Andrew: Don’t touch anything because before today’s interview I’m gonna show you something you’re gonna wanna see. See this graph right here? It shows the size of my audience throughout one of my past interviews. Can you see this section here at the beginning of the interview? That shows that I’m losing about 20 to 25 percent of my audience within the first few minutes of my programs. That’s where I do my sponsors. That’s where I do my ads. So I’m gonna zip through today’s ads so that I hopefully don’t lose too much of the audience, and then I’m going to ask you for something and tell you what I’ll give you for it in return.
First sponsor is wufoo.com. If you go to wufu.com, you’ll get embeddable forms and surveys that you can add to your website so that you can learn from your audience and get the kind of feedback from your audience that I get. Use wufoo.com on your site for free. Second sponsor is Grasshopper. When you go to grasshopper.com you get a robust phone system that you can manage from the Web. It’s the virtual phone system that entrepreneurs love. Check out grasshopper.com. Finally shopify.com lets you set up an online store within minutes and have all the features easily within your command throughout through the time that you run your store. Check out shopify.com.
Here’s what I’m going to ask you. How can I improve my commercials? How can I make them more engaging? How can I make them so that I actually retain my audience throughout my ads instead of losing them? Give me your feedback on the form that I’ll have underneath this video on mixergie.com, and if you do, I’ll show you the chart for this program, the one that you’re watching right now, complete with how much of my audience I’d lost as i did this this first section of the interview. And you’ll also get to see which sections of the interview were the most engaging for my audience and how much of an audience I had at the end, at the end of the interview. Give me your feedback and here’s the interview.
Hey it’s Andrew Warner, founder of mixergie.com, home of the ambitious upstart, and today I’ve got with me the founder of Goldstar, Jim McCarthy, actually the co-founder and CEO
Interviewee: Co-founder.
Andrew: Of Goldstar. It’s you and two friends who founded the company back in 2002?
Interviewee: That’s right, that’s right, Rich Webster and Robert Graf are the other two founders.
Andrew: Cool. And all three of you guys are at the company, all of you contributing day to day to the business, right?
Interviewee: We are strapped to the wheel in this thing. Yeah, absolutely, absolutely.
Andrew: And Goldstar has one million members. And I know Goldstar from back when I lived in Santa Monica. When Olivia and I started dating, that is where we would go, to goldstar.com, to find events to, to go to, we’d buy our tickets from Goldstar because they were often, I think you told me before, usually half-price off? I just remember them at being, I just remember the tickets being sold at steep discounts. But I don’t remember how much.
Interviewee: Yeah, it’s about 95 percent of the time it’s half price. It, there are some cases it’s not quite that, but the whole point is I think that as well, it’s not just the discount, we’re helping you go find things to do. I think that’s part of the fun as well.
Andrew: Yeah, that’s the thing, that I couldn’t, I know that I get stuck in ruts. And so, if I’m starting, if Olivia and I have to go out, I’ll suggest let’s go to a restaurant, maybe let’s go see a movie, definitely let’s go to a friend’s house for a party. And I know somewhere in L.A. there’s some theaters to watch live performances, but I don’t really know where, and it’s too much trouble to figure out what I like. I go to Goldstar and I know that you guys are going to have an interesting collection of events for me to go to, I know I could, frankly, I know I could save a little bit of money and I like that, and I know that I’m going to be a hero to Olivia and she knows the same thing with me, that she’ll be able to come up with something fun and look like a hero to me.
Interviewee: Well, the whole business has been based on the idea of getting people over all the barriers to going out to live entertainment more often. If you ask somebody, would you like to go out to live entertainment more often than you do, almost everybody says yes to that. And that was really kind of the founding observation of Goldstar, was that, okay, then there must be some barriers. Price is one of them, but not the only one. Information: where are these places, what’s it going to be like when I get there. So Goldstar is based on getting people over those barriers and getting out to see shows.
Andrew: Okay, alright. I’m going to ask you a few more questions now about Goldstar just so people
Interviewee: Sure.
Andrew: Understand the business. And then we’re going to go back in time and talk about how we got here. First question is, I don’t know if I asked you this, I guess I did ask you this in the pre-interview but not in the interview itself. Are you guys profitable?
Interviewee: Yes, we are indeed.
Andrew: Okay, and then we’ll talk a little bit more about the revenues later on. Was there outside funding in the business?
Interviewee: Not really. We’ve got some founder money, some family money, but we’ve no venture investors, we’ve had no, you know, strategic investors if you want to say that. It’s pretty much been inside money. So the company is one hundred percent founder, employee, and family owned.
Andrew: And how many people at the company now?
Interviewee: About 45 employees; about 25 or 30 full-time and another 15 or so part-time. So it’s a nice little group. Still small enough that everybody knows everybody, but, but not so small that you get tired of looking at the same three faces every day.
Andrew: And, alright, okay. Let’s go, let’s go back in time. We’ll come back forward and we’ll talk about the revenues and where the business is today. But let’s go so far back that the business didn’t even exist. Let’s start off with, this is something that I’ve read on your LinkedIn profile: You went to Japan?
Interviewee: I did.
Andrew: To live, to work… why were you in Japan? This is right after college?
Interviewee: Yeah, this is right after college. And I graduated in ’91, which was the last–well, it was a pretty big recession in ’91. And all those seemingly secure jobs in consulting and I banking, which I wasn’t really interested in anyway were vanishing on people. And I was there as a new college graduate, and a friend of mine had gone over to teach at this private language school in the countryside in Japan, and said, “Hey, there’s an opening for another teacher in this school. You could do a one-year contract.” And really, I thought to myself, when will I have the chance to just throw all my stuff in one bag, fly to the other side of the world and be a sort of a super tourist for a year, you know? Do the job, but really it’s an opportunity to go live in a foreign country, and so I went. It turned into two and a half years, but that’s why I went. I mean really, it was an opportunity I couldn’t pass up.
Andrew: Did I hear that right, the job was to teach?
Interviewee: Yeah, yeah.
Andrew: To teach English?
Interviewee: To teach English conversation to people ranging in age. My youngest student was three, and my oldest student I think was 70. And so, you know, some of them were classes of 15 or 20 high school students, others were private lessons. And the goal–it wasn’t a formal school, it was something people did for a hobby or maybe to improve their business situation with being able to speak English better. And so, you know, we were very much in the customer service business at that school. [laughs]
Andrew: Alright, Jim, let me stick on this for a little bit.
Interviewee: Sure.
Andrew: Because when you said, “Hey, how could I pass up such a great opportunity?”
Interviewee: Yeah.
Andrew: I’ve gotta tell you that when I was in my early 20’s and just graduated from college–
Interviewee: Yeah.
Andrew: That wouldn’t have seemed like a great opportunity that was a no-brainer.
Interviewee: Right.
Andrew: To me it would’ve seemed like a waste of time. I would’ve said, “I wanna go out there and just start a business.”
Interviewee: Right.
Andrew: It’s not until now that I realize that there’s some value to going and exploring the world, that’s why I’m here in Buenos Aires.
Interviewee: Yeah.
Andrew: But I want to understand your mindset at the time. Did you know you were going to be in business and this was somehow going to help you see the world and get to business? Did you not care about it yet? Did it take you a while to form your decision and your vision for your future?
Interviewee: I think it was more of a faith thing. I didn’t see how it could possibly hurt me. I guess I had a sense that I maybe wanted to be an entrepreneur, maybe wanted to be part of fast growth companies in the future. But it was a very vague idea. You know, when you’re 22, you can be very poetic and get away with it, you know what I mean? You have a window of time where you can sort of, you know, sit in the park and read ‘Hamlet’ or whatever and that’s fine. So my feeling was that in some way this is going to be enriching to me on a personal level. And it really was! I mean, and I don’t pin it down to, “Well, I met this guy who introduced me to this thing, and then I made a million dollars,” or anything like that. I don’t think of it that way, but by being really fully immersed in another culture and, you know, I went and learned a language while I was there. I think what I realized was you really don’t–you can’t assume that people are looking at things the same way you do. I mean, really and truly. I mean, that’s obvious in a way, but… you know, I remember one time when I was first there and I was first learning Japanese. And I asked somebody, “Well, how do you say blah, blah, blah in Japanese?” I can’t even remember what it was. And this Japanese woman who taught at my school sort of puzzled about it for a minute and said, “Mmm, you don’t.”
[laughter]
Interviewee: You don’t! And I… OK, Alright. [laughs] You know, so it really sort of challenges… one of the things, for example, that I learned that I think changed my perspective on a lot of things in Japan was–again, I was talking to some of my Japanese co-workers. And I said something to the effect of, “Well, it’s very important to express your feelings about something.” And they said, “Why?” You know, and it was an honest question. It wasn’t–they weren’t being sarcastic, it was an honest question. It was like, “Well, why is that so important?” And I’d never stopped to think–well, why is that important? Is it always important? You know… and so the Japanese don’t universally agree that it’s important to express–you know, it’s a cultural difference. So those kinds of things where you, you know, you get to throw away some of your long held assumptions, I think, is very important to an entrepreneur–not to be locked into a way of thinking.
Andrew: Wow, that’s… you know what? That’s interesting to hear.
Interviewee: Yeah.
Andrew: And by the way, one of the reasons why I asked you about that is–last week I did an interview with a guy, with Anand from Anandtech.com. And he said that he started that site when he was 14 years old.
Interviewee: Wow.
Andrew: This morning I got an e-mail from a guy who says, “I don’t know what I… how I’ve wasted my life! I’ve just not been focusing enough. I don’t know what’s wrong with me. Andrew, do you have some time to talk it through with me?”
Interviewee: Yeah.
Andrew: “What I’m going to do with my future, because I feel like I’ve wasted too many years.” I look at his e-mail. The guy is 21 years old! [laughs] Talking about wasting his life! It’s good to hear that there are different stories out there and that there isn’t one path and if you haven’t exactly gone down that path, then you’re a failure.
Interviewee: Well, you’ve talked to Gary Vaynerchuk
I really like where he is coming from, when he says, “I do things for how happy they’ll make me.” It’s a great way of looking at it. Not every moment of your life is happy–but at the same part not every moment is fun, put it that way. Everybody is different. Some people, would be made miserable by the idea of trying to put together a business when they were the age you were, when you started yours.
That’s not the advice I typically give people at that age. For most people, that’s probably the wrong thing. Most people probably should go out and work on somebody else’s dime, and learn a business on somebody else’s dime for a few years.
But there is special guys like you, who just know how to do it; you, Bill Gates, you know Zuckerman.
Andrew: [laughs] I would say, I wasn’t exactly like that. I always wanted to start a business, and I was thinking in that direction, but 14-years old is not when I got my start.
Interviewee: [laughs]
Andrew: OK. So, you come back to the US, and again going back to LinkedIn. LinkedIn is such a great resource for me when I’m doing these interviews, because …
Interviewee: It’s sort of frightening, actually.
Andrew: Sorry?
Interviewee: It is sort of frightening. I have to make sure that I have just the right stuff up there.
Andrew: You know what? What I love about your LinkedIn is that little summary. Most people don’t fill it out. I don’t even know if I did, but yours, I like the way your wrote it. One of the points in there, that I didn’t see anywhere except for LinkedIn, maybe I should have done more research, but it turns out, you own 50 Noah’s Bagels.
Interviewee: I didn’t own them. I opened them.
Andrew: Oh. You opened them. So, you worked for Noah’s Bagels.
Interviewee: I worked for Noah’s Bagels. Yeah.
Andrew: OK. I see.
Interviewee: I wish, I had owned 50 of Noah’s Bagels, but I did not unfortunately.
Andrew: Well, you also say, “Do you remember Noah’s Bagels?” because they really didn’t become the huge hit that was envisioned for them. So, maybe you’re better off just working for them, not owning the 50–actually, maybe I’m better off not making statements, and asking some questions instead. So, let’s ask this; why did you go work for Noah’s Bagels, and what was the experience like?
Interviewee: It was like a 10-year career in about 3 years. When I got to Noah’s–I’m probably going to get the numbers wrong, but when I got to Noah’s, you were off and building companies, and everything. I thought I was doing a lot for my age. I am 24.
I spent a few months running a store, so I could learn the business, which was very good. Then the company asked me to move to Southern California. I was in the Bay area. They asked me to move to Southern California, and open this new region for Noah’s Bagels.
For those of you who don’t know Noah’s, it is really high quality bagel chain. It used to be a kosher keeping shop. We were actually under rabbinical supervision, and all that kind of stuff.
It was this blistering pace of growth. We were at one point opening a store a week in Southern California alone. So, I was responsible for a big chunk of that growth at a pretty early age.
The company at that time really stood for a lot of extraordinarily special things. There is a man name Noah Alper, who was the founder of Noah’s. You should talk to him, actually. He would be a great interview for you.
Andrew: I am going to hit you up for an introduction.
Interviewee: Yeah. I just talked to him the other day, actually. He is an awesome guy. Cool! If you are from Boston, you probably know [xx]. He’s opened a bunch of businesses through the years, and had a lot of entrepreneurial success.
But this was really the thing that I think he loved, because he was doing a kosher bakery, with an extreme focus on customer service. There is so many legends of ‘great’ Noah’s service. It is like the first day that the first store opened. They closed, and they realized they had all these bagels that were just not sold. I mean, some number that they didn’t manage to sell.
So, Noah on the spur of the moment is reputed to have put those bagels in a bag, and taken them down to the People’s Park in Berkeley, and given them away to the homeless people that are living in the park. That gave rise to every store, every Noah’s from then on, I don’t know if it is still true, but certainly when I was there, any leftover bagels were donated to food banks and things like that, for years and years to come.
By the way, there is a word that stayed with me “hamisha.” It’s a word that Noah used to describe the feeling that you want to get when you walk into a Noah’s, which is the feeling of ‘coming home.’ This feeling that you’re walking into your mother’s living room, or something like that.
Andrew: So, how were you doing that there at the company? What was your personal part of making people feel like the store that they’re about to walk into is like coming home?
Interviewee: You mean now, or back then?
Andrew: Back then, when you were starting up all these stores. How did you do that? I want to get a sense of what your personal experience was there.
Interviewee: Sure. I took that very seriously. For me, there were really several parts of it that I focused on. Really, it was hiring and training that I focused on, because we were opening so many stores so quickly. You couldn’t just kind of promote a couple of people, and move a couple of people around.
We were going from a base of, well zero I guess, I guess, stores in Los Angeles to about 150 in a course of a year. So, we were hiring thousands of crew members, and dozens–maybe even hundreds of managers, and so we really poured a lot of energy into the selection process.
Now, how do we find the people who have that heart, that kind of “Noah’s” heart? It’s not just the ability to run a restaurant, or anything like that. It’s also, do they get what we’re trying to do here? Which was something that we felt, and the customers felt was really special.
So, then the training. I mean, we were really obsessive about training. Managers had two full months of highly supervised training, and it was not just in the typical aspects of running a store, but also in the culture of Noah’s. What were we trying to achieve?
We had a group of non-Jewish employees, who spoke a lot of Yiddish. You know what I mean? Because you just picked up all these terms and phrases, and everything. People got to be, not only experts in the food, but also in this sort of atmosphere we were trying to create, and this sort of heart and soul behind it.
So, selection and training is a big part of that. So, I was engaged in that all the time.
Andrew: OK. Alright, so then why did you decide to go and get an MBA afterwards?
Interviewee: Actually I was doing an MBA during that–doing an MBA during that. My logic for an MBA was actually remarkably rationale if I look back on it, which is that I wanted to have a career either as a general manager or an entrepreneur. I am still kind of thinking maybe there is two different career paths there.
So, my feeling was, I am naturally inclined toward the sort of marketing and people side of the business, but I have to be conversant in every aspect or every discipline of business.
So, rather then go take a job in an accounting department somewhere for a couple of years, which might of killed me, rather than do that, and then do two years in this and two years and that, I thought, “Well, an MBA is not going to teach me to be an accountant or teach me–but it will make me conversant in the language, and give me the basics of it.”
So, that was my feelings, was that I could do this, and then come out of it with this sort of breadth of perspective of a general manager. So, that is why I did it.
Andrew: Did you get that out of going to school?
Interviewee: I definitely did. I definitely did. I think if you go to business school, you have to know what it can and can’t do for you. It can’t make you a good marketer. It can’t teach you to be a leader, really. I mean what it can do, I feel is that it can make you aware of the things you need to think about, and help you understand the limitations of your knowledge, so that you turn to the right kind of people when you hit those limitations.
So, taking all and all, business school is terrific.
Andrew: There is another benefit that I saw, as I was going through the biographies of the three co-founders of the company. You all seem to have met at UCLA.
Interviewee: Not exactly. I met Rich at the Anderson School at UCLA. He and I were classmates. Then coincidentally, Robert went to UCLA for undergraduate. I met Robert at GFC.
Andrew: I see. OK. So, you didn’t meet there, but all three of you did go.
Interviewee: We did, coincidentally kind of, but Richard and I met there.
Andrew: Gotcha. OK. Alright, then what was the next step?
Interviewee: Well, at some point the culture of Noah’s began to change. The company was sold twice actually, the last time to the Boston Market Organization, in the form of Einstein Bros. Bagels. Which was OK at first, and then there were really I think there were a number of misunderstandings about what made Noah’s a strong brand on their part.
This is a story–I did a presentation on this in the MBA school. There was a point where the management of Noah’s said, “Only 7% of our customers keep kosher.” By the way, I am the farthest from a kosher keeping–I am not Jewish by any means, and I don’t keep kosher at all. I love bacon.
But 7% of our customers keep kosher, but having kosher in the store means we can’t have a ham sandwich or even a turkey and cheese sandwich. So, the logic went, “OK. If we lose the 7%, because we’re not kosher, we’ll replace it by selling these other things.”
I remember at the time thinking, “That’s not how it is going to work,” and saying, “That’s now how it is going to work,” and it did not, in fact work.
Andrew: Why?
Interviewee: Well, because you’ve taken the 7% of people who love you, think of you in a way that brings goose bumps to them, and told them to, “Go to hell.” You’ve told them to leave your store.
And more importantly, you’ve said to the employees ‘Remember how we used to stand for something other than just selling bagels and cream cheese – we don’t stand for that any more’, you know, and actually there’s a story to that.
Howard Shultz, I’ve never met Howard Shultz, I’d love to meet him one day, who is, he’s not the founder of Starbucks exactly, but he’s one of the…he’s the guy who really grew Starbucks, I’m sure you know who he is. There was a point, I think in the 80’s, and I might mangle this story but it’s a very interesting contrast, where somebody came to Howard, and coffee bean prices were going through the roof, and it was a threat to the survival of the company because the cost of coffee is a big part of their business, right? And so, gosh, this crisis at Starbucks – ‘how are we going to make it?’, and so of course somebody comes to Howard and says: ‘You know, if we just kind of kick down from the top grade of beans to this one, everything’s cool, and we’ve done a survey right here, that says only, let’s just say, 7% of customers can tell the difference between the best coffee and the second best coffee, and his response was, ‘No, we’re not going to do that, we’re going to find some other way to get through the price crisis, because even if nobody noticed, not to mention the fact that you’re probably losing your best- the employees will notice.’
Andrew: I see.
Interviewee: And the employees will know that we’ve come down a notch from our whole thing about quality, that we’re not talking about that any more.
Andrew: I see.
Interviewee: Which I though was an interesting contrast in those two stories, you know.
Andrew: Yeah, Noah’s Bagels then, even though 93% of the customers didn’t care about kosher, weren’t interested in it…
Interviewee: They didn’t keep kosher, it doesn’t mean they didn’t care.
Andrew: I see, they didn’t keep kosher, but they cared about it in the sense that this was part of the spirit of the company – this was what the company stood for.
Interviewee: Yeah.
Andrew: And that’s what they connected with.
Interviewee: I think that’s right, and whether it was just the perception from the outside, or really it cut some of the heart out of the spirit of Noah’s from the inside, it works either way. And so that was really the end of the growth of Noah’s, and sort of the end of that, sort of, animating spirit behind Noah’s, and so I decided, and this is ’97, I decided, you know, this is a nice sort of breaking point for me to think about what else I want to do. There were, about, I think, a dozen or two, sort of, upper mid-level managers like me, who left in the space of two months, because we just weren’t with it, you know, it just wasn’t what we wanted to do any more. And I though, you know, I want to get into this whole internet thing, and that was, for me, the point where I said ‘You know what? I don’t want to do – it’s not that it was about bagels for me, it was about Noah’s and, you know, about what Noah’s was doing and making possible. The thing I want to be doing is I want to be building the Internet as this is getting started.
Andrew: What was the vision for yourself, I mean, maybe you were in Japan, and you weren’t sure what you were going to do when you came back to the US, but, at least going into Noah’s and going and getting your MBA, you had a business vision for yourself – What was that?
Interviewee: Well, I guess I had two thoughts. One, either I would run a business that was doing something great. That was, you know, my thought was maybe I’ll run a business like Noah’s, you know, maybe I’ll kind of rise through the ranks, and be the CEO of a business like that, or Two, maybe I’ll start a business, and it really wasn’t clear to me which of those was a better path, or the clearer path, until a little later.
Andrew: OK, all right, so then you got your MBA, you decided to leave Noah’s, what was next?
Interviewee: Geocities.
Andrew: OK.
Interviewee: I know everybody remembers Geocities, or maybe not everybody, but Geocities was, you know, right in Santa Monica, sodown the road from us here in Pasadena, and were just beginning to do a little thing called e-commerce, made some relationships with Amazon, and CDNow, which some of you will remember, and Egghead Software, which probably even a few of you will remember, and a handful of these, sort of, early e-commerce titans, you know. And, so, Geocities, for those of you who don’t know, was a massive site, it was the, I think in ’99, it was, at one point, the third biggest website in the world. And so, then the question was, ‘There’s this thing called e-commerce, what are we going to do about that?’. So, I was in the middle of my MBA program, and a man named Jim Ray, and a guy called Rich Rig, and another guy named Dick Hackenberg met me, and said, ‘You know, we’ve got to throw this guy at the whole e-commerce problem and see what happens’. I had, you know, experience with retail, and sort of a marketing inclination, and whatever, so in I went, and had the relationship with Amazon and all these guys and really learned e-commerce form that.
Andrew: All right, let’s talk about where the company was at the time, Geocities was just a place people went to create their own personal homepage on the Internet, and it’s known for having ugly homepages today, but, back then, people loved the bouncing smiley faces and the glitter letters…
Andrew: … glitter letters. Frankly, just a few years ago, they loved it on MySpace. I bet if somebody created it again, today, people would still fall in love with it.
Interviewee: That’s right. It wasn’t that GeoCities was ugly, it’s that the internet was ugly, in that sense. It was a different sensibility, at the time. It was kind of, how many things can you shove onto a page and make something out of it.
Andrew: And the way they made their money was through advertising on these pages that people created. And, it was also a time where e-commerce was isolated. I mean, each product seemed to have its own website. So, CDNOW was the place you went to buy your CDs. And, Amazon was where you went to buy your books, and I forget the other. Egghead is where you went to buy your software. And, things were starting to change and I guess, GeoCities said, let’s get into e-commerce because they wanted a piece of the e-commerce revenue? Why did it make sense for them to do that?
Interviewee: On one level Amazon and CDNOW and all those guys were advertisers, you know? And, on another level, here you’ve got millions of people on GeoCities who were very, very interested in stuff that was relevant to them. So, they organized themselves into neighborhoods. You can probably remember Silicon Valley and Basin Street and all the different neighborhoods of GeoCities. And so, it wasn’t a stretch to say, Gosh, if there are all these people in an Anime neighborhood or a Cajun cooking neighborhood, couldn’t we sell stuff to them. You know what I mean? So, that was hardly a stretch. So, that was the idea, it was, we’ve got these self-organized communities. The content should be pretty easy. If you’ve got all this stuff to sell them, that you can easily target and move around or whatever. That you ought to be able to do that.
Andrew: And, you guys weren’t going to sell and fulfill the orders directly. It sounds like you’re saying you’re going to have partnerships with.
Interviewee: Ship them straight over to Amazon or CDNOW or whatever it was, yeah.
Andrew: So, it’s not so much e-commerce as still an ad relationship, but more of a partnership, than an advertiser or publisher relationship?
Interviewee: Yeah, a big part of it was that we had a direct incentive on the sale. So, they advertised with us and, then, we were also sort of a mega-affiliate, if you will. So, what we learned from it is, what works and what doesn’t work in e-commerce. In many ways, what works and what doesn’t work hasn’t really changed much, since those days. Interestingly enough.
Andrew: Do you have a couple of lessons that still hold true today?
Interviewee: Sure, it’s absolutely the case and I’ve seen this two or three times over a decade, where if you say to somebody. Let’s suppose you, we’ll go back to the Cajun cooking example. You know that somebody’s interested in Cajun cooking. If you give them two different things. If you give them a book about Cajun cooking, like some popular title. Hey, buy Paul Prudhomme’s Cajun cooking book. Or, if you give them a thing that says, find Cajun cooking books. The more general one, that’s still not too general, is going to outperform the specific one by a factor of four or five. It’s very robust. Very robust result I’ve seen again and again.
Andrew: Do you have another one?
Interviewee: Yes, basically. Well, this is a little more general, but in general, with e-commerce, context is really important. So, a lot of time at GeoCities was spent thinking about where to shove different kinds of ads or whatever. But, in the end, ultimately, what you have to do is, you have to create some context for people to be interested in buying something. So, the farther you are. If you’re deep into a content site, let’s say, you’re probably not going to sell anything there. So, if you’re at a page where, for example, you’re deciding what you might do. That’s a better time to say, hey, provided it’s relevant, maybe you ought to think about buying some Cajun cooking books. But, once they’ve gone a couple levels deeper and they’re doing something, the context is not there. So, it can be as targeted, it can be like, Hey, buy Andrew Warner The Cajun Cooking book. However targeted it might be, the context is lost. Do you see what I’m saying? So, it’s hard to get somebody to divert from an activity to go buy something. And, I think that’s still true today.
Andrew: Is there a way, then, do you think, to get people to navigation pages more frequently than they would otherwise?
Interviewee: I’m not sure, I’m not sure. I wouldn’t take a stand on that issue. I think, generally speaking, you want to make it possible for people to do the thing they want to do. When you’re on a website, rather than try to come up with clever ways of turning them in the direction of doing something else. I think you need to, from a business point of view, you need to make it so that the thing that makes you money is the thing that people want to do on your site.
INTERVIEWEE: –the thing that people want to do on your site.
ANDREW: Let’s read a couple of the comments here and then we’ll go back into the GeoCities story. First of all, Cover Cash is saying that maybe some of the bad videos that were produced, I guess our video is going a little grainy on the Internet, and he’s saying that it might be my connection. No way, my connection here is solid. I think it’s just because we’re piping it in so many different directions in order to get it online for the live audience.
INTERVIEWEE: I just think the wealth of the contents is just too much for the Internet to handle, between you and me.
ANDREW: I agree, this is too much information. Cover Cash, Dave Viner I guess he went to Anderson, so he’s saying go Anderson, and I guess he worked with GeoCities.
INTERVIEWEE: He did!
ANDREW: Oh, so you know Dave Viner.
INTERVIEWEE: It’s Veener.
ANDREW: Oh, it is? Why do I keep saying Viner? Of course it’s Veener, I know him. And a bunch of people are just reminiscing about the old days with GeoPoints and GeoStores, says Casey Allen. You remember her too? What are GeoPoints?
INTERVIEWEE: I don’t exactly remember. Drew Bolden would know, who’s possibly listening. But somebody probably knows in the audience, you know. I’m sorry, I should know. It’s been a long time. I’m old.
ANDREW: No problem. Let’s move forward with the story. I probably can’t remember either. If Casey, the person who wrote about GeoPoints remembers, I’d love to see the answer in the comments there. OK, so you stuck with GeoCities until after they were sold to Yahoo! When did you leave and why?
INTERVIEWEE: I left at the time of the acquisition. Whether Yahoo! was interested in me, I don’t know, but I was really interested in moving up and being part of Yahoo! But Yahoo! was a great organization at the time. Still are, in many ways, but was really sort of at the height of its powers in ‘99. It just wasn’t what I wanted to do. I didn’t want to move, I didn’t want to be part of really, really big company. And so instead, Robert and I, and actually Rich as well, joined in a Venture-backed, eLearning/eCommerce start-up called Kiko, which you may have read a little bit about. It was an ambitious project that was really buffeted about severely by the happenings over the next year or so. But it was a great time, and then it went [fist hitting other hand sound] really bad and real fast in ‘99-2000.
And Kiko was in the “Go, go, go,” model of ‘99, and then about the second quart of 2000 it whipped all the way around and so the same people that were saying, “Hire everybody you can! Just hire them all!” were wagging their fingers saying, “You shouldn’t have done that. You should have focused on…” And you just four months ago said…And the three of us were at an interesting perspective, because we weren’t senior management, we were kind of like peering, we were kind of like that next level down peering in on it. So we had a good observational point of view on that, without having the direct ability to deal with it. You know, it was a very compelling idea, which was that if you that needed to [xx] up or just learn stuff, you could go into a system and pull out a sort of customized set of learning materials that they could do online. And then you could establish a prize for them that was an eCommerce based prize. And so they worked through it and if they did they’d get a prize. It was a pretty cool idea and still no one’s done it. And if someone wants to do it, I’m happy to give you my input.
I think it’s a great idea. And so that sort of simple peer focus was terrific. It just went wayward as 2000 went on. And all of a sudden [xxx] businesses weren’t in fashion anymore and we were spending so much money on stuff that we needed to get funded again in 2000, and to do that you had to compromise this, that and the other thing. And pretty soon the original concept was lost and it became a more B to B knowledge management sort of thing, which wasn’t super interesting. But that’s how it went. It was a very interesting transformation, how it happened.
ANDREW: Beyond the interest of the company and their goals and how they executed it, was the reason you were there the good exit? That they had good funding, it seemed like they were going to flip or go publicly, and this was the next level up after GeoCities? You get in early, you get to leave early, and then you get that done and go get to do your own thing?
INTERVIEWEE: Yeah, it sort of fulfilled that idea that I had, which is that I wanted to be part of successful things, and make my mark on it. And you know, the mission is one that I and Rich and Robert, and I’ll say everybody, honestly believed in from a societal point of view. We thought it was one that was really important.
ANDREW: Why didn’t you go and start your own business after GeoCities, considering how much money was out there at the time?
INTERVIEWEE: You know, somebody asked me, when I left GeoCities, somebody said, “Are you going to start a business now?” And I said, “I’m about a year or two away.”
You know, like to me, and I was, you know, 20 or so, again, by Andrew Warner standards, I’m way late getting into the thing. But for me, you know, it was one of these where I just felt that there was a little more, you know, that I wanted to see before I did that. And so, I don’t know. For whatever reason, that just felt right to me.
Andrew: Well, let me say this, that my goal isn’t to fit anyone into a specific mold, or say why aren’t you…
Interviewee: Yeah.
Andrew: performing to anything. My goal is to just bring out the fact that this is a different path, and to understand your path, and to point out some of the differences between each entrepreneur’s path.
Interviewee: Yup.
Andrew: And that’s the only reason I’m saying that. OK, so what happened at Kiko at the end, just before you left?
Interviewee: Well, Kiko went through a number of bad things…
Andrew: Hmm-hmm.
Interviewee: to say the least. Really, never really was able to generate revenue. I mean that was, you know, a little problem. After two or three years, you should be generating some form of revenue. Went through successive rounds of layoffs, and you know, dramatic, strategic shifts in the business. And so, over the course of about nine months, Rich, Robert, and I all left, at different times. And you know, it’s funny, because I guess I had, at that point, or at least up to that point, a little naivete about how this stuff really worked. And so I think I was a little slow coming to grips with the fact that this isn’t working out, you know. But once I did, I felt, you know, lesson learned. You know, what can you take away from that experience. And in that interim period, where the three of us were sort of drifting away, one by one, from the business, because we all, you know, lived sort of nearby in Pasadena, and we, you know, hang out on the weekends, and whatever. We started saying, you know, we should do our own thing some day. And then we started thinking, you know, what about now, you know? I felt right. I felt ready, finally, you know.
And Rich and Robert certainly, you know, were ready. And the three of us had complementary skills in many ways. And so, you know, there was a project that Robert had been working on that didn’t work out, but the core concept was one that we all liked. Talked about it. Put some sort of hours into it in our spare time. And thought well, you know, we can do this. This is right in our wheelhouse. This is e-commerce. This is marketing to consumers. This is, you know, using, you know, simple web technologies to match up, you know, inventory with people. And do it mass customizable way. We can do this. And we can do it by ourselves, and with a handful of friends that we’d met along the way, from GeoCities, and Kiko, and elsewhere, who were good, you know, web and e-commerce people. And so that’s what we did. You know, we began to really put all the pieces in place for Goldstar, which was called Goldstar Events, at the time. And then launched in February of 2002, really with no fanfare, you know. Very little to sell. Very few people to sell to.
And kind of committed to each other to spend, you know, six months, maybe a year, in addition to whatever other duties we had, you know, to pay our bills and that kind of thing, seeing what we could do to make the thing work. And that was a challenging time, but it was also kind of fun because it was a blank slate. And we were learning everything. I mean, you know, we knew a lot about e-commerce. We didn’t know the specific nuances of selling tickets, but we really didn’t know anything about live entertainment. I mean other than as consumers. You know, we didn’t have a lot of relationships with venues, or anything like that. So it was a very interesting time, you know?
Andrew: Did any of the three of you go and work somewhere else while you were building Goldstar?
Interviewee: We, Robert and I, did little projects for people, like web development, web consulting projects. Which frankly, I’d like to thank Peggy O’Brien, who at the time was the Executive Director of Cable in the Classroom, and who’s now the Chief Communication Officer for the DC Public Schools. Because, you know, she was a great believer in me and Robert and Goldstar. And really, you know, had a lot of big projects for us to work on with Cable in the Classroom, and other stuff as well. But that was one of those things where you’ve got to keep body and soul together. You know, and I think any entrepreneur that’s not prepared to sort of face the challenge of that, probably isn’t ready to be an entrepreneur. You’ve got to, if you’re business isn’t doing it, you know, you’ve got to figure out a way. And that’s how we did it, you know.
Andrew: How long were you doing other projects on the side?
Interviewee: Oh, probably a year.
Andrew: Wow.
Interviewee: A year and a half. Yeah. Yeah, I mean it was, you know, it’s kind of like having a full time job and a full time job, you know.
Andrew: Yeah.
Interviewee: You know. I mean we didn’t really pay ourselves for about two years. Because we felt very strongly that we needed to, A, not throw, you know, a million dollars of our own money, which, you know, would have been hard to generate.
But I mean, you know, we didn’t want to throw a bunch of money at something, and sort of amp up the risk in that way. Nor did we want to, and I think this is critical, nor did we want to have another influence in the business, at that point, by taking somebody else’s money. We felt very strongly that, especially at that point, where the business had no strength. You know, it was small, and it was weak. That another influence that didn’t get what we were trying to do, that didn’t see what we were seeing, would have ruined it. And I think that’s really true. I mean, you know, in retrospect, we should have gotten half a million dollars, and sort of like short cutted the first year, but it’s in retrospect, you know. So yeah, that’s how we did it. We did it ourselves.
Andrew: I love your site now, because of little touches that you anticipate. I think, for example, when I scroll down and look at a list of events,
Interviewee: Yeah.
Andrew: that top title bar stays always at the top of the page. Even as I scroll past it, it doesn’t allow, it doesn’t slip off the page. And that’s helpful for me because it lets me see what each column has in it.
Interviewee: Right.
Andrew: There’s so many little touches like that throughout the site that make the experience intuitive and pleasurable.
Interviewee: Right, thanks.
Andrew: I’d like to know what that first version of the site was like. What did that look like?
Interviewee: Less like that. If you went to Way Back Machine, you could probably see it. I mean the first challenge we had was, I wouldn’t say we had to disguise the fact that we had nothing to sell, but we had to do something about the fact that maybe we had five events to sell, you know. And so at first, we were much more about, because we had to be, we were anticipating a structure more like the one we’ve got now. But at first, we had to sort of say, “OK. Here’s a great event if you’re going on a date. Here’s a great event if you’re going out with co-workers.” You know, so there it was a little more like that. You know what I mean? Like so we built out a little more sort of structure and content to say, “Hey, comedy club”, you know. “Hey, co-workers”, you know. And here’s and event that you can do that.
Andrew: But it was pretty much the same five events. They were just re-packaged under different titles? Pretty much?
Interviewee: Sort of, yeah. I mean, sort of. And you can easily discover that there are only five events, and we weren’t trying to hide that. But yeah, that was the thing. You had to do something with it to give people a reason to buy. You know, and that ultimately, every entrepreneur faces the same thing. I mean, and every marketer. It’s about giving people reasons to buy. And if we didn’t have a tremendous amount of selection, we had great prices. We had good events. And we could tell you what they might be useful for that you might not have thought of. So, you know, being an early entrepreneur, and I think, any entrepreneur, it’s about hustle. It’s totally about hustle. You can’t, it’s like you can’t fight a guerillas war if you’re not out hustling the regular army. You know what I mean? I mean, in a shooting match with a regular army, they’re going to beat you. So, you got to at least have hustle working for you.
Andrew: How did you get the first few events?
Interviewee: Personal charm, on the part of Rich Webster and me and Robert [xx]. We really, going to venues and saying, “hey, look at this. You know, we’re going to do this thing. It’s really a no-lose situation for you, and we’ve actually got pretty good credentials in the e-commerce business. Look at what we’ve done before. And we promise that it will get better. And we’re nice guys. And we’re going to work really hard to deliver new customers to your venue.” And so, in some degree, it was a case of putting together a proposition that was hard to say “no” to. Why would you say “no” to it? It’s a great looking site, you got guys who can demonstrate to some degree that they know what they’re doing in this area. And it doesn’t cost you anything. And all that type of stuff to where, you know, a rational venue’s point of view, they say, “OK, we’ll give you guys a shot.”
Andrew: Were you cold calling the venues?
Interviewee: More or less. Yeah, more or less.
Andrew: So, you would just say, what do you mean by “more or less”, but what more than cold calling did you do? How did you find the right people, the right venues?
Interviewee: Well, it was easy to identify folks who had, for example, done discounts in other places, you know. So venues that listed discounts elsewhere, even though there wasn’t any place that had many of them, you could sort of figure, “Well, if they’re doing that there, maybe they’d do it with us as well.” You know?
Andrew: So what other places were they listing?
Interviewee: I can’t even remember. I mean you’d see a coupon on an email, or you’d see on city survey, you know, just wherever you might find them.
Andrew: I see. And if you saw that someone was already out there offering a discount, they would probably be interested in partnering with you, too.
Interviewee: At least that part of it you wouldn’t have to start completely from zero, you know.
Andrew: What else did you do to find the original venues?
Interviewee: Just research. I mean, you know, we made a decision to focus on Los Angeles. And I think that was a very good decision because, you know, it’s inherently a local business. So having a little smattering of events here, and a little smattering in San Francisco, or a little smattering in New York, is like building a fire, you know. You need critical mass of burning material.
And our feeling was, if we can’t do it in one place, we can’t do it. So, let’s do it in Los Angeles. So, it was not hard to go to CitySearch or go just, Google performing arts venues, or look up every comedy club in the city. Make a list, figure out who the contact people were, you know, reach out to them and say, “hey, we’re doing this thing”. You know, and that was it. And, you know, that approach hasn’t materially changed when we go into a new market except that now we come with a reputation and we have connections, and things like that. But, it’s time, we didn’t have any of that.
Andrew: What’s the deal for the venues? You guys get to offer discounts. How do you convince them to give you discounts? What’s the deal that they get?
Interviewee: Well, if you think about that, a venue has an expiring inventory. Has an expiring inventory on a product that has no marginal cost. So, Andrew, if you walk up to a box office at 1 minute till 8, and the show’s at 8 o’clock, there’s no cost to the venue of serving you, right? There’s no incremental cost. So, your ticket is pure profit, in essence, once the fixed costs have been allocated. So, what was the deal for venues, right? So, from our point of view, what we were doing is we were saying, “look, we are going to reach a new group of people. We going to reach people that you might not reach. Tend to be a little younger, tend to be a little more diverse, tend to be a mainstream education entertainment consumer rather than a committed, already in the boat, you know, theater fan or comedy fan, or whatever it is.” Because we’re going to create an overall value proposition that says, “hey, if you want to offer your entertainment more, we’re going to make that easy for you.” So, what we’re doing is taking unsold inventory, which has no cost basis for them, and we’re not charging them for simply being on GoldStar, and turn it into a strategic marketing tool. Not only is it, drop straight to the bottom line as profit. But it also brings in a new audience of people who are going to come to the venue and enjoy the venue and start thinking about whether they want to come back to the venue.
Andrew: Are you buying in bulk before you list it, or do you only pay if you sell?
Interviewee: Yeah, we’re not buying tickets, we’re basically selling on behalf of the venue.
Andrew: OK. And another thing that I’ve noticed about the site, maybe this is my own personal experience, but it used to be easier to get a ticket. I can wait a little bit longer, I can say, “Olivia, let’s think about it”, and the ticket, I know, would be there. Just before we left to come to Buenos Aires, I would see that if I didn’t buy the ticket quickly, somebody else would buy it, and you guys would run out. And, we couldn’t keep postponing, we couldn’t keep procrastinating.
Interviewee: Yeah, you know, and our job is to make sure that you can buy the ticket that you want. But, sometimes, it doesn’t work out that way. But, the community’s bigger and we’ve been able, more or less, to keep up. But, sometimes, that does happen.
Andrew: I thought that was intentional. I was talking to Steven Boal of coupons.com, who said that that’s an upside of growing. That now people would jump on coupons there quickly, because they know that there’s so many others who are going to jump on them,, and…
Interviewee: There’s an, I want to say for the record, that even though that’s true. I mean, if people have an increased sense of urgency, that certainly helps us. The downside is, if we weren’t able to sell you a ticket you were prepared to buy, we didn’t sell you a ticket.
Andrew: I see.
Interviewee: Which is a bummer. And so, our goal is to get people out more, right? So like, bottom line, everything that we do and everything that we’ve ever done, is to get people out more. So, playing those kinds of games does not ultimately, we don’t believe, it doesn’t ultimately help us. It helps for people to think they ought to take some action sooner rather than later. But, we want to sell you a ticket. We want you to go to a show. When we can’t sell you a ticket that you want, it’s a bummer, because that doesn’t make us any money, and it doesn’t make you happier with us, or get you out to a show. So, I want to go on record as saying, “we do not engineer scarcity.” And there’s a big mindset in the live entertainment business that all they have to do is engineer scarcity, and people will come pouring into their venue. And I think it’s foolish. You know, frankly, I think, I was at a conference a couple years ago, Broadway Producer’s Conference. Where the big keynote speaker said, “this is all about creating perceived demand, people. You know, you got to make people think you’re selling out” And I’m sitting here in the audience thinking, or, you could create actual demand.
Andrew: Ha, ha, ha.
Interviewee: By giving people reasons to want to go out more. How about if we focus on actual demand?
Andrew: That brings me now to the next piece of the puzzle. We now know how you got the early venues, and today you guys have, I guess only Ticketmaster has more venues than you.
Interviewee: As far as we know. And some of those venues are the same. And we work with them both.
Andrew: Right, OK. So, that’s how you got the venues. Let’s talk about how you got the demand. How did you even get anybody to come to your website and then take a credit card out and buy from you? How did you do that?
Interviewee: I mean, one person at a time. I mean, it really is true. I mean, early on, there were a couple of things that were key for us. One, we sort of leaned on our personal networks.
Probably the first couple of thousand people that were there, you know, came from people that we knew who knew people. And that’s kind of silly. But that’s a good foundation, you know. You’ve got to at least hve that foundation. The second thing that we did early on. Because we didn’t go and spend, you know, a bunch of money on, on buying banner ads, or anything like that. Because we weren’t really in a position to do that.
About a month or so after the company started, we came up with this idea that we could go to the HR Departments in big companies around Los Angeles, like CountryWide Home Loans, and EarthLink, and So Many Pictures, and a handful of others, and deliver for them a page full of event deals, you know. So, it co-branded to them, no muss, no fuss, great offers with they were, and, you know, great shows. If only they would email their employees to let them know that this exhibit existed. And, so, you know, that was a lot of work.
We had to find the people. We had to do an original amount of [inaudible], and all the rest of it, but. But, you know, it was of interest to them. They were looking for ways to give benefits to people and, sort of, give people something extra. And it worked. You know, it was the kind of. Yeah, it was all shoe leather. You know, it was hustle. Making the page, doing exactly what they would need for it to do. And really just, you know, being very, very helpful as we could, in, in getting that page set up for them, and.
And, you know, it worked. So, at that time, we, we bought a few Google keywords and a few things like that. But, really, we might have signed up a few dozen people a day in the early, early days of Goldstar. But we, you know, CountryWide, CountryWide Home Loans might send out an email and sign up a thousand people in a day. And, of course, that also activates a little bit of a viral build as well. Because those people have really good experience and, you know, share with friends and that kind of thing, and so, about.
Andrew: [51:49] But then it would, the page would look like CountryWide’s page, it looks. It would look like CountryWide had an events page.
Interviewee: [51:56] Well, it would look like a Goldstar page. But it would also say CountryWide. Because it was very important for people to understand they were, you know, having developed a relationship with Gold, this thing, called Goldstar Events. So, it was kind of co-branded. And we told them how it would work. But it was clearly sort of like this is for CounryWide, and we. We would, you know, at that time do things like offers that were just for any [inaudible] bank employees, or something like that, you know, and.
And, so, for six to twelve months, this was. This was the thing that helped us break that vicious cycle of nothing to sell and nobody to sell to. Eventually, it became much more efficient for us to, to go back to a more, you know, one-to-one consumer type model. But to get over that hump, I think, you know, it took this sort of, again, hustle, you know, you got to. You got to come up with something that’s gonna work. It might not work forever. You don’t need it to, you know.
Andrew: [52:44] Yeah. It gets people in the door. Now, I want to understand CountryWide, what their incentive is. They weren’t buying the tickets for their people, right? Their people were, it was just a service that that they were offering their people, just turning their people on to this and saying. Here’s a great deal that you guys might be interested in.
Interviewee: [52:59] Right. In their case, actually, they had an elaborate, hard ticket-selling benefit. So, they were moving, you know, cash and hard tickets around this massive organization already. So, if you wanted to buy a ticket to whatever thing, there were some that they had available. But it was this elaborate, sort-of inter-office mail, sort of, nonsense.
Andrew: [53:20] OK. So, the company would buy the tickets on the behalf of their people, I see. And, so, you made it easy for the company to buy tickets on behalf of their employees.
Interviewee: [53:27] Yeah. No. No. It was that the employees would just buy them directly, so that the company no longer had to get in the middle of that ticket purchase, which is really not a value-adding, you know.
Andrew: [53:37] How did the company ever get in the middle of a ticket, ticket-buying experience?
Interviewee: [53:41] You know. You know, and I’m sure they still do this to some degree with some things. It’s just that companies are always looking for ways to give people little perks, and. And HR Departments are constantly looking for ways to sort of improve.
Andrew: [53:53] I see, they were giving people discounts on tickets. But in order to get the discounts before GoldStar came around, people, the employees would have to go through HR somehow.
Interviewee: [54:02] Yeah. An email [inaudible] at HR, you know. You put 25 dollars in an envelope. And you put it into inter-office mail. And, then, you know, it goes to her. And Johnny in Sector 7G is, you know, [inaudible] tickets [inaudible] to him, you know.
Andrew: [54:15] So, how did you even discover this, this pool of potential customers. I wouldn’t even think to go to HR for this.
Interviewee: [54:23] You would have. You might have. You know, it’s just one of those.
Andrew: [54:25] How did you discover it?
Interviewee: [54:29] Well, I don’t remember exactly. I mean, we. We just talked about how, what can we do here, you know, what, what’s available to us. And, you know, I had spent some time at Noah’s, technically in the, in the HR Department. So, I think something about my, my short stint of time where I was reporting up to the HR Department. I just thought. They did a lot of things, you know, at Noah’s.
I should have done a Japan tie in there, cause it. I thought of it because of something that happened. No. I’m kidding. That must, that must have been it.
You know, the idea that one HR manager who has a lot of credibility with 10,000 employees could send out an e-mail that says, “Hey, go to Gold Star” just struck us as kind of a winner, and it was, you know, for a good little while there.
Andrew: Alright, what about this: Why do you guys require registration before people can get at these deals?
Interviewee: Yeah, it’s a good question. You can actually get around the registration if you want to. It’s not-
Andrew: So it’s not required but it’s urged, and I’m asking because I’ve been adding a registration to Mixergy, I’ve been testing it, I’ve got reasons why I’m into it, but I want to find out about you.
Interviewee: Well actually, and this is another one of these just sort of e-commerce nuts and bolts, we read a study – there’s one Ann Holland who runs the site called Marketing Sherpa, do you know, great site, and Ann’s terrific – and several years ago she published a study, I can’t remember who did it, the study said requiring registration increases sign ups, increases sales. And there was data and everything, and I’m looking at it being a sort of like open internet sort of dude, everything should be open man, I thought that’s nonsense. Robert and I are just – we put a lot of stock in Ann’s work and we’re like “this is ridiculous, that’s just going to turn people away! They don’t want to sign up for a thing that they don’t even know what it is.”
So we actually tested it, scientifically tested it, and lo and behold, when we sort of said “hey you know, Gold Star, this is what it’s about, being a member is what you ought to do – it’s not just about buying a couple of tickets, it’s about changing your lifestyle, going out more often, and learning about exploring your city, that kind of thing” – lo and behold more people signed up and the people that signed up bought more from us. And so of course based on that we said “that’s not true.” So we had to test it again. So we did, and the results were exactly the same. And so, I think, and then we tested it again a couple years later and lo and behold the exact same thing. And I’m speculating here because you know the vagaries of the human heart are many and so it’s hard to say exactly, but we feel that perhaps by saying to people “here is what this site is, this is not a cash register for you to buy cheap tickets.
This is a place for you to change your lifestyle and go out to live entertainment more often, and heres how that’s going to happen, here’s how you do it.” I think it kind of causes people to actually buy into the concept more, like this is what we do. That’s the theory I had, that’s about all I can do as far as why, I just know it’s true and you know, it’s helpful as well for the venues because discounting is something that there’s a little sensitivity to. And so we say look, this is a membership-based site, you don’t have to pay to be a member, but the idea is people have bought into something bigger than just buying a couple of cheap tickets.
Andrew: Okay, it does also make the discounts feel a little more special
Interviewee: I think so.
Andrew: Like only I get it. This is the only way to do it, I’m in the know.
Interviewee: You are. You definitely are
Andrew: (laughs) I finally figured out where all the action is in L.A., that was the feeling when I first moved there and discovered you guys.
Interviewee: That’s great.
Andrew: Let’s see, let’s see if we have any questions from the audience and then – oh, I’ve got a question: so, revenue. What’s your revenue last year? Let’s wait for the video to catch up, okay there it is.
Interviewee: I can’t remember what just- what sort of slightly masking answer I was going to give you, but I’ll tell you it’s high single-digits in millions of revenue, and some multiple of that of ticket sales, so we don’t count the whole sales revenue, just our part of it.
Andrew: I see, so only, so over five million in revenue, and you’re profitable.
Interviewee: Yeah.
Andrew: Okay, and you sold 20 to 25 million tickets last year?
Interviewee: No, no, it wasn’t that bad.
Andrew: Oh dollars, sorry 20 to 25 million dollars.
Interviewee: Somewhere in that ballpark, it might have been a little higher than that.
Andrew: Oh wow, okay. Alright-
Interviewee: And we’re probably, I was going to say, our growth rate has been, you know, 50 to 60 percent a year, and that’s going to continue this year as well.
Andrew: How many cities are you in?
Interviewee: Well depending on how you count ’em, we consider it 11 – we’re in Seattle which is our newest one, so here in Seattle, the Bay area, Los Angeles, San Diego, Las Vegas, Chicago, D.C., New York, and Boston. 2 or 3 more this year.
Andrew: Alright, so you guys are doing millions in revenue, we talked – that’s where you are now – we talked earlier how you had to for your first year work for someone else just to bring in enough revenue to keep the business going
Interviewee: Well to keep our sales going really
Andrew: Right
Interviewee: The business didn’t really cost much, it was really us, that, you know
Andrew: Sweat that went into it.
Interviewee: Yeah. Yeah.
Andrew: Let’s talk about the first million in sales. Do you remember what that was like? What was your first million like?
Interviewee: Better than the zero. I’ll tell you that much. It was a lot better than the zero. You know, there was a point in the business -and I can’t remember, I don’t remember it sort of being you know, the first million or whatever- there was a point where we knew the sort of east was active, you know. And growing, you know. We were- it was probably about nine months into the business. And we were still doing the company night out thing pretty readily as our kind of way of moving forward.
Well one day we sent out this email about an event which was this sort of French horse ballet. And we sold- all of a sudden we just were selling like crazy. You know, everything up to that point had been like push, push, push, push, push. And so we sent out this email and so all of a sudden [sound effect]. By like the standards of then, so we probably sold a hundred tickets. But it felt like a lot to us, you know what I mean? So at that point, we thought, ‘Wow! It worked!’, you know. This is what we envisioned happening. You know, like sending out an email and just members of Goldstar just buying it, you know? So that was one point where we thought, ‘Oh something’s happening here.’ And our sales started to kink upward.
But it was probably a couple years later where we said, ‘Okay we got a very predictable projectary upward. We got member growth that’s happening you know, primarily from good word of mouth, and member referrals and that kind of thing. So we’re sort of on our way. So there came a point, you know, probably two or three years after we started the business where we thought, ‘Okay. We’ve got something here if we don’t screw it up. Which was a great feeling.’
Andrew: It must be. It must be.
Interviewee: Yeah.
Andrew: To just feel it- just finally come together to know that…
Interviewee: Yep.
Andrew: …the business can start taking care of you a little bit.
Interviewee: Right.
Andrew: That you can start focusing on bigger issues. And figure out how to grow it, but not just how do you keep it going.
Interviewee: Right.
Andrew: Casey, Allen is saying that you guys got your user experience guy from Grasshopper, which is one of my sponsors? Is that true? I don’t even know how we would know that. Casey, how are you figuring this stuff out? What kind of research are you doing?
Interviewee: I may know. Is it BJ that we’re talking about?
Andrew: You know what?
Interviewee: Mm-hm.
Andrew: Let me turn the question around and ask…
Interviewee: Okay.
Andrew: …about your user experience.
Interviewee: Yeah.
Andrew: What kind of user experience do you guys. What kind of user experience testing do you guys do? How do you develop your user experience?
Interviewee: We have a great team of guys. Robert leads the whole development team. And we’ve actually grown that team a lot. We switched from our old proprietary framework, and this isn’t user experience. This is more technical but we switched from an old proprietary framework with Mob Pearl and everything. About a year plus ago,we’re on Ruby on Rails now. And that’s enabled us to bring in a lot more talent. Guys like BJ Clark and Steven Baker, Pat Maddicks, and you know, our guys, Borem. And you know, I don’t want to miss anybody, but I, you know, I don’t want to bore you with a long list of names.
You know, I wouldn’t say it’s super scientific, but we have all kinds of ways of getting feedback about what people like and don’t like on our site. Part of it is, we literally ask. So we get thousands of pieces of formal feedback every week from people who have gone to shows. We have a thing called the Goldstar Advisory Panel where we have a few dozen relatively frequent users who do online chats. They come into the office sometimes; we meet with them. We take in feedback in as many different ways as we can. And the thing that Roberts built and Kristy Dieters is the director on this team is I think. This is interesting. Kristy Dieters is production director here. She was a huge Goldstar customer before she came to work for us. So we sort of try to bring, you know, that perspective into everything they do. I mean it’s not, you know, I can’t sit around and say we have like a methodology like IDEO or something like that. But you know, we try to do everything we can to make sure, you know, that we’re getting input from every direction, and constantly sort of hearing out there. And it doesn’t hurt that a lot of us are heavy event goers or actually a lot of people that work here produce events of their own too. So you know, all of that helps I think.
Andrew: So you’re saying also after somebody comes back from an event, they might get an email from you guys saying, ‘What’d you think of the experience?’
Interviewee: Yeah.
Andrew: The event, the venue, and the site?
Interviewee: The process with Goldstar, yeah. I mean, no. We started that about a year after the company started. We realized that, you know, getting us ongoing feedback from people was going to be critical because you know, we’re sending people out to venues that we don’t control, you know? We’re not there. So it’s very important for us to know precisely what was happening. If people have any problem we want to, you know, take care of it for them. And so we did that sort of on an informal basis for a couple years. And then we became the first people to do unedited, real time reviews of live entertainment in the world. A couple years after that, so you know, that was a new thing for us.
Andrew: How did that work?
Interviewee: Worked great. You know. It worked really…
Andrew: I mean, what was it like? What did it look like? What was the experience ?
Interviewee: [01:05:03] Well, it’s very similar. We just went from an informal sort of system where we’d get the feedback and the venues could see it as well to one where the person’s review just went live the second they wrote it.
Andrew: [01:05:13] I see. I see. So the person writes a review. It’s live kind of like comments on the blogs.
Interviewee: [01:05:18] Yup. Yeah. And it, and the, even, there’s no moderation. I mean, we can back moderate it if it’s profane or whatever. But it hardly ever happens. But, you know, in the live entertainment industry, there, there’s a little bit of conservativism in terms of people’s, you know, willingness to sort of have people say whatever they want and that kind of thing. So, we were kind of leading the industry of live entertainment, saying. No. No. This is really good for everyone. Because you don’t want to put the live entertainment industry at a, at a competitive disadvantage with, say, the movies. You know, people know they can get reviews on theaters and movies and whatever. If you can’t get that same thing through live entertainment, then people are gonna be that much more cautious about buying tickets. So, we felt that that was a really critical step for the industry to take.
Andrew: [01:06:03] And earlier when we talked about registration, a few people in the comments, Andy Dang and 140 Adam were saying. I think a light bulb went off in Andrew’s head and register, registration splash page on Mixergy is coming in five, four, three, two. [inaudible] what’s going on in these interviews. I don’t know if that, if that splash page would make sense on Mixergy. Well, maybe I should test it.
Interviewee: [01:06:24] [inaudible] different, right?
Andrew: [01:06:26] Joseph Jacks is asking what size profit margins are there in this business.
Interviewee: [01:06:31] Or the producers or shows for the.
Andrew: [01:06:33] For the website.
Interviewee: [01:06:35] They’re, they’re pretty good. I mean, our cost of goods is pretty small. So, our profit is netted against, really, what you might think of marketing in GNA. So, you know, we’re still in the scheme of things relatively small, which we’re trying to take care of over the next couple of years. But we’re, we’re. So, we’re not what you would consider at scale for any commerce business. We could be much, much larger. But, you know, we have a nice solid profit margin that. So, for us, again, it’s, it’s GNA. And it’s marketing that are the primary drivers of our costs and salaries.
Andrew: [01:07:09] Well, cost of goods. You’re still buying the tickets, right?
Interviewee: [01:07:10] No. Not at all.
Andrew: [01:07:12] You’re being a div in the tickets. All you do is sell them?
Interviewee: [01:07:16] We’re not even being given. It’s an allocation. So, we’re selling on behalf of the venue.
Andrew: [01:07:18] I see. OK. So, but if you. If you sell a ticket for thirty bucks, that ticket doesn’t cost you zero. It costs you some percentage of thirty dollars, right?
Interviewee: [01:07:29] You remit the great majority of that money to the venue.
Andrew: [01:07:30] I see. And you keep a share for yourself.
Interviewee: [01:07:34] And we. There’s a service fee, as there are with all, you know, ticket transactions. A service fee, a part that we keep. But, primarily, though, the ticket money goes back to the venue.
Andrew: [01:07:42] I see. OK.
Interviewee: [01:07:43] So, that’s our. It works really well. Because we’re not taking a risk, and they. If we don’t sell them, they can sell them as well. So, it’s. It’s kind of a nice win-win for the customer, the venue and for us.
Andrew: [01:07:55] Let’s see. Joseph Jacks was asking earlier. Where’s the value for the vendors aside from the increase in traffic? So, the venues. Are they getting anything beyond, beyond more customers coming in the door? Are they getting a better, a bigger reputation? Are they getting advertising online? What’s? Is the benefit to them just that you guys can move tickets?
Interviewee: [01:08:11] Yeah. That’s certainly one of the benefits. But it’s not just generically selling tickets. I think there’s really three things that are beneficial to the venue. The first is that we’re getting new people into their venue who otherwise would not be there. And I know that because when we look into this. The last time we looked into this, 86 or 83, it might have been 83 or 86, percent of the time, people don’t come to the Goldstar site with an event in mind. And maybe your experience is similar or different. You go to the site, and like. What can I do? What should I do?
Andrew: [01:08:44] Right. I might say. I feel like comedy, but I’m really just open-minded.
Interviewee: [01:08:48] Yeah. Right.
Andrew: [01:08:49] I feel like whatever.
Interviewee: [01:08:51] So then by, almost by, definition, someone who goes to a venue through Goldstar as a person who would not have been here otherwise. So, that’s. That’s valuable beyond just the ticket price. That’s valuable in the sense that that’s kind of like trial marketing. It’s kind of like we’re sending hundreds of people to a theater or a, you know, some venue to experience what it’s like. And the likelihood that person’s gonna come back is, is much higher than if they’d never gone in the first place.
So, getting new people into the venues is an extremely valuable thing for the venues. And the sales are great because. Again, it’s all profit, you know, they, the. You know, an increase in sales of say fifteen percent can translate into an increase in profitability on the show of fifty percent. Because that money drops straight to the bottom line. So, that’s nice. What’s also true is that, you know, Goldstar is.
I’m gonna claim is perhaps the best marketer of live entertainment in the world. If not the best, we’re certainly one of the best. And, so, what we ‘ve seen, and what we’ve been told by many partners of various stripes is that when a show goes on Goldstar.
Not only do we begin to sell half-price tickets, but we also, sort of, as a side benefit, increase the regular box office sales because hundreds of thousands of people are thinking about the show. And consider, maybe, we don’t have the night or the section or, maybe, they see it on Goldstar and then sort of forget about it and end up buying it directly from the venue. So, there’s the promotional value of it, the fact that we’re sending all of these people there, and the sales are doing great. It’s really a productive thing for the venue. We’re building their base. We’re building their base of people buying. The money works really well, and it’s just this real win-win. And then, there’s no risk for them to do it. It doesn’t cost money for a venue. You can’t buy your way onto Goldstar, but it doesn’t cost anything either. So, it’s risk-free. They have no cost basis in the ticket. It works out really well.
Andrew: Adam in the audience is saying, really? There’s such a thing as horse ballet. Yeah. I was wondering that, too. There is.
Interviewee: There’s more than one horse ballet. I can’t recall the name of the one in 2002 that I was talking about, but there’s a well known one called Cavalia that tours. The founder of Cavalia is actually a Cirque du Soleil veteran. So, oh yeah, big time. Catch it next time, great show.
Andrew: Let’s see, people caught on here earlier that I mentioned LinkedIn and I love them for research, and Joseph Jackson is suggesting that I interview Reed Hoffman. I’ve e-mailed Reed Hoffman back and forth a couple of times. We just haven’t locked a time down. I need to convince him that doing Mixergy is worth his time. So, we’ll work on that.
Interviewee: Who’s Reed Hoffman? I’m not familiar with Reed Hoffman.
Andrew: He is the founder of LinkedIn.
Interviewee: Oh, right, OK. I should have pieced that together.
Andrew: I’m glad you asked because that means other people in the audience wouldn’t have known either. I think we’re going to leave it there. There’s a lot of questions, but let’s save some of them for the next interview.
Interviewee: Sure.
Andrew: Oh, can we say over seven million dollars in revenue? Can I say seven plus million?
Interviewee: You know, I’d rather not answer it. I appreciate where you’re coming from.
Andrew: Can I say in the headline five plus–the reason I’m asking is I know you and I did a pre-interview here, and I promised that I’d be sensitive to your concerns about the profit and the revenue numbers. I want to make sure that the headline that I go with is something you feel comfortable with and, of course, I want to pump it up so that it seems bigger. If five plus is what you’re comfortable with, I’d be happy.
Interviewee: That’s absolutely accurate, but it leaves it vague enough that, you know… People can just wonder, not that it’s a great mystery of the world that anyone…
Andrew: Do you tell the people inside your company what your revenues are?
Interviewee: More or less. We don’t hide it. It’s just I’d rather certain kinds of people not be able to project with precision what we’re doing and that kind of thing. From the point of view of the world, anywhere between five and 10 is practically the same. It’s a rounding error anyway.
Andrew: I feel that way, too. In fact, I’d much rather that you didn’t give me an exact number that you felt uncomfortable with because then I’ll get with some other entrepreneur and then there’s just calls afterwards asking me to edit. As people who have seen my interviews before, you know that I used to do those edits. I just can’t do that but…
Interviewee: Right. I understand.
Andrew: I get where you’re coming from, and I’m happy just to leave it at that big.
Interviewee: That’s descriptive enough. People get the idea.
Andrew: All right. OK. Finally, what’s next for you guys at Goldstar?
Interviewee: We’ve got some really cool stuff coming up this year. We have a program that I can’t talk about too much right now, but it’s a program that’s going to be designed for people who are very frequent users of Goldstar to be able to do some stuff that doesn’t exist anywhere else in the ticketing world. It’s very, very neat.
Andrew: You can’t say anything about what it is, right?
Interviewee: I wish I could. I better not. I’ll tell you about it next time. It’ll be really interesting, some kind of ways of being able to buy tickets and do things with tickets that don’t exist anywhere else. So, I think that’ll be really, really interesting. It’s designed for people who just inhale live entertainment. So, we want to kind of make it as smooth as possible for them, and we’ve got some fun stuff coming up. We’ve got some game-like dimensions that we’re going to add to the site later this year as well. So, that should be a lot of fun.
Andrew: What about global Goldstar? 140adam in the audience is asking. When are you going to go global?
Interviewee: Well, we’re going to work on the rest of the United States first, but we got a really nice invitation from the mayor of London to open in London. So, I’m sort of beating the drum for that one. So, I think sometime in the next couple of years, maybe 2-3 years, we’ll probably open in London as our foray into Europe and then see where it goes from there.
Andrew: I see you’ve got a few people in the audience who would like that, maybe, not London specifically but anywhere in the world outside the U.S., wherever they are.
Interviewee: Yeah, OK.
Andrew: All right.
Interviewee: We’ll do our best.
Andrew: Jim, thank you for doing the interview with me. I’m going to ask my audience for feedback, too, for the same reason that you do. You guys keep improving your product because you keep asking for feedback. I’m going to do it over and over again even though there’s some people who think I should have it all figured out by now.
No, I want your feedback, what do you think of this interview, what do you think of the way that I did it. Did I push Jim a little bit too far on the revenues? Do you feel that I spent a little too much earlier on — on the non-tech part of his career going over in those [xx]? Do you feel that I made him feel bad for not wanting to a 12 years old start an internet company? Even before it even existed.
Interviewee: I didn’t feel bad. You know I, I should say that I didn’t feel bad about that at all. I was sort of — I was saying that’s a sort of highlight that, you know there’s no — there’s no one — one path, you know what I mean and I — I didn’t feel so bad at all. Well, there’s nothing I can do about it now anyway so, you know, it’s — it is what it is, you know.
Andrew: Okay, well there we go. So, thank you guys, thank you Jim for coming on Mixergy and I’ll see you all in the comments.
Interviewee: My pleasure [xx].
Andrew: Bye.
