Hey, before we get started, Mixergy is sponsored by Grasshopper. It’s the virtual phone system that entrepreneurs love because they’ll give you a toll-free number, unlimited extensions, call forwarding, voicemail via email and so much more. Go to Grasshopper.com.
It’s also sponsored by Scott Edward Walker of Walker Corporate Law. If you’re an entrepreneur in the tech space, you probably already have heard of him. If you’re not, if you’re new in the space, check out Walker Corporate Law, and you’ll understand why so many tech startups and so many advanced tech companies use Walker Corporate Law.
All right. Here’s the program.
Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. How does a first time entrepreneur build a company that sells for $100 million dollars? That’s exactly what today’s guest did.
Rick Marini is the co-founder of Tickle.com, a quiz site that sold to Monster. He followed that up by launching SuperFan, and today he is the co-founder of a new site called BranchOut which is a career site that uses your Facebook connections and LinkedIn resume to help you network.
Rick, welcome to Mixergy.
Rick: Thanks. Good to be here.
Andrew: We’re going to spend time here going through the story of how you built out Tickle, what you did after, talk about BranchOut and my personal experience with it, but let’s start off this way. Take me to the day you sold it. What does that feel like to sell a company for $100 million dollars?
Rick: It’s a good feeling. I think it feels like the end of a marathon because it was a long ride for us. We started the company in ’99 and went through a lot of ups and downs to get to that final sale. So I think there’s a sense of relief when you get there. You feel good about it, and maybe it’s a little like graduation. You worked hard to get there, and you celebrate and then you look forward to what’s next in life.
Andrew: I actually just finished running a marathon here, and I do remember there’s a clear finish line. You know exactly where it is, and in that moment you’re aware of your feelings. I felt like I could do anything after that.
What was the finish line at Tickle? Was it signing the paperwork? Was it getting something back?
Rick: Well, Monster when they acquired us, they allowed us to run fairly autonomously, which was great. So we stayed on with the company for about three years after the acquisition. It wasn’t a situation where we got the money and we left. We wanted to be committed to the acquiring company as well as the employees that wanted to stay on with us.
It didn’t feel like, let’s go celebrate, cash checks, and move on. It was really about, okay, we reached this huge milestone. It changed our lives in a wonderful way, and now it was about how do we use their platform to make this a bigger company.
Andrew: How did it change your life?
Rick: Well, obviously, financially it was a very good exit, and we are very excited about that as the founders and the management team and the investors.
Andrew: In a practical day to day level, how does it change your life? Do you go live in a different house? Do you finally buy the car you want? Do you finally wear the monocle and top hat like Monopoly man?
Rick: The monocle and top hat, no. The car, yeah, I did buy a new car because the car I had before was breaking down. So, that was a necessity. I bought a couple other things for family members really, which was nice to do.
Andrew: Like what? Just give me a little color to get a sense of who you are.
Rick: The biggest purchase I made was, and probably the proudest moment of my life, was calling my dad and saying, “We sold the company. I want you to retire. I’m going to buy you a house, and quit your job.” So, that was a nice one. I guess that’s one of those things that changes your life when you can do that for family.
Other than that, I really tried to maintain a similar lifestyle to what I had before. I didn’t want that to change me too much. It definitely took the pressure off when you’ve got some money in the bank, and you’re not thinking as much about building value for an exit as much as you’re thinking about building value for consumers and everyone else involved. So, that takes one of those issues off the table that you had to think about.
Andrew: I see. Okay. What did your dad do, by the way, growing up? What was his background?
Rick: He was a mechanical engineer.
Andrew: Okay. All right. Let’s talk about where you came up with the idea for Tickle, which I think . . . what was it called? It was called Emode or E . . .
Rick: That’s right. It was originally called Emode.
Andrew: Emode, okay.
Rick: Kind of like the mode of your life, the emotional modes of your life. Unfortunately, that name didn’t resonate with a lot of people. They thought it was Eloan or something, back in the day. So, we ended up changing it to Tickle, which was more spellable, memorable, and evocative. The spark came from . . .
Andrew: Sorry. Evocative of what? I never really ever fully understood what tickle.com meant and how it related to quizzes. It was a memorable name, but how did it relate to quizzes?
Rick: Well, we also had two other sites that we were running under the Tickle umbrella. One was a matchmaking site, which Tickle fits in well because it sounds kind of flirty and fun. And we had a photo sharing site as well, which was more social and Tickle is kind of a social name, and then we had Quizzes. Quizzes was the biggest part of the three kind of legs of the stool, but Tickle was something evocative. It kind of makes you feel good, right? It’s a fun word. Again, it’s kind of flirty which is good for the matchmaking application.
But, you’re right. We originally called it Emode, and the spark came back in ’98, 1998, which feels like a long time in Internet years. I was at Harvard Business School with James Currier, who was the other founder of Tickle, and we both took the Myers-Briggs test as everyone had to your first year at HBS. What we found is that people started to open up once we got our results two weeks later. It was a pen and pencil and paper test which is a boring test. Your results are four letters ENTJ, INTF, really boring but people started to open up.
They were like, okay, now I get why we don’t get along. You’re an introvert, I’m an extrovert or whatever. And we saw this opportunity to say, we could take something like this, bring it online. Again, this was back in 1998, so a long time ago on the Internet. We could make this immediate results. We could make it fun. We could make it colorful, and we could make it shareable. So, you can share your results with all of your friends and not just your Harvard Business School friends. So that was the initial spark. We realized that we could do a lot with that.
We graduated in ’99 and started the company basically out of our dorm rooms, and then got some office space in Cambridge, Mass. And we were there for about a year, and then raised money from August Capital and moved the entire company out to San Francisco in 2000.
Andrew: The original money came from where, your professors at Harvard? Did I get that right?
Rick: Yeah, that’s right. So, the seed money, we had some angel money. The first money that went in was a couple professors from Harvard, and that was nice because that gave us some credibility. So, we also went over to MIT across the river and met with a woman named Pattie Maes who runs the MIT Media Lab, which is really a well-respected group, and she put some money in.
Then, we went over to Yale, and their head of psychology put some money in as well. Now, all of a sudden, we’ve got investors, psychologists from Harvard, Yale and MIT, and that helped us build some credibility early to be able to go attract additional angel investors.
Andrew: How do you get professors to invest in your company? I guess they were your professors, right?
Rick: Yeah. The initial investor was a guy named Professor Bill Sahlman, who teaches a class in entrepreneurial finance, and he typically invests in one or two student companies per year. He had James and I in his class, and I guess we impressed him enough in the class that he was interested in hearing our idea. We gave him the idea for Emode which became Tickle. He liked it, and he put some money in.
Andrew: How did you impress him when you were in his class?
Rick: I think that’s just being a good student, being engaged.
Andrew: Everyone at Harvard is a good student. Some are more engaged than others, it’s true. But what do you think you did to stand out in that period that you were in front of him with all those other students?
Rick: Yeah. Half of our grades at HBS are class participation. So I think being intelligent and articulate and being able to argue your points well in class but also be open to those of others. All of those things, I think, combined to be not only a good student but a respected student, either by your peers or by your professors.
Andrew: Okay. But there wasn’t any one thing that you guys did where you just clicked.
Rick: Well, I will say for James and I, and I think Professor Sahlman may have seen this, James and I were, I think, great complimentary partners in the business. This is something that I try to advise younger entrepreneurs when they look for a partner. Don’t bring in someone with your exact skill set. If you are both investment bankers or consultants or engineers, bring someone in that has a different skill set.
For James and I, my background prior to grad school was corporate finance. I was the CFO type. James was a venture capitalist and a technology guy. He was more of a visionary big thinker, and James and I needed each other, right? He was playing at the 30,000 foot level while I was down there executing. We both knew what we were good at, and we let each other do that, trusted each other to do that. Bill Sahlman may have seen that in class that James was definitely a big, big visionary guy and I was a guy that was into details. In class you need both people, and in a company you definitely need both people.
That’s advice that I love to give to young entrepreneurs. Find your soul mate that’s complimentary, that does not have the same skill set.
Andrew: Okay. What was the breakdown in ownership between the two of you back then?
Rick: I don’t recall the numbers at that point, but James did have more. The reason he had more equity was that he was older and had some more experience. I think that’s totally fine. I think that’s totally fine that both founders don’t need to have 50-50 on day one. If one of the founders is bringing more to the table, whether it’s VC contacts which James also had because he came from that world and he was going to be the guy that was really going to lead the charge early on in fundraising. If someone brings more to the table, sure you can have a different equity split. I think that’s totally fine. Both founders just need to feel good about that.
Andrew: Okay. We’ll talk about how the business model changed, but what I’m curious about now is what did that business model look like when you took it out to MIT, to Harvard, to Yale and you were just getting going?
Rick: What we wanted to be was what we called the “infomediary.” The infomediary meant we were the person, the company, the facilitator between the consumer and the brand. We were going to be able to use these personality tests in a viral way to get millions and millions of users, which we did, but also to collect great data, deep data on these users.
As an example, let’s say Ford is one of our advertisers, and let’s say we give a user a quiz. And at the end of it we know that they’re a happy-go-lucky person. One of our biggest quizzes was a dog test. What type of dog are you? Let’s say, you’re a happy-go-lucky kind of person, you might be a golden retriever. Or let’s say you’re a tough guy, you might be a German shepherd.
Well, we could target the Ford advertising in order to be that personality. So, maybe, it’s the same car. It’s just one of them has a black one in front of Versailles for the classy person, and one is a red car at the beach for the more fun loving. Same product, based on personality.
Andrew: Your model eventually went on to include offers that you were giving users and getting a commission every time you converted them into an offers user, advertising, and paid membership. Was it just advertising at first that you had in mind, or did you know that eventually you’d go into all three?
Rick: Advertising was definitely the area that we thought we’d be in first. The second revenue stream we thought we would really tap into in a big way was research. What happened there is that there are research budgets out there, but it turns out that they’re far smaller budgets than advertising. They’re harder to get at. It’s a longer sales cycle. And for all those reasons after a while we said, “You know what? We should just focus on the advertising because that’s where bigger dollars are. The research is nice to have and, maybe, we can bundle that in the bigger advertising packages.” And we did that as well. But we realized, where can we make the biggest bang for our buck? And that was in the advertising.
The subscription model and the CPA stuff, that came later. The subscription model came really, I guess, two years after we started the company when the Internet evolved. The Internet really went from advertising based back in 1999 when we started the company into, we went into a recession, as you may recall back in 2000, and a lot of the advertising dollars went away. So scrappy startups like us had to figure out, how are we going to get through this recession and bring some advertising dollars in to keep the company going?
We looked around at what was happening out there and saw some companies starting to charge consumers for subscriptions as long as they were adding real value. Whether that was a subscription to the New York Times or, for us, a personality quiz where you could get deeper results for a pretty small cost. Things like that were starting to work. We were one of the earlier companies to use the subscription model online.
Andrew: Let’s get back to the revenue later on. First thing you did, was it to rent office space?
Rick: Yes, early on, yeah, back in Cambridge James and I were doing our finals at HBS. It was probably May, and between finals we were hopping on our mountain bikes cruising around Cambridge looking for office space. We got some basement unit of a building, which we ended up literally taking all the junk out, all the trash out of there to make an office. We were there for about a year, and then things really took off for us. We raised money from August Capital, and that’s when we got the bigger office out in San Francisco, which was a big move for us. James and I are both from New Hampshire, so it was a pretty big move to take two New Hampshire guys who were in Boston and kind of in our home element to move 3,000 miles away.
Andrew: I want to spend a little more time on that first year from launch to when things took off so well that you could grow and bring in more money. But I understand the first thing that you did was come out with tests like depression tests, anxiety tests, the kind of things that you imagined, tests that were similar to Myers-Briggs test that were firing up your imagination when you were in school.
How did you put those together? What was the reaction? I see you’re smiling. Take it away.
Rick: Yeah. I’m smiling because what we found quickly was our initial idea was just wrong. We thought people would want these deep tests that gave them real insights — are you depressed, you have anxiety, really bring in psychology and help to people online.
It turns out, when you’re building a media company, those things aren’t that interesting for people to want to share, because it’s not really fun for your friends to hear how depressed you are and it’s’ not really that fun for you to want to share that.
So in the early days of viral marketing and we were one of those pioneers, that wasn’t the way to go. We started the company actually back in July of ’99, some background on the pivot, and we launched the first tests on 9/9/99, an easy date to remember. Again, those were really around serious tests, Ph.D. certified anxiety/depression tests, Myers-Briggs, that kind of stuff. It turned out nobody was really that interested in taking those. So in December of ’99, the entire site did one million page views total — very, very small, not that interesting.
James and I sat down and we said, “Okay, this isn’t working. Our idea on these really serious tests is not the way to go. We need to pivot.” So, we had a brainstorm session and said, “What do people really care about? What do people, like in the Midwest, what do they think about? Well, they love their pets, dogs, and they love their kids and babies and things like that.”
So we said, “Okay, let’s go with a pet theme. Why don’t we come up with just a really fun test called ‘What breed of dog are you?'” And that is a reflection of your personality, if you were a dog. So, again, the example would be if you’re really fun loving, you might be a golden retriever. If you’re tough, you might be a German shepherd. We probably had 12 different types.
We launched that around January 1st, and we went from one million page views a month to one million page views per day on that one test. It resonated with people, and people started to share that. And they were like, “Oh, I’m a pug. You need to take the test.” We gave people, I think, a new fun way to communicate why they’re the same or different.
Andrew: I’m sorry. Let me pause the story here, because I have tons of questions already written down that I have to dig in for. First of all, when most people hear one million impressions in the first year or in the first month . . .
Rick: First month, yeah.
Andrew: Within the first year. That doesn’t sound small. How does a company that had no history suddenly get to a million impressions?
Rick: Well, a million impressions is not a million users, right? A million impressions over a month, it might have been 10,000 users, 50,000. It wasn’t a big, big number. The way we did it though was we did have the viral hooks in place that allowed for sharing.
Some of the quizzes we had, like the Myers-Briggs, were more shareable, absolutely. The depression tests and anxiety were not. When we saw something that was more shareable . . . that was also part of the reason why we did the dog test was because the Myers-Briggs test, what we saw at HBS was that people started to communicate because they could say I am this type.
That was also part of the impetus to do the dog test up. Let’s give people a type, their type as a dog. Everyone can relate to dogs because dogs are all around you all the time, and you grew up with them or your neighbors have them. So let’s, basically, instead of you’re an INTJ and I’m an ENTF, you’re a golden retriever and I’m a German shepherd. It’s a more fun, shareable way to kind of do the same thing Myers-Briggs was doing on a lighter scale.
Andrew: What kind of hooks did you have in the beginning? What kind of viral hooks did you get right?
Rick: Some of the really basic things, back in ’99, we would give you a result type. Let’s say you’re a German shepherd. And we would give you the ability to send that to all your friends via e-mail. Facebook wasn’t even a gleam in Mark’s eye at that point and this is ’99.
We didn’t have the viral channels that we do today. So, it’s really based on e-mail, and Tickle was one of the first companies to build an e-mail importer back in 2000. This was really on, and everyone kind of has those now, and it’s really standard practice. But this is ten years ago when no one had them.
What we did is we gave people the ability to in these open text fields to type in your friend’s e-mail address. People were doing that, and they might put five of them. After five or ten, you’re tired of copying and pasting or you forget your friends’ e-mail addresses. So, we were only getting so viral. But we really wanted to accelerate that, so we were like, “Okay, how do we make this really easy for people to bring their friends’ e-mail addresses in?” So we built it an importer.
Andrew: Okay. And the pivot that you talked about, it sounds so easy and so quick. People don’t like depression. People don’t want to talk about the Myers-Briggs test, but they do like talking about dogs. Let’s shift to that.
But it’s a big transition. You guys are two smart guys who went to Harvard, not to end up creating dog tests but to create something meaningful that changes the world. That’s why you’re taking a risk. You got professors from top universities to be part of this. Was it easy? What was it like to make that change, to say, “Hey, you know what? This is where the market is. We’re going to chase dogs”?
Rick: Part of our vision was to change the world in a positive way, absolutely. But what we also found is if you’re only changing the world with a very small user base, those people taking the anxiety test and the depression test, we weren’t doing what we wanted to do. We wanted to touch millions of people, and we ended up doing that instead of touching thousands of people in a positive way.
We needed to pivot and iterate and change the platform that was going to give us the ability to reach millions of people. Part of that was to create more entertainment focused quizzes to get more people onto the platform. And then while doing that, in parallel, build out some other quizzes that might have more teeth to them.
In the end, we had 400 tests — 70 of them were written by Ph.D.s, and about 330 were just for fun. But that mixture allowed us to attract literally 200 million people. That’s how many we had at the end, skipping ahead. We had 200 million people that took our quizzes. Because there’s 200 million people, they were also taking some of the deeper quizzes as well that they may never have had an interest in if we hadn’t gotten them in with a more fun, entertainment based quiz.
So, that was our thinking. As an entrepreneur, you absolutely have to be ready to pivot and iterate, because most likely your first idea isn’t going to be the one that really takes off. Time and time again, you hear this from entrepreneurs. Their first idea may not be anything where the company ended up, or the first idea probably iterated into something similar, but it’s not really what got the company to take off. As an entrepreneur, you have to be flexible.
Andrew: Okay. How was advertising going in the beginning?
Rick: So, it’s funny. Back in ’99, before the crash, I think I remember CPM rates for kind of remnant, standard ads . . . we didn’t have an ad sales force. We were using a company called Flycast, which old school people remember that one. I think our average CPM rate was $6 to $7. After the crash happened, literally three, four months after the March of 2000 crash, our CPM rate went from $7 to $0.50. So, it just went away. And $0.50, even if you had a fair amount of traffic, isn’t really going to pay the bills when you went from $7.
So, the advertising market went away for about a year and a half. And that was about the time when we were hiring ad sales because we started to have a lot of page views. Once you got a lot of page views, then you can start to build on ad sales force. The timing of it was horrible, because as we’re spending money to build an ad sales force, the CPM rates just plummeted.
Andrew: I see. If you’re making such high CPMs, cost per thousand impressions, of $60 plus dollars, why bother getting funding? Why not continue to grow the business and channel the revenues back into growth instead of going out and raising money?
Rick: Yeah, it was $6 or $7, not $60.
Andrew: Oh, okay. All right. I see. That makes more sense. Okay.
Rick: I think the question is still a good one. At a $6 CPM, if you had a lot of traffic, you could make some good money. At that point, we were just kind of coming out, and we had decent traffic but not enough to support a full team.
Rick: If you were going to grow this company for the long term, you had to look for outside funding, because at that point we had exhausted most of the angel money. We raised almost $1.5 million of angel money, and we used most of that in that first year to build out the company.
Andrew: You spent it on what in the first year?
Rick: People. It was almost exclusively people. James and I ran the company pretty lean and mean. Our office space, like I said, was cheap basement office space, and it was really about the people, the computers and the chairs. Those are the three things that you want to spend money on.
Andrew: Any on advertising?
Rick: No, we didn’t do any advertising. We were kind of a poster child back then for viral marketing. We put the right viral hooks in place, like the e-mail address importer. And we were really very proud that the first couple of million people that we had on the site, we didn’t spend a dime, a single dime on marketing. It was all viral.
Andrew: Wow. Again, you, and I think you mentioned this a moment ago, neither one of the two co-founders here were developers yourselves. How did non-developers manage to build a site that’s so heavily reliant on developers?
Rick: Yeah. It’s a good question. James was a VC, and I had a finance background. We’re both business guys. The key thing is to find your soul mate in technology if you’re going to be an Internet company, right? You have to have that person that you trust at the high level.
Our first VP of Engineering wasn’t the right guy, unfortunately, but the people under him actually were very good. All of our engineers came out of MIT. Harvard and MIT are right next to each other there in Cambridge. Our first office was actually next to the MIT campus. So, we had a couple guys that came out of MIT, and one of them became our Chief Architect, who is still a very good friend of mine today. He came over from Cambridge to the transition over to San Francisco, and we had a couple of guys who became kind of an engineer soul mate. He wasn’t a VP yet, but Adrian ended up becoming a very important part of our technology team.
So, you need to find that person. When I started this company, my current one, that was one of the first hires I made was make sure I find that guy, that technologist that I really trust.
Andrew: Okay. So, you guys moved to San Francisco. You’ve got money. You’ve got your development team. What’s the first thing that you do after you have all that in place? What’s new now that so much has changed?
Rick: The two things at that point were secure an office space and grow in the team. We got office space in San Francisco. We got that one checked off. And then it was about growing the team with the right people and building the right culture.
James and I are big, big believers in culture. I personally hire for four different characteristics of people — people who are smart, people who have integrity, people who are fun, and people who are entrepreneurial. Tickle had that mentality, and it was something that helped us attract great employees because employees want to work with people like that I think. And it also helped us retain employees. We had very, very little churn, because when you’ve got a group of people that you get to work with like that every day, that you’re inspired by because they’re good people and they work hard and they’re smart and they’re hands-on, when you have a group like that, you don’t want to leave that, especially if it’s wrapped around a good idea with management that you trust and that’s transparent. That was our initial focus early on is to build that core team out with those values.
Andrew: You talked about the address importer. Where did that idea come from, and what did it look like at first? Where did it come from, and what did it look like at first? I’ll cut off the question there.
Rick: Again, it came from just having a . . . I remember these open text boxes that we had where you could share your results. So, you’d get your result and we’d say share it with all your friends. And it would go into their e-mail box, and you’d have maybe five or ten open text fields that you would put their e-mail address.
We were realizing a lot of people were maxing out. I think we started at five. And then, we’re, like, well, let’s put ten. And then after that, it just looked like a big blank page. So, we said, “Okay, we need an easier way to do this.” It was, okay, we’re getting viral. It’s working. Let’s take it to the next level, and now let’s hit the gas and really blow it out and give people all the e-mail addresses right in front of them.
Back then, people didn’t have thousands of e-mail addresses like people have today. It was more like you probably had about 100 to 200. So, it was easier to scroll through a list that you could just check off. You check it off, and then we put it right into that box and it was super slick.
So, that was the thinking. This is working already. How do we make this go 10X faster? And I think Adrian, who I mentioned, our Chief Architect, I think he was the person who built it. He probably came up with that idea with us, thinking about how do we grow the site quicker because people are maxing out on how many they can already send. So, let’s give them the ability to send a hundred of them if they want.
Andrew: It’s kind of a pirate move though. Did you guys have any fear at the time that you’d get in trouble, that maybe you shouldn’t do it, that you’re invading people’s privacy. I don’t know what kind of issues. Did you have any of those?
Rick: Well, it definitely wouldn’t be spam because spam is unsolicited e-mail from somebody you don’t know. This is an e-mail from your friend who’s sending you something that’s fun and asking you, “Hey, should take this quiz too, so we can share results.”
Andrew: That part I get. But the part of going in and scraping people’s address book, today it’s common. Today, in fact, Google makes it readily available to companies like yours, their users’ data. Back then, it wasn’t and it was kind of a pirate move. I saw your smile when I brought it up. You recognize that.
Rick: I think it was innovative. I’m proud of that. I’m proud that we were possibly the first to build that out for a consumer based product like this. I feel like we were innovators, pioneers in viral marketing by coming up with something like that. And because we had the right purpose, it’s a noble purpose to be able to let people share great content that they care about, that felt good. We never wanted to be spammers, and we want people to be able to share great content.
Andrew: What about the writing of the e-mail that people got? I know that if you send out one generic e-mail, you’re not going to get a good response. If you send out a different kind of e-mail, maybe addressed from the person who took the quiz, maybe with a friendly subject line, you get a bigger response. What kind of experiments did you guys do on that?
Rick: We did a lot of testing there, and that stuff matters — the colors, the word choices, the calls to action. We became pretty immersed in the marketing and what’s going to work in e-mails, what’s the most effective. A lot of it’s A/B testing, being diligent about tracking that, about tracking metrics.
Andrew: You guys had A/B testing in place at Tickle back then?
Andrew: In e-mail? Really?
Rick: Well, what we would do was pretty rudimentary in that let’s send out this e-mail this week. Let’s see what the response rate is. Let’s try this one next week. So, it wasn’t as formal as what you can do today in real time. It was kind of the early stages of that. We were constantly testing and watching those metrics. A lot of it was just Excel driven. Our Product Manager would be following what are people clicking on and that copy worked better than this copy, and okay, that one worked better, stick with that one.
Andrew: I remember hearing about one kind of e-mail, not from your company but from another that really worked out well, insanely clever. They sent out an e-mail saying, “Your friend wants to add you to this” or “Your friend wants you to take that action.” Then, it had a link that said, “Take the action.”
They also included though a second link that said, “Ignore.” So, now ignoring wasn’t just moving on from the e-mail, it was clicking that ignore link. When you click that ignore link in your e-mail, you’d be taken over to their website where they said, “Okay, if you don’t want what your friend sent, how about what else we have on the website? How about signing up for that?” What kind of tactics did you guys have like that?
Rick: Yeah. That’s not our style.
Rick: Yeah. Because if you’re not interested, then you just move on. Sure, it’s great to get that second opportunity to bring someone on. It feels a little disingenuous to me.
Rick: So, we were more about we’ve got great content that your friend wants to share with you. Click here to see it. And the click rate was super high. The conversion rate was super high because it was real content from your friend. I’ve always been more about the positive side of I want to share this with you because this is something that’s really cool than the trick to click kind of stuff.
Andrew: Okay. When did you guys discover advertising? I remember Tickle ads blanketing the Internet.
Rick: Yeah. We actually at one point were one of the biggest Internet advertisers. Okay, so we launched our IQ test in December of 2001. With that, we realized we had something pretty quickly. Literally, within minutes of launching this, we started to see people taking it. We had a lot of traffic on Tickle at this point already, and literally within an hour, we were starting to get people that were buying the test.
The way it worked is all of our tests were free. You would get your results. Let’s say it’s the IQ test. We tell you, you have an IQ of 130 or whatever, and then we’ve give you the ability, if you wanted to, to get the full results and see how your brain works different than other people and get a certificate and other benefits.
The conversion rate early on was like five percent, just really high. Five percent of the people were spending $10 or $15, whatever the price was back then, to get this full report. We realized at that point we’ve got something here. We’re advertising it on the Tickle website, which is great, and we got a fair amount of traffic, but let’s start to market this to other sites.
What we did is I did some, what are called, CPA deals, cost per acquisition, with a couple companies that sent e-mail newsletters out. They added an ad for us in their e-mail newsletter, and I gave them a percentage of the sale. I think it was $15, and we gave them $5 of the sale. So, we’re making 10 bucks from people we never would have found anyway, and there’s no risk to us because it’s a CPA model. It just took off.
We had three partners that we were working with, and the secret is that they all kind of watch each other’s ads. They’d know what’s working because they’ll double up on the ads. Instead of me reaching out to CPA vendors, they were all calling me and saying, “How do we work with you guys?”
Then, we got to the point where we were kind of maxing out the CPA and did the back end calculations and realized if we can buy on a CPM, the numbers could be, literally, 50X bigger, because think about how much CPM inventory is out there compared to CPA. Once we got to that point, that’s when the revenue really took off.
Then we built an online marketing team. I was the first guy that did that for probably six months, and then we were sort of overwhelmed with everybody wanted to work with us. So, I hired a guy named Dylan, and then we ended up hiring four other people, and that became a really important part of our business. We were doing about $20 million a year in online marketing ads. It became a chunk of money.
Andrew: Wow. When revenue was $40 million a year, advertising costs were about $20 million.
Rick: That’s right.
Rick: About half of our cost was advertising. A chunk was people cost, of course. And then, we had a healthy profit margin.
Andrew: When you were doing the CPA ads on something like that, even when someone doesn’t convert into a paying customer, they’re still giving you their e-mail address. They’re still promoting you to their friends, right?
Rick: Sure. Even if they’re not clicking to buy, we could show them ads. Our ad sales team really took off at the same time as well. Of the $40 million of revenue we did in our final year, not all that was subscriptions, of course. A lot of that was advertising, and we had a huge amount of inventory.
We were the 18th largest site in the world at one point. We became a big site. A lot of that was driven around great content, but then marketing to get people there, which meant we had a lot of page views to sell. So, it was this virtual cycle of marketing, bringing people in, a bunch of those people buying the test, and everyone, including those people, seeing the ads.
Rick: So, it really fed together really well.
Andrew: When people were paying for their results, they were also paying to be members of the site and to pay on a continuous basis, right?
Rick: Yes. What we would do is you could buy the first test for roughly $15, I think it was. And then, we’d give you access to the other 70 tests, all 70 for like $10 a month. So, if you stayed on for a month or three months, whatever it was, you were getting access to 70 tests for less than the price of one, which was a great deal. Even if you just wanted to take one or two more, you could do that.
Andrew: I hear that and the way you’re talking is great when you’re talking consumers, but when we’re talking to entrepreneurs, we also have to say it’s a brilliant decision on the business part because you’re taking someone who would pay you just once and you’re converting him into a customer who just keeps paying and paying and paying.
Rick: It changed the entire business, that decision. Early on, we did not have a subscription model. Again, we’re paying the CPA guys $5 of every $15, and we were getting a lot of requests. It’s funny. A lot of business decisions come from feedback from users. People were saying, “I’ve already bought this one. Can you give me a discount on another one?” Or “I want five more. Can you give me a discount?”
Then, we were like, okay, people, now that they found Tickle from advertising and they took one quiz and they see the bunch that are free, but the ones they really care about, certain people, they want the Ph.D. ones. They don’t want to keep paying $15, right? So, when we realized that, we said, “Well, let’s just do a subscription. Let’s just give people access to all of them for ten bucks.” And it changed the business because we went from a lifetime value of $15, or let’s call it maybe $20 with advertising. People were staying on the site on average roughly three months. So, that’s an extra $30. So, we more than doubled our lifetime value. When you’re a marketer and you’re thinking about, what can I buy on a CPM rate, when you’ve got a lifetime value of $20 or $50, it changes the game.
All of a sudden, we could buy so much more inventory because the CPM we could buy on was double because our lifetime value just doubled. Now, that really opens up to work with companies, like, some of our biggest partners back then were the New York Times, the Washington Post, and sites that had a more intellectually stimulated audience because our IQ test was our most important one. But they also tend to have a little higher CPM than some of the other guys. So in order for us to be able to lock that in, we had to pay a little bit more, and having the bigger lifetime value allowed us to do that. And that’s when the revenue took off.
Andrew: Wow. All right. That’s where revenues took off from memberships. We talked about advertising a little bit. What about offers? What was the offers component of that, of your business model?
Rick: The biggest piece of the offers revenue stream was what we call EDU. So, education providers like the University of Phoenix, Capella, and all the online universities that are still cranking away today. We were kind of at our peak with those guys from ’03 to ’06, I would say, those guys were really starting to take off, those businesses online.
Our IQ test was perfect for them because these are people who are, again, intellectually stimulated. They care about education. They want to better themselves, and not all of them can get to a four-year college. Online university was a reasonable way for them to get educated.
What we did is we realized that, and we started to offer some advertising within our IQ test for those universities, especially at the end where we’d say, “Your IQ was X. In order to further your education, here’s an offer for Capella University or the University of Phoenix. ” And we had a really good hit rate on that, and they paid well per lead.
Andrew: They pay a lot per lead. Where you converting those leads on your site on tickle.com, or did you send them over to the universities’ websites and have them fill out the form there?
Rick: Yeah. We would send them over to the university website from there. We would lose them as a customer at that point on the site and bounce them over to University of Phoenix, or whoever our partner was, and they would take it from there.
Andrew: If you’re producing that much profit, what happens to that profit in a venture funded company?
Rick: It’s interesting. It’s interesting because, when we first started with the IQ test, I mentioned that we were keeping two-thirds of the revenue and one-third was going to the partner. Two-thirds of that revenue, it started to become a pretty big number.
At one point, I was in a board meeting talking to our VCs, and I was super proud because we had these 30 percent net margins and look how great we’re doing. They looked at me and they said, “No, no, no. You don’t get it. You need to plow all of that back into marketing. You need to grow this company because you’ve got this opportunity where people obviously like this and they’re willing to pay for it. These are big margins, but we’re not trying to build a nice little cash flow business. We’re trying to build a big company here. So, take that profit margin and, obviously, people like this, so start marketing out there on a wider scale.” And that’s what we did.
We’re still profitable. We took it down to more of a 5 or 10 percent net margin instead of 30 percent, and the company grew from $1 million to $4 million to $16 million to $32 million in a four-year period. It was kind of a perfect scale by accident. That was really driven by the ability to market online.
Andrew: What was it like inside the company when you hit that first million? Forty million seems hard to comprehend, but what was the first million like?
Rick: There was a lot of fun celebrations early on because we were all doing it together. It was a small team, and those milestones mean a lot. I remember when we hit our one million members, we had a party at the office. A million in revenue and we had a party at the office.
I remember we had one of those, I called it like a blood drive graph where every month I was putting another line up there and then another line, and once we hit a million, we had a goal to hit a million by year end. I think we hit it in September, like way before. We ended up having a big party because everybody was watching that. It was a huge graph I had in the back of my desk where everybody walking by saw that. They could see every week or every month that I was increasing it. That was obviously a key metric for everybody to key in on because it’s this giant graph in the back of my desk. That got people motivated and excited.
Those are some of the most fun times that I had with Tickle in the early days and those early wins.
Andrew: How do you keep people internally who see those numbers, who see how you’re bringing those numbers in, from going out and creating their own little IQ test and running the same business?
Rick: Yeah. We had competitors do that. We didn’t have any employees do that. The employees, I think, were loyal to us. They were excited because we had a big opportunity, and every employee had stock in the company, no matter what level you were at. Everybody knew we were building something big.
The flip side of that is, yes, we had competitors. Yes, they did copy us, and they tried to do it. Now, we had Ph.D.s on staff that were actually writing these, and those people aren’t cheap. A lot of the outside competitors, that tried to do this, tried to do it in a kind of half ass way. I think consumers can see that pretty quickly.
If you want the quality results, you’re going to go to Tickle. And if you want kind of the crappier one, you might go to the other site. With the CPA guys, if those people aren’t converting for the lower tier sites, they’re not going to work with them.
Andrew: All right. You said earlier that you wanted to sell to take the pressure off. What kinds of pressures were you feeling? It seems like every day is a great day. You’re bringing in profits. You’ve got good employees who you’re working with. You’re growing the business. What’s the problem? What kind of pressures?
Rick: All of that was great, and as an entrepreneur you work hard to put yourself in that position some day, big team.
Andrew: There are people who now are listening to us, 49 minutes into this conversation is where I think we are right now. They’re listening and hanging on to every one of your words because they would love to be in that situation. There are real pressures, sorry. What were they?
Rick: No. There were real pressures around, how do you find your next big hit. For us, the IQ test was our big, big hit. We had tried many, many tests before that. Like I said, we had 400 tests on the site. The dog test was a big hit early on, and we had a couple in between.
But I looked at it similar to running a movie studio. You have an “Avatar” or one of these Batman or one of these giant movies that comes out. You have a bunch of them then that don’t do very well. We’re talking about the IQ test, which would be kind of like James Cameron talking about “Avatar.” But you know what? There’s a lot of other movies that the studio puts out that don’t work. And we had a bunch of those as well.
You’re always thinking about what’s the next big thing. What’s the next big thing? There’s a lot of pressure there, because you need to come out with that every couple months, and there’s only so many of those out there that you can do in personality quizzes. So, that was definitely one thing.
Another is that we got to a point, and this was point of the reason we sold, that we were doing so well that investment bankers were calling us to say, “Hey, you guys might be on a track to go public some day.” James and I, we’re excited by that, but we’re also realistic. How many companies really go public? Most companies like us are gobbled up by bigger.
That was exciting, but there was also anxiety around that, like, can we really position for that? Can we get there? And then, what happened was some VCs came in and they said, “We want to do a Series B with you, and with a Series B we’re going to raise money at a pretty high valuation” because the company was cranking.
At that point when you’re going to raise a Series B, you have a decision as a management team, are you ready to sell now or do you do a Series B and you really go for it? Even though we were doing really well, that was part of the impetus of the sale.
So, when you asked, “Hey, where’s the pressure, everything’s going well.” Sometimes, things are going so well that you have people come in and make you an offer, and then you have to make a decision. Things are going well, but are we really going to take this to the next level?
That really is what got us to the decision to sell, because we looked at raising money from a VC at a very good valuation. But when you do that, you have to also step back and say, “What’s a VC going to want here?” They’re going to want, at least, 3 to 5X their money in a Series B. Well, if the valuation was going to be around $100 million, which it would have been, how many companies out there could buy a quiz site for $500 million?
This is post the Apocalypse, of Yahoo buying Broadcast for $5.7 billion. Those days were over. That wasn’t going to happen anymore. We looked at our options and said, “Well, things are going great right now. But can we get it to $500 million? Is that realistic?”
As an entrepreneur, you have to be realistic and not just say, “Of course, we can.” You have to be optimistic but also realistic, because if you miss your window, and there are so many entrepreneurs that missed their window and then never sold at all when they had a $100 million offer on the table.
So we sat down with the investors and the management team and employees and figured out, okay, what makes sense for us to do. And the offer that we had from Monster was a real one. It was a good one. It was $100 million, and we also realized that as first time entrepreneurs that could change our lives.
Andrew: It did. You stuck around with Monster for a while, and then what did you do afterwards before we get into the business. What did you do for fun after you left Monster?
Rick: Yeah. So I stayed on with Monster for about three years, and then I needed to recharge the batteries. I took a year off and traveled around the world. I gave myself exactly one year. I left Monster on January 1st, and I said I’m going to be back in San Francisco next January 1st and start the next company.
I took a year off, gave myself time to write the business plan for the next company, which is called SuperFan. I didn’t feel like I was disconnected necessarily because I was still trying to write the business plan.
Andrew: You went to six continents. You were traveling. You were really all over the world, and you were writing a business plan while you were doing all that.
Andrew: Wow. All right. Did you get to party? Did you go out and celebrate? Did you go out and date? Did you do any of that?
Rick: I had a great time. I always tell people, if you have the ability to travel, whether it’s for a month or a year, any time you can do extended travels, do it because it changes your life. I learned so much about me and the rest of the world and how little I knew about the rest of the world. And being able to take that time off, it really changed my life.
Andrew: What kind of trip were you doing? Were you doing Four Seasons everywhere or hostelling it?
Rick: Somewhere in the middle.
Rick: It wasn’t hostels. I didn’t need to be in the Four Seasons. A lot of it I traveled on my own. I definitely didn’t need to do that. It was definitely decent hotels around the world. I would typically do a month or two on a continent and come back and see friends and family and have a burger and things that I missed, and then get back and do another continent.
Andrew: How did you meet people? Last question on that, and then we’ll move on to BranchOut?
Rick: Some of the trips, I took friends. Some of them, I took family members. The nice thing about going to HBS is that you have friends and contacts in pretty much every country out there. So, literally, every country I went to I could meet up with old classmates.
Andrew: Oh, cool. All right. So, I did actually in the beginning of this interview talk about SuperFan. But I think we should save it for another interview, and I hope you’ll come back and do another interview. I’m dying to ask you about BranchOut.
I signed up for BranchOut. To say that it just connects your Facebook connections to your resume it just understates the specialness of it. I went on today just to do some research on you. I linked up my account. Yes, all my Facebook friends are in there. It’s smart. It was smart in that it said, “Hey, how about pulling in information about you from LinkedIn?” I said okay. I hit another button. Suddenly, my whole resume was populated from LinkedIn. My picture was from LinkedIn. I had a status board with what my friends were up to. I saw Chuck Longanecker on there who I happened to interview recently. I said, “What’s up with him?” I saw a few other people who I interviewed recently who posted jobs on there. I said, “This is really cool.”
Tell you what? I’m doing you a disservice by describing your business. I’m sure you can do it better. What is BranchOut? How would you describe what you’ve got built over there?
Rick: BranchOut is your professional profile on Facebook. It allows you to get inside connections for jobs or leads and career networking through your existing friend graph on Facebook. So, when you and I are Facebook friends and we both install BranchOut, we can see each other’s Facebook friends as well as one degree outside of that.
So, let’s say I’m trying to find a job at Microsoft. I can type in Microsoft into BranchOut. I can see all of my friends who either work there today or ever have in the past, but more importantly I can also see everyone that I’m connected to and who my friends are connected to at Microsoft. So I can get the inside connection whether it’s for a job or a sales lead or a biz dev lead. I’ve got hundreds of thousands of connections around the world that I never knew I had.
So, as an example, our marketing manager was back East last week talking to some students, college students. They’re graduating seniors, and they said, “I’d love to work at Facebook or Google, but I don’t know anybody there. I don’t have any connections.”
So he said, “Go into BranchOut. Type in Facebook.” They typed in Facebook. They had 50 connections, and it might be through their brother or their uncle that knows someone or someone like that. They’re like, “I never knew I knew all these people. I have 50 connections to Facebook I never knew I had.” That’s been really cool to see that people can use this as a true utility and really add value, again, jobs or leads.
Andrew: Now that they find their friends on Facebook, now that they find they have a connection who has a connection that works at Facebook, what do they do next? How do they find a job through that kind of connection? How do they know if the connection through their brother-in-law is actually somebody who can help them out?
Rick: I think one of the coolest things that we do is we also have a job board. So, not only when you type in, let’s say, Facebook, we don’t only show you who you’re connected to, we show you all the available jobs at Facebook. I think we’re up to over three million jobs in our database and over 10,000 internships. So, we have this huge database of jobs and internships.
What we do is we bring two things together, the jobs and the people you are connected to which is really powerful. If you want to work at a company, we’ve got all the jobs for you. Great. I want to be a visual designer at Apple. Cool. How do I get my resume to the top of the pile? Oh, I’ve got 50 friends over there that could connect me with HR or their product manager or whoever it is to get me that interview.
Andrew: How did you get so many job listings?
Rick: We’ve got over three million job listings.
Andrew: How? Where are you getting those job listings?
Rick: We’ve got partnerships with companies like Indeed that we bring those in plus we have our own job listings as well.
Andrew: Okay. How do you guys sell your job listings?
Rick: Anybody can post a job on BranchOut for free right now. If you are hiring at your company, go ahead and post a job for free. Right now, companies and individuals can do that, so I encourage people to start using BranchOut to do social recruiting within Facebook.
Andrew: I encourage people to check out BranchOut for this reason. The way that you’re interacting with Facebook and LinkedIn is unreal. That’s the way that we as users want sites to interact with these two social networks and with other social networks, too. It’s so frigging brilliant.
If you were to sit back and say, if the guy who created Tickle who understood to scrape the address book before anyone else was even aware that that was possible, let alone the power of it, if he were today going to build a business using social networks, what would he do? How would he use that cleverness?
BranchOut, I swear to you guys, in two minutes you’re going to see this stuff and you’re going to be so blown away. Watch it with your engineers. Bring your developers in to watch what BranchOut is doing. Is this inappropriate that I’m telling people to steal your ideas here, essentially?
Rick: Don’t steal it. Use BranchOut.
Andrew: Don’t try to copy BranchOut, because these guys are probably on to the next thing. But really, the way that you’re interacting with the social networks is brilliant.
Rick: Thank you.
Andrew: LinkedIn understands that you’re sucking in their data that way. Yeah, they do because you’re using their LinkedIn connect system, right?
Rick: Yeah. They have an open API. These are public profiles that they have out on the Web and a lot of that is for SEO and SEM purposes. People are searchable. We are just using their API and we’re doing it in a way that they have stipulated under their Terms of Service. So, we’re definitely playing within the rules. I’ve got a lot of respect for LinkedIn. I think they’ve built a great platform, and we’re trying to build a great platform over on Facebook.
Andrew: All right. Now, I’m not looking for a job right now. I like BranchOut a lot though. I want to somehow be a part of what you’re building over here. What do I do between now and whenever I happen to need a job or look to hire someone? How do I stay engaged? How do you keep me around?
Rick: Sure. We’re adding a lot of different things to the site that are going to hopefully increase user engagement. One example of that is endorsements. So, endorsements is a product we launched last week which allows you to endorse your friends, basically, a recommendation. Hopefully, there’s reciprocity there, and they’re going to endorse you back.
I think what it does it gives people a better feel of who you are and the people who endorse you. Of course, you can see who the people are that endorse you. It’s not anonymous. That’s something that you can also post on someone’s wall. So, let’s say, I think someone is a great engineer. I can, within 140 characters, so it’s a concise tweetable endorsement, I can say, “Joe’s a great engineer. He really built the architecture that changed our company” and so on, and I can endorse him. It’s a feel good thing. It adds more data to the database so people understand that people really respect that person, and it’s something that can bring you back to BranchOut.
We also have the activity stream in there which is something that changes minute by minute, so you’re seeing what’s going on with your friends. I’m happy to see that you have friends that are active on BranchOut. I love that. It’s also good for sales and biz dev leads.
There are a lot of other ways to use it besides just recruiting. That’s been definitely a focus because that’s such an obvious one that people could be using the site for.
Here’s another one. The initial spark for BranchOut actually didn’t come necessarily from the recruiting side. A friend of mine asked me for a sales lead, someone that I knew in my Facebook social graph. I knew I knew someone at that company. I couldn’t remember which of my friends worked there. So, I typed it in to Facebook, and it brought me to the Fan Page. I realized that I’m trying to help my friend to connect with another friend on Facebook, and I can’t do it. That was the initial spark where we said, it would be really great to see who you know at these companies to help your friends with jobs or leads. So, it may not be just for you, but it could be to help your friends.
Andrew: Can I research people the way that I research people now on LinkedIn? I looked you up on LinkedIn. You had a very good profile.
Rick: Thank you. We do allow you to search by several different parameters. One would be by company. Another would be by name. So, you could find me by name. You could do it by job title. So, you could put “founder” and hopefully I come up, or you could put “Rick Marini” and find me, or you could put “BranchOut” and find me there. So, there’s several different search parameters that we allow so you can search through Facebook to find that right person.
Andrew: All right. Let me do this. Listen, guys. If you’re going to judge me based on . . . there’s no way that Rick is here to try to get new members to his website. So, my telling you to go join the website right now is not for him. You’re not going to be able to get more than a few hundred people from me. It’s not going to be traceable. It’s not scalable because you can’t keep finding people like me to do it. So, I’m not doing it because you want me to.
I’m doing it because I want my audience to check it out. If you guys go and check out this site, go log in, create an account. If for some reason that you think I’m putting you on over here, my credibility with you is shot. If you go through this process and do the LinkedIn portion, too, and you’ve got an epiphany about how well sites can interact with social networks, come back and thank me. In fact, come back and endorse me on BranchOut.
Check it out. I’m telling you I wouldn’t send you to a place that you shouldn’t go. I wouldn’t suggest something that you shouldn’t take a look at. My reputation is on the line, not Rick. Rick’s here promoting his own website. No one would feel bad if his site wasn’t perfect. My reputation’s here. I’m telling you guys, check out BranchOut.com.
Is that too pushy? I’m kind of new here at this whole interviewing thing. Should I not be that pushy? Do you think I went too far there?
Rick: No, I appreciate it. I think that’s great.
Andrew: All right.
Rick: I feel like we’ve created a service that has added real value to people’s lives, helping them get jobs or sales leads, helping them make more money in life, helping them connect with their dream job. These are some of the core values that we’re trying to build for people here. We’ve worked hard as a team to be able to build that service. I hope your listeners are going to get that same kind of value that we’re trying to provide.
Andrew: Cool. Do you know what? I think that Michael Arrington had a similar response, didn’t he?
Rick: Yeah. Mike did a very, very nice positive piece on us. I’ll tell you. It was interesting. It came out a couple of days after we launched the site, unsolicited. He actually called me at home. I know him anyway. He called me at home at 11 o’clock on a Monday night, and he said, “Everybody’s talking about BranchOut. I want to do a story on you,” which is great. You want to hear that.
I walked him through the site and he was like, “This is amazing. This is really, really cool. No one’s done this before. I get it.” So, he said, “I want to write the story right now.” And I said, “Okay, let’s do it.” And he wrote the story. I think he published it at 1:30 in the morning by the time he actually got it out there. I stayed up because, of course, I’m so excited to see it.
It was really positive. I think he called us LinkedIn on Facebook or something like that. We do have some similar functionality, I guess. But we’re trying to do something different within Facebook. We’ve been blessed with a lot of other positive press since then.
Andrew: You know when I read that he said that, I thought interesting, but I really dismissed it, and I’ll tell you why. He and Robert Scoble and a few others, they get excited by new technology for the sake of technology. I can’t do that. I can’t get caught up in whatever new app there is that everyone’s getting excited by. I have to be much more discriminating because I don’t have as much time as they do to look at the stuff.
Then, I looked at it myself and I was kicking myself for not checking it out before. There it is. There’s my enthusiasm, and I’m sure a lot of people are going to dismiss it when I say it now. Maybe, one of their friends are going to recommend it, and that’ll mean a lot more to them. But, you heard it from me, not first. But you heard it from me before you heard it from your friends.
All right. The site is BranchOut.com. Rick, it’s great to meet you. Thanks for doing an interview here.
Rick: I appreciate the time. It was great. Thank you.
Andrew: Thank you all for watching. Bye.
This transcript brought to you by www.SpeechPad.com.