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Here’s the program.
Andrew: Hi, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. You guys know what we do here. I interview entrepreneurs about how they built their business. Bring back some of their best ideas for you, so you can go out and build your company and hopefully do what today’s guest is doing at some point in your life. Come back and do an interview about how you built your company and teach others what you’ve learned.
Joining me today is Bhavin Turakhia. He started his business as a teenager, and today it’s worth $300 million. All bootstrapped, right, Bhavin?
Bhavin: Yes, that’s right.
Andrew: The company is Directi Group, which owns a portfolio of businesses that includes domain registration, instant messaging, advertising, and domain parking. How old were you when you launched the business?
Bhavin: I started off at 18. I did launch, I was involved in some consulting assignments and a bunch of other entrepreneurial stuff before that. But if you look at Directi, it started off when I was 18, back in college.
Andrew: You had your brother join you later on as a co-founder. I actually was doing some research on you, and I saw an article in the British Telegraph that says your brother’s worth $300 million. Did they get that wrong? They mean the whole company, don’t they?
Bhavin: The whole company, yeah, yeah. He’s my younger brother, and we’re sort of, it’s the same family. The group is worth $300 million.
Andrew: What’s the biggest portion of your business today?
Bhavin: If you look at the various business focuses that we’re in, I would probably divide them into web presence services. That’s one big focus area. In fact that’s the primary business that we started out with, which is essentially facilitating all the backend services that anybody needs to set up their web presence or website online. Right from domain names, as you rightly pointed out, domain name registration, web hosting, Wii PS and cloud servers, website design tools. We don’t do custom designing but website design tools to facilitate designing your website. Traffic monitoring, SEO services, digital certificates, pay and gateway services, pretty much the entire gamut of products and services that you would need to set up a web presence. That’s one big focus area.
There ‘s various business brands and business units that deal in that focus area. We have ResellerClub.com, LogicBoxes.com, BigRock.com, and a couple of different businesses there.
Then we have focus around online traffic monetization and sort of media, where we facilitate monetizing web properties, so park domains, actual websites. Companies like Investopedia, Yahoo, etc., they also use a bunch of our contextual, analysis technology to monetize their traffic. That’s the media side of the business. That’s actually also what largely, that’s also largely what Div, my younger brother handles. That’s the traffic monetization piece.
Then there’s the entirely new sort of area there, which is instant messaging, social networking, collaboration, and online, sort of, group chat and so on, and so forth, which we’re just starting out. We actually started on that business unit about a year ago, and it’s been under development for pretty much the better part of the last year. We are sort of alpha launch right now, but we’ll likely beta launch in a couple of months. That’s a relatively new business that doesn’t really have any customers or any large customers as yet.
That’s the primary focus areas. If you look at the first two, which really comprise the Directi Group as of today, they’re about equal in terms of size, in terms of their contribution to the entire group revenue and etc.
Andrew: Okay, let’s talk about how you got here. What was the original idea that you had back in, I think it was 1998?
Bhavin: The story probably begins a little before that, right back in 1989. I was just 9 years old. That was my first tryst with computers. Back in school, I started programming on a IBM X86 microprocessor at that point in time and programming in GWBasic and MS-DOS, etc. I have been very fascinated by computer programming and software development right from that time. I was a geek back then. Use to spend every possible waking hour, short break, lunch break, after school, in the computer room. Reading up with a ton a material, conducting courses for other people and advanced programming in GWBasic. I knew right from then that whatever I wanted to do in life had to be in computer science and computers in some form or the other. I’ve always been, partly because of the way my parents and my dad encouraged me to do a lot of reading and partly out of personal interest, I’ve also been an extremely avid reader of biographies and autobiographies of successful entrepreneurs and companies, etc. Again, back in school days, I always knew I wanted to do something in computers and I always knew I wanted to do something on my own, something of my own, basically.
Immediately after passing out of school, somewhere in ’94, the Internet sort of started to take shape in the country. We really didn’t have Internet connectivity accessible for the private sector until then. I got hooked onto the Internet, and I knew that whatever I wanted to do had to be related to the Internet. Right after ’96, I sort of took the conventional path of computer engineering. I decided to start my, sort of, first enterprise of venturing out into starting a business and tried my hands dabbling around with building some applications and software for various companies. Started out with building out a web product that I wanted to go out there and sell. I tried that for about a year and a half and failed miserably. I spent a significant amount of time trying to sell this service, but really the idea wasn’t meant to succeed.
Then, somewhere in late ’97, early ’98, I started getting acquainted with general web infrastructure. So it was somewhere in mid-’98, figured that the number of Internet connected users in India wasn’t too high. If I wanted to look at some sort of service or some sort of product for the Indian Internet audience, back then, it had to be something very fundamental. That’s when we started out with web presence services. We said that if anybody wanted to set up a web presence online, they’re going to need a domain name, a hosting package, and a bunch of other services, so let’s start out with that. That’s how we started out with our first business focus. From there, we kept ramping up and going forward.
Andrew: Before we continue with the story, you said that you failed miserably and the business wasn’t meant to succeed about your previous company. Can you tell me more about what that company did and why it wasn’t meant to succeed?
Bhavin: Sure. I’ve actually gone through a couple of different companies that I started out before Directi. The first one was more of a hobby, a company called Bits and PCs, sort of a creative twist name. It was meant to be a computer hardware company, where I went out there and sold a bunch of computers, assembled them myself, and sold them to friends and family. I even went door-to-door selling a bunch of computers. I never was interested in hardware from a business standpoint. It was just more like learning while earning kind of a process. I really then started out on the website with . . . I wanted to build a web application or provide a web service of some form.
Back then in India, I said let me start on the first idea. For about a year and half, I built and tried to sell a software service, which was essentially a job match engine. Sort of similar to what Monster.com and in India naukri.com actually provide. But it was kind of different in the sense that it was meant to be . . . I was a very young, immature programmer more than sort of a business guy back then. It was a great idea, but naive from a business standpoint. It was meant to be an artificial intelligent engine for matching jobs, for matching vacancies to resumes. The engine would self-learn based on past mistakes and past incorrect decisions. You feed in like hundreds of thousands resumes. You feed in tens of thousands of vacancies. It will actually do keyword match analysis. Over a period of time, automatically learn what makes maximum sense in terms of matching a vacancy to a candidate. The idea was to try to reduce the effort required to do that kind of matching manually.
The tricky piece here was that really an engine of this nature would only really start giving you intelligent decisions when you have hundreds of thousands of users using it simultaneously. The total Internet connected population of the country at that time was around 35,000 to 40,000. That fact completely escaped me. In my mind, I had this beautiful software and I was like, “Oh the entire world is going to want to use this software. It’s so brilliant and when it really works then it’s going to do wonders and so on and so forth.” I felt in my head that even though the world’s behind it’s going to catch up me.
Clearly that wasn’t meant to be. If you look at it in hindsight, I was way ahead of my time. I was still working with concepts that would not materialize for several years to come. Actually, I keep talking about this in various entrepreneurship forums. That being ahead of your time is not necessarily always an advantage. In many cases, it can actually turn out to be a disadvantage. This is a fairly valuable lesson that I learned across the first year and half that I attempted to start and run this business. But I had a really fun time, developed a lot of industry contacts that actually helped me significantly in springboarding my next attempt.
Clients who couldn’t work for my first product, could actually then potentially work for my second one. I also had a lot of help along the way, a lot of advisors, a lot of people who helped me. I think a large amount of business learning, the initial exposure to learning how a successful business can be conducted for me was actually that year and a half of failing consistently at trying to pedal this software that was actually not meant to be.
Andrew: It’s interesting. I actually was talking to the founder of Monster.com recently. He told me the story of how he struggled for a long time in the early days because even in the U.S. there weren’t enough people online. He couldn’t get enough job listings on his website from the few people who were online at the time. How does a teenager get so many advisors and build that kind of business while still going to school? Where do you find the time? Where do you find the guts to make the phone calls to bring people in? How do you even get the advisors?
Bhavin: On the school part, I actually, out here in India, we have much like the U.S. After your, what we call 12th grade, I think is equal to high school in the U.S., you essentially join college. You go through four years of college or three years of college, depending on which course you’re doing out here. In most circumstances, most people who were looking at taking up a career in computers or doing something in computers typically end up going into what we call computer science engineering which is equal to bachelors in computer science in the U.S.
I, on the other hand, decided actually to drop out of that stream immediately after my 12th standard. Because here at least and even today to a certain extent that exists, but at least back then, the kind of stuff that they used to teach in computer science curriculum, I had already done most of that back in my school days. I figured I don’t want to spend four years of my life pursuing a computer engineering degree which is not going to teach me much from an academic standpoint. I’d much rather just start out on my own and do stuff on my own.
My parents, of course, were pretty insistent on me getting some sort of an educational degree. So I joined a commerce course, which is not really very intensive. It gives me a significant amount of time to spend outside in terms of doing what I wanted to do. I completed doing the entire bachelor’s term across three years. I must have attended college for accumulative period of 12 to 16 weeks in total across those three years. The rest of the time was pretty much available to me to do whatever I wanted to.
Going back to sort of the failed attempt at running or trying to provide this first software that I developed, I think I was actually pleasantly surprised. I was 17 back then, trying to build this software and then going out there and selling it to people. I must have spent days going to various placement agencies, talking to various companies to buy my service and so on and so forth. While there weren’t too many buyers, they weren’t lining up outside the door to pay for my services. People wouldn’t pay for the service.
I was pleasantly surprised at the number of people who were willing to listen. The number of people, if I pick up the phone and randomly call a bunch of people and tell them to look I’ve got this Internet product that’s going to make your recruitment process, it’s going to cut down your recruitment time cycle and help you considerably. There were a lot of people who were willing to listen. In my head, I can recall companies who were, entrepreneurs who were the CEOs of companies, small and medium enterprises who spent hours, in may cases three to four hours sitting with me, looking at my software, and giving me feedback. I think part of it was well they were just nice people. There are always nice people out there. Part of it was, they themselves were excited about this whole Internet phenomenon that was just starting out in the country. How could it change processes for them? They heard about it. They hadn’t really used any Internet application. Here was someone that was willing to come and demonstrate stuff to them. They were curious and excited about it. They were willing to do that.
Part of it was because, as entrepreneurs, they themselves had gone through those kind of stages in their life. Today when people come to us, there are many times I spend time with potential entrepreneurs who want to provide us with a product or service and help them in terms guidance. I was pleasantly surprised the number of people out there who were fairly encouraging and fairly open to assisting me and giving me guidance and spending their time, which even if they weren’t paying me money was a valuable enough commodity that helped me move ahead.
Andrew: Okay. I see you’re still doing that. You’re spending an hour here with me and my audience telling us about how you built your business. That can’t be easy. It’s also late in the day for you. I’m especially appreciative that you stayed in the office where you had Skype with the camera to talk to us. So 1998 is when you launched Directi. Was the opportunity, as I understand it, that the U.S. government opened up domain registration of dot com, dot net, dot org, and you said, “Okay, if anyone can start registering these domains, we’re going to jump in.” Do I have that right?
Bhavin: The opening up of the [inaudible 16:02] actually happened in ’99. That was through the first phase. Subsequently ICANN accreditation really became, I wouldn’t say mainstream, but became available to companies like us only after 2000/2001. In 1998, we were still buying domain names from Network Solutions, which is the incumbent monopoly as the registry and registrar back then. We were buying hosting servers from the U.S. and domain names from Network Solutions, which is a U.S. company and providing them to the Indian audience, because companies in India weren’t really capable of going out there and buying stuff and setting it up. Then there was software aspects and more, which is software for control panels for managing their hosting package, FTP servers, e-mail hosting solutions, web mail software and etc. which had to be integrated in the right manner to actually provide a holistic package and holistic solution to customers here.
So, yes, you’re rightly identified that point in time, as I said, the whole job matching engine was sort of a failure. So I figured let’s start with something really fundamental. If anybody wants to set up anything on the Internet, any application, or website, or communication or whatever, they’re going to need domain names and space. That’s how we sort of got into this. Yes, we bought our first server . . .
Andrew: Let’s see if we lost the connection. If we did, we’ll just reconnect. There we go. We lost the connection there for a moment but we’re back. You were reselling services. How did you get your customers?
Bhavin: That’s sort of what I was alluding to earlier, right, that during the year and a half that I was trying to sell this whole job match engine to various placement agencies and various companies, while I didn’t make any sales there, I must have met like a couple of hundred companies and made contacts, several thousand contacts in the industry both in the IT industry and general SMEs and businesses, etc.
For me, when we started all this new product, it was a matter of picking up the phone and calling everybody I knew, saying “Okay, now we’re not doing what we were doing earlier anymore. But we have this new product. Do you want to set up a web presence for yourself?” Also we started talking to a large number of web design companies. We were going to other designing small web applications web sites of various individuals, etc. You have to understand, this was also a time, this sort of the dot com 1.0 days when, these were heady times when lots of people wanted to set up portals and websites. It’s pretty much the initial growth phase. A little bit before the 2002/2003 slump, everybody wanted to set up a website. Everybody wanted to get on the web. They didn’t know what it would do for them. They had no clue in terms of how it would help them. Everybody wanted to get into this new bandwagon that was coming up. There were lots of parties and conferences and opportunities to market your services. As long as you were providing these fundamental building blocks, there were enough takers out there who would purchase these products and services from you.
Andrew: I see. Okay. Do you remember what the price was that you were charging and what you had to pay Network Solutions?
Bhavin: For domain names, we were paying them $35 and charging anywhere between $40 to $50. For hosting, we would buy a server for a couple of hundred dollars a month. Then we would partition it up and expect to make about three times or four times what we were paying when we actually managed to utilize all the space that we had.
Andrew: There was very little infrastructure cost here. There was clear margins. Every time you made a sale you were able to bank a profit.
Bhavin: Absolutely. Right now, we have a large number of different products and services that have a long gestation period, that we probably invested in terms of development time, etc. we invested a couple of years before we actually start seeing revenue there. Back then, the initial set of products that we started with were cash flow oriented products, where every sale was money in the bank and pretty much everything that we do was outright positive. There was really very little risk in that business at that point in time. We could actually start out with a low amount of capital and just go out there and aggressively acquire as many customers as we could.
Andrew: Then it was 1999, you said, when the world changed, when the U.S. government opened things up. How did that effect your business? What did you do?
Bhavin: We actually became, in 2001, we became the first ICANN accredited registrar in India as a country. Until then, we were reselling, earlier from Network Solutions and then when things opened up, subsequently from open SRS, which is Tucows. We became a partner and a reseller for them. Across those two years largely, we spent a ton of time in technology because we built out some really amazing control panels. Right from the beginning, I think, one of the biggest focus areas, one of the biggest fundamentals on which we thrived has been preemptively trying to scale. Even if you were ten customers, we’re thinking let’s build our processes and our systems such that we can accommodate 100,000 customers. If we’re ten employees, we’re sitting and building automation and processes to account for 100 employees. We started building these control panels for automated purchases, automated billing, automated management of every single element and aspect from our customer site. We started giving controls to our customers and software to our customers that would allow them to manage those packages and services directly without any human intervention from our side. We always were thinking from a scaled standpoint.
We also started thinking, you know, Indian market, we were doing very well. We made a fairly good dent into the market share. We realized, the largest part of the market share and the market audience actually exists outside the country. In 2000, we started focusing on these reseller focus packages and building technology to start signing up and facilitating a lot of reseller oriented business. We built up these control panels where resellers could sign up with us and buy our products and services and resell them to their corresponding base. That’s what lead us into becoming ICANN accredited registrar back then, saying, “Let’s actually become a registrar ourselves instead of reselling from another registrar and provide domain names and that whole thing to sort of a global audience, basically.”
Andrew: I went back to archive.org to see what your site looked like back then, and you were really going after Network Solutions. You said, for example, Network Solutions uses mail to forms and we don’t. We’re highly automated unlike them. We let you do wildcard searches for domains. We lower our prices. You were beating them on prices, and everyone I think was for a while there. When we sell a domain, it’s really sold. Unlike Network Solutions, which sometimes people would buy a domain and then find out that it wasn’t sold because Network Solutions wasn’t an automated system and didn’t know what was sold and what wasn’t.
Bhavin: Yeah, to the credit of other companies also, we weren’t the only ones precisely doing that. There were a couple of other companies also that were a fully automated system online, but we were one of the first ones in Asia, which is what made us the largest company in Asia, in that particular space in a short span of time. We’re also amongst the first movers in this part of the world. There was Tucows, eNom, Registrar.com bunch of the companies from the US that set up. The U.S. and Canada became registrars, and we were one of the first companies in Asia to do that. Also one of the first to focus on this whole reseller channel because we realized the web services industry and the web hosting industry is a fairly fragmented industry across the globe. There’s many, many hundreds of thousands of players who all wanted to buy hosting space or domain names for reasonable prices from a reliable provider. So it made it very easy for various companies to do that.
Right from the beginning, you see we created these pieces. We actually had you sign up for our reseller program on our website. You actually not only get our products and services, but you get a fully automated billing system that you can use, a fully ready website for yourself that you can use to sell these services to your customers, marketing material you can use to start selling these services. We started building in these pieces that we ourselves needed. We felt we would start building these pieces in a manner that any company can then leverage this technology to become a company in their respective region and start selling these services to their respective customers.
Andrew: How much of that infrastructure was built by you, and how much was it built by other people, by your brother, maybe someone who you hired?
Bhavin: I wasn’t able to contribute to much of the programming pieces from the early years. Div has been responsible for some of the control panel stuff and then a lot of people that we hired. Then over time it’s largely been individuals that we’ve hired that have built out many of those pieces. Although the technical guidance and respective . . . we’re very, very involved from a tech standpoint. I still code to whatever extent I can. I still am involved in all the technical architecture and the design, some of the technological aspects. The actual coding, we now have a team of close to 150 techs who are responsible for different projects and products, who are involved in a large portion of the development. In the early days, I would say 30 to 40% of the development work was being done by myself, by Div, and by some of the senior folks. Over a period of time, that sort of gradually continued to decrease.
Andrew: I also read that, I think it was 1998, that you earned your first million dollars? Is that right? This business really took off quickly. Is that right? Is my information correct?
Bhavin: No, not in 1998. In 1998, our turnover was actually only close to four to five lakh rupees, which is really not much. It’s only about $10,000 to $15,000 of revenue. The next year we multiplied that by a factor of ten. Then the year after that we again multiplied that by a factor of five or ten, I’m not again sure of the numbers. By 2001, we were actually doing a sizable amount of revenue, 2001 to 2002 we started clocking a sizeable amount of revenue.
Andrew: Roughly how much in 2001?
Bhavin: It would probably be, and I might be off by 20% or 30% I guess, but it would probably be around $200,000 or so, which in Indian terms was a sizable number back then.
Andrew: Okay. Unlike the first business, which you just couldn’t get momentum, here it seems like momentum happened right away and you were able to just keep building and building on top of it.
Bhavin: Pretty much. Actually, in the very first month we acquired 40 customers. Again, it was fairly surprising and pleasantly surprising at that. Then we realized this has got tremendous potential, and we started aggressively marketing these services. The momentum caught on very, very immediately.
Andrew: Okay. Then what was the next milestone? First is you get to resell. Next is you sell directly. What’s the next big milestone?
Bhavin: If you look at the very small steps, we actually started out by selling to 10 customers. The first year and a half that’s what we did. The first milestone was getting our own ICANN accreditation. Until then, we were reselling and then providing those services to our customers. But we sort of started building these companies out ourselves. The next big milestone is building this whole reseller system where we ourselves are resellers globally. For near about five to six years, four to five years, that’s what we largely did. Then after that, in the last, for the first four or five years after our ICANN accreditation, we were largely building out this reseller channel. We had about, now we have about 40,000 or 50,000 resellers worldwide, about 10,000 really active resellers who are consistently buying our products and services and selling them to their respective customers. At the end of that process, after about four or five years, the next set of milestones were largely centered around we’ve been launching newer, newer businesses every two years.
We started working towards this whole media business where we started with domain parking, and within a short span of two years, we have become amongst the largest parking, we became second or third largest parking company worldwide within a fairly short span of time, despite the fact that we were late entrants in that particular business, then sort of grew that media piece in terms of adding a couple of different products and services. Then the next set of milestones have been around launching these ancillary businesses which have respectively grown into large size businesses themselves.
Andrew: How did you discover the opportunity in domain parking?
Bhavin: It started out, again, as an add-on to the existing revenue opportunities that we had. We had a large number of domain names, we had millions of domain names worldwide. We had a bunch of customers of ours as well as domain names on our own platform that were expiring that we could generate revenue out of through parking. We actually started out with a simple Google account, parking our own domain names. We figured that the technology that Google was using to optimize them and to [inaudible 29:23] revenue out of them, we could actually make more money by optimizing them through our own technology.
We started building those technology pieces ourselves. In fact, that’s sort of the general trend that we’ve seen in terms of various businesses that we’ve launched. We started doing something. Then we realized we could do it better. So we built the technology ourselves. Then we realized that we’re not the only ones that need that technology. We can go out there and sell and license that technology to many other potential customers, so we started doing that. That’s sort of how domain parking and the media business started. We started by parking our own domain names, our own expired traffic. We figured we built some amazing technology to do that that other registrars and customers can use. We sort of hybrid off into an independent business unit and then sort of started generating revenue by providing that, licensing that to other people.
Andrew: Domain parking is basically taking a domain that’s not used and throwing advertising on it?
Bhavin: That’s correct. The core technology is essentially monetizing traffic. Now we’ve actually, under Media.Net, now we actually provide monetization technology and ads and context sensitive ads, etc. to domain names that are parked as well as to websites in general. The same fundamental technology is used to analyze context and analyze best potential ads that can be displayed on a web page or a media property. Then we apply that to now other websites, such as Yahoo, Investopedia, etc.
Andrew: In the way that Google first ran adverting in its search results and then opened up those advertisements to be put on anyone’s websites, you guys started out by running ads on parked domains. You’re starting to take those ads and put them on other sites. When TechCrunch covered it, your brother was being interviewed on TechCrunch, and he announced what you guys were about to come out. TechCrunch’s response was, “Basically you guys are competing now with AdSense. How can you do it?” How were you able to do it? This was just a handful of weeks since you’ve launched. How have you been able to do it?
Bhavin: First, like many other mature markets, in fact, I would say online advertising is not yet a mature market. In fact, it’s still in its growth stage. But it’s a very large market, like a $50+ billion industry. There’s many, many opportunities. Google definitely has the lion’s share of the market, but they’re still playing a specific area and a specific sector. Even at 1% or even 0.1% of that market is still a sizeable revenue opportunity for any company. Any company that is fairly tech savvy and a company that has a good technology product can build a reasonable revenue stream in that particular industry, which is what we hope to achieve. We hope to slowly grow our market share in terms of niche of the areas that we focused on and actually build a pretty healthy revenue in that significantly large billions and billions of dollars of industry that it constitutes.
For instance, we have a couple of interesting products. Domain parking by itself is an interesting product. We generated a sizeable revenue from that particular product itself. On top of that, Media.Net, as you rightly pointed out, we’ve started these contextual ad blocks. They’re, sort of, contextual ad blocks with a difference. General Google AdSense is text ads on your website. You put up a piece of code. The piece of code analyzes context on your web page and then picks out a bunch of text ads that can be displayed on that web page. We’ve done it slightly differently. What we’ve done is we’ve got these, again it’s a piece of code that you put up on your website. It analyzes the context of your website, but then it creates a, dynamically creates a, display ad unit. So a skyscraper banner or a 300×250 banner or a customized banner that is a custom size that’s fitting within the profile you created in space. It’s a graphical banner or flash ad unit that picks out a bunch of keywords that are related to your website. It almost doesn’t look like an ad unit. It looks like an integrated portion of your website, with a bunch of keywords, with a bunch of related searches that people can click on. When they click on them, they actually take them to a landing page that is sort of like a directory listing of various advertisers that are interested in that particular topic. Subsequently, on the second click, they actually go to the advertiser’s website.
In many cases we found, for instance, if you’re on Investopedia or you’re on a travel website, you’re typically less interested in a direct ad that might be displayed out there. But if there are certain topics that might be very relevant to what you’re looking out for right now, you’re more likely to click on them and then click on multiple ads as opposed to clicking on a single ad, because the second landing page now has a plethora of options that are related to that particular original search term.
In many cases we found that the monetization opportunity of an ad unit of this nature, as long as it’s very relevant to what the user’s looking out for, tends to generate probably in several cases 30% to 40% or 25% higher revenue than you might otherwise be able to generate off a basic contextual ad unit that you would obtain from Google AdSense.
There are many such opportunities for being able to creatively target ads in certain articles, in certain spaces, to represent a sizable chunk of the online advertising market and to actually provide a product that will result in higher revenue for the publisher. Media.Net contextual units target those kind of opportunities.
Andrew: It’s counterintuitive to say throw another step into the process and you’ll end up getting more clicks and bringing in more revenue. When you had the idea, how did you test it to see if this counterintuitive idea makes sense in the real world and you should build out the business, or if it just doesn’t because, you know, there’s an extra step. How did you test it?
Bhavin: I mean in some sense domain parking is an extra step, right? When you type out a domain name where nothing exists, we’re actually showing you a bunch of keywords, images, and concepts. Then you click on them and get a bunch of advertisers. Then you click on them further, and you’re essentially landing on an advertiser, right? In a sense, if you really think about it, most of the internet browsing that we do today is also very similar to that paradigm. You go to Google and you’re searching for a concept. Then you get a list of links. Then you select the right link that you want to go to and then you click on that link and then you actually end up on the website that you want to visit, right?
This is a paradigm that you’re more used to than actually clicking on banner ads. If you think about it, in some sense it might be counterintuitive, but in some sense it’s very intuitive. What are you more likely to click on? If you’re generally browsing the Internet today and you see banner ads that are in some sense contextually targeted but in most circumstances largely irrelevant, you’re propensity to click on them is very low. But if you see a list of topics that you’re interested in, you click on those topics, you get a further list of links. You refine those links and you yourself make a selection out of those in terms of where you want to go to. That’s a browsing pattern that all of us are actually very, very used to. In some sense, it’s not that counterintuitive because that’s really a browsing paradigm or browsing process we’ve been using to navigate the Internet through search engines, to navigate the Internet through parked pages, and now to navigate the Internet through ads, where instead of directly seeing an ad, you’re as a user making a choice saying okay, I’m interested in this topic or this subject and then narrowing down to potential advertisers that you’re interested in with some additional information available for each of them. Then you . . .
Andrew: So, how do you test it? How do you make sure that this makes sense as a business before you roll it out?
Bhavin: We were already using this technology for domain parking. We actually took a set of websites that we were affiliated with from, with respect to we provide web presence to a large group of websites around the world. We started testing some of these units with those websites to see what kind of revenue they’re generating. We saw that without almost any optimization we could actually, in many cases, make equivalent revenue or better revenue than these sites were already making with some of these ads units. At that point in time, we hadn’t put into place a lot the cool technology that did this in a fully dynamic and a fully automated fashion. We were trying some of this stuff out manually. Then we realized some of this stuff can actually work better than existing conventional ad units. So we start building and refining the technology to actually make it much more automated. It should be able to scale to the kind of proportions, levels that we want it to scale to. That’s how we started launching this phase wise.
Andrew: How do responsibilities break down between you and your brother?
Bhavin: Right now, it’s actually fairly divided by business units. He handles all these Media.Net related business units, Skenzo, Big Jumbo, Domain Advertising.com, and sort of Media.Net related businesses. I’m handling ResellerClub, LogicBoxes, BigRock, and .pw WebHosting.info, all the web presence side of the businesses. Plus some of the core functions such as finance, some legal aspects, etc., and then some of the other core responsibilities are shared between us in terms of core investment decisions and core directions and core strategy. We may sort of refer toward each other in terms of decision making processes.
Andrew: I saw over and over as I was researching you and you even brought up earlier in the interview that you and your brother love biographies, love reading stories of how other companies were built. How has it influenced the work that you’ve done to read other stories and other biographies of other people’s businesses?
Bhavin: I think in many ways it has been an important fundamental element of our formation. I think a large chunk of the inclination to become a entrepreneur has been based on reading many of these stories. Also, sort of, encouragement from parents, as far as wanting to do something on our own, etc. My dad’s been very instrumental, for instance, in pushing us towards, you know, you want to try to experiment stuff on your own. Make your own decisions and build stuff up on your own, etc. I think, if I was to sort of list down factors I think that have been instrumental in encouraging us to take up entrepreneurship, I think they would be instrumental in, you know, as a entrepreneur, you could be a small enterprise, you could run a small business, etc. I think many of these biographies, I have devoured almost every biography of Microsoft that I could lay my hands on. IBM, Apple, Xerox, McDonald’s, Chrysler Corp, like pretty much every large, successful company you can think of. GE, Donald Trump, so on and so forth, hundreds of biographies that I have gone through. Many of them have ultimately been instrumental in having this really big vision, really ambitious, large scale sort of vision, as opposed to, “Okay, I want to start out a small shop and run it out of a small city in Mumbai or whatever.”
I think even the scale has largely, the fact that our vision has always been sort of grandiose and overly exaggerated and big has been also a large factor in reading many of these stories and biographies, etc.
A third factor that I think has been derived from, again, many of these books is the fact that many of them have consistently failed at many of their ideas and succeeded in many of them. Many of them also started out with no real knowledge of how money is going to come about and how they’re going to make money out of this. It’s just been a passion. They really love doing something. They start out at it and it eventually sort of forms into a business idea and it crystallizes into a vision and so on and so forth. Just the knowledge that look, you’re not going to start out with the golden goose the very first idea that you start out with. You will fail along the way. There will be hardships along the way. There’ll be things that won’t work out, etc. Just that knowledge that almost everybody’s who been successful has gone through that is also helpful when you go through that, so that you don’t give up at the first failure or the second failure or the 20th failure. You know that, look, at the end of the day persistence is going to pay off. That, I think, is important in terms of an important lesson that’s a take-away.
Then, after that, outside of these three sort of macro fundamentals, I think many, many tiny aspects that you can borrow from and learn from many of these biographies with regards to decisions that they end up taking in terms of hiring. Many of these, most of these biographies talk about hiring the best. Making sure you’re the best possible team. Lots of fundamental principles that are common. If you look at any successful company, you’ll find many of these common principles of hiring the best team, how to motivate individuals, etc. Decisions they make, whether it’s about profit sharing, whether it’s about business strategies, whether it’s about legal issues they face, etc. A lot of these tiny, tiny decisions they take along the way that I think intuitively help us make decisions when we face those kind of situations in our business.
Andrew: You mentioned failure, that they failed and failed and eventually succeeded. Or along the way there are a lot failures. Can you talk about one of the big ones for you?
Bhavin: There’s definitely been lots of tiny failures, well, more than failures. I think they’re scenarios or situations where you realize you reach an inflection point and you have to basically deviate. For instance, as I talked about earlier in our dialogue, largely when we started out in Directi, we were an end customer focused company in the first two years. Then our goal and target was, look we want to multiply this business by a factor of 10X over the next several years. But there’s no way we can set up shop in various different countries around the world to actually go and sell to customers in those countries, etc. because we’re largely based in India and it’s kind of difficult, geography’s a factor and so on and so forth. The only way to do this now would be to deviate from our original plan and start focusing towards this whole reseller and channel focus business. We did that for a better part of four to six years. Now, once again, in the last several years, we’re in a position, we say, “Look, we’ve got a fairly healthy cash flow, an extremely well running business. Now we want to look at significantly increasing margins and significantly expanding our customer base. We now have the wherewithal to go out there and actually invest in terms of setting up shop in various countries and getting a large number of customers and so on and so forth.”
There so many business units that we are now starting out independent of our web services. We’re now starting out direct to customer. There have been various inflection points and strategic decisions that we’ve taken along the way, where the original path, if we had just gone down that path then that wouldn’t have really materialized to the next level of growth that we wanted.
Andrew: Who do you turn to for advice in those situations?
Bhavin: It’s a mix of . . . there’s no one person or a set of people. It’s a mix of research, primary and secondary, on the Internet. It’s a mix of people that we know in the industry, veterans, you know, it’s a mix. This industry, especially our industry, the Internet industry, there’s really no such thing as, you know, a lot of competitors are also amongst our friends. Also amongst our clients, in some sense, we facilitate or provide them with some services and products and vice versa. We frequently talk to people in the industry, other registrars, other hosting companies that we meet up with at various forums, etc. We exchange ideas, things that have worked, that haven’t worked, and things like that. A lot of the insight and information comes from both research as well as conversations with competitors as well as just general people in the industry that we would know.
A lot of it also comes from internal individuals, people, employees, within the organization. We have a really amazing team of people who themselves on a constant basis are contributing to strategy and contributing to ideas in terms of feasibility, etc. in terms of ideas and so on and so forth.
Andrew: A topic I’m always interested in, in these interviews, is the speed to launch and the way that you launch. How did launching Directi differ from the way you launched your previous company, the job search site. Was it a smaller, leaner launch? Was it bigger?
Bhavin: Both were fairly similar, and that principle also applies largely to many of these products and services that we launch now along the way. They have always followed and in fact now, in the recent years, we’ve actually learned to recognize those patterns and give them names. The word starts talking about the agile methodology of development and lean thinking and so on and so forth. But we realize that many of these principles have existed both in the way we’ve done things as well as the way many other successful companies that we see have done things.
In fact, I can quote another interesting . . . there is this book called the “Go-Giver.” I am still a very avid reader, and I tend to read almost like a new book every month, outside of the technology reading and all the other reading that I have to do on a daily in terms of running the business itself. So a management book or a book on strategy or so on and so forth, one of the interesting books that I read several years ago. It talks about this concept of the most fundamental element of a successful business is when you build a product or service and you provide it to a customer, the value that the customer derives out of the product should be greater than the value that you’re expecting them to compensate you.
If I’m going out there and providing, let’s say, traffic monetization to a company or I’m providing a digital certificate to a company or I’m providing a web presence package to a company or an e-mail package to a company or instant messaging product to a company, that company, when they use that product, if they’re going to save $100 by using product or they’re going to make a $200 revenue by virtue of using that product, they’ll be more than willing to pay me $50 for it. In a nutshell, what I’m trying to say is if we can build a product and sell it to a customer at X such that the value the customer derives out of that product is greater than X, then we have a successful business.
That fundamental principle is applied to every product that we build. Obviously, keep in mind that that is the case, you typically, we all start out with ideas in our head. We don’t want to shut ourselves in an ivory tower and build a product for ten years or five years and then come out there and sell it only to find that nobody wants this. In some sense, when I was ahead of my time, in the first venture that I started out, that was the lesson to learn. Oh, look, wait a minute. I’m going out there, constantly talking to customers. The unfortunate disguising factor there was that all of them were very interested in the product. They at least demonstrated interest. So it took me a while to understand that they were interested more from the excitement of the Internet or whatever, but not really interested in terms of paying for the product.
If you look at any successful business, you look at the launch process. Even now, we typically we’re constantly in touch with our users, constantly in touch with our customers. Trying out new ideas and stuff, test beta for a while, until we realize. In the process, we learn many times that we may be excited about something, but it’s not a viable product because nobody really wants it. The process is very agile and lean and you have the constant feedback cycle involved.
Andrew: You talk very fast, by the way. My transcriber’s fingers must be burning up from trying to keep up with the way that you talk. Was it always like this? Where does this come from — this speed, this energy? We’re talking late at night. I’d thought you’d be bleary eyed, exhausted, and barely standing up or sitting up straight.
Bhavin: I’m a frequent speaker at many of the B schools out here and many of the management schools, etc. and even in junior college. One of the biggest complaints from most people, from the audience, has been that, you know, that I talk too fast. I think, again, that it’s a common trait. The same applies to Div, and it seems to be a trait amongst many entrepreneurs. We tend to think so fast that verbalizing it actually ends up in a fast tirade of words thrown together in some form or the other.
It just doesn’t apply to conversations and talking. You’re right. We’ve always, I think entrepreneurs are generally an impatient lot in that sense. We always think of these ideas real fast. We’re always thinking of stuff, of new things to do. We always want to see them materialize in no time at all. In fact, our biggest frustration at all points in time as entrepreneurs is not having adequate resources to actually fructify the number of ideas we have at any given point in time. We always want to see something come to life on an immediate basis. We want to see something translated into code on an immediate basis. It’s sort of a fundamental trait. I can see that every time I think of something I want to see it come to life as soon as possible. You always want quick results, getting things done now. It’s also interesting how we sort of, that plays an important in attributes that we look out for in individuals that we recruit. We always, in fact, there’s this very interesting article by [inaudible 50:26] Software about recruiting developers, where he talks about these two fundamental attributes and he says that the two things that any good software developer . . . by the way, when I talk about that article, to me it’s actually about recruiting anybody. But he talks about the two fundamental attributes that you should look out for, just smart and gets things done.
That’s sort of the fundamental, we have sort of, we follow a certain system ourselves into recruiting individuals. We look out for what we call snap [inaudible 51:00], about seven attributes and I can discuss them independently. The idea is, going back to what you were talking about, is that we’re always looking out for people. There are a lot of people who are smart. A lot of people who are intelligent, but you’ll always find kind of people who are really brilliant but never to seem to get things done. You always want to sort of build a team out of people who are smart but who also are always constantly getting things done.
Andrew: Why are some people unable to shift to produce, to get things done, as you say, even smart people? Why, what’s limiting them do you think?
Bhavin: I think, in some sense it’s an attitude. I remember, I came through various phases and upsets in my life, in college and in business. I always come across people who are brilliant, who you can talk to. You can pose a problem, they can debate it and discuss it with you and come up with brilliant solutions. But when it comes to actually executing and following it through, they never seem to get stuff done. I think it’s attitude. I think it’s their inclination or the pleasure they derive from the planning process versus the execution process. A lot of people love solving problems, but entrepreneurship or running a successful business or building a successful product is not just about solving a challenging problem. You also have to go through and integrate these. You also have to go through drudgery. You also have to go through work that might not necessarily be interesting or challenging from a problem solving standpoint. It depends upon what you consider a challenge.
If you consider a challenge just solving a problem theoretically, then you probably don’t have the attitude to sort of follow through and dot all the i’s and cross all the t’s. If for you the challenge is seeing a successful outcome, seeing people use your product, then you’ve got greater incentive, inclination to actually follow through and get stuff done. I think it’s a matter of attitude, a matter of inclination, and so on and so forth. Like I don’t, to me, it’s as much fun putting all the pieces into place and writing all the documentation and doing all the grunt work as it is to come up with the idea, because I want to see the whole thing fructify. It’s as much fun to do all it as just coming up with the initial idea. It also depends on that, what your inclination, your attitude, your goals, and etc. are.
Andrew: You started the business with a few hundred dollars. Now, as we said in the beginning of the interview, it’s worth $300 million. How has life changed for you?
Bhavin: I have definitely enjoyed the perks of success in terms of fame, fun, you know, whatever else, etc. But really in terms of my schedule, I don’t think much has changed. I mean it’s a . . .
Andrew: Give me an example of some of the perks, the fun, because I do interviews where I get into the nuts and bolts, and it’s interesting and useful, but I also want to show what the benefit of it is, or what some of the perks are of doing all this work.
Bhavin: We own a Cessna Stationair that we bought. Divyank’s actually a licensed pilot. So we fly, well, we can fly on weekends and take random trips if we need to. We do some hobby flying. Largely he does more of the hobby flying than I do, but I do accompany him on trips. We own a Porsche Boxster. We own various gadgets. We own properties in various different places. We do have the luxury of being to take, well, travel in style, in some sense, party, in some sense, etc. We actually get a lot of kicks out of adventure sport. That’s really our thing. We love scuba diving. We actually haven’t really taken a vacation that wasn’t combined with work as an agenda literally since the last decade. But we do tend to, if we have conferences that we participate in that happen to be at destinations that are fun in some sense, we’ll probably combine a weekend and do a weekend diving trip or do an adventure sports trip of some sort in many of our work trips. We do have that.
Andrew: I think I’m looking at a picture, tell me if this is wrong, I see a picture of your brother with the plane. I see a picture of the two of you guys, I guess it’s the two of you guys, off road biking, cycling. Is it you or your brother who is on the wings of a plane while the plane is flying?
Bhavin: Yeah, that’s him. He actually did wing walking in the UK.
Andrew: That’s called wing walking? Where you walk on the wing?
Bhavin: Wing walking, yes. You’re strapped on top of the wings of a plane, on a pole vertically. Then the plane does aerobatic flying. It does loop-the-loops, it does battle rolls, it does deep dives, low flying, while you’re strapped there. Think of it as a roller coaster ride but on a plane.
Andrew: You’re strapped in by your feet? His hands are up in the air because he’s enjoying the ride, I guess.
Bhavin: Yeah.
Andrew: Strapped in by his feet and the plane is flipping around while he’s standing up?
Bhavin: That’s right.
Andrew: Wow. Wow, you guys are intense. All right. Let’s finish off with this. One bit of action advice, one step that somebody who’s listening to this, who’s an entrepreneur the way you are can take, that you would advise them to take, right now.
Bhavin: There’s this session that I deliver, as I said I’m a frequent speaker of various schools. There’s this lecture that I deliver at many, many B schools which I call “The Game of Business.” I actually liken to how running a successful business, the principles in running a successful business are very, very similar to if you were managing a team. Back in school, in college days, if you played sports, you know, football or cricket or whatever and you wanted to select a team, run a team, or manage a team that plays that game. It is very similar as to how the principles that result in success and managing a game or sports event are similar to those principles are when applied to business. There’s about eight principles that I really cover, eight to ten depending on which audience I’m delivering that session to.
The most fundamental one, there’s a couple of favorites that I have in terms of principles which I think would be instrumental with respect to the success of Directi. The one that I give the maximum importance to, that I keep harping even internally within Directi, is largely about making sure that you hire the best people. Hire the best team. Even today I can say that I, Div, and many of the smartest individuals and the management team here and, well, actually right from the grassroots all the way to the management team here, I think all of us spend . . . I still spend 30 to 40% of my time recruiting, literally. This does not mean interviews. It means right from the process of identifying the right talent, the interviewing processes. I still take almost 90 to 95% of the final interviews of every single individual that’s hired in Directi. I consider that to be the most valuable activity.
One of the things that I typically leave most people with is a successful company is not one person. It is not ten people. It is going to be a large team of smart people making the right decisions most of the time. You want to make sure that you hire the best at all points in time. Some of the examples that I talk about, I put up a slide and I say, with an image of Beethoven and a bunch of musicians on the side. Even if you take 100 average musicians, they can’t do what one Beethoven did. Right? Especially in our business, if you’re building a software product, it’s actually a very creative field. You can take 100 average programmers, and they will still not be able to produce what one really good programmer will be able to produce. This principle applies to every single position that we hire. If you hire the best, then you can leave them and let them make smart decisions to work their magic, basically. That’s one principle that I think has been very, very important to our success.
Andrew: You did that right from the beginning, where you got your brother to come in and work with you.
Bhavin: Right. He was as interested in computers as I am. Right from school days he’s also been involved in computer programming. Yeah, he’s been instrumental in delivering success to the organization.
Andrew: Even ownership in the business? The two of you own the same amount?
Bhavin: I’m sorry?
Andrew: Even ownership of the business, you guys both own the same amount of the company?
Bhavin: Ownership, sub-tiers are actually divided between dad, mom, and so on and so forth. It’s a family owned business in that sense. There’s no meter in terms of who owns what piece, as being differential between us at all.
Andrew: Wow, your parents must be incredibly proud. Congratulations. Thanks for doing the interview. I really appreciate having you on here. The company is Directi. Thanks.
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