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Here’s the program.
Andrew: Hey everyone, my name is Andrew Warner, I’m founder of Mixergy.com, home of the ambitious upstart. How does a boot strap company earn a quarter million dollars in revenue within a year. Joining me today is Vid Luther. He is the founder ZippyKid, which offers managed WordPress hosting. Vid, I see your camera just went off and there, it came right back. Welcome to Mixergy man.
Vid: Thank you.
Andrew: So, when will it be a full year that you’ve been in business?
Vid: May 22nd. So two more days and I’ll be one year old.
Andrew: OK. We’re doing this interview on May 20th. May 22nd you’ll be a year old and I think a day or two afterwards we’ll have this interview up on the site for people to see.
Vid: Sweet.
Andrew: So, very quick, that’s pretty impressive. Let’s make sure that people understand what the company does, and then we’ll go back in time and figure out how you got here. I was pausing for a second because your camera just went yellow on me for some reason.
Vid: Yeah, I’m noticing that. I have no idea what the cinema display is doing.
Andrew: [Laughs].
Vid: It is as if I sit somewhere else, It’s going to [??] back to white now. I have no-
Andrew: I’m OK with it. You know what I found, most people don’t really care that much about the video. What they do is, they play the audio in the background, or they read transcript. They only come back and look at the video if I say that you just did something wild. Like if I said, “oh my god, I can’t believe you just did that!”. People are going to come back and look. If I said, “hey, the video is yellow,” people are going to come back and look.
Vid: [Chuckle].
Andrew: So, when we say that ZippyKid offers managed WordPress hosting. Don’t just about all hosting companies offer WordPress hosting today?
Vid: Yeah but, they basically wants you to install with Go Daddy or Media Temple something like that. How do you optimize that? If you’re a small business, or you [??] How do you [Audio Skipping] link with Facebook?
Andrew: How do you do what? Can you give me that list of stuff that you do again?
Vid: How do you, basically, put your assets on a CDN. What is a CDN? Unless you’re in the Silicon Valley, you have no idea what a CDN is. How do you upload your theme, how do you customize it, how do you upload your logo? All of that stuff is stuff that people, non-technical business owner needs to figure out on their own. Or, they can come to us and you basically say, “tell us what you want the domain name to be, what your logo is,” and then start getting into some content you put up and we’ll basically have a website up for you. My mantra is, basically, focusing your content management system. I think that in 2011, the fact that us techies are making people focus on things like FTP and DNS [sp], is just a disservice. You have no idea how Skype is working. You have no idea this call is happening and you shouldn’t. The same thing for my mom and any non-technical business owner, they shouldn’t hear any of that stuff.
Andrew: So you actually then, are giving that kind of support. You will create the person’s blog. You will take the customer’s logo and put it on a WordPress theme. You will change that theme when they say, “oh, that’s ugly.” You will explain to them why you can’t change the margins, when they complain about that. To that degree, you’ll spend time with them all for $20?
Vid: That…
Andrew: I’m going to come back to that question in a later part of this interview, because I don’t know how you can offer that kind of customer service for 20 bucks. And I don’t know how that kind of customer service scales when it’s so technical. I’ve been using WordPress now for maybe, four or five years. I didn’t know what CDN was. It wasn’t until Jason, who works at your competitor at WP Engine, told me about and explained it to me, and walked me through it, that I added that. It’s something that speeds up your website. Right?
Vid: Yeah. It takes the load off your own web servers that gives the impression of a sped up website. You have to be very technical to [??] what it does.
Andrew: I’ve been doing this stuff for a long time. I have a CDN that I use for my site and I still don’t even know what it is. I understand what you’re saying about the frustrations that users have. It shouldn’t be that simple.
Vid: Even with a CDN you probably, if your hosting a WP engine, they probably did everything for you. If you’re a doughnut shop owner, having to go and figure out what CDN to use, getting a better deal, and all of that stuff. How do you even figure, S3 [sp] CloudFront versus Rackspace Cloud Files versus NetDNA. All of that stuff is something that nobody should care about.
Andrew: You want to know something? I actually am not hosted by them, but Jason just is a friend. He did the interview here and he walked me through the process. I still didn’t know what to do. He kind of guided me via email. I contacted the company directly. Who am I using, CloudFlare right? They offer CDN?
Vid: Yep.
Andrew: I contacted them. Somebody at that company was so good that she came on Skype with me and walked me through it. I showed her my desktop on Skype and she walked me through it. This stuff is insane. You’re absolutely right. That’s why I think a lot of people end up going for Prosterous, or some simpler hosting solution. The problem with is, Prosterous and Tumblr and all those different platforms are really easy to set up but they’re not as feature rich. So you can’t offer a membership site later on. If you decide you want to do that, you can’t add that special plug-in that’s going to make your site even more optimize for search engines. There’s a lot of things you can’t do, and that’s why people go for WordPress. But you’re right, it’s kind of pain in the butt how tough WordPress can be.
Vid: Yeah.
Andrew: So, let’s find out how you got here. What were you doing just before ZippyKid? Were you working on Third Party Code? Is that the business before?
Vid: Yeah, Third Party Code was a joke name that we came up with for my consulting company. Normal PHP consulting doing stuff. Writing PHP code for anybody that would pay me, basically. One of things I found out was, when I moved to San Antonio, I started doing some virtual optimization for Third Party Code and my people who search for PHP consultants at San Antonio hadn’t shown up. And most of my calls that were coming in were saying that my website was down or was hacked. And I started noticing [??] websites, and they were hosted on hosting providers that were shared hosting providers, and didn’t have adequate security. And people would never update their plug-ins or core. We request that ours does a very good job of saying, “Hey, when you are him and there’s a big ass thing saying ‘update available: this is a security update’,” and people don’t do it. I think that has to do with Microsoft training people not to do updates, because if you do an update and it breaks. So most non-techies don’t do updates.
I started noticing that all these people were having these problems and I started fixing them one by one. Then I realized, “You know what, I have to keep finding these people. Why don’t I just get them to host with me.” I have a background in hosting. I’ve been doing hosting for a very longtime. Rackspace bought one of mine old hosting companies that I was a senior assistant administrator for and I helped them with a lot of retention and scaling issues. So, I figured I’m no longer a [??] or anything like that, so let’s start my own company. Started that way with basically where one guy said, “Hey my website’s packed, can you fix it?” I said, “Sure, but wouldn’t it be better if I hosted it for you. This way you’ll never have to worry about it and you won’t have to find me, and if you pay me a monthly fee, I’ll respond to you much faster.” Oddly enough he said yes. My first $20 a month. Actually it was $10 a month before ZippyKid could officially start. It was 9.95 a month and I started noticing people were willing to pay, and it went from there.
Andrew: I want to spend a lot of time in this interview focusing on how you got customers, but I’m going to try to resist ranting but I can’t in this case. When you say non-techies don’t upgrade WordPress because they were trained from the Windows environment, I’m someone who doesn’t upgrade WordPress and it’s not because of that. I’ll tell you the reason I don’t do it is because it breaks plug-ins. I actually emailed, because Matt Mullen [SP] when he came here to do an interview and I had his email address, and I emailed him directly one time to explain that specific issue. If I upgrade my WordPress, a plug-ins going to break and if a plug-in breaks, which breaks my website from my audience. It’s a pain in the butt.
Vid: Yeah. That is very true, and that is something that happens less often than the other reason why people don’t upgrade because they’re afraid the core will break. We actually offer something for that specific reason. When you set up a website, we automatically get a test site. We upgrade your core on your test site first and make sure everything is working, and we do some functional testing. It’s kind of automated. We basically make sure that everything is working when we do the plug-ins upgrade. But, I would say 95% of our customers want the one-click WordPress install, least today, works really well. The one-click WordPress upgrades, those work really well.
Andrew: They don’t break a plug-in or a plug-in doesn’t stop working completely because of it?
Vid: No. It’s very severe now. We have a list of plug-ins that we recommend for people for a certain class of functionality. We don’t limit you from any plug-ins. 95% of the times we don’t have any issues. We have some sites that are very custom or very high graphic, and we’ll do those in a different schedule that the rest of the sites. The plug-in thing that is a very valid thing, I mean my wife hasn’t upgrade her iPhone apps… there’s no plug-ins for them, they just don’t do it.
Andrew: [Chuckle] I see, non-techies don’t want to upgrade. It’s almost better to have an environment like Chrome that automatically will upgrade for us, so we don’t have to deal with it. As long as it doesn’t break plug-ins.
Vid: Yeah. I agree.
Andrew: OK. So, I see what you’re saying, you saw this opportunity you said, “I’ll host this first person’s site,” my imagination is that you had a vision to build a business on top of it and you were testing the idea out with this one customer. True?
Vid: Yeah. I just wanted to see what somebody would pay me. The first customer said 10$ a month is OK, I was like, “Oh. OK. Maybe I’m charging too little.” That was kind of Seth Godden’s [SP] post on pricing. If somebody agrees on a price pretty quickly, it’s probably too low. So I went from there.
Andrew: OK. So, you had this vision. You decided to try it with one customer. You still need to have the infrastructure for a hosting company. How’d you get that?
Vid: Luckily, your [??] space and Amazon can solved their problems. And since I’m in San Antonio, actually their offices are right down the street from me, you can literally walk to their new offices. I basically decided to put everything on cloud servers, and it’s pay as you go. The initial cost of the server before, I would had to get a dedicated server somewhere. That would have been a $300 investment. That would mean I would need a lot more customers before I was profitable. Now, it’s at $20 a month servers. Get it up and running, just need three customers to be profitable.
Andrew: Three customers to be profitable?
Vid: Yep. That’s what I needed. That was the math I was doing in my head. My infrastructure costs were the only things I have to worry about. $20 a month gets me a server. So, at three customers at $10 a month, non profitable. Not including my time or anything like that.
Andrew: Let me get a little deep into the details here, because I want to understand how this process works. I really want it to be in a basic way. Let me see if I understand this. You go to rackspacecloud.com. They let you have file hosting, or they let you rent servers, and so on. You just buy a server from them that way. Right? You just fill out a form, give them your credit card. You now have a virtual server somewhere in the cloud.
Vid: Yeah. And it’s operational in less than five minutes.
Andrew: Less than five minutes and it’s up and running. And how many websites can you host on that?
Vid: On the basic plan server probably [Audio Skipping] not more than [??] first place. But once you started optimizing, and once you know hosting really well, you can optimize things and you can start building you own clusters. So, you can put a load balancer, two app servers, a database server, and you’re spending less than $100 a month. And you have a fairly reliable, for low traffic websites, high availability clusters.
Andrew: OK. That’s not something I can do. But I’ll tell you what I have been doing with it. I use it to back up my website. I just go in and I get a Rackspace computer and I back up my website. When I was in Argentina and I needed to buy books from Amazon in the U.S. , and I couldn’t do it, or movies. I go to Rackspace, I get a server and I would use that. I found, even for buying just books or movies and backing up my computer, it’s about $60 or $70. And you’re saying you can host a whole website for $20. How?
Vid: A website, itself, is usually very small, for small businesses. Most small businesses have a “who we are,” “meet the staff,” “here’s our location” and “here’s the hours.” That’s maybe one megabyte. If you put some logos and stuff on there and do that, maybe two or three megabytes. If you have a 20 gig hard drive for $20 a month, you can store a lot of stuff on there. Your books and stuff like that are much higher, and you could probably get away with using cloud files actually and reduce your cost from $70 a month to a lot less. And that is probably something, I mean I can be a salesmen for Rackspace and show you how, if you want.
Andrew: [Laugh]
Vid: You could reduce your cost, if that’s all your doing and spending $70 a month, you’re paying too much.
Andrew: OK. I wanted to just get a sense of how you were doing this, and this sounds very basic. Any kid with a credit card essentially can do this. I think they will call you up to confirm that it really is your credit card and that you’re not looking to do any kind of piracy or anything illegal with the site. But essentially, you got a credit card, you got a computer up in the cloud. Alright, so you’re up and running and you get your first customer. How do you get your second and third customer so you can break even?
Vid: For initially, it was just SEO. People were basically still coming in with PHP consultant and then people started talking about me. Like one guy’s like, “Oh. My work website is now hosted over here, you should go talk to them.” One of the advantages of living in a small big town like San Antonio, is that, everybody knows each other. So, you fix one guy’s problem and you do it right, he’s going to tell all his friends. And everybody in San Antonio is an entrepreneur. Not from a Silicon Valley perspective, but everybody has their own business over here and everybody needs a website. So it started growing by word of mouth and a little bit of search engine optimization.
Andrew: But everyone already has a website, pretty much. Don’t they? They might need a better website, or a better website hosting. But they pretty much have a website today. How do you get them to switch in the early days?
Vid: They usually come to me. If your hosted with any of the other shared hosting companies out there, like Go Daddy or Media Temple, and you installed WordPress. WordPress has done a really good job of telling people that you should use WordPress for your website. So they go to Go Daddy and they do the one click install and they install WordPress and they go, “Oh crap, this website runs really slow. What do I do?” That’s the real reason why people want to switch. And then if you can convince them, and you can show them studies by Amazon and all these other big players that, if your web page takes more than four seconds to load, your losing 30% of your visitors. When they start seeing that, and you can run the test on their website, they go, “Oh crap. My website is running really slow. I’m losing a lot of customers. People don’t want to see me.”
Andrew: How do you get that message to them? The reason why that I wanted to do this interview with you and talk to you about the first year and how you got customers in the first year is because, it’s hard for a new company to get anyone to know that they’re there. They can have all the data coming in from Amazon, and you Google, and commission reports up the wazoo. And no one’s going to pay attention to them because they’re too small and too new. So, how did you get anyone to noticed that you had the facts and you were the guy to, not just make their website faster, but that they needed a faster website?
Vid: One, I knew [Audio Skipping]
Andrew: Sorry. Can you say that again? It looks like we just lost you for a moment.
Vid: One, I knew people needed a faster website. Can you still hear me?
Andrew: Yeah, yeah.
Vid: OK. I knew people need that and I started going on forums, and work at stock exchange [sp], and looking for people who had questions about how to speed up their website. And that’s the delicate art right? You help people not looking for a sale, but you also want to increase the rareness. So, I would answer people’s questions when they were self posted and I would say, “Well you should this about [??] configuration. You should try this for your engine next. You should do all these other things to make things run faster.” I’ve been in the Linux community since 1995. I owned the domain name linuxpower.com back in the ’90s. I almost sold that to [??] linux, if those who the people are here remember what I’m talking about. I am very involved in open source community and very much involved in server performance, and server optimization. I would answer people’s question and people would start finding out that, “Oh. OK. That Luther or ZippyKid, they know a lot about faster websites and faster [??] websites, so let’s try them out.”
When you go from Go Daddy or Media Temple, and you come to us. More than likely, your websites are going to load three times faster. And the three times faster is the biggest thing, because people notice that big of a speed increase. When the page loads immediately, people go, “Wow, it’s like it’s sitting in my basement. It’s not somewhere in Chicago, or, Bumfart [Sp]. Sorry.
Andrew: That is why I can never get into iTunes’ featured podcast, because my guests curse, and I curse. It’s cool. I want you to be natural. I want the truth, I want honesty, I want openness. Let’s go dig in and find more of that.
You talk about forums. You just went into the forums and you started answering questions, and customers came as a result of that?
Vid: Yeah. I would tell people like, “OK. This is what we’re doing at our company. But if you want to do it yourself, here’s exactly the same configuration that we’re using.” In sharing all of that, then-
Andrew: And that would overwhelm someone. Wouldn’t?
Vid: It would sometimes overwhelm somebody. Some sysadmin would basically say, “Hey. I don’t want to deal with this crap anymore. Do you just want to take my customer?” I’m like, “Sure, if they pay me. If their credit card works, I’ll take it.”
Andrew: If a sysadmin doesn’t want a customer, its often because the customer is a pain in the butt. Why would you want a tough customer?
Vid: You have to understand what the customer’s issues are. Again, my, about ten years of being in the consultant industry, gives me a unique perspective into what the customer’s frustrated about and what they’re complaining about. As opposed to a normal sysadmin, who just wants to deal with servers. I’ve dealt with human beings and non-technical people for so long that, I know that when they say something: one, it’s not a personal attack on me; two, they just don’t know how to solve their problem. So, if I can solve the problem for them, if I can understand what their complaining about and go, “Oh. This is what you actually need. Let me do it for you, and I know a better way of doing it. And I can do it for them much faster than a sysadmin, who has to sit there and explain to them, “what they want isn’t what they really want.” I can do that. It’s an actual ability for me. People have always said that, I have always been good with human beings. Being a nerd and being an engineer, and being able to talk to non-technical people have been a huge benefit for me. I remember I was 19, I was talking to the CEO of Schering-Plough, and nobody knew I was only 19 years old.
Andrew: [Chuckle] That’s cool. Alright, so you’ve gone into forums, you help people out. That helps you get customers. What else do you do?
Vid: I really started doing optimized search engine and optimization that was…
Andrew: Tell me about that actually. You brought it up three times and I didn’t follow up on it yet. So, what content did you create and optimize?
Vid: Well, the first thing I did was managed WordPress web hosting. Again, coming from the Rackspace backyard, and having been bought by Rackspace in the past. I just figured managed WordPress web hosting was something that you would want to show up for. I kind of started telling people we’re like Rackspace but just for WordPress. Rackspace is managed hosting, we do managed WordPress hosting. So, I started targeting that. When I did the Google research, I figured, even though there aren’t that many people that searched for “managed WordPress hosting.” I had a hunch that those people would be much better qualified leads, than somebody just searching for “WordPress hosting.”
Andrew: OK. You said, “That’s the phrase that I want to target: ‘managed WordPress hosting.’ When somebody types that into Google search, I want to be the first person that they come up with.” And you’re saying to yourself, I understand your right, “It’s not a term that the average term the average person use, but when someone does use that phrase, they’re great prospect. I’m going for it.”
Vid: Yeah. They had invited their own problem. They know they needed WordPress hosting.
Andrew: OK. So, once you decide that’s the keyword, that’s the phrase you’re going for, what do you do?
Vid: I’ve had the fortune of working with a company called “Para Analytics” [Sp] that does SEOs. So, they kind of helped me figure out what to do with my content, with my title tags, how to do my own SEO properly. So, I started putting content about what managed WordPress hosting means. What kind of features I do. And Google pick me up and I’ve been on page one for “managed WordPress hosting” for awhile now.
Andrew: You did this on a blog? Give me some details on what you did after you had the conversation with the SEO experts.
Vid: Well, I created a page that basically said, “zippykid.com/managedwordpresshosting.” So if you have a phrase right after the URL. And then, I kind of changed structure around so it’s not zippykid.com/benefits/managedwordpresshosting. I basically started the title tag, the H1 tags, stuff that they had basically said, “This is what Google will have and Google [??] and what your page is about. And then also, in my email title, I say “managed WordPress hosting. Anywhere I go, I tell people, “this is what I do.” Any place on the internet when anybody links to me, I ask them, “Please have it say my managed WordPress hosting provider.” So, inbound links saying, “this is a managed WordPress hosting company,” was a huge benefit. One of our customer is a company that gets a lot of inside information from Warner Bros. So, it’s a pretty big movie fan website, and on the bottom of that it says, “WordPress hosting by ZippyKid.” That helped quite a bit.
Andrew: You put that on the site?
Vid: I asked them to.
Andrew: You asked them to?
Vid: I said, “I won’t charge you.” They qualified for a higher pricing plan, but I knew that it was something that was going to be a…. I know that I’m not going to make a profit on every single customer. And I know that, from a infrastructure standpoint, I’m not making profit on that customer alone. But, the benefits of this SU, and the links used benefits that I’m getting from having a link from a page rank six website pointing back to me, saying “WordPress hosting,” was worth the $20 or $30 a month I’m losing on them.
Andrew: So, why is it the URL says, “benefits/managedwordpresshosting?” Why is that important?
Vid: I just wanted to organize the content a little better so people know that these are the benefits and then you have “benefits/managedwordpresshosting,” then scale [??] hosting. It’s a battle that you always have to do of, SEO versus what is a more legible URL that makes sense when somebody reads it and they go, “Oh. This is the page is about.” And Google is getting more and more semantic as well. It hasn’t hurt my positioning on Google. [??].
Andrew: You know what? I actually just did a search for “managed WordPress hosting,” and I hate to say it, but Page.ly, a competitor, came first.
Vid: Yeah. Page.ly’s been around since 2009, so they’re the first company that did it. But, I show up a couple slots below them.
Andrew: Oh. You’re very clearly on there. You’re number three on the page and it’s very easy to spot you on there.
Vid: Page.ly’s going to be there for awhile. They’ve been it for awhile. I’m still getting sales from it. I could spend time trying to beat them. But, I have more things to worry about than beating them one specific key phrase.
Andrew: By the way. I talked to Josh over Page.ly, awhile back. And I asked him if he wanted to do an interview and I knew his revenues, but he said, “You know Andrew, I’m OK with you knowing my revenues. I’m not OK with your audience knowing them. I’d rather we keep it off.” You on the other hand, were comfortable with sharing your revenues. Why?
Vid: Because you can find them pretty easily.
Andrew: Why can I find your revenues so easily?
Vid: Well, I raised money recently. So, all the filings and everything that you do, you kind of get an idea of what the company’s worth is. Even if it’s a private investment, you can see how much money I raised, you can see who got the money, and evaluations and all that. I’m not embarrassed, people give out revenues all the time. I’m okay with. I’m kind of proud too, 250,000, a quarter million in less than a year. I did a pretty good job, so I’m patting myself on the back.
Andrew: [Laughs] How many people on the company?
Vid: As of today, four.
Andrew: OK. And, when did you hired the first person?
Vid: First person I hired was in December. He was part time, and he was out of Florida. He kind of started helping me out with support and stuff. When I finalized the raised on April 25th, was the second employee. Then on May 1st, were the third and fourth, they were officially on board.
Andrew: You told me a little about SEO. What else did you do for search engine optimization?
Vid: WordPress hosting, I don’t show up yet. I’m moving up. I used Para Analytics for SEO consulting and I use Ginso Metrics [Sp] for keyword positions and figuring out where I am. And I can tell that I went from page 100 to now, I’m on page 4 for WordPress hosting. It’s moving up. SEO and word of mouth have been the biggest sellers. If you solved somebody’s problem and you helped them make problem, they will tell everybody about. That’s been it. Word of mouth and SEO has been pretty much all I’ve done so far. One thing I did do is, I used a company called Aderal [Sp]. They do something called, “retargeting.” Where basically people come to my website and they go, “Oh. I’ve never heard of this company,” or “They’re a fly by night company.” Then they go somewhere else and they start seeing my ads, and that helps quite a bit. My spend with Aderal is about the how much one high traffic customer pays me right now. I’m only spend $100 a month. That gives people a lot of confidence when they start seeing your ads in sites that they didn’t think I would be able to afford them.
Andrew: [Laugh]
Vid: They’re like, “Oh. Wow. You’re everywhere.” That’s the only thing people say, “You’re everywhere man. You must be blowing up?” I’m like, “Yes. I am.”
Andrew: That’s awesome.
Vid: I am growing. We’ve doubled our revenue for the past three months. We are definitely blowing up. But, back in the day when I started Aderal, we weren’t blowing up. We were just scraggly growing up.
Andrew: The reason that it worked so well is, they hit your site one time and then they move on, and they start to see you everywhere. They go on to their favorite blog, or a big news site and boom. Your ad is there. And then they click and they come over. And if they don’t click, they now got an impression that your company is really big because it is advertising everywhere. While it’s only advertising everywhere that they happened to go. You’re paying less than $100 a month for an ad there. What size revenues are you getting from it per month.
Vid: I’m getting about four or five customers a month from them right now.
Andrew: OK.
Vid: And then the customers, they really varies. Sometimes I’ll get a medium traffic customer. We have three plans: 20, 60, 100. So, it kind of helps. We also, actually, got a customer that’s paying us a lot more than $100 a month. They came to us and they said, “You don’t seem to have a plan with us.” I said, “No, no, no. We can build a custom thing for you and we can do that.” And they’re like, “Yeah but, if you don’t know what the pricings going to be, we don’t know how scalable you are.” So, I just changed one of the banner ads. And then everywhere he went he would start seeing, “scalable WordPress hosting.”
Andrew: [Laughs] Wait. You can target a specific person that way?
Vid: No, I can’t target a specific person. I just changed one of the ads to start the safest [??]. He used a phrase that I hadn’t thought of using which was, “scalable WordPress hosting.” So, I said, “OK. If big customers are concerned about stuff like that. Then I should start using jargon that they’re used to.” I kind of just went from there.
Andrew: I see. And, did that lead to him signing up? Or, other customers signing up?
Vid: It lead to him signing up. He started seeing my ads everywhere and he like, “Oh crap. You are bigger than I thought you were.” And that’s where I didn’t tell him that it’s just me and my three dogs at that time. It worked out.
Andrew: I keep hearing about retargeting ads and how effective they are. And I’m trying to find an interview to do on the website here. But I just haven’t been able to figure out how to make it work. The companies aren’t willing to share how big they. The retargeting companies, there’s not a lot that they’re happy to talk about yet. And I think It’s because it’s still early days for it. But I’m working on it. Alright. We’ve found out about the forums. We found about search engine optimization. Of course word of mouth is going to be big. What else? What else did you do to bring in customers?
Vid: I would show up at Word camps.
Andrew: Word camps. Yeah.
Vid. Uh-huh. I would just basically, people would be speaking. There’s someone who has [??] this problem. Just answer their question and don’t expect the sale. One of the things is, I’m not always in sales mode. I’m in help mode. If I can help the customer, if I can help somebody and they don’t have to pay me. They’ll think very highly of me as opposed to me saying, “I’ll only help you if you give me $20 a month.” That has worked out for me all my life. When I was 18, I worked at a retail store. I was the number one salesperson there. And people have been working there for 20 years and they asked, “how you do this?” I said, “Well, I live with my parents. I don’t have to feed anybody’s kids. So, I’m not under pressure to sell. I just help people and sometimes I’ll tell them they don’t need me.” Honesty is the easiest thing to sell you and sell your business. We have turned down people or said, “We’re not for you” or “We don’t scale.” I actually sent one person to WP Engine, just saying, “I don’t think we should be holding onto you right now. This is something that’s going to cost $2000 a month. You should try WP Engine out.”
Andrew: What do you do to encourage your customers to tell their friends and other people about you?
Vid: The first thing is, give them a product to believe in. If their website always stays up and loads really fast. And they know the benefits of that, then give that. If somebody is not technical, and they need help with logos, or basic placement, and they love that level of support, give them that. And lately, I’ve been thinking about toying with Nethalia Program [Sp]. Nethalia Programs are great, but at the same I don’t want it to look like this person is only recommending me because they’re going to make money off of me.
Andrew: You know what? I don’t want to seem cynical. But, I just don’t believe that happy customers naturally spread the word. Because there’s so much in my life that I’m happy about. If all I did was talk about the products that I was happy about, I’d be a bore, and no one would want to talk to me because I would be a walking commercial. I’m really happy with my hosting company. I have Media Temple on Mixergy. I’m happy with them. I love that they take good care of me. I don’t talk about it to my friends. If someone emails me and says, “Andrew, are you happy with Media Temple? I see that you have their link on your site.” I’ll say, “I’m ecstatic. I’m very happy to be with them and I recommend them.” But to go out of my way to say, “Go use Media Temple” or go out of my way to say, this pencil, I have in my hand every interview. I’ve never once told anyone about. You enjoy what you enjoy and you move on with your life.
Vid: I completely agree with you on that. I don’t think you should be walking, or any of my customers walk around saying, “Oh. Let’s have some wine and talk about ZippyKid.”
Andrew: [Chuckle] Right.
Vid: I don’t think anyone does that. The problem is, because WordPress is so pervasive and so popular. It just becomes the thing of conversation where people are like, “My website’s down.” Like today I [??] heard someone say, “My blog is down.” When a business owner talks with another business owner, they talk about, “What are you doing to make your website faster?” sometimes, or, “Hey. Who did your website? It looks really nice” or “Loads really fast.” It comes up in conversation and people recommends it. I don’t think any of my customers are walking around going, “You should use ZippyKid,” instead of selling their own product. When somebody does ask them that, I show up. I think that’s why my initial growth was very slow. But it’s blowing up, because as the number of customers I have increases, the more people there are to say nice things about me, SEO marketing efforts. When you go to Word camp and you talk to a social media consultant or an agency, they just go, “This guy Vid, he seems to know a lot about WordPress. Let’s just ask him.” Or somebody goes to them and they go, “Oh you need WordPress, just go to Vid and he’ll take care of you.” That has helped. But nobody just walks around saying, “Let’s talk about Zippy.” We’re not Apple. This is not an iPad or iPod that somebody goes, “Oh my god! You got to check this out.”
Andrew: [Chuckle] Right, right. And for the most part you guys are invisible, the hosting companies.
Vid: Yeah. Nobody should ever try and talk about us.
Andrew: Do you put your logo on your customer’s site when they sign up? No.
Vid: No. That’s just tacky.
Andrew: Hey, you mentioned earlier that Rackspace bought a previous company of yours. What was the company?
Vid: It was share hosting company called Blue Domino [Sp]. The people that ended up forming Mosso [Sp] and cloud sites, the leading engineer for cloud sites and the Mosso staff used to be my junior sysadmin. They bought that company. At that time we had about 20,000 customers, a lot of revenue.
Andrew: How much did you sell the company for?
Vid: It wasn’t my company. I was a senior sysadmin.
Andrew: Oh. I see, I see. OK. Alright.
Vid: That’s where I got my hosting chops, in a sense. I have no idea what the company sold for. I just knew that I had a job at Rackspace, and that was to scale that whole thing even further.
Andrew: What made you decide to go off and create Third Party Code? I know you had a job in the early days of running Third Party Code. But what made you decide to go and do it full time?
Vid: I just wanted to do something on my own. I was 26 or 27 at that time. I didn’t like working for a big company. I just wanted to do my own thing. And I figured that if I’m 26, not married, single, now is the time to take a risk. As opposed to being 35, having kids, and being scared shitless, I can’t- how am I going to feed my kids.
Andrew: And yet another reason why I can’t make it into iTunes. Mixergy really should be featured.
Vid: Isn’t like Kevin Smith featured on iTunes? I mean, he curses a lot.
Andrew: All of these people are featured on iTunes, except for me. I’ve never once been featured on iTunes. I pump out more interviews, more programs than any of my… not competitors but anyone else in this start up, entrepreneur, business world. I publish more than they do. I spend more time on the quality than most of them do.
Vid: You should find somebody who knows Steve Jobs and send him a petition.
Andrew: Send him an email. right. Apparently he answers his own email.
Vid: Yeah.
Andrew: Maybe someone in my audience will have insight into that. Alright. Before the interview started since I didn’t know you very well and I couldn’t find out enough about ZippyKid online, I asked some people who did know your business, what they wanted to know. And here’s what they told me. Here’s the first question, they said, “How does he handle tech support expenses in a business where customers are often non-technical and yet they run into technical problems?”
Vid: Most of their problems are very easy to fix. When your technical product is WordPress, so when somebody says, “I need my logo done over there.” There’s only three ways to do it. We’re focused on such a niche market that most of the problems are, if you’ve done it once, it’s going to be very similar for the rest of the 5000 or 100,000 you’re going to get.
Andrew: Hasn’t WordPress kind of become like Microsoft Word, in the sense that, every time you add a new plug-in to it, it’s like adding a new program that could be screwing things up. Any time a customer goes back in, I know I’ve done this myself, somehow I deleted a HT access file that was hidden but apparently wasn’t when I deleted or adjusted it poorly, or some plug-in adjusted it, and destroyed my site. And I remember going back to the designer to put my site up, and I said, “Josh[Sp] what do I do? Come save me.” They needed to go in and figure out. It could’ve been anything that kept my site down. It happened that, it was just one file that was causing it. That’s not an easy problem to solve and that’s not one that comes up a lot. That’s one you have to hunt for. How do you deal with that?
Vid: It’s been solved in security circles a long time ago. You can use monitors to see what changed and you can have an auto log. So when a customer says, “Hey, my website’s down,” first question is, “Well, what did you do?” Usually they say, “Nothing” and then I go, “Well, actually. The computer over here says you installed this plug-in. So let’s deactivate this plug-in first and see if your website comes up. Oh, it does. What functionality do you think this plug-in was going to give you. And then let’s not do it on the live site, let’s do it on the test site that will be provisioned for you, and see if it works and we’ll go from there.”
Andrew: You could do a test site for every customer?
Vid: Yes.
Andrew: So, what you described there could be about an hour’s worked. Right? Going back and forth with the customer. No?
Vid: No, because if somebody says that their sites down… Again, my background in hosting, really helps me do a lot of this stuff that is fairly obvious to me. When I’m explaining it to you right now, I think if other sysadmin are reading this they’re like, “Why don’t people know this? It’s not that hard, he’s not doing rocket science.” There are ways to see what changed, how long ago it changed. And when somebody says something’s down, we have a snapshot of our sys software, our whole network operations center which is basically cloud. We know what changed. We can look at it and go, “OK. We need to explore it down this path.” It could usually be 10-15 minutes, not an hour. The hour’s usually is, for migrations or very large websites. We have some sites that get about seven million page views a month. Those, when they go, because you don’t know what node the problems happening in. Sometimes it takes a little bit longer.
Andrew: So what about this. Tell me if my thinking on your business is right. It seems like, what you’re doing was, a service based business for the first year that happens to also have this hosting attached to it. That people were really signing because they wanted Vid to be there for them in case something happened to their websites, so they could call your cell phone and you will deal with it. They were putting you on retainer at $20 a month or $60 a month or whatever.
Vid: Yeah. That’s what most small business hosting is. When you’re doing any hosting for the people in Silicon Valley and all the dot com starters and stuff like. There you’re supposed to be hands off. But, for the 20 million small businesses that are not technical, they just want somebody they can call. Like a plumber, you’re not paying him $20 a month, but you call him and you can get somebody to help you out. They’ll come immediately to help you out. They’ll charge you an arm and leg to do it, but they’ll do that. Same thing with us. It’s automated, I don’t have fuel cost and I don’t have to go to your house to fix it. I can do it from my iPad; I can do it from my laptop; I can do it anywhere.
Andrew: Next question. A lot of things on WordPress are sold affiliate marketing. Is that what you did and Vid, you told us you that you didn’t do it. I’m wondering, did you do anything like affiliate marketing? Paper, performance in any way?
Vid: Not yet. There have been some people who’ve basically said, “You should set up an affiliate program and we’ll start sending more customers to you.” Just because they’ve been real happy with the service we’ve provided them and they want to make some money off of that. So, actually, for your audience if they could send me an email or tell me what they think is a better affiliate program. I’m trying to figure out, if I should give people 25% off the monthly recurring revenue for every sign up that they send me, or just a flat $50 or $60 per sign up that they send me. I’m curious as to what people would be willing to do. I have both plans set as a referral. I just haven’t made it public.
Andrew: That’s a good question. I’m curious to see what they say about that too. Next question, let’s see. “Hosting is one of those unforgiving businesses, where if everything works perfectly, nobody notices, but when there’s just a little problem, the sky comes down on you. How does Vid handle publicity and how does he handle customer’s expectations and those emotional blow ups that might sometimes happen on twitter.
Vid: I’ve been very fortunate that it hasn’t happen yet. When it does happen, I’ve told people, “I’m not guaranteeing you 100% uptime, I’m guaranteeing 100% access to me. Something goes wrong, you have my cell phone, I will be working on it at 2 a.m. and 3 a.m. And that has happened. Somebody has emailed me, the website hasn’t gone down, but they’re like, “Oh my god, the wrong logo’s there.” And I received the email at 3 a.m. and I just happened to be awake, and I fixed it. And people are like, “When do you sleep?” And I die. I mean, I sleep but, when you’re doing this and you’re having fun, you don’t need that much sleep.
Andrew: Are you a married guy?
Vid: Yep.
Andrew: And you wake up in the middle of the night to handle someone’s tech support issues. What does your wife say?
Vid: She usually sleeps through it.
Andrew: Just sleeps through it. She just says, “Oh, that’s Vid he’s just going to deal with it.”
Vid: I’m pretty quiet when I get out of bed. But at the same time, I have a very understanding wife. I did worked, when I was a consultant, I worked on my honeymoon in Hawaii.
Andrew: You did?
Vid: Yeah. I had my laptop.
Andrew: And she was OK with that?
Vid: She was OK with it because it started raining. So, there wasn’t anything we could do.
Andrew: I don’t know if that would ordinarily make a women be OK with it. That’s surprising. What about when you have dinner? And suddenly the phone rings, or the email coat [Sp] goes off and you have to deal with someone’s customer service. Are you going to break dinner to go deal with that?
Vid: If it’s an absolute emergency. Yes, but-
Andrew: What does she say about that?
Vid: This why I’ve also hired some staff. If I see something, now, [??] at zippykid.com. Other people can take care of that. If four things are happening, I can’t take care of four people at the same time. So, initially, yeah I would do that. And one of the thing is, I am one of the most luckiest guys in the world. My wife is very understanding. She knows that I’m doing this so that we can live like millionaires in five or six years. This is a sacrifice we’re both doing.
Andrew: When she knows that, and you know that, and it’s time to reconnect with that. How do you express that? Do you guys sometimes sit back on the couch and say, “Look, I know it’s tough right now, but in 4-5 years, we’re going to be millionaires from this business. It’s going to be easier, we’re going to have a lot of people helping us.” How do you reconnect with that vision in the future.
Vid: Pretty much the same you actually described.
Andrew: The way I actually described it.
Vid: We just go like, “You know what, this sucks. We haven’t actually seen each other. Sometimes she would come home from work and she’ll see me in the office she’s like, “You have time to talk.” I’m like, “Nope.” Then she’s like, “Alright, fine. What do you want for dinner?” She’ll make dinner and I’ll eat out of my desk. Then sometimes we’ll go out and we’ll have fun.
Andrew: Here’s another question I’ve brought up before. “How do you draw the line between tech support and professional services?” Vid, it seems to me that you don’t draw that line.
Vid: No. Some people say that I’m stupid for that, but I have a profitable company. So, one of us is stupid [Chuckle]
Andrew: [Chuckle] How profitable were you? The first 12 months you brought in a quarter million in revenue. How much in profit?
Vid: 25% profit.
Andrew: 25% profit. The biggest expense is in your own hosting right?
Vid: Hosting and… some things add to outsource. Every now and then we would get people who didn’t have a website. And they needed a design done and some other things done. The processes of managing, getting the design done through Brandstack, one of your interviewers. And then going from there to building an actual work website [??]. I can’t do all of that and be hosting a-
Andrew: You offer people design work too?
Vid: We didn’t offer. We basically would say, “Go to Brandstack, get the design done, and we’ll get the development stuff going.” So, we would charged them for the development of the website. So, it wasn’t just 20$ a month, we charged them a couple of thousand of dollars to take the Photoshop file into a WordPress [??]. But, that wasn’t really revenue that I was making. It was kind of passed through or I make $10 off of it. But, it was basically that conversion process and everything.
Andrew: What portion of your revenue is that kind of work? Non hosting revenue.
Vid: Non hosting revenue would be about 40% right now.
Andrew: 40%?
Vid: Yeah.
Andrew: Oh wow. So 40% is design work like that. And what else beyond design work?
Vid: Then it’s hosting. 60% is hosting. 40% is just… we get a lot of people who have a slow website that they initially go, “OK. Now you’ve made it fast.” Then they start realizing that it looks like shit- or looks like crap. No more iTunes for you.
Andrew: I’m off iTunes featured for now, so go for it.
Vid: They look like crap. So then we go, “Well obviously if you look at my website, I’m not a designer. You should go to Brandstack, get a design done and come back to us. And we’ll take that and we’ll build a WordPress out of that.”
Andrew: So basically, it seems to me that the first year you said, “anything that our customers need, if it’s related to WordPress, we’re going to do it.” I’m trying to think of some outrageous example to come up with but I can’t come up with one. But you basically are saying, “We’re going to do anything that these customers want, I will be-” were cursing, “I will be your bitch as a customer for the first year, in return you’re going to help build my business and you’re going to lay the foundation for me.” And that’s the secret to your success for the first year.
Vid: yeah. First year or second year. We’re running into our second year, and we’re actually porting the website right now from a Legacy PERL-based [??] WordPress. We are doing, we’re virtually doing posts one at a time. Pages one at a time, taking that and putting it into WordPress. There’s no way for us to automate a table based layout into a non table based layout in WordPress. We’re manually doing this, one by one. And there is over 350 of those. The person that is behind this project is somebody you don’t say no to. It’s just like-
Andrew: What do you mean? Who’s the person behind the project.
Vid: I don’t want to make that public.
Andrew: What kind of person?
Vid: It’s a very famous person. It’s somebody that if we impress, I know that I’ve impressed him in the past, because that-
Andrew: Is it a blogger?
Vid: It’s somebody who’s a multi-billionaire.
Andrew: Multi- oh I see. For that, that makes sense.
Vid: You’ll do what you can to be in his good graces. When that multi-billionaire refers you to somebody, he’s not saying you should try them out, he’s saying you should use them.
Andrew: I see.
Vid: So, we’re doing that for him. The whole mantra of helping customers, that’s something that Rackspace- obviously Rackspace bought us before, it’s always been with us, it’s been with me. I want to help the non-technical customer get online and have something that doesn’t look like crap. One of my friends, Paul Ronheimer [Sp], in the PHP community basically said he wanted to make the website suck less. And this is my way of doing it, not having crappy website, not having websites that take forever to load.
Andrew: Why did you decide to go after investment?
Vid: [Snore] Sorry my dog is snoring. Lady [Sp].
Andrew: [Laughs] It’s all good.
Vid: I decided to raise investment, because I found out that, when people find out about me, they would sign up. I wasn’t doing enough of a good job with marketing so I raised money from people who built other companies before, who have a better idea of marketing than I do. I’m all about customer service and getting the job done. Marketing I suck at, apparently I don’t suck that much, but there are people who are much better at it than I am. I raised money from people like that so that they could help me do marketing.
Andrew: Do you have to prove that you knew what you were doing with marketing, and that you had a plan for marketing, and that all you needed was to put more money in an already working plan?
Vid: No. Looking at my graphs, basically my growth charts and everything, you can tell that this is a growing business. I was profitable. The fact that you’re profitable, and you go South by Southwest and you tell an investor that, is much better than saying, “We’re going to be profitable in a couple of months.” I think the WordPress market and WordPress itself has done a pretty good job of showing that there is a huge market for this service. I didn’t have to do anything to show that marketing will help me get more customers. It was fairly obvious to all the investors that invested.
Andrew: Alright. How much money did you raise?
Vid: I don’t want to get into that.
Andrew: [??]
Vid: Gabriel Lineberg is the lead investor and there’s a couple of other people behind him.
Andrew: Yeah, he’s a phenomenal marketer himself. Has he given you feedback yet, on how to market?
Vid: Yeah. We’re starting to implement some of those things like, going to more Word camps; sponsoring Word camps. Helping to build traction, like the affiliate programs and going after specific verticals. I can’t just say, “We do WordPress hosting” and I can’t just say, “We do managed WordPress hosting.” Sometime next week we’re going to be changing our slogan to, “We’re WordPress Host for Businesses.” Basically, if you’re a business and you’re making money, you need to have a professional website and you need a professional host. Managed WordPress hosting for a doughnut shop owner does not make sense. I have to explain to you what managed WordPress hosting mean. I shouldn’t have to do that to businesses. Businesses don’t care that it’s WordPress, it’s a website. It just happens to be WordPress.
Andrew: So, he wants you to focus on business. He doesn’t want you to keep talking about WordPress because they don’t know what WordPress is.
Vid: Some people don’t, some people do. It’s a fine line. The people who already know WordPress needs to know that we’re a WordPress hosting company, so it’s “WordPress Hosting for Businesses.” But, at the same time, like I said, you shouldn’t have to know what a CDN is. A doughnut shop owner does not need to know what a CDN, and he doesn’t really care what a CDN does for him. He just knows that if he hosts with me, his websites going to load faster, customers are going to be able to find him and they’re going to be able to find what his hours are.
Andrew: Alright. Congratulations on a great first year. Thanks for coming here and talking about how you did it. Sorry you had to slave away for a full year in order to get there, but I’m sure it’s going pay off in the long run.
Vid: Oh yea. It’s the first world of problems right? Slaving away in front of a computer in an air conditioned its fairly nice. It’s not something I can complain about when you see people in Africa and what they’re slaving away with. This is nothing.
Andrew: [Laughs] You know what? You’re right. As a kid, I worked in a basement, putting alarms on shoes, and alarms on shirts. And I used to say, “There’s no one in a office who can complain about working hard. There’s no hard work compared to this. They could say its stressful, but they could say all kinds of things, but hard work? Not compare to this.”
Vid: Yeah. Exactly. My father-in-law used to do tar on roofs, in bare feet. That’s hard work.
Andrew: Tar on roofs in bare feet?
Vid: Yeah. That’s what he says.
Andrew: Yeah. Right, because shoes aren’t that expensive now.
Vid: Well, this was back in the ’50s and ’60s. He had a tough time.
Andrew: I’m not putting him down as tough time but I’m…
Vid: Putting tar on the roof, in Oreano [Sp] Texas, in 110 degree weather is not fun, even if you have shoes on.
Andrew: Fair point. Actually getting up in the middle of the night, because a customer has a logo issue. That’s not much fun either.
Vid: Yeah. But you’re still air conditioned.
Andrew: [Chuckle] That’s right. There’s still air conditioning. Alright. Vid Luther, from ZippyKid, thanks for doing the interview.
Vid: Thank you sir. Thanks for having me.
Andrew: Thanks for watching. Bye. [Music]
