Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses for an audience of real entrepreneurs. And get this. Today’s guest has been running his company for about . . . Patrick, has it been like five years at this point?
Patrick: Five, yeah. It feels like longer, but five.
Andrew: And it’s huge, but still kind of under the radar and . . . Right?
Patrick: Yeah.
Andrew: And I wonder why. I invited him here to talk about how he did it. His name is Patrick McKenna. He is the founder of Strike Social. What they do is they use machine learning to buy online ads for their clients, and that’s partially why they’re kind of under the radar. Nobody sees the software that a client is using to buy ads on the internet, but they’re out there. They’re doing good stuff. They’re building up. And I want to find out how Patrick and his company did it. This interview where we find out about how they did it is sponsored by HostGator for hosting websites, Toptal for hiring developers. Patrick, I’m going to hit you with the first question that I think you’re going to feel comfortable, in fact, proud to answer. Revenue, where is it right now?
Patrick: A hundred million.
Andrew: A hundred million dollars already a year?
Patrick: Yeah.
Andrew: You were just in Inc. for 2017 with your revenue. What was the revenue in 2017?
Patrick: 2017, I think we were at 60, 70s, somewhere in there.
Andrew: Look at that, man. Look at that. How much outside funding do you have?
Patrick: We took on some debt. We took on some equity, $1.3 million. We paid the debt off, so we’re carrying $250,000 in an equity owner, small seed.
Andrew: Wow. That’s nothing.
Patrick: I know.
Andrew: Right?
Patrick: Yeah.
Andrew: But Patrick, when we talk about $100 million, does that include the money that you then use to buy the ads on your client’s behalf? It does.
Patrick: It does, yeah.
Andrew: Okay. Net of that, what are we talking about?
Patrick: Thirty, 35 million.
Andrew: Wow-wee.
Patrick: Yeah.
Andrew: And you are under the radar. You acknowledge it as I said it. I wonder why you want anyone to know about now. You’re like on a roll. What’s your goal here with letting my audience find out that you’re out there doing this?
Patrick: Well, I mean, I think every business needs to get out there and let companies and other businesses know about them. I mean, there’s a lot of competition in this advertising space and advertising market. There’s tons of competitors and offerings out there. And I think what we’ve done is a really good job of retaining the customers that we got and providing real value, so very low churn and now it just becomes sales and marketing effort really.
Andrew: Before we started the interview, you said, “What we’ve got is machines talking to machines. It’s machines that are not writing the ads, they’re not creating the images, they’re not creating the YouTube pre-roll videos. What they’re doing is intelligently placing them.” Can you give me an example of how machine does it at Strike Social that would be different from how human beings do it elsewhere?
Patrick: Well, yeah. So, the 80/20 rule applies to media buyers and planners, right? One of the things that I was curious about was before we’re manually pulling levers in, the goal was to get rid of repetitive tasks using software. And then before AI sort of became a thing, I started asking questions about, you know, what makes a good buyer and what makes a great buyer a great buyer or even a poor buyer. And the two things that came up consistently were attention to detail and gut. And when you’re talking to software platforms, they should never be gut, right?
Andrew: Uh-huh.
Patrick: And then when you’re hiring someone, it’s really tough to scale attention to detail and gut. That’s hard to do in an interview is to find out, well, how good are you at details and what’s your gut like? So, what we wanted to do is create a software, artificial intelligence to sort of get rid of that gut because media buying, it’s mathematics. It’s talking to a computer and it’s mathematics. So, that’s what we did.
Andrew: Okay. Because software can . . . Because frankly, when I go to Facebook and I buy ads from them, they’re doing some of this already, right? They’re already saying, “Andrew, this is your audience. We think that people like this are similar to your customers, this . . . ” And so on, right? This is what we’re talking about. It’s already being done. What are you doing differently that I’m not already getting from these platforms?
Patrick: Yeah, exactly. So, that’s a great point. So, you get . . . Behind Facebook’s algorithm and their machine learning, you get a relevant score or in AdWords, you get a quality score. So, maybe you get a five one day or you get a seven another day and you don’t really know what’s behind that score. You can see who you’re asking and then, “I want to place ads to people who I think my viewers are going to be that have this interest or that interest or are interested in this topic.” But what you’re really looking for is, well, what part of that five? What’s behind that relevant score in that audience? And what are potentially adjacent audiences to the audience I’m really performing for? So, you do a lot of multivariate testing, and then you optimize towards what’s actually working the best so you can understand how to manipulate that relevant score and improve it.
Andrew: You’re someone I wouldn’t have expected to be an entrepreneur. I looked at your background. You talk about how . . . At times you’ve talked about how you spent 12 years at Microsoft.
Patrick: That’s right.
Andrew: What stood out for me as I look back on your LinkedIn profile was the time you spent at MCI Communications, that company that went bankrupt before giving AT&T a hard time as a competitor. I just wouldn’t have known that you were an entrepreneur. And still, I don’t know where I saw this, but is it a little personal for me to ask you a little bit about your siblings growing up?
Patrick: No, not at all. Go ahead.
Andrew: You had an unusual childhood. You were adopted? Am I right?
Patrick: Yeah, that’s right. Yeah.
Andrew: How did that . . . Well, tell me . . . I’m trying to find a way of asking that question without . . . Because you and I don’t know each other and to be honest with you, you intimidate me a little bit. I think it’s because . . .
Patrick: Why?
Andrew: I don’t know. I’ve got some theories on it, but I don’t think we ran this by you before that I was curious about this, that you were adopted, you had this like family of 11 brothers and sisters, you were the middle child in that experience and you felt like you needed to compete and that competition I heard is what made you feel like, “You know what? I might be an entrepreneur in here if I could just survive in that environment.” I wonder what made you think that. Tell me a little bit about yourself.
Patrick: Yeah. It didn’t feel like competition at the time. It doesn’t feel like competition now. They’re all accomplished. I got a brother that’s a doctor. I grew up in Spokane, Washington, which is a small town east of Seattle. And my sister is the COO of the largest company out there. My brother is a very good football coach in the Catholic High School there.
Andrew: And so growing up you would see these people do really well, and did you feel like, “I’ve got to do well in this environment. Look at how my sister is doing. Look at how my brother is doing”?
Patrick: No. I think it was just a general sense of . . . I think when you grow up in an environment that you’re already seeing how your parents are managing all these different personalities and you’ve got to get along with a lot of people. And so maybe that’s the competition. Maybe the competition is, “How do I get noticed in this massive group of people?” But my parents, they were just fantastic people. I mean, they adopted kids from . . . When I was about 10 my parents started adopting kids from international orphanages, so we had . . .
Andrew: And so they adopted you then they kept adopting. After you, they adopted before you. They just wanted to fill up their house.
Patrick: And they kept going, yeah.
Andrew: But why?
Patrick: I mean, they were just incredibly giving people.
Andrew: Why?
Patrick: I can’t put my finger on that part of it. I think my parents just felt like that they had a big house. My dad was an entrepreneur. He started his own . . .
Andrew: A doctor entrepreneur. What did he do?
Patrick: Doctor entrepreneur. He started his own practice. And so I watched him work morning, noon and night and the effort that he put into that practice and was the largest practice in Eastern Washington, maybe east of Seattle. So that was really interesting. And it’s just . . . I can’t say enough about my family. I mean, they’re just incredible people.
Andrew: Did you ever rebel against them? Because I would feel like if my dad was that good of a person, how am I going to say, “Dad, you suck,” when I’m going through my 17-year-old anger phase?
Patrick: Yeah. Well, I can’t say that I was the easiest child out of the group. But I was definitely . . . I mean, I would have been a model child in any other family, but when you’re in a family full of summa cum laudes and those, it becomes a little challenging.
Andrew: Wow-wee. Your dad know how well you’re doing right now with Strike Social?
Patrick: You know, my parents passed away both of them, but I wish. I mean, he was definitely around when I was at Microsoft and he was very proud of that.
Andrew: You talk to him in your head sometimes, like, when you’re raising . . . You have one child, right?
Patrick: Yeah, I have one child. Yeah. I’ve watched . . .
Andrew: You ever just see like, in your head like say, “Dad, look at how I’m doing. Look at this cute thing”? Do you ever in your head when you hit 100 million go, “Dad, you’d be proud right now”? Do you do anything like that?
Patrick: You know, I definitely miss the moments that you could talk to your parents when you have your kid. I would love to be able to show them what I’ve accomplished in that realm. The business part I don’t really feel that successful to be honest with you, Andrew. I just don’t.
Andrew: Really?
Patrick: Yeah.
Andrew: What is it going to take to make you feel more successful?
Patrick: I don’t know. I just feel like I’m just working, right? I mean, I feel like I’m working hard and I’ve got a plan and we execute that plan, but I don’t ever sit there and go, “Gee. Hey Pat, you’re so successful.”
Andrew: Are you profitable?
Patrick: What’s that?
Andrew: Are you profitable?
Patrick: Oh yeah.
Andrew: Do you want to treat yourself maybe like go on website right now, buy yourself a nice car, something that will remind you every day that you’re doing well? No.
Patrick: Yeah. No. Spending the money is actually kind of a hard thing for me too. I’m not out there. I don’t need that much. I just . . . I’m not . . .
Andrew: You did pretty well at Microsoft.
Patrick: I’m not going to go buy a Ferrari, right?
Andrew: That’s not you.
Patrick: No. I’m not doing that. In fact, I don’t own a car right now. I own a golf cart.
Andrew: I love that. How do you get by with just a golf cart? I would love that.
Patrick: Well, my wife has the Audi, but I’m driving the golf cart around.
Andrew: You mean like in your neighborhood you can drive the golf cart? You’re the guy who drive into the grocery store. You are? Wow.
Patrick: No, I don’t. So, I live in Reno, Nevada. The company is headquartered in Chicago and I live . . . We moved from LA to Reno and I just didn’t . . . I noticed that when I’m here, I just work out of the house and I don’t . . .
Andrew: Is it impropriate to say that you moved there for tax purposes?
Patrick: Well, it’s partly that I guess. I moved because we started the business in Los Angeles. And Andrew, one of the things that I’ve really focused on always is how am I going to scale. And I got to a point where we moved the business to the Midwest because there’s a lot of service aspects to the business and it’s really tough to service coastal clients when you’re in Los Angeles. You got someone who’s coming to work at 9:00 which is reasonable and you’ve got a client who had their hair on fire at say at 8:00 a.m. Eastern. This is not going to scale.
So, we moved out there and then as the business kept growing and I started focusing more on international growth, I had a PR expert out in Tahoe and I was kind of like, “What am I doing here?” And for me to live in LA at that time after we had sort of run the company through the house, it didn’t feel like home anymore. It sort of felt like work. And so we came out and checked it out and the first realtor we have we’re going to move to South Lake Tahoe and he started talking about our little kid and our dog and bears, and we decided to move to Reno, and so that’s how we ended up here.
Andrew: You, as I said, were working at Microsoft, you made some angel investments in startups, you were advising, you were helping. How did you make the leap from that to coming up with this idea?
Patrick: Yeah. So, I was at an agency incubator and this kid came in, the young kid came in and said, “I can make any video go viral on the internet.” And that was a big deal back in 2011. It was very hard to get views to videos and so people would buy media to do that, but I didn’t realize that that’s what was happening. And it took me a little bit of time to kind of dig in and figure that out. But once I figured that out and sort of knew what was in the market in terms of making videos go viral, I realized it was a paid thing and . . .
Andrew: Oh, he was buying views.
Patrick: He was buying views.
Andrew: Okay.
Patrick: And so I started testing what that would look like and we started achieving . . . I was hoping for maybe a 5% decrease in price and maybe a 20% increase in performance review rate. We started seeing a 70% reduction in price versus what was in the market and . . .
Andrew: Meaning, where most people would buy ads and expect, let’s just say $100 cost per acquisition, you would take one of their videos, you would juice up the views, it would start to go viral as a result, instead of paying $100 they were paying what? 70 or 30? I forget the . . .
Patrick: No, no, no. So, just on the pure paid side, somebody would charge let’s say this is 2013 pricing.
Andrew: Okay.
Patrick: They would charge say a 10 cents cost per view on YouTube.
Andrew: Okay.
Patrick: And we were able to achieve with margin a four cent cost per view. And so we got into transparency right out of the gate. We felt like it was really important for brands to understand what they bought in a transparent model and what our fees were. And that wasn’t a big thing back in 2013, 2014, even 2015 until sort of report came out that said, “Hey, by the way, you don’t know what you’re buying or what you’re getting.” And that’s . . . We were already there, so it was a big deal for us.
Andrew: How did you get that decrease in cost per view?
Patrick: That goes down to that gut, that attention to detail. We used onshore teams, offshore teams, we built custom software to make that happen.
Andrew: To do what?
Patrick: What’s that?
Andrew: To do what? I understand how the person who came to you and said, “I know how to make a video go viral.” What he was doing was buying views.
Patrick: Yes.
Andrew: What did you do to get . . .
Patrick: Yeah. So, we were buying views for considerably less with the approach that we took with multivariate testing within that at the time.
Andrew: Oh, buying. What he was doing was buying views, not like the shady but buying views. He was buying ads that then led to higher views. Got it. I thought what you were saying was that he was using one of those server farms or some like one of those organizations that will just pump up your view counts. That’s not what he was doing. He was buying ads that got more people to view the videos and as a result, the videos would go viral. And you said, “Wait a minute. If these ads can work for him, I think we could buy ads on a more efficient basis.”
Patrick: That’s right. That’s exactly right.
Andrew: And where were you buying the ads? On YouTube?
Patrick: On AdWords, yeah. So, we were using the AdWords platform to buy them on YouTube. Now we use DV360 and use our software solely to do it. So, the software does it all.
Andrew: What’s DV360?
Patrick: DV360 is Google’s Double Click. They were just renamed it to DV360.
Andrew: Got it. Okay.
Patrick: Yeah.
Andrew: So, you saw this, you said, “This works.” How did you get your first clients to experiment with?
Patrick: Well, yeah. So, that was interesting. So, we built a . . . We started building technology . . . We knew we wanted to be a technology company and that’s my background. And we got out in the market with an analytics platform. We got on TechCrunch and we thought, “Oh, Jesus, this is going to be the be-all end-all.” And as PR goes, you’re going to have to go out and you’re going to have to sell. So, we started building a team which was me and an inside guy setting up meetings and we just went out door to door to agencies and started selling the service. We finally got . . .
Andrew: So, first you built . . . I’m sorry. You finally got who?
Patrick: What we finally got a bite from someone up in San Francisco. The brand was called Corning and it was their Gorilla Glass product at the time. And I’ll never forget the guy. The guy gives us a $75,000 campaign and we run it for about two weeks. He calls us back with $150,000 campaign. We run that one and he calls us back a week later and says, “I want to run another 125.” And so we’re running these campaigns and we’re running out of money, so he’s just eating all of our capital.
So, I’m trying to talk the guy into paying one of his bills so that I can fund his next campaign and he says to me, “Maybe you’re too small for me.” And we’re like, “No, no, no. We can figure this out.” And he goes, “Well, I tell you what, I’m going to go on vacation.” It was right around Christmas. “I’m going on Christmas break and I’m just going to assume you’re going to figure this out.” So, I had to run around and try and raise money from friends and family and other people, businesses . . .
Andrew: Because he didn’t want to pay net 30. He needed whatever time they usually take to pay . . .
Patrick: Oh, man. Agencies pay, if you’re lucky, net 90. Usually, it’s 120.
Andrew: Wow. Wow.
Patrick: So, you’re hanging out there . . . Yeah. The float is, you’re hanging out there for a while.
Andrew: Wow. And you got a hope is when you’re getting started that you actually earn this, that you get to keep it, that there’s no funny business or any of that. I guess you can kind of count on it at that point considering who they were, right?
Patrick: Yeah. Oh, yeah. Yeah. I mean, you kind of have to do that. I mean, they are very good at paying their bills. I don’t think we’ve had one bad debt collection in the five years. They’re very good at that, but they just pay slow. And part of it is the brand pays them slow and then they wait till they settle up their business and then they pay you and so you’re kind of stuck in this wheel.
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Patrick: Yeah.
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I will even say this. If you do end up working with their people, and I love their people, they’re the best of the best developers I say, you’re going to get 80 hours of Toptal developer credit after you pay for your first 80 hours and you’re going to be off to the races with them. One more thing, they’ve got, not a money back guarantee, but we won’t charge you, we will not bill you if you’re not happy guaranteed. Go check it out at toptal.com/mixergy where that offer is exclusive to us. Top as in top of your head, tal as in talent, toptal.com/mixergy to get that special offer. Patrick, who’s the person who you hired to code this stuff up in the beginning?
Patrick: Yeah. I met a guy through just business who was working with startups at Microsoft and all the things that I was doing there and he owned a dev shop in Poland. And we hired one guy, and then we hired another guy, and then another. And then pretty soon after about, I think it was about three months, we essentially had to buy them out of there and open a location in Poland. So, we have Chicago, and Poland and Manila for our offshore teams and then we just sort of expanded sales into those markets too.
Andrew: Meaning, hire . . . Like, you were hiring through him and you said, “We don’t need to work with you anymore. Can we just hire this person directly?” You pay him to . . .
Patrick: Yeah, he was very friendly. We paid to get out of the contract to hire them full time and then grow that entity over there in Poland. So [inaudible 00:22:07]
Andrew: What’s it like to work with those kind of hours? Like, they are way ahead of where you were in California. What was it? Nine hours ahead, 10?
Patrick: It’s exhausting. It really is. I mean, talk about burning the candle at both ends. I think a smarter move would be to go raise money, get a technical co-founder, get some minimum viable product up in the market, and handle that. In the U.S., you can see the whites of their eyes, but I’m really fortunate we had a co-founder and I remember sitting around the table and was like, “One of us has to go out there.” And I have a kid and a wife, so . . .
Andrew: And so your co-founder flew to Poland, lived there.
Patrick: Flew to Poland, lived there. Yeah.
Andrew: Wow.
Patrick: Lived there. And so we got . . .
Andrew: Just so there’s somebody there to communicate what the product is, about what you need.
Patrick: Yeah. I remember there was one instance where . . . And we were really meticulous about getting up the JIRA and having all of the plans that we wanted built out for the dev teams like we wanted to code it like this and to look like that and do this, and I remember they missed one thing where we were going to be able to connect with someone’s social media account and in the solution they had it so that the software that connected to the account would actually be able to write to a brand social account. And that’s a huge miss. Like, I can’t be writing on Coca Cola’s Twitter account.
Andrew: Right.
Patrick: Right? So, we were like . . . They did everything exactly the way we asked them to but nobody would do it like the way that they did it with the permissions that they asked for. So, we felt like we had to go out there, and we did and grew the team with that manager out there and co-founder.
Andrew: Meanwhile, while he was there, you were in the U.S. just . . .
Patrick: I was in the U.S.
Andrew: . . . talking to people explaining what the software could do. How did you get the leads? How did you know who to go and talk to?
Patrick: Oh, man. I mean, getting leads now it’s become such a sophisticated thing for us. I mean, back then it was, we looked on the internet at all the contacts that you could find that WPP or Publicis or some large holding company and we just start going down LinkedIn and trying to connect with them and scraping emails and things like that.
Andrew: That was you. You personally would just contact them or you’d have, what is it called? An SDR?
Patrick: Yeah, an SDR. Myself and Harry [SP] and he worked together really closely in the beginning to do that and then after we got paid from our first client we got a sales rep in Chicago and then we got one in New York and then we finally replace me in LA.
Andrew: I’m looking at early version of your website. There’s Strike score, engage and promote. The Promote, I think is the part that we’ve been talking about. The engage part is what I’m curious about. It was like you were saying there are 500 years of YouTube videos watched on Facebook every day and 700 plus YouTube videos tweeted out every minute, find out where your videos were shared across YouTube, Facebook and Twitter. This is the analytics part that you were telling me about.
Patrick: That’s the analytics part and that’s where we started. That gave us the credibility to go and show, “Hey, look, we understand media, we understand social, we understand the impact of getting views to social.” And that market really changed. I mean, it went from building a massive network to pay to play, and that’s where we are right now. You really got to kind of promote what you’re doing to get out there at scale.
Andrew: Were companies willing to pay to understand how their stuff was being shared?
Patrick: Yeah. I mean, there were more paying as they would pay for television or any other type of advertising. I mean, these are platforms that were growing really quickly, they had large user bases and you could target really specifically on them. So, brands were using them to . . . I mean, now, Facebook for acquisition is just incredible. I mean, it used to be just search, right?
Andrew: But you’re saying that they would pay you to see how well their videos were performing. I think, what was it? Oh, I got a tab here somewhere on my screen with your headline. The headline was “Measure Your YouTube Performance and Expand Your Audience.” It was you were offering the measurement so that they could figure out what to do to expand their audience and they were willing to pay for that.
Patrick: Yeah, we would actually in that platform we built some really great tools. We could show you what your competitors were spending on the platforms, we could show you how your video content stacked up against another competitor’s content. We call that the contagious index. And so if you had a score of . . . It went from 1 to 100,000. And if you had a score of one, you had an incredibly viral video, like that Dove beauty video that went viral that one year. Some of those Ken Block videos had 35 and they were just fantastic.
Andrew: And still, I read in builtinchicago.org, you at one point had $900 in the bank and your personal checking account had less than $40.
Patrick: That was that Dorima [SP] stuff. I was just . . . I mean, I knew they were going to pay. It was just a matter of when.
Andrew: But you put all in, all your money into this business. This was it. No more Microsoft consulting, nothing.
Patrick: Nothing. All of it. Yeah.
Andrew: Because? What was it? Because you got one client and you knew if one client is getting the results, we could do it for more?
Patrick: Yeah. I mean, we knew what our margin was going to be on that business. We knew that as soon as those checks landed, that we were going to be able to expand even more and we were confident in the funnel that we had on the sales side that we could keep repeating the results, and so we knew we had a business.
Andrew: The sales side was this LinkedIn thing you were talking to me about. You said a little bit about TechCrunch. Did TechCrunch send you customers? Did they send you leads? Were people hitting that demo link on your site or just gawkers?
Patrick: Not really. I mean, the site got flooded. Our bill went from like a few hundred dollars to like $5,000 in one day and obviously, we didn’t have that much money in our bank account anymore. So, we were stressed out about that. But not really. It’s really been hand to hand combat on the sales side. And again, I think we talked about this. It’s tough to get noticed but the good news about what we’ve done is we have that repeatable customer base, the people who use us, like us, and could keep using us. So, that’s been a huge benefit. We just don’t lose clients.
Andrew: What’s this thing that I saw with . . . There was a quote. The first version of the product was like a 1980s horror movie. Why did you say that? I think I saw it a couple of times online.
Patrick: I mean, the colors were so bad. We used black and red. [inaudible 00:29:18] the platform was there. It was just . . . Now it’s a lot of white space and black for the numbers and we have a beautiful yellow and so it looks yellow and green. It looks great. It’s very clean. But back then it was like, oh my God. We look back and just laugh.
Andrew: Yeah. The design doesn’t come through on Internet Archive but the content does. And at some point, very early on, I saw a bunch of logos on your site. Like, I’m talking about within a year. And that’s because if you work with an agency and they like you, they’re using you on their brands, you then get the brand, got it, credibility that goes on your site.
Patrick: Yep. We get the brand credibility. The brands, in some instances, don’t even know that we’re working with them or powering their media. But you get an agency that likes you and you can start running with a bunch of teams and a bunch of brands real quickly. So, we were really fortunate to have Fortune 500, Fortune 100, Fortune 1000 brands that use us over and over again. And now we’re really into that D2C market, a direct to consumer market with our performance.
Andrew: I’m noticing. I went on your website and I saw one of those chat bubbles come up and it asked, “What’s your advertising spend?” And I think ours is like 20,000 a month or something like that. And it turn that we qualify. I go, “Wait a minute. I thought Strike Social is for the high-end enterprise.” No.
Patrick: Yeah, no. I mean, that’s the beauty of software, right? I mean, we can manage and run much smaller campaigns for brands and still get them the performance that a large brand expect. So, this D2C thing that’s happening right now really big customer in that.
Andrew: What’s the D2C?
Patrick: Direct to Consumer.
Andrew: Direct to Consumer. Got it. Okay.
Patrick: So, you got the Ubers of the world, you got the Airbnbs, you got Netflix, but you got like Dollar Shave and Trunk Club and those guys and they’re really sort of putting the pressure on consumer packaged good offerings and all kinds of things. So, that’s been a big growth area for us.
Andrew: So, I hunted down the early YouTube article about you. It was written by . . . Excuse me, the early TechCrunch article. It was written by Anthony Ha.
Patrick: Yeah.
Andrew: And I could see there that the reason people were . . . The analytics part of your business was free.
Patrick: Yes.
Andrew: That’s how you were getting leads. It’s not that there was this big need for analytics and people will pay anything for it. And that’s how you got your first customers. No. It’s, you know how to analyze it really well, they would come in to get analysis, you’d say, “Look, you know how well this is doing. Can we do better for you?” because that was the sales funnel for people who were coming in cold like that from that article.
Patrick: That’s right.
Andrew: Got it. Got it. Okay. And then you were starting to sell. How did you get in the beginning? How did you get the results that you got? I feel like we’re far enough into the future and at this point that we can talk about what happened then that worked. What was working?
Patrick: Yeah. We had a very detail-oriented other founder who got in there and it’s just one of those . . . How do you . . . He’s just one of those guys is in a different realm. We built some of our . . . This is going to sound bad. But we built some of our [inaudible 00:32:42] models. These are algorithms that measured things like, how much-paid media went into this promotion. And we took that over to USC’s professor of Data Science and we were so good at it that my co-founder was sort of heckling the professor about how he came up with his model. He couldn’t beat the model that our guy did and our guy is not a trained math guy. So, it was just one of those things where I think we were just really fortunate.
Andrew: But what were you doing? I guess I don’t understand, what was it that got more views at a lower price?
Patrick: Yeah. I mean, in the platform, in AdWords, you can do very extensive multivariate testing.
Andrew: Okay.
Patrick: So, you can go into that platform and you can say, “I want males and females, 18 to 54 that have an interest in this topic and have an affinity for this and I want to find them in the United States.” And what we would do is we would take that campaign and we would breakout every single age group, every single device, all the topic, all the interests, all the affinity, everything into separate line items so that we could measure each one of those. So, it was really the difference between taking the time and using onshore and offshore teams to have that multivariate test strategy built out, and it was just something that nobody else was doing.
And so now we have taken that and built that into software so that if anybody wanted . . . So, the reason I’m so open about telling you what we did is getting to that, first of all, you need an onshore and offshore team and software to help everybody know where they are and in the optimization, but now we’ve got a platform that does, you know, it’ll do up to 6,000 lines of multivariate tests.
Andrew: And in the beginning, it was you manually or your team manually going in and saying, “Add work,” but with whom?
Patrick: And we’d see it in the results. We could see in the results it’s resonating with 18 to 25-year-olds on mobile at this view rate and it’s not resonating with 18 to 25-year-olds on tablet, so let’s turn off tablet and you go “Topic, keyword, interest rate,” all these . . .
Andrew: But every day you would sit and do this in what? In like Excel?
Patrick: Oh my God, every day. Every day in excel and then till we built a platform to help us get out of Excel to help us factor the math because each one of those lines has a budget, and so you turn one off and you may be taking $100 worth of budget and moving it over to a campaign that’s got $2,000 worth of budget.
Andrew: Wow-wee.
Patrick: And so, you’re doing a lot of factoring and we couldn’t make mistakes. You can’t take a brand’s $100 thousand campaign and screw it up. And so the attention to detail and the level of detail that we had to have was just impeccable. Incredible.
Andrew: Who is this? This is Timothy your co-founder who did this or Mark?
Patrick: This is Mark, yeah.
Andrew: Mark.
Patrick: Tim is in Poland. So, Tim is in Poland.
Andrew: Got it. Mark Shore, president of Strike Social and co-founder. Timothy is interesting because in his LinkedIn profile . . . Again, every time you tell me something, I go and I look it up. He has vDrive. You also have vDrive in your LinkedIn profile. What’s vDrive?
Patrick: vDrive was my consulting company for Microsoft.
Andrew: So Microsoft wouldn’t hire you directly. They hired your consulting company and he and you were in it together.
Patrick: That’s right. Well, I was in it and I was contracting with Tim to do some work for me vDrive as well.
Andrew: Okay. What did you do for Microsoft?
Patrick: So, I was in Windows Media. So, there was about 50 of us at the time and we were enabling what you and I are doing right now. We were trying to get audio and video to work on the internet back in ’97. That was a . . .
Andrew: For what product?
Patrick: Open field Windows Media Player.
Andrew: Right, right. It was their competitor to Real Player. It was one bundled with every Windows machine. It would do like . . . You could play the MP3 from your desktop, but you could also stream audio, right?
Patrick: Yeah, that’s right. Yep. Yep. My funny story. So, we were doing a live stream of them blowing up the Kingdome and I had done the deal with the streaming provider, and I’m watching the live stream of the Kingdome getting blown up on my computer which is about a two by three inch view on my media player, and it’s blowing up right behind me, and I look back and it’s just dust. I mean, that’s how nascent video and audio was on the internet at the time. It was just wasn’t . . . It didn’t exist.
Andrew: And then YouTube kind of . . .
Patrick: It just changed it. It just blew it up. And there was no . . . We were out there talking to the labels and the studios and trying to get them on the content and getting their content on the internet, you had what was going on with Napster. It was a struggle to get companies to go do that. Now what you see is everybody is on there. I watched HBO on my Roku last night, so it’s everywhere now. We knew it was going to happen, but . . .
Andrew: But when and how.
Patrick: Yeah.
Andrew: All right.
Patrick: Bleeding edge for sure.
Andrew: I’m going to talk about my second sponsor. It’s a company called HostGator for hosting your website. Let me see, actually. I’m looking at my screen here. LBP. Is he doing . . . No. One of my first guest, the very first one that I did video with, Patrick, is a guy named Seth Godin. You probably know him. He’s the content creator, the marketer. I remember before I ever interviewed him sending them a note saying, “The URL structure on your site just stinks and here’s how you could do it.” And he go, “Oh, this is great.” He wanted to change and they realized, “The software I’m using doesn’t allow me to do that.” He just couldn’t even change the URL structure on his website. WordPress came around and it made that kind of thing so simple that it’s . . . I think now 31% of all websites are powered by WordPress.
Patrick: Yeah.
Andrew: So, if anyone out there is listening to the sound of my voice, Patrick and I know it, you know it, I am excited to tell you. WordPress is an easy way to publish any website. And if you’re looking for a hosting company to publish your WordPress site, go to HostGator. These guys have been around for well over a decade. They just work. I’ve been with them now for over a year. We’ve had people at the rate of 1,000 people show up to a webinar within five minutes that I hosted. The site just holds up. And it’s important that when that many people show up at your site that it holds up. And I’ll tell you something else, Patrick, as someone who had a lot of people come to your website and you know it can be expensive. It costs me nothing. That’s like what? $150 for that monthly account?
Patrick: Yeah.
Andrew: Not even that. It might have even been $70 and I went all up. I actually signed a three-year contract with them. Unbelievable hosting. Super cheap. I don’t even know how these guys make any money. But I’ll tell you this. They’re making money, publicly traded company, doing really well. I know how actually, Patrick. What they do is they upsell you. So, you sign up for this hosting package, it’s super inexpensive, it just works and they say, “Hey, are you ready for an email marketing software? We just bought a company. Sign up for that. Boom. You need this, we got that.” And that’s how they do it.
So, if you’re out there and you’re looking to host your website inexpensively, go to hostgator.com/mixergy, they’ll make the price even lower for you if used that views that URL and they’ll scale with you. And you can see they survived a beating. And my site takes a beating. All right. I do. I’m into webinars. I love talking as many people as possible. I’m the guy at the party who wants to keep going until the party’s over and then I’ll do an after party. I can’t stop. Are you a social person?
Patrick: You know, I can’t do what you do. I have a lot of respect for guys who can. I can’t put . . . My wife is way more social than I am. I just like, I’m really like talking about business and I like performing in business, but I don’t like talking about how I did it or what I did or . . .
Andrew: You seem comfortable now. You don’t look like you’re hesitant. There’s some people who are so uncomfortable with it that it’s a horror show for me to talk to them because they can’t open up about anything. You seem comfortable with yourself.
Patrick: Oh, that’s nice. Thanks. I appreciate that. Well, I’m a sales guy.
Andrew: You know what? That is actually something I’ve noticed. The sales guys are so much easier for me to talk to. I could . . . And then I feel like I’m great because like, “Look at me. I got to talk to them. They opened up. They’re so easy.” I should realize, no sales guys. Don’t you think that every kid should do some kind of sales in school? I feel like my four-year-old should be in a sales class for three months or something.
Patrick: And I sold everything.
Andrew: What did you sell?
Patrick: I sold books door to door. I sold MCI long distance door to door.
Andrew: MCI . . . Really? They did long distance door to door because they . . .
Patrick: Door to door, business to business. I’d walk in right past the no solicitor sign. I don’t think you can do it anymore. And I’d have to say size somebody up, get prepared for a bunch of objections and sell it.
Andrew: Why did you do it? I did it. I sold sandwiches door to door. I don’t remember. I did a bunch of sales because I felt like the best entrepreneurs, the people have full control over their lives, never mind entrepreneurs, were the ones who could sell because if you got nothing else going on in the world, the economy is bad, the salesman’s going to do well.
Patrick: Totally.
Andrew: You too.
Patrick: I mean, that was a huge part of our success. I mean, the reason why we were able to give the analytic software away is because we were selling service and the service was performing. So, most companies don’t have that luxury. We were really, really fortunate in that. But yeah, I mean, I was in the top 1% at MCI year over year and I just really liked going in and learning from the founder of the company when I got a chance to talk to him if it wasn’t too big of a company about their business. And I just asked a lot of questions and took a real interest in them and then I would sort of tailor the pitch like, “Oh, you fish internationally, you’re probably talking to Japan. I know how much that costs. And here’s what you could do it.” You know what I mean? It was kind of like that. So, you kind of tailor it that way. It was a great experience. I mean, I can’t imagine doing it now, but it was a great experience. I’m glad I did it.
Andrew: Also like the reward, the instant reward, you know you’ve done well, it’s not going to come years in the future.
Patrick: I’d sign them right there. I had to sign them right there. I had to walk in because I knew if I didn’t, then they were going to be in a long file folder and I was going to try and call back some other time.
Andrew: Sometimes I do wish I could go back to those times. It just feels so exciting to get every little sale. Were you married at the time?
Patrick: No, no, no. This is early . . . I mean, this is right out of college. I didn’t get started till late. My kid is only eight years old.
Andrew: Yeah, I didn’t get started till late either. I also wasn’t . . . I didn’t get started relationships till later. But it would have been so exciting to come home to my wife or like a serious girlfriend and say, “Look, I made four sales today. Usually, it’s two.” and go out and celebrate with a pizza or something.
Patrick: Right.
Andrew: Or buy the nice champagne that costs $10.
Patrick: Nice champagne. Exactly. Oh my gosh. That is . . .
Andrew: You guys, you got it into machine learning at some point. How did you get into that?
Patrick: Yeah. I mean, sort of before. I mean, everybody talks about AI and machine learning. Now, it’s kind of one of those buzzwords. In fact, that’s part of one of the frustrating things. We put something up on our site, they see the success that we’ve had and they’re like, “Oh, well, we do that too.” And they’re like, “Come on. This is very tough stuff.” It took us three years to develop machine learning. Data science is one thing, writing algorithms is one thing. Coaching those algorithms is another thing and then teaching those algorithms how to improve themselves, that’s tough stuff to do. That’s hardcore.
Andrew: So, creating the algorithm means you write the formula that searches to see which category of people who saw the ad responded positively to it.
Patrick: Man, there are so many factors that go into that. There’s, I mean, just basic stuff. Seasonality is another one. Time of day is another one. Creative is something that has to be measured. The type of ad. Who you’re targeting is certainly it, but what’s the buy [inaudible 00:45:36]?
Andrew: So, when you use the algorithm stage, now at the machine learning stage, it’s you saying, “We need our software to look at the weather,” and the software does it. When you’re at the machine learning phase, the machine needs to say, “But is the news depressing or not? Let me go and figure out if the news correlates with it.” Am I right about that? Is that [inaudible 00:45:56]
Patrick: Yeah. Yeah. And it just keeps growing the factors that you’re putting into the machine keep expanding.
Andrew: Okay.
Patrick: Well, how did we get there? It’s back to that gut conversation. When you have two pieces of software that are talking to each other, they speak a different language, like, I just got Google Home and I have Alexa. And even those two machines, I have to talk to those machines differently. So, you have to build that software in a way that optimizes the way that . . . My Alexa just turned on.
Andrew: Everybody’s did right now.
Patrick: Sorry. You have to build that machine . . . The machine has to be built in a way that it talks to the factors that you’re getting out of that data and it’s got to be able to analyze that and push new factors back into that machine that are going to perform, and that’s not easy stuff to do. It’s very difficult.
Andrew: Okay. And that’s not your part of the business. Your part of the business all changes equally rapidly, and it’s selling on your own is one thing, hiring salespeople and then managing them is a whole other set of skills, right?
Patrick: Yeah.
Andrew: How did you learn how to do that and what was different about doing it through other people from doing it on your own?
Patrick: I brought up MCI a lot in this conversation. Back in those days, I would get on the phone with the reps who weren’t doing very well. I wasn’t their manager, but we were a small team in Seattle and I would take them out. I’d show them what I was doing and how I was being successful in a territory. And it’s interesting, some people respond and some people just don’t. There’s just only so much leading a horse to water but I think that having the perspective of being a sales guy and having sales managers and, like, I don’t make people build out funnels every week. You know what I mean? I’d rather just have a conversation with you or I’d like to see it in Salesforce or see it in some of the other tracking tools that we have . . . We use Outreach, by the way, which is a great company.
Andrew: What’s Outreach? I was nodding because I know Outreach. I interviewed a founder of Outreach, but I think we’re talking about a different company.
Patrick: Outreach.io is a Seattle based company that . . .
Andrew: Oh yes, it is.
Patrick: Yeah.
Andrew: I saw you did a video with them or something as I was researching you. That kept coming up because their SEO is great. Okay.
Patrick: They’re good. They’re good. We deployed them earlier this year to sort of scale that communication.
Andrew: So, what you’re saying is that you show them what’s working, you have software to tell you whether they’re doing it or not, and if they’re using your process, it works and then you keep them on. If not, you don’t.
Patrick: And that process is key, but . . .
Andrew: And it’s you creating the process at first, Patrick, and then the team helping to improve it?
Patrick: That’s right. That’s right.
Andrew: And their process was what when it was in its infancy before this complexity is at today.
Patrick: Well, in its infancy, we had no process. I mean, the process was just me writing a deck, taking a rep out for a week, sitting in his territory, going to all these meetings and just having him try to learn from me. Now the process is, it’s all written down, they have what they call in Outreach, they have sequences, and so you create sequences and we have them by brand direct, by vertical, by agency, by . . .
Andrew: Sequences is what they’re supposed to do step by step. So, they finish the phone call, they know the next step is to send the email with . . .
Patrick: That’s right.
Andrew: Right. That’s it. And is . . .
Patrick: That’s right. And you got to write all that. You got to do all that homework and write all that. So, we spent probably . . . We spent probably a good solid eight months on sales process this year because it had been . . . When you’re growing like crazy and you hire a rep and you sort of put them out there, you start to realize like, “Look, we need a process here. We need to be able to see the activity and what they’re doing.”
Andrew: And you needed to also be self-improving kind of like the software is.
Patrick: Yeah, yeah.
Andrew: What’s your process to get it to be self-improving so that the new salespeople teach this process a way to improve?
Patrick: Oh, man.
Andrew: Are you at that? No.
Patrick: I don’t know if we’re there yet to be honest with you. I don’t know if we’re . . . I would say that communication is probably something that we’re lacking on the sales side and that’s probably me. I’m not a guy who needs a lot of coaching and sales, so I try to find people like me so that I don’t have to hand-hold, but that’s not how everybody is. There are lots of people that do need a lot of hand-holding in that process. I’m really, really fortunate we’ve got a great team, we’ve got really great international guys. But I was going to say like working the hours. I’ll shut my computer off at like 6:00 and have dinner, but my computer is in my bed at night. I mean, it is . . .
Andrew: Wow.
Patrick: I am available to these guys internationally I feel like all day and all night.
Andrew: I’m not saying wow because having the computer in a world with phones means that it’s pretty intense work that you would bring that in. I could see that you guys are very international because I was using SimilarWeb to see where you get your traffic, and the number one top referrer is Google User Content . . . It’s a translate tool which is not random.
Patrick: No kidding.
Andrew: Which means that you guys are translating your site into multiple languages and making it accessible. Am I right?
Patrick: Yeah. Yeah. Yeah. Yeah, we’re in Japan. We’re in Korea. We’re all through Asia with a base in Singapore there. And then Australia and all throughout EMEA. So, South Africa, we’re not. And that’s really about it.
Andrew: Wow.
Patrick: And I’m interested to go too because I’ve never been in [inaudible 00:52:17]
Andrew: I’m planning to go there too. I want to run a marathon on every continent. I’ve got to do that.
Patrick: Are you . . . Really?
Andrew: Yes. So, the biggest one is . . . You’re a salesperson. I just decided to do this a couple weeks ago. I would love to do it all in 2019. I haven’t been running for a year because I hurt my foot. I got into this big running injury, but I’m back, so I think I can get back in shape. How do I . . . I’ve got to find a way to convince the one organization that can get me into Antarctica and running in March to make room for me when they’re already sold out. I don’t . . . What would you as a salesperson do to get them to say yes?
Patrick: I don’t know enough about it. I don’t even know . . . Well, who is it?
Andrew: I forget the name of the organization, but I like your question. The thing that you just said reminds me of the way that you sold at MCI is a way that I need to approach it, not how do I convince them, let’s get to know them. I don’t know enough about them. How do they work as an organization? What are they going through? Talk to them a little bit before I make my case because I was just going to call them up and say, “How much is it going to cost to make my way onto your boat?”
Patrick: That is everything. That’s everything. That is the key to our success has been preparation. I don’t buy into fake it till you make it. I feel like you got to make it and it’s got to be really good and the only way to get there is understanding what your customers’ needs are and where the need in the market is. And so . . .
Andrew: So, do the kind of research on your customer, in my case, on these companies that I’m trying to work with . . .
Patrick: Yeah.
Andrew: . . . as I did on you. And then I’m talking to them and understanding who they are and then do the pitch.
Patrick: I think so. I mean, that’s how I would approach it. You may find that it’s really easy. You may find that you get on a cancellation list or something like that. I don’t know enough about it. But I mean, that’s how I’d approach it for sure.
Andrew: Our producer I think asked you, “What was your lowest point?” and you said, “The first two years everything is emotional.” I don’t sense in you that you’re an everything-is-emotional person. You seem like . . .
Patrick: Oh, man.
Andrew: Really?
Patrick: Yeah.
Andrew: What’s an emotional point for you? I feel like there’s logic, there’s reason, there’s experience, there’s calm in everything you’ve said. Where’s the emotional part?
Patrick: Wow. Andrew, I appreciate that. I mean, everything’s emotional.
Andrew: You mean the sales . . .
Patrick: The hire that you really wanted, you lose a deal, you didn’t get your pitch, you didn’t get to say what you wanted to say in your pitch, you didn’t get the deal that you really wanted. I think I said in my interview like, there are times when especially when you’re working in your house where I had to literally coax my feet on the floor and just say, “Pat, if you open your eyes you’re going to be in your office. Just open your eyes.” But then . . .
Andrew: To push yourself to go get started and knowing that, “Hey, I need some space and even waking up is not giving me space from work.”
Patrick: Trust the process and trust the plan and work the plan.
Andrew: Were there periods when you felt like you couldn’t do it? I remember the founder of Infusionsoft, Clate Mask, telling me there were days when his wife would tell him, “We need a job. You don’t see, I can’t feed the kids. Your parents are bringing food in here and I’m buying clothes from the neighbor’s yard sales.” And he said he was able to continue because he had a process but he could have been depressed. Did you have that kind of period too?
Patrick: Oh, absolutely.
Andrew: When? What was bringing it out for you?
Patrick: I had to pay a $4,500 rent bill when I had $900 in my account, so, yeah.
Andrew: And so then what kept you going knowing one more sale . . .
Patrick: I kept looking at Microsoft, your wife is like, “Well, can’t you go back?” Like, I had a job.
Andrew: So, what kept you going then?
Patrick: Yeah. We believed in what we were doing. We believed that we had a solution for the market. And you know what cures everything, Andrew? It’s sales. That is the killer app, if you will. I mean, that is it. And so we started selling, and then it was just . . . we just had to wait to sort of collect the money. But once we got that first, that was a big deal. That was $350,000 worth of media and then it was just off to the races after that. It was really sort of a rocket ship. But you go through and there are deals that you don’t get and that bums you out, but there are also times when you don’t even need coffee. You’re just like, you’re up and you’re just going at it. So, it’s an interesting thing.
Andrew: That’s the emotional part. The up and the down. All right. That’s another takeaway. Sales. That’s like the antidote to maybe not everything, but almost everything in business.
Patrick: It’s something else. Yeah, yeah. If you’re not producing revenue or sales or customers, you’re in big trouble pretty fast.
Andrew: All right. I’ve seen a lot of websites, businesses that sells to business. I know you said direct to consumer, but you’re selling to consumers in a business or in a business way. They’re hard to figure out. It’s just they don’t do a good job of explaining themselves. I feel like even the early version of your website, the part that you said maybe was like a 1980s horror show, maybe it’s because I didn’t see the colors because the CSS wasn’t saved in Internet Archive. I feel like you do a really good job of explaining what the software does. And a little thing that you use from Drift does a great job of just like leading me through. I don’t know what they’re doing at Drift, but it’s really good. You know what I’m talking about, that little thing that comes up when I go to your site?
Patrick: Hey, that’s another one we did this year too. I mean, Drift and Outreach have been two big ones for us on outsource service. And I’m always looking for tools like that to help scale that stuff. Having people come in through hello or having someone look at your website, and I’m glad you think it’s not confusing. We have plenty of people that say, “Your website is confusing. I don’t know what am I getting here?” Because we talked about service and we talked about software and so people can be like, “Well, can I just take the software without the service?” Well, yes, of course, but we find that we can chat with them through that bot and lead them through a funnel process to get them to a real quality lead and through a discovery call. So, it’s been a big deal.
Andrew: Yeah. David Cancel, the founder of Drift, he’s got a winner with that. I’ve seen people try to replace it with competitors because it just looks like automated chat you put on your website and it’s expensive. At like $800 for a startup it’s expensive, but it works and so people could be using it. All right.
Patrick: He’s got a winner for sure.
Andrew: Yeah. I agree with that too.
Patrick: Yeah.
Andrew: It’s a . . . For anyone who wants to go check out your website, they should go check out strikesocial.com, strikesocial.com. I talk very fast, so I force my lips to move slowly when I say things that are [inaudible 00:59:11] Strikesocial.com. I’m a New Yorker at heart. Patrick, thank you so much. And I want to thank my two sponsors. If you’re looking to host a website, go check out hostgator.com/mixergy. And if you’re hiring, really go check out . . . You’ve heard me say this for years because it works. So many of our listeners have signed up and love them. Toptal.com/mixergy to hire. And if you do have one of those speakers from Google, from Amazon, and from Apple, whatever it is, just shout, “Play Mixergy.” I’m telling you, you play Mixergy in the background, you get these great stories. They will not only inspire you but the lessons that you get from Patrick, they’re the ones that will embed themselves in your head and years from now when you never even thought about it.
You’re going to go and make a sales call. You’re going to just think, “I don’t understand what this guy has to say. I’ve got to hear her out before I make my pitch,” in a way that you probably knew and you embody because of the stories that people like Patrick have told you on Mixergy. So, go shout at your speaker, listen to Mixergy more. And Patrick, thanks so much. I’m looking forward to having you on when you hit $1 billion in sales. I feel like you’re just a rocket ship right now.
Patrick: Me too.
Andrew: Yeah, man.
Patrick: Thanks so much. I really appreciate it.
Andrew: And thanks for getting on here. Thank you.
Patrick: Yeah.
Andrew: Bye, everyone.
Patrick: Okay.
