Andrew: Hey, before we dive into the questions here, I just wanted to make sure that this was the right move. Actually, what I’m trying to figure out is how big is the business? When we asked you for metrics, you said that you have 1.7 million social followers, which just doesn’t seem like a business metric. I mean it is, but it’s not.
Stephen: I’m not sure if we gave that as a business metric. We certainly would have given that as the social followers. The business has grown steadily every year. We don’t unveil our exact sales figures. But we’ve grown by double digits every year since launching in ’06.
Andrew: But if you started with like $1 in sales and you double every year for the last 10 years, that still doesn’t put you at a profit, right?
Stephen: Yeah. We have sales in over 50 countries. We represent about 500 artists, with international artists taking about 15 percent of that.
Andrew: Have you done over $1 million in sales yet?
Stephen: What’s that?
Andrew: You do over $1 million in annual sales, right?
Stephen: Yeah.
Andrew: You have. And you feel comfortable saying that?
Stephen: Sure. Yeah.
Andrew: Okay. You guys profitable?
Stephen: No. But on a rolling basis right now, we’re right at that inflection point of scaling up and being cash flow positive.
Andrew: Okay. And you guys are paying yourselves, the three cofounders?
Stephen: Yeah.
Andrew: You are?
Stephen: Yeah.
Andrew: Outside funding?
Stephen: We do. We raised–our first sale side funding was through family office back in early ’08. They’ve continued committing capital to the business. We’ve raised $1.7 million in outside capital. That was after putting the first $100,000 in by myself and my two founders.
Andrew: Is it fair to say you’re doing over $3 million in sales annually?
Stephen: I’m not going to go beyond–we’re well above $1 million. But I’m not going to go beyond that. The business continues to grow. We’re up 50 percent this year in sales. We currently have a small collection in Williams Sonoma home, selling onsite and offsite channels like that and we look to continue to expand that.
Andrew: Okay. All right. Let me ask you this, how do you feel about keeping what we just said in the interview? I don’t think people usually get to see the jerky part of me that happens before an interview where I’m trying to make sure, “Did we get the right guest here or not?”
Stephen: Yeah.
Andrew: Are you good with that?
Stephen: Totally cool with that.
Andrew: All right. Here’s another thing people don’t usually see. I have to do this. Joe, please keep the previous part in the interview, but I do this for Joe, the editor. I always do it twice just to make sure that he’s got it. That allows him to align the audio and the video. While I’m at it, I should make sure to introduce myself and introduce you. Why don’t I start with you since I was the one who was a jerk? Did it come across as jerky?
Stephen: No, no, no. don’t be too hard on yourself. Not at all. You want to make sure the people you’re interviewing–I’ve seen a couple–but the people that you’re interview are serious about what they’re doing. They’re passionate about what they’re doing and it’s a full-time gig. It’s not a side hobby of people working, growing their businesses and are committed to them.
Andrew: Thanks. I appreciate that you feel that way. That actually is exactly it. I don’t want to start putting people on here who are just still trying to figure it out. Frankly, sometimes I research my guests or potential guest and I see they’ve been interviewed somewhere else and I see they’ve been snowed. The other interviewer just bought this big lie. I don’t want to do that here for Mixergy.
All right. So, we researched you. I talked to you here before the interview started. I should introduce you. You are Stephen Tanenbaum. You are the cofounder, one of three cofounders of UGallery, which is a curated online art gallery. People can go there. They can look at art. They can buy it. They can put it in their homes, their offices, etc., right?
Stephen: You got it.
Andrew: Cool. My name is Andrew Warner. I’m the founder of Mixergy, home of the ambitious and sometimes very pushy upstart. This interview is sponsored by HostGator and Toptal. Later on I’ll tell you why if you need a hosting company, you’ve got to check out HostGator and if you need a new developer, you should go to Toptal.com.
But Stephen, this whole idea happened because Alex, your cofounder, his mom had an art gallery, right?
Stephen: Yeah.
Andrew: What did you notice when she had that art gallery?
Stephen: Yeah. Alex and I actually met up through the entrepreneurship program out at University of Arizona through the Eller College. We didn’t know each other before we started this business. I think that’s important. We can get into maybe that more in the interview.
Andrew: Why is that important?
Stephen: It’s just one dynamic that we didn’t have to worry about. Not being friends before we started the business, our whole relationship is around the success of UGallery. It allows us to have very dynamic debates over the course of the business without taking it personally because at the end of the day, we know we’re both vying for the success of UGallery. I think that’s treated us really well since the beginning. Alex and I are working on this full time and our third cofounder, Greg, moonlit for us at the beginning and now he’s doing fashion design in New York.
But Alex, yeah, he grew up in Jerome, Arizona, a small mining town outside Sedona, Arizona. He grew up in his mother’s gallery. It had both furniture and artwork. He was in the art school at University of Arizona. I was in the business school. We met up in this entrepreneurship program where we had to come up with this business concept that both kind of fit the regiment of the academic program but also something that was scalable and that we could really flesh out a whole business plan for it.
And he came in, we met up through that. He had this idea to give his–he was in the art school doing a double major or a dual degree and he had this idea to give his classmates and recent graduates a credible place to exhibit and sell their artwork online because the gallery scene in Tucson was small, very inclusive, competitive. You couldn’t get in there–only so many galleries, only so much wall space. These really talented artists had no outlet for their work, including upon graduation.
So, we came up with the business plan to give these collegiate artists and recent graduates a place to exhibit and sell their artwork online and at the same time, open up access to original artwork to everyone. This was back in ’06 so it was before the Great Recession. Affordable was relative to what it was two years later.
But at the time, it was if we could be able to sell artwork for $1,000 instead of $10,000, then we could open up this whole new customer buying base of original artwork and they’d stop decorating their walls with posters and prints. So, that’s how the concept came apart. Alex really took on the art side of the business early on. And I took on the business side of the business.
Andrew: Before we get into the business part, you were in a bunch of business plan competitions and you were studying business plans in school, did you learn anything that was actually useful for running UGallery?
Stephen: We did.
Andrew: What did you learn?
Stephen: So, just the art of writing a business plan, doing your SWOT analysis, your strengths, weaknesses, opportunities threats out there. Just going through that process, we were forced to take the time to really dive deep into the market research on whether even the business is viable. Everyone has the great idea, right? Everyone has, “I thought of a coffee shop like Starbucks before that was even big.” It goes on and on. But the majority, 99.9 percent of the people, don’t take the time to thoroughly research the business, who’s out there, who’s doing what and if it’s a viable–
Andrew: So, what about this research showed you that it was a viable idea?
Stephen: Well, we saw that there were not a lot of players out there doing it. We had trouble finding validation in terms of the appetite for original artwork, much less original artwork online by student artists. But we did see that there were a number of large sales held at the top art schools each year that raised a ton of money for these programs.
Andrew: You know, I’ve noticed that too, that schools have art shows. I always assume that people buy it because they want to support the school or they want to support the artist who’s like a family member. I saw you roll your eyes as I said that. Does that ring true?
Stephen: Yeah. I think it does. I rolled my eyes because when we started out, we actually thought that was one of our kind of–through the collegiate business plan it was people, you can sort by school and people can search for artists by school so they can support their alma mater and then we can see about giving some of the proceeds back.
Long story short, we’re at the beginning. We transitioned in ’08 beyond collegiate artists and today we represent all emerging and mid-career artists from around the world and it’s not just student artists. We’re way beyond that. Our average age of our artists is like 45 years old.
But we started off in this niche category. It served us well. We had a really strong focus in terms of going to recruit artists and trying to understand who we were trying to sell to. At the same time, it limited us when we assumed the market wasn’t as big as we initially thought. We kind of owned that original student art market online. Our traffic wasn’t going up any higher because there weren’t a lot of people looking for student art.
Andrew: Okay. Did you do anything to see that people wanted art, wanted to buy original art online?
Stephen: Yeah, definitely. EBay at the time was selling gobs of original artwork. The major auction houses like Sotheby’s had tried and failed at the time, I believe with Amazon back in the dotcom bust of ’01. So, people had tried it back during the dotcom age and it was just now kind of getting that second web 2.0.
Andrew: So, beyond eBay, did you see other sites that were selling original art?
Stephen: Yeah. There were some other ones that are now defunct. PicassoMio was a large European one out there. So, we saw it. We saw that there was appetite. There was a bigger appetite for the posters, like Art.com, right? Just wall décor that people were buying online at a much lower price point.
Andrew: Okay.
Stephen: Our idea was to convert those customers from buying those cheaper wall décor that might still be a couple hundred dollars for a framed poster or framed print and convert them over to original art buyers at the $500 to $1,000 range.
Andrew: I see. I wouldn’t have known that there was any money in the space because I’m not in the space. I had scotch with a Mixergy fan here in San Francisco who told me about his revenues. He’s in the online art gallery space. I just couldn’t believe it. But he opened my eyes to the possibilities.
So, you didn’t have that research. You did have the awareness that some places were selling it online and there was a possible way to grow the market by tapping into some people that are going to buy posters online and getting them to upgrade a little bit. So, you sat down and you wireframed the site. What was important for you to have in that original wireframe?
Stephen: Yeah. So, in our original design, we really focused on the design aesthetic of it and maybe not as much on what you would think of encouraging conversions. So, the original design was probably like 90 percent design, 10 percent focused on sales, at least I don’t think it was intentional, but that’s how it turned out. We wanted really large images, especially when it got to the homepage.
We didn’t want ads or any clutter on the site. We wanted the focus to be on the product we were selling, original artwork. Artwork is such a visual buy. It’s an emotional purchase where customers really see a piece and they fall in love with it and they really need to be able to see it because it’s online.
When we first did our case competitions and really the first four years of the business, we ran into people every day that said, “I would never buy artwork online. Why are you starting this business? You should go to dental school.” When we were going out starting to pitch for money and everything else, it was totally foreign to them to buy artwork online. Of course today, Christie’s, Sotheby’s and everyone is selling artwork online including UGallery.
So, it was a different beast. It’s amazing how far the internet and ecommerce specifically has come since ’06 when we launched.
Andrew: One of the things I noticed about the first version of your site, my researcher showed me that you guys had this tool that allowed people to see what the art would look like on their wall. They can pick the color. How important did you think that would be and how important was it?
Stephen: So, we thought it was really important for the customer and we still do to understand the size of the piece. So, you have the thumbnail in search results and you click on the piece and you have the standard size image for each page on your site when you’re selling a product. So, every image looks like the same size, but certainly the artwork could be a really small piece or it could be a mural sized artwork.
So, to be able to show the perception and depth of the piece in terms of whether you have a small wall or big wall, the size of the piece to make sure somebody doesn’t get it and it’s going to be this thumbtack on the wall and they’re going to be unbelievably disappointed or the flip case that they have a small wall they’re buying for and they get it and it doesn’t even fit. So, that would be the worst case. Truthfully, we need to update that virtual wall. It’s still not much–
Andrew: I think it’s still the original one that you guys had on the first site, right?
Stephen: Yeah.
Andrew: I see a man standing in front of a door way and there’s a lamp next to him and a couch next to the lamp and when there’s a piece of art that I’m looking at, I can put it on this wall and get a sense of how the art looks in proportion to the man, to the door, to the couch and I can change the color of the wall. You didn’t code any of this stuff up. You hired a developer, in fact a development firm, to do it for you.
Stephen: Yeah.
Andrew: How did you find them?
Stephen: Yeah. That ended up being through a lot of cold calls, interviews. It ended up being through a friend of a friend who had a firm that specialized in ecommerce sites. They had a proprietary ecommerce CMS system. That turned out to be great in the sense that they were focused on ecommerce and the site was built architecturally for SEO. It was built from the ground up.
So, that was good. We are a little different in terms of today. I think we don’t have a developer on staff. One of the founders was not a developer. We did have the graphic designers in house.
Andrew: But even to this day you don’t have a developer on staff?
Stephen: Today, we actually outsource our development. We have a firm out of India. We’ve been working with the same guy the last four years. It’s pretty remarkable. I’m actually going to meet him face to face for the first time in a couple weeks when he’s here in the US. It’s kind of the world we live in. But we’ve been able to run a lean operating kind of machine here. That’s been a big piece of it. It takes a little bit more work. It’s a little bit more–certainly the communication and the time gaps and not being able to knock out thins maybe as quickly.
Andrew: Give me an example of something that you weren’t able to do because you don’t have in house developer?
Stephen: Well, I think we’ve been able to do everything we’ve wanted to do. But as quickly as we want to do stuff, whether it’s small bugs that you come across on the site–if it’s during the day here and it’s overnight there. If there’s anything critical, I’ll wake him up, but try not to do that certainly. Whether it’s integrating a little bit tighter with some third party analytics software, whether it’s Google Analytics, monitor conversions, more A/B testing…
Andrew: That takes longer because he’s not here?
Stephen: That takes much longer and it’s not as easy by any means. That’s the stuff that is real fluid and dynamic. You want to be able to say, “Let’s change this around.”
Andrew: You know, investors often like to have the developers inside the company that they’re investing in, especially–not especially, but if it’s a tech company for sure. It’s easy to blow them off and go, “What do those guys know?” But in reality, there’s some truth to it. What’s the biggest thing that you look at and you say this is why investors say entrepreneurs should have a team in house? What’s one example where you would give it to them and say they’re right?
Stephen: When it comes to the software companies, for sure because you want to stay ahead of the competition when you’re developing new technologies in a space to where you want–
Andrew: You just don’t see yourselves as a software company. You see yourselves as art sellers.
Stephen: Ecommerce company, yeah, a storefront. We’re a closed marketplace in the sense that artists have to apply and be accepted. We work kind of like maybe some of your higher end retail chains where they’re curating the merchandise versus marketplaces like eBay or Etsy, which has hundreds of thousands of sellers and in that sense, yeah, you need developers in house because you need to constantly be giving new features to your market and your users to be able to keep them on that marketplace. For us, at the end of the day, we need to be making sales.
So, with an ecommerce store, I think adding so many features can actually be a negative. If you add too many and the customers don’t know how to use half of it, it gets cluttered on the site.
Andrew: So why not use Shopify or one of these simpler platforms? Magento was around back then.
Stephen: Yeah. We wanted it custom built. Basically, the artwork review process–Alex and I, business partners, our gallery director, we needed a way for an artist to apply to a site, basically put artwork in a queue to where he reviews it all. We review the images. If the images aren’t up to par, we don’t put it on the site. They have their artists suggested. A lot of different customizations–I can go through them in detail.
Andrew: Okay. You’re saying there were certain things that you wanted that were so important that you couldn’t use off the shelf software. So, even though you’re not a software company and you don’t see yourselves as having to have the cutting edge software on the site, you still have some features that are so essentially that you need to have your own developers build something from scratch.
Stephen: Right. I’d say our CMS is very proprietary and is a competitive advantage to anybody else that would want to come replicate what we’re doing. I don’t think it’s really feasible to do it with Shopify or Magento without a lot of customization to those–those are great platforms–without a lot of customization to those platforms the way we do it. If you’re going to have a curated marketplace site, you need to be able to monitor commissions, etc.
Andrew: I can see there’s some stuff that is just so unique to your kind of shopping experience. I can see a painting, click on the artist’s face, see more of that artist’s paintings, then I can click to follow her and all of those things are unique to your kind of experience. All right, let me do a quick sponsorship message and then come back and I want to ask you about how you got your first customers.
The sponsor is a company called Toptal. Stephen, have you ever heard of Toptal?
Stephen: I haven’t.
Andrew: You haven’t. Good. That’s why they’re sponsoring Mixergy. They’re paying me to help get the word out to more tech companies. Here’s what they do. You know how finding a developer is really tough, in fact. You found one that really helped you build your business, but it’s hard to do it. How long did it take you to find this guy?
Stephen: It probably took a month.
Andrew: A month? In your case, it was really easy then. A month is no time at all. It takes me longer to find a good dentist. Well, imagine your developer needs more help, needs more people because you have this new project, new addition you want to add to the site. What do you do? You can hope that he can go find the right people in a month the way that you did or you can go to Toptal.
You tell them exactly the kind of work you guys are doing, show them your site, say the way you work, say what you’re looking for and maybe your guy is in India so you want somebody who fits in that time zone or maybe because he’s in India you want a developer who’s in the US time zone to make it easier for you–you let them know the whole thing, the quirks of how you work. How do you communicate with your developer?
Stephen: Skype, GChat.
Andrew: Boom. So, you say, “Look, Toptal, I need the guy to be able to use Skype and GChat. Here’s the way we integrate. Here’s our culture.” What language did you guys build the software in?
Stephen: .NET.
Andrew: .NET, good. I kept seeing ASPX in the URLs. That makes sense, right? So, you tell them that. They go out. They find the right person for you based on how many hours you need and all the things they just told me and they make an introduction. And if you like the person, you can hire them and get started within a few days, within a day or two sometimes. If you’re not happy with them within–I forget how long. I’ve been saying this so long and I forget what their guarantee is.
Anyway, I’m going to Toptal.com/Mixergy because they’re giving Mixergy users this–there it is–two week trial period, no risk, which means if you’re not happy with the person, in two weeks you go back to Toptal and say, “Hey, this is not working out.” If you do it in two weeks, they won’t charge you. You will not be billed. And the developer will still get paid because they don’t want to stiff the developer just because you’re not happy.
Finally, if you go to Toptal.com/Mixergy, you will get 80 free Toptal developer hours when you pay for 80. It’s an amazing resource, very few people know about them because it’s a relatively new company, but they’ve got incredible backing, incredible customer list including Airbnb, including Zendesk. And frankly, a past interviewee, while we were doing a spot for Toptal, he said, “Oh, we hired them.” Brian Wong of Kiip hired them.
So, anyone listening to me should write them down. Actually, I think they got boxed out of advertising here. Sachit has started to sell ahead, so I don’t know how much longer we’re going to be running their ads. So, you might as well write it down, guys–Toptal.com/Mixergy.
Do you remember your first customer?
Stephen: No. I remember when we had the first sale. We launched in October of ’06. We got that first sale within a couple weeks. So, it took a little longer. It was like a $100 photograph, which we were super excited, right?
Andrew: How did you get that first sale?
Stephen: Yeah. So, we didn’t have a lot of money. We put in $100,000 of our own capital upfront.
Andrew: You, the cofounders did?
Stephen: Yeah.
Andrew: How did you end up with $100,000? Is that what you said?
Stephen: $100,000.
Andrew: How did you end up with $100,000?
Stephen: Yeah. So, we had about $25,000-$30,000 from our competition winnings. So, we participated in these three business planning case competitions, one up in Queens University in Canada, one at Ball State University and one at University of Arizona. We ended up winning them. They gave us cash prizes. We walked home with these huge, looks like we won the lottery checks on the airplane, which was pretty fun.
Andrew: Do you actually deposit those checks? No, they give you another check too.
Stephen: No, they give you another check.
Andrew: I think technically those big checks are legal, right?
Stephen: I didn’t know that. If they were, we should see if we can find that somewhere. But yeah, we could have gone off and gone on a trip around the world with it, but we really got this great feedback through these judges who were these successful entrepreneurs and alumni of the universities to really give us the confidence to launch UGallery.
Andrew: They gave you–let me just say this, otherwise I’ll get in my head about this. Those checks are technically not legal, those big giant checks. I think you can make a check, a legal check just about any size, but those checks are not legal. So, they got you to $100,000 or they got you partway?
Stephen: They got us partway and then the three F’s–family, friends and fools–rounded out the $100,000. We didn’t take a salary the first year with $100,000. We put that in the website. The website, goodness, in ’06–this is going to sound crazy now–we spent about $25,000-$30,000 to build that website. So, about 30 percent of our initial capital, we put in to building the site.
Andrew: What was in that first version? I’m looking at it. It actually looks like it kind of makes sense that you would have spent that much money on it considering the time.
Stephen: Considering the time for sure, but nowadays…
Andrew: What was on it?
Stephen: It was basically the back end, which really improved the best. But on the front end, really the menu, the main menu navigation dropdowns are very similar than they were. Initially we had you can search by school and you could search by price, which we don’t really do anymore. People like to discover artwork. They’re not necessarily looking for something at a certain price point. Everybody has their thresholds.
Andrew: You were hitting that for a while, where you would say, “Buy by price or push yourself and get a little more expensive than you want.” I forget how you phrased it, but it was part of your sell for a while.
Stephen: Yeah. It was. We realized when you do that, people will start to browse strictly to find the cheapest item. At the end of the day, you pay for what you get, so our best artwork isn’t going to be the cheapest artwork or the most desirable based on size or medium of artwork that you’re looking for. That initial version of the site was very clean. You had to dive into some of the search features. I think we had like one slider on the front. You had to really find your way to search through those mini-navigations.
But the back end was really where we put all the effort in. That has paid dividends now because we’ve been able to work on that same backend.
Andrew: What was in the backend?
Stephen: That was where the artists applied. We could review the artwork. We could manage the order and the fulfillment. At the time when we launched, we had all of our artwork packaged–artwork comes in every shape and size, right? So, most artists aren’t the best at packaging their own artwork.
So, we actually partnered up with the UPS Stores at the time. Artists would literally drop their artwork at the UPS Store. We were in the UPS Stores’ POS systems. So, they would click on UGallery. The artists could give them the order number. They would type in the order number. We were able to work our way into that when the companies using that system were like Dell and really large corporate–
Andrew: Yeah. How did you get into that system?
Stephen: A lot of calling and persuading the UPS rep at the time. I think they were just growth. I think they had just bought the Mailboxes Etc. I think we sold them on, “We’re going to have some really large packages that need to be built that aren’t going to be coming in there otherwise,” versus just the freight. The actual stores make most of their money off of the packaging versus the freight goes to the parent company, the freight company at UPS.
So, that was at the time, but what we saw–so, building up that to be able to have all the emails fired the right way, being able to have them login and basically just be an iframe at the time. And we’ve since transitioned to our own proprietary packaging where we ship a custom-built art box to the artist. We ship via FedEx, which we’ve had good experience with.
Andrew: Actually, before I get to marketing, one last random question–on the bottom of your site, it says who designed it, which was ObjectWare. That’s the outsourcing company, right? It also says, “I bought [inaudible 00:31:11]. It looks even better in person. Thanks, Milky.” What does that mean? Does that sound at all familiar to you?
Stephen: So, we have a feature on there where you can leave feedback to artists and customers can interact through the blog system. Artists blog through their portfolio pages. So, that was probably kind of a back and forth or feedback left by the customer to the artist. It sounds like an artwork title.
Andrew: Got it.
Stephen: Is it on like the past version with the text coming up?
Andrew: Yeah. I’m using Archive and I’m using Google Cache. My people will go into–WhoIs sites will sometimes grab screenshots to beef up their SEO, I guess, or to beef up their content so they’re not just SEO sites.
Stephen: ObjectWare has since sold. I don’t even know who they sold to.
Andrew: It looks like they’re part of BridgelineDigital.com.
Stephen: Yeah. That sounds about right.
Andrew: Back to marketing–here’s what my team says. Actually, the pre-interviewer you talked to said it was press that allowed you guys to initially get your first customers. Is that right?
Stephen: Yeah.
Andrew: What kind of press did you get when you first started?
Stephen: Oddly enough, we were on the cover of Entrepreneur Magazine. Our business school entrepreneurship program was ranked as the number one public entrepreneurship program coming out of it after our year. I would hope we had a little bit of something to do with that.
Andrew: So, you got to ride that wave?
Stephen: That kind of teed it off. It allowed us to kind of like–you know, press kind of like builds upon press, I guess. So, we were able to kind of use that and start pitching out to whether it’s Real Simple like home magazines…
Andrew: Were you the guy who did it, Stephen, who would call up Real Simple, who would call up home magazines and try to get in?
Stephen: Yeah. So, that was Alex and I. At the start, it was just Alex and I. We launched the company out of Phoenix/Scottsdale, Arizona. We lived in a house together, woke up in our boxers on the computer and went to be after the sun went down. That was me like searching for the emails. I honestly can’t remember how we came across emails back then. It was just nonstop research and finding different ways. Now it’s very easy to contact reporters via Twitter.
Andrew: Once you’d find their email address, what would you say to them to get them excited about writing about your new site?
Stephen: Yeah. We just launched a curated online marketplace for emerging artists. This is a place where you can find affordable–really just giving them the pitch where there’s no other place where you can buy affordable original artwork. Forget the galleries. I’d venture to say the majority of people probably fall in the bucket that yeah, they like original artwork but they’re never thought about, even today, they haven’t really thought about buying original artwork because they don’t think they can afford it. They’re intimidated by it.
Andrew: So, that was your pitch? You were basically making a sales pitch to your customers through these reporters?
Stephen: Through the reporters.
Andrew: And that worked?
Stephen: That worked. A lot of the times it worked. And then also, just showcasing the need for a platform for artists to be able to sustain their craft and hopefully launch their careers. I think that was a big point from the press side, probably as well.
Andrew: How much time did you spend going after press in the beginning?
Stephen: That was a lot of my time. It was press and SEO. So, back probably in ’08, I knew everything in terms of SEO, I was an SEO expert.
Andrew: More even than press.
Stephen: What’s that?
Andrew: More so than press?
Stephen: Yeah.
Andrew: By the way, I’ve got this Entrepreneur Magazine. The cover way, “Young Millionaires: 24 of America’s Best and Brightest Share Their Multi-Million Dollar Secrets.” Is that what you guys were in?
Stephen: Yeah.
Andrew: And then it was on top, the “The Top 50 Colleges for Entrepreneurs,” like in that little text.
Stephen: Right. So, the press can be a little misleading sometimes. So, certainly being in that, I certainly don’t believe everything I read anymore. But we were part of the story with the top schools, not the 24 millionaires out of college sharing a room and not taking a salary.
Andrew: The way you’re positioning it even here was, “We were on the cover of Entrepreneur Magazine,” I think, right?
Stephen: Yeah.
Andrew: So, saying you were on the cover of Entrepreneur Magazine to me doesn’t make that huge a difference in your business. But when you were pitching other press, saying, “We were on the cover of Entrepreneur Magazine,” which technically is correct, even though your photos aren’t on there, it’s text at the top. I see. That gives me a sense of the way you were working.
Stephen: Yeah. When you’re starting out, certainly you need to be bold. You certainly don’t want to stretch the truth, but you don’t want to give any more information than you have to, especially starting out when you’re–you don’t have a lot to choose from. You don’t have a lot of resources. You’ve got to do really anything you can up to a point to get your name out there.
Andrew: Here’s what else you guys did. You pitched yourselves as helping starting artists, that finally starving artists have a hero in the business world or in the startup world, right?
Stephen: Yeah.
Andrew: And one more thing–who is Jenny at Spitz Agency?
Stephen: Yeah. So, now we do all of our PR internally. When we started out, we kind of reached out and did internally. And then over the years, we’ve worked probably with three PR companies, just public relations where we’re paying a retainer. They go out and try to get you stories. I could probably write a book on that.
Andrew: It’s Spitz Agency is what it is. The company is not around anymore.
Stephen: Yeah, I was going to say I don’t know if they’re around anymore. I’ll just speak PR as a whole from the experiences we’ve had because they’re all pretty much the same cycle. They serve a purpose in a probably limited time frame. So, PR companies, like anyone, have a network of contacts. They have those relationships with people in the media and the press. And they can leverage those contacts for their clients.
They’re literally personal relationships, personally business relationships is what it amounts to. So, after they run the course of their network, it becomes tougher for agencies, I believe, to garner press. Certainly there are more robust agencies out there that put on activation events, etc. that are much larger budgets and certainly there’s a place for those. I’m talking specifically from a startup standpoint where you hired an agency to get you press.
Andrew: And did it work for you?
Stephen: It did. It worked up to a point.
Andrew: So, was it you getting on the phone and sending those emails and trying to figure out how to get people’s email addresses or was it Jenny?
Stephen: It was us at the beginning. We probably hired them a couple years in once we took on funding. Once we took on funding, hired them, we kind of ran through the course. Some were better than others. I think we worked with two other ones.
Just this year–last year we worked with a really solid one here in New York. They helped us do live events. They generated press and awareness for us. It worked out great. We just decided to bring it internally to really kind of own and craft the message ourselves. We hired an associate marketing person to help us do that for 2015.
Andrew: Okay.
Stephen: So, it’s definitely a love/hate relationship when it comes to PR, I think. If you don’t have those contacts and you’ve got to balance the time and money, right? You asked like, “Was it me?” Yeah, it was me doing it at the beginning, but then it comes onto you’ve got to be building the site, you’ve got to be doing SEO. You want to build artists. You want to develop strategic partnerships. I probably wore too many hats for too long a time, for those first three or four years. But it’s kind of you do what you have to do to continue growing the business.
Andrew: Okay. A quick sponsorship message and then I want to come back and find out more about what you did to get customers. You said SEO was a big one. I also want to talk to you about social media is we can get to that.
The sponsorship–of course, my sponsor is HostGator. You’re the patron of artists, HostGator is the patron of podcasting. These guys are sponsoring Mixergy because they want to let everyone who’s listening to me know if you hate your web hosting company, if you hate the people who are running your site because the site is crashing or they don’t give you the uptime you need and they’re not around after they take your credit card number–I know I’ve had those experiences–you don’t have to put up with it.
You can switch. It’s easy. All you have to do is go to HostGator/Mixergy. Why add the /Mixergy at the end? Because they’re going to give you 30 percent off if you go to HostGator.com/Mixergy.
Stephen, are you the kind of entrepreneur who has a bunch of different ideas that if I told you, “Here. Here’s a HostGator-hosted website,” that you’d know what to do with it, that you’d have a big business idea to start with it?
Stephen: Sure.
Andrew: What would it be? If we just started you off–let’s give the audience an idea of what they could start if they wanted to get started with something new.
Stephen: In terms of any business idea?
Andrew: Any business. It has to be on the web. I just gave you theoretically a HostGator account and you could build any website on it. What would it be?
Stephen: Let’s build a marketplace for selling–it’s kind of a competitor to StubHub. It’s a marketplace for selling tickets to any events, whether it’s movies, sporting events, concerts, etc.
Andrew: And you could probably partner with StubHub and other sites so you can resell their tickets, right?
Stephen: Yeah.
Andrew: How about a UGallery for art that you don’t hang on the wall, but the stuff that you would put on your shelves. Do you guys do that?
Stephen: We don’t.
Andrew: You don’t. So, is there a market, do you think, for that? Someone can go to HostGator.com/Mixergy and people can start selling art, physical stuff that people could put on their bookcases or coffee tables?
Stephen: Yeah, definitely. We have a very small section of sculpture. But the home furnishing market is huge. That’s certainly something we’re looking to partner up with companies that are selling other high-end home items.
Andrew: Cool. HostGator.com/Mixergy–you can get started right away. I’m telling you–don’t have an idea that you just sit and ponder. Have an idea that you just go to HostGator with, launch the website with. They have one-click install so you can get your whole website up or other platforms if that’s what you prefer. You can just experiment and tool around with it, sit down.
Here’s what I would do. Here’s what I did when I started Mixergy. I sat down with a beer in my home office with my couch that pulled out of the living room because I liked the seat that I liked in the living room but I didn’t want to be in the living room because I just wanted space from my then girlfriend, now wife.
I started tooling around. What if I install WordPress. Boom. I installed WordPress. What if I add this theme? Installed it. It looked good. What if I do this? Now it doesn’t look so good. I messed around. Eventually I had something I was so proud of I couldn’t wait to post it. That’s what I started Mixergy with. It was actually Blog.Mixergy.com and then I shifted it to Mixergy proper. So, now it’s Mixergy.com.
Anyway, if you have an idea, just go to HostGator.com/Mixergy. They give you 30 percent off and they guarantee that you’ll love it. If you’re not happy, you can just cancel. You’ll get your money back.
SEO, what did you do for SEO, Stephen?
Stephen: Yeah. So, it really came down to when we started out focusing on keywords that were around buying art online, specifically at the time buying student art online. That’s kind of what I alluded to before. We were coming up, setting your page titles, your H1 tags at the time was like meta keywords. It transitioned to trying to get link backs, etc. So, at the time, we were coming up at the top of the search engines for anything around student art online, both in Yahoo at the time and Google. We still were only getting–we hit a peak in terms of traffic that was not high enough to sustain the business.
Andrew: So, I’m looking at your URL structure, of example. It was UGallery.com/ProductDetail.ASPX?ProudctID and then a number–there’s not even the name. It’s not even “Student artist” and whatever is in there.
Stephen: Yeah. Nowadays we handle that with canonical tags and certainly the SEO-friendly URLs. .NET was not the easiest in terms of the SEO. But especially back in the day and even today, it still kind of gives us a few headaches. But it wasn’t as competitive as feel certainly at the time, further there were specific keywords that we were going after.
Andrew: What did you do to rank for those keywords? I don’t see you “student art” on your website a lot. I don’t see what you did.
Stephen: Back in the day we did. It was in the page titles. It was in every single meta description.
Andrew: Oh, I see.
Stephen: “Student art for sale…”
Andrew: James Caselana, he is a photographer. Here is the meta name, “Concrete, photography artwork by James Caselana of Hereford High School,” and then the keywords, “buy art online,” “online art gallery,” “local art gallery,” etc. Is that what worked for you?
Stephen: Yeah. You’re digging deep. I don’t recognize that name, but obviously it was an artist on there. Certainly Google has really transitioned kind of what they view and how they rank their algorithm.
Andrew: I didn’t think that mattered back then in 2006 and 2007, the meta description and meta keywords. I didn’t think it mattered that much.
Stephen: Page titles have always been the top. Meta description is for the click through rate. So, that encourages higher click through from the search engines. Meta keywords, I believe so. If not, we had H1 title tags for sure and then link backs generating links from associated sites.
At the time, we got a lot of links from art schools and universities. At the time, the .edu links were viewed as more trustworthy because it was an academic resource. So, that helped significantly. And then certainly any of the press we got helped at the time as well. I think that helped more than what it does now as well.
But again, that wasn’t driving the sales that we needed. What really drove the sales at the beginning and what really continues to drive the sales today are what I call third-party validators. So, when we get any kind of testimonial or articles written that are every genuine, not like just a carbon copy, but somebody that’s experienced UGallery or somebody who has just found us and writes about it and talks about what they like, people, I think, love being able to support artists. When it’s from a trusted source, they trust them, especially the designers and design blogs. They trust this person vouches for this art–
Andrew: You did a lot of outreach to get that, right?
Stephen: In the early days, yeah.
Andrew: What kind of outreach encouraged people to write about UGallery?
Stephen: Yeah. So, certainly we’d send site credit, have them experience UGallery, buy a painting, buy a photograph on us.
Andrew: You’d give them–who would you give credit? You’d give it to a blogger?
Stephen: Yeah. “Here, no strings attached. If you’re interested…” Say they’re blogging about redesigning their house or redesigning their room. “Hey, you’re redesigning your room. Here’s $300 for a piece of art work. If you love the experience, feel free to share. If not, enjoy the artwork.” So, we did that. That worked. Now everybody is a blogger, but at the time, it was all the rage and they had a very loyal following. I think a lot of the blogosphere has moved on to Twitter and Instagram.
Andrew: Pinterest and others. You’re right. There was a period where if the right blogger wrote about you then boom, you took off.
Stephen: Also a site like the daily deals site, right? Or the email newsletters, I don’t know if you remember one called DailyCandy.
Andrew: Yeah.
Stephen: So, we got in that. I remember I was at my brother’s college graduation, I guess. This was like a couple of years after we graduated in ’08 in Ann Arbor. We had just got word that we were going to be in DailyCandy the next day. I was on the phone with our developers at the time. At the time we were on shared hosting, which is great if you’re small, but it can cause all sorts of issues when you get a spike in traffic. I can’t remember exactly–it was like 20x, 30x the amount of traffic.
Andrew: For being in DailyCandy?
Stephen: Yeah.
Andrew: And that was free placement, right?
Stephen: Yeah. That was just free. That was pitching we’re supporting these emerging artists. We have a great place where you can buy affordable original artwork that we think your users would love.
Andrew: By the way, I had a strange experience with Dany, the founder of DailyCandy. I remember I was in Argentina. She said, “Andrew, I’ll do Mixergy, but I don’t have a camera.” I said, “All right, I’ll buy you a camera.” From Argentina, it’s not that hard. I bought her a camera and shipped it to her house.
For some reason that didn’t work out. I shipped her another one. I think I sent her two cameras to her house and she was supposed to show up and she didn’t show up. It was back when I was doing it live. It was such a strange experience. It’s like she just wasn’t hiding. Frankly, I haven’t seen her in public much since then.
Stephen: Yeah. I know they’re not around.
Andrew: No. They closed up, which is too bad. It was a really good email newsletter.
Stephen: I didn’t understand that either. Now there are email newsletters that I guess are giving a little more substance, like theSkimm, right?
Andrew: Or Thrillist. Thrillist is really big. I feel like Thrillist was trying to be DailyCandy for men and they didn’t sell. DailyCandy sold and because they sold to this big corporate company that I believed didn’t know what to do with it, they closed down. But Thrillist was run by this hungry entrepreneur, one of the best guys out there. So, he kept finding ways to grow. One of the ways that he grew was Jackthreads and that became a major part of his business.
Stephen: Yeah.
Andrew: By the way, Jackthreads interview on Mixergy–fan-freaking-tastic. Anyone listening to me should go watch that. The Thrillist interview with the founder–I’m blanking on his name–Ben Lerer? I don’t it remember it standing out as great, but it was good. All right. My self-analysis of my past work here and my past guests.
Stephen: I can’t wait to hear about this one.
Andrew: You heard this one in public right there. I accosted you right away from the start, “What’s the deal with just social media numbers? That’s what matters to you?” I know what I said. I said, “That’s not really a business metric.” You said, “Andrew, I didn’t tell you it was a business metric.” But here it is, actually. You’re not big on Facebook. You’re not big on Twitter. You’re kind of big on Instagram. You guys are giants on Pinterest–1.6 million followers on Pinterest. Frankly, or you, I would rather be on Pinterest than every other website put together except for my own, right?
Stephen: Definitely. Pinterest and Instagram are synonymous with just visual pictures, photographs, artwork, culture, everything. So, it really jives with us. The social media following is great. Why I said I wouldn’t have given it as a business metric is it’s a totally different follower. We keep trying to figure out how to convert those followers into paying customers. People on Pinterest, they’re using UGallery to seek information in terms of their boards. We have over 7,000 pieces of artwork.
Another way for startups to really try to build, try to like build their following and build partnerships and something we continue to do today and it helps us with Pinterest was we were really active in it when it was really early on when it wasn’t big. That’s what allowed us to gain that following on there. We ended up, we were so active on it that they ended up featuring us as a featured account for their new welcome email subscribers and it really ballooned from there, that whole viral network effect. It really exploded.
We continue to do that. Partners–we seek out really cool companies that might have just raised their seed round or might have just raised their series A.
Andrew: What’s one example of someone that you’ve done that with recently?
Stephen: We did a home giveaway with The Bouqs and a couple of other brands. Recently a home makeover–it was a sweepstakes giveaway and when people sign up, they opt in to the partners who are giving away email newsletters.
Andrew: Oh, I see.
Stephen: So, it’s an email user generation method, which is low cost, right? I think we gave away $500 on our end and then the other brands give away–so, it’s like a $2,500 home makeover. We did it even with some outdoor brands.
Andrew: But everyone who joins the contest ends up giving their email address to you and the other partners and now you have a bunch of people who are interested in renovating their homes who are potential customers for you. That’s the way it works, right?
Stephen: Yeah.
Andrew: We did a course on contests. Anyone who’s Mixergy Premium should go check that out. I don’t want to keep promoting our stuff, but that one was really good. It’s with Travis, if you want to do a search. But Pinterest, I do see that your stuff is doing well there. I see that I can click the link at the top and visit not just the site, but go directly to the piece of art that’s been pinned on your website. You’re still not seeing high sales from that, not big conversions?
Stephen: Not in terms of conversion rate, not big conversions. We’re definitely seeing sales. Granted, the volume, 1.6 million followers, if we can get that uptick a little bit and continue to find ways–I know Pinterest is starting to work on their strategy to monetize and build in their shopping tools.
Andrew: To allow you to buy directly from a pin.
Stephen: Right.
Andrew: And if you were on Shopify, you’d be able to do that easily. Because you’re using your own platform, is it harder to do? Is it an issue?
Stephen: It’s not an issue, but again, it takes a little bit more development to code and make sure even when you click on a pin and go to our site and vice versa, making sure the meta tag keywords, the alt text is showing up properly over the images. So, it just takes a little bit more leg work, maybe it’s a day turnaround instead of being done in an hour.
Andrew: Okay. That’s not too bad. I see Apartment Therapy sending you guy some traffic. What are you guys doing with them?
Stephen: We haven’t done anything with them recently. The beautiful thing about some of these content sites and press that you get online at least–and that’s why we focus online instead of getting in any kind of physical–we’d rather be somewhere online with a lot of web traffic than in The New York Times newspaper and we were omitted on their online site because you can monitor all the traffic. You see traffic still coming to the site. I think we’re on their holiday gift guide, I believe. We had a few articles.
Andrew: Yeah. They’ve written about you a bunch. You’re in some directory they have for places to buy art. You’re in the “How to Find Affordable Art: The Affordable Online Source List.”
Stephen: They’re a great DIY creative platform for anybody looking to kind of upgrade and work on their home in an accessible way. I’d say our clientele, that was years ago. We’ve learned from just over the years and our price point has continued to skew upwards, is our customer base is actually a little bit higher end than what we initially set out.
There are platforms like Etsy and it’s not the same customers that are shopping at Etsy that are shopping on UGallery. It’s not even the same customer as somebody shopping at an affordable furniture place like IKEA. That’s not our customer today and it’s not what’s allowed us to grow how quickly we’ve grown over the last three years to where we are today either. We’re a higher end customer, more like the customer shopping at Restoration Hardware, William Sonoma, Crate & Barrel.
Somebody a little bit older-skewed as well in terms of age–our primary customers are over 40 years old, six-figure household income. I’m not trying to deter anyone from not coming. We do have artwork from the $200 price point.
Andrew: Let me go back and understand little bit more about how you built up the business. In fact, I want to talk about one of the challenges. It happened in 2009. You told Jeremy, “The ’09 recession was hard and coming out.” What does it mean to come out in 2009?
Stephen: So, again, when we said what was relatively affordable–I think this is actually a good segue from what I was just saying. We were going after this customer that we thought we could bring up market. Coming with the whole Great Recession with 2008 and the real estate crisis, everyone was cutting back. Even people who had a lot of wealth weren’t going into galleries and buying $20,000 pieces of artwork.
But if anybody owns original artwork out there, they know it’s highly addictive. It just gives you this priceless feeling and it’s everlasting to be able to own a piece of artwork and you get a lot of joy out of it. So, people who normally shop in galleries were looking for alternative places to buy artwork but were not spending that five figures on it.
So, we ended up getting a lot of customers, I believe, and through our customer surveys from then, customers who normally shopped at galleries but they ended up looking to buy online. We weren’t an ad-cluttered site. Alex, my business partner, has done an unbelievable job of keeping the collection cohesive and really committed, talented professional artists with some unbelievable work.
That allowed customers to really respect what we have and give us a try. I think we netted a lot of new customers then, just by the way our brand was in terms of the quality but also having that more affordable price point to some even though it was well out–
Andrew: Sorry. I’m not following and it could be my own fault because I was doing research as you were talking on what you were saying to see what was going on in ’09 with you. What I’m trying to figure out is–let’s get into some of the challenges. I don’t want to just talk about everything working out great. We’re almost at the end of the interview, if we say that everything was perfect, then it seems a little too easy, like we’re selling a dream here.
Stephen: Okay.
Andrew: The challenge in ’09 was what? What were you feeling? Talk to me about the pain of it and then we’ll talk about what you learned to overcome it.
Stephen: Coming out of the economy kind of in turmoil, we were looking for ways to expand our customer base. We weren’t getting traffic. We weren’t getting as many sales. We decided to launch one of the big distractions and something that didn’t work out for us we tried to go down market at the same time. So we launched a separate sister site called Paperwork. That name still gives me like…
Andrew: Why?
Stephen: Why? I guess at the time, my gut wasn’t in the name because I thought it was confusing. It didn’t say what it was. What it was, was limited edition prints, limited edition giclee prints for like $25. We launched a sister site for it. There were some other sites out there doing it well. Now they’re a dime a dozen, these sites. Society6 you can buy nice quality stuff but it’s just mass produced stuff.
So, we launched this site to try to expand our customer base, capture low end sales while still selling the higher end artwork. It just took a lot of time to build a whole other brand and then try to explain what that brand is while differentiating original artwork where you can really charge that higher price point while trying to sell this lower price pint, but on the computer screen, it kind of looks the same, the same image and by the same artist. It went through.
We probably left it up six months, a year too long before pulling the plug. I think that was a big learning experience to learn not everything is going to work out. You have to be willing to say, “This didn’t work out,” and move on. Otherwise it’s going to continue to be a major distraction. It’s going to be a detriment to the rest of your business.
We’ve had a great board of advisors on UGallery since we started, more formal in the last few years. That has really helped us, not only they helped us transition from student artists–certainly this is like our baby, coming out this is what we were believing–
Andrew: That’s what the U in UGallery is. It’s University.
Stephen: Well, at the time we had a more holistic view of what U was. But at the time, we even had the university-stylized U in the logo. Now, U as in the artist, U the customer. YouTube was big. That didn’t hurt. I remember we had some press. They did all the U sites.
Andrew: You were one of the U sites.
Stephen: We were one of the U sites.
Andrew: The mentors allowed you to know, “Hey, it’s time,” the advisors allowed you to figure out it’s time to close the sister site. It’s just not your market and there’s not enough money in it and they also allowed you early on to go broader than just university artists. In the recession, you finally realized, “Hey, this new site is not working out for us.” What was working out was going back and selling to the same customers who had bought before, helping them buy more. In fact, today, what is it? 35 percent of your sales come from repeat customers, something like that?
Stephen: Yeah. That’s right.
Andrew: What do you do differently to bring people back after they bought art from you? What do you do that’s not obvious, that other people can learn from?
Stephen: The obvious things are certainly email marketing and trying to personalize that. If they follow and artist, they upload new artwork, letting them know that the artist they purchased from has uploaded five new pieces, etc. I think those are more the obvious things.
I think especially with ecommerce companies, giving a little bit more of a personal touch, whether that’s a phone call afterwards to see if they’re loving the piece. We do our VIP holiday gifting where we send all of our top customers a physical gift card in the mail with a nice thank you note, giving them an update on our artists as a whole, how they’re doing. We’re helping them launch their careers and they’re helping them support their careers as well.
So, just really having that more personal touch–I can’t tell you how many times–we try to be very transparent for an ecommerce company. Having the phone number on the site if they want to call in, just making sure we follow up to check in and offering them those incentives to come back to us and reminding them we’re always there. So, I think it’s a lot of that special sauce of just really massaging those relationships over the years.
Andrew: Do you still have your phone number on the site? I guess it’s under contact.
Stephen: Yeah. We have a chat box at the bottom. Amazon, you have to dig. I don’t think you can find a phone number to them. With artwork, people again, it’s still an intimidating space to furnish your home with original artwork. We decided to do everything possible to make it as frictionless as it can be and letting them know we have our art advisors here ready to walk you through or answer any questions or give you feedback or even connect you with the artist and visit the studio.
We even have customers calling, “I’m going to be in LA. I see Kevin Brewerton is in LA.” He’s one of our top artists. He’s this former mixed martial arts kickboxing champion turned painter. “Can I go by and see his studio?” We’ll connect that potential customer with the artist. Our artists will always send a sale back through UGallery because they appreciate what we’re doing for them.
Andrew: All right. Cool. The website is UGallery, the letter U then Gallery. And frankly, check out their Pinterest just to see all the action that’s going on, on there. You guys have a really good system for Pinterest. Every piece of art goes in there. You categorize it based on photography, acrylic paintings, etc. Sometimes you get more specific. You also have guest curators who can create pins. You guys are really good at Pinterest.
Stephen: That’s just another press marketing thing, a way to generate collaborations and partnerships.
Andrew: All right. The sponsors are HostGator. If you need a hosting company, go to HostGator.com/Mixergy. And if you need a developer, go to Toptal.com/Mixergy. And of course, as always, if you haven’t subscribed yet to Mixergy’s podcast, you should. You’ll get every single interview as I do it directly delivered to your phone or other device before, frankly, it goes to members only. So, you might as well go in there and get it right now, sign up if you haven’t yet.
Stephen, thanks for doing the interview.
Stephen: Thanks, this has been great.
Andrew: Cool. Joe, thanks for editing.
