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Here’s the program.
Andrew: Hey, everyone. I’m Andrew Warner. I am the founder of Mixergy.com, home of the ambitious upstart. How does a bootstrapped entrepreneur keep his company profitable when the platform it’s built on keeps changing? Joining me is Hussein Fazal, co-founder of AdParlor, and for the past three years he’s been in the Facebook ad business and every time Facebook changes its ecosystem, Hussein has had to change up his business to keep up with it. I invited him here to listen to the inspiring story of an entrepreneur who will not let his company disappear and, in fact, with each change it just keeps growing and getting bigger and bigger and I want to find out how he did it. So, Hussein, welcome to Mixergy.
Hussein: Thank you very much. Thanks for having me.
Andrew: So, let’s give people just a quick understanding. We’re going to spend the hour here going over the details of how you adjusted, but I want to give them a quick understanding of the way that you’ve changed. What are three big changes that you’ve made? Where did you start, what did you move to, and where did you end up today?
Hussein: Yeah. So, thanks for asking. So, when we started at about three years ago with my co-founder, Kristaps, we both have computer science backgrounds, and this was very, very initially, when Facebook first launched the platform and said, hey, you can start building applications on Facebook.
So, I built a couple of applications for fun. Kristaps built a couple of applications for fun, and we realized at that time it was hard to build a very good application, a very good game, and we said, hey it looks like the ad networks are the ones making the money, the people who are serving ads within the applications. So, we decided to build an ad network where we’d serve ads within Facebook applications, within Facebook games.
So, we did that and it did quite well. It grew for about a year, year and a half, two years, but then some very interesting things started to go on. There seemed to be lots of scam ads being shown within Facebook applications. People were pulling in, you know, user’s pictures. People were showing ads that were confusing the user. Users were getting mad. Facebook was getting mad, and Facebook started to say, hey, you can’t serve this, you can’t serve that, you can’t serve this. Very much restricting the ads we could serve within banner applications. Also, managing so many publishers, just a big headache. And around that same time, this is where we made our first pivot, we saw what was going on the virtual currency market. So, there were a couple of companies that were taking advantage of virtual currency within Facebook games.
So, you know, I’m playing the Facebook game, I’m playing the farming game, I want to buy the purple cow, and in order to do that I’d spend some money to get that purple cow. I’d also complete certain offers to do that. But, again, similar things started happening with the offer wall games. So, people started doing things like the mobile ring tones. So, the user would put in the cell phone number in order to get some virtual currency, but then they’d be charged $10 every month for the rest of their life with no way to cancel. So, Facebook started to crack down on the offer wall, as well.
So, that’s when we made our second pivot, and we saw that in our banner network and in our offer wall, the largest advertisers seemed to be Facebook game developers. Facebook game developers were looking for large volume of highly targeted traffic. So, that’s when we said, hey, we need to start working directly with Facebook and serving ads on the Facebook right-hand column. So, we made that pivot about eight months ago, and since then things have gone really well. We went from serving banner ads within Facebook applications to having an offer wall managing virtual currency again within applications to now working directly with Facebook and serving ads on the right-hand column.
Andrew: Okay. And all that within three years.
Hussein: All that within three years. Yes, and I mean the industry moves so fast that three years is actually a very long time.
Andrew: All right. And a lot of people, one of those changes I’ve noticed not just would have killed them, but did kill their companies. You kept adjusting and growing with each one. How big is the business now?
Hussein: So, right now, we’re serving about 10 billion monthly impressions on Facebook. So, I mean, it’s hard to say exactly how many impressions Facebook is serving total, but 10 billion a month is very significant. So, just to give you an idea of what that 10 billion impressions actually do, our biggest advertisers are actually Facebook game developers, and we drive users to Facebook games. So, we advertise Facebook games on the right-hand column. In a typical month, we send about three to four million new users to Facebook games.
Andrew: Okay.
Hussein: So, it’s very, very significant right now.
Andrew: But, it’s not just Facebook games. I think Groupon bought ads from you that they hoped would send traffic to Groupon.com to convert people into members of Groupon. Am I understanding that right?
Hussein: Yeah, that’s correct. So, not only. . ….
Andrew: That’s another part of the business.
Hussein: Yeah, well, I mean it’s all performance based Facebook advertising. So, one of the advantages is if you go directly to Facebook, you’re buying on a cost per click. If you come to us, you can pay on a cost per acquisition. So, for a game developer, an acquisition is someone clicking on the ad, clicking on allow, and starting to play the game. For Groupon, an acquisition is someone clicking on the ad, submitting their e-mail address, and proceeding to, hopefully, complete one of those deals.
We also work with external game developers. We also work with brands and agencies looking to get fans. But, really, anywhere where there’s a performance metric, we can optimize based on that performance metric and buy ads much, much more effectively.
Andrew: Okay. So, I could come to you and say, “Look, AdParlor, I’d like to buy fans for Mixergy. What’s the price that I have to pay per fan? I don’t want to have to figure out all the, I don’t want to take a risk on buying a lot of ads and not getting any fans. What’s the price per fan?” Or I can come to you and say, “I’m trying to grow my e-mail list. What’s the price that I have to pay you every time a new member joins my list?”
Hussein: Yes. So, that’s a good question, and the answer is actually it’s up to you. So, the way our business model works is you define how much you want to pay, and we drive as much traffic as possible. Now, we can, of course, help you and advise you with rates, but let me give you an example. Let’s say you come to me and say I want to get subscribers for my e-mail list and I want to pay you ten cents per e-mail. So, mathematically, let’s just say you have an amazing conversion rate, and one out of every two people who click on the ad end up signing up for your e-mail list. If you want to pay me ten cents per conversion, I need to buy clicks from Facebook for five cents. So, for us to buy clicks from Facebook for five cents, that’s not going to happen. We bid five cents. Facebook is not going to give us any impressions, not going to give us any clicks. You’re not going to get any sign-ups. So, typically, we work with really mature buyers. They know roughly their cost per acquisition, and they give us rates that make sense for them and then get the volume. Right?
And, also, another thing, it depends on how much volume you’re looking for because you can get e-mail sign-ups maybe for 50 cents. You can get sign-ups for five bucks. It really depends how much volume are you looking to drive per day.
Andrew: Okay. All right. That gives me a good sense of it, and I also know you guys don’t play around with small players. Either you want $10,000 minimum order or else it’s just not a good fit.
Hussein: Well, I mean, right now we have a full service model. So, when we work with a client, we want to put our full effort into them. We have an account manager who’s going to be analyzing their campaign, helping them to optimize it, constantly trying new things, coming up with new creatives, coming up with new targeting. Although our automated system takes care of a lot of that in terms of creating ads and modifying bids, there’s still a pretty heavy manual component into getting a campaign started.
So, because it’s a full service model, we have one account manager on our side managing maybe five to ten accounts. So, that time is very valuable and we want to make sure we give our clients the time they deserve.
Andrew: What size revenues are you guys doing?
Hussein: I can’t speak about that, unfortunately.
Andrew: What size profits are you doing?
Hussein: Again, I cannot say.
Andrew: [laughs]
Hussein: I mean I did give you some indication of how many acquisitions we’re driving a month. So, we’re doing three to four million acquisitions a month off those ten billion impressions.
Andrew: Three to four million acquisitions. What’s an acquisition go for on average in the market, apart from you guys? What can a developer expect to pay?
Hussein: Yeah. So, and, again, it comes back to sort of your volume goal and what countries you’re advertising in. I mean let’s say you were trying to get users in Malaysia, Indonesia, or Philippines. You could pay as low as five cents per acquisition. But you look at a country like U.S., U.K., Canada, Australia, you could be anywhere between about 50 cents and a dollar per acquisition.
Andrew: Okay. And most of your business is in the U.S.
Hussein: A lot of our business is in the U.S. So, typically, when a game developer comes to us, they start by just advertising in the U.S. because that’s what where there’s a large volume and they’re very highly monetizing users. There are users who are going to play the game and eventually spend money in the game. Then after that, we typically expand to other English speaking countries, Canada, U.K., Australia, and then, from there, we have a list of countries which we know perform well. So, we’ll start hitting up Western European or other countries where we know there’s a positive ROI.
Andrew: Okay. I want to hear this story, but let me just stick with this for a little bit longer. I know you and I agreed in the beginning of the interview that we weren’t going to give out, even though you told me what the revenues were, that we weren’t going to give that out. But I want to ask a couple of questions.
Hussein: Sure.
Andrew: Think about them out before you answer, because I want be able to edit them out if you feel uncomfortable with them, and I’m not looking to trap you into releasing things you don’t feel comfortable with.
Hussein: Right. Sure.
Andrew: Can you say whether last year’s, can you say your monthly revenues are over a million dollars?
Hussein: I cannot say that.
Andrew: You can or you cannot?
Hussein: Cannot. Unfortunately.
Andrew: You cannot.
Hussein: We just don’t release those numbers, unfortunately.
Andrew: Okay. You know what? Based on just the way that you said that, I’m not going to push any more. I’ve got a good sense of it. I know the company is doing phenomenally well. I was trying to find a way that you feel comfortable talking about how well it was and . . .
Hussein: Yeah.
Andrew: . . . and give, but not reveal too much. So, for my audience I’ll just say really, really well.
Hussein: Thank you.
Andrew: Let’s find out how you got here. The original idea was you guys were going to create apps. What’s your experience that you guys, you and your co-founder, that led you to create apps?
Hussein: Well, so, because we both have computer science backgrounds, it was just fun. At that point, it wasn’t even a business. It was just, hey, and it was kind of done independently. I started creating some applications on my own. He starting creating applications on his own. And it was just something that was fun to do, because there was this platform and people were building applications and we were seeing, even at that point in time, how fast they were growing. So it was just a great opportunity to be able to do something cool instead of . . . I actually, in a previous position, I was working at Bell Canada. So, I mean, it was a great company, but it was a big company. It was a big corporate environment. And a lot of the development work you’re doing doesn’t have the same distribution or potentially even the same impact as doing this kind of stuff. So, it was just fun and we just started building Facebook games on the side, and then realized that it’s hard to build a good game or it’s hard to build a good Facebook application. Let’s try and be that middle man and let’s take advantage of other people who are building good games and let them do the, you could say, the hard work. Then we can step in and help them make some money and grow their application and be that middle man.
Andrew: What did you know about advertising that you were able to bring to the business?
Hussein: I actually didn’t know anything about advertising, and my co-founder didn’t know anything about advertising at all. And, actually, there’s a story in our very early days. We had our banner network. The very first advertiser we got and I won’t to say who that is, but it was a $2,000 contract. At that time, we were like, wow, this is amazing. But, unfortunately, after about two weeks, we had to refund them $1,900 of the $2,000 because we had no idea what we were doing. We couldn’t even serve their ads. We didn’t know where serve it. We didn’t really have an ad network. Right?
Andrew: How did you get them as a sponsor?
Hussein: It was just a good sales effort, but, in the end, it just didn’t work out. So, the problem with building an ad network, especially when you don’t know anything about an ad network is that it’s a big chicken and the egg problem, because you have an advertiser who wants impressions and who wants clicks, but then you don’t have any publishers who are actually serving your ads. And if you get publishers who are serving your ads, but you don’t have any advertisers, then the publishers are not going to make any money and then they’ll leave your network. So, it’s this big chicken and the egg situation. Now that I know a little bit more about ad serving, if I were to start an ad network, it would be different because there’s tons of exchanges out there. There are ways to, you know, hop on to the right media exchange or do other things in order to sort of fill the publishers and other ways to fill advertisers. But when we started, we didn’t know about any of this. So, we got this contract for advertising, and after a couple of weeks we had to refund almost the whole amount because we had no idea what we were doing. So, we knew nothing about advertising when we started. We just knew how to code and we liked what we were doing. So, we just kind of learned on the fly.
Andrew: How did you make that first sale if you didn’t have any experience?
Hussein: Probably just a lot of Google researching trying to learn different terms. Sending out e-mails. I mean . . .
Andrew: Did you send them out randomly to people who, did you send them out, not randomly, but were they cold e-mails you that were sending out?
Hussein: Yeah. They were cold e-mails. So, what we would do it we would go through, at that time we were also looking at MySpace, so we would go through the MySpace application directory and then you could see who the developer was and we would just click on their name and send them a message or send them an e-mail and say, “Hey, we have this ad network. You can make some money. We can help you grow your application. Come and advertise with us.” So, it was just kind of scrappy just sending out e-mails and cold e-mails, cold messages.
Andrew: I see. And one advertiser probably said, “Hey, you know what? $2,000 is not that much money. I’m doing really well with my app. If they could get me more installs, I’ll do even better. Let’s give it a shot.”
Hussein: Exactly. That’s exactly what happened and he was a little bit disappointed.
Andrew: I’m sure you were, too. You got $2,000 . . .
Hussein: Yeah.
Andrew: . . . a lot of money, and you had to give back almost all of it.
Hussein: Yeah. We had to give it back, but it’s good learning experience. I mean, the first six months to a year, it was really touch because, I mean, you quite you full-time job and you’re doing this to try and grow a business and it’s not easy. Right? I mean, when it’s just myself and my co-founder and we’re both working out of our own homes and trying to make things work, it can be tough sometimes. But we kind of fought through this and one of the things that sort of kept us going is the fact that we’re just in an amazing industry. So, if you look at social media, if you look at Facebook and social media in general, it just seems to keep growing, and the pace in which it’s growing and you look Facebook, 600 million users, you look at companies like Zynga and their crazy evaluations, it’s a great industry to be in. So, with all the changes and all the growth, it kind of, I mean, we’re kind of riding the wave of Facebook’s success.
Andrew: Okay. Yeah, when a company is growing, you can make some mistakes and still do well. Let me ask a few questions about what you’ve said so far.
Hussein: Sure.
Andrew: First thing is you said today you’d do things differently if you wanted to build an ad business. You said you’d work the exchanges. Actually, tell me how you would do it differently, if you were to do it today.
Hussein: Yeah, I mean, that’s if I was going to go and build another banner network and a banner exchange. But that’s not what we do anymore. What we . . .
Andrew: There’s always going to be a new product out there that needs advertising, and I know someone in my audience is going say, “Hey, you know that Hussein build a great business on Facebook. I want to build a new business on, a similar business for iPad apps or maybe there will be a watch that you wear that has apps and I want to build the AdParlor of that.” What would you advise them? How would they work the exchanges? How would you do it?
Hussein: Yeah, so, again, the problem we had when we launched the ad network was the chicken and the egg. Right? And we didn’t know that there were publishers and advertisers which you could just kind of pull off an exchange. So, for example, let’s say I’m a major ad exchange or a major ad network. I’m always looking for more publishers. Right? So, meaning to show the ads for my advertisers. And because they have so many advertisers and so many publishers, they don’t really have any volume or buyer lists. So, when we go directly to an advertiser and we say, hey, we’re going to take $2,000 and we’re going to serve it for you, they expect to you serve that. When you go to an ad exchange, even if you’re just showing maybe a few hundred or a few thousand impressions a day, they’ll still allow you to enter their exchange where you can get publishers and you can advertisers. Then when you have your own advertisers, you can just kind of plug that right in. So, you’re kind of working off of an initial base, which gives you, which fills in for the supply or the demand that you don’t have. Once you’re big enough and you have advertisers and enough publishers, then you can sort of do it on your own.
Andrew: And an exchange would be a place like what? Like BuySellAds.com?
Hussein: Yeah, I mean, BuySellAds.com. You can talk about the Right Media Exchange is one of the largest exchanges. So, there’s tons of sort of supply/demand fulfillment. Rubicon Project is a very interesting one. But there’s tons of supply/demand fulfillment where if you’re missing one side of the puzzle, they can fulfill the other side.
Andrew: The other thing you said was that you quit your job. Why did you quit your job before this thing was up and running, profitable and dependable?
Hussein: Well, it was about three months into the launch of AdParlor where I quit my job, and I was always sort of looking to just start my own business. This was just I felt that this was the right opportunity. I saw that the industry was doing really well. My co-founder, Kristaps, was just as excited as I was, and he was just as motivated to start his own business and do something. So, it was kind of, I mean, I had graduated and then been two and a half to three years where I had been working at Bell. So, I was at a point where I was looking to make a move anyways. I mean, it was okay, do I make a move to another position, or do I make a move and try something else? When you think about it, worst case scenario, if I had left my full-time position and this hadn’t worked out, I mean I don’t know if I would have so much difficulty finding another job, and worst case I lost maybe three months, six months of time, which at my young age I guess it’s okay to do.
Andrew: Yeah. Okay. So, at what point did you know that AdParlor was going to be okay?
Hussein: I would say, the thing about running your own business is that there’s so many ups and downs. Some days you wake up and you say this is the greatest business ever. I’m going to make a trillion dollars. And then, there’s other days you wake up and things are just not working out. Things are falling through. Technology is not working. Sales are not coming in. And you’re just kind of like what am I doing? Right? So, there’s always ups and downs, and there’s always times when you feel like this is going to work, this is not going to work. But, really, I would say about six months to a year into it was when we really started to see that, hey, this is going to be, you know, this is definitely going to be something big. I mean we knew it was going to do pretty well, but we didn’t realize how big it was going to be until about maybe six months or a year into it.
Andrew: What happened at about six months that made you think we’re on the right track?
Hussein: I think we just kind of solved that initial chicken and the egg problem. So, when we talked about that banner network, we kept getting advertisers and we just didn’t have enough impressions and clicks to satisfy them. And then, we would get publishers and they just weren’t making enough money on our ad network to keep showing our ads. But I think at about the six-month to a year mark, we had enough advertisers and enough publishers that we could bring on new advertisers and we could bring on new publishers and we wouldn’t be in a situation where there was way more supply than demand or way more demand than supply, and we were able to really, the ad network really started sort of living and breathing.
Andrew: Okay. And I actually saw a comment that you left about two or maybe three years ago on a blog post.
Hussein: Uh-oh.
Andrew: The Lookery. Actually, so much has changed since then, but Lookery, at the time, was saying that ads on Facebook are like 17 cents CPM. They’re just trash. No one clicks on them. At the time Google was trying to sell MySpace’s ads and nobody was clicking on those ads. It was completely a worthless deal for Google.
Hussein: Yeah.
Andrew: Not completely. It was pretty bad for them. But you stood up and you said something else. In retrospect, was it right, though? You said, at the time, we have ads within apps. Those in-app ads are going to do really well. In retrospect, who was right?
Hussein: That’s a good question. So, in retrospect and now, when I look at ads within applications, I look at ads within the Facebook right-hand column, the ads in the Facebook right-hand column do perform much better in terms of a higher click-through rate and higher user quality, and the reason being because you’re able to target so deeply. So, when I create an ad in the Facebook right-hand column, I can say I want to target 23 year old females, who like Farmville, in Texas, and whose occupation is this, who are single. So, because I have such amazing targeting capabilities, I can serve good ads that can get high click-through rates.
Now, when we talk about serving ads within applications, Facebook has now restricted so much how much information that the application developer can pass on about the user to the ad network, that now it’s no longer possible to really do really high performing ads within applications. So, at that time, things were a little bit different. So, at that time, Facebook was okay with app developers passing some information on to the ad networks, but they’ve really . . . well, it’s been a while now that they’ve really clamped down. And without that targeting information, it is just not as effective.
Andrew: Okay. All right. So, for a while there, you were doing well. You had the buy and the sale side of the equation taken care of. You also were selling ads within the page, not on the margin, not at the top of the page, but right within the apps. So the ads were doing well. What happened that forced you to shift?
Hussein: Yeah. So, there were a couple of things. First, as I just mentioned, Facebook started to cut down how much information could be passed on to the ad network. So, all of a sudden our targeting became almost non-existent. All we could do was say, “Hey, you have a farming game? We’ll show you ads on other farming games.” Right? But we couldn’t do anything in terms of age, gender. It was just heavily restricting us. Number two, to be frank, a lot of the ads that were making us and the application to offers a lot of money, they were not necessarily the best types of ads. So, they were ads like take an I.Q. quiz, and you would fill out this I.Q. quiz and you put in your mobile phone number and then you would start to get spammed. It was a tough situation to be in because you look at competitor ad networks, they’re serving those types of ads, therefore, their publishers and application developers are making more money and they don’t want to show our ads unless we’re showing that kind of stuff because they just want to make money. Right? That became a very tricky situation.
Then, eventually, Facebook came in and said you can’t serve any more mobile ads. You can’t serve recurrent subscriptions ads. You can’t serve any ads where the user doesn’t know exactly what they’re getting into, and they just put a whole bunch of restrictions on there such that it just became a much less profitable and a much lower revenue business. So, back in the day, if you had a good application and you were serving banner ads as an application developer, you were, maybe, you could make $3, $4, $5 CPMs. Meaning for every thousand impressions you show, you’re going to make $3, $4, $5. And we’re talking about big applications. So, they were raking in some really big checks. After Facebook cut out the targeting and put all these restrictions, all of a sudden CPMs started to plummet, and we’re talking about, now, for making $3, $4, or $5 per thousand impressions, now they’re making 10, 20, 30 cents per thousand impressions. So, it just completely shifted the business.
Andrew: But before that happened, did you get into virtual currency?
Hussein: We did get into virtual currency. So, at the same time while we were running our banner network, we got into virtual currency.
Andrew: Why? Why did you get into virtual currency when the banners were doing so well?
Hussein: We just kind wanted to expand what we were doing. I mean, it was kind of a natural extension because we said, “Hey, application developers you want to make some money. Okay, you can make money by showing our banner ads. You can also make money by integrating with our offer wall.” Our offer wall would have different payment options, different surveys, offers, sign-ups that they could complete in order for the users to get virtual currency. So, we’re kind of trying to be a one-stop solution for application developers to monetize.
Andrew: Okay. All right. And then what happened? What happened to your business when Facebook said we’re changing the rules, we’re not allowing you to have some of your most profitable customers, and we don’t like what you guys in the virtual currency world are doing?
Hussein: Yeah. So, there was actually a big blow up. It was about a year and a half ago. It was between Michael Arrington and Anu, who was at the time the CEO of Offerpal, and that kind of goes down in the history of Facebook and monetization. Really after that, everything started to change. But one thing which we noticed was, again, our biggest advertisers were game developers. So, we actually had a specific game developer from China, and they launched some Facebook games and they wanted a ton of traffic for their application. More than we’ve ever been able to handle before. And they said, “Okay, we want to buy traffic from your banner network. We want to buy traffic from your offer wall, and we want to buy traffic directly from Facebook.” So, what we did was we said, “Sure, we can do that for you.”
So, we started serving their ads on our banner network. We started serving ads on our offer wall, and we started serving ads on the Facebook right-hand column. And a few interesting things happened. First of all, there was just not enough volume on the banner network and the offer wall to make them happy. The Facebook right-hand column was the only place where they were getting enough volume. Secondly, they had some very good analytics, and they were able to analyze the quality of the users from each source. They were saying that the users coming in from the Facebook right-hand column were by far better than the banner network and a hundred times better than what was coming from the offer wall. So, they shifted their entire campaign to the Facebook right-hand column. So, we started serving ads on the Facebook right-hand column, but what we were doing was we were manually creating the ads. So, we were going in like a regular advertiser, clicking on create an ad, and creating ads. Eventually, we got access to this thing called the bulk upload tool. So, what that allows you to do is upload hundreds of ads at the same time by using an Excel spreadsheet. So, we take the ads, make hundreds of variations on the Excel spreadsheet and start uploading that. It still wasn’t as effective as we’d like it to be. But, seeing the heavy demand, the higher user quality, the higher volume from the Facebook right-hand column, we figured that this was the place that we needed to expand our business on. And, more and more we had advertisers saying, ‘Hey, we want to grow our application.” And we would say, “Okay, we can more effectively buy ads for you on the Facebook right-hand column.”
So, as that business started to develop and we needed a more scalable way and more efficient way and better way to do that, that’s when we applied to get access to the Facebook Ads API. So, the Facebook Ads API allows us to programmatically create ads, optimize bids and do a whole bunch of very effective ad buying. So, with access to Facebook Ads API, now we can take a particular advertiser and with a few clicks of a button we can create thousands of ads at the same time.
Andrew: Let me pause the story right there and just go back a minute and ask you, did Facebook kick you guys off as I read online?
Hussein: No. Facebook never kicked us off. We both . . .
Andrew: They didn’t say you guys are dealing with the scammy ads? We’re going to ask you not to run ads on our site the way they did to Gambit.
Hussein: No. That never happened at all. So, there were a few ad networks which did get kicked off, and, you’re right, Gambit got kicked off and there were a few others that did. The reason they got kicked off is because they were not complying with Facebook at all. So, one of the big no-nos on Facebook is serving gambling ads, in the U.S., especially. From what I understand, Gambit was serving gambling ads. Facebook sent them a note to remove those ads. They removed those ads and then they ended up appearing again. Facebook said, you know, we can’t have this. Whether Facebook was setting an example or whether Gambit was really consistently being non-compliant, that’s when Facebook decided to take that action.
Andrew: You were looking at their business pretty carefully back then. What do you think?
Hussein: I’m not sure exactly what happened with Gambit. I’m not sure what the lines of communication were, but I don’t think Facebook would go ahead and ban a company for no reason. So, they must have had a good reason to do what they did.
Andrew: Okay. All right. So, you guys did not get banned. What I read was wrong.
Hussein: I’d like to know where you read that.
Andrew: I’m reading from comments on blogs. I’m reading people’s pontifications on the situation. So, I don’t want to present that as fact. I just want to say I’m sucking in as much data as I can . . .
Hussein: So, yeah, so Gambit and, I believe, Social Reach, and there were a couple of other companies that were banned. Whereas, all the other companies that were in the offer wall space, they were just told, you know, clean up, but make sure you’re not doing any of this stuff. And, of course, we got notifications from Facebook, just like every other company did, and they started policing them more carefully. So, if they saw any offers which they didn’t particularly like, they would tell us. They would say, this offer, this offer, and this offer do not meet our requirements. Please remove them right away. We were happy to remove those and sort of had that good relationship and good communication with Facebook throughout the process.
Andrew: What about this? I think every company that I’ve interviewed in this space that was around at the time said that their business took a hit. Financially, they took a hit for a few months at least. Did you experience that? What was it like for you?
Hussein: Yeah. 100%. And I mentioned, sort of, on the banner network. We talked about CPMs going from a few dollars to pennies, and we talked about the offer wall. It was the same kind of effect. Revenues were dropping by, you know, 50%, 60%, 70% because we had to remove so many offers which were money making . . .
Andrew: 50%, 60%, 70% revenues were going down.
Hussein: That’s correct.
Andrew: What do you say to yourself as an entrepreneur who is on top of the world in a fun space and suddenly you wake up one morning and, quite literally, you wake up, go to work and suddenly 50% of your business is lopped off?
Hussein: It’s tough. It’s very difficult. It’s a stressful time because it makes you question, I mean, is this still going to be a profitable business. Are we going to be able to continue like this? And the . . .
Andrew: Tell me about one incident. I understand a lot through one simple example. So, was there an example of a time when you woke up in the middle of the night and you said, “What am I doing here? I’m in trouble.” Were you about to buy a house and you suddenly decided that you couldn’t do it. What was the deal? Give me one example.
Hussein: Yeah. I mean, I don’t have a particular example, but one of the things, I guess, as a CEO and a co-founder of the company, I mean, your employees look to you to have that constant, positive attitude, direction for the company, and you don’t want to give off that feeling or that thought that, hey, we’re in trouble, because when you start giving that off, then that sort of infects the rest of the company and who knows what’s actually going to happen. Right? So, and I’ll say very honestly, if we didn’t make the pivot to serving ads in the Facebook right-hand column and getting access to the Facebook Ads API, if we were still in just the banner network and the offer wall game, we probably wouldn’t have a company right now. It just wouldn’t be worth it. It just wouldn’t be profitable and growing enough to be in business any more.
Andrew: You know for a lot of people when they’re in that kind of trouble, when the business takes such a big hit and everyone’s looking around them for confidence, they freak out and or at least they worry and in that freak out or worry or concern or whatever their level is in that situation, they’re not really at a place to think creatively and to come up with a powerful idea that’s going to help them grow. How are you able to do that?
Hussein: Well, we kind of got lucky, as I mentioned, with that one really large client in China. They came in and they kind of said, hey, we want to do all three types of advertising and the user quality and the volume were much higher from the right-hand column. At that point, it was kind of an obvious decision for us. It was like, here’s the demand, here’s the volume, here’s the quality, here’s the money, and we’re know so much about advertising already. We have so many connections with almost every application developer already. We know there is a huge demand for growing applications, especially when Facebook started to cut off a lot of the viable channels. So, it’s a bit of luck, a bit of opportunity, a bit of taking advantage of the situation, but it kind of just came to us and I guess we were in the right position, the right time, and the right frame of mind to take advantage of that.
Andrew: How did they find you? Why didn’t they go to any of your competitors?
Hussein: So, we do a ton of stuff to try and get the word out there. If you look at a lot of the popular blogs like, Inside Facebook, Inside Social Games, we sponsor those blogs, so we have ads up there. We do a ton of stuff in terms of going to conferences, sponsoring conferences. You know, even just taking out Google AdWords. There’s just bunch of stuff we do to try to get inbound leads. So, it actually came as an inbound lead and we were able to capitalize on that.
Andrew: Of all of those tactics that you take, what’s the most effective? Conferences, ads . . .
Hussein: Sometimes it’s hard to say because sometimes it could be that there’s a company that sees your ad and maybe they don’t do anything. Then, they go to a conference and they see you’re sponsor and they don’t do anything. And then, someone else tells them about you, and, then, finally, they’re like, “Oh, yeah, okay, let’s get to them.” But I would have to say the most effective right now for us is word of mouth, because we work with so many of the [inaudible 38:56] application developers. So, I mean it’s pretty well known now if you are a game developer and you want to grow your game, you go to AdParlor because we’re going to save you time, we’re going to save you money, and we have a great team behind us and some great technology behind us. So, everyone in this space is kind of connected. So, when you launch a new game and you talk to your peers who are launching games and you talk to your peers who are developing games, I mean, it’s a pretty good chance that the person you’re talking to is already going to be working with us.
Andrew: How hard was it for you to turn down an offer from Adknowledge to buy the business?
Hussein: There was no offer from Adknowledge.
Andrew: There was no official offer, but wasn’t there an offer?
Hussein: There was not an offer.
Andrew: Really? I thought they offered everybody money.
Hussein: We did not get an offer.
Andrew: Is the vision to sell the business at some point, or is it to just keep growing it and do this in your 50s and 60s?
Hussein: It’s hard to say. As you can see in the past three years, the business has changed and pivoted so much that if I was in my 50s and 60s and still running this business, who knows what I’d be doing. It would definitely be something completely different. So, I don’t know that the goal is to sell right away, but I don’t think that the goal is to run this business until I’m 50 or 60. It’s not a traditional business in the sense of maybe, running a store or an import-export business or something like that where you just kind of keep it running. So, right now our focus is just on growth. We’re growing extremely fast and doing well. So, we’re just kind of focusing on growing the business right now.
Andrew: Of all the challenges, what’s the biggest one for you? Of all the ones that you’ve had up until now?
Hussein: I mean earlier on, our challenge was our chicken and egg problem with the ad network. Technology was difficult. Not knowing much about ads or the ad business at all. It was just difficult with our lack of experience. Now, I would say our biggest problem is just in terms of hiring. So, we’ve been actually lucky so far. The guys we’ve hired have all been really stellar. But being in Toronto, it’s not that easy to find the rock star, you know?
Andrew: Why are you in Toronto then? Why not leave and come to the U.S.?
Hussein: Yeah, so, I was born and raised in Toronto. My co-founder born and raised in Toronto. We’ve established an office over here where we now have 11 employees, and we’re all based and comfortable in Toronto. We do have our business development manager in San Francisco way more than he’s here in Toronto.
Andrew: Okay.
Hussein: So, we definitely, and myself personally, I fly out there almost every month. So, we definitely spend a lot of time out in San Francisco, but just, I mean, Toronto is not bad and also a lot of our business you don’t necessarily need to be face-to-face. Most of the business we do is done over e-mail. Sometimes over phone and over Skype and that’s about it. I mean it’s not really necessary to be face-to-face. Although, of course, meeting people face-to-face and wanting to meet a client face-to-face and conferences, we do need to be out there. So, we spend as much time as we can in San Francisco, but I think we’re doing pretty well over here in Toronto.
Andrew: What about the best decision that you’ve made? You talked about the biggest challenges, the best single decision that you made?
Hussein: I think the best decision was just to give it a shot like right off the start. A lot of people have business ideas and a lot of people, in full-time positions, they talk about doing something and they want to do something and then the next day they’re still talking about it, but they haven’t done anything. Right? I think it’s important, I mean, not everyone’s in a situation where they can, maybe they’re in a position to be able to just quit a job and go for it. But I definitely think that if you really are passionate about an idea, there should be no excuse why you shouldn’t give it a very legitimate shot, and I think being able to make that move, being able to make that plunge, that was the best decision.
Andrew: I said that I’d come back to the APIs. I think this is probably an example of something that you can only do because of the APIs. I got this off your website. You say it may, for example, I think there might be a typo on this, but basically you’re saying that, “An ad with text A and a blue image might work well with someone who’s a 25-year-old male in Texas at dinnertime on Sundays. So, our algorithm will proactively increase the cost per click bid for that ad at that time.” So, you can pinpoint the person, know what kind of text works well for him, know what kind of color or image works best for him, and only show him that right offer at the right time, the right person, and that’s why you’re able to increase it. The only way you can do that is through the APIs?
Hussein: That is correct.
Andrew: Because they give you so much access.
Hussein: That’s correct. I mean, the ads which we create and the targeting which we do is exactly the same as you could do creating an ad manually as an advertiser. So, we don’t have access to any additional information or any additional fields, but what we can do is we can track things much better than you would be able to do manually. So, we may take, for example, on a very basic level, we may take an ad and use a blue image and use a red image. So, what we can do is with all of the data we’re collecting, we can see who is clicking on the blue image, who is clicking on the red image, and we can start to see, hey, the blue image has a higher click-through rate and higher conversion rate when we serve it to males, and the red image has a higher click-through rate and higher conversion rate when we serve it to females. So, right there we made a pretty basic conclusion that the blue image works better for males, the red image works better for females, and our algorithm will figure that out and will kind of provide us with that feedback and allow us to take advantage of that. That was very basic. That was just saying blue image for males, red image for females. You can expand that same concept out to every single create in every single target and combination, and then you even bring the time component into it. So, there are many different things that you need to think that you can use to your advantage to optimize advertising.
Andrew: You know, let me ask you a personal question.
Hussein: Sure.
Andrew: Your name, Hussein.
Hussein: Yes.
Andrew: I’ve talked about how my name, I actually tested different names and found one that was American sounding that worked for people on the phone and was able to hit, increase my conversions when I was doing research.
Hussein: Yeah.
Andrew: And then, when I did sales, it helped tremendously. Your first name is Hussein. How has that impacted your ability to do business by phone with people who don’t get to see you and know you?
Hussein: I don’t feel like it’s really had an impact. I feel that, at least in the industry we were in, most of the people we’re working with they’re younger. They’re more open-minded. They’re not going to look at my name and say, hey, I don’t want to do business with this guy or who is this guy. So, I don’t feel like it’s had a significant impact. Although I can’t say for sure, but I don’t feel like it has.
Andrew: Did you ever go by a different name maybe in a period in your life when you were younger and less confident about the name? No?
Hussein: No. No, I’ve always stuck with the name.
Andrew: All right. Here is the other personal question that I’m going to ask you. I’m looking over your shoulder as we’re doing this interview, and it looks like you’ve got two halves of a lime behind you or a lemon? Yeah, what is that?
Hussein: It’s just some paperweights. It would have been cool if it was a lime, though.
Andrew: Okay. Yeah. It looks like a rock right now in front of the screen.
Hussein: Yeah.
Andrew: What is it?
Hussein: I think it’s a rock paperweight.
Andrew: What’s the deal with all the books?
Hussein: So, we actually . . .
Andrew: The ones behind you. For people who are listening to the MP3, he has got a bunch of books behind him.
Hussein: Yeah, we put these books up there so we look smart. Especially, when we do video interviews. We actually share an office. So, we have an office shared with a company called Social Game Universe, and they initially were building Facebook games and now they’re, they’re still building Facebook games, but they’re also focusing on something called IGAPI, which is cross-promotion toolbar that allows application developers to kind of send traffic to each other as apps and engage with it more effectively. So, this was actually their office and we moved in. So, these books were here when we got here and I think it’s cool.
Andrew: All right. All right. Finally, I’ve been asking this of a lot of other entrepreneurs who I’ve interviewed here. One action advice for people who are listening to me. A lot of people who are listening to these stories say they’re interesting stories, but send me off with something I could do at the end of them because I’m all fired up. So, what can we send them off to do? What piece of advice would you give an entrepreneur who is listening to you right now?
Hussein: Yeah. I think I said this a couple of times. You really need to just go and do it.
Andrew: You have said that, and you know what? Actually, I wondered when you said it earlier, I’m sorry to interrupt you, but when you said it earlier, I was thinking six months it took you to get traction. Wouldn’t it have been better for you to sit and do research for maybe four months or five months and then go out there for a month or two and get your traction based on what you research you did? Why is it better to just get started?
Hussein: Yeah, well, I mean it really depends on the industry you’re in. I mean if you talking about getting into maybe making a large real estate investment or putting down a few hundred thousand dollars to start up a store or whatever it is, then yeah, you should be doing your research because if that doesn’t work out, you’ve lost a lot of money. Right? When it comes to our business, we started working out of our homes. We started with a shared hosting account. We started by using my cell phone as our business number. So, really there was no cost to getting started other than our time. So, maybe if we’d researched a little bit more, we could have started a little bit more successfully. But there’s not better way to learn than to make mistakes, and there’s not better way to learn than to actually go through the process yourself. Luckily, in our industry and in the technology world and in this sort of fast moving environment, you can learn pretty fast and you figure out what works pretty fast and you can pivot pretty fast. Right? So, it is by far the best way to learn, to just go out there and do it, make mistakes, do what you need to do.
Andrew: All right. The website, of course, is AdParlor.com. Hussein, thanks for doing the interview.
Hussein: No problem. Thank you for having me.
Andrew: You bet. Thank you all for watching.
Hussein: All right. Take care.
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