Andrew: Coming up in this interview, have you ever heard the expression – Don’t get mad, get even? Well, today’s founder might have a different motto: Don’t get mad, go start your own business. Wait until you see what happened when he got the wrong answer when he approached a boss at his previous company. Also, why is this founder, who I interviewed, who you are about to watch, why is he glad that he didn’t take funding? When you hear it, I’m curious to see do you agree with him. Was he right? Also, can you really start a business while sailing the world? This founder you are about to meet tried it. Wait until you see what happened to him. All that and so much more is coming up. So, watch this interview.
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Hey there freedom fighters, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. How does a company that was bootstrapped on a sailboat become a multi-million dollar tech company is less than two years? Paul Mokbel is the founder of SiteScout, an ad technology company that gives small to mid-sized businesses the ability to buy ads with a small deposit, use technology like re-targeting and get up to the minute data on their campaigns performance. I invited him here to have him talk about how he pulled this off in such a short amount of time. Hey Paul.
Paul: Hi Andrew. Thank you for the opportunity.
Andrew: Glad to have you on here. Now, one of the reasons why you ended up starting this business is, you went to the guys who were running the company that you used to work for and you asked for, what?
Paul: Well, long story short, I built a whole business for them, from conception to execution. And once it gained steam, I asked them for equity in the business and they promised me a very, very small minute amount. And I realized that if I did this, I can do it again. And, here we are.
Andrew: So, you went to them and said, “Hey can I shares in this business that I helped create?” You’re basically taking the product that I built and you’re building a business around it. What was there response to you asking for a little bit, a little piece of the business?
Paul: Well, I think they recognized and they appreciated the fact that I was entitled to it, but ultimately I felt that it was significantly my business. And they didn’t feel the same way. I had been working for them for a decade and I thought enough is enough. If I can do this for them, I can do this for myself. And that’s exactly what I did.
Andrew: OK, and the business that you helped create for them was essentially, before the interview started you told me it was like Justin TV. It was a canned based, high, a lot of programming work involved and you helped put it together, you were the visionary behind it. They said no to the shares and you decided to take off. Where did you go?
Paul: Well, I had been in Panama at the time, actually traveled and I was living in Europe and South America. I had been in Panama at the time and I had been there for quite a while. We have two oceans in Panama that are a hour apart and I always had an affinity for the water. I am an Aquarius after all. It dawned on me, I want to get a sailboat. I always loved the idea of sailing. I had never done it before and I just thought, hey I’ve got to do something crazy, I’ve got to live my life. So, I put some money together and I bought a boat.
Andrew: That’s a kind of gutsy thing to do if you’ve never done it before….
Andrew: I used to think sailing was really easy, but I just went and did it here in San Francisco and it’s incredibly tough.
Paul: It is and it’s dangerous. That’s part of my love for it. The adrenaline, the idea that you’re in control, and you’re [on your own island]. There’s no police. Especially when we were out there, there’s nothing. We were many days away from civilization and that was really the appeal for me at that time. I think being young, that’s the sort of thing that really tickles your fancy.
Andrew: I’m going to get back to business in a moment. And for the audience that’s waiting for me to ask, I will of course ask about his revenue, but something interesting happened while you were on this boat. Early on, you got into trouble. You got to just take a quick segue away with me and talk about what happened there and then we’ll get back into business.
Paul: The boat… Actually I’ve had quite a bit of trouble at the very beginning. We had a situation where we were actually near the entrance to the Panama Canal and the rudder on our boat, which is like a 5-feet rudder, it’s a very sizeable rudder, and it locked on a [90-degree] angle. I thought I was going to die. There were 8-feet seas. We were stuck in circles. There was really nothing we could do and there are these huge freighters that take miles to turn. Thankfully the wind was coming offshore and pushing us out to sea. We just caught our engines and radioed for help.
And it’s actually a great story because at that time we didn’t know, but the VHF radio on the boat had been fried by lightning strike. So [when I went to go on Mayday], no one heard us, and all we heard was static and it was the most frightful thing in the world. I think we were eight miles offshore and it was terrifying. It really was. What was happening was, and it’s funny because… I had a first generation iPhone at that time and there was no bar on the phone, but my friend had an old Nokia phone on the boat and he had one bar. It was an old phone. They’re high powered. So we were able to call the marina and talk to a manager there and let him know. He’s telling us, “Everybody in the harbor hears you, but you can’t hear us.” It was quite a situation. Then we had the coast guard come and rescue and I’m thankful that they did that. It was a scary experience.
Months later we started our journey throughout the South-West Caribbean. We entered Colombia, the border there, and I had an [M16] pointed at my face [??] I had a bunch of these experiences. It’s quite possibly one of the best experiences I’ve ever had, and I highly recommend to anyone that works hard that they do something crazy just like that, and get out and live.
Andrew: I got to reveal something to the audience. This you’re saying with a smile on your face, and you’re really excited that you did it. The question of whether you should do a Mixergy interview with the fact that we don’t do anything editing, with the fact that you know the kinds of questions that I ask, that made you say, “Um, maybe I don’t really want to do a Mixergy interview at this stage.”
I’m not going to push you to talk about that, but I just want to acknowledge that and say that to the audience, there’s a kind of an element of risk here, but there’s also an element of trust and I think that that’s why so many entrepreneurs have done these interviews. They say, “Hey, the guys who invested in me very often recommend doing a Mixergy interview. My friends have done this. I’m going to give it a shot and go forward.” I’m glad that you’re here to do it.
Paul: Excellent. I appreciate the opportunity.
Andrew: So you’re on this boat and you decide, “Hey, you know what, I know I’m on a boat, but I want to start a business.” The business that eventually led to this was something that you started with your buddy, [Ratco]. That’s his name, [Ratco] by the way?
Paul: [Racco, Racco], yeah, yeah, who’s currently our director of marketing. He’s a super-intelligent guy. He’s part of the reason why we’ve had success in the way that we have. Yeah. He actually quit his job around the time when I landed. What had been happening was I’d been sailing. I’ve been a geek my whole life. I’ve always been on my computer. There’s not a day that went by that I didn’t have my computer.
When I started sailing, I realized, “My God! Months are going by and I haven’t opened up my machine.” I guess six months after we started our journey, we ended up in Cartagena Harbor in Colombia which is a really beautiful city. I say ‘city’ because we had not seen civilization in forever. So to actually see buildings and restaurants and even steak for first time, I was in love. We dropped anchor and we settled there. This was in 2009. I got a USB GSM 3G modem for my computer.
Andrew: I didn’t know you’re [that connected] to the rest of the world.
Paul: Yeah, I’d not been able do that previously and it had allowed me to communicate with my friends back home, and [Racco] hit me up. He was like, “Paul, I’m doing really well. I’m doing this performance marketing and doing so well.”
Direct response performance marketing, affiliate marketing, all loosely tied together. He had signed up to affiliate offers and basically was arbitraging inventory, buying traffic, arbitraging it, and making a margin on it. He had been doing really well and my eyes lit up.
I was like “I haven’t worked in forever. I’m a programmer. I can probably do this better than most marketers can because A, I understand marketing very well. I can write tools to make it much easier.” That’s what we did. He quit his job. He had been working at Pepsi at the time. Flew down to Columbia where we had set anchor, got on the boat with me, and we put our minds together and thought, “How can we do this together?”
Andrew: I’ve got to ask a little bit more about what he was doing. Just as your eyes lit up when you heard what he was doing, I know there’s someone listening to us going, “What? What exactly did he do? I’d like to do that.” Be a little bit more specific. Can you give me an example of what Ratko did where he arbitraged ads and ended up doing so well generating so much revenue?
Paul: I don’t know the specifics off hand. There are all sorts of offers out there. For instance, Valentines or Halloween comes. Amazon has a tremendous amount of Halloween offers. You can sign up to the affiliate program and make a commission on the sale of the products. You’re really strategically placing advertising around products. Essentially, you’re spending money on media buys and expecting to make your money back and a margin on the sale of the product. It’s quite a gamble. When you find something working, usually you can scale it infinitely. That’s the appeal behind affiliate marketing. It’s not as easy as it used to be because obviously there’s a ton more marketers out there doing the same thing, but I wanted to get into that. Ratko showed me what he was doing.
Andrew: Why? If he’s doing so well buying ads and placing affiliate deals, not necessarily Amazon, but placing affiliate deals that generate so much revenue. Why does he want to bring his buddy Paul in on it instead of keeping it all to himself?
Paul: I think we had agreed that his existing deals or buys that he had been doing would be his own and whatever we were going to do would be a part of that. I think it was a win-win situation because you can’t have too much.
Andrew: He wanted you to help code some way to increase his results.
Paul: I don’t think that was the appeal at the get-go. I think it was purely a marketing play, running numbers, trying to figure out new offers that we could position. On the sideline, I realized that I could write programs to make this more efficient and effective even for competitive intelligence and so forth. That’s what we ended up doing. It didn’t work out. We started and then I realized I didn’t want to do affiliate marketing. I quickly realized there was a huge need for ad technology in the space.
Andrew: As you told me before you started you lost your shirt. What was the problem?
Paul: At the time I had not been working. $10,000 was a lot of money to me. That’s the sort of money I put toward that. I didn’t really make any money back on it. “Lost our shirts” is probably an exaggeration.
Andrew: You lost a significant amount of money.
Andrew: What was the problem? You’re a smart guy with experience in the space. Ratko has definitely had experience, he brought a winning model to you and still it didn’t work. What was the reason?
Paul: In performance marketing it’s trial and error. You usually need a lot of volume in order to evaluate whether or not something works and sometimes it’s not consistent. Given a $100,000 budget, we might have found something that worked. I realized that I could probably make a lot more money without any of the risks by developing software where there was a need for this.
Andrew: Okay. You also were starting to see that the way that you bought ads was antiquated. What year was this?
Paul: Absolutely. This was 2009, and one of the things that we had tried to do was put together media buys, putting together IOs and it occurred to me, and this is very primitive, having to pick up the phone and call an account web and publishers, and I’m trying to negotiate a deal, sign paperwork. I mean it really was primitive.
Andrew: What was primitive about it?
Paul: Well just the fact, it’s like a phone switchboard. It’s a very manual process of paperwork and having to commit when all you really want to do is experiment. Media buying is all about experimentation. Sometimes specific advertising campaigns don’t work on certain websites, and you don’t know unless you really try.
Andrew: And what they were asking from you as I understand it was they said give us a big commitment, thousands of dollars, sign this paper IO. If your ad buy doesn’t work with this IO, this insertion order, this agreement to buy ads then sorry, you have to continue running it, and then you go and buy another one. It was that kind of manual process, did I understand it right?
Paul: Yeah there are clauses in many IOs, but it was more the tedious process and it’s hard to scale when you have to call each individual publisher and structure a deal with them. And to me…
Andrew: Couldn’t you just buy Google Ads and just blanket everywhere?
Paul: Yeah, I mean Adwords was one of the platforms we ended up running with, but it wasn’t as effective and it didn’t have the scale that RTB has today, mind you this has obviously come a long way and that may not be the case today. But certainly I can tell you from our perspective, operating RTB, we have Google’s (?) [02:02], but then we also have a dozen other exchanges in the (?) [02:06] as well.
Andrew: RTB, by the way means real time bidding. It’s all of us advertisers are bidding on spots on individual websites, and that’s how we end up buying our daily ads.
Paul: Absolutely, actually I should give some small background on that. That’s actually a really awesome technology. Any time you go to a website and there’s an adsense tag on the website, for instance, what ends up happening is an impression is generated, and then real time, let’s say 100 milliseconds, the perimeters of that impression are sent to hundreds of different RTB platforms, mine being one of them, and given the opportunity to bid on that impression, so for every individual user, where on the page, what the URL is, every attribute that you can think of associated with that impression is sent on the wire, and the idea being if there’s something that one advertiser knows about a specific impression over another one, they would bid much higher and ultimately yield the CPM. This is ultimately generating more yield for the impression they typically wouldn’t normally see.
Andrew: So every time I serve up an ad on my site as a publisher, all these different platforms and all these different advertisers are bidding for that one spot, that one impression, that one customer.
Paul: In a tenth of a second, which, imagine every time you see a banner slot for the most part it’s going through this process, so to know that that is going is actually interesting. A lot of people don’t know that.
Andrew: Now you obviously hadn’t built up this business at the time, you were just trying to buy some ads and get more revenue…
Paul: RTB didn’t exist.
Andrew: And you were just (?) [03:53], you were trying to buy some ads and generate more revenue from affiliates, from commissions, then you were spending on those ads. It was an antiquated system. Most people would say the system is rigged against the little guy. No one is going to take me seriously because I’m in Colombia on a boat, no one’s taking me seriously because I don’t have a name, no one’s taking me seriously because most people would have bitched. You said no, that’s not my way, and you decided to build something. What’s that first thing that you built?
Paul: So the first thing we built, or I built was an ad server technology, and I mean my background is in high concurrency, high throughput analytics, so for me this was a no brainer. In fact, I love it. I absolutely love writing this sort of software. It’s a challenge for me. So what we ended up doing was focusing on building the actual ad server platform and I took it half seriously but then I realized that this is actually something that could work very, very well and after a few weeks I realized I’m going to throw the towel in on the selling and go back to work, because I hadn’t worked in a long, long time.
Andrew: What were you going to build? What was the original idea that you were going to launch that became SiteScout, the site we’re talking about today?
Paul: Back then in terms of for ad serving…in order to really scale your offers you really needed to do direct buys as we were just talking about. The solutions at the time, there were two extremes. You had a free ad server, which really couldn’t handle the traffic. The other extreme was enterprise ad serving solutions like Atlas and DART. It’s enterprise software sales, they’re long term commitment six digit contracts. For someone that’s just experimenting that was not an option, so I wanted to fill the void there.
Andrew: Let me see if I understand this. I’m sorry to make this so simple that I know that Max Teitelbaum, who introduced us is probably going to pull his hair out if he’s listening, going “This is too basic.” I need this basic understanding. You’re saying you’re going to build ad serving technology that the advertiser would use to serve up his ads on the publisher’s websites where he’s advertising?
Andrew: Why wouldn’t he just give them an image of a banner and say, “Run this 5,000 times and I’m going to pay you X amount of money for that?” Why does he need this ad serving technology?
Paul: Some publishers do allow you to do that, but it’s really not advantageous to do so. The idea behind having your own ad server is that gives you the flexibility to really evaluate the performance, change the landing pages, the level of granular statistics you’re also able to see, different hours where it’s operating. Those are some of the reasons why you would need your own ad server. You could just give a simple banner with a destination landing page to a publisher, but you’re probably not going to have much success.
Andrew: OK. You’re making me understand why I don’t want to do that. You also told me why existing solutions didn’t make sense. Either they were too expensive and too big or you’re saying they were too small and what’s wrong with the free stuff that was out there.
Paul: It really couldn’t handle the level of traffic that we were expecting to hit it with.
Andrew: I see. OK. Now you’ve got this idea for technology. You’re off your boat. You’re going to sit and code this thing. We’re still small time. We’re eventually going to see how this became a multimillion dollar business in a couple of years, but we’re still small time. In order to make this into that multimillion dollar business that we’re here to do the interview about you need to get two groups of people. You need to get two groups of people. You need to get advertisers and publishers on board, right?
Paul: To some degree. We’ve never really worked with publishers. It’s strictly been an advertiser site business. Our relationships are purely with the advertisers.
Andrew: You did try to get publishers at first.
Andrew: You’ve got to tell the audience what the reaction was when you called up publishers and told them where you were and wanted to do.
Paul: Yeah. That was a rude awakening for me. When we were initially trying to put together IO’s, through the process, they’re asking us where we were, Ratco and I. I’m like “We’re Canadian, but we’re in Colombia.” That didn’t fair too well. I can appreciate that as well.
Andrew: Why? What’s the risk? It’s easy for us to bash them and say, “Those people didn’t understand.” Just because you’re in Colombia doesn’t mean you’re a bad guy. I want to understand them. There was something that they were protecting themselves against. What was that?
Paul: There’s are malicious advertisers out there. If you don’t have history, if no one knows who you are, how do they know that you’re not one of those malicious advertisers? Certainly I wasn’t, but I can appreciate their perspective on that. That’s really what it was. It’s shady, right? “Who are you? You don’t have a LinkedIn profile. I don’t know who you are. Do we really want to do business with you?” It didn’t sit too well with me, but today I can completely understand that. If we had somebody on our platform that wanted ad tag access on our RTB were in Columbia, I didn’t know who they were, and there’s no history about them, I absolutely would not allow them on the platform.
Andrew: Okay. We’re going to get into how you got the advertisers in a moment. I’m actually going to ask you about the first one because I know people in the audience will go, “Wait, don’t jump from idea to millions of dollars in revenue. Take me to the first advertiser.” To get that advertiser you needed a place for his ads to run, didn’t you or is it not important?
Paul: No, we didn’t do that because originally it was simply the ad server technology.
Andrew: Then he could take it to whatever publisher he wanted to work with.
Paul: Yeah. Our customers of the ad server would structure their own direct buy, sign their own IO’s and ultimately utilize our ad server to actually do the ad serving. So they would have their own relationships.
Paul: They would specifically sort of like a software as a solution model.
Andrew: So how’d you get your first advertiser?
Paul: I don’t quite remember how we scored them but, the story’s quite great because the way we ended up doing it was that every ad server customer would get their own subdomain [.sitescan.com]. And this specific customer was a pretty big DR advertiser and he had his tags everywhere and pretty much all the other marketers had seen that this guy was using our ad server software and it instantly gave us legitimacy. It was viral almost. Simply because it’s social proof. They see that he’s using it, he’s a big advertiser, it’s everywhere. Now these guys think ‘OK, there’s something with this. We need to start a business software (inaudible) as well’.
Andrew: But you don’t know how you got him?
Paul: You know what, yeah, I don’t quite remember right now, to be honest with you.
Andrew: What would you have done to get the first if, not him specifically, but the first group of advertisers who are going to take a flier on you. How did you get them?
Paul: You know what’s funny, too, because some of the first advertisers, a lot of these DR performance guys, they’re very sensitive to their secrets. And if they don’t know you, they don’t trust you. You don’t have a name, they’re probably not going to work with you because they’re paranoid that you may steal their campaigns. And I remember one of our older customers we, Matt and I, were on the phone with him, trying to sell him and his thing was, ‘How do we know you’re not going to steal our campaigns?’ This and that. And, again, we’re a tech company. I did a very small amount of media buys and I have not touched it since. And my passion is in the technology and that’s what we effectively told them. And today he’s still one of my customers so it’s actually an interesting question.
Andrew: So this is a guy who said, ‘Hey why would i want to use your technology? You’re probably going to find out which affiliate deals I’m running and what publishers are working well for me and then anyone can go and get the same affiliate deals and publish.’ How do you get a guy like that, who’s making a lot of sense, to accept you? What did you do?
Paul: Well, I think it’s a collection of him seeing other advertisers utilizing the software or stressing to him that we do not do this, we’re strictly on the technology side. And I think, at the end of the day, he swallowed it and agreed and again, to this day, he’s running with us.
Andrew: But it took months, actually, from what I understand.
Paul: Yeah, it did. That guy in particular, he came back a few months later and signed up and it could have been that he’d seen that these guy they’re still in business and they have a ton more customers now. I mean it’s obvious when you’re surfing around and you see sites get tags if you were.
Andrew: But let’s go back and just understand. How would you have gotten your first advertisers, the first people who were going to take a risk on, take the shot that you’re not going to steal their stuff, that your software will work and not waste the thousands of dollars that they’re going to spend on ad buys that are served up by your software?
Paul: I don’t that there was ever a question that they wouldn’t work and that certainly has never been an issue. I think that the biggest issue was whether or not they could trust us. And I absolutely love that subject because that was something, back then, that I couldn’t get over, that I was really concerned about because it was a very legitimate concern. I certainly would have felt the same way, I completely appreciate it. But it’s sort of just gone away. And I actually, back then, thought this could be a recurring issue. It’s never happened since. And we’re very honest people so we’ve never done anything, revealed or shared information about what people are doing so…
Andrew: …word gets around if you guys are stealing someone’s business…
Andrew: …and that’s why people want to see that you have a track record. Because if all these other people are still with you, it means you didn’t steal their business and if you didn’t steal their business, you’re probably not going to steal any other customer’s business. But…
Andrew: I’m sorry to stick with this and I know that this wasn’t your part of the business. In fact, let’s talk about who’s part of the business it was as a way of understanding how you got customers. You hired a guy named Matt. Who is Matt?
Paul: Matt was my old business partner from, SiteScout is actually an old corporation, and he used to be a partner in that corporation over a decade ago. And he’s also one of my best friends so…
Andrew: You just had this corporation sitting there for ten years?
Andrew: What was it doing?
Paul: Nothing. It was a holding company and it wasn’t operating at all. I was gone.
Andrew: Every year you were paying the hundreds of dollars that you need to the state to keep it going?
Paul: Yeah. It wasn’t significant, purely just filing taxing. It’s actually poetic because Matt, who had been my old business partner from a decade ago is back into SiteScout. It was great. I’m back in Toronto, I’m like “I need someone to help me that knows this stuff” and Matt popped into my head. It worked so well. He’s my right hand. He’s so smart he knows everything about media. He’s not a programmer, but he’s almost a programmer. He knows tech.
Andrew: What do you need Matt for? What’s his part of the business?
Paul: Everything that I can’t do he can do. I’m very much on the technical side. I’m on the strategy side. He’s very much a people person. He’s a business savvy guy. He’s really good with coming up with pricing forecast. I really needed that at the time. It wasn’t until I got Matt that we put together our pricing model for the ad server and then really started selling it. He made that possible.
Andrew: Ratco is the guy who actually introduced us. Matthew Teitelbaum of WhatRunsWhere introduced me to Ratco. Ratco introduced me to you. Ratco offered to do an interview at some point in the future about how he gets customers. I’m looking in my notes here. It seems like what he did was participated in forums, created content, talked to his friends, got people in the business to try SiteScout.
Paul: Absolutely. He’s taken an organic and viral approach to the whole thing. Part of his strategy was to position ourselves as a resource and not just a platform because this industry is in its infancy [sp]. There’s so many of these media buyers that are just getting into the game. There’s very limited literature about this. Part of the strategy has been creating a knowledge center, participating regularly on forums. We put together webinars regularly. They’re free. We attract hundreds of people. We teach people in a live setting how to use a software or how to do certain things, how to get started with media buys, not to mention our blog.
Andrew: I’m going to SiteScout.com. You’re saying, “If I’m on SiteScout and I don’t know how to do ad buys, but I realize that it’s time for me to start buying ads to grow my business, I can take a webinar to learn about ad buying in general?” In the process, you guys are going to teach me about SiteScout and why I might want to buy from SiteScout.
Paul: Yeah. I think we generally invite people to the webinars once they’ve signed up to the platform. I think they do mailers in that regard. They’re awesome resources and very well received.
Andrew: How do you get people to start using the software so you can give them the webinar and get them…
Paul: We have a knowledge center on our website that has a ton of literature about ad buys and how to use the platform. We do have a starting point for them. That’s really been our…also, participating a lot of the PPC forums. A lot of the traditional forums where marketers that have some experience maybe not in direct media buys, but on the traditional PPC adword sort of thing.
Andrew: I see the knowledge center. It’s mostly knowledge center about how to use SiteScout.
Andrew: It’s not about how to buy ads in general. Also, as a new user, if I were on your site I’d have to really look carefully on the bottom just about the copyright “All rights reserved” note for the knowledge center. I’m sorry to keep pushing on this, but this is an important question. How do you get your first customers? It’s great to build software, but if you build software and nobody uses it it’s a waste.
Paul: Absolutely. We have something called the [SP] “RTV site wise,” which is this letter that goes out. It’s new. That talks about industry, what’s happening. It’s probably not an educational resource, but those are the things that we’ve concentrated on in regards to positioning ourselves as leaders in the industry and getting people to recognize us as the first point of entry into media buying and we’ve really created our TV. plot from an away, where there are several barriers of entry. I mean, you don’t have to get on the phone with anyone. You can be sign up and be up and running in five minutes. I don’t know any other rtv plot forums that operate like that, so by removing those barriers of entry, we’ve really positioned ourselves as the go to platform for these media buyers.
Andrew: Alright. Did Google search here as we were talking to see how and where you guys participate, I can see people having conversations about sites got on warrior forum.
Andrew: Where there’s a case study about sites [??] media buy plus click bank, where there are the cheapest paperclip companies like site scout, et cetera. I see people having conversations on warrior forum. On wicked fire, someone posted: my media buying strategy, looking for critiques. He’s saying that he uses his startup [??]. I’m using site scout to buy the banner impressions and click bank for my products. I can see a marriage right there. Alright, so people are definitely having conversations in forums, and you’re saying by participating, that you’re moving people toward your site.
Paul: Yeah, but I think even just by opening it up. I like to refer to our platform as the open platform. You know, it really is the one platform where we don’t make you jump through hoops. You can sign up and get started right away. I know when I get on a program; I don’t look at the dots. I just look at the controls and I figure out. I can see how it works and I can see what the possibilities are. And certainly if these advertisers are advanced, they’ll immediately figure out who this stuff works by making it an open platform where you’re giving them the opportunity to jump right in and start working on it, whereas a lot of our competitors make it very, very difficult to sign up. They want to [??] you and insure that you have millions of dollars to spend. We’ve done the polar opposite.
Andrew: Okay. Alright. I did sign up for an account months ago. I interviewed Max and he seemed to be your biggest cheerleader.
Paul: That’s awesome.
Andrew: So I said that anything that Max recommended that highly, I went and signed up for.
Paul: That’s awesome.
Andrew: Pipe drive, which I freaking love for organizing a process of any kind, but especially sales process. And then he also talked about site scouts, and I created an account with you guys and one of the first things I saw was essentially a menu of websites that I could run my ads on.
Paul: That’s right.
Andrew: Categorized with information about what I’m going to pay for the ads and number of impressions. I also saw a column that said Google Ad Words, and I think I saw a Rubicon project and so on. How did you partner up, with say, the Rubicon project so that their sites show up on your platform?
Paul: Yeah, so okay. It goes back to the story of one of our first ad server customers. Again, we discussed how primitive the IO’s are. The second I heard that this technology RTB was coming into fruition, one of our ad servers was a big buyer on the Rubicon project and they gave us an opportunity through him to get started in their beta program. My eyes just lit up. I knew right away that this really was going to be a big win for the industry; in the same way that e-trade did for the stock market.
This is going to be the same thing as buying advertisement. We got started with Rubicon and we built a very simple self-serve interface into Rubicon’s inventory, and we basically document the inventory that their sending us and we try to determine what the domains are, and what channels they are. Any sort of information. The G.O.’s. Where the information’s coming from. We display it in what we call the ad planner. We’ve done the same thing with every exchange we’ve plugged into.
Originally, we started with Rubicon as you mentioned, and then as time went by all these different exchanges released their RTB platform. This is before what they referred to as open RTB, which is a standard specification. Each of these companies had their own specification, which was fine for us, but back then there was only a handful of companies and since we had some legitimacy, and we were doing these buys of Rubicon, it was easy to get in with the other exchanges.
Andrew: Let me see if I understand this. I keep breaking this down because I want it to be simple to follow and I also want to be able to understand your progress. You’re saying that one of your advertisers told you that Rubicon project, which represents many publishers and allows advertisers who have big pockets much bigger than your customers, often, to buy ads on any one of those publishers that Rubicon sells ads for?
Paul: Yeah. And then, sorry.
Andrew: That’s what Rubicon does and what you did by partnering with them was take all those publishers and make them more accessible to the small or mid-size ad buyer.
Paul: Absolutely. The idea which is very exciting. You asked me before whether or not we were publishers. If we hadn’t been publishers, this would not been possible. There’s so much. There’s communication. You need to have a lot of communication with every publisher that you work with. These exchanges, they typically work with thousands of publishers in tandem. They have the relationship with the publishers. They’re the ones that pay the publishers where we simply create the technology that leverages the real time bidding of the platform and allows us to buy on the spot inventory from any of the publishers that they’re doing business with.
It’s a great idea. It allows us to really have a huge reach and a huge scale without ever having those relationships. So we have a relationship with a dozen exchanges, and those exchanges have a relationship with thousands of publishers. So it’s nice and consistent.
Andrew: That’s a major change in your business. You started out with the idea that you were going to create software that would allow advertisers to run and manage the ads that they run on other sites.
Andrew: Suddenly you partner with Rubicon Project and other exchanges, and as a result you become a place where I can go and decide where I want to advertise and basically have a relationship with publishers.
Andrew: How did you decide to make that transition?
Paul: That’s funny. I mentioned Averisk and Averisk is a great sort of interface. It is limited to inventory, and they’re very stringent on how they operate. Now since this came about and other exchanges were pushing out to do as well, it became a no brainer that I ultimately wanted to create a self-serve platform. So maybe Google AdWords were for display over RTV, and that’s really the idea.
Andrew: Why? The reason I’m asking is because this is where your big growth came, that we as entrepreneurs have so many different ideas, so many different possibilities for where we can take our business. If we pick the right one, we could grow and explode in growth the way that you guys did at SiteScout. If we picked the wrong one, we could end up losing money. We could end up losing momentum. We could start hating our whole frickin’ lives. How did you pick the right one so that you could grow?
Paul: Well, the out server was built out of necessity. We needed it. There was no question about it. It was, to me, obvious that it was going to be what each did for the stock market, but more importantly the lie is simply because it was really obvious that this would remove all the friction from the sales process. By building a self-serve platform over RTV, all of those eventually have gone away. The ability to buy transparency over thousands of publishers at the click of a button, that’s a big win. I knew that that would be well received, and it has been.
Andrew: I wonder why. In some industries when you reduce friction, people are more excited to do business with you. In others, they’re not, even within specific industries, in restaurants. If you take away all the barriers and make my favorite restaurant super rich, as in walk in, take the cash, and give you the food, I’m going to hate it. But if you add more steps, like a waiter who greets me and so on, I’m willing to pay more and enjoy it more and stick around. How did you know in this place that you would be an absolute win?
Paul: As I mentioned before, the idea, the primitive nature if you will, of having to call the account manager, sign an IO, fax it back. That’s a lot of leg work to run on a single publisher that you don’t even know if it’s going to work or not.
Andrew: It all goes back to you having been your own customer before you built the business for other customers like you.
Paul: Absolutely. With everything that we built, I always think of myself a few years ago. And that’s sort of the line of thinking when we each do a feature. I always think, “Is this something that I could have used two and a half years ago?” So absolutely, yeah.
Andrew: I used to do that with Mixergy interviews. I would ask really probing questions about the first customers because Mixergy was just starting to grow, and I needed to know how am I going to get my first audience. I remember talking to Seth Goden and saying, “You talk about crowds and how to manage them. How do I even get a hundred or how do I even get two people to watch my frickin’ interviews? Don’t talk to me about it, and that’s why people started watching because I was my own audience. We had the same pain.
As I grew, that pain started to go away because I wasn’t so desperate to get new customers or new users even. I had them and to connect with people I now have scotch here at the office. I invite customers and I invite people in the audience to come in and have a drink with me. I get to know what their issues are and I get to hear in the comments when people hate me; I love it, because they tell me what I missed, so that I know what not to miss in the future. That’s my way, it’s very crude, but it’s work of understanding my customer when I stop being that customer.
Andrew: What did you do to understand your customer when you no were no longer that [??] because you were not allowed to be?
Paul: Pardon me, what was the question?
Andrew: What did you to to keep staying in touch with your customer when you were no longer that customer?
Paul: Well, we take a tremendous amount of feedback. I mean, that’s a great question, we have account managers that operate here that routinely talk with our customers and we’re very open to feedback. In fact, we live on feedback. We actually recently just did a survey, we used surveymonkey, it’s awesome software. We just did that a week ago actually, we got some awesome feedback, but you know, we have our feedback channels as well, and our forums, email… but we really do listen with open ears, but you know, to be honest with you, a lot of the biggest features usually came from our customers. Equally, there are things I came up with myself. I have this philosophy, I’m a big believer in small things that give you really big returns, and I’ve proven that time and time and time again.
Andrew: How do you find those things? I end up finding things where it takes me a whole lot of time and they get small returns, and I don’t want to keep doing that.
Paul: Yeah, I know, I know.
Andrew: And sometimes you can’t figure out what that small place is that’s going to give you a high result.
Paul: Yeah, well, for me it’s very tech-centered. So, I always think of, on a technical level, I can add a small feature that would give huge value to the customer. So, for instance, recently we added a feature called audience capture. What that allows you to do is, so if you’re running a very niche campaign, say you’re selling diapers, okay? The population of people buying diapers is a very small niche audience. If I’m spending a few thousand dollars searching for this audience, or rather promoting this audience, or promoting to a very large audience, the users that ultimately click on that banner for diapers, those guys are probably worth a lot of money. Simply because, they’re far and few in between.
So what we did was, and this was so super easy to add, was that we added a check box that allowed our customers to very transparently add anyone that clicks on the banner to their own audience list. Sort of like an email list, so that now you can target anyone that has clicked on your banner, you can re-target them with further advertising, and/or, we’re actually working on a product that has been unannounced. It’s basically what we refer to as the audience marketplace, which allows the advertiser, whose collecting this sort of data, allowing them to sell very targeted audience lists to other advertisers.
Andrew: So how did you know that someone, that an advertiser would say, I want to reach someone who clicked my ad before? Another way they could go is say, hey, I just paid for that click, I just had that customer on my site, I don’t want to reach them anymore. How did you know that they were going to react the way that they did?
Paul: Well, you know, quite honestly, re-targeting has always been a feature of our platform, and we had customers that had been placing the re- targeting, pardon me, they’d been placing the re-targeting pixels on their landing page and I was like, wow we can remove that process altogether. I mean, they hadn’t been really asking for that but I realized like, if they’re doing that, I mean, this is a no-brainer, they don’t need to use it, but ultimately it’s data they should be collecting. They should never be leaving this data uncollected.
We don’t charge our customers to collect this sort of data. Simply because, we want them to utilize the platform against that data, but it’s a no- brainer for advertisers, and publishers as well; that they should be collecting this data and they ultimately should be selling it. I mentioned before, I like to refer to ourselves as the open platform. The industry’s still got a ways to go. There are components of the industry, one part [??] is called DMP, data management platforms, and they’re typically the database or the aggregators of data. These sort are the guys we typically work for, work with. There’s still a process where they have to call and sign a contract and do all that, and that’s sort of another thing that you know, we want to streamline and remove all that friction from the process. Because there’s no reason why they need to do that, I mean, it’s 2013. It is the future and we definitely have the technology to you know, those are the sort of things that impress me at least.
Andrew: One of the things I learned from Shed Simove who did a Mixergy course on how to be creative and he’s an incredibly creative guy, one of the tricks that creative people use is they find something that they like in a world that’s far from theirs and they bring it and adapt it to their world. You did that and I can see that you’ve done this several times at SiteScout. In fact, one time was when you saw an ad for Groupon and it gave you an idea for what to do with a social network and we’ve agreed before the interview started that we won’t mention the social network because we don’t edit anything here and you’re not allowed to say. But what did you see Groupon do, I just want to see the thought process I don’t need anything specific.
Paul: That’s a great one. I’m sure your audience is familiar with the Groupon ads, they’d show a nice hamburger, find a hamburger in your city, rather it’s find a hamburger in Toronto-
Andrew: If you happen to be in Toronto it would say find a burger in Toronto but if you happen to be in Georgetown D.C. then it will say find a burger in Georgetown and that’s what their ads say and that’s how they get high click through rates.
Paul: That’s right, so I think they have their own answer but it occurred to me that this is something that I could ad to our TB that would ad tremendous value to advertisers, the idea was simply upload your banner without the actual text and then we simply had an editor where you’re able to, you know, overlay HTML text with macros so it would say find a deal in bracket geo bracket and it would work flawlessly through every geo. So, that’s a cool feature, I was like why stop there? There’s all these social widgets out there where we can be one of the first, in fact I think we were the first to introduce social widgets into the advertising. But, you know, it occurred that probably like a specific social network was not happy with that, so we took it down, upsettingly.
Andrew: I won’t say specifically which social network you were talking about, but let’s pretend it was MySpace and the idea was that there was an ad that said hey, friend me up on MySpace and within the ad people could be friends with you on MySpace, that’s essentially what you were doing, and there was nothing against you were doing but the social network frowned on it and you moved on.
Paul: I think mostly it was because they wanted to reserve the right to do that themselves in the future, but I don’t really know for sure.
Andrew: But I see where you’re doing this, what you’re doing is you’re saying what are the big advertisers doing, how do I bring this down to the small advertisers who for 400 bucks can get started with an ad and experiment. What is it that Groupon is doing on a high level, how do I bring it down to the guy who’s running a corner store or just starting affiliate marketing? That’s the way you do it.
Andrew: So what tools do you do you, and it’s OK to not say Max’s tools, but what tools do you use to spot tools online. You must be doing more than just browsing without an adblocker.
Paul: No, no, in fact we do none of that. Again we’re just strictly technology; we don’t do competitive intelligence, that’s Max’s business, what runs where, that’s really his craft.
Andrew: You don’t see that, you don’t say hey, the top advertisers, the guys that are most creative in our space at this moment maybe are fab, lets’ go to a sight like what runs where, or there’s several other competitors and we’ll type fab.com in and we’ll see all the ads that fab.com is running and we’ll go aha, that’s a clever one, let’s see if we can bring it into our world
Paul: Yeah, we don’t do that, but to be quite honest with you, the things that work, you will see everywhere because they scale, and if they’re very effective, if they score very high click through rate, you’ll see it. yeah, we have a team of ad quality reviewers that just look at ads all day long and we have a board of shame which I think they’re taking down, but either way there are funny ads or ads that might be really risque or what not, they may get a high CTR but they are not kosher and they cannot be run, but we get a kick out of it. But certainly the ones that work, I’ve seen, you’ve seen, that Groupon banner, that Groupon banner does really well, the one with the hamburger.
Andrew: I see so you’re just saying, hey if I run, if I surf the web without an adblocker I’m going to come across the top ads because they are blanketing the internet at the time and you can find the tools they are using within their ads and find ways to bring it back to SiteScout. Alright, first million dollars. We talk about millions and millions of dollars. First million in revenue, how long did it take you to get to that?
Paul: I think, I would say after the first year. I mean, it was a slow start but then it became exponential, and you know, now we’re doing seven digits a month revenue.
Andrew: Seven digits a month?
Andrew: TechCrunch at the end of 2012 estimated that you guys did 20 million in 2012, I think. Is that right?
Paul: You know what, I can’t really comment on it, but it’s not too far.
Andrew: Is it over a million in profit a month?
Paul: No. I don’t think we’ve mentioned this but we’re fully bootstrapped, no outside investments, no debt, and we are profitable. I started the business with $6,000, which I think your audience would probably like, to hear that. So, it is possible, there’s a lot of work involved. There’s nothing magic about the situation, but yeah, it’s been an interesting ride.
Andrew: You started out on sewing machine tables and…
Paul: That’s right. My father used to have a business in industrial sewing machines, and when I moved from the [??] back to Toronto, I’d been in my dad’s house. Me and Matt had been working out of a bedroom in my dad’s house and our desks were literally industrial sewing machine tables. So, we’ve had a very humble beginning. It’s funny, just the other day I saw a picture of Matt with long hair. I mean, it’s almost like we’re in the ’60′s, and literally that was two and a half years ago. So, we’ve come a long way.
Andrew: You know what? It was a foolish question, now that I think of it, to ask are you doing over $1,000,000 in profit a month. Of course you’re not. One of the realities of this [??] is that a lot of the money goes back out the door back to publishers.
Andrew: Yeah, it’s not like you’re keeping millions of dollars.
Andrew: But you are profitable, and that’s important, or say, you are bootstrapped, that’s important, or say, you are doing well over $1,000,000, multi-millions, a month in revenue. Can you say how many advertisers are on your platform?
Paul: We have over 10,000 registered customers. In any one day there are between 800 and 1,200 active campaigns, which is very significant. There’s probably anywhere between 200 and 600 active advertisers at any one day, but yeah, it’s grown significantly.
Andrew: I’ll say. So, I was looking in my e-mail to see what happened when I signed up, just to get a sense of your process. So I signed up in…Let’s go back, December 9th, 2011. Then, within minutes I got a confirmation request and I got an e-mail coming in from, oh, I sent you a question quickly. I said, here’s what Matt’s told me to do, how do I do it? And this guy Steve Monty responded back, I think he said, here’s what you should do if you want to be exactly like Matt. I emailed at 9:49 a.m., Steve Monty emailed me at 9:55, nine minutes later, actually, 11 minutes later.
Paul: Part of our success is being responsive. We’re constantly being told by our customers that call us and are like, whoa! You actually picked up the phone! You know, it’s as simple as that. It’s not difficult, customers appreciate that highly. They’re not dealing with a faceless corporation, that they’re dealing with a very agile company, and we appreciate the business.
Andrew: But here’s the other thing. It’s a very automated process, it’s great that he answered my customer service question right away because it enabled me to get started, but…10:01 a.m., same day, I get an email from John Botero[SP] with his cell phone number and a reference to your blog where I can learn more about you guys, and do I want to get on the phone and talk about how to buy ads, and also I can ask him about the standalone ad server, Google display network is coming, etcetera…He is clearly trying to get me on-board and getting started with this. So, as automated as it is, you have salespeople. What process do you use to get your salespeople to be as helpful as John was to me and to get me on-board? Do you use pipedrive? Do you have an internal CRM?
Paul: We do, we used pipedrive for a bit. We ended up writing our own CRM, which is actually still under active development, but we do have a process. We try to reach out to every customer that signs up as intensive as that is, we feel that, that’s been a big appeal for us and just to show that we are here and we are listening. We love feedback, if there’s any friction of the process, we’d like to overcome that. So, absolutely, being responsive, you know, that’s funny that you got two emails. That goes hand in hand with what I’m saying. We actually pick up the phone, so year. That’s really…
Andrew: I’m surprised because this is something that took me a long time to pick up. Companies that sell to businesses will often not just allow the business to sign up and use the software themselves. They will have someone call that company and start talking to them and get them onboard properly, a human being doing it. It feels to me that a guy like you who’s automating everything that you would have found a way to automate this better. To not have a human being which costs money.
Paul: That’s a great point, that’s a great point. It’s a balancing act. I can’t speak for my competitors, but we have a feeling that we’re running far more campaigns in parallel than they are, and being able to do that is simply because we’ve built a self-service platform that doesn’t necessarily require them to talk to an account manager, they are able to run on their own. And we’ve done the same thing on technical level, we’ve really optimized our software to be able to run as many campaigns in tandem as possible at the lowest amount of cost. And you know, we try not to be intrusive, so that our account managers will ping you and see if you need help but we’re certainly not pressing you to spend and if you’re not spending a lot in one month we’ll leave you alone. That might not be the case with other companies, but certainly with us that’s how we operate.
Andrew: What is your process, it’s as soon as someone signs up, within in minutes a human being will email them.
Andrew: And then the goal is to do what, what’s the next step?
Paul: Really evaluating what their needs are, what’s good for them, trying to figure out, because I mean the platform is quite complicated. It’s simple if you want it to be, but it can be very, very complicated if your needs are complicated, if you have very specific needs, if you need really high end targeting, or you know, very narrowed down term parameter, those are the sort of things we would like to help you with, but you need to ask first, figure out what their needs are, are they buying mobile apps, are they buying display apps, so there’s, and again, they can do this on their own, but we tend, we’ve learned that if we can help it usually speeds the process up significantly and they’re on their way. And once they’re set up they are self-sufficient.
Andrew: Do you have an example of something you’ve learned by calling up a customer and on boarding them that influenced the way that you developed the product?
Paul: You know I can’t think off the top of my head right now, but it’s funny you mentioned that because we are sending out, I’m actually sending out personalized emails right now on sign up and I’m having tremendous amount of direct feedback to me myself that I mean just today I got some emails that are awesome. One of our customers signed up and they have like, I don’t know, two dozen points of feedback which was awesome.
Right now we’re actually working on version 2 and I was happy to answer and tell them this is actually already being done but there were a few things that they mentioned that I really appreciated that we’re absolutely going to throw into the next platform. That’s perking my ear up and having that level of communication, you know, I’m the CEO and I’m presenting myself to my customers as hey, talk to me, let me know your problem, and I think that the customers really do appreciate that.
Andrew: I’m going to ask you one final question, something you just said happened and I want to follow up to understand how it happened, maybe the most dramatic thing in the businesses and I wrote a note to make sure to follow up but first let me say this. A lot of people have been liking and asking me to continue doing, to recommend courses within Mixergy that aligned with interviews they just listened to. So if you you’ve watched this interview and you say I want to try some of these ideas, let me give you a couple of courses that I recommend. First Max Tatoboms course, he’s the guy that introduced us, but that’s not why I’m suggesting it.
He showed how to do ad buys and he’s the guy that tons of ad buys, the affiliate arbitrate process that Paul described earlier that’s what Max did in the early part of his career and he walked us through how to do it step by step and he actually said you know what I’m going to give you a real example, he said Charity Water, I’ll do it for them and show you how if I were running a Charity water ad I’d figured out what other ads would work, I’d figure out what placements would work and I’d figure out what to do in my own ad buying based on some secret, I wouldn’t call it spying, but inspection of what competitors are doing and what’s working for them.
So that’s one thing I’d recommend and I’d also recommended his interview and now it just occurred to me Paul that maybe one of the reasons that you were hesitant to do this interview was, first of all, you’re a private company and why go blab about how well you’re doing at this stage, but the second reason is, Max got a lot of love and a lot of flak for his first interview on Mixergy.
Andrew: You saw that?
Paul: I did.
Andrew: Actually, I can see why that would freak many people out, including Max. Let me see if I could, he’s done pretty well since then. Site, Mixergy. Actually, I’m going to go up to the new Mixergy [inaudible 00:26].
Paul: That interview was two years ago now?
Andrew: He was the very first one. It obviously worked out well enough for him that he wanted to come back and do another one, but it was shocking to people that he did so well. I think, partially, there was jealousy there. How could this guy, who was a kid, do $20,000 a day? It was called Burnt out at 20, Making $20,000 a Day. It was from November 21st, 2011 on Mixergy.
Andrew: I’d recommend those. His interview, his course, and then one final one if you’re interested in this idea of following up with customers who sign up. Jamie Kennedy pointed out to me that that’s something that a lot of businesses do and he said that that’s what he does.
When someone joins his system, when someone gives him an email address and says they want follow up from his company, he actually will call them up and he has this process that he uses to understand the person who expressed interest in his business and turn them into a customer through phone calls. So, Jamie Kennedy’s course on calling your customers is incredibly powerful.
Go to www.mixergypremium.com if you’re a member, all those courses are there for you. If you’re not, I hope you sign up and become a member because, first of all, you’re going to enjoy all these courses and you’re going to watch yourself grow, the way that I have.
Second, you guys are the reason people who join Mixer do premium, the reason we can do this site so well. So, www.mixergypremium.com, I guarantee you’ll love it.
Here is the thing, there was an inflexion point, where you guys, it took you over a year to hit your first million and then boom, the thing just kept growing and growing. What happened there?
Paul: Oh man, you know what, that’s a tough question to answer. There is this snowball effect, I don’t think it was one thing. It’s funny, for the longest time, I didn’t feel like I could afford to hire the right people. As time goes by and you’re collecting, you’re revenue is starting to grow, you’re less cautious about hiring. It’s really all about brain power and the second you’re able to really bring more people into the business, it really gives you that flexibility to grow.
It’s like a snowball effect, that’s probably the best way I could really describe it. One thing leads to another, you’re adding one feature, you’re adding 10 features. You add more people, more account managers with their own customers. You’re able to scale a lot more effectively. It’s a chicken or the egg thing, you really can’t as a bootstrap startup, I can completely appreciate where entrepreneurs that are just starting out, where they’re coming from.
Avoid the venture capitalists by the way, if you can do this on your own, do it. For us at least, it’s been quite revealing. There has been a lot of time in the past where I’m like, I think we can grow out a lot faster if we had the money, and that might still be true today, but there’s certainly a level of pride. If you can do it on your own, do it on your own.
Andrew: It is impressive if you can do it on your own. Certainly if you decide to go after funding, what was it that Gabriel Weinberg of DuckDuckGo says? It’s a lot easier to get funding when you’ve got traction.
Andrew: Especially for a company like his. Congratulations on the success of SiteScout and thank you so much for doing this interview.
Paul: It’s been my pleasure. Thank you so much.
Andrew: You bet and thank you all for being a part of it.