to ask you. He’s saying, “How did you get in front of those big decision makers at those big companies that you talked about?” And he’s bringing up a point that, a question that keeps coming up when I interview, when I interview people like you. You talk about how you need to make big deals, and you go out there and you make them, and the impact it has on your company. But I think I need to spend more time asking about the details of how you get in the door of a big decision maker. How did you?
On why Excite didn’t beat Yahoo!
Andrew: Why do you think Excite didn’t beat Yahoo?
Craig: Because we didn’t dare to play a different game
Andrew: How do you mean?
Craig: The big lesson there is you know we were always one quarter behind Yahoo. We were just trying to out-Yahoo, Yahoo and that just doesn’t work. It never works. And you know, we didn’t dare to try to do something different from them and you know, it was inevitably
Andrew: What do you mean? How would you out-Yahoo, Yahoo? Can you give me and example just so I get a clear understanding?
Craig: Out-Yahooing, Yahoo is we were trying to beat them feature by feature. So we would come out with a new community product called Excite Clubs and they would come out with Yahoo Groups, three months later. And we would come out with Mail or they would come out with it. And we were going back and forth, tit for tat on features. It was all very incremental. To try to change the game would be to try be something different. We had talked about it but we just didn’t do things like, how would you, instead of just trying to go tit for tat on search revolutionize community or the community experience? Really double down and try to play a different game. I think if you are the challenger, you have to play a different game. You cannot beat the contender at their own game. Especially in the internet which is a scale business. You have to play a different game.
On how Oodle is differentiating itself
Craig: So we’re really tipping and starting to achieve critical mass. I’d say as we move forward, it’s all about differentiation and being something different. I was at Excite for many years and one of the big lessons I learned was that you never take out a category leader by beating them at their own game. You need to create your own game.
You need to figure out what you are and why that’s different. And we’re not trying to beat Craig’s List. We’re trying to create a very different experience. One where, when I’m selling something I want to know who’s on the other side. I want to know something about them. I don’t want to invite some person I have no idea who they are over to my house to test drive my car.
If I’m looking for a job. We hired someone recently. I was very reluctant (it was a marketing job) to put it on Craig’s List. I love Craig’s List, and I think it’s great. But I didn’t want to put it on because I’d get a thousand resumes and it would ruin my weekend because I’d have to sort through them all. I want to be conscientious and reply to everybody.
So to put it up, of course I’d use Oodle. One of the things that happened with Oodle is it went out on my Facebook feed and my Twitter feed. And I started getting recommendations from friends, all referral-based. And it was wonderful, but it was different. And ultimately we’re trying to build a very different experience around trust and reputation. And I think increasingly that’s going to become relevant, and word of mouth will help it. Your product is your best marketing tool.