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Here’s the program…
Hey everyone, it’s Andrew Warner, I’m the founder of Mixergy.com, home of the ambitious upstart. I recently had Brad Feld here on Mixergy and of course he’s one of the most respected tech investors. And when I asked him about his best investments, he mentioned a company called Service Metrics. Well today I’ve got the founder of Service Metrics. His name is Neil Robertson. He’s here on Mixergy with me. There’s a video of him. And I’m gonna be asking him how he launched that business and sold the company within 18 months of launch.
Also, he recently created a new company called Trada, which I think many of you online marketers are gonna love because Trada lets dozens of ad optimizers create Google, Yahoo, and Bing page search ads for you, and then those optimizers only get paid if they do a good job for you.
How’d I do with that introduction?
Interviewee: Great, great.
Andrew: Cool. And I think also Neil there was a company in between those two businesses that you launched that you spent a few years on, I think about four years in the mid-2000s?
Interviewee: That’s right. I started another business which was focused on PeopleSoft and SAP management tools. I worked on that for about five years, and you win some, you lose some. So I put one in the lost category on that one.
Andrew: Well, you know what, one of the things that I loved about my interview with Brad Feld is that he talked about his big setbacks and he actually talked about how some of the best successes in the companies he has invested in have come on the heels of a setback. So I’d like to ask you about all three of those businesses.
Why don’t we start with the big win here, Service Metrics. What was the idea behind Service Metrics before you launched it?
Interviewee: So Service Metrics, just to put it in context with timeframe was ’98 through the end of ’99. So you’ll remember we were all dialing into AOL and getting online with 14.4 modems, and speed was really a big differentiator with company success. In the early days if Amazon was slow, you would stop and go to Barnes and Noble because you have to go through four or five pages of transaction process; and if the first page was slow, you didn’t want to go through the next four.
What companies had trouble doing was really understanding the end user’s perspective of speed. So we actually very simply built the equivalent of a browser with measurements tools in it and we shipped these computers all over the world to 148 different locations, from Sao Paulo to New York to Tokyo. And we put them onto the network in very similar ways that a user would connect, and we simply downloaded web pages constantly, compiled the data, did analysis, then sold that data back to…
DoubleClick was our customer and [? 3:13] was our customer and anybody who was doing commerce online. And it allowed them to sort of empathize with their enduser’s perspective, then because of the data set and the breadth of it, they could actually triage what the problem was…and oh, is my issue I don’t have good connectivity to NTT in Japan, or is my issue that my data center is slow?
What ended up happening was we sold that business to Exodus, who if you remember was the largest hosting company in the world at the end of 1999. And they basically showed up and said we’re really tired of our big customers bringing your data to us and sort of like threatening SOA breaches with it, so we’re just gonna buy you.
It was a little bit of NBC buying Nielsen so to speak, but there was a lot more value than just being able to measure your data center.
Andrew: OK, and I know that you stayed on board with Exodus for a while afterwards. Now that we’ve got the overview of the company, I’d like to go a little bit deeper and spend a little more time on each one of those sections. So let’s talk about where the idea came from.
Interviewee: Sure. So I actually met Brad Feld through the MIT community. I was at MIT in the early 90s as an undergrad there. He was there at the end of the ’80s. In the early, early days of the internet some MIT people were sort of starting companies. I went to go work as really a summer job. I grew up in California. I didn’t want to go back for the summer, I wanted to stay in the MIT community. So I took a summer job at a company called NetGenesis.
NetGenesis was you know, if you know your history, which I’m sure you do, back when Spyglass was around, which was the core of the IA []? quarter deck, you know before core fusion existed…
Interviewee: I’m dating myself in internet years right now. There was this little company called NetGenesis that got started and we hung out a couple blocks from MIT. We decided to build everything that ended up being successful, and picked the one thing that didn’t.
So my first job literally there — I was a CS major at MIT, that’s my background — was to build a distributive search engine and research the whole web in seven days with three Linux machines, using RPC technology to be distributed computation. And we thought that took a really long time. So to give you an idea, there were 70,000 or 80,000 pages or websites [?5:38] at that time.
So I was working there at NetGenesis and they tried a bunch of different things. They built evertyhing you could ever imagine that’s successful now. And the one category they picked, which didn’t look like a good idea, I’m not faulting them for picking it, was actually web analytics.
So all of us use Google Analytics now. Well, Google Analytics we take for granted is like the fourth generation of analytics software. So back before people thought oh, just put a tracking code on your website, what we were doing was downloading log files that the web servers put out and putting them into huge Oracle databases for companies like Sun and Discovery Channel and things like that.
And getting people analytics reports that almost everybody who owns a blog today is very familiar with, and we also were charging $250,000 a pop. Back then the idea for Service Metrics came up one day when we said well, what’s kind of the other side of the coin? We know what people are doing, but what’s there experience?
And it was actually one of the founders of NetGenesis that had the core idea that became Service Metrics. He said let’s measure the performance, and we put those two things together. It’s a little bit of analytics nirvana. We actually built Service Metrics at NetGenesis and then realized literally once we released it like three days later that being a software company and a services company was a very hard thing to be, and then shut down the Service Metrics, what became Service Metrics, that part of the business.
Through out a series of events, random run-ins at airports, when I was looking for other jobs and ran into the CEO who was also looking to start another company on the same plain, that kind of stuff, it came together and we took the idea and got it funded.
Andrew: Why was it hard to build a software company at a service business?
Interviewee: Well I think as we learn a lot about today, it’s very, very hard to be broad. There’s a lot of things you need to learn to get good at and back in those days, delivering software, burning it on a CD, putting it in a pretty box, labeling it 4.0, writing 300 page manuals, it was a huge twice a year event.
And getting infrastructure at a business to be very, very good at that is very different than learning how to deliver uptime and monitoring, any kind of services; and what I mean by services is like SaaS as a service. Nobody thought of websites as being the app back then and that was pretty progressive, but we realized there were a lot of challenges to that, not to mention the infrastructure of the internet just wasn’t that good.
Andrew: I just want to make sure that I understand this. So what became Service Metrics, what was the name of it actually at NetGenesis?
Interviewee: It was called NetSweep.
Andrew: NetSweep. So NetSweep wasn’t software, it was, at the time were you putting computers all over the world already when you were at NetGenesis?
Interviewee: We did four cities and at NetGenesis we actually did it with banks of modems if you can believe that. So we shipped a bunch of 14.4K modems to Chicago and hooked them up and downloaded web pages 24 hours a day. And we sent all the data back to NetGenesis centrally and we had a web app, which people think is very common now, but back then that was kind of crazy to sell someone access to a web app. You didn’t do that, you had news on the web, right?
When we started Service Metrics we did that in much broader scale and we had abandoned modems and we did it with T1 lines and DSL lines and things that were more contemporary years later.
But we sent all the data back to a central website and had servicemetrics.com was the app. Again, in ’98 there weren’t a lot of companies where the website was the app, so that was kind of fun to be on that leading edge.
Andrew: So am I understanding this right that NetGenesis had NetSweep as a web app and they weren’t comfortable selling access to a web app back then?
Interviewee: That’s right. They weren’t comfortable building a service based business, an annuity based business where they’re charging every month. They were building a company designed to put stuff in a box and send it to a CTO or CIO once every six months. And we again, now days it’s sort of crazy to think that’s how you do stuff.
Neil: It’s sort of crazy to think that’s how you do stuff. Like in Trada we release a couple times a week. And there’s people I know that release thirty
times a day. Thought of doing, putting stuff in a box and naming it, you know, Trada 5.0 is ludicrous. But that’s how everything was done at the end
of the 90’s. And you got ripped by it, you know, you’ve got marketers who know how to make pretty boxes. That’s who you hired.
Andrew: I remember actually near the end of that big box shrink wrapped phase you’d get these boxes with nothing but a cd inside them and they’d be these big boxes, what am I doing here? It just was absurd because of course the cd would have the big guide book on it and it would have all of the information that you needed.
Neil: Right.
Andrew: There’s no sense in the box.
Neil: It’s funny though, cause I remember that too. You’d go down to whatever, Target, flipping through Quick Books, and it’s got, you know, the
Velcro rip out, basically a market piece. And I remember the last transition was when you didn’t even get something on the CD, the CD loaded your browser to the web site, to download it and that’s when you know that was sort of the 3-dimensional marketing apocalypse. Right? After that ok, those people should probably be toting themselves as online marketers.
Andrew: And so was the threat to Net Genesis where they worried that once they started offering web apps that their main business of selling boxesthat are shrink wrapped with the CD inside them that that would start to be threatened?
Neil: It’s a good question. I think it was actually more learned wiseness. It’s not really a word but, it was sort of intelligence for people like Brad and Ted Gingersmith who were on the board, from CRB, that just knew that young companies tend not to do two or three things well. They tend to do one thing well. Very kind of, crossing the chasm right? Get your beach head, do it well, and then even though it was in the same general ball park, the difference between product vs service and new body versus a 250 thousand dollar sale cycle, was just to much for a small and fragile company, which every small company is, to kind of navigate through it. A few people have tried it, but, a percent of a percent ever make it. There were just smart enough to say you’ve got to kind of let go of one of your babies.
Andrew: I see. So they said to Net Genius “focus, focus focus.” This next week, they might have a promise, might not, but you are just to young to get distracted by it.
Neil: That’s right. And you know, to give you an idea of how quickly things were moving, I left and co-founded Service Metrix, a product, and we funded, built and sold that company and then Net Genesis a year later went public. So we actually got a liquidity event before the original company had been around for 3 years, or ever did. Now they got a great liquidity event through an IPO, but it was just amazing to have stepped out of that and everyone thought I was crazy for leaving, and then 18 months later they were swabbing it out and we sold to Exodus.
Andrew: It’s amazing, you go from being a fool to being a genius in 18 months in this industry.
Neil: Yup. Well the thing about it is, 12 months after that Exodus went from being a 34 billion dollar public company to going bankrupt and getting bought for 850 million dollars by cable wireless. So you go back to being a fool quicker than you become a genius.
Andrew: That’s true too. The road down is a lot faster than the road up.
Neil: Oh yes.
Andrew: Ok, so, can you tell us how, and what point did you decide that you wanted to build this business away from Net Genisis. That you wanted to make it into a seperate company, that you owned and ran.
Neil: It was kind of a confluence of things that happend. First of all, the original CEO for Net Genisis, a guy named Rodge *unintelligible*, an MRT guy, he had decided that he wasn’t going to scale Net Genisis to the next level. He needed to bring in adifferent kind of CEO to do that. But he was really passionate about this idea he thought up because we tested it among early customers and so he had been looking around for money but then realized that he didn’t a) want to become the full time CEO and b) didn’t have a technical team, and at the same time, because that product had been shut down, it was the second one in a row at that company that I had worked on that had been pulled out from underneath me, right when we were about to launch, I simply said I’ve got to go be somewhere where I can have some success with a product. And he agreed with that. And so the story is literally that I had my wisdom teeth taken out, taking monday off, but a friend of mine from MRT that worked at Cogeco, had called me and said please come interview they are looking for some internet guys. And I went on a plane on monday morning from Boston to New York, and I ran into Rodge who was on the same plane, sneaking off going to try and raise money for Service Metrix. And we sat at the back of the plane and he was sort of like, what are you doing? And I, we kind of admitted to each other what we were doing, I went down, got offered this job at *unintellible* which
was sort of crazy for the times.
Interviewee: …which was crazy for the times, but I realized I didn’t want to work at a bank. And Raj went off and got enough momentum with the idea. On that plane trip I actually committed to being the CTO of the business if he could get it funded. About four months later he came back and said we’ve got momentum, but I need you to sort of jump in as part of the team now. I didn’t take the banking job.
It was like literally one of those coincidental, staring at each other at terminal B at Logan going what are you doing here, right? I love these kind of stories, but that’s what happens sometimes.
Andrew: And so you were cofounder in the business. You got to own a piece of the business.
Interviewee: I did, yep.
Andrew: Was there vesting back then?
Interviewee: I think there’s always been vesting.
Andrew: Yeah, it did exist, but was it common enough among two people who’d worked together? Did you guys, did you have to vest?
Interviewee: Here’s actually what happened. There’s actually five cofounders of the business. Raj was one. I was an executive cofounder. We looked for a CEO, a guy named Tom Higley who is here in Boulder, which is why I ended up in Boulder where I am today. And there were two other kind of advisory founders, Risberg and Terry Duriay [?16:11] who was at MacAfee.
So when I came out here for the first time it was to meet Tom Higley and you know, that first meeting was a) to meet him, and b) to sort of negotiate out terms that I would work under. I knew absolutely nothing about equity. I knew a little bit about vesting because I’d had it at NetGenesis.
I got a year of acceleration on the traditional 4-year vesting plan that Raj and Tom knew was a good thing for me to ask for. I also got reverse vested shares, which from a tax perspective is the smartest thing you can ever do as an entrepreneur. And most entrepreneurs don’t know about it. I can explain that if you want.
Andrew: I do. I actually don’t know about it either.
Interviewee: OK, so the funny thing, I’ll come back to that in a minute. The funny thing is, so Tom took me to this restaurant in Ft. Collins called the Rio Grand which is notorious for having these killer margaritas. They won’t sell you more than three of them. Never negotiate equity over margaritas.
So I didn’t know any better; I’m like oh, sounds good to me. And then 18 months later I was like oh, three margaritas! But we all did phenomenally from that deal. We sold it for $280 million in 18 months. It was just, you know, there’s nothing I can complain about.
Reverse vesting and there’s probably different terms for it, is when as a founder or early, early cofounder of the business you buy your pre-series A shares. So you go and form a company, buy the shares for 1/1000 of a penny because they’re not worth anything. Then you give the company the right to buy them back in the opposite term of your vesting. What’s important about this is that you own stock so that you start the capital gains clock ticking. And capital gains after two years becomes a capital write-off instead of an income write-off, so you want that capital gains clock ticking as fast as you can.
In our case, 18 months, I actually couldn’t sell anything for capital gains, 25% versus 45%, so it’s exactly the same mechanism. If you leave the company, the company will basically take what they given you back, they have the right to do that; and you paid $700 for your share because they were 1/1000 of a penny, and every single entrepreneur that ever starts a business and gets venture funded should reverse vested their shares. There’s no reason why anybody would say no to that because it’s exactly the same mechanism, it’s just tax treatment and if you’re doing something [?18:50], you will save potentially a lot of money. It made a huge difference in our exit.
Andrew: Wow, OK.
Interviewee: My best tip for the day.
Andrew: That makes a lot of sense. By the way, how long do you have to own, do you have to own shares to get capital gains?
Interviewee: Two years. So you want to start as soon as you can. Now days, people get exits in 18 months, 2 years, 3 years. It makes a huge difference because let’s look at the other way. Let’s say you don’t do it. You sell your business in two years, you then own the equity, right? You’ve gotta pay the taxes at the high value and then you’ve gotta wait another two years before you can get capital gains treatment. So it all works in your favor to pay $700 upfront, buy your shares, and get the tax clock ticking.
Andrew: OK, and you said that 18 months later you said I shouldn’t have had those margaritas. Why? What happened at that point? What did you realize at that point?
Interviewee: When we sold the company and I didn’t…in retrospect based on the… Tom was a tremendous mentor to me. So it’s funny…
Neil Robertson: It’s funny. I asked my father when I was trying to make a decision about where to go work. Should I stay at Net Genesis, should I go work for Dorcha Bank. I had an offer from Netscape, remember them? You know, back in the days when they wrote software? And my father said, “All of that doesn’t matter. At 22 find the smartest person you can go work for and go and work with that person.” Tom Higley, a little bit actually, sort of accidentally in a sense that I didn’t really know him that well was a phenomenal mentor to me. Knew I had a computer science background and was a CTO of the company and never one time told me, “You can’t get interested in this department and learn about it.” I had this unbelievable multi-departmental experience at Service Metrics. Which was for me more valuable than any other part of the experience. But, it was a very short run and now looking back the percentage that I had related to other people who were non-founders and Tom or whatever. I would negotiate that out differently. Although like I said, I’m not really complaining right? It wasn’t like anybody did anything bad. It was just Tom had no idea who I was. I was a totally unproven CTO. You know, he gave me what was appropriate and I didn’t know any better or frankly have any leverage to ask for anything differently.
Andrew: You were a CTO at a very early age.
Neil Robertson: I was 22 as a CTO and went into the business when I was 24. I remember a totally random story. So, we sold the business in October of 1999. If you’ll remember, if the viewers remember the Y2K phenomenon was really scary. People didn’t know if the world was going to implode. And when you have a subsentive net worth in paper waiting to become sale-able in January. It became sale-able one day after my birthday, January 25th. My birthday was January 24th. So, I was sitting there in San Francisco glued to the television on New Years Eve watching the different cities. Not because I cared about the amazing Eiffel Tower fireworks display, which was actually phenomenal. The most beautiful thing I’ve ever seen. But I was wanting to see if the lights went out in Europe. And the minute that the ball dropped in New York, because I was in San Francisco, I knew that Y2K had either been either fixed or just overblown. Probably the latter. Then I got on with my night. I was sitting there white fisted, clench fisted thinking that everything I did would just dissipate in literally 30 seconds. It was a sort of interesting experience.
Andrew: You know and I had a similar experience. I didn’t go out New Years Eve. I stayed with CitiBank. Tried the number, made sure the money was still in there. After a few minutes, called back and made sure the money was still in there. The system didn’t go haywire. But, I couldn’t have had fun that night.
Neil Robertson: It’s sort of funny looking back to think how kind of really neurotic people became about it. In terms of like buying all the water and can goods and building bunkers and sort of moving into the hills. It’s also interesting to look at which companies were completely successful because of it. SAP is the powerhouse that it is now. We needed a generational technology replacement to happen and Y2K gave it to them. That is the reason SAP is successful. They grew dramatically from 1996 to the year 2000. Mercury Interactive, which is part of HP now. They built their huge business around testing Y2K. That’s what made them became the lead player in the testing business. That one event made billionnares two or three years later as a sort of direct correlation to it. So, I think these things are interesting.
Andrew: It might be in the audience saying that every computer guy knew it was going to be BS. I don’t agree with that. There were a lot of developers who were adjusting for the Y2K problem, including my brother. That was one of his first real tech jobs. They said they just weren’t moving at the right pace. They were taking too long. They weren’t gonna hit that milestone. That they weren’t going to finish by the year 2000. Who knew? And frankly when you’ve got a lot on the line you just can’t relax. You gotta make sure that it all works out. Ok, you had this idea. You found the team. You decide to move to Colorado. You found the mentor in Tom. The first step is to get the computer out all across the world. Is that true?
Neil Robertson: We developed basic software for a while. It’s funny, at each company I’ve built I’ve taken a risk on a new technology. Keeping in mind the timeframe, we built everything in Java, which was pretty progressive in 1998. And the reason we did that was that Java was one of the few languages that would self update. Because you could basically ship the program to itself and it would self update. Which was pretty progressive at the time. So, we built that kind of infrastructure.
Interviewee: …and then we started shipping computers all over the US first and then the world in building this you know, network. And of course building the software and databases to handle that. But we were able to get that out pretty quickly within about the first, five or six months. I just, was literally clearing out my basement… to try to build a media room. Which I thought would be fun to do a green screen and, and, and do a lot of videos and stuff. And, I found a bunch of pictures, like from Service Metrics, and I have a picture of the first, they were called DCA’s, Data Collection Agents in boxes. They were Sun, you know Solaris machines, right, so they were you know, this big, this long, and had the horse power of my blackberry, right. And we, they were in the back of Chris Burden who was our first engineer, they were in the back of his truck going to FedEx to ship them. I just found this picture the other day, it’s very cool. By the way so Chris Burden, first engineer at Service Metrics, first engineer at my next company Numerics, firsts… you know one of the first three engineers at Trada. So stuck with the people that I have loved to work with for the last four…Brad I’ve known for fourteen years, he’s invested in every company. I [digress] but you know, I like to put that out when I think of it so…
Andrew: Yeah actually that is surprising to see that you stuck with the team, including Brad. Chris, when you were shipping those boxes by UPS, where did you send them? Where did all those computers get housed across the country, and across the world?
Interviewee: Well that’s a great question because in those days it was the early days of data centers, you know there was not, now we take for granted that there’s you know rack space, and one to one hosting, and a million other data centers, and you can kinda pick any, city in the world and there’s gonna be a few thousand square feet there. Back then, there was a couple early incarnations like… [DidJacks] and Exodus, but, we actually sent them to companies like AT&T, and Cable and Wireless, who had taken their… their, their CO’s, their Central Offices and things like that, for their… phone infrastructure, and kinda bolted on data centers. And that was kinda what you got. You could get Cable and Wireless data centers, I think they had seventeen at the time, which was crazy. And…it was a lot of work to actually physically put something, geographically, and from a network perspective, in the right place. So we were shipping them to, the shipping department of AT&T in Tallahassee, so that their, ready hand service, their professional services could literally walk in and physically install them into a rack, hook them up, and then call us and say, “here’s the IP address.” It’s, it’s, it’s funny now that you deploy something on EC2, you can deploy it to six different places, and, no one ever touches it physically. It just, that’s not the way it worked back then.
Andrew: Okay, so you had it up and running how soon before you guys had a, data that you could sell?
Interviewee: I, you know, probably within six months we started selling our first customers. And… it’s funny, I was talking about this with the team, at Trada the other day. You know we sold data based per URL. So you would buy for a $195 a month, you would buy ten locations on one URL that you want to constantly download and I think it was three times an hour or something like that. And if you were a big company you had hundreds of URL’s and you wanted hundreds of locations, if you were a small company you just wanted your website. Now you get all this stuff for free. Right? So, it sounds kinda crazy to pay for that. Back then this was pretty big for someone to be able to say, “show me what I look like in Tallahassee right now.” So that’s kinda how we started charging for it, but you literally could buy our service for $400 a month. But most people would spend, between $15,000 and $30,000 a year, they would buy a contract for a year. So we had a [tele sales force]. And I remember noticing one day that Don’s friend [Cassidy], who was one of our sales rep, would just send these emails out everyday. $20,000 deals, [$50,000] deals, companies I heard of, companies I’d never heard of, and all of the sudden it just started to happen, you know. The message was simple, the sign up was easy, the need was there. And it’s funny because at Trada, which we’ll talk about, it’s starting to be exactly the same. I just see the deals coming in, and I talk to the sales reps, they’re just you know, we’ve kinda got it down. We know what the pitch is, we know the kind of customer, and that’s a really amazing transition in a business, that we never made in the middle run, in Numerics. And I’ll be very fair about my failures as well as my successes. Every deal was like a struggle. We never figured out any pattern, that really worked well. A pattern of the kind of sales person that worked, pattern of kind of the deal size that worked. It’s a very long answer to your question, but, it was, definitely something I noted after maybe six or nine months. We did actually change our VP of sales, in that process, and that was the best thing we ever did at Service Metrics. We hired a guy named Randy Kenworthy he took a, very different approach to selling. And he came in and we had been doing maybe, $100,000 a month….
End of transcription.
I: … and he sold a million dollar contract within the first 30 days. That just changed the complexion of the whole company like instantly within 30 days. He will always be my hero.
A: Within 30 days, 10 times bigger than the business was before that. What did he do that was different?
I: So, we were selling directly to website owners right? And that might have been an Amazon.com or it might have been SatelliteRadios.com He said, you know what, the people that matter the most here are people that provide Internet services. And he went straight to Doubleclick and he went straight to Akamai who was just starting back then and the guys from Akamai were my professors at MIT which is pretty interesting. I actually didn’t do that well in their classes. He went to those people and very quickly they said, “You know, we have to measure ourselves for our customers.” He was able to get really big, I think we got a million dollar contract with Doubleclick, we got a million dollar contract with Akamai within you know 30 days and 60 days. He just changed an understanding of who would see value and a lot of selling is about constantly thinking who will perceive the most value in your product and will be willing to pay for it because perception does not always mean transaction. So he was just good at that.
A: Now Neil, what we’re seeing is a constant upward rise here in this business. It is the hockey stick. Were there any bumps along the way? What was the biggest setback you guys had there?
I: Well what was interesting about that business is that when we started the idea in that Genesis, there was no competitor. Between when we started the idea and when we launched our product, there was a competitor. It was a company called Keynote, who’s still a public company. I think they’re worth a half a billion dollars or something and they’ve expanded a lot past the core business. But at the same measure and understand the experience idea. So we entered a market where there was actually a substantial and well known player. There was a singular thing that happened somewhat accidentally that changed our ability to compete with Keynote. Because for a long time we were the other player, unproven, same pricing model. I was in the executive meeting at our company and I was trying to explain all of our data right? Because we didn’t just tell you this web page took three seconds to load, we told you all of the sub pieces and drawing up graphs and using colored pens. I just got really frustrated by it all so I grabbed Chris Burton again and we stayed in the office one weekend and banged out this thing that basically painted the exact happening of the downloading of a web page you know, object by object, image by image, etc. in a timeline and I came in on the Monday morning executive meeting and I showed it to people. And they go, “Oh. I understand what you’re talking about now. And like the light bulbs went off. We turned that into a product feature called Web Performance Timeline and we went out to the market and we won almost every single deal. Because the Achilles heel that we competed in. Because the Achilles heel of Keynote is that they used a estimation system. They would download 5K of a web page and multiply the time it took by 10 because an average web page was 50K. That was okay if you wanted good, bad, or ugly. But people started to realize that there was other things on their page that mattered, i.e. if the Doubleclick ad took a long time to load, the users perception was that Amazon.com that was loading that ad was the one doing the bad thing. They didn’t know the details. That massively changed the business. If we had not done that would have had a lot harder slob. It also, at that time, businesses were very much affected by industry analyst’s opinions. You know now you’ve got a, you’re talking to bloggers, you’re talking to Mixergy. I mean, this is phenomenal stuff right? Back in the day it was Gartner, Meta, you know IDC and you had to kind of go to the mountain and really establish a story there because everybody called them before they bought. That singular feature was something that all the analysts latched onto. Ironically, after we sold to Exodus, you know there was a bunch of competitors that would come out to Akamai when they became very successful. There was Mirror Image which Exodus invested in, there was Speedera which ended up getting bought by someone and I remember going into the Speedera office which was down the street from the Exodus office and their CTO, I can’t remember his name, took me into his knock and he’s like, “Look at this thing that we built.” And he whipped up an exact copy of the Web Performance Timeline. And they had probably sat in a room and thought of it themselves. I’m not saying they copied it but he was completely enamored with what it could tell you and the details and the subcomponents and he had no idea that Chris and I had already sat in an office and built the Colorado seven years before, six years before and come up with it and it changed our business.
Andrew:
Interviewee: Just funny how these things come back around.
Andrew: I want to make sure I understand what this looked like, what the web performance timeline looked like. I as a customer would get to see a visualization of my webpage loading in Chicago or any one of your datacenters.
Interviewee: That’s right.
Andrew: And I would get to see, Oh, the ads popping in first, everything else stands still and then I see the background color or background images coming in next and then the text. I get to actually see how it loads on people’s screens in those parts of the world.
Interviewee: That’s right. So, you could pick a city. That was fundamental. If your users were calling, if Amazon users were calling from Chicago saying it’s not working, you know there might have been an internet option affecting them there. Alright, I’mma pull up Chicago. You would see this, think of it like a mural, where every sort of line of the mural was an object, an image, an ad, nowadays it would be javascript or something like that. And what would happen before that is we would tell you it would take 8 seconds, but now what you would see is that all the images have loaded in 1 second and that your ad provider was taking 7. Or more importantly when you submitted a payment, there were a lot of outsourced credit card providers like there are now, you know, it might take 35 seconds, but 32 of that was the credit card provider coming back. So we enabled the customer, this was the value piece, to take the data, go to their credit card provider and say we will stop delivering you a million dollars worth of transactions unless this goes down to 3 seconds. And at a grander scale, you know, people were coming to Exodus, who ended up buying us, showing them the data and saying “You broke our SLA” for uptime and owe us 10,000 dollars now. And we were a third party measurement service, which hadn’t existed anywhere on the net before. So you just kinda saw all these colored lines, and you would look for the big one, and that big one would be the problem and you would solve that. It gave people, it’s funny, when you give people data for the first time, and you give them the ability to focus on low-hanging fruit it’s amazing how much they can change their business by just pruning low-hanging fruit. And this is something that I think a lot of business owners are starting to and need to learn, data and analytics is amazing because there’s almost always an outlier. If you don’t know your numbers, then there’s almost always an outlier and if you get rid of that you can massively change your business very quickly.
Andrew: Ok, I get that. Let’s, um, I want to spend so much more time with you than we have. Do you have a hard-stop at the end of this interview?
Interviewee: (laughter) No, I’ve got as much time as you need.
Andrew: Good, great because I do have to say, I want to talk about what happened at the end of this, what happened at the next business and ordinarily I’m not that curious about new companies, cause it’s too early to be curious about, but Trata, I saw the videos you guys have on there, you sold me. You sold me before I saw the video. I clicked over on the bottom, on some kind of “How it works” link. Boom! I quickly understood it, I said “This is friggin phenomenal.” I’ll come back to that, I want to spend more time on that then I ordinarily would with a new company because I’m just so fascinated by that. I wish somebody would have thought of it before, but I’m glad that you’ve got it out there. And I promise you guys, if you’re doing any search engine ads, you are going to love this. I don’t get a piece of his business, I don’t care whether you love it or not, I just love it and I want to share it with you guys. Ok, so what was the height of the revenue, at service metrics?
Interviewee: You know, we changed spots so quickly, we were moving into, we projected to be at about 15 million run rate a year after we were bought. So, we were at about a 2, 2 1/2 million run rate when we got bought. Although, this had started, it didn’t end up happening, you never know ’til you do it, but it looked like we’d get up to 10, I mean, we were in a high growth pattern.
Andrew: Why’d you guys decide to sell so soon?
Interviewee: This is a really interesting question because, well, you read everything in the news about FourSquare and Yahoo, and, you know, back then entrepreneurs didn’t get to take money out of round. There was no, “Ok, great I’ll take a couple million dollars off the table and I’ll keep playing…” It was all or nothing, alright? Which is, most people still play that game, but the attitude is changing now. The preamble to this was, a few things were important. Exodus had actually offered us 70 million dollars two months earlier. We had, Tom had done some great brinksmanship and in between that point and us selling for 280 million dollars, so two months 210 million dollar difference, that’s good salesmanship. The key though is that Tito had gone public, and we knew that they would go public and we knew that they would set precedents. And they were worth about 450 million dollars in market cash. So, it just hung the bookends, 70, 450, and it just allowed us to get in there.
Why we sold?
Neil: Frankly I think at that point of time, I was 24, I probably had 10 more companies in me, Tom was, you know, was in his 40 I think at the time, and he had a family and this was a life changer for him. And we believed in the business, we believed in the future growth, and we actually really did believe that Exodus would fulfill the ability of the business to accomplish what it would accomplish. Because they had one quarter of the traffic on the internet in Exodus database. They had all of the customers. And they were a massive company. So to us, it was the number one channel we wanted, which is why we wanted to do a partnership with them, which turned into a sale. But, selling to them seemed like a great way to go and execute that. In my naivete as a 24 year old, I didn’t realize that vaulting in a 2 million dollar revenue streaming business to a 500 dollar revenue streaming business would be nearly impossible to do successfully. The sales people just don’t pay attention. Right? They can go sell something and make 10,000 dollars in commission or go sell something and make 100 dollars, what is it they are going to do? I didn’t understand that, and it just sort of felt like it was the right thing to do. If we had worked on it for 7 years, it was like, our passion and our baby, and it was like blood, sweat and tears, we probably would have held off of it. But you can never answer that question unless you are sitting there, looking at, there were 68 employees in the business. 27 of them were millionaires on paper when we sold the business. To me, that was a massive win. And I just wanted to take it for people.
Andrew: What was that like when it happened to you?
Neil: It’s funny because, so, I’m not really good at keeping secrets. I’m very open about everything. Personally and other wise. Selling the business was the only secret I ever kept. I called my parents, I have a very good relationship with my parents, I called them the night before, and I said I have some news I’m going to tell you in the morning cause Tom was working on papers, I knew he’d be done. I have some news I’m going to tell you in the morning, I need you to be around at 8:30 in the morning. And I went out that night with my neighbors, who I am friends with, and drank a lot, came back, somehow did not spill the beans to my neighbors, woke up in the morning, called Tom at 8 in the morning, he’d been up all night with our lawyers, I said, are you done? And he said, almost. I called him back about 15 minutes later, and he said yes, it’s done. And I called first my mother, and, I mean, she must have thought the worst right? I got married in Vegas, or something right? Whatever goes through mothers heads, and I called her and I said this is what happened. It happened today, this is kind of my personal piece, this is what’s going to happen to the company, and I think, you know, my parents grew up in Scotland. They came from a middle class family, she’s hard working, you know, religious backgrounds, it was, I was speaking a different language to her. She literally couldn’t, didn’t understand what I was talking about, she said, “That’s very nice. What are you doing for the rest of the day?” Like literally, didn’t even register. And so I was like, I don’t know, telling people we sold the company. So then I called my father, and my fathers is a symphony opera conductor. He’s actually quite a successful opera conductor and I pulled him out of the middle of rehearsal, I think he was at New York City Opera or something at the time. I literally pulled him out of rehearsal, he’s on the phone, and I told him in five minutes what had happened. And he you know, just had a sort of completely different reaction to it. So, it was a very interesting experience sort of working through that whole process and what I ended up doing is, we had badly scheduled the timing to go to a conference for one of our bench investors, and the only thing I regret about the whole sale process to Exodus is that I was supposed to fly that night, we planned it a month ago, to San Francisco, to go to NAPPA for a conference for one of our bench investors, I should have canceled it. It was the right thing to do, to stay with the people who had helped me build the business, both celebrate, but also deal with anxiety. A lot of people are anxious about that stuff. You gave us a three week vacation policy, and Exodus says it’s two, and it was the wrong thing for me to do, to leave. But I was just so confused. I left, I remember driving to NAPPA and getting about half way there and pulling over on the side of the road. And literally just screaming in my car for five minutes at like, what had happened to me. And then getting back in my car and driving off. And that was it. That was my emotional peak, and back to business. So..
Andrew: And actually didn’t, I don’t remember seeing this in my research, did you guys end up with cash? Or Exodus shares?
Neil: So, back then there was two types of deals that you could do and I forget what they were called. Basically, they were the same thing, but one your accountant for good will different and Exodus really wanted to do it in stock and so we said okay
[45 minutes]
Interviewee: They were the same thing. But one, you accounted for goodwill differently. And [Sounds Like] Access really wanted to do it in stock. And so we said okay, and we got them to [Sounds Like] collar the downside, but not the upside. What ended up happening is, the 280 million dollar deal quintupled in value in six months to over a billion dollars. And it was all in stock.
Andrew: I see. Wow. And you couldn’t go any lower than the 280, or around there? [Overlapping Conversation] Because you had a floor set?
Interviewee: [Overlapping Conversation] We could go 10 percent lower, but there was no upside collar. And that was when…if you look at [Sounds Like] Access, that was when they hit their massive peak. So depending on when investors and employees and things sold or could sell, because of vesting, for some people it was a phenomenal deal.
One of our investors was [Sounds Like] IDG Ventures. And they had two deals that year: F5 and Service Metrics. I remember looking at one of their investor reports, and Service Metrics was like 1100 percent return. It was good stuff. So–
Andrew: Yeah. And what was your share of the business by the way?
Interviewee: I don’t remember. It was a relatively small fraction. We raised a lot of money. It was a great win, but I’m not calling you from my yacht right now. Let’s put it–
Andrew: [Laughs] Okay. All right. And by the way, it was a great win for your investors. Brad, I think I saw in Business Insider, as recently as a year or two ago, was talking about how great this deal was for him. And it’s one of those reputation builders for you.
Interviewee: It’s…that’s right. I think…for Brad, it was relatively early in his career as a professional investor. He was at [Sounds Like] SoftBank at the time. He had done his own personal investing through Intensity Ventures. And then it was one of his big early wins. It was his deal. He made it happen. He kind of pooled it out, he cultivated it.
A very Brad-like thing to do, right? Pick an entrepreneur and let them run, that’s kind of his style and he’s done it very well. For me, it was a total game-changer. I mean, to come…sort of setting money aside, to come out and have that kind of a success. And then as interestingly…good Exodus, which was at the time one of the biggest public tech companies.
I was 24 years old. And I was effectively the CTO of Exodus. My title was VP of Research but there was no CTO. So I spent all of my time with both Wall Street and industry analysts and built a relatively good name for myself in the tech industry. I still run across people at banks that are like, “Oh, I remember you from Exodus.” And that was 10 years ago now.
And that allowed me to go back and have some flexibility building the next company. Although I will say, it was interesting….
When we went to go build [Sounds Like] Numerics, my last win had been Service Metrics and there was definitely a big difference between being the CTO and the CEO in terms of how much credibility someone that doesn’t know the details is willing to give you for the success of a business.
I ran into this somewhat surprisingly when I went to go raise money for [Sounds Like] Numerics. People said, “Awesome win, Service Metrics, was great! But you were the CTO.” And I say Tom was responsible for the win, Tom would probably say I was responsible for the win. The truth is…us and our 68 awesome employees were responsible for the win, and our investors, and the spouses of those people for letting them work all weekends and all of that stuff.
But people were like, “Yeah. I’ll put money behind the CEO but the CTO, I’ll have to think about that.” I was really surprised by that.
Andrew: Even though you were a cofounder in the business. You were there in the beginning. It’s not like you just came in for a quick stint and then sold it and left.
Interviewee: I will not name names, but I went back to one of my investors that made a lot of money at Service Metrics to go pitch [Sounds Like] Numerics. And it was slightly outside of their focus area, and slightly outside of their stage. And they didn’t even take a meeting. And it’s not because I’m a jerk, right? It’s just…this perception of…the correlation of success to the CEO and to others.
I mean, if we went through a bunch of companies in the Valley. And I said, “Who’s the CEO,” you can probably name it or I could. “Who’s the CTO…” other than companies like Twitter, well actually Twitter just got theirs for the first time. This is a bad example. But who’s the CTO of Facebook?
Andrew: Yeah. I was just wondering that same thing. I don’t know.
Interviewee: I don’t know. I’m sure he or she is awesome. Right? Who’s the CTO of Tumblr?
Andrew: Actually I do know that, that’s Marco.
Interviewee: Well, okay. Well, bad example. But you know what I mean? It’s like, you and I don’t know who the CTO of Facebook is. That’s crazy! Right?
Andrew: [Overlapping Conversation] And you’re right. And this is an environment that always says that we value engineers, that we value the guys who are developing. “Developers, developers, developers…” but you’re right. The credit for the win goes to the CEO.
Interviewee: It’s because we value those people as…and I think this is completely inaccurate. We try to actually change the culture and trod away from this. A lot of people value those people as a mechanism to do something great.
[50 minutes]
Interviewee: to do something great. Not as a part of the overall greatness and their ability to contribute in the business – we talk about this a lot in TRADA. And, you know, our engineers in TRADA are super-interested in solving sales scaling problems, and lead generation animation problems. And we let them run loose and they come and they have ideas. It’s a culture thing that you imbue into the company to not have anybody, whether it’s a sales person fill that clichéd sales role, or an engineer fill that very clichéd engineering role, or anybody. But you really have to put an effort into it because people… It’s funny – my sister is a school teacher, and myself is an English teacher, and she tells me always that every class, that comes into her, there is one person that projects an image that they are used to having other people think of them. So: “I’m the dumb blonde, I’m the jock, I’m the whatever…” and she finds that person in her class at the first day and treats in a complete opposite of the perception that they are used to other people having of them, and it is transformative. And I think about this a lot in a business where, you know, engineers know those (%litter piece of boxes) underneath the door cliché, and even if they totally disagree with it, they actually live out to it. It’s like a someone says that you are a class clown – you start making a lot more jokes. So you have to try very very hard in a CULTURE to break those cycles of mentality because people are just comfortable with boxes…
Andrew: So how do you do that?
Interviewee: You talk about it a lot. You have to talk about it. You sometimes push people outside of their comfort zone. People that would never think of scheduling across departmental meeting – you tell them they need to schedule something. And say :”About anything you are passionate about.”. It could be the furniture in the office, it could be the log in process, it could be whatever. People very sophisticated – they pick important things. You empower them and than afterwards you say: “And what do you wanna do now about it?”. Right? You know, you asked them how to think about integrating those ideas into the overall priorities in the business. And we do other things like we did something call the barn raising which is like a… you know, sort of a (%HAKATHON), but the barn raising is a business centred (%HAKATHON). We got everybody in the business to talk about problem we had, share why it matter to them, and then we do a little bit of engineering work to flash out a kind of the core what it would be. and then we finish it off about a week later and put the feature out. And what I’ve heard, we did it one day, what I have heard from one of our engineer was: “To be able to hear the sales perspective on this feature, on the marking perspective, and to like collaborate, to agree, to disagree, and to kinda tossing around – we don’t get context to that. And so doing something like that gives us context and no we have a context can solve problems”. So gantry question is: you do it by thinking about it a lot and not just assuming it will happen.
Andrew: You know, I’ve heard you actually talk about that with Jesson Callahana on this week in TECH. The barn raising… Found understand this right, you guys say: “We are going to create this
product, we all gonna to do it together, we all gonna to do it in a short period of time” and that way everybody gets to interact and is forced to interactions that might never happen or if they do happen, happen over such a long period of time that you don’t motive them… in business day today.
Interviewee: Yes, it is right. In our case wanted to put a profiles of our page search experts in TRADA and into the system rather than just go do that and let yourself add a picture or anything like that (sorry I’ve just dropped my speakers). We sat that and said: “Who cares about this?” Right? You know, like “Why this is matter to sales? Why this is matter to marketing?” And I sat there amazed by half of the answers that I’ve nerve thought of before. Right? And to really talk about kind of the wide in the business context of things before you start signing code and database structures – we put that feature out in a record time and it is one of the best parts of out system now.
Andrew: You know, lest do just a short conversation an a numerics. And then maybe I’ll have you back on here an go deeper into DEPTONE because I think that there is a lot to learn from that experience. But lets go just a short conversation and then we will move on to the TRADA where we’ll spend a lot more time.
Interviewee: Sure.
Andrew: What was numerics?
Interviewee: So… Large companies, that you’ve never heard off due to going (%DARSOF AVENUE) and United States which there are tens of thousands of, all run their systems with SAP, ORKLE or PEOPLE SOFT or J.D. EDWARDS if there is a manufacturing. Those systems… The selling point of those systems is:”Install it! Make your work for your business processes”. The reality is: everybody’s business works differently so they have those customisation frameworks. And every business gets customised and every years there are more and more customised. Well every time that you, SAP is on your release you have to ratify every customisation you’ve done with what SAP delivering to you and that process becomes like incredibly painful. So we invented basically a set up tools that really helped people through the transition process, from, everything from a simple patch to…
Neil: everything from a simple patch, to deployment, to upgrade. Focusing on both helping make the changes and identify the differences, and also then testing them with automated software at the end. Really good value proposition, the software was, for a bundle of it all, about 250 thousand dollars. But that’s what we helped people do, is basically make the process of constant change to those enterprise systems much more cost effective and efficient.
Andrew: That makes a lot of sense, I can see the need for it, I’ve read articles that, I’ve read interviews that you gave back in the early days of launching the business, made a ton of sense. I’ve got quotes from it, what I don’t understand is then, what went wrong?
Neil: Well, when you put it like that, what could have gone wrong? That company failed 100% because of internal problems. That was a super good lesson to me, because I had come out of this phenomenal experience at Service Metrix, and because Tom was so natural at team dynamics and everything, and thinking about organizational structure, and communication, you know when you’re young you don’t appreciate what is happening in front of you that it’s designed, not just natural. And so I went into *unintelligible* just sort of not thinking about those things. And I brought in a CEO because I didn’t think I was ready to be the CEO. I brought in a CEO that we had similar opinions about what we wanted to do with this, but 180 degree different management styles, philosophies on employment, I mean you name it. He’s now a good friend of mine, and we’ve kind of come back to center on it, but literally the biggest argument that he and I ever had was in a parking lot screaming about whether or not
Andrew: Wait, whether or not what? Sorry we lost the connection there, in the parking lot
Neil: Oh, whether or not to give engineers free soda. Like, that’s how fundamentally misaligned we were in terms of philosophy and building a business. We wanted the same features, sell to the same customers, hire the same kind of sales, none of that stuff mattered. If you can’t agree on whether to give an engineer a 40 cent at cost soda, you should not be working in the same office as partners. And it took us two years to kind of conclude that was an intractable problem and we couldn’t have resolved it. And then we switched out the CEO and we brought in our chairman, a lady named Wendy Lee who has been the second business mentor of my life. She’s now the CEO of Get Satisfaction, a company you might know. It’s just an awesome company and she has done a phenomenal job there. And she taught me, I mean, everything about you know, organizational dynamic, metrix related marketing, just amazing. And she had only planned to be interned there, so when she was sort of done with her stint it was kind of the solid days of the business. We grew and everyone was happy. We brought in another CEO that couldn’t have been more misaligned with the culture that we had happen there in terms of a culture of transparency, a culture of openness, a culture of collaboration, a culture of no hierarchy, just vastly different. And I spent all of my time going between the offices of the executives complaining about what was going on, and none of my time building the business. At Trada, we’ve never had any issues we’ve had to work through, like, when you scale and change people, things happen, it’s natural. We spend none of our time, very little of our time dealing with stuff. Because we think about it and we design for it.
Andrew: What is your title there now? What’s your title at Trada? Did I just lose you? We lost connection there. What is your title?
Neil: Sorry, I’m the CEO of Trada.
Andrew: Okay. Alright I gave the description of what Trada is in the beginning, can you give it in your own words as the founder and CEO?
Neil: Sure, so, everybody I think understands that they need to be marketing online. The most common way to do that is to put ads on Google and Yahoo. The reality is that the systems are actually very complex. So the expertise required to do it effectively and efficiently doesn’t exist for most small and medium sized businesses. Certain people who want to spend between 3000 and 50000 dollars a month. While you could solve that problem with technology, you can give them a tool to make doing the job easier or better, it still requires that they are in the drivers seat. And they don’t want to do that. They want to go build their plumbing business, or sell furniture, or do whatever they want to do. The innovation of Trada was to realize that there were a whole bunch of people around the United States and also around the world, that know how to do this very well. There’s hundreds of thousands of them, they are all certified by Google. And that, the big gap for someone to become successful for their business with paid search, is simply an expertise gap, it’s not a technology gap.
Interviewee: Coincidentally, that was sort of the rise and maturation of crowd [?] sourcing, which are essentially businesses where groups of people get together to produce better results than any individual can.
We smashed those two things together and we built a marketplace where someone who wants to do paid search or is doing it now and is frustrated by it, or wants to do it and is scared about it, or is on Google and wants to do it on Yahoo and Microsoft also, but doesn’t have the time, can come and basically define their business goals…I want to spend $5,000 a month, I need to get a sale for under $20 or I need to copy less than
$.50 per visitor.
Then put that into our marketplace and then have from our over 500 pre-vetted, pre-certified paid search experts, have them opt into the campaign because they understand that campaign, and work collaboratively and competitively as essentially their paid for performance marketing team.
So on average a campaign has about 25 paid search experts that work together. And what Trada does is provide an application in the middle, which is to a paid search expert, the equivalent of Google AdWords, or Yahoo search marketing or Microsoft AdSence. It has all the same functionality. Let them work and do things they would do normally do, then we sew all of that together into a singular campaign, which we then put into Google, Yahoo, and Microsoft.
So when Google sees it, they don’t know how it got made. They don’t know how the sausage got made, but it’s good sausage. It’s very comprehensive, lots of keywords, hundreds of ads. And we sit in the middle and we basically count every single click that comes through the system, and based on a pay for performance metric, we reward those people working on your campaigns for either getting you a click, a visitor, or a sale for underneath the price that you’re willing to pay.
The beauty is if you’re gonna allow someone to spend your budget for you as if they were your marketing team, you need to define the rules. So the rules we let you define are I’ll pay $.50 a click, or I’m willing to spend up to $10 to get a sale on my website, and the paid search experts which we call optimizers have got to play within those rules.
So if you say $.50 a click, they’ve got to find something on Google that costs less than $.50. If they’re super creative and they find a great long tail keyword for something very, very specific, because Google is an auction model, the specific stuff is cheaper and they might find a click that costs $.40, they make that $.10 difference. And out of that Trada takes a percentage.
So we’re working on a pay for performance system too. Once you’ve got a lot of traffic and visitors, you can then overlay the sale based model and say I don’t want to think about click by click, you need to figure out how to spend less than $10 to get me the sale and I’ll give you whatever is left over. So if you can spend $7 to sell that car stereo online for me, you get the $3 that’s left over.
The incentive system that we’ve designed aligns everybody the right way. And the wisdom of 25 people thinking about selling something works really, really well in paid search because if we asked all the users that you have right now to write down 10 ways they’d go look for cell phones online, you’d see a lot of common ideas. You know, used cell phones, discount cell phones, and some people would say who sells Nokia 8800’s online? Some people would say who sells Blackberry’s that have OS7.3 installed on it or whatever.
Our whole premise of our business is we can collect all that and sew it into one campaign, and have a small or medium sized business have the sophistication that is only available to a Target.com or a Cars.com because they can afford to pay for full time people and full time agencies working on it. Those are the results that we see in our system. It works very, very well.
Andrew: So let’s take an example, somebody I interviewed here recently on Mixergy, Patrick McKenzie, a young guy who’s got a company called bingocarcreator. He buys a lot of ads on Google. He says that he has to learn to write the ad copy in a special way, and it’s a new way of writing ad copy. It’s not the way that you learned to write in the past, but he’s figuring it out. He can only come up with certain… [trouble with speaker on table] …so he could only come up with certain headlines for his ads, certain copy for his ads. If he works with you he has on average 25 people who are all writing the headlines and copy for his ad in Google AdWords.
Interviewee: Coincident with that was sort of the rise and the maturation of crowd sourcing which are essentially businesses where groups of people get together to produce better results than any individual can. We smashed those two things together and we built a market place where someone who wants to do paid search, who either is doing it now and is frustrated by it or wants to do it and is scared about it or is doing it on Google and wants to do it on Yahoo and Microsoft also but doesn’t have the time, can come and basically define their business goals; I want to spend $5000 a month, I need to get a sale for under $20 or I need to have it cost me less than 50 cents for a visitor, put that into our market place and then have from our over our 500 preveted, precertified paid search experts, have them opt into the campaign because they understand that campaign, and work collaboratively and competitively as essentially their pay for performance marketing team. So on average a campaign has about 25 paid search experts that work together and what Trada does is provide an application in the middle which is to a paid search expert, the equivalent of Google Ad Words or Yahoo Search Marketing or Microsoft Ad Center. It has all the same functionality. Let them work and do things the way they would normally do and then we sew all of that together into one singular campaign which we then put into Google and to Yahoo and to Microsoft. So when Google sees it, they don’t know how it got made, you know they don’t know how the sausage got made but it’s good sausage, right? So it’s very comprehensive, lots of keywords, hundreds of ads, and we sit in the middle and we basically count every single click that comes through the system, and based on a pay for performance metric, we reward those people working on your campaigns for either getting you a click a visitor or sale for underneath the price that you’re willing to pay. The beauty is if you’re going to allow someone to spend your budget for you as if they were your marketing team, you need to define the rules. And so the rules that we let you define are, I’ll pay up to 50 cents a click or I’m willing to spend up to $10 to get a sale on my website and the paid search experts which we call optimizers have got to play within those rules. So if you say 50 cents a click, they’ve got to find something on Google that costs less than 50 cents. If they’re super creative and they find a really great long tailed keyword or something very, very specific, because Google is an auction model, the specific stuff is cheaper. And they might find a click that costs 40 cents, they make that 10 cents difference and out of that Trada takes a percentage. So we’re working on a pay for performance system too. Once you’ve got a lot of traffic and visitors, you can then overlay the sale base model and say, “I don’t want to think about this out click by click. You need to figure out how to spend less than $10 on the sale, and I’ll give you whatever’s left over. So if you can spend $7 to sell that car stereo online for me, you can get the $3 that’s left over. So the incentive system that we’ve designed aligns everybody the right way. And the wisdom of 25 people thinking about selling something, works really, really well in paid search. If we, you know, if we asked all of the users that you had right now to write down 10 ways that they would go look for cell phones online, you’d see a lot of common ideas; used cell phones, discount cell phones but some people would say, “Who sells Nokia 8800s online?” Some people would say, you know, “Who sells Blackberries that have, you know OS 7.3 installed on it or whatever?” Our whole premise of our business is that we can collect all of that and sew it into one campaign and have a small and medium size business, have the sophistication that is only available to Target.com or CARS.com because they can afford to pay for full time people or full time agencies working on it. And that, those are the results that we see in our system. It works very, very well.
ANDREW: So let’s take an example of somebody who I interviewed recently on Mixergy, Patrick McKinsey, a young guy who’s got a company called Bingo Card Creator. He buys a lot of ads on Google. He says that he has to learn to write the ad copy in a special way. I’m hearing some kind of a…
INTERVIEWEE: There you go.
ANDREW: Ah there we go. He says he has to learn how to write the ad copy and it’s a new way to write ad copy. It’s not the way that you’ve learned to write in the past but he’s figuring it out. He can only come up with certain – wow, what a – maybe it’s the speaker. Can you put it back up on the table?
INTERVIEWEE: Is that?
ANDREW: Let’s see. Testing one, two, three. Oh, yeah. Now there’s no more echo.
INTERVIEWEE: Okay, sorry. I had the mic up next to the speaker. Okay, that’s it.
ANDREW: Okay, cool. Thanks.
INTERVIEWEE: Okay, cool.
ANDREW: I’ll do a little adjustment here too. Okay here we go. Testing one, two, three. So he can only come up with certain headlines for his ads, certain copy for his ads. If he works with you, you guys have on average 25 people who are …
Andrew: You might want to check that one out. It’ll give you a good understanding of what this business is about. But really, this site does a great job of explaining what the business is.
Interviewee: Thanks a lot. This is great, it was really fun. I love talking to you both about the things that work and also the things that haven’t worked for me. Those are probably the more informative time periods in my life, so it’s good stuff.
Andrew: I’d love to do another interview with you. You’re always welcome back here. I’m gonna go check out Trada.com guys, check it out and thank you for doing this interview, Neil.
You know what, I’m almost embarrassed that I’m so excited about the new business, but you know when you get excited if you hold it back then you’re fake. So, I’m excited, I’m not gonna hold back, I’ll be honest. I like this idea. I like it a lot.
Interviewee: Cool, well I really appreciate that and we’re having a lot of fun with it. That’s great.
Andrew: Thanks. Thanks for being here. Thank you all for watching. Come back to Mixergy, give me feedback, especially if you’re a customer of Trada or if you think I’ve been too excited. I’m curious about what you guys think. All right, bye.
Interviewee: Cheers.
