Andrew: Hey, before we get started, if you’re listening to the video, wait, listen to the… if you’re watching the video of this interview and you hate my face, number one, shame on you. Number two, you’re in for a treat because I accidentally set the video recorder to picture in picture for this interview which means I’m going to be tiny on your screen and my guest will be big, taking over the whole screen, all the real estate. If you’re listening to the audio of this interview, well you won’t notice a difference at all. All right, here’s the interview.
Hey, there Freedom Fighters. My name is Andrew Warner, I’m the founder of Mixergy.com, home of the ambitious upstart. Boy, I’ve got a great guest for you guys today. Listen to this story. Guy gets some money, invests it in fantastic software, and the software doesn’t really work out, so he ends up on a couch. He has to rebuild from scratch, and he ends up getting a customer who just wants him to do some ad buys. That little thing which we’ll find out about later on led to the company that today is over $20 million in annual sales and the person who you’re about to meet has had fantastic influence on not just business and the companies that he works with, but also on politics as we’ll discuss in this interview.
His name is Mac Cummings. He is the founder of Terakeet. They want to be the number one company in the world when it comes to connecting brands with influencers online, and you’re going to get some clear examples of how they help these brands in ways that most people don’t even know are possible.
This whole interview is sponsored by Pipedrive. I want to show you guys how we book Mixergy interviews and tell you how if you’re trying to make any sales at all, you can use our philosophy and our software to do your sales, and our software is Pipedrive. I’ve used them now for years. We stopped this messy booking process. A guy like Mac would never, never do an interview on Mixergy with our old process because he would just slip through the crack, or we wouldn’t have had the organization to even book him.
A few years ago I sat down and I said, “What are the steps to booking a guest?” I laid them out in a software called Pipedrive, each step had its own column. Step number one, find potential guest. Step number two, I mean stupid simple, find the guest e-mail. Step number three, send the guest an invitation. Step number four, remind the guest that he’s been invited and so on, all the way down to step number 10 which I’m going to finish in about 50 minutes here today with Mac. Every step of the process was laid out, so I knew that I was on track and then I could hire virtual assistants to say, “Take the easier spots like finding an e-mail.” I don’t have to do it myself.
With an app like Pipedrive, you can do it so simply and with such organization that anyone and even a virtual assistant who’s never seen your company can help you grow it. They give you stats to hold you accountable. We weren’t booking enough guests, I wanted stats. How many guest are we inviting every week? I said to my team, “We will not stop until we at least invite 10 people.” Pipedrive allowed us to set those goals for ourselves.
Anyway, we do that for booking guests. If you’re selling, you want to lay out each step of your selling process in Pipedrive and hold yourself accountable with those numbers, did you really make as many calls as you said you would? Did you really follow-up when you would? The software will make sure that you follow every step of the way. It’s like a boss, like your ideal boss will make sure you get things done, because of that we have Mac here as a guest on Mixergy.
If you want to use our same system to not close interview guests but to sell, use a software that’s helped Mixergy for years. Go to Pipedrive.com and if you go to Pipedrive.com and add a slash Mixergy at the end, they’ll give you two months free to experiment with the software and see why I love it so much that I just took up a chunk of time at this interview because I couldn’t stop Mac. I love this company, Pipedrive.com/mixergy guys. Mac, thanks for sticking with me through that sponsorship message. Did it feel a little bit long? I felt a little passionate and I just kept going.
Mac: No, no, I think it was good. I think I got to go to the website and put in my key code and hopefully sign up for a two-month membership.
Andrew: Fantastic, we got one. I think you’ll really love it. I mean really the organization is fantastic. All right, let’s start though with you. The idea that you had came to you from where? The original idea, the one that was Voice over IP.
Mac: Yeah, so we were building websites just while we were doing consulting through college, and when we graduated college, we decided that we were going to do what we are doing on a larger scale. Instead of using college students to perform the work, we started building a business in Syracuse, New York.
One of our first customers had a Voice over IP company and they had just purchased a speech recognition engine that was sitting in the back of the call center. Out on the main floor they had a call center full of people. if you’ve ever walked through a call center before, it almost sounds like birds chirping. You can’t exactly make out any sound. It doesn’t always sound like words. It just sounds like a lot of noise.
In the back room they had the speech recognition server and we said to ourselves, “Wow. Wouldn’t it be amazing if we could connect the speech recognition server that’s doing sport scores and news and weather, and connect it with these people on the floor who were providing information and data on people’s accounts that were Voice over IP customers, and to combine the two entities.”
We said, “What we’re going to do is replace as many of the people as we can that are talking about what your bill is for this month or how much time you had used on the phone that month and to combine that with this system, this speech recognition system they had paid $500,000 for in the back, and combine the two.” We took terabyte, the form of the data that was back in the server room and parakeet birds that talk, although we later found out I think that parakeets don’t actually talk but that’s neither here nor there. Now we took parakeet and terabyte and we combined the two, and that’s how we came up with the name Terakeet, and so…
Andrew: The idea was that when somebody would call in, instead of speaking to a human being, they could speak to this machine that your potential client had already bought and the machine would spit out responses.
Mac: The idea behind Terakeet was that we had built a system or we’re working on building a system that allowed call centers to build these speech recognition apps really quickly. It would spit out what’s known as voice XML using objects to build the software. We had this idea and we had never really executed on anything like it before, and so we decided that we needed about $500,000 to be able to build this piece of software on Terakeet that we called J3. That’s where the story of Terakeet began and quickly ended for a while for us.
Andrew: Well let’s go through that early part first and then we’ll get to the success part, but the early part was you tried to raise half-a-million dollars, you actually raised $400,000 right?
Mac: That’s right.
Andrew: From friends and family. At your worst days, who did you look back on and say, “I can’t believe I raised money from this person and I feel really bad about them?”
Mac: My grandmother.
Andrew: Your grandmother. How much money did you raise from your grandmother?
Mac: Ten thousand dollars. She’s 92 years old now. There were a couple of times where I was prepared to drive over to her house in DeWitt, New York and let her know that she had lost her money.
Andrew: But you didn’t?
Mac: That’s right.
Andrew: You did though recognize pretty early on that this idea wasn’t going to work out. What was the first indication after raising money that the idea wasn’t going to pan out?
Mac: I’m not a software guy by trade and my job was to sell the software. While the software was being built, I was drawing up interest and the more I talked to customers, the more I thought that there was going to be huge, giant, interest in what we did. It was one of these businesses that someone that I… in school used to refer to this as the MBA business. Giant market, obvious adoption opportunity, huge amount of money that you can charge and you’re replacing something where there’s like this 20,000 seat call centers in New Jersey that Verizon has. It’s just like such an obvious business.
I felt so good about our ability to sell the software because I felt like everyone needed it. But despite being told that when I went in front of our first potential customers and actually had a product to sell them, number one, the product didn’t work like we had anticipated it would work. It was much more cumbersome to use. Secondly the dogs just didn’t like the dog food. They didn’t want to pay for it and that…
Andrew: What didn’t they like about it?
Mac: Number one, they didn’t want to do the work themselves. They run call centers, they weren’t software people. Even though we thought our software was really easy to use, it wasn’t software that I could use. It was a software that the people that worked for us knew how to use but it was still extremely complicated. The other thing was the call centers were working pretty well. The model was working pretty well. Something that happened right around that time was that call centers started to move overseas. They could do that at a very, very low cost. In certain cases lower than the cost of speech recognition or at least close to the cost of speech recognition.
The choice between a human and really something that hadn’t been widely adopted yet put us in a real predicament. We had spent I think around $400,000, $390,000 on the product and paying the employees that were building the product. I remember vividly that we were going to have a holiday party that week when we had run out of money with all of our investors and all of our customers. The problem was, we didn’t have any customers. We had a bunch of investors. We invited a bunch of our friends and our family. I remember my mom cooked hot dog wieners for everybody.
Andrew: Did Nana come?
Mac: Nana was there unfortunately. That same night, our third partner in that business resigned and gave us his two weeks notice. All this came down within like a two-week period and was pretty…
Mac: Go ahead.
Andrew: I’m trying to understand a little bit about what… how you could have avoided it so that others can learn from you? Would it have helped to do customer development as we call it now where you would have called your customer and said, “If I build this, is this something you would want?” Would it have helped if you had that feedback before you built it or is it something that even your customers couldn’t anticipate until they saw the actual product?
Mac: A couple of things, we might have just a bad business. There are plenty of folks that start businesses that just don’t have good ideas and don’t have good businesses. Maybe if we had done all this customer success and sat down with customers and done interviews, they would have either told us the same things or they would have told us our product stunk. It probably wouldn’t have changed a whole lot about the underlying fact that our business wasn’t that good.
Another thing is that money sometimes can pollute a business and can pollute an outcome. What you see now with a lot of the money that’s being poured into companies is one, money can get poured on to a bad idea and that’s not going to ever turn it into a good idea necessarily. But money can also cause you to be blinded in seeing things that you normally would see much more vividly if it was your own money or if you were running a boot strapped operation.
Andrew: Are you saying that because you had money you are blind to something, or are you saying that if you had more money you would have been blind and wouldn’t have stopped building this product?
Mac: Yes, so I think the fact that we could spend what money we needed to spend on engineering made us just think that that’s how we were supposed to do it rather than perhaps doing a beta test with a customer where we built them some custom module, and saw how it worked for them and then scaled it from there. I think it was just like we have this money that the customers are demanding this product, we’re going to go out and build this product and then we’re going to see how much of it we can sell. I see a lot of people do that. I would never do that again, but it certainly was a major lesson for us.
Andrew: Your partner put in his notice and said he was leaving, you had to actually buy your partner out, why did you have to buy him out if there was nothing really in the business?
Mac: We had built a product. I don’t think we knew how awful that product was yet. I think we just figured that we were going to iterate and we were going to build a better product and people were going to buy it. It was still fairly early on and we hadn’t seen the sales piece through. We actually went out then and hired a sales director for a short period of time. We thought maybe that was our problem that just none of us had ever sold a product like this before. We were still early on in figuring out how much our product sucked.
Andrew: I see. There was still some perceived value. How much did you have to pay him when he left?
Mac: I think it was somewhere in the neighborhood of $20,000.
Andrew: Wow. All right, so now you have another $20,000 and then there was also an IRS thing. What’s the IRS thing?
Mac: Let’s not make it sound too dramatic, but what we figured out early on was that if we took our checks as they came in and paid ourselves the salary, that we could actually kind of rectify the tax issue at the end of the year. What ended up happening was to stay above water, my business partner and I were, essentially we would get a $2,000 check and then we would have an expense either a personal expense or something else. We would use the check to try to pay something off. We would have office expenses. We were set up as a C-corp, so we had a corporate tax issue. I wanted to…
Andrew: Wait, what’s the tax issue that would require you to take money out of the company to avoid?
Mac: This particular tax issue was an income tax issue. We were paying ourselves zero dollars. We had made an agreement that we would pay ourselves out of any money that was coming in. We went back almost immediately to doing consulting, and so what…
Andrew: I see, so that happened after some money was at least starting to come in. Got it.
Mac: Exactly, exactly. We went back to doing web design and really anything that we could do, internet marketing.
Andrew: Let me pause then for a moment because now your partner left and in addition you have to pay him out another $20,000. Your other partner had to leave his place and ended up living where?
Mac: Back with his parents.
Andrew: You were living on whose couch?
Mac: It was a friend of mine named Scott Johnston. He was a stock broker in Syracuse, and he had had the good fortune of purchasing a two-bedroom apartment. The second bedroom didn’t even have a bed in it and so for a period of time, I was sleeping on his downstairs couch for a long period of time actually.
Andrew: Now, for most people this seems just like part of life. You just live on a couch in early days of your business. Terrific. But your guy who had a big success. I was reading Cornell’s website about you. They’re raving. They freaking love that you went to that school because when you were in that school, out of their dorm, you built what?
Mac: We built a consulting company which is what we eventually went away from again that was extremely successful. The business model while we were at Cornell and remember this is also during the dot-com boom so…
Andrew: Yes, the dot-com boom before you ever even discovered this whole Voice over IP idea, you were in school, seeing everybody is wanting to get online, everyone seems to think they could get rich and you decided you were going to start a consulting company from your dorm. What kind of consulting were you offering?
Mac: Yes, so we basically were building websites, we were doing custom software. And the other part of the model was there were really smart kids at Cornell, and we would go to this venture backed companies. Back then people don’t realize that there were a number of start ups at colleges in ’97, ’98, ’99. They had big amounts of venture money.
What we were doing was going to like a file sharing CEO that was… had an office on campus and saying, “We can build a Linux module of your file sharing program for you.” They would say, “Oh, great. How much does that cost?” We would say, “$80,000.” Then we would go to students and we would get a couple of students together and say, “Hey, how much would you charge us to build this Linux module for a file sharing program?” They would say, “I need a new car. I don’t know.”
We would pay them some lower amount of money and essentially keep the margin in between. It was a combination of that and building websites through college that actually right in front of us was a really successful business.
Andrew: How successful? What kind of revenue did you guys do then?
Mac: We’re doing about a half-a-million dollars in revenue by our junior year going into our senior year. I had bought a car. I wasn’t saving a whole lot of money but we were paying our way through school and things were going really, really well and…
Andrew: What kind of car? Because frankly school is very freaking expensive but I can’t… couldn’t have absorbed all the money you were making in this half-a-million dollar business.
Mac: I bought an Infinity which coming from where I came from at 20 years old was a pretty significant expenditure.
Andrew: Where do you come from in 20 years old that Infinity seemed like a huge expense? I mean it’s a beautiful car. It’s high-end.
Mac: Yeah, yeah, it was probably like a $30,000 car, something like that. Yeah, there were three partners and I would say half of our money was probably margin. I would say half of it probably at that time went to taxes, and then I had savings, I had stocks, I had some money saved, not a ton of money but I had some money saved and things were going really well.
Andrew: Did you lose all of it when Terakeet Version 1 didn’t work out? You did.
Andrew: Wow. Well I don’t want to brush over that because when we’re living it, we can’t just brush over it and see it as a moment in time on a bigger story that’s actually going to end up being successful. We’re not that rational. Let’s just identify with how you felt. How did you feel having gone from such great heights to now sleeping on someone’s couch?
Mac: Yes, so I had… I remember at one point during my senior year I had like $126,000 in Oracle stock through an online account and I can’t remember if it was E-Trade or what it was but I would print out the statements because I was so proud of the money I was saving and things like that. That had completely evaporated to the point where like you eluded to earlier, I had gone on payment plans with credit card companies, I was on a payment plan with the IRS, and not only was I, did I have zero dollars and had lost what I had, but I had car payments I was missing and it felt like the walls were caving in.
Andrew: Do you remember like a memory of how… I remember when times were really tough for me, I remember walking into work in a sense of like I was sleepwalking. I just couldn’t even take in any of the outside environment. I just had to get to work and so I was walking like I was sleepwalking. I remember thinking about a letter that I got from someone who wanted to buy my company for almost a hundred million dollars and I just kept saying, “Why did you gave that up? What happened that you allowed yourself to do it? What if you could go back in time?”
Those kind of memories were really, really tough. I remember thinking, if you didn’t get a vacation before, now if you have to go get a job, they’re not going to give you a vacation the first month in just so you can relax and recuperate. You have to go work somewhere else pretty crappy and you’re exhausted. What were your thoughts that went to your head in that period?
Mac: Yes, so there’s a couple of things going on. One is that you can’t let the people around you including your business partner or your employees that remain see that, so if they feel like they understand to the extent what you’ve been devastated, they’re not going to see how you’re going to dig out of it. I wasn’t totally transparent with the people that I worked with which I’ve diminished down to a couple of people about how bad the situation was.
I remember one specific time that I was sitting at a stop light, and the snow was coming down in Syracuse and I was crying. I was crying and I felt like I had lost everything and I was thinking about what job I was going to go and I was going to get. I was thinking about how I would tell my parents that I had failed. And I called up a guy who was a mentor of mine and when I got back to the office and I told him that I had just sat in a stop light and cried because I knew it was over.
The thing that he said to me was, “It’s only going to be over if you allow it to be over. You started with nothing and you built up this business and you can go back to that and you can continue to build this thing. People have overcome way worse.” I remember the guy telling me that his name was Tom Robinson. Hearing it from him who I knew had been through things similar, gave me the motivation to say all right, we’re going to stick this out a little while longer.
Andrew: Did you get back into consulting because you knew that there is no big fix cost in it and you had already succeeded in it before?
Mac: Yeah, so it was just an easy way to generate income. I knew that we had done it before. It was more challenging because there weren’t as many startups and the dot-com bust had happened but there weren’t as many competitors either. What I had observed had happened was all these people had built these websites in like ’99 and 2000. By 2004, 2005 they needed refreshes.
When we were refreshing the websites, they had for the first time started realizing like how do I drive traffic to this website? Now it’s not a billboard for me any longer. It’s not a card, a business card. It’s actually something that can drive revenue to my business or drive people in my stores and people became more and more curious about ways that that could be done and we did too.
Andrew: Speaking of driving traffic, you told our producer that there was one client who came to you and said, “Hey, I’ll give you… I’ve got $15,000 budget. Can you buy ads for me?” You took it on, and you went to Yahoo and what happened?
Mac: Here’s something I didn’t tell the producer. An interesting part of that story was that client that came to us was actually the one who had the call center that I walked through who had the speech recognition server and who actually gave us a second chance. They never ended up buying our software for their call center. That tells you how bad it was but they ended up giving us a second chance and they allowed us to purchase ads for them.
We purchased Yahoo banner ads off of their search engine. It was for their ISP product that they had. We ran $15,000 worth of ads and they didn’t get… I think they actually might have gotten one purchase but that was it. It was…
Andrew: Was it worth it? Is it the kind of business where a $15,000 per customer…
Mac: No, their cost of acquisition was probably less than a hundred dollars. It was a disaster.
Andrew: I was buying ads back then and you know the ads that worked well on Yahoo? They are the ones that looked like a dialogue box with an arrow warning and it said, “We have one message waiting for you.” Then if you click the OK button, then you end up on my site and then the message was whatever the ad wanted to make…
Mac: They don’t allow you to do things like that anymore.
Andrew: No, they shouldn’t have allowed us to do it back then.
Mac: On the main stream ones, yeah, yeah.
Andrew: Yeah, all right so that didn’t work out but you were starting to get your groove. Where was the first big hit? The first one that made you say, “Yeah, we can do this. Things are turning around.”
Mac: We started naturally exploring SEM next and in an auction based system, it was in the early days, so the price per clicks were really low back then compared to what they are now with a couple of exceptions where really smart marketers had caught on to the fact that the clicks were really low, and it was a great way to drive traffic where the intent was clear.
At that time we started exploring SEM and found it to be somewhat expensive and started exploring well, how are people obtaining the organic results? Why is this company that looks like its run out of somebody’s basement ranking number 1 for sneakers when Nike is ranked number 10 for sneakers? We started to research this world of Search Engine Optimization which you know back from your early days was really the Wild, Wild West back then. It was really a black box, really manipulative way for brands to try to figure out ways to get links and to rank better on Google.
Andrew: What’s the craziest thing that you did? I admitted. What would you open up with now?
Mac: Early on we experimented with running web counters with hyperlinks at the bottom of the web counters. We experimented but never succeeded in some of the doorway page stuff early on. There was an update that happened though within like six months of us beginning to explore and test out SEO called the Florida Update. I’m sure you remember that but that just like shook up this entire world. We really started seeing that as an opportunity to innovate a bit and that was the first time that we started looking at the idea of manually e-mailing for links.
We started by just trying to only classify high authority sites and e-mail them for links which is nothing that we would do today, but we were still thinking about it the wrong way. We were thinking about it as how can we figure out ways to get high authority sites linking to our clients. Then there was a purchase by Google called the Hilltop Algorithm where Hilltop started to associate relevance. As these algorithms rolled out, we just said from an altruistic standpoint like, “Where is Google going? What are the signals that they are going to use in the future?”
By 2006 or 2007, we had a handful of customers that were coming to us and they were coming to us for our ability to have people that worked here sending a lot of e-mails to sites that were in some way related. It was working, it was working well but…
Andrew: You said 2007.
Mac: It was impossible to scale though.
Mac: How do you prevent two people from e-mailing the same sites? How do you manage the responses if someone e-mails you back? How do you know who responds if you have multiple people working on multiple accounts? How do you measure the value for more than like five clients and articulate it? How do you capture the rankings? It’s just was one of those things where like when you get from 5 to 10 people, you feel like you’re back at 5 people. It’s very hard to keep clients because back then, it’s like okay, well once I rank number one for the one term that I care about, why do I need you guys anymore? It’s just was very, very challenging to figure out like how do you scale this SEO consulting company? That’s when we began to innovate a lot more.
Andrew: How did you even get those clients? The ones who are paying you for SEO?
Mac: One of the first things that we did is when we were doing our SEM keyword research, we started looking at the most expensive keywords and we figured we’re not going to get any major customers, but if we can prove that we can go into difficult keyword categories with our own sites and succeed in that then maybe that will draw the attention of some of these brands. Some of the money keywords that we evaluated, the credit card space well, but we looked at credit cards, we looked at insurance, we looked at personal injury stuff, and then we happened upon mesothelioma.
In 2003, that was the first year that we started experimenting in the mesothelioma space. By 2006 we probably had six or seven websites under our control and we were getting marketers that were contacting us through our web forms asking us how we were doing what we were doing. When I say marketers I’m talking about like major corporations like Dell computer and companies where we wouldn’t have even known where to start in terms of talking to these companies.
Andrew: I see. Wow. All right, and now all of this stuff is working well. It doesn’t scale and you said you need to innovate. Before we get to the innovation, I’ve got to tell you that it’s very hard to research you. I have to be completely open and say that I couldn’t back up a lot of what you’re saying with any of my own personal research because one of the things that you guys do is you do reputation management and you’re damn good at it. I’m not saying it as a compliment. I’m saying it as an opening about how tough it is for me to research you guys and to be open to my audience.
I couldn’t confirm all these stuff because for example your robots text tells archive.org not to show old versions of your site. Fine. I go back to Google and I start searching. Everything in here on the first page at all links that makes sense for you guys like your Instagram and your LinkedIn. I do what I do for other people. I go to the fourth page. You know what’s on the fourth page?
The fourth page is Foursquare link to you. Is there anything on there? Not dramatically. Fourth page includes MapMyRun for Terakeet Road Runners group. How many people are on there? Just one guy. I think it’s your co-founder. There’s a Vine page. There is an infographicbox.com page for Terakeet. It has nothing on there but you guys control. You guys are damn good at what you do. Again I could keep on going.
I said, “Page number five has Monster.com job search. I’ll see what jobs they are hiring for and I could see where they’re going in the future.” I go to that. There are no jobs but there is a jobs page on Monster.com. What you do is you hold on to pages on the site that you know rank well and you crowd out any space that there might be there for someone who’s going to put you guys down. Not that there is, as far as I know there’s no one out there who says anything negative but it does keep that. That’s the way things work in…
Mac: Sure, sure, yes. What you’ve just described is what someone would evaluate if they were a brand or if they were a politician or if they were an individual that was coming to us to try to determine how we can help their brand from a reputational standpoint, from a crisis management standpoint. And so what you just hit on is a key part of what we do now which is helping brands think about how they’re talked about online. It’s not much different than a PR firm.
I think the difference of what’s changed in the world is that if the Cleveland Plain Dealer decides to do a story on you tomorrow, it would only have mattered to people who lived in Cleveland 10 years ago or 20 years ago that that article was written. The difference now is that that article if it’s negative or if it says something controversial, it’s like a neighborhood. In your neighborhood if you win the Man of the Year Award at your church or at your synagogue, none of your friends’ friends and the people in your neighborhood are going to call each other and talk about it. If you do something bad like blast into a mailbox on your way home drunk from the bar and you’re doing that every night, then they’re all going to call each other and talk about it. News works much in the same fashion.
The way that we look at it and the way that Terakeet looks at it is that every two to three years, you’re going to encounter some kind of crisis and whether it’s a crazy blogger or it’s an unhappy customer, no matter how rare, almost everyone is going to encounter some kind of crisis at some point. Having an immunity built up against that and having positive things that are out there said about you is something that every business should be doing.
To your point, we represent brands, we represent politicians that are coming to us for a myriad of reasons. One might be that they just want more visibility online. Another might be that they want just better digital PR from influencers. But another thing might be that they’re worried, that they’re going to be susceptible as a really cool, really disruptive top 100 internet brand to people saying negative things about them everyday on all the platforms that exist to be able to do that. Having people saying great things about you is obviously a core component of what we do and the value that we bring to our customers.
Andrew: Is United Airlines a client of yours?
Andrew: No, okay. One of the examples that I keep thinking of is this guy, David Carroll, gets on a United Flight. They break his guitar, he sings a song about it that goes viral. I still every time I think about United, it’s in my head. For a long time if you search for United Airlines what you would come up with is his song on YouTube and you would come up with his song and article about him on Mashable and all this other stuff. What you’re saying is the reason that or one way to combat that is to start to control your search results by being frankly one will… by doing what you guys did that we mentioned earlier.
Mac: Yeah, and you know most of this stuff, 90% of stuff when it comes to a business is stuff that you can try to control. You can try to control and build your culture, you can control what people get paid. The one thing that is very tough to control is these environmental things that happen that you don’t see coming. How did Subway, how would they ever have known, it sounds like they did all kinds of research and everything else. They put this guy in front of all these millions Americans and made him the face of their brand, and here this guy has apparently allegedly at least the person who ran his foundation done awful things. Now Subway is at the center of this giant controversy.
Andrew: You’re talking about how his computers were raided by, I forget who the FBI or someone and turns out there was child porn on the computers, something like that. I don’t know the actual story and like allegedly. I don’t want to disparage this guy without knowing what happened because it’s such a horrible thing to have been found about you but that’s what you’re saying. They did all their work and suddenly this one little story about him, a big story actually that had nothing to do with Subway, can end up ruining their reputation.
Mac: Yeah, and so like the Home Depot will spend $26 million to put their brand on the front of a race car that a guy drives around the track, 150 times and will go from track to track to track and they’ll broadcast this on TV and they’ll pay $26 million to have their brand seen by all these people on TV. Think about how quickly a brand can be damaged or a brand can be killed by a bad story. That’s not to say your goal as a brand should be, you can do bad stuff and Terakeet will come and help you clean it up. It’s more that if 99.999% of what you do is good and you’re giving back and you have a great product, if you know that one person who could even be lying can screw that up, why wouldn’t you be doing the right things to try to protect your brand over the long term?
Andrew: All right and actually I do see a story here. It’s the director of Jared Foundation who was arrested on child pornography, exploitation charges, Jared is the spokesperson for Subway Sandwiches. These are the kinds of things that you guys added. What was the first big innovation? The first big product that you guys added?
Mac: The most time consuming thing about trying to do digital PR is to actually build lists of people to contact and the way that we used to do it, when I say we, I was actually one of the people doing this, is to go and do Google searches around queries like fashion bloggers talking about spring fashions, and you’ll go to the first 10 or 20 or 100 results and you’ll cut and paste those results into a spreadsheet. Then you’ll go back to those results after a week and you’ll try to find the e-mail address or the contact information around that.
Andrew: Are you talking about the same thing I described earlier that we do with Pipedrive, a lot of people do in Excel spreadsheet.
Mac: That’s right, that’s right. That’s actually something that we’re exploring that I’ll talk to you about after this call is Pipedrive. We’re exploring on the sale side of things, how we can scale our sales operation through doing the same type of work that we do for our software platform. That’s another conversation that I’m interested in.
Those two steps that I just described, the looking for the sites and then collecting an e-mail address. That takes up like maybe two or three days of your week if you work at an agency. The first innovation was to bring those two pieces together in a proprietary piece of software that would essentially allow the software to go out and perform searches and capture the sites, and then capture the e-mail contact information through either scraping or crowd sourcing. And making that process really, really simple so that a lot of different people could do it. That’s where we were able to get to maybe 15 employees where they were actually spending more of their time e-mailing and in dialogue versus doing what I just described.
Andrew: Yeah, I used to do that too. It takes forever. I would have to do a Whois search on your company name and then maybe that Whois search wouldn’t turn up your e-mail address. So I’d hunt down your personal blog and then I’ll probably realize that your personal blog is registered to you under your old e-mail and I could use that. That takes a while.
Mac: Yeah, it takes a long time. Sometimes people put it right on their websites. But if you’re trying to find thousands of sites, that can be really difficult and so…
Andrew: Your first innovation or one of the first ones was, let’s create software that does this. This is so much better for software and when you said crowd sourcing, you mean something like Mechanical Turk?
Mac: Yep, so that’s one of the platforms that we use. The other thing that we have the advantage of now is we’ve got a database of about 25 million records, and so because we’ve done this, we first put this into place in the later 2000s, we’ve done this now so many times for so many different brands that we’re starting to build out a pretty big database where the record already exist which is…
Andrew: Let me ask you this then, why are you guys using Sunshine Sachs to connect with me to hook up this interview if my name is probably in your system?
Mac: Good question. We’re relying on Sunshine Sachs to provide us with people outside of what we consider to be an influencer. I think what would be helpful is if I kind of describe to you as what we look at as an influencer, the type of influencer that we would contact and then distinguish how that’s different than you perhaps.
Andrew: Okay, and Sunshine Sachs I should say is just the PR company that introduced me to you.
Mac: Yes, so we hired a PR company three or four months ago maybe five months ago because to your point as you looked us up, we’ve done this all from Syracuse, New York. We’re not in New York City, we’re not in Silicon Valley, we’re not raising money. We don’t have TechCrunch and Business Insider writing articles about us. But we’ve built a relatively large company that’s based here in Syracuse, 175 people. Outside of the Syracuse Post Standard as you called me out on, we didn’t have a whole lot the…
Andrew: Or the Cornell University Newspaper.
Mac: Yeah, but I mean I wouldn’t put that up with [inaudible 00:41:44].
Andrew: Yeah, no, but in Syracuse you are very well loved.
Mac: That’s right, that’s right, I appreciate that. But outside of the area, we weren’t known. Sunshine Sachs is based in New York City. They’ve done this for other brands like ours successfully and…
Andrew: What’s your… I understand now why you would go to them, that you would want to raise your profile now with the broader tech startup community and maybe the world at large. But you’re starting to find how their… how your way of working is different. What’s your way of working?
Mac: Yeah, so we look at an influencer. I’ll tell you a story of what an influencer might look like. We look at an influencer as the young woman in South Dakota who has an iPhone and who has a computer and a laptop, and works a job that probably has nothing to do with fashion. But is looked at among her friends and her family as someone who in her geographic location of the world knows a lot about certain subject matter. My mom is a former teacher and she loves to cook and she in her earlier years, published a little recipe book that she gave to all of her friends, and she code named different foods that she cooked and everything else. This is the modern day version of my mom.
This person first starts by being the person that goes with her friends to the mall and helps her friends pick out outfits for going out on Saturday night. Then decides, ‘You know what? I’m going to start taking pictures of myself and post it on social media, and talk about the different clothes that I’m wearing.”
She gets this suggestion eventually, “You know what? I’m cool enough and there’s enough people asking me this questions that I’m going to start publishing. I’m going to start a blog.” She might register a blog spot account, and sooner or later realized “For $9.99 I can buy my own domain name. More and more people are coming to my site” and in a certain point, it’s going to show up on our radar. The site is going to have enough authority. The site is going to have enough comScore traffic. She’s going to have enough social media following that we realize that this person has real clout. But you and I have never heard of this person before.
A brand like the GAP is going to have no clue that this person even exists. But there are millions upon millions of these people in every single category all across the country where their circle of friends carries with it, and their friends’ friends and their friends family carries with it a very, very strong level of influence when it comes to subject matter like fashion and politics and lifestyle and all these different things.
Our goal as a company is to find those people at scale and make them aware of the brands that we work with, make them aware of the products that they sell, make them aware of the content that they’re publishing, that hopefully is interesting to them, and give them a compelling reason why they would write about that brand and talk about that brand, if anything because it validates them. It validates that young lady in South Dakota that a household name that you and I are aware of has reached out to her and told her that they have read what she’s published and would love to be included in something that she’s writing in the spring about the upcoming fall fashion season.
Andrew: I see, I see all right. I could see a little bit of how it helps the brand. It’s a little bit of SEO, a little bit of orders for sales, a little bit of reputation, what’s the big one though?
Mac: Yeah, so it can manifest in different ways. For a brand that sells Greek yogurt, the way that it’s going to manifest is that if mommy bloggers are writing about how they’re using Greek yogurt in their kid’s food instead of mayonnaise. When a person who’s read that blog walks into a Walmart in South Dakota and they see 13 different Greek yogurt brands, they’re going to hopefully pick our customer’s brand because there is brand recognition and visibility.
For an online retailer, their goal is going to be that maybe if they’re in the fashion space, there is this huge amount of engagement and visibility that’s been built up around their brand so that they’ve got traction against a GAP or a big, big behemoth company that they’re trying to challenge online.
Andrew: You got this to how much in revenue this business?
Mac: Run rate revenue in the neighborhood of $25 million.
Andrew: In 2014 revenue?
Mac: Collective revenue $17 million, run rate probably $18 or $19 million.
Andrew: Wow. We talked about how you find these mommy bloggers, a little bit we talked about it. It’s your software that actually does it right? It’s a hard process to do manually. You spent sometime creating software. I don’t imagine that we can get into the details of what your software does. But I am curious about how you get your customers. How do you get so many of them that you could get to $25 million run rate for this year 2015?
Mac: Yes, so it was all through word of mouth up until this point. We didn’t have a sales team in place until last year. I think most companies that I’ve researched get to maybe $5 to $10 million with their network before they reach this hot coals point where they have to really amplify their sales efforts.
Andrew: How do you get word of mouth to get to that level? That’s a really hard thing to do. Word of mouth usually is sparked, that’s what you guys do for your client. How did you spark word of mouth?
Mac: It’s a lot of new economy brands, and the new economy brands interestingly unlike really, really big brands and Fortune 500 brands, they share a lot of information, they go to the same conferences, they are on list serves with one another. The other common thread there is that there are typically VC backed by a lot of money.
What’s happened or what has happened is that a lot of these brands began talking to us or talking about us at board meetings and to VCs and so the VC started actually reaching out to us. A number of major VCs like Battery Ventures, and Andreessen Horowitz, and Excel, and Thrive Capital in New York City started asking us, “Hey, would you guys be willing [inaudible 00:48:17] ventures? Would you guys be willing to talk to some of our other brands that we’re investing in?” I think…
Andrew: I see, so you’ve gotten your way into the funding community without even having any venture funding. Those guys aren’t looking for just brand protection at that point, right? When a company is just starting out, they don’t even think about the guy who’s going to wrap. What are they thinking about?
Mac: There’s a life cycle of a brand, and the first part of that life cycle is to grab as much visibility as possible. I would say every single retail venture background has some kind of PR firm that they’re working with. That’s the first thing that you do the moment that you get money. They’re looking to really get larger amounts of visibility. They’re looking to spend money. But they’re also looking to get like an organic natural way that they can grow so that people can become…
Andrew: What do you do? You were telling me about a prescription eyeglass company that sells their glasses online. You said you didn’t want to get into the name of the company but you would talk here about what you did for them. Can you give me a description?
Mac: Yes, so we met them early on and they were challenging the status quo of the idea that you could purchase prescription eyeglasses through a website. When we met them, their challenge was that not many people knew about them. They had done a nationwide survey where outside of New York City, only 2.5% of Americans had ever heard of their brand. They were a little bit depressed by that and upset by that but they really saw Terakeet as a vehicle that could provide for them huge opportunity to grow.
When we started working with this brand, it was all around collections. We would go to fashion influencers and we would tell them, “Hey, we want to provide you with information about a collection that’s going to come out in two or three weeks. We’re only going to a select number of people to tell them about this collection and we want you to be aware of the brand, what they’re doing, and be aware of the collection.”
What would happen was in over that course of the three weeks, we would line up as many influencers as we possibly could. They would ask for things like are there any pictures of the collection? Two or three days before the collection we would send them different pictures and tell them about the colors and things like that. By the time their posts were ready, the day that the collection launched, the company would sent an e-mail and then there were all these influencers that were talking about the collection. To the point where after the first two collections launched, the brand only did two types of marketing and continues to do two types of marketing on the day that they launched their collection. They send an e-mail and they use Terakeet.
Those are the two forms of marketing that they used. The thought process behind that is, this is a very natural way to get influential people talking about you that fits into the taxonomy of the desired customer of that brand and where that taxonomy of people and that constituency lives and breathes on the web.
Andrew: What does something like that cost?
Mac: $25,000 a month.
Andrew: A month. What’s the most expensive package that you have?
Mac: That’s the average. We have an enterprise version of what we do that’s about $50,000 a month and then…
Andrew: You’re getting to $20 million, $25 million on like $25, $50,000 agreements?
Mac: Yeah, yeah. Our smallest agreements don’t go below that threshold and we’re fairly selective about who we work with too. We’ve had brands come to us where the size of the market of influencers just isn’t big enough to warrant engagement with us. We’ve turned opportunities down in certain cases where we feel like we can’t be successful.
Andrew: I don’t see any of this in your Wikipedia page. But what I do see in your Wikipedia page is Hillary Clinton.
Mac: That’s right.
Andrew: You were moved by Hillary in the ’08 election, 2008. You saw that there was a problem. What was the problem?
Mac: Well I wasn’t going to bring up the politics stuff because I don’t know how much of your viewership is Republican or Democrat.
Andrew: Yeah, why did you get into politics considering that it’s very polarizing? I intentionally didn’t name the politician at the top of the interview because I know the people started to tune out the methods that you use because all these years, Hillary Clinton and I don’t like Hillary Clinton or I love Hillary Clinton, and to me, I don’t care who it is. I just want to know the process. But I do recognize that people do get influenced by this and I would stay away from politics completely. You dove right in, why?
Mac: Yeah, so the wildcard for the growth and I didn’t explain because I didn’t want to necessarily get into the politics stuff if you didn’t want to get into it. A lot of that growth came from being attached to the later campaign that we worked for after Hillary which was the Obama campaign. And a lot of businesses saw fairly explosive growth because they were associated with that campaign and that was a big catalyst for everything that’s we’ve done. There’s no question.
Andrew: I see. Dan from Optimizely told me same thing happened to him that because he helped Obama, everyone was amazed by what Obama did with digital advertising or with the campaign fundraising, and they just wanted to see what he did and hired his company. I could see the benefit of it.
Mac: Optimize [inaudible 00:54:02] example of Blue State Digital that was acquired by WPP shortly after the 2008 election is another example. There’s actually a number of examples of these folks that came out of the Obama campaign or started businesses out of the Obama campaign. Another one is BPI Media, my friend Andrew Bleeker, Bully Pulpit Interactive, they had done extremely well. So there’s examples of that.
What I saw was that 2008 was going to be the first campaign that had the capability to be one on the internet through a small donor base. I had met Hillary in college and I had met people from her campaign. Her campaign chairman Terry McAuliffe, who is now the governor of Virginia is from Syracuse, New York, that was the connection. He was aware of our business. He was from Syracuse, he introduced us to the campaign and he was chairman. He brought us in in the second half of the campaign when they were really struggling online, and Obama was crushing her when it came to the small donor base and…
Andrew: Before that, this is just me reading my notes from your conversation with our producer. You reached out… wait, 2007 Hillary Clinton came to Syracuse and Mark ran a fundraiser for her. You wanted to do something to help even more, so you reached out the local bloggers, you used e-mail to get a hold of people, you used some ads, basically you did the stuff that we described here for brands except you did it for her. Did you do it on your own? Did you just say, “I’m going to do this because I know it’s helpful?”
Mac: Yes, so it was a little bit calculated. I wanted to become involved in the campaign and I wanted to come out with a big number that would get her attention. At the time the fundraisers were like $90,000 and there were smaller fundraisers. And so we came out and raised $215,000 and I had people from Rochester and Buffalo, and all these upstate cities that most of your followers won’t be aware of.
With her, she was impressed by that and she asked a lot of questions, which I wanted her to. I went down and started a consulting gig about halfway through her campaign that was the last three days, and ended up staying there for six months in an Arlington hotel room. Ended up taking over components of her internet and all of the online fundraising.
Andrew: Can you tell me a little bit more about what you did to get her attention? You had the ability to raise money for her, right? They deputize people to do this and you said, “I’m going to do it in a different way.” I kind of ripped through the notes here. Can you just describe it a little bit more in depth?
Mac: Yeah, so to get her attention, she was just impressed that I had done that. It was more her campaign chairman and the connection to Syracuse. He’s an entrepreneur himself. He started a driveway business, sealing business in Syracuse when he was 13 years old. All of his entrepreneurial start came from Syracuse. I think there was a connection between him and our business and he really liked what we were doing, and he wanted to find a way to get this Syracuse company involved with the campaign.
It wasn’t until the campaign was struggling that the light bulb went off for him where he said, “We’ve got to get this guy down here. This is a chance for him to help us.” The rest is history.
Andrew: I’ve read about a lot of the things that you did in the campaign. What’s the one that had the most impact and you’re proud of?
Mac: The outcome wasn’t… we didn’t get the outcome that I went down there for. She didn’t win. I think for me the experience was great because politics is a place where you’re driving more traffic than you can ever imagine. They are spending more money than any company is spending in the last days of the campaign, like a million dollars a day on SEM, and the traffic volume is there to support. So with like access to analytics and that sample size and everything else, I was able to see things and learn things that just like I never would have been able to learn with…
Andrew: For example?
Mac: Like for instance, looking at geographic locations of traffic through analytics and seeing almost every Democrat in a single city and where they are located. How little like 1% movements in page authority can change the percentage of people that are coming to that section, the site by tens of percents. I mean just things like that.
I think what I realized though was there are a lot of moving pieces and components that go into a campaign and just like any business, there is a ton of stuff that’s outside of your control. But one of the things that we learned for instance was putting a contribution screen on the homepage of the site when there was any moment of something awful happening or something great happening, like she won Texas or something like that. When we did that we incrementally raised the amount of money raised by double digit percentages just by putting that on the home screen. That was something that like every campaign since then has used.
Another thing that we did is we realized that the feedback we were getting from people is that they wanted to be able to in some way have their money affect outcomes. One of the things that I came up with was instead of asking somebody for two dollars or five dollars, ask someone to purchase a yard sign in New Hampshire. Making somebody feel like their money is actually… it wasn’t. It was just like we have to buy 5,000 yard signs until we raised $25,000 we weren’t going to get there. But making someone feel like they’re a part of the outcome is critically important.
Andrew: That’s more marketing. It’s more like how much does it cost us to get a yard sign? When you’re paying this much money it’s the equivalent of getting this yard sign. But there is no specific yard sign that was only bought because you paid.
Mac: That’s right. It wasn’t like I had my name on the back of the yard sign or something like that. But what we learned on the political side of things was that if people feel like they’re able to affect the outcome, they’re more likely to give. That was really interesting.
The other thing is that having access to analytics made it obvious to us that we had a missing component of our business and that was how we demonstrated value. Coming off of that campaign, we had this aha moment of not only do we need to be really good at understanding Google Analytics and how the work we’re doing is affecting analytics and traffic segments and things like that. We’ve got to package this up really nicely for our customers so that all levels of the organization can understand it.
That’s really the third component of our software. Our Chorus platform, was taking the Google Analytics APIs, taking third party APIs like Moz, Majestic, scoring around social metrics and taking that and building that into one report has made us really much more sticky with our customers where people don’t even know what our company name is and the CEO is asking for the Chorus report.
Chorus is the name that we gave to this software system that we built where now all of our customers log-in on a real time basis and have full transparency into everything we’re doing. They can see the number of e-mails that have been sent in a day, they can see the sites and click on them and see what people are writing about them in real time.
They can see how that’s manifesting in the form of social engagement, how many times the post is being shared or how that person is sharing, what it is that they’re writing. They can see the traffic segments and how that’s showing up as direct click-through traffic to their site and purchases. The idea is that like in an engagement with Terakeet, we want to totally open up the blinds and we want the customer literally did know everything that we’re doing minute by minute from our office in Syracuse.
Andrew: That came to you because you helped in the campaign and you saw that you needed to justify things and create measurable results.
Mac: Yes, so like at the campaign when I got there, they didn’t even have a credit card tied to Google SEM. They weren’t doing any type of advertising. They didn’t have an ROI model and it was shocking to me that these campaigns would spend tens of thousands of dollars on types of traditional advertising and like TV ads and all this stuff. They weren’t doing the same types of measurement online which is like where you can measure stuff. And that really dawned on me, like if a political campaign that’s on the cutting edge isn’t doing these things, if we can measure things and articulate value better than anyone, then companies will pay for that.
The big companies we started working with were just tuning in to this. But as we develop this platform, it’s like day one we’re coming in. We’re telling companies, “Here is how you should be judging our performance. Here is how you should be judging the value that we’re driving to you. Tell us what’s important to you from a KPI standpoint, and we can build those KPIs into a dashboard that they’re logging into multiple times a day.”
Andrew: All right, there’s one last question I’d like to end with and that’s, I see here when you were growing up, you had all these different entrepreneurial activities. I was going to say businesses but I don’t know if I would be that formal about it. You sold Christmas trees, you and your dad? What was that?
Mac: We had a Christmas tree farm at my house where I grew up. I planted actually all of the trees when I was a younger kid. The goal was when I got older, we would sell the Christmas trees. People would pull up to our driveway almost like we were having a garage sale or whatever.
We’d put signs out front, people would pull up to our driveway and they would come and walk with me with snow shoes or whatever else, and my dad. And we would go out and they would pick their tree, and they could cut it down if they wanted to. We’d help them drag it back and I think they were like $15 a tree or something like that. That was actually the first bank account that I opened was the money that we made from doing that year after year.
Andrew: Then there was something with golf balls, what was that?
Mac: Yes, so I used to go fishing in Canada and there was this area where there was the swamp and I had hip waders from fishing, and so we brought the hip waders up there and I would go in the swamp. And there was a machine where you could wash off the golf balls and I would go back on the course and try to sell the golf balls to people for $0.25. They weren’t mine to take out of the pond or mine to sell. But people were happy to buy the golf balls. I was happy that this pond wasn’t full of golf balls I presume. There were…
Andrew: You were involved in lemonade stands and bake sales. What I’m wondering is, how did all of these entrepreneurial activities help you when you were starting to build your business and grow it?
Mac: Yes, so I didn’t come from entrepreneurial family. My parents were in education, and so it’s not like we were sitting around the dinner table, talking about my family business, and the challenges that my dad had dealt with that day, and things like that which I think hopefully will be valuable to your kids and my kids. I was left to learning lessons and I think as I look back, at the time I didn’t understand why I didn’t sell any lemonade. It’s because I was growing up in the middle of nowhere and there was no one to purchase it.
I think the biggest lessons from any of that stuff early on is, I would say, I failed my entire life. I failed early on in school. I failed to get into the college originally that I wanted to get into. I failed multiple times with our business where like we’ve gone out of business, and just continually dusted ourselves off and gotten back up. I know it sounds clich?, but the difference that I see between people that I would consider to be successful and people who have not been successful is that they gave up.
If you give up and you walk away where we could have multiple times, no one would have questioned that. They would have just said, “Yeah, Terakeet failed. They didn’t have enough money from investors, they were under capitalized or the product wasn’t ready for the market.” Those are just excuses that you come up with, after the fact as to why you weren’t successful but the real reason that you weren’t successful is because you gave up most of the time.
There are different situations where you’re forced into bankruptcy, or there are extenuating circumstances where you lose your vision and sight or you get hit by a truck. I mean there are certainly extenuating circumstances. But the common theme I would say is that you just keep going and fight through it.
As you know, you’re well aware, those moments happen everyday. There are things that happen every single day, that are challenges that you can either latch on to and enjoy the experience of fighting through, and look at it as future barrier to entry of your competition or you can look at it as like yeah, we can’t figure that out. Let’s try something else or let’s just stop doing what we’re doing.
Andrew: You guys definitely found something else to do and it’s working. The website is Terakeet.com, T-E-R-A-K-E-E-T-dot-com. I’m grateful to you for being on here. I will just say goodbye to the audience in a moment and then you and I can talk about what it is that what you guys are doing for sales and I could even show you my screen and show you how we’re doing it. Well and by saying, guys I’ve been suggesting that you… if you’re interested in Mixergy that you subscribe to the podcast so you could get every single interview directly delivered to your favorite podcast player.
I’m seeing that advertisers are actually so much happier now with the results because more people are subscribing which means more people are listening. That’s great for advertisers. But it’s even better for me and for you because it means we get to continue this relationship because that means more people who are listening, more guests like Mac who come on here and do an interview with me, and more that I can do to help you out if you keep subscribing and it’s all free.
All you have to do is go to Mixergy.com/podcast and if you want to take it to the next level, I’d be honored if you even gave a review. All you have to do is just go to into iTunes under Mixergy and give a review. Mac, thank you so much for doing this interview.
Mac: Thank you very much.
Andrew: You bet. Thank you all for being a part of Mixergy. Bye, everyone.