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Hey everyone, it’s Andrew Warner, founder of Mixergy.com, home of the ambitious upstart. Today I’ve got with me Jason Spievak. And before I introduce him I want to introduce the topics he and I are going to be talking about.
We’re going to talk about monetization. He was at CallWave and as their CTO helped take the company public. We’re gonna talk about how he took customers there from free to paid, always an important subject for any online company. We’re gonna talk about how to define the product. RingRevenue he says he defined before he even launched the business. I want to hear how you do that before there are any customers, before it’s a real business.
We’re gonna talk about mentors. That’s one of the topics he told me pre-interview was important to him and has helped him. And, if you have time, I don’t know that we will, but if we do, spend a little time to find out about travel. Apparently Jason’s family, Jason’s parents travelled around the world. Jason said that you had an idea you might want to visit every country on the planet. Am I right about that?
Interviewee: Absolutely.
Andrew: I shouldn’t have made that the first question. Unprofessional of me. Let’s go back and find out what RingRevenue is, the company that you’re the CEO and founder of. What is it?
Interviewee: Sure. Thanks Andrew. RingRevenue is a company where we’ve built a platform that enables advertisers to track calls just like you track clicks. And we built a very robust platform for creating and managing these campaigns, then we licensed that technology on a white labeled or branded basis out to the leading affiliate networks and online advertising networks.
Andrew: Okay, so can you give me an idea of somebody who might want to use that, a use case?
Interviewee: Sure. So let’s take the example of Dell Computer. Let’s take an example there where Dell is running online advertising campaigns where they have a bunch of affiliates who are driving traffic to them at their website. And what happens is those affiliates go out and buy search traffic. They take out of the economic risk there. They’re really the pioneers in the advertising business.
They drive that traffic to Dell’s website and everything is tracked back through the affiliate network in the middle. And if the consumer visits that site and purchases something, then a commission is paid back through to the affiliate and that network in the middle keeps a part of that as their transaction fee.
It works great for certain products and services. It’s a multi-billion dollar a year industry. We used it do build CallWave in fact, very successfully. But what happens when that consumer lands on a website like Dell where it’s a bigger ticket item or it’s a more complicated sale like insurance or financial services is they often pick up that phone we’ve all got in our pockets and call that toll-free number on the website.
Great for the advertiser because the conversion rate is much higher on a phone call than on a click, but the challenge is that that affiliate that drove that lead in in the first place got cut out from that transaction.
So as a result there’s no way to track that high-converting, high value transaction for the advertisers back to the lead source that drove it, which would of course allow their programs to scale. So we built the infrastructure that provides all that tracking and quality control in real time.
Andrew: Absolutely. I know there are a lot of high value, high margin products that affiliates aren’t really getting involved in because what are they gonna do? Are they gonna promote the product on their website, they might even have a conversion, but the user isn’t gonna click over and buy insurance right away, or even click over and I’m using your example, buy a computer online right away.
He’s gonna want to talk to a human being, be reassured, have his questions answered, then place the order. And that kind of stuff can’t happen on the web. And up until recently there was no way to track that order back to the affiliate.
Andrew: there’s no way to track that order back to the affiliate, and that’s what you guys are doing.
Interviewee: You’re exactly right, Andrew. Nobody is clicking ‘get it now’ on a $3,000 purchase or a $5,000 purchase. Maybe those of us in California are but not many, frankly. People want to talk to somebody. They want to pick up that phone and know that an agent is available to help them. And then once that trained agent gets them on the phone they do a very effective job of converting them into a customer. So the advertisers really want those calls, but that big phone number on the advertiser landing page has been scaring off affiliates for years.
Andrew: Okay. All right. So we talked a little bit about the company that you were with before Ring Revenue, before you launched this business.
Interviewee: Right.
Andrew: We said it was Call Wave. For anyone who doesn’t know, what is Call Wave?
Interviewee: So Call Wave started in 1999. I was actually VP of business development and CFO. Our CTO was [Collin Kelly] who’s actually…
Andrew: Oh, sorry. I meant to say CFO who took it public. I apologize. I might have said CTO in the intro.
Interviewee: Not a problem. Collin’s probably pounding on my door here. But Collin was our CTO at Call Wave and is our CTO here at Ring Revenue as well. So what Call Wave was is a company where, if you go back to the 1998 1999 time frame, most of us were getting on the Internet using dial-up back then and if someone tried to call you your line would be busy. And if you recall, back then a lot of us were getting second phone lines for data and for our home fax machines that we all had for some reason ten years ago. And that was another 30-40 bucks paid to Verizon or your phone company. If you were running Call Wave software and someone tried to call you while you were online, instead of them hearing a busy signal that call would route through our switch, we would wake up the Call Wave client that’s on that person’s desktop while they’re online and show them who’s calling and then let them hear the message while it’s being left. And if you decide that you actually want to get offline and talk to that person or have the call ring over to your cell phone, you’d just click a button on that Call Wave software client and the call would be routed over to your phone.
So we initially launched it as a free service. It was intended to be an advertising supported service and ’99-’00 was a tough time to launch an ad supported service there. So we grew our user base very rapidly into the millions of subscribers who were all using it, loving it. And then we set about the very challenging and necessary process of converting millions of those folks into paying monthly subscribers at a time when really nobody wanted to give their credit card over the Internet.
Andrew: So how did you do it?
Interviewee: A lot of hit and miss. A lot of trial and error. The nice thing was that thanks to the customer acquisition team that we had, actually led by [Rob Duva] back at Call Wave whose now one of our cofounders and our CMO here at Ring Revenue, we had grown the base to about 15 million registered members, you know, varying levels of activity there. But we’re an intensely data driven group. It’s great that you have an opinion, Mr. and Mrs. Marketing Professional, but go ask a customer or better yet go look at how ten thousand customers behaved when you put the software in front of them and that’s the answer.
So we took an intensely data driven approach to looking at the varying activity levels of all of our Call Wave subscribers and then put a program out there where we initially attempted to monetize with some upgrades, some up-sell our 100,000 most active subscribers. And we went out to them and said, ‘How many of you would like to pay $9.95 a month to get longer message length, etc. but to keep Call Wave in business,’ and amazingly about 30,000 of those folks on the first email blast said, ‘Yes, I’ll pay ten bucks a month.’ We then went out to our next million most active and asked, ‘How many of you would like to pay $4.95 a month to keep your Call Wave service and keep us in business,’ and pretty amazingly over the course of about two months about 300,000 people stepped up. We then got a little bit smarter and figured out that we could actually offer a discounted annual plan to a number of these folks that have prepaid for a year.
So all of a sudden we went from being on fumes, I mean, lending the company money to make payroll. Literally my first day on the job I lent the company 40k to make payroll and, of course, said to my wife, ‘It’s a great company. You’re going to love it.’ But we were cash flow positive long before we were actually profitable as a result. Now getting people to want to pay you is one thing, being actually able to collect the payments from them, even when they want to pay you, is quite another as it turns out. And we went through some very, very innovative methods of billing our subscribers which I’m happy to point out a couple to you here, but they involved household names like Miss Cleo, the Horoscope Hotline.
Andrew: Oh, get out! All right. Let me unpack some of what we’ve talked about so far. Okay, so the first thing you said is that you did an email blast to the 100,000 most active users of Call Wave and you asked them would they sign up for the service. Was that just a survey to help you decide
Andrew: …decide what product to create or were you actually launching a product and selling it this way?
Interviewee: The product was already live. We had already figured out which features we were going to include in our CallWave Pro offer.
Andrew: How did you know that? How did you know what to create in a product people would pay for?
Interviewee: So we did things there the same way we do things at Ring Revenue and the same way that I’ve tried to do things throughout my career actually with Nextel and with Netopia and with CallWave and with Ring Revenue is we test it. If you come into my office down the hall here you’ll see a banner that says “Ease of use equals use and use equals revenue.” And so we’re intensely focused on getting that in-user experience right for them by looking at the way they interact our software and making that the primary driver in our software development processes, so we test everything. We would send out newsletters, we would test whether different background colors on the newsletter drove higher conversion rates and lower turn rates for example. So we were testing these offers with small subsets. The neat thing about having millions of subscribers at that time was you can pull out a statistically significant bunch of them to test anything. Any day of the week we did tons of surveys, we did tons of newsletters, we were intensely driven by in-user feedback so we knew which features they wanted most and we loaded those into the $9.95 offering and then we took a stripped down version of those and loaded those into the $4.95 offering but again we knew what our conversion rates were likely to be before we launched the paid service.
Andrew: So you’re sending out emails testing out potential products with a survey or testing out potential products by saying “we have this additional feature, click here if you want it” and seeing how many people take it? What was…
Interviewee: Well great question. And it’s a debate that raises all the time because somebody says will behave as a customer and the way they actually do behave are often two different things right? So you have to take someone all the way through the process where they believe they are purchasing this and getting their credit card out of their wallet to know whether it’s actually going to convert. So we would actually in the early test days with these paid offerings, we would take people all the way through the sales funnel, capture their credit card data and then on the confirmation page let them know that the service will be available shortly, they will be notified and their credit card will not be charged. But we had to know, we had to get them all the way there to know that they would actually push the button.
Andrew: Interesting. Eric Reese would love this. The guys at Lean Startup they would go crazy for the way you guys did this. This is way back then before it was the hot way to test an idea.
Interviewee: ten years ago. Yea.
Andrew: so what ideas did you test and didn’t work. What surprised you?
Interviewee: Boy, that’s a long list.
Andrew: Oh really?
Interviewee: A lot of things surprise me every day because I consider having ideas, and it’s great to have ideas but you really got to go do it to find out whats going on. So some of the things, going back to CallWave, that tested and surprised me, in hind sight these things are pretty obvious. You get a smack on the forehead lesson and never make that mistake again. One of them was we were really gun hoe on launching a newsletter. We wanted to keep our community engaged and knowing what we were up to and hearing about the offers and learning, reading about CallWave families and how they use it and how to call for the organ transplant got through because they were using CallWave. We sponsored a family of girls who did junior racing, in South Carolina, which is a lot of fun, the Wiggins family. And we’d do this newsletter and we thought everybody would love it, and we’d do this newsletter and every damn time we’d send it out, we’d get ten thousand people discontinuing their service each time. And so what we found was we had a very active base that we knew loved CallWave. If I’d go to Disneyland with my family with a CallWave hat on and people from around the country would go “Honey look, he’s wearing a CallWave hat” so we knew we had a very active base of loyal users but with any subscription service as we moved into that paid realm, we had some number of folks who were on the fringe of getting value out of it, forgot they had it, forgot they were paying for it, whatever the happened to be, but when they got this newsletter, yes we got lots of upgrades and sign-ups but you have to brace yourself for this wave of terminations that came every time you reached out to your huge customer base. So that struck me as a surprise. Fortunately we had smart folks like Rob in there, knowing how to manage and evaluate those trade-offs so that were would ultimately, again, test and optimize sending out many different versions of the newsletter to smaller batches of people and then propagating out the ones that have the highest conversion and the lowest turn rate out to the broader base every time. One small example, probably the area where we go the most sort of beat-you-over-the-head learning, and again you have to go back about eight to ten years when people really weren’t using credit cards over the internet, was we had all these people who wanted to pay us and we couldn’t figure out how to get a payment from them…
Speaker: Probably the area where we got the most sort of beat-you-over-the-head learning.. And again, you have to go back about eight to ten years to when people really weren’t using credit cards over the internet… was we had all these people who wanted to pay us, and we couldn’t figure out how to get a payment from them. They weren’t using credit cards, or in many cases, didn’t have a credit card. They wanted to mail us a check, which was a little bit unheard of at the time for an internet service, and so we were getting–literally we went from being on fumes to, I kid you not, postal crates of envelopes full of inbound checks coming in, being delivered every day. It was amazing. We had to hire temps just to open and scan checks in, which was one of the greatest turning points of that company. But even that, the failure rate was so high with paper check and mailing people bills that we went down the path of approaching our competitors, which were the phone companies, the Verizons and the Nynexes of the world, and trying to get them to put us on their bills, on a rev-share basis. So because the phone bill is the bill that gets paid first in every household, so we wanted to get Call Wave put on their bills as an enhanced service on that last page that nobody ever looks at. And we did what in hindsight was one of the dumbest friggin’ things, and I’m amazed it worked out, but we sent a letter to the CEO of Verizon at the time on our Call Wave letterhead, and the tagline on our letterhead was, “Free alternatives to expensive second phone lines.” And here we’re pitching him to become a partner, while we’re talking specifically about eradicating one of their most profitable lines of business. So, it worked out.”
Interviewer: And you say it worked out… What do you mean by that? Did he actually help you get on the phone bill after seeing that letter?
Speaker: He did. About six months after that, we were on the–in the enhanced services part of the phone bills of all the major phone companies. And that very quickly became the main method of billing for us, and allowed us to scale the paid side of our business, and was a big part of helping us grow enough stable revenue and income to be able to take Call Wave public. But yeah, we were–we reached a point where about two-thirds of our subscriber base was paying us by just saying, check the box “Yes,” put Call Wave on my phone bill. And it was an amazingly sticky payment form. We went through a couple of very interesting attempts to do 900-number billing and auto-dialers and all that good stuff in between there, though. So–
Interviewer: Auto-dialers meaning that you disconnect the person from the internet, you dial into a number, and then you disconnect again and call back to internet for them?
Speaker: Well basically, the way that we would bill subscribers–and this worked well for a while–AT&T loved us until they sold that business off. But we built into the software–and this really is just an example of how you try to adapt to the environment that you’re in–we built into the software the ability for the client to once a month place a call out to a 900 number, which would result in a $3.95 charge, which was our rate at the time, that would be paid to Call Wave. A huge chunk of that was kept by AT&T, obviously. That was the nature of the 900 business. But the challenge was that about a third of households at the time had 900 dialing blocked on their phones. So we had a failure rate that was at least that. Even with that, we were doing so much AT&T that if you called the 900 number or the help line back in about 2001, 2002, you’d hear, “Thanks for calling AT&T, press 1 if you’re calling about Miss Cleo, press 2 if you’re calling about Call Wave.” We were pretty big business for them at the time. It was just–it’s amazing what you do when you need to scramble, and find a way to make it work.
Interviewer: And so did you–was this also used on existing customers, existing users in order to convert them to customers?
Speaker: The billing method?
Interviewer: The billing method, yeah. Or was it just for bringing in new customers?
Speaker: Well, we started out with just a base of millions of free subscribers, so our job really became in that 2001, 2002 timeframe: take this huge base of seemingly loyal, happy Call Wave users and convert as many of them as we can into paid subscribers, because the ad-supported model just wasn’t working. The CPM’s weren’t there at that time in the evolution of online advertising. So it was–we were reaching out to everybody. We were doing a free trial for every new subscriber. We had a, what we call the state machine, where every one of these millions of people was in a different stage in our marketing funnel based on their activity–how frequently they were using the service, what percentage of their calls they click to take the call on, how long were they a subscriber, a variety of other factors that would help us decide exactly which campaign to put in front of them and at which time. We knew, for example, your “free trial,” even though it said thirty days–we knew we weren’t gonna attempt to bill you until you had received and picked up on at least two calls, for example. We had to know you were getting the value out of the service before we attempted to bill you for it.
Interviewer: I see. And how did you come up with the $3.95 that you were gonna put on people’s phone bills?
Speaker: Testing it. Testing at various price points and saw where–which price points would get people to click “Get It Now” and put in their credit card information for which types of service offerings.
Interviewer: I see.
Interviewee: …says I’ve got great ideas and that my team has great ideas, but all the idea is is a stake in the ground where you go take action on. From there you need to immediately iterate based on the feedback that you’re getting from actual users and prospective users. And I think in many, many cases your opinion served as a good stake in the ground to get the team rallied around, to get capital rallied around. In many cases that’s going to change based on the way people react to and use your service.
We’re seeing it today at RingRevenue. We envisioned a platform. We did tons of customer research. We spent six plus months talking with prospective customers, advertising networks, before we ever wrote the first line of code. And we’re still everyday getting input from our customers that’s continuing to drive our development process in different directions, usages of the platform that we never really envisioned.
Andrew: All right. Let me ask a couple more questions about CallWave then we’ll move on to RingRevenue. The first has got to be why’d you take the job? You get hired and one of the first things you’ve got to do is kick in $40,000 to the business. Why’d you do it? What drew you?
Interviewee: You know, my wife and I had just moved to Santa Barbara. She and I went to school here back in the 80s. And we were in the same dorm hall together so we’d been together since ’87. And we were up in the Bay area for about 10 years. I was with Nextel, with Nutopia. Then after grad school doing investment banking, software M&A for a few years at Broadview, working with a great team there.
Then once we started having kids we really had the desire to come back to Santa Barbara and kind of raise the kids here in the bubble where it’s always 72 and sunny, and I can see the ocean and palm trees are swaying right outside the window. It’s not a bad place to be. What a lot of people don’t realize is Santa Barbara really is an epicenter for online advertising.
You think about the companies that are here, FastClick was born here, CallWave was born here, Software.com, ValuesClick, CommissionJunction, RightScale, Citrix, Yardly Systems [?], Folio is here. So we’ve got dozens of great up and coming software companies and several big successes here. So there’s a great pool of talent to pull from here for software development.
So we came back down here. I came out of banking. I was ready to make a change. Story for a drink sometime, but my wife had crawled [?] the top of the stock market in February of 2000 and it was time to get out of the Bay area, out of banking as quickly as we could. So we spun the globe and picked Santa Barbara, and wanted to come back here and raise a family.
I’d like to tell you there’s a more deliberate plan behind joining CallWave, but I went to UCSB to checkout the business plan competition because I was trying to figure out what I wanted to do next, and I wanted to go back to my alma mater and see if I can get involved there. I’m sitting next to this guy, 40 years old, cast on his arm, can’t sit still, watching these business plans present.
I started talking to him outside. Great guy, Peter Sperling, he’s co-founder of the University of Phoenix, and a close friend of mine. And we got to know each other and he said hey, I’ve got this company I’m an investor in and we’re trying to figure out if we should raise another round or sell the company. You’re a Silicon Valley banker who just came into town, why don’t you come and meet with my guys. And then just went from there.
I saw tremendous potential with the team and with the opportunity to convert all these millions of free users who were clearly getting value out of the service, to convert them into subscribers. And that’s exactly what we did.
Andrew: And can you tell me a little bit about going public — as a CFO, not CTO. Man, one letter off and the whole meaning is distorted. I’m talking about the intro, but yeah.
Interviewee: Sure. Well, I can’t do the CTO job so that one letter is pretty significant.
Andrew: That letter is huge, it’s huge. But you know what also, I should stop even if I’m in the intro. I notice on your face that something I said was off. I saw an expression that said Andrew stop for a second, but you can’t stop the intro. You can always come back to it. Maybe in the future I should stop and say well I think I’m a little off here. What happened? What’d I say?
Interviewee: It’s tough to stop in the middle of your backswing.
Andrew: It is. All right, so the IPO.
Interviewee: So, been through a couple, which is great. With CallWave, our last one in 2004, it was really my first opportunity to be in a true process leadership role there kinda being the guy that 100+ employees and dozens of shareholders are thinking this is the guy who’s gonna figure out how to get this done as tough as the market is and as complex as the process is. We were fending off M&A offers at the time. We were growing rapidly. We had a lot going on.
So the IPO process was interesting. You get a lot of learning from that and you get on the back end of that, especially in the CFO capacity, thinking wow, that was painful. Great outcome, but I never want to do that again that way. It is all the things people think it is around the private jets and red carpets, and fancy hotels. You’re on the 60th floor of every tower in New York City. You’re flying three cities a day.
Interviewee: …in New York City. You’re flying three cities a day. Yes, it’s all that but it’s not anywhere near the glamorous process that I think people would make it out to be. You’re up ‘til two in the morning, you’re willing to some hotel in Minneapolis, or Denver, or New York, or Chicago, or Dallas or San Diego or wherever. You’re up at six. You’re getting briefed; you’re getting your daily briefings from your handlers. You have ten or twelve meetings that day where you’re going from fund manager to fund manager, an entourage of people tracing along with you, your handlers and bankers and timers and drivers and analysts and all that good stuff. And you have the same meeting twelve times a day, you tell the same story to the same 15 minutes, you answer the exact same questions with the exact same answers. You tell the same dumb jokes, you laugh at their same dumb jokes. You do this in 45 minute cycles, ten to twelve times a day and you hop in the limo and you get your briefing sheet on the next one and then you go and do it again, punctuated by breakfast with 50 people and lunch in front of a hundred people. Then you’re on a plane that night. So it’s just brutal. We’re going through a whole tin of Altoids a day, just the two of us, me and the CEO, Dave. It was very exciting, it was very educational, I learned a hell of a lot. You get to see how the sausage is made, frankly, and how the equity capital market is ran from the inside and the decision is made about which companies get to go public and when and how much and where the shares get allocated to. It was an amazing, amazing process.
Andrew: So what was the biggest take from the experience of going public?
Interviewee: It is a very challenging, low-probability road to take your company down. I think it’s important that with every company you build you, you build it with the expectation that you’re going to create a standalone competitive threat to the leaders within the industry and I think you have to build that way and early on you have to report to your board like a public company and you need to manage like a public company because that’s what you’re going to grow into ultimately. But the M&A route, when a big company comes along and says, “Oh you’re interesting piece of our puzzle”, that’s a easier process to take your company through and a much higher likelihood of getting it done for your shareholders than heading down the IPO path I think.
Andrew: Ok actually one last question about CallWave. Company changed over the years, it actually has a different name now, I think it’s called Fuse something…
Interviewee: Fuse Box.
Andrew: Fuse Box??
Interviewee: Yea, Fuse Box I think is the name.
Andrew: I should have it up here on my screen, for some reason I don’t, but changed its product over the years. What went wrong?
Interviewee: Well a lot of things went right and a few things went wrong and I think you’re going to get that pretty much anywhere. What went right was that we identified a fantastic market opportunity back in the 2000 time frame. Back when the world was still mainly in dial-up. It was a massive opportunity and frankly, despite being told ten years ago that dial-up was dead then, a decade later, dial-up access revenue in the U.S. is still on 3 billion dollars a year. Between AOL, NetZero and Earthlink they combined into over 3 billion a year in very high margin, pure dial-up access revenue. So that industry believe it or not may be asleep but it is far from dead today, which surprises a lot of people, but back then we targeted a great market opportunity. What we were late to do was evolve our service offering to provide more value to broadband users. We got there with broadband voicemail but we got there late. Other companies were in the market already. We also had a very unique opportunity which I believe was part of what helped us go public. Which is we enable CallWave for mobile phones. So if you were to call my cell phone today I still got CallWave running. I’d see the caller ID if you were calling. If I didn’t want to answer I could then listen in while you were leaving me a message, just like I could have on my computer ten years ago. And if you’re calling because you have Lakers tickets, I can press one and pick up while you’re talking. And it runs on every mobile phone with no software on the phone required. All the magic is behind the phone number itself and not inside the phone. So we did a lot of things right, one of the things I think the company did not do as well was respond quickly enough to changes in its capitalization size. When the company went public we had about a 350 million dollar valuation. We never got a whole lot higher than that. We came out at ten bucks a share. We got up to 16 and then began to trend lower. I think it would have been the right choice to sell that company sooner, immediately following the IPO or within the year or two, or to take it private years back. Which they eventually did about six months ago with a refocusing with a new management team and a new board around the remote conferencing market where they’re promoting software that enable people to conference on mobile phone and iPhones.
Interviewee: to enable to conference on mobile phones and phones.
Andrew: A competitor to WebEx and GoTo meeting and actually there was a great piece on techcrunch about the transition, about how they took, about how Call wave went private and about why they went private. Sometimes techcrunch has got incredible analysis and I wish that they analyzed more companies and sometimes they are just ridiculous and fun. Ok so ring revenue
Interviewee: I
Andrew: Sorry
Interviewee: I hit that site every day.
Andrew: Me too ,Me too ,several times a day and especially useful for interviews like this, because they do add a lot of substance to their blog posts, even the Wall Street Journal and Business week, I went in to their sites to search for you and for Callwave,but the information was kind of scraped off other sites, but tech crunch ,they filled me in .
Interviewee: Well I can tell you, our interactions with techcrunch, they do their primary research. They get you on the phone, they ask the tough questions, they have a great team out there real researchers,
Andrew: Yeah really! Ok so how did you define the product? at ring revenue? How did you know how the product was going to be?
Interviewee: Well again coming off from Call wave, We have most of our founding team came out of there because we had lived with a lot of these problems, We grew Call wave to over a billion calls a year and we did over a 100 million in revenue over that first five year stretch. We had acquired most of those customers from using the affiliate channel, so we were big advertiser on commission junction, Three, performex and some other networks back then, so we acquired many of our millions and millions of subs through affiliate driven traffic, At the same time , because we were an ad supported service, we were also an affiliated publisher, because little Call wave software client showed banner ads and so we were serving up billions of banner ads every month pulling third part y offers off from our networks, so we were simultaneously one of the very large advertisers and the very large publishers . So we were living this problem and seeing the leakage that occurs when a customer gets drawn to a website when he sees a phone number on it and then you see the conversions, disappear. So we knew that, given, inspite of our unique backgrounds, in really understanding large scale telecom, handling over a billion calls a year and not dropping any. Thanks to the platform that Colin and his team had built, you know, at peak hour that’s about a 100 calls a second, that we are handling. So we really understand the telephone side and having been such a large performance marketing advertiser, we really understand performance marketing as well and saw the opportunity to bring the skillsets together and solve what is called a leakage.
So the biggest problem that exists in online performance marketing today ,which is the affiliates are afraid to driving traffic to a website with a phone number on it, so we went to the largest affiliate networks in the industry. The commission, junction and the link shares share the sales of the world and went straight to their CEO”S. A lot of this starts off with a cold call frankly and said, here’s what we are looking to build, do give us feedback on it, and we went through many, many inter-operations, you know, flights out to New York, flights out to Chicago, Time spent in Santa Barbara, reiterating on identifying exactly what their needs were and not until we have got them to the point where all slide well at that time. It all got on to a point where they said “ if you build it this way, and it does these things, we will pay the usage and we will sign an agreement which looks like this “. Not until we got that with the leaders in the industry did we come back and say, “Ok, give us some time when we go build it, and we will be right back. And we did not write the first line in co-existence, we knew that we had good chance of the largest companies in the industry sign on as customers.
Andrew: And did you have an agreement with them, that said, if you build this, they will be customers.
Interviewee: No
Andrew: But if you built it, they were going to sign agreement with you,
Interviewee; And infact some of the companies had been working with different providers of some call tracking service and that they were having mixed results, so not only we had to come in and say, “hey, we can solve your problem” but we had to come in and say, we also understand why this other solution hasn’t worked for you and here are the other things that we are building to do that piece differently and solve this problem for your advertisers. So it is a very very interactive and engaged dialogue with the senior leadership with each of these companies. No Promises obviously but when we saw the heads nodding, that yeah, we have come on board with that, or you could deliver that way, with this kind of pricing and this kind of support,Yeah, we would give it a try.
Andrew: I am curious about how the product evolved? What did you start off with and how did it change and change, change and change, Infact what did it look like along the way?
Interviewee: Well most things are crude to begin with right? you want to get to basically ,your ,as Steven Gary would say, your MVP, your minimum viable product,, where , I don’t know if you have read the “ the four steps to the epiphany” but an incredible book in terms of defining software products and how you would bring those to market? We started out just looking to deliver the baseline functionality that we could get, the initial users in the door who start to give us feedback.
35 – 40
Interviewee: Deliver the baseline functionality that we would get, the initial users in the door to start to give us feedback because again while we have got great ideas and we have lived in a space a long time ago, I get feedback from the people of the affiliate networks and the advertising networks, we really wanted to get as quickly as we could, get this offers into the hands of the users without over thinking it too much.
Andrew: I mean, before you even were launching the product you had an idea, you took it, you shopped it around, you got feedback, you got feedback and you kept adjusting based on that feedback. I am curious about what the product looked like before it was even launched, what were you describing it first, how did that evolve, what it was it next, I actually want to see how the feedback you get helped shape the product you are going to build?
Interviewee: Sure, so the basic product was going to be an interface that allowed advertisers to create call based campaigns, pay per call campaigns as easily as they do online campaigns today, upload a creative define your campaigns, etc, etc and also lets these affiliates or publishers to come in and browse us campaigns, and select the ones that are relevant to their distribution, pull down the [36:05] they need, get real time tracking, see their payments etc., that was the basic concept that we started out with and the religion that was driving that really was ease of use. We had to take this really complex telecom technology in the back end and front it with a stupid simple self serve interface because we knew that if the affiliate networks as our customers need to do a lot of outreach and support to their customers, the advertisers and the affiliates, it wouldn’t scale. And so that was our basic concept. Some of the things that we learned in that process were for example we built in the ability to record calls, now on the one hand when we initially started out I said okay, I get that and the tech team brought it to us and I said we build it in, but my bet is less than 2% of advertisers who are going to turn on call recording because they are already recording calls in their own call center. It turns out it is exactly the opposite, about 98% of advertisers select record calls when they set up campaigns. Lot of reasons for that, they were learning about now but was not part of our [37:06]. Another example is the extent to which companies like to use search and want to be able to attract phone calls, inbound phone calls back to individual search keywords. That’s not something that we anticipated would get a lot of attraction, we built it in, we wrote it into our patent applications years ago, but I am blown away at the level of demand that we are seeing for that, and as a result we are constantly evolving a platform now to meet the needs of those types of search publishers.
Andrew: I see. Why do 98% of advertisers want to record the calls if they already have the technology on their side?
Interviewee: That’s a great question and there is a part of the industry that I did not know whole lot about when we jumped in here, and that is the role of a third party call center. Most large advertisers have at least some of their calls go to a third party call center and that’s often located in Maimi or Manila or Bangalore. It is a third party business paid by the hour and increasingly performance based now, by the way it’s a very interesting trend taking place in the industry but when you would ask your call center, if you are, make up an example of, if you are Dell, you [38:19] and you have got calls that are arriving during Monday or Friday 8 am to 6 pm central or mountain time, they are arriving into your Austin, Texas call center but after hours are going out to Bangalore, and you are using a third party out there, when Dell asks that third party call center for samples of call recordings because conversions are never where you want it to be and they want to optimize it, they are going to get back, in some cases they handpick set of recordings and the ones that you don’t hear are where the Asians says please just purchase this you can return it tomorrow but my kid needs a new pair of shoes and it turns out that the relationship between the advertiser and the third party call center is not always a trusted one, and so when we were able to offer the advertisers recordings of every single call for essentially no additional cost, it is a no brainer for them as it turns out.
Andrew: I see. At what point did you raise money?
Interviewee: We self funded, coming off the IPO of [39:19] number of us were in a position to put the resources behind our next company and so we self funded revenue for about the first almost year and a half and only when we reached the point where we had real validation from customers we felt good about the way that the solution has been received in the marketplace, that there were no through direct competitors out there and that we had made a pretty good guess about what that market up generally looks like, not until we had revenue and customers and we were also at that point reaching the time where for some of the early folks it was getting harder for them to put in their pro rata and continue to fund the company out of pocket..
Interviewee: So we had done a bridge round actually. We reached out to folks that are close to us, mainly former CallWave investors who’d gotten liquid with about 35x [?] off their CallWave investment, so they were pretty willing to come back in behind this team regardless of what color the widget was this time.
So we sent out a bridge offering to six handpicked people and unfortunately it was in September of 2008 and the day I sent the bridge docs out was the first day that the market dropped 500 points. And you can remember the days before this insane volatility.
So the world was going off a cliff there, but amazingly all six of these guys came back with in just a couple of days and filled the round. And so we had a bridge round pretty early that gave us a lot of runway. We weren’t looking at venture capital in the near term at that point in time.
But I got invited down to go present at a conference in Irvine called Venture Net back in the fall of 2008. Almost didn’t go, kind of a story behind that, but I ended up going, presenting, got a morning session. Got up, did my seven minute pitch, got drilled by VCs for three minutes. There was about 500 people in the crowd. And then headed for the door. We actually had a family camping trip that we were leaving on that afternoon. And I got stopped at the door by about a half dozen guys from some of the bigger funds in Southern California. My history being all in Silicon Valley in Menlo Park, I really hadn’t given a lot of consideration to an L.A. based venture community. But I met some amazing people coming out of that, including Mark from GRP.
We got into a dialogue and he came up to Santa Barbara two days later and spent two days with our team up here. And the first thing he did when he walked through our door at our offices at RingRevenue, he blew right by me. Went straight back to engineering, sat down with the dev team, we had a half dozen guys back there at the time, and spent his first hour of the day back there talking to the developers.
Mark and I then spent the rest of the afternoon, went to dinner. And Collin, our CTO’s feedback, he came into my office later that evening and said I don’t know what you’re thinking about doing on the capital side, but if you’re gonna take anybody’s money, take that guys. He’s pretty smart.
So that lead to a dialogue that we had going that eventually lead to RingTime venture partners in Santa Barbara as well. But recall the market was going sideways in a big way in that September-October time. And Mark and I spent some time together and he said look, I like the market opportunity. I like the team. I like what you guys are doing. The market is going off a cliff right now, things are pretty unpredictable. But I’d like to do this deal and if you want to too, let’s shake hands and we’re gonna keep it together. And we’ll know we’re there on valuation and term when neither of us are happy.
So Mark and I spent the next couple of months frankly talking through terms, giving him business updates. We were very busy signing customers at the time. We just put some money in the bank, so there’s not a lot of urgency there. We ended up putting a structure in place.
It took us 3 or 4 months to close with GRP, which is more than their average. We put a structure in place that I think really works well for our common shareholders and puts us in a better position structurally to have options down the road and be able to work hand in hand with our Series A investors that are preferreds, as opposed to in conflict with them, which was one of the challenges we had at CallWave which frankly lead us to take CallWave public as opposed to one of the M&A offers we had at the time.
Andrew: I see. You said that you were signing up customers. How did you sign up customers so effectively with a new product like this?
Interviewee: Face to face. Going and finding the relationship with the most senior person we could, which in the case of Commission Junction it was the GM, Kerri Pollard; and in the case of LinkShare it was the VP of the lead gen team, Russ Pechman. In the case of ShareSale it was the CEO and founder, Brian Wilson and his brother Michael.
So with each of those cases we went as senior as we could within the organization because I didn’t want to talk to the technical guy. I didn’t want to talk to the sales guy. I really wanted to talk to the people in the company that cared most about generating more revenue, more transaction volume on their platform.
So in each of those cases it was pretty close to a cold call at the time that we just were very persistent with and grew into a dialogue and a trusted partnership. We’re in a pretty unique position in working with those companies because we are one small company that is providing all of the PayPerCall technology to these larger public companies that are in direct competition with each other.
They’re each fully aware that we’re working with each of their competitors providing largely similar technology and that we are taking good care of their confidential data and that there’s no crossing of data across our platforms here. So it was really a lot of trust that had to built up in an industry…
Interviewee: …so there was really a lot of trust that had to be build up in an industry – online advertizing – frankly which sometimes is a little light on trust.
Andrew: Often, especially that part.
Interviewee: Yes
Andrew: It’s the networks then who are your customers?
Interviewee: Right.
Andrew: I see. So we kept using Dell as an example. You wouldn’t work directly with Dell?
Interviewee: No.
Andrew: You’d work with the network that worked with Dell and worked with publishers.
Interviewee: That’s exactly right. And Dell is a hypothetical example there. We don’t contract directly with advertisers or publishers in any way. We simply do all of the call tracking. We provide the tools for creating and managing these campaigns, making sure the calls are high-quality, making sure there’s no fraud, making sure the right creative is available- whether it’s for an online advertiser, like for a banner ad or a text link, or an offline advertiser that’s going to be using this material in television- direct response TV, remnant (???) radio, remnant (???) print etc. We provide the entire toolset for those advertisers and those publishers, those media partners, to come together and promote and track those campaigns but then we feed all of that data in real time into the billing systems of Value Collect, Commission Junction, Link Share, Share Sale, Media Trust etc, etc.
Andrew: By the way, if at times you see my eyes go down it’s because I’m checking out the chat room. They’re loving you in here, I see Casey Allen – fascinating. Dan O’Manion (???). Casey, I agree. They were sending over, I guess it was Dan Blank, who found a picture of Oprah’s house in Santa Barbara – when you said it was beautiful there they were passing that back and forth.
Interviewee: It doesn’t suck here.
Andrew: Oh, it’s wonderful there. Libby (???) and I were thinking of living there before we moved here to Buenos Aires and going to another country…why not.
Interviewee: Buenos Aires is great too. I don’t know how you’re up at this time of day though. I remember my first trip to BA, one of the things we were doing was touring the stock markets- this was back in business school, with North Western and the market was open for two hours a day at the time, like noon to two, and I’m thinking ‘what the hell’s going on down here?’. And then we went out to dinner and we’re eating steaks at midnight and we were dancing until 6am and everybody needed to get some sleep before going to work so…
Andrew: Yeah, they really do stay out way too late. The dinner here doesn’t start until 10 o’clock.
Interviewee: That’s amazing. Have you been up to the falls? I mean, we can talk about this later.
Andrew: Actually, yes I do want to bring up travelling in a little but I do have some questions that I want to cross off before I move on.
Interviewee: Sure.
Andrew: The first is, when I talk to Mark Zooster (???) here on MixerGN (???) in person, he said he likes to back entrepreneurs with a chip on their shoulder. I think what he means is, something to prove. What do you have to prove?
Interviewee: That’s a really good question. I think I’ve been pretty fortunate, so far, in my career and I’ve got a very, very strong and supportive wife, Lynette, to thank for that. She’s my much better two thirds and has been for more than half my life now. We work together as a team and we were very fortunate back in our twenties, we both started out with nothing, and back in our twenties we were able to work hard and create a six figure outcome for ourselves and that was a lot of money back then. And then back in our thirties we were able to work hard together and team with great people and get lucky and get a seven figure outcome. And our goal this time around is to build something so substantial that everyone involved here can have a very, very meaningful exit. What’s my chip on my shoulder? I look back at what we did at Callwave (???) and those nights where I’m up at 2am with my controller and the ceiling is literally crashing in with broken pipes and computers are sparking everywhere and, you know, the crap that we put up with to get this done. Every time in those 40 or something consecutive nights of working past midnight that I wanted to take a break or take my foot off the gas. What I felt was a responsibility for those 125 families that were counting, not on Callwave the management team, some of which had long gone to bed, frankly- but on me. Or so I thought, to go get it done for them, to create that life changing outcome for those people that I really care about. If you can call that a chip, that’s probably what it is, I feel a tremendous sense of responsibility for the folks that I talk (???) into, bringing into our vision or becoming a part of our plan. Because most people just want to partner up with someone that they know or some team that they know is going to take risks, take smart risks, and go make something exciting happen that they can be a part of supporting. It’s harder to be in that role where you raise your hand and say hey we’re going to be the folks that claim to have that vision and claim to have those leadership skills that can take this idea and this great team and can turn it into something substantial which has that life changing affect. I think as far as chips go, probably the chip I have on my shoulder is that I just really fucking hate to lose at anything. It’s really hard, especially with my kids, where I had to teach my son games like golf and fussball, basketball and chess, where you have to let them win.
50 to 55
Interviewee: And basketball and chess where you have to let them win enough to get them engaged. And so there is a lot of lessons in terms of how you manage your team that can be found in how you manage yours kids but I just can’t stand to lose any. If I lose a fancy football match up in a week which fortunately is rare, just chaps me for days trying to figure out what went wrong and how I can fix up the next week. So that may be what Mark is speaking to and I haven’t had that conversation.
Andrew: I could see how we love that about you. I feel that he has the same drive and I should have asked him that question too that there is something that is driving Mark, I don’t know when the guy sleeps, I don’t know when the guy takes a moment off, you can send him an email and within minutes he will fire back an email at you one that shows that he understood the topic that you are writing about and one that shows that he actually read your email and I don’t know how he can do that considering all the people who are demanding his attention these days. You know one [50:59] he was a rock star in this industry.
Interviewee: Yep, he truly is amazing. I will tell you we have been together now for, we have spent about a year and quarter, there is not a day that has gone by in my life since meeting Mark that I have any regrets about having Mark and the GRP team on board and he has got some very capable partners who have had some great successes but in our eyes GRP really is Mark and also his right hand guy Kelly over there, but Mark and I share a couple of trades, one is besides the inability to accept a fancy football loss by the way, is we are both pretty much nocturnal as it turns out, it is really hard to do with three more kids because they don’t respect the fact they are up till 2 or 3 every night. I kind of get this burst of energy around 11 o’clock and midnight where I am going and people who work with me are kind of used to get emails at 2 am and they learn quickly that I am not expecting you to respond at 2 am and just putting this on your plate for the morning, but kids don’t respect that fact and so our household is up at 6 everyday with puppies barking and kids running around and I feel like I just went to bed which I did but it makes me tremendously productive in the evenings. So, yeah Mark shares that trade, if I send him an email, so is our attorney. If I send Mark an email at 1 or 2 in the morning I know I am going to hear back from him pretty quickly. He is incredibly accessible and highly responsive and just a smart quick thinker. We are very lucky to have Mark and also John Greathouse from [52:24]
Andrew: I have got another note here to talk about mentors. Who are your mentors?
Interviewee: Well, I think something that, you are going to start your career with nothing other than some motivation and hopefully some basic skills, something that I actually got from my grandfather who taught me a lot. I had the opportunity to live with my grandparents when I was in high school and my grandfather who is 90 now, used to come visit me at work back in the beginning of my career and his question will always be are you learning something new everyday. [52:57] and I started to think about it and whenever I reached the point where I wasn’t learning something new it was time to make some sort of a change. What I found in that was if I look back throughout my career, at each interesting stage of my career development there is a mentor or two that I can look back on and realize that I modeled something, I patterned something after that person. Nobody is perfect but you can get it when you find someone you respect, there is bits and pieces of how they do things that you can put it into your own tool box and I think back to [53:30] and it was Kevin Gavin of VPA Marketing, and I think back to Metopia and it was Ray [], I think back to Broadview and it was Paul Denninger. I think to back Callaway that was Jack Henley the chairman of Oracle who we got to join onboard and now with revenue I have got great resources to draw from on our team, Collin, Rob, Montey, Andrea, Gretchen or Dev Team but I think about who are the mentors that I am trying to pull bits and pieces from now and pull this into my toolbox, it really is a couple of guys we have on our board today, it’s Mark and John Greathouse who are just tremendously successful, confident, capable individuals that we are fortunate to get their time and their creative energy behind building our company.
Andrew: How do you go from having a business relationship with someone where you are exchanging ideas, where you are talking sharp to a mentorship relationship with that persons actively guiding you and you are just listening and taking that information in? It is more that you just happen to be here.
Interviewee: That’s a good question. This helped on occasion.
Andrew: So you would sit down with someone, you’d have a quite conversation where you’d say this is what I am going through and get some feedback and help from them.
Interviewee: So we do that quite a bit and one of the challenges with being in the CEO role is a lot of people believe that you feel like you have all the answers or worse yet that you should have all the answers and so what you get behind the scenes when you get guys like Mark and John on your board who have been there and done it,
Interviewee: …who have been there and done it, they each built software companies before and taken them successfully to liquidity for their shareholders, their investors. John and I used to work together at CallWave. And you’re able to get together behind closed doors and sit down and say yes, these are all the things that are going well, but that’s not what I need your help with. Here are the things where I’m challenged. I don’t know the answer here. This went the wrong way. I’m not sure how this is gonna work out.
And those are the things, you sit there, there’s no pretenses, no I need to have all the answers because I have CEO on my business card and I get input from these guys who’ve either done this successfully or fucked them up before.
Either one creates tremendous value. So that’s what we do. And Mark again, incredibly available as an investor and a mentor. He offers all the time. He drives up to Santa Barbara just to spend an hour or two together…last week, next week. So in my book you can’t make the decisions on your own. Even if you’re the guy who came up with the great idea which in our case it’s really been a team effort, the chance that you’re right all the time in your assumptions is pretty much zero.
So if you don’t take someone else’s advice you’re gonna screw up some important things. So I go out and actively solicit that advice and I’m constantly trying to improve myself as a manager of people and a manager of processes as I’m looking to create the right outcome for this particular company as well. And it’s invaluable to have guys like Mark and John there as part of that team.
Andrew: Okay, and finally travel. Did you parents actually visit every country?
Interviewee: My grandparents actually.
Andrew: That’s even more amazing.
Interviewee: Yeah, some of their rooms in Beverly Hills. It used to be mine a long time ago. The bookshelves are just racked with those yellow Kodak slide reel boxes, 100s of them. And they’re labeled with things like Afghanistan 1952, Johannesburg 1961. And other than just being a tour de force of bad clothing, which is worth watching alone for those, there goal was to go to every country. And back then there were fewer of them, it was a little bit easier.
My grandfather figures they got to 200+ of them. And some of the things they did are incredible. He tells me they were at a club in South Africa in Johannesburg where Les Paul was playing back in the early 60s, and he stopped playing because he saw that the black South Africans were not being allowed into the room; they were outside the doors and windows. He stopped playing, unplugged his guitar and started to walk away, which caused a riot and my grandfather and grandmother end up helping Les Paul into an elevator and fighting off the crowds to get out of there. You never know what you’re gonna find when you’re out there.
So my wife and I have been very close on travel. I was raised in a very travel intensive family. Go see the world. We’ve been to 50+ countries then kids kicked in and that slowed us down a little bit, but we still drag them around often.
Andrew: How often do you travel with the kids?
Interviewee: [inaudible 58:02]
Andrew: Yeah, actually. It was important to me when Olivia and I started dating that she was someone I could travel with. I figured if we could travel together we could live together, so soon after afterwards we took a backpack trip through the Balkans and we went through different countries and different environments, and dealt with the heat and lack of accommodations. And I said all right, she can deal with that, she can deal with me, we can get married.
Interviewee: That’s the right way to go. Frankly, my wife would kick me if she was listening to this. I don’t think she will be, but I would apply the same four criteria to picking a compatible mate that I would to the criteria we use for hiring and bringing on teammates. There are really four.
The first one is does the person have integrity? Because if you can’t trust them you can’t rely on them and then you can’t rely on them obviously.
The second is does the person have the skill set and the ability to do what you need them to do in this role?
And then the other two are a little more esoteric. The third one in my book is does this person have a winning mindset? Meaning are they oriented toward success or are they one of those very poor souls that’s been raised since childhood to believe that even if they get the ball to the one yard line, they’re gonna fumble and someone else is gonna get the credit. There are unfortunately many, many people like that. I need to be surrounded by folks that know that they deserve to take that last step into the end zone because it’s theirs, they earned it, if anyone deserves it it’s them. And it’s reasonable for that success to come their way.
Then the fourth is the one that you mentioned about Olivia which is would I want to sit next to this person on an airplane for eight hours?
Andrew: Yeah, that’s a tough one too. With or without an iPod. Let’s sit down without and iPod.
Interviewee: Or the new iPad. Have you played with your iPad yet?
Andrew: No, I can’t even get an iPhone down here. My iPhone and I’m now on a Blackberry. Well, on that sad note…
Andrew: Well, on that sad note for me, I want to thank you. Thank you, Jason. Thanks for coming on to Mixergy and telling your story. It’s a pleasure to meet you and see you next time in California.
Interviewee: Thank you very much. Look forward to it.
Andrew: And the site, RingRevenue.com. Cool, thanks. Bye everyone.
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