Andrew: Before we get started, I hope you’ll celebrate with me that I’ve got two new great sponsors, because I know they’re gonna be useful to you if you’re building a business. The first is 99designs. They’re the largest crowdsource design company. And the best way to explain what they do is to tell you that I recently used them, when I needed a template designed. And what I did was, I described on 99designs.com, what my ideal template needed to have. Next day I got a batch of designs. I gave them all feedback. All the designers who created it. Day after that I got a new batch of designs, I gave them feedback again. Next day I had a new batch of designs. I finally picked the perfect one for me, and that’s the one that I paid for. 99designs even let me pick the price that I paid. And, you’re gonna be blown away by how many, options you have. But if you don’t like any of them, 99designs guarantees, and you don’t have to pay for any of them. Check out 99design.com.
Second company is DNAmail. If you’re running a business, you’d be a fool to also try to manage your own Microsoft Exchange Server. I know because I was that fool taking on too much when it came to my email system. Let DNAmail take care of it. They’re gonna guarantee a time, they’re gonna give you 24/7 support. You can call up somebody in Los Angeles where I was recently living. Not, not a foreign country, not limited to a certain number of hours. You get all the support that you need, so that you can collaborate with calendars, tasks, contacts, make sure your email is dependable, and so much more. And, if you need Google Apps, they take care of you with that too. DNAmail.com.
Finally you already know about Grasshopper, the virtual phone system that entrepreneurs love. I’ve been talking here about how I have a Grasshopper phone number. So I can be reached no matter where I am in the world. So I can have extensions, so I can have all the features that I need. Grasshopper.com will do the same thing for you. Check them out. Here’s the program.
Hey everyone it’s Andrew Warner, founder o f Mixergy.com, home of the ambitious upstart. When I had investor, Howard [Lindzon] on Mixergy, I asked him about entrepreneurs that he, that, I asked him about the kinds of he likes to back, and the kinds of entrepreneurs he likes to watch. And the kinds of entrepreneurs he likes to be in business with. And he kept telling me about this guy, Michael Lazerow, the chairman and CEO of Buddy Media. And I hit him up for an introduction after the interview. I said, “You gotta introduce me to this guy so I can get Michael on Mixergy so I can do an interview with him and find out what makes this guy so great that, Howard Lindzon’s getting all excited about him. So today I’ve got Michael with me. He, he’s here he told me before we started the interview, that he hates, Skype based interviews. I’ve gotta ask you why? This is great.
Interviewee: Yeah, I mean, we… it’s not that I hate the interviews. I should like…doing interviews, it’s just the fact that I have… kinda crossed eyes and it seems like you’re in a very informal setting, but blasting out to, potentially thousands of people. I’ve gotten in trouble on Skype interviews so I’m gonna try to keep this one very clean and safe and watch what I say.
Andrew: You’ve gotten in trouble with Skype based interviews. What have you said in the past?
Interviewee: You know I mean it’s a very informal setting. You know, you’re sitting at your desk. I have, I don’t know if you can see but I have my Captain America outfit in the back right there.
Andrew: Yes.
Interviewee: So, you know, what…sitting at your desk, versus sitting in like a TV studio. You know you say things that maybe you shouldn’t say but I’m gonna watch myself today.
Andrew: I’ve had actually people email me afterward and say, “Andrew, I can’t believe that I told you what my revenue numbers were, or I can’t believe that I said this or that.” But, but that’s the point of having an informal setting and, what I can’t believe is, that you just started out and you said you have crossed eyes. I thought we weren’t supposed to bring that up. I, I wasn’t sure what to say.
Interviewee: Well you were asking why I don’t like Skype interviews and that’s pretty much the only reason why.
Andrew: Oh wow, you know what, I like your honesty. You could have just as easily said, “Well it takes away some of the, the rapport that you can communicate…”
Interviewee: Yeah.
Andrew: “… when you’re meeting someone one on one.” Or I don’t know, you could have made up some other b.s. So let’s tell people about your history a little bit here.
Interviewee: Sure. Did you want to ask a question or should I just…
Andrew: I was actually gonna go through it but why don’t we just start off this way. Why don’t we start off with what is Buddy Media.
Interviewee: So Buddy Media helps major brands market on the social network. So, primarily Facebook. We help them, you know really optimize their social presence so everything from building their Facebook pages, to managing their, their open graph sites. We’re the first platform to, offer full integration with Facebook’s open graph technologies. And so we have a marketing platform called the Buddy Media platform, which primarily does four things. It’s a content management system. It’s 30 plus apps out of the box, quizzes, virtual gifts, polls, that type of stuff. It’s analytics so, we can tell you what’s going on everywhere. And it’s publishing, so you can kind of publish, out to all of your fans, all of your followers. Anyone who’s connected with your own [inaudible] on the Facebook open graph which is the new, the new technologies.
Andrew: Okay, and one of the reasons that I invited you here is that it didn’t start out this way. The business had to adjust, and I – and I’ve been listening to my audience and hearing that some of them are going through tough times, and I wanted to find out how, when you found yourself going in the wrong direction, how you were able to adjust and move Buddy media in a different direction, and I’ll be asking you mostly about that, but we’ll also throughout the interview talk about how you founded University Wired, which was sold to Student Advantage in the late nineties, how you founded, uh, Golf.com and Golf Surf, about Lazaro Consulting, about so many other things. But –
Interviewee: Sure.
Andrew: Why don’t we start off with that? Why don’t we start off with: What was Buddy Media when you first launched?
Interviewee: Uh, well sure. Well, I mean, assume that whatever you put in your business plan and your financials, um, not only is it wrong, but all investors know that it’s wrong, so you’re going to spend a lot of time building this really long business plan and financial models and hire people to do it, and at the end of the day, it’s just pretty much bullshit. Um, so just kind of put your thoughts down on paper and kind of what you think you’re going to do, kind of in the next, like, month, and, uh, potentially give a vision for where this could go if you’re right, and… Um, you know, and really, to me, the business plan and the business, um, planning is really for the management and helping management figure out what they want to do next and what they want to focus on. Um, and so with Buddy Media, I don’t, you know, we got a lot wrong in the beginning. I don’t think there was getting anything right. I mean, Facebook had launched the platform, you know, days before, Facebook, um, had 25 million people on the site. Who would have known, you know, where we would have, you know, gone in the future? Pages didn’t exist, businesses couldn’t have their own kind of profiles on the page, there’s no open graph. Um, you know, things like, um, Beacon, hadn’t even been launched, and so it was just a different world, so we had a core idea that the opening of a social graph was going to be one of the more powerful things that happened on the web, so this idea that, you know, you could build applications, and those applications by default were social because you were doing them with your friends, um, that was a huge idea. And so some people, like my business partner, Mark Pincus at Zynga, he started building games and he has a multi-billion dollar business. And, you know, some others who aren’t as smart, like me, launched marketing platforms. Um, and—
Andrew: But when you launched, was it a marketing platform, or was it a virtual currency? What was the original idea?
Interviewee: It was always a marketing platform—
Andrew: Mmhmm
Interviewee: —but the marketing platform, you know, to start with, was we were going to have a virtual currency that brands could come and use to incent, kind of, consumers to do stuff. SO it was very much an open platform, you know, called Ace Bucks. We worked with, you know, application developers, we worked with, um, you know, all sorts of brands. Um, and yeah, we’d show up and we’d say, “Hey, we’ve got these things called Ace Bucks. They’re, you know, it’s basically Baby Jesus currency, it’s the best thing you’ve ever seen. You’ve got to get involved. If you don’t you’re going to miss the boat, you’re going to be grossly negligent. You know, how many do you want to buy? And they’d basically glaze over. They’re like, “Yeah, we hear about this Facebook thing, we’ve got to figure it out, but I have no idea what you’re talking about.”
Andrew: Wow.
Interviewee: So, we basically said, “Well, that’s a business, helping them figure out Facebook. This Ace Bucks thing is kind of cool, and maybe we’re a little early, but let’s, like, pursue that. And we started doing branded apps and then Facebook pages and then marketing platforms, and now, you know, we went from an idea to, um, you have a software as a service marketing business always on Solution for Brands.
Andrew: Alright, let’s take all of that and go deeper into it. How far did you get with Ace Bucks before—actually, how much of it was built when you were walking around and telling companies about this Baby Jesus currency?
Interviewee: So, you know, we didn’t have much. We had an idea, and we had, uh, you know, we had an application, an Ace Bucks application, and we had some games that it tied into—we used it as this, like, unified virtual currency.
Andrew: Games that you guys made?
Interviewee: Games that we made, and then we opened up an API where other companies could kind of, you know, debit and credit accounts, so…
Andrew: How long did it take you to get to that?
Interviewee: Um, very fast. We’re talking about months. Or weeks, I meant.
Andrew: Three months?
Interviewee: No, I mean, it was weeks to start.
Andrew: Wow. So within weeks, you were able to get a virtual currency up and running, create your own games, and partner up with a few sample games so that you can show what this fully working vision is?
Interviewee: That probably took a month. All that, to do, took a month. And the reason is ‘cause, like, the Facebook platform, it was new, you could iterate it very fast. This wasn’t a business that we were going to do a—I didn’t write a business plan, I didn’t have financials. Um, we raised a little money from some people who believed in us. So, Peter Thiele, who’s on the Facebook board, and Mark Pincus, the CEO of Zynga, and Howard Lindzon, who you referenced earlier, and now Ron Conway and other guys.
And we just started building and we use the data that was staring us in the face both from users and from brands to stay that this idea by isn’t the best one, let’s try something else, and really when we shifted to doing at that time apps, this Facebook pages didn’t exist for brands, we were really hit on what has led to kind of pretty significant business, 65 people have already been [10:29] of all year, and businesses all around helping brands make sense of this open social web, so they are used to kind of spending money on ads and driving people to website, but by doing in the social world you can reach not only consumers but their friends and there is a viral growth to it that we just don’t see with other advertiser.
Andrew: I’ve got to go even slower on this story. I have got to really get into this thing so that I can understand. I got an audience of people who aren’t just hanging out and watching and paying attention to the cool shirt that you are wearing and watching to see what other costumes you have in the background, but these guys really are going to be using this in their business, I have a mission to really hunt down information that they can use. So one of the things you are going to be wondering is how is this guy, new company with weeks, within about a month launching not just a simple web page but a virtual currency. There is a lot of responsibility when it comes to creating any kind of currency, even a virtual ones, I want to learn how you kept it so simple that you are able to launch something within a month.
Interviewee: So from a business perspective we use, from a technology perspective off the shelf tools, we had and we still have some of the earliest developers on the Facebook background, so even though I have 25% tech team many of the people in the team are as experienced building on the Facebook platform as anyone in the business, people who Facebook announced their platform they started launching out straightaway. One of our apps, I think the number 3 app, like the third app ever to launch on the Facebook platform. I was [11:57], I get dating app, matches [] and so you have to move fast. You get step out there, you get it out there inexpensively and you fail fast and then you move on.
Andrew: Let’s put one [12:13] it and be more specific to you. What specifically was the part of the first launch. What was in the virtual currency.
Interviewee: So e-spots had no value. You couldn’t e-spots and couldn’t redeem e-spots and so who is virtual in every sense of the word. It had no value or tangible aspects to it. So that gave us a lot of freedom to basically do what we want. So we knew and it has turn out to be correct with other virtual currencies in the Facebook platform that you have to balance kind of how you earn the currency and how you burn the currency. And so we wanted a lot of different ways to earn currency and we wanted a lot of things you can do with the currency. So we used to burn it. And so in the earn side we had games and we tied into our own games and other games. They are very casual games, word games and we had licensed some games that were available to us from third party publishers, we got them live and then we launched the e-spots virtual store, you could buy virtual items and you could gift items, and you could transfer the items into different currencies if you wanted which no one really did, and basically got it out there and what we realized right away and when you are looking at data both quantitative and qualitative usually the answer is right there if you look hard enough and you are not biased. So lot of people go into data they say I want to see data that shows me why this is a great business idea, and they look at the data and they pick out the data that supports their claims they can put into the business plan rather than ignoring the mounds of data that shows it is a crappiest idea since ideas were created, and I don’t that e-spots was a crappiest idea but clearly it wasn’t one that I wanted to spend my time scaling the business and I think entrepreneurs, usually first time entrepreneurs, that’s my fourth business but first time entrepreneurs, they have a lot of time, lot of energy, lot of passion and very little money. The last thing you want to do is spend what you have, your time, energy and passion on stuff that doesn’t generate money. So want to fail fast so you can get on to the stuff that is actually going to work, ultimately you want to kind of create great products and change the world and make money. So people just want to make money, other people actually care about the products.
Andrew: Amen, I’ll take them all. And it sounds like that you are in that direction too.
Andrew: You’re in that direction too. So data. What data did you look at?
Interviewee: So, I mean there’s quantitatively. We looked at how people were using Acebucks? How many people were signing up for the application? The velocity of the money. We were looking at, basically, all of the very – I mean just the data we got from our analytic system. The more important data to us wasn’t what users were doing.
It was how our revenue stream, our potential revenue stream was playing out because we just couldn’t get brands on board and so, in a world where we’re saying, “Give us product that people can buy with their virtual currency as this new age marketing program,” not being able to get brands on board was kind of a death sentence for that business.
That even if we got users, we weren’t convinced that we could actually grow a business and so, really by the end of – I think we funded the business in September of ’07, maybe early October ’07, by the end of the year, we knew that we were off to a much bigger opportunity which involved marketing and brands and the intersection between social media and digital marketing.
Andrew: How much money did you take on in the early days?
Interviewee: We raised $1.75 as our super seed round, so it was a seed round, but it was a larger seed round than you’d typically see and then we raised $6.5 million in April of ’08.
Andrew: And the $6.5 million came only after you discovered the right path to go on. This is after Acebucks.
Interviewee: Yeah. We had – I mean at that point we had some customers, we had some traction. I didn’t have a business plan. I never did a business plan, but I think I had a 10 page dec and some kind of rough financials and we went out to talk to some BCs and we were fortunate that five of them were interested. Five of them gave us term sheets and we, at that point, just picked people who we really wanted to work with and we thought was just a great fit for the business.
Andrew: Michael, I can understand now looking back how this all makes sense, but if I were in the moment as an entrepreneur who invested time, money, and was exciting my people towards one direction, even if I saw all this data, I could see myself saying, “The market will come. It’s still early days for Facebook platform. It’s still early days for social media platform. These brands will eventually discover the need for bucks or for some currency and then we’ll be there,” or I could see myself saying, “It’s the sales team. I must not know how to deal with brands. My sales team probably isn’t the right sales team to go deal with brands and sell to them. We just need to revamp our sales approach.”
Why did you not pick one of those two options or anything else and decide, “Hey. This is not those options. We need to move on from this.”
Interviewee: I mean it’s God’s decision. We were based in New York. I was seeing what was going on with Zynga and Playfish and the game companies, the offer companies, the offer pals and all those guys and I thought that being a New York company so close to brand, so close to Madison Avenue, to ad agencies that we really needed to be close to those brands, to be close to the marketers.
And where I made a decision that it just wasn’t going to happen and frankly I think Acebucks or a virtual currency could have worked as a user funded, user paid idea that went across games, but probably a west coast company that was much more product focused and developing social games like Zynga was probably better positioned to execute that. As where being in New York and having a media background, an advertising background, we were probably much better positioned to dominate the brand marketing space and ultimately it comes down to you want to be in business where you can just cut the legs out of anyone else.
So, you want to be able to – if there’s competition, you want to be able to take your strength and just dominate the competition and you don’t want to try to out Google Google or out Facebook Facebook or out Zynga Zynga, create better games and better distribution. You want to be the ones that have that power to dominate the market. I think we’ve proven that we have a platform and a team that has created the leading company in the space and [19:35-19:38 inaudible] big company in the space.
Andrew: I see. So, maybe all the things that I said are true and maybe in time you could have gotten a better sales department, maybe in time people would have discovered that this was a real opportunity, but by then you already would have other competitors in the space and by then time would have just burned away and here you are looking at a real opportunity that you could dominate, that you can actually get into and that it.
Andrew: It sounds like it was starting to make a little bit of money. And so you’ve got to take the offer.
Interviewee: Exactly all of this, it’s just decisions present themselves. And you know which ones are right. I mean if you develop your intuition as an entrepreneur, to know what ideas are great ones, you’re able to say, when opportunities present themselves; ‘Well, that’s a great idea’. That’s one I think is going to play out. In a way your investors and others are something you’re not going to get. We talked about social marketing platforms and before we built it we had a vision that no one else saw, and we set up in a position to get to where we are.
Andrew: How do you develop that? I don’t want to leave my luck to just happenstance, I don’t want to hold in my gut where my instinct is developed, I want to be a little bit more methodical about it. How do you think you do it?
Interviewee: Well I don’t think often you hear people say: ‘I shouldn’t have listened to my gut’. You hear ‘I should have listened to my gut, I knew it! I felt it, I was trying to force it’.
Andrew: But in one moment, can you tell what’s gut, and what’s fear? All you know is that you’re waking up in the middle of the night going: ‘What the fuck is going to happen to me tomorrow, where’s my money going’, do you then only the next day know what your gut is telling you?
Interviewee: The business owner is really the only one who knows what’s going on in the business. So, your investors don’t know, your employees don’t know, you see everything, you’re the most intimately involved. If you’re worried about something or concerned about something, and it’s weighing on you, that date point alone is enough to stop for a second, think, whiteboard plan-out, you know, what are these different companies going to do? We want to be a large player in the social-media ecosystem: Facebook, Twitter, Twitter wasn’t as big then as it is now. But we didn’t want to do stuff that we thought that the platforms were going to do themselves. So we worked very closely with Facebook, and we thought that our bet was that if we build this, it’s complimentary to what they want to do. Because they’re a product company, they’re building their site, they want to start up. They had two hundred employees at the time. So, they needed to build their site, and I said ‘Someone needs to build the platform for brands’, and that’s what we did.
Andrew: Okay, how did you get your first customers in this part of the business?
Interviewee: It’s just relationships; I’d been in the business since 1996 with several other supportive businesses, so it started with my relationships and we were lucky enough to get Anheiser Bush on board, which is one of our largest and best clients. And we got case studies and took those studies and clients, and people were starting to hear about this Facebook thing, I hear it’s going to be big, like 30 million people or 40 million people, they’re releasing their ad product, and slowly with all of this chatter, people are starting to hear about Facebook. You know, two years ago we weren’t even allowed on the site because it was only open to college kids, and we knew that once that started happening, people started asking, like I remember saying, what happens at 100 million people, what’s that to our business when Facebook’s at 100 million people? Wow, we’re going to have a massive business. Well, they’re at 450 million people now, almost half a billion. So it’s always good to get in early, but not too early. If you get into too early, nothing’s going to happen, if you’re late you’re probably going to get crushed, but if you hit it right before when it’s at it’s peak and everyone is kind of interested in a solution, you want to own that solution there. You don’t want to identify, ‘Oh, everyone wants us, now. So I’m going to build it’, takes three months, and by the time you build it someone has it already, and you’re dead. You want to have it when they say ‘Wow, I need something for my, you know, twenty brands on Facebook’, and you’re like ‘Well, we have it’.
Andrew: What was the first thing that you had available for it? What was the first solution like?
Interviewee: What was it, specifically?
Andrew: Yeah, did you have a single app that you were taking to them?
25:00 minutes
Interviewee: What was it specifically?
Andrew: Yeah. What did you have? Did you have a single app that you were taking to them? Did you have just the ability to manage their profile? Did you have something else?
Interviewee: [Overlapping] Yeah. So a lot of our business early on was we had a development platform that we could build apps really fast. So we did kind of like custom apps on top of our platform. Brands, they can either advertise with Facebook at a time or they could build apps. There were no pages. And there was no Facebook Connect, there was no graphic API. There’s no kind of all the technology we’ve seen today.
So we just made it easy to build apps. And part of it was custom, part of it was our technology. But a lot of that revenue funded the more scalable business, which is now our marketing platform.
Andrew: Okay. So what you started out doing was creating apps for brands. And I remember one of those apps. I met one of your guys in Los Angeles at a party that I organized.
Interviewee: Yeah.
Andrew: [Overlapping] And he showed me…I forget what magazine it was. It was some kind of woman’s magazine. And he said, “Look. You take your picture from Facebook. This app that we built for them will attach a hairstyle on it, and you can just keep flipping through. And then when you’re done you can take the picture out and show it to your friends.” Do you remember what–?
Interviewee: [Overlapping] Yeah. It was called “The InStyle Hollywood Hair Makeover App.” So you saw the app and then you took your picture. Either your Facebook picture, or uploaded a picture, or any ones in your Facebook. In the Facebook platform. Your Facebook profile. And you could try on maybe like 90 different celebrity–
Jennifer Anniston, and Cameron Diaz…and then you published that out to your friends. And they went from, like…zero to 400,000 people were trying on hair. I think the actual number’s like 9 million makeovers were made. So that’s…I mean, that showed the viral growth available through these platforms.
Andrew: And one of the things that I remember hearing about you guys even in the beginning was that you knew how to make your apps viral. What are some of the things that you learned about making an app viral?
Interviewee: So we’re constantly looking at viral coefficients of everything we do. So if one person uses something and shares it…. So if you send an email out or send a Facebook notification or post to someone’s profile, or insert something into someone’s feed, what is the result of that action? So I take an action, it goes into my friends’ feeds. How many people click back and take that action? And anything above one, you’re growing.
Anything below one you’re basically dying. Unless you get more people in. And so Facebook offers–at that time I think they offered 16 viral channels that we could optimize against. These were News Feed, Profile Boxes, App-to-User Notifications– I don’t even remember them all. But they were all the spam you used to get. I apologize for the work we used to do.
But you used to be able to blast. Like someone comes into your app and then you blast to 100 people, like, “Mike just took the Hollywood Hair Makeover App.” Whether they did or didn’t you just send it out. They see it in their feed, they click, and the good news about what’s happened is Facebook has really cracked down on the App Spam.
So there are no more App-to-User notifications. And most of the stuff we do now is all around peer to peer sharing. So if someone proactively shares a piece of content, or likes a page, or takes an action…and that action is shared, there’s no–
There’s no more non opt-in viral channels.
Andrew: I notice that a lot. That in the early days, what is accepted, what is common practice–
Interviewee: [Overlapping]. Yeah.
Andrew: –years later becomes…or yeah. Becomes considered spam. Back then I think it was okay. Facebook cracked down on it, they changed it, and things are different today. [Overlapping Conversation] So that’s one of the things that you did you–
Interviewee: [Overlapping Conversation] Yeah. Well they had to.
Andrew: Yeah.
Interviewee: [Overlapping Conversation] They had to crack down on it. If they didn’t crack down it would’ve been the worst user experience. Imagine 450 million people sending, like, virtual goat dung at each other. It’s like, ridiculous.
Andrew: It would never have gotten to that many. It was pissing all of us off. And none of us wanted to install any of the apps after those experiences.
Interviewee: [Overlapping] Basically what happened is it was a race to the bottom. There’s only so many…eventually the App Ecosystem was going to eat itself up. And Facebook make the smart call to say [Laughs], “Okay, enough, this is crazy.”
Andrew: Okay. So you used all the channels that they gave you. What else did you learn about making an app viral back then?
Interviewee: Back then, or now?
Andrew: Back then, now…. I want to learn some of the viral techniques that you learned.
Interviewee: So…it’s much different. Back then, you had access to the platform. And programmatically you could blast stuff out. And there was a lot of great things that you could do programmatically. Now, it’s very much about–
30:00 minutes
Interviewee: Now it’s very much about you know user you know someone takes an action so I visit a website or Facebook page I like something that like but or that activity (30:12) send a virtual gift or (30:16) whatever the activities get shared on my profile so now on my profile says you might likes whatever mixergy.com or mixergy on Facebook that’s the name right (30:28) make sure I got it right?
Andrew: You think in the beginning I called you Lazlo by accident before correcting us what I came up with Lazlo?
Interviewee: So published on my profile to my friends news feeds all of my friends see that some of them click, they go back to mixergy.com on your front page, some of those that’s a viral loop branded viral loops, some of those people like or comment or click or do something that shares with the Facebook so that gets polished to their profile, their friends feeds, their friends see it, some of them come to your site and are trades this kind of we called a Branded Viral Loop and so what we do for our clients help them create that viral loop and manage their viral loops and track their viral loops and optimize them you know because you know in the whole world if I told you okay this like but got this one over here got a thousand likes, this one got a one like, which one did better, thousand, right, what if I told u that the one that got one like sent 10,000 clicks back to your website but the one that got you know thousand only send a thousand (31:51 one dozen not too bad right?
Andrew: Interesting.
Interviewee: So it’s about kind of you know back to the data, it’s about analyzing the data to see what’s really dry again the key metrics that grows your business so having people like your website does not grow your business.
Andrew: So how do you go from that like to, to the hit back to your business?
Interviewee: So I like something on your site or just see a Facebook page, I found a Facebook page, I like your Facebook page, its goes in my (32:20) it automatically after (automatic does not make feed all my friend see it, they click on the link, they go back to the Facebook page.
Andrew: Yeah, but how do you get more than to click on that link?
Interviewee: There is a lot of different ways.
Andrew: Give me a couple.
Interviewee: Its kind of you know arithmetically the more traffic you have the more likes see you want to send traffic there in store, things on your website, you know you should be adding a lot more social into your website we’re going to talk about that later. You know the second way is (32:52) what people were actually, you know what are people on your site or on your Facebook page actually doing, why are they there, their commenting make sure that the comments go back to Facebook if their shopping make sure if (everybody to like stuff and send it back to their friends on the Facebook, if you know their booking, you know give them an option to say, hey! I am going to this concert on this day. As basically adding virility to the natural use of the site so the old model (33:27 bunch of banners and people’s faces and tried to get them to click. The new model is how to we turn our visitors into viral ambassadors, viral engines for our properties.
Andrew: I see, okay, so it’s about getting.
Interviewee: There is hundreds of different ways to do it.
Andrew: Okay. How do you learn the new ways?
Interviewee: The lot of (technology were most on the strategy base so, you know just as easy as same, you known asking questions like. Lot of people when they go to their Facebook wall their natural thing to do which is promote their content so check out the interview with Michael Lazerow mixergy.com with a link to your website. What if you would ask to question, you know do you think by the media as a chance of being a major player. I would argue that (34:16) more engagement of the question because it’s more natural to how people use Facebook then just promoting yourself so in that case you want to get people comment like share their friends see their activity and their friends come back in, you know for what you are doing I would imagine that you know questions and growing this kind of startup community is where the viral is going to happen, it’s not going to be like hey you like do this for me, you know ask more of the users, ask less of the users and give more, so don’t say do this, like this, cross this say you know ask for their, what do you like or
35 – 40
Interviewee: Ask for their opinion, what do you like or what should we do and the site looks better, and get them engaged, you don’t care what the action is as always been shared with friends, you don’t care if it is a lighter comment or share our virtual gift, as long as it is like flowing.
Andrew: Okay, earlier said that the next step in the business was making it more scalable. How to do that?
Interviewee: You have to figure out what your heart and soul of the business is, why are you different, what is the product differentiation. And then once you have your product and you think that you have product that can scale over time, meaning new versions and it is not going to be [] disintermediated by any other technology. You then can very easily start to scale the business which is like how do scale on the revenue side, so is it more sales peoples at channel partnerships, is it marketing, what are the different ways you are going to drive revenue, then on the operation side and product side like who is going to run the business and, there is a level of management that needs to come in, your heads at technology and heads at sales.
Andrew: You also built a product that was more scalable, right?
Interviewee: Our business model is more scalable because it is not people based, so you are either, most entrepreneurs are really just kind of freelancers, they basically work for themselves, they have new product, their output is directly related to what their input, so if they put in 10 hours a day they will probably be compensated for 10 hours a day. Businesses that I like at least are you go to sleep and you make money. They scale geometrically with arithmetic increases in head count, so can you see a 10x increase in revenues with only a 2x increase in expenses.
Andrew: So what did you do to your business to get it that way?
Interviewee: We have a licensing business, so we don’t have, the model isn’t unique, we have software and instead of spending $100,000 a license upfront, you license it for much less than that, and you pay kind of this monthly licensing fees. So whether we have a hundred clients on it, or two hundred like we have right now, or 10,000 the costs are pretty much the same. There is some variable cost hosting and stuff that, I don’t need to service clients like I have to by my ad agency or consultant, or any sort of service business.
Andrew: Okay, so in the beginning you were make more of the apps custom, you were building them as you were growing, now you have 30 apps that are just ready to go, a company doesn’t have to talk to you, and talk to your sales people, they can just go to the website, you have got a platform that’s easy to use, I saw that [38:07] it is all easy slide, the apps wherever you want, you pick the apps you want, you pay them and move on
Interviewee: Exactly.
Andrew: And you don’t move on actually, you use them to keep engaging with your audience. Kind of cool how you can schedule things to go on a news feed with buddy media, you can add multimedia with buddy media, what else do you have here, intuitive dashboard, real time tracking, interactive social ads
Interviewee: So everything that you need to make Facebook work. So it works in a brand, they don’t care specifically about individual functionality, so check in [38:44], the company I had spoke about earlier. They don’t care about what the functionality is, they just want it to work, make social work for us, and that means let me publish easy and kind of manage my campaigns and manage is always on two way communication and that’s what we do.
Andrew: What happens is Facebook moves and suddenly they call you a hole filler and they decided they are going to build it themselves and you need to go focus on creating on the Lotus 1-2-3 of Facebook. How much of a danger is that?
Interviewee: It is not a very large danger for share investors of Facebook, we work very closely with Facebook, we are very trusted partner of Facebook as part of their preferred developer program, we are one of a handful companies that they basically named preferred developer on top of their platform. So could it happen of course, I am not naïve enough to think that can’t happen, our goal is to provide so much value to Facebook and their advertisers who we serve, that Facebook feels like they do today that the space we are in as being very well served by the eco-system and they don’t need to offer a solution now.
1:40
Andrew: “…so I can have extensions, so I can have all the features that I need. Grasshopper.com will do the same thing for you, check it out.” 1:45
Interviewee: . . .right around then to start Golf.com, grew Golf.com.
Andrew: University wire, let me combine two questions into one, what did you do right and what did you do wrong as you were building that first business?
Interviewee: So, what I did right is I started it. You know, like, half the battle is just launching, just get these things going. Because, you work in a company. Even if you’re making really good money, your paying like big percent taxes; and you’re busting your ass for no upside. So, when you start your own business you could make zero, which is fine; or, you could make billions, or somewhere in between. So if you want kind of long term security for like yourself and your family and not have to worry about, umm, you know, other people employing you and being kind of dependent on others, then I think you are better off taking the risk while you are young. Cause I have three kids now, umm, I don’t know if I could start a business right now, a, maybe I could but I live in New York City, have three kids. Like I have, um, expenses that I have to pay. When you’re, at that time, nineteen and even though I had no money in my bank account, and I put like five grand into this business. Umm, ya know, my downside isn’t that big. Like I go from making zero to making zero. Yeah I could go be a journalist and make seventeen grand a year or I could start my own thing so my opportunity is the after tax money on seventeen grand. So, okay, I’m, umm, you know, its costing me twelve grand a year to run this business.
Andrew: And, what did you do wrong? What could you have done differently, now, looking back now?
Interviewee: You know, I mean, I don’t really look at it like that. Umm, I’m sure there are things I did wrong, a you know it was a while ago, this was ’96, and so, um, you know the web didn’t exist, this was the beginning of the commercial web, you know there’s no, a, the only web sites are kind of the old News.com, and, a, the Nandonet, which was like news and observer at CNN, had just put up their first site, and, USA today, and all of a sudden you’re getting, like,headlines from USA Today on your computer and this is like ridiculous. And, so, we looked at it as opportunity, and, ah, and in terms of what I did wrong. . .
Andrew: What could you have done differently, done better now that you have all of this experience?
Interviewee: My, the first business I started at Northwestern, became a, turned into a public company.
Andrew: Yeah.
Interviewee: So, like, what I don’t. . .
Andrew: That’s what happens when you take a shortcut and come up with two questions in one without even listening to the first.
Interviewee: Made a hundred bucks, you know, could I have sold earlier in the IPO market, or like after the IPO, or um do I wish I had sold, I wish I had sold more before the crash of 2000, ya know, when we were a public company, but you know who would have guessed it. Even looking back, I’m like yeah, this stock is at thirty, its going to go to a hundred. It never went through my mind that like this little company is worth a billion dollars. It was more of like it should be worth 5 billion, why not, like we’re 23. I think that step of like, work hard, build great businesses, and cash out when its right is probably the biggest lesson I learned because things can go from billions of dollars to hundreds of millions or zero very quickly.
Andrew: Uh, are you telling us a little bit about Golf.com? I know we don’t have much time.
Interviewee: Yeah, so I mean Golf.com I started with my wife. I’ve done three businesses with her including Lazaro Consulting . She is the COO of Buddy Media Kass Lazaro, and she had a great idea, like why don’t we let golfers track their game online. She was a golfer, played at Dartmouth. She was a much better golfer than I was; frankly I didn’t particularly care for the game. But I was more from the media side. I’m like, if we could aggregate an audience of rich dudes, well that’s a good thing, like that’s going to lead somewhere. So, we basically, the first business which was Golfserve which then bought Golf.com, grew that, and then we sold that for, a what did we sell that for, it was about $24 million which was to Time/Warner.
Andrew: Wow, okay, uh, you know, you said earlier that you wanted to say that there’s more that I could do to be more social with my website, maybe can you talk more generally beyond just MixerG.com, what do you think sites like mine need to do?
Transcription Minute 50-55
Interviewee – People want to share your content, not especially this interview, this may be one of your worst interviews, but a lot of your content, that is good like stuff you done with Gary Vaynerchuk and Paul Graham, like real people, that’s all people don’t get, they like to share, vote on, rate and comment and how do you infuse everything that you are doing as an organization? In your case, as a site with the viral tools? And so you need to think about your site , less as like a linear publisher ,and more as you can like, you can build your viral loop, so build your own brands viral loop ,manage that viral loop, optimize that viral loop, know what ‘s working and what’s not working and turn kind of your current visitors into more visitors, in a way that you don’t have to pay Google if you don’t want, or if you do pay Google for clicks, the clicks , you are getting are so much more valuable because there’s a viral nature to it . And so in ,you know, terms of specifics, its face book tuck functionality, like buttons, like boxes, activity streams, login with facebook, facebook for websites, its platforms like buddy Media which gives out of the box solutions, from like quizzes,polls, virtual gifts, stuff that publishes back to the stream. It’s your, other share of functionality, tweet this. , it’s your content specifically has to live anywhere. It can’t live on one site, which you already know, you publish on Justin TV. You publish all over the place, you are promoting on twitter. You are getting it out there
So we live in a world where ubiquity is what breeds well and not exclusivity. We grew up in a world where exclusivity grew, you know, bred well, We have the exclusive interview, we have the exclusive this, no one wants exclusive, you want to be known as, “we are the most widely distributed, we have the most or we are adopted by the most number .and if you kind of just internalize that and don’t care where consumers interact with you, you are more than happy for them to interact on your website,…. But if they like Justin TV great! if they like Twitter great!, if they like YouTube great! If they like your Facebook page and if you are offer it for free there, Great!
You give them your product where they want and let them share it, and we are in a world where companies live or die, based on this viral growth, you know, because of this word of mouth. So if you were a show like yours, like you were a movie or a TV show, you know, you will die if you do not have word of mouth, you don’t have viral growth. These tools are just viral growth and word of mouth on steroids, its rocket fuel for viral growth.
Andrew Warner – Well… To be fair with your time, I will say, Thank you now, I had a ton of questions, remember a lot of questions. You were wrong; you are one of my favourite interviews. I hope You and I get to meet when I come to New York.
Interviewee – the other day I saw, I was having dinner with Gary Vaynerchuk and I told him that I am doing this interview, and he said that you told him, that he was your favourite interviewer.
Andrew Warner – That was back then, I have done so many new interviews after that
Interviewee – Chuck..he did not say that
Andrew Warner – How am I going to get viral growth? What I do is I compliment everyone and then you are going to go and tell “Gary Vaynerchuck that I said you were my favourite interviewe. And you will tell Howard Lindzon and that’s how my word will get out. No seriously
I appreciate you doing this interview, I know how tight your schedule was and I specially appreciate the fact that you came on Skype even though you can’t stand the damn system.
Interviewee – Well! No , its been fun, I think I will do more of these things
Andrew Warner – Thanks
Interviewee- Thanks ,bye
Andrew Warner – Bye
Sponsors I mentioned
99designs – The largest crowdsourced design company. When I used them, I wrote a description of the design I needed and how much I paid. I got a bunch of designs back. I gave each designer feedback. I got more designs. I picked the one I liked. All within 3 days.
DNAMail – Try this. There’s a number on their web site. Call it. See how fast they pick up. If email is important to your company and you want that kind of support, sign up. They’re the experts, but their prices are shockingly inexpensive.
Grasshopper – Entrepreneurs (like me) love and use Grasshopper because it offers all the features of the big, expensive phone systems (like multiple extensions, music on hold and call forwarding) but it works with any phone and starts at only $9.95 a month.
[Thank you Howard Lindzon for intro’ing me to Michael.]
