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Here’s your program.
Andrew: Hey everyone, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and the place where you come to listen to successful entrepreneurs tell you stories behind the businesses they built.
How does selling virtual assets lead to a multimillion dollar business? Joining me direct from Hong Kong right now is Brendan Blumer. In 2007 he launched Accounts. net which enabled the sale of in-game avatars. Within 90 days that business did a million dollars in monthly revenue. Today, he’s the co-founder of Okay.com, the leading software for real estate agents in the Asia Pacific region. Brendan, welcome.
Brendan: Nice to meet you, Andrew.
Andrew: Thanks. Hey, is it dark back there? What time is it where you are?
Brendan: It is a bit dark. It’s actually 10:00. I just got back from dinner, but no worries.
Andrew: You just back from dinner to do this interview. I really appreciate it.
Brendan: Oh no, my pleasure.
Andrew: Where are you from? You’re not from Hong Kong. You’re no Chinese.
Brendan: I’m actually from Iowa in the middle of the U.S., if you’re familiar, from a town called Cedar Rapids. I was born and raised there. I spent most of my life in a city of about 180,000, so Hong Kong is obviously a very big contrast, but I do enjoy the city. I would consider myself probably more of a city person.
Andrew: You sold Accounts.net. Can you tell us what you sold it for?
Brendan: Well, Accounts.net was basically… Institutional capital came in from the Wallenberg family, about a $35 million valuation. I did sell out my stake for a valuation of a bit less than that, and I was about a 25% owner of the company at that time, but the company is till ongoing today. The company has actually not been sold per se to another entity. It was just that my stake was purchased after some traction had been gained.
Andrew: OK. All right. How old were you when you sold the business?
Brendan: Accounts.net?
Andrew: Yes. Sorry, you just said you didn’t sell the business, and here I am saying how old were you when you sold it? I’m following along with my questions Larry King style without paying any attention to your answer.
Brendan: So, 22, I was 22 when I ended up selling out my stake in Magelo. I’m 24 now.
Andrew: I see. OK. Boy, it’s 10:00 your time. I don’t know why I’m not keeping this clear. Let’s go back in time and follow along down the natural narrative of your history, of your business.
Brendan: Sure.
Andrew: You launched your first business real young. How old were you at the time?
Brendan: I started a business called GaMeCLiFF which was a company selling avatars, and I was about 15 years old when I initially got started. I spent about two and a half years building up a brand which eventually led to opening a website, Gamecliff.com. I was noticed by a man named Brock Pierce who is someone who has taken me quite a few steps in my career. He purchased the company in my latter half of high school and then relocated me to IGE to manage the subsequent Purchase Division.
When I came to IGE, they didn’t have actually the product offering that I was selling. They bought that and then they expanded their product off.
Andrew: Tell me about the idea that came to you that eventually led to Game Cliff.
Brendan: Well, to be quite honest, I had always been interested in Video games. I’m still an avid gamer. I have to admit.
And I realized that by recruiting assets and worth inside of these games, it can be traded for monetary value in the real world.
And it was a great way to start mixing what I enjoy with the ability to support myself.
So I was young at the time, but I quickly grew into quite some serious amount of profit.
I at about 17 years old, I was making more than most others of my family.
So I had to take it more seriously than just a hobby.
And I start to develop into a small operation, I had few of my friends come over, and by the time I left I had about eight computers in my room.
Andrew: How much were you earning at your height with this business?
Brendan: Well, this business was a smaller one than Accounts.net. Accounts.net is probably the full fledged business in this industry.
But at the time of purchase I was doing about $15,000 US in monthly profit.
Andrew: OK.
So what was the game actually you were selling assets for?
I’m not a gamer at all, and I never understand this base, unless it’s really explained to me in simple terms.
So what was the game you were playing and what exactly were you selling?
Brendan: The game that I actually started in and really started the industry, which we call RMT, it stands for Real Market Trade, was a game called Ever Quest.
Which really started, was a catalyst for all of these MMOs that you hear about today.
And basically it started with my trading, buying and selling swords and armor and shields. These little assets of value inside these games. Starting to accrue the virtue currency of that economy which was gold at the time. This gold can then in term be sold out to other players that were looking to advance their character, advance their person further and quicker.
So I actually set up a website and started purchasing assets from people that are quitting the game or leaving for no longer have the time. And we disassemble these assets and then we sell them to other players who obviously has the interests.
Andrew: So somebody who gave up on the game had all kinds of assets, gold and I guess weapons and defense mechanisms, shields and so on.
They would just come to you and sell it to you?
They didn’t just give up on the game and move on?
Brendan: That’s right, because generally if they are going into the military or they found a new job, it’s really the options are you can trade it into a company for a little bit of the money or you can just throw it by the way side.
And those two options are apparent. Obviously there are a certain demographics, they would like to get a little bit of cash for all their work.
Andrew: How would they find you in the game?
Brendan: Well, they didn’t find me in the game.
Actually I advertised through Google and extensive marketing campaign.
So people with key phrases are quitting Ever Quest. Well, get some money for all of your work. So it started out like this and eventually people started become aware that this was possible.
And people start to look for companies to sell off their craft.
Andrew: So they have their assets, they were doing the search for Ever Quest. They saw that there is a guy online that is going to buy their stuff.
How did you pay them?
And how did you take possession of the assets that they had within the game?
Brendan: Well, there was a high level of trust obviously, that need to be established. That’s where the reputation came in.
So basically I would select a virtue asset, once I have received them. Basically we would send it with PayPal.
PayPal is pretty much the universal payment for the first five years. Now you’ll see companies, I’m no longer in that industry, but you’ll see companies that will take credit cards.
Andrew: So they would walk over to you in the game, hand you the stuff. Then go online get their payment from PayPal.
Brendan: Exactly.
Andrew: And that in reverse same thing will happen. When it’s time for you to sell it to other players.
Brendan: Exactly.
Andrew: OK. And that’s how you were bringing about $15000 a month in revenue.
Brendan: That is. And to give you an idea, when I came to IDE, which was the market leader at the time. We did about $10 million US a month in revenue.
Andrew: $10 million doing this kind of stuff?
Brendan: It was a multi-billion dollar industry at its height.
It still is now, but the industry is a bit fragmented than it used to be at the time.
Andrew: And this is all just selling stuff like what you described. The sword and assets.
Unreal, so you have this, you meet Brock Pierce at what point?
Brock he lives in Los Angeles like a celebrity of the text space.
You walk over to the art gallery and suddenly all venture capitalist go over and talk to him, instead of vice versa. They want time with him.
Brendan: Yeah, I’m still very good friends with him. He was the one who initially found me when I was sixteen. And I flew to L.A met with him very quickly. He hired me and he is actually one of the only two relationships that had survived IDE.
So he’s been great, he’s a great person to learn from.
Andrew: How did he find you?
Brendan: Well, I was a competitor in the space. So in truth they knew, they were aware of their competition.
And at that time they were on acquisition, and they were looking for acquisition target. And they were really looking for people to come and help out the management team.
The company was growing faster than the operation can even keep up. So they need competent people to get in there.
Andrew: Why, what was the challenge in the space?
It seems fairly easy right, you just get somebody to buy ads on Google, and advertise that you are buying and selling assets.
What else was there, what am I missing?
That they need to get someone who is already running their own business that they couldn’t just hire someone right off line, or online?
Brendan: Well, the industry started out relatively simply but it started to get much more complicated.
Especially when the Chinese players start to enter into the industry, because they just start to manufacture things.
So the industry start to shift very quickly to China production, and then selling to people located in the United States and Europe.
So that become a lot more complicated because there was tremendous amounts of pricing need. For example, these games do not all operate all in one world, you take a look at World of War Craft, they had about 500 different instances of that virtue world. And each one of those is its own economy, with different pricing. They’re all impermeable markets. So it was necessary to have competent people that can really link, basically the East to the West.
Andrew: And when you say there are people in China were manufacturing assets, what do you mean by that?
Are they sitting around playing these games and accumulating assets and then offering them for sale or making them within the game?
Brendan: Still today there’s over 500,000 people, which I like to call professional gamers. Which basically sit down and basically accrue assets in the game through playing, what you would consider leisure coffee pass time.
They play the game and they sell those assets to people in United States and Europe. It’s very fragmented market so for example a husband and wife, they get a computer, they share the time on the computer. They are accruing assets 24 hours a day. That’s how they support their family.
Andrew: Well, unreal.
OK. So you then start working with Brock, you’re in a bigger environment, what are you noticing, what you were learning that you didn’t learn that you were on your own figuring these stuff out, hustling for yourself?
Brendan: Well, I learned a tremendous amount. I have to say, more than I think college could have ever taught me.
Brock could give me a very senior role in the company and continue to increase my role as time had gone on.
It was, I learned, obviously, office politics, corporate politics. The sourcing supply, inventory management, there was too much to even list.
It was really learning how to construct and organize a company.
Be quite honest, Brock has the ability to orchestrate, and he’s able to orchestrate different pieces of a business. So it was very fun to see how he’s done that and obviously there’s lot of similarity in that.
Andrew: Can you give an example, what do you mean by orchestrate?
Brendan: Brock is an orchestrator and I would say I’m as well. This is the ability to put different pieces of business together and have them all coincide so you can reach a launch or reach an achieved goal.
I have a very particular management style which is very focused on deliverables, opposed to micro management. Which is I feel the only scalable way to manage, if you’re going to have so many different moving pieces.
And this is obviously something I learned and I’m still honing today.
Andrew: Do you have examples of something he was able to do by choreographing a big group of people by bring them together just the way you weren’t aware could be done?
Brendan: Well, Brock’s the kind of person that can recognize two different, he can conceive a business that is actually the sum of three different businesses.
And Brock can actually, what he can bring to the table is the ability to say, this business, and this business, and this business will equal this business.
Andrew: What are these three businesses, give me an example of how he was able to do that?
Brendan: Well, I was just speaking of recently, I know he’s involved in a lot of things with, and I don’t want to give too much. I’ll let it come from him, but I know he’s involved in a lot of things in China, even in participating with the Chinese government in terms of regulations and video games et cetera. He did have an acquisition called X-Fire. I know he has some plans able to take this company and another company and augment it with the support of maybe a regulatory body to create something that is truly spectacular. I’m sure you guys will hear more about it very soon.
Andrew: OK. All right. I’ll leave it to him to tell that story then. Let’s go back to your story. In 2007 you decide to launch something new. What was that?
Brendan: In 2007 at that time I had left IGE, and I started Accounts.net. Accounts.net was really taking the stuff I had learned from some of the big corporations, and I had basically built the way that I would run a virtual biz company. I focused specifically on the accounts side or the virtual avatar. Actually, when you enter the game you enter with some kind of identify. You need a figure, if you will. I sold those avatars only. I didn’t go into the virtual currency side of the business which IGE was dominant in.
I started the virtual accounts business, and it was called Accounts.net. What I did was I created a network, so all the other companies that didn’t have this product offering, didn’t sell avatars, meaning they just sold the virtual currency because virtual currency was about 90% of the market. Avatars were only 10%.
I created a network so that my offering could be ported on to everyone’s website. I started basically feeding my accounts to all these other websites and was the accounts business for multiple other companies.
Andrew: All right. Again, I don’t know the space well, so I’ll ask basic questions, but I’m imagining my audience doesn’t know it that well either and will benefit from the answers to these basic questions.
Brendan: Yeah.
Andrew: Are you saying that I walk into the game myself, I have to create my own account. I have to create my own avatar in the game, and then I start playing around hunting for gold and using my sword and so on.
What you did with Accounts.net was create the accounts for me and enable me to come in already with an account, with an avatar and so on.
Brendan: Very good question. Thank you for slowing me down. Actually, when you start an account or character, there’s a level associated, so let’s say, level one. As you play and you do certain activities, you grow greatly in power. You increase in power and over the course of years, literally.
For example, when I purchased an account, it generally had about 365 days played. That’s 24 hours a day played. So, the amount of time to put in these characters, to get to the highest level of power was extraordinary. It’s something that almost can’t be replicated by just people doing man hour labor, even in China.
What I would do is I would purchase, again from people who were leaving the game. One of the things that we were the first people to really do on a very sophisticated level is to value accounts with all the different… There’s 100,000 different ways an account can look, and we would proscribe values to each one of those, and we would have an automated value process.
They would say, give us a link to their character and then we would give them a number as to how much we would pay them. So, then they would submit their account information. We would send that payment, and that account would go as inventory on our website waiting for a purchaser.
Andrew: I see. All right. Inventory management sounds like something that you learn by working for a big organization.
Brendan: Absolutely. [laughs] Inventory management was a very big deal, and so was security because when you’re dealing with virtual assets, all the value is contained in one line of text. The ability to mask everything… Truly, for all of these virtual companies their biggest enemy is internal theft.
The acquired technology to have everything masked so they would automatically log in the game for you without finding any kind of sensitive information, this was a big feat. It’s more than it may sound, but the technology that went into security was probably more than anything else combined.
Andrew: Can you give me an example of theft, something that’s just so crazy clever that you wouldn’t even have thought of before you got into the space?
Brendan: Well, obviously I’ve had theft within Accounts.net many times. For example, an employee was able to basically… If they got direct details of an account, meaning a user name and password, and this account is worth 3 or 400 U.S. As soon as they get it, if it ever goes through customer service, they could theoretically just basically sell that user name and password to a competitor or to any other player in the space, which could use it for value, and they’d get paid directly to their personal account. Furthermore, the ability for us to do anything about it or recourse or track it, is virtually no-existent. Because, it’s a virtual asset, everything is contained on the video game servers, it’s not like we can do anything to really figure out what happened. The only preventative measure, the only way to stop theft, or remedy theft was to prevent it in the first place.
Andrew: I see. All right. So, I see how it’s a good idea I understand how people would want a new avatar and how they would want to start a few levels ahead. But to get to the million dollars a month within ninety days, how do you do that?
Brendan: Well, with Google, anything is possible, as you know. So, it was a very special industry that our product offering. We were able to, and had so many more accounts and we had better pricing than anyone else in the market. To give you an idea, Accounts.net, when we were doing this, had probably about three to five thousand accounts on the website, at any given time, and the next competitor was at 200. So, there was a tremendous amount of inventory, and our product offering was just so much better. We were able to bid in Google to get a tremendous amount of traffic with very high conversion rates. To give you an idea of how lucrative this market was, the average click, cost per click on Google at this time, was $4.00 per click, U.S. So every time someone was clicking on your link, you were paying Google $4.00. So, my marketing bills were about $150,000 a month with Google.
Andrew: And, what were you earning, what was the retail value of the average avatar?
Brendan: The average avatar went for about $500 U.S.
Andrew: $500.00 U.S. is what people would pay in order to skip a few levels and get more power?
Brendan: I’ve sold accounts for $20,000. U.S.
Andrew: Wow. I see now where the $4.00 makes sense.
Brendan: The average is about $500.
Andrew: So, were you also getting people, were you getting Chinese workers to build up the characters for you too, is that how you ended up with such big inventory on day one?
Brendan: In truth, no actually. It was a model that some people took. But the quality of the characters you can get through the leveling process. Basically they would get to the max level, but they wouldn’t have the ability to get all of those items, those very spectacular items. So, still today, the best accounts come from players. Virtual currency is something that is done 100% now, from China and other areas where professional gamers have taken that over. But Accounts still remain something that the model is very much purchased from the player that is leaving, and sell it to a player that’s interested in speeding up the process. And to give you and idea . . .
Andrew: Mm-hmm.
Brendan: Generally, somebody would play for a year and a half with one class, let’s say a warrior. They would play a warrior for a year and a half, or two years, and then they would decide, I want to be a priest, and heal people instead. So, instead of spending two more years to get to where they were, because they already know the game, they’re already familiar with the concept, they already have friends that are at that higher end level, they just purchase another one, and it allows them to try something new, and experience more of the game immediately.
Andrew: I see, all right, I get that. When you put it that way, it makes sense to do it. Especially if it’s a hobby that you’re that deep into, why not pay a few hundred bucks?
Brendan: Absolutely. This is a very serious hobby for a lot of people.
Andrew: How many characters were you able to start off with when you launched the business?
Brendan: Well, when I launched the business, I had none. So, I started off by advertising on Google, to purchase the characters. After about a week of purchasing, I started advertising to purchase and sell the characters. So, it was very much, in truth, Accounts.net, was started with less than $50,000 U.S.
Andrew: Really?
Brendan: It was a very quick ramp up. It was a very, in nascent stages of the industry, and the accounts side of the business had not yet reached its full potential. By Accounts.net, I will tell you, one thing about Accounts.net, which goes to show how much I’ve learned, is that the third month we were doing a million dollars in revenue. The fifth month was our highest month of revenue ever. So, there was a very quick, relatively to how a normal business, there was a decline in revenue over the next following years because, there was a copy cat process.
Andrew: Mm-hmm.
Brendan: As soon as people saw what we were doing, there was fifty competitors on Google, very quickly.
Andrew: I see.
Brendan: So, it was a business that grew very quickly, but the barriers to entry were very hard to put into place. So, competition came quick.
Andrew: And how much software and infrastructure did you have to build and have with you on day one? What was it like, what did you have on day one?
Brendan: Well, I had to actually spend, and that’s where most of the initial capital investment went to. Basically I spent about two months developing a very rudimentary account management system. I always develop technology, and I’m always the kind of person that says you never develop technology until it’s ready, until you need to develop technology, meaning if I’m going to have a process that’s going to occur three times a day, I’m going to do it manually. I’m not going to build technology until a process is actually going to… until it’s actually going to be economical to build it.
I built the most simple platform necessary to offer good customer service, but it also had a very large manual element to the business to prove the concept. Once the concept was proved I really started to flesh out the technology and invest in much more high end software.
Andrew: If I saw your offer to buy my character on Google and I came to your website, I would see what and then what would happen on the back end. Give me a sense of how basic it was and how manual it was.
Brendan: Well, at the very beginning it was extremely manual. What you would do is you would come to Live Chat which was just a little chat software through the website. You would give us a link to the description of your character. This is something that’s provided by the game that you play, so it’s generated automatically. We would take that link.
At the time myself or a couple of my staff would look, manually look at your assets and basically make a verbal offer through live chat based on what we knew we could turn around and sell it for. So, it was completely manual. As the process went on, we started to look at specific things like the item level of every single item on the character, and we created a formula of how to spit out a valuation automatically so that we could remove that manual element.
Andrew: I see. But at first, you were just making bids for these or making offers using chat. You would collect the character, and you’d send payment via Pay Pal. It was that manual, nothing but Live Chat, no other technology there?
Brendan: To start off with, that was it.
Andrew: That’s unreal.
Brendan: All the technology was more in inventory management. Basically, it was just a very simple database to manage all of the characters. It really was just getting to market quick. I wanted to get out and get a web presence fast, and I knew all this stuff could come after. So, I built what was necessary to start. Once we’d start, we started getting revenue incoming et cetera. It was much easier to beef up the tech team. From there it turned into a very sophisticated account management system.
Andrew: At what point did you start plugging in with other companies? You said that was a big reason that you were able to grow so quickly.
Brendan: I actually plugged into companies before I had even started. While the technology was being built, I obviously had some time, so I started going, I made some trips to China and made some very good partners in the market who basically were willing to send their traffic… Basically, we supplied the accounts on their websites. The business would come to us, and then they would get royalty checks.
At the time, one company was called TH Sale which was the second in the industry. They did about 5 million U.S. a month in revenue. I had other partners, Off Gamers, lou.com, many, many websites which probably are unfamiliar to you.
Andrew: Yeah. I’m getting an understanding of the business and how you saw the business. What about the software that was required in order to work with TH Sale, how basic was that?
Brendan: It was very basic. To keep it very simple, what we did was we created a website that looked just like their websites. And so, the customer experience, when they went into the accounts section of the website, actually what was happening was changing to accounts.net but the look was so similar that the experience was like you never left the website. We created like little fillers for other people’s websites. Actually, everyone was on our website, but it was hard to even realize.
Andrew: Were you tied it that tightly even back when you were just buying characters, or did you wait until you were selling it before you started doing that?
Brendan: We waited until we sold it. We built up some inventory and then went live, but I had already been in negotiations before the company had started.
Andrew: How manual was that process of passing a new account to a new customer that wasn’t your customer but someone else’s customer that TH Sale was trusting you to take care of them?
Brendan: That was a little bit more… Like I said, a lot of the technology was related around security. What we would do is an account would go into our system, and it would all be encoded and encrypted.
Andrew: What about in the beginning? I want to understand how you handled it when you’re still trying to figure out the business, when it was just you in Live Chat essentially making purchases. What was it like when you were selling the asset to someone else’s customer?
Brendan: Even from the very beginning, one thing that I did do from the very beginning was encrypt passwords. Passwords would go into the system. They would be submitted by a player, and we would have the ability to check if it’s right. So we could log in. So, no one would ever see the log-in and password of that account until it was actually sent via email from the
system to the end user.
So once someone had mad a purchase, it was as simple as sending an automated email. Once we had we had confirmed the process, the payment, that we had cleared all of its verification, then we would basically send an email. Our customer service wouldn’t re-expose the asset, and it would contain all of the sensitive data that would allow them to log in into the account.
So it was a more simple process than you would probably even imagine.
Andrew: Really? How long did that take to build up?
Brendan: Again, this was all part of that two months. It was…
Andrew: OK. That’s impressive. It seems pretty sophisticated actually, to be honest with you. The purchasing seems very basic. Am I missing something about the way that it was sold? Because to me it seems like a very intelligent system. One that can…
Brendan: Relative to what we’re doing today with Okay.com and Virtual Office Space, it’s very simple.
Andrew: OK.
Brendan: But, yeah, there was a level of complexity to it. It took some detail. The devil’s in the details. We organized it, and we had a very good User Requirements Document when you build it. The actual execution of the code was just not very difficult.
Host: OK. What was the big challenge in the business beyond security? What about marketing. What was the big challenge there?
Guest: The marketing was…more straightforward in the beginning, but basically what happened was people started…you know, Google is a very weird beast in truth. The reason it’s so interesting is because you can actually create a business today that doesn’t actually make what you would call, “traditional business sense,” but it hinges on the was Google works, and therefore you can make money. What we had to do was start putting many different websites. So you have to start six different websites to act as placeholders in Google.
This is something that we were honestly slow on the uptake, but our competitors in China wouldn’t launch one website. They’d launch 15. So when you typed in keywords, for example, “buy, WoW, gold,” very simple words, actually, they’re all the same company that you’re seeing. So whichever one you happen to choose and go with, you’re actually buying from the same
provider. This is how the industry went. That was the biggest challenge in terms of marketing.
Host: And were you able to catch up to them?
Brendan: Well, we had slightly different…OK. When Magelo started coming in, our idea was to go in a little bit of a different direction with virtual goods, and to create a customer-to-customer platform. To be honest, we were with the Wallenbergs, and we had visions to go public, for example. The truth was, we weren’t looking for underhanded business tactics: blanketing the website with tons of different websites that look like different companies that are ultimately still the same one. In truth, we weren’t willing to sacrifice our integrity to go that route and compete directly with those people in China.
Andrew: I see. As a company that’s going public, you want everything that you do to be…if it ever ended up on the cover of the Wall Street Journal, you wanted to be proud of it, not embarrassed.
Brendan: Of course. But it was an expensive decision.
Andrew: Why didn’t you guys end up going public? Why didn’t you get big enough that you were able to take it to that level?
Brendan: Well in truth, in that particular venture, I had had a partner who was in control of technology. Someone named Christian that was involved with Magelo, which is a very large content network. What we wanted to do was combine virtual assets with content networks. For example, when you’re browsing online for information about a game, how to complete this
objective. It could say, “This is the steps to complete this objective, and this is the item you need to acquire. And here you can purchase it.” We wanted to marry those two things because we thought the integration of selling virtual assets with content networks was obviously the most logical next step. In this particular case, there was a very strong difference in direction that both people wanted to take with the company; and ultimately was one of the reason why I ended up leaving the company.
Andrew: What was the direction that he wanted to go in, and what was yours? What was the disagreement?
Brendan: Ultimately I was more interested in that virtual goods integration, and really leveraging and having the virtual goods having the primary revenue generator of Magelo. They were more into purifying content: very clean content that didn’t have interruption of virtual goods. Virtual goods was a very controversial issue for many years. A lot of gamers supported it, and a lot of gamers did not support it. People thought it was cheating or purchasing your way to the top. I will say that Blizzard just made an announcement, the largest game provider, about two weeks ago that their next biggest game, Diablo3, which is… Blizzard is the biggest MMO producer in the world. Diablo3 will have integrated virtual asset sales, so players will be able to purchase from other players.
At the time it was something that was very controversial, not really relevant today. Today it’s something that’s much more accepted.
Andrew: What were the margins in the business? If we say, for example, that you were doing a million dollars in revenue per month, how much of that was profit?
Brendan: About half was net.
Andrew: Really, unreal. How does it feel to be that young, to have a company that’s that successful so quickly?
Brendan: Well, I mean, obviously it was very overwhelming. What’s really interesting is to look back at how I handled that success. What I wish I had spent more time doing was creating more barriers to entry to that money because I didn’t realize, I didn’t protect the asset I had well enough. It’s something I very much incorporate in my business plans. I know how important it is. I’ve seen my stuff get copied. I’ve seen my graphics from my website be copied and rearranged.
Andrew: What barriers could you have put to entry?
Brendan: Well, in truth in this particular circumstance there wasn’t a lot. There really, really wasn’t a lot; however, when moving on to make my next business venture, obviously this is something that I learned so, creating barriers. I’m a very big person with user generated content and now feel that companies are no longer able to offer enough static content to keep people happy, and I’m about creating critical mass platforms which was something that was very difficult to do in the accounts industry.
Andrew: OK. That brings us to today, the new business. What was the original vision? I understand that visions change, and I want to hear about the change, but take me to that original idea that made you say, there’s a business here, I’ve got to pursue it.
Brendan: Well, in truth it was through the bad buy-in experience. I had purchased my first flat in Hong Kong, and what became very evident was the lack of any IT infrastructure whatsoever. I’m sure a lot of your viewers are very familiar with the U.S. market, but the Hong Kong market is very nascent. It’s as simple as walking into an agency, a broker, and they, “What are your requirements?” You give the requirements, and they look on their computer screen, and they write down a couple options for you and hand you a scribbled paper. The ability to raise the bar was unbelievable.
From a consumer’s perspective, an online experience, the inaccuracy of the information, the data integrity, was again completely non-existent. The general process… Hong Kong is a very homogenous market, so what you would do is you see an image in a building, a unit you like. The customer would call them up, and they would say sorry, that was no longer for sale. People were not actually managing real inventory on the website.
Andrew: After you see the place? You’re not just seeing it online. You’re walking and looking at the place? After that, you discover it’s not available.
Brendan: No, as soon as you call them.
Andrew: I see.
Brendan: Basically, about two years ago, everything that was for sale in the Hong Kong market was fake properties, OK? When you call about those fake properties, then they would show you what they really had because they didn’t have the listing management software to truly, accurately outlet all of their properties to the market, to the different websites that Hong Kong consumers go to.
The ability to actually manage these systems was too time consuming for them to even have accurate properties. So, in so many more ways than one, did we want to basically take a new concept, virtual office place, maximum flexibility, and which I’ll talk a little bit more about, promoting teamwork amongst the Asian marketplace. We wanted to really create… My company is Okay.com, but my competitive advantage is called Titan which stands for the technical infrastructure of the Asian network and this is the system, this is the virtual office place. It is the entire back end of Okay.com. Okay.com is just one source of customer acquisition. It’s a very small piece of the business.
Andrew: What do you mean by virtual office space? Actually, let’s talk about the small piece just to understand what I think is going to be easier to follow. Customer acquisition on Okay means I’m looking for, let’s see, an apartment. I come to Okay.com, and I see that there is a Manderly Garden apartment available for 150 Hong Kong dollars, 150,000, what is that?
Brendan: 150,000 Hong Kong, it’s about $20 million U.S.
Andrew: OK. So, $20 million U.S. I click, I buy it, that’s the standard stuff, right? That’s what we see and we’re used to in the U.S. and on this website.
Brendan: Yep.
Andrew: Right? What’s the next level? What’s the virtual office part that you’re talking about?
Brendan: Well basically, in truth Hong Kong consumers are limited to what they can take in a website. So, a website, like Zillow, would not be usable for Hong Kong consumers. It’s just too far technologically advanced. We’ve put all of our energy to build the virtual office place. Let’s talk about that a little bit, the ability for an agent to plug in and have Facebook like concepts.
So, they log in to the system. It’s not just a property database, but it’s notifications of everything that’s coming that’s relevant. Your customer that you showed this property to two weeks ago, well this property is now 20% cheaper, you should contact him. It’s not waiting for the agents to make a decision as to what they should do or how they should run their business. We’re pushing the necessary steps to them using Facebook like concepts.
Andrew: Ah, I see. OK. So, you’re taking them through a CRM essentially. Am I understanding right?
Brendan: Absolutely. It’s a total customized CRM specific to the real estate market. Furthermore, the industry in Hong Kong is very selfish. It was, I have my listings. I have my clients. They’re all in my calendar book, and I’m not working with anybody. An average experience for a consumer, if you worked in a property agency and you started talking about property, the agent would be like, shush, shush and take you outside and speak to you because they didn’t want the other agents to hear about what property might be selling soon.
In this model what we use is basically the Ford assembly line principles. One person can contribute the listing. One person can contribute, make it say, oh now this is for sale. One person can be the transacting agent and bring the buyer, and we’re able to act as a guarding body and split the commission amongst all the agents to promote teamwork. Teamwork is absolutely essential for an organization to really flourish properly and for the customers to feel a positive experience.
Andrew: Now, you don’t have a background in real estate, and you’ve got to come in in this business, understand it well enough to break it down, understand it well enough to then reorganize it, know what to add technology to, and what needs to just be handled by people. How do you do it? How do you understand the market that well?
Brendan: Well, I had a multimillion dollar degree in real estate, and that was the first two years I started the company. I hired basically a group of agents that were very in touch with the local Hong Kong market, and I started to reverse engineering the systems they use. We went in to understand the exact structure, the limitations, the benefits, and how the mind set of the agent is when they use that software.
Andrew: By walking into other agents’ offices and watching how they work?
Brendan: We hired them directly.
Andrew: And then, you watched as they worked for you.
Brendan: Completely internally and help us design new software.
Andrew: I see. How did you get them to trust you enough to share all this information with you, considering that they come from a culture of privacy?
Brendan: Well, in truth I had to find people that were willing to share the vision, and I had to speak about what I wanted to accomplish, and there was a group of people that were willing to join the project. I was very fortunate to find some very competent people that were interested in also really improving what the Hong Kong market was seeing. There was a passion for improvement.
Andrew: What’s the first thing that you systemize in this business? I like seeing, as you noticed, when you talked about Accounts.net, how this idea starts to play itself out in a business. What’s the first thing that you launch? What’s the first step that you took towards automation?
Brendan: Well, the first step I took towards automation was to basically tie the property management systems with what you’re seeing on the websites. I started to contact all the portals in Hong Kong, and basically gave direct contact, direct feeds of our properties to them.
Now, when agents are managing their properties, they don’t have to use seven different systems to put properties on websites. It’s just one system. They log into Titan and they do a couple things, and this saves them hours. Not only does this save them hours and make things possible, it’s actually an accurate reflection of what your inventory is. So the consumer experience is also infinitely better.
Andrew: And this was just for your agents? That you got, your agents first on Titan, and then others?
Brendan: Still Titan is a completely proprietary software. And we only keep it internally. So we are now building an agency and we just started the recruitment push. Actually in August 1st, we’re on the cover of the largest property magazine in Hong Kong, Are You OK. So, it’s exciting. And, everything is internal So right now we have a group of about 20 agents that are on the platform. And, it’s the most powerful tool in the Asian Pacific.
Andrew: I see. And is there a plan now, I see. OK. Yeah. What’s the vision long term, and where do you see this going?
Brendan: Well, this model I think works very well in China and also Singapore. And what we really want to start doing. I mean, for the moment I really want to start increasing the tools and continuing to raise the bar in Hong Kong. While we have really changed the Asian experience in Hong Kong, and our system is a lot better than what’s out there. Personally I still feel there’s a tremendous amount of low hanging fruit and ability to increase the platform, much, much further.
Just because we’re the market leader I don’t want to get complacent. And, furthermore, I think a lot of the benefits that we can really see is moving into other countries in the Asian Pacific region. And then starting to bridge the platform. Because, you know, Asian Pacific is a lot of small countries. So, the level of communication and interaction that goes on between Hong Kong and Singapore, for example, is much greater than what happens in the United States and surrounding countries. Asian, they’re all very connected. So I would like to create what I would like to consider as the Asian Pacific MLS.
Andrew: Let me ask you something. You now have three companies that we’ve talked about. Great track record. You watch other entrepreneurs. Do you see any common mistakes that they’re making that you think, man, if they only saw this, they’d be doing so much better. Or, if they only understood what goes on. What we learned in the gaming industry. They’d be able to change their business completely.
Brendan: I can say to you two things.
Andrew: Yeah?
Brendan: And this is what I live by. And I think one thing is that you need to make sure you have a solid technology infrastructure. And you need to see where your company is going to be in 20 years. I feel like too many people start businesses for what is necessary now. All right. But you need to really be constantly looking at, where am I now, and what is this company and industry going to be looking like in 20 years? And you need to be constantly looking towards a vision that you really believe in. and through that process you will create something great.
The second thing that I really feel strongly about is, starting off simple. Like I said, I’m a firm believer of building technology only when it’s necessary. Only when it makes sense. A lot of people, and you see this a lot of times in Silicon Valley, they say, I’ve got an idea. They spend two million dollars and they build a concept. All right. I’m very wary of this model. I say what do you need? What is the very minimum you need to prove the concept? I look for proof before I build a business. And I think this is a sound way to do things. It’s not for everybody, but, I start out small.
Andrew: What was the very minimum that you felt OK with for Okay.com?
Brendan: Like I said, before, basically it was just a simple property management tool. That, it wasn’t even robust enough to manage the properties themselves. It was only a listing management tool. So you could one property in, and it would put it to a 100 different websites. And this became, this was a very powerful tool. And from that point, from that rendition, we basically then said, all right, this concept works.
When we merged with Asian Pacific Properties who’s been in business for 25 years. We were getting ten times the amount of leads or inquiries on a daily basis than they were. After 25 years of building up traditional methods. So, we said this isn’t going to work. We closed our doors and we ran to technology development for two years. And we rolled out the full system. We spent millions of dollars building a complete virtual office, completely proprietary system and now we’re just in the process of rolling it out. So it’s a very, very exciting time.
Andrew: You’ve come a long way. You started your first business with, I understand it, $1000 dollars you borrowed from your grandfather?
Brendan: Grandmother. And grandfather I guess.
Andrew: So have they seen how far you’ve come? Have they gotten to see it?
Brendan: Absolutely. Yeah. My grandmother has always been a tremendous role model. Herself was, she was a self made single mom that was, you know, a millionaire before she was 30, by managing apartments the hard way. So, I really was, I’ve always been very interested in her stories. Very interested in her business mind. And we share a lot of ethics and morality, so it’s been phenomenal. And I keep in touch with her all the time. I keep her [??].
Andrew: It’s an inspiring story. Brendan, thanks for doing the interview. It’s nice to meet you.
Brendan: Absolutely. I did my best.
Andrew: And the website is OK. Okay.com, if people want to go and check out the company we’ve been talking about.
Brendan: Thank you Andrew. Pleasure.
Andrew: Thanks.
