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By Yaro Starak
Neil Patel needs no introduction if you have spent any time researching the world of online traffic and conversion. He’s a superstar of SEO and the founder of two very popular software as a service companies – CrazyEgg and KISSmetrics – that help you do all kinds of testing and tracking on your website.
Neil started his online career very young, before finishing high school, attempting to build a clone of the Monster.com recruitment site. His site never quite succeeded as a jobs site, however Neil became very good at driving traffic to it using search engines.
After graduating from High School Neil started college, where he found himself one day doing a talk on search engines. In the audience was a man who owned a battery business, who hired Neil to help with his online lead generation. Suddenly Neil was a traffic consultant earning $3,500 a month.
Eventually as a result of Neil’s work, almost 50% of the leads to the $50 million dollar battery business were originating online. This lead to Neil taking on more traffic and online lead generation clients, and a few short months later he was making more than $20,000 a month, all while still a teenager!
Eventually Neil grew tired of the consulting business primarily because of all the sales work involved, and he decided to switch to software. This lead to the creation of CrazyEgg, which did well enough to attract a $6 million buyout offer within six months of the launch, yet Neil and his partner declined it (you can find out why if you listen to the interview).
KISSmetrics was born after the struggle Neil and his partner had in finding venture funding for CrazyEgg. Investors wanted something bigger – a bigger vision with real scale potential. KISSmetrics hit the spot and they were able to secure $4 million in funding.
Today Neil spends most of his time on KISSmetrics and also building his profile online, with his blog QuickSprout at the center of his personal branding campaign.
This interview really shows how much you can achieve at a young age, or any age really, if you put enough time into what you are doing. You can tell Neil has a single-mindedness to what he does, and although it took a few years of playing with different business models he didn’t like, he always excelled, and today finds himself in charge of two companies that have him financially set for life.
IMPORTANT: be sure to look out for the 5 minutes or so about one third into the interview where I ask Neil to break down what link building techniques work in SEO today. This is straight from the horses mouth from a guy who is on top of the SEO game and has worked for some huge companies.
YARO: Hello, this is Yaro Starak and welcome to an interview. Today, on the line, I have Neil Patel and I am really looking forward to doing this one in particular because wow, Neil has quite a, well, almost like a history of success, Neil. I don’t know if you have any failures in your background. I’m sure you do. Everyone seems to.
But, thank you for joining me on the call today.
NEIL: Yes, no problem. Thank you for having me.
YARO: So, I’d like to go back in time and see where you came from. Where are you originally from?
NEIL: Sure. I was born in London, England and when I was like around one or two years old, my parents went to Orange County, California, not the version you see on TV but, there’s a much more normal poorer part. It’s called North Orange County, more away from the water and that’s where I grew up.
YARO: Okay, so you don’t have a British accent.
NEIL: I don’t have a British accent sadly, right. I wish I had one though.
YARO: Yes, I am a big fan of that. So, do you have an Aussie accent? Would that be right?
NEIL: Yes, California accent or just… I would say, West Coast accent.
YARO: Okay, so growing up in California, did you have an entrepreneurial experience early on or were you following a normal career path going to college and so forth?
NEIL: I didn’t go into college in doing all those basic things that most people do but, I did start off with the entrepreneurial background. I started because my mom has been an entrepreneur for ages with her own little day care business and from her and other people in my family, I learned quite a bit over the years.
From there, I pretty much decided to start my own business in high school and started off selling CDs and DVDs and cable TV boxes so that people can watch more channels than they technically were paying for. From there, I expanded into many other things.
But, yes. All my first businesses were very tiny. My first real business was an Internet site and that actually failed miserably.
YARO: Okay, let’s put a time stamp on this. You went to school in Orange County. What degree did you start and where did you go?
NEIL: Sure. My degree was in marketing. I went to California State University of Fullerton.
YARO: When was this, like what year?
NEIL: Ah… a while ago.
YARO: Am I dating you?
NEIL: Ten years ago. Let’s say nine years ago.
NEIL: So, you’re looking at roughly like 2003. It’s when I pretty much started college.
YARO: Okay, all right. So, you graduated sort of mid-2000
NEIL: That’s correct.
YARO: And, your mom is your primary inspiration. Now, as I was saying to you before we had start to record the call, I actually know you, well, I have seen your name everywhere but, one of the things that keeps coming at my head is the fact that you have an article on ShoeMoney.com many years ago about a Platinum… what was it, a VISA card or Mastercard? I don’t even know what it was or American Express?
NEIL: It was a Centurion American Express Credit Card. It’s all the same thing though. There is no difference. Credit card is a credit card. It’s just one that’s a bit more exclusive. They claim you got all these perks but without them they were all useless.
YARO: What I thought was impressive though is you have to, like the balance or something, you get $100,000 limit? Is that…? I can’t remember. It was a while ago now when I read this.
NEIL: Yes, there’s really no limit. They’re not really like credit cards. They’re more of like debit cards. So, whatever you spend in the month, you have to pay off.
YARO: Right, okay.
NEIL: The limit is based on your spending history and all that. Supposed rumors you had to spend $240,000 or $250,000 a year to qualify. I ended up finding out from a source inside American Express recently actually, you only had to spend $150,000 to qualify.
It’s not a bad card overall but, it’s not really financially worth it because the first year of fees for like one person is well over 5000 bucks. So, it’s like $6000 or $7000 for the first year for credit cards. It’s not really worth paying that.
YARO: Right so, it’s more like if you want the status to say that I’ve got this very exclusive credit card.
NEIL: That’s correct. I don’t have it anymore and my current American Express spend is like around $130,000 a month.
NEIL: So, it’s like why get a credit card you have to pay money for when there’s other credit cards that actually give you a cash back? Do you understand?
NEIL: …2% cash back every month.
YARO: Right. Now, I remember when Schumann, Jeremy wrote that article, I really haven’t set the scene here for those who don’t know you. I kind of assume that everyone has heard your name before but, maybe I should set the scene a little bit.
I think the other place that I first came across you would have been possible Crazy Egg and maybe your blog, Quick Sprout as well. You seem to have a name as a traffic generator like that’s possibly the strongest personal brand or certainly everything what you do seem to be around the traffic and conversion sort of space. Is that correct?
NEIL: That is. If you look at all my businesses, all the ones that are at least somewhat successful, they’ve all revolved around the traffic space. My first one was the Internet Marketing agency. That one did well or my first successful one, that was traffic related. My second one was Crazy Egg. My third one is, which is a current one, KISSmetrics.
YARO: Okay. Well, let’s just jump back in the timeline and there’s a few businesses to get to. So, we’re graduating in mid-2000 and you said around that time, you had your first Internet failure. Is that correct?
NEIL: I’ve had my first Internet failure in high school around 16 years old.
YARO: Okay, tell us about it.
NEIL: My first one was called Advisement Key. You’re based in Australia, correct?
YARO: That’s right.
NEIL: I don’t know if you guys have Monster.com there or Monster.com.au.
YARO: We did. It didn’t really take off. We did have it. They attempted to come into our market.
NEIL: There you go. So, it’s huge in the US. I was like around 16 years old or 15. I forgot the exact age. I wanted to get a really high-paying job. So, I went on Monster, tried to find one. I couldn’t because they all required a college degree and I was too young.
But, the one thing I did notice was on the bottom of the site, there was a stock symbol. I clicked it and I noticed they’re worth billions of dollars. So, I was like, “Crap! If I end up creating a website just like this and if it does all the same stuff, if I can make one percent of what they make, I’ll be a rich kid.”
So, I went out there, found someone to create it and it failed miserably. There’s a few main reasons it failed. The first one was when you pop up a website, you got to figure out how to get traffic to it. I assume that when you pop up a website, everyone already comes to your website. Like it just automatically gets popular which never really happens.
Two, to make money online, you have to be able to accept credit cards. I had no way of accepting credit cards on my website and at this time, there wasn’t too many popular payment processors. Paypal is wildly known now, authorize.net. There were payment processors online. It was just as a 15- or 16-year old or however old I was at that time, I didn’t know how to do those things.
YARO: What was your plan? You just wanted to copy Monster.com?
NEIL: I did and the biggest mistake I made there was I didn’t try to solve the unique problem, right? I just tried to create another me too company which wasn’t solving a payment or marketplace which probably was the main reason why the company failed.
YARO: Okay, so how long was that experiment? I’m assuming you did it all yourself?
NEIL: I paid someone, I don’t know, my guess is I spent less than 20,000 bucks on the whole business, I paid someone 5 to 10 grand to build, I would say like around five and that money was made something like CDs and stuff in high school and car parts.
YARO: Okay, it’s all funded.
NEIL: The rest was spent by marketing. I didn’t have much more money than that. I still worked a 9-5 job at a theme park where I was picking up trash and cleaning restrooms. I used that money to pay marketing firms to build more traffic to the site.
None of them really did a good job. After a while, I actually got fed up paying these people because I was getting no results. And, I had to learn Internet Marketing myself because I didn’t have any more money.
YARO: Okay, so this business was the trigger to almost start your entire career in the traffic generation path.
NEIL: Bingo! I was successful at getting that site’s traffic. We ranged for like job search, tech jobs, all these specific keywords on Google. Don’t get me wrong. I still don’t make money from the business but, I got the traffic part down. And since then, I’ve been pretty decent at generating traffic. I’ve always sucked at monetization but, I have been pretty good at generating traffic.
YARO: Okay, so this is a great point in your life for you to explain especially in your early days how you got good at generating traffic. What did you learn in particular for this job Monster cloned website that you could take for? Was it all SEO-related?
NEIL: It was 100% SEO-related, right? There were really no Twitter at that time, Facebook wasn’t around. What I ended up learning was, if you wanted to get good rankings on the search engines, because search engines were still popular back then. You had to get a lot of sites linking to you and I got really good at figuring out how to get other websites to link to me.
So, the head up web masters, manually emailing them or I’ll start cold calling websites with high-paid rank and convince them and do deals. I’m like, “I’ll link to you if you link back.” I’m not saying these tactics work now. But, back then, they work really great.
YARO: Okay, so how did these all leave you in the sense that you’ve stopped doing the Monster clone and move on to something else?
NEIL: Well, I got fed up with that business after a while because you’re getting all these traffic and you’re just like, “Crap, I’m not making any money.” And, even if I figured out a way to accept credit cards online, I probably still wouldn’t have made money because I didn’t really have too many job listings and I didn’t have people paying me to post a job.
You need to have job searchers and the job searchers aren’t going to keep on coming back to your site if you don’t have job listings. If you don’t have enough job listings and job searchers, you’re not going to get people who are willing to pay to post their listing.
YARO: Monster should have hired you to drive traffic to their site.
NEIL: There you go! I would have it done pretty well for them. But, yes. I got fed up for a while and I decided, “You know what? Screw up. I’m just going to go to college like every other normal kid and get a degree.”
So, what I started doing was when I was in high school, I started taking night time college class at the community college so, I can finish college in 2-3 years instead of 4 years like most kids.
My first class was on Speech. I gave a speech about, “How search engines work,” was one of my first speeches. One of the guys in that room was a sales rep at a power supply manufacturing business.
That guy, he said, “Hey, we’re looking for someone to build up our traffic.” I work for this company called, ‘Opec (?) Electronics’ and we provide like power supplies to heart resuscitators and Boeing airplanes and random things like that. It was like an unheard of company but, they print cash and they’re huge because they provide power supplies to most electrical things that we see in this world.
The guy introduced me to someone in marketing over there and they hired me. My first gig there was like $3000 or $3500 a month, I forgot what the exact amount was but, I thought it was homerun. I was like, “Wow, I’m getting paid all these much just for like 10 hours a month?” I was ecstatic especially for a young kid who was 16 or 17 at this time.
Little did I know, I was making them a lot more money than they were paying me.
YARO: This is before just when you started college, right? This is early days of 2000s. You’re 16, 17. You get your first consulting client pretty much because you do a presentation for a class.
NEIL: That’s correct.
YARO: And then, you figure out that they’re making a lot more money than they are paying you, is that…?
NEIL: Yes, just the Internet leads and I was the only one doing Internet work whereas bringing 51% of the leads that resulted in revenue and they’re doing over 15 million bucks in revenue a year.
YARO: Wow, so you were basically responsible for like 25 million.
NEIL: Something like that. I don’t know the exact…
YARO: Not completely responsible but, at least partially responsible.
NEIL: That’s correct, right because someone’s also produced the products, sell it to them. Just because the lead comes in doesn’t mean they’re going to pay unless the sales guy goes and close them.
YARO: Close the lead. Okay, so did this open up a new idea? Were you thinking maybe I should be charging more or something else?
NEIL: Not even because what ended up happening is the guy who owned that company, his son owned the ad agency in Los Angeles so, he introduced me to his son and his son, within a few months, gave me more business.
I was like doing twenty grand a month in business while I was in high school because from the owner, the owner’s kid, and so forth and so on, they all started adding up and his friends, they were all started paying me.
YARO: Okay, Neil. I’m curious here, there’s a lot of people go out there, trying to start a consultant firm, even in the time frame you did it and they’re much older than you were at that time.
Why were you good at getting traffic for all these different types of businesses? What’s the secret sauce there?
NEIL: My secret sauce was I was just busting my butt, much more than most other guys out there. They are charging premium amounts and they are giving you fancy presentations and giving you all these fancy reports instead of focusing that time-energy on the results.
This is my first gig. I didn’t know how to make these fancy presentations, do sales pitches or any of that. All I knew how to do was do technical work and I focus 100% of my time on providing results.
So, I was more scrappier on getting links. I was better at doing on-page changes and stuff like that. I was much more up-to-date with the technology and learning what changes are happening algorithmically to the search engines versus spending my time getting business. Now, granted customers don’t pay you forever. Sooner or later you get churned and if you don’t focus on sales in growing your business, you’re not going to keep on growing the revenue but, I didn’t know any of that.
All I was focusing on is just doing the work which is why the clients I had at that time were really happy.
YARO: So, would it be safe to say much of your work was keyword research, on-page optimizations and generating links to these sites?
NEIL: That’s correct and I would say, link-building was 80%+ of it.
NEIL: I was just more scrappier and better at getting links than most people out there.
YARO: Okay. I’d love to maybe just take five minutes now because everyone will want to know this. I don’t want to make this an SEO lesson interview. I’d much rather hear your entire story. But, just in 5 minutes and make it current perhaps is the best way to talk about this, since link building is always the number one thing that people have to get done for SEO, could you just give us like, what do you do nowadays for your link building either advice or you’re actually doing for your clients? What works?
NEIL: Sure, so a few things still work. Manual outreach has always worked. If you go and find out who links to your competitors because you can do backward link checks on them, you can actually go to every single one of those sites and manually hit them up. You can even do some fun stuff to automate it in which once you get a link list of all the people who link to your competition, you can put up all those URLs on something like… what’s that service? It’s by Amazon like that crowd-sourcing. I totally forgot the name of it.
It’s really popular. But, there’s like programs like not Elance… You pay a penny per record… I forgot what it was but, nonetheless there are sites out there in which you can say, “Hey, for every email address you give me,” or you can give them any task and you tell them how much you’re going to pay for it.
So, I would go on this Amazon service and I should know the name.
YARO: We should look it up.
NEIL: That’s right. And, I would pay them like a penny so, I would give them a list of like 10,000 websites. When I would give them a list of the 10,000 websites, I would say I would give you a penny for every email you give me.
What I would do was once I got those record lists and actually got it out — it’s the Mechanical Turk. So, once I got those record lists from Mechanical Turk you already have two options.
One of these is to create a template and start automatically emailing all those 10,000 or 100,000 people and try to see if they link back with a generic template.
What I typically do is go the other route dealing with a customer and have my guys here who I’d pay minimum wage or whatever it may be, start manually emailing out these people one by one and try to convince them to link back. That’s one strategy.
Another strategy I use these days is Social Media. A great way to use Social Media is you can use programs, like Tweet Adder to build up your Twitter account. You can build up your Facebook account manually. There’s a lot of articles. I’ll talk about that. Easy way is start adding some friends or all the people that you want to follow or are influential and start participating in the community and so forth and so on.
But, building up yourself for profiles and then, when you write content and you tweet about it, share it on Facebook and so forth and so on, you’re going to get more traffic. The more traffic you get, the more links you’re going to get, right? Because one of those people are more likely to now go, “Hey, I shall link to this because this is a great article.”
Another thing I do is Viral Bait and what I mean by this is like infographics, good video content, whatever you want to do, things that are so attractive that people just want to link to.
We used to crank out infographics every week on the KISSmetrics blog and that’s one of our big secrets of building up that blog audience. Crank them out, push them out to the social hub and link. You’ll get links back because of the embed codes.
Another thing that we ended up doing that worked out really well is guest blogging. So, we would go out there, find all the blogs that would write on topics related to ours and we would hit them up and offer them a guest blog post. The key with that is, when you hit them up, you already give them specific titles and posts that you know they would like to accept based off of their old content, right? Within that blog, you can get a link back through the bio or you can add links to your own site.
So, those are some of the ways we’ve link built it over time. You can also get into buying links and stuff like that if you want to spending money and there’s a lot of places like Sponsored Reviews or Blogsvertise. There are areas where you can find guest blog posts really easy. My blogguest.com…
There are a ton of services out there and there are a ton of ways to get links. The real key to building links is actually just creating a good product or service or writing good content which is what most people neglect these days. They try to just throw the route of, “Hey, let’s just pay someone to build links versus spending that time and effort and energy into building something good,” because if you build something good, you can pay a PR firm and I pay this company called PR Serve, for every press release they get.
So, if they get me on TechCrunch, it costs me $750. That’s the PR firms cost. If they get me on Hufftington Post, $750. If you have a great product or service, these guys are more willing to write on you. If you don’t, you’re not going to get written up.
YARO: They pay on performance too.
NEIL: That’s correct. You’re not paying for the link or you’re getting a link in essence because no one really does a press or blogs about you. That’s a big magazine or online journal without really linking to your site.
YARO: Okay, well that’s a nice little segue, some current SEO or link-building advice, I think, that sounds like the tried and true methods that have been working for a while now. You’re obviously still doing all those things. So, that’s what you do for a lot of your clients, I presume?
NEIL: That’s correct. I don’t really have too many clients these days. I hate doing consulting, I’ll be upfront with that but, yes. It still works and I still have a few clients because there’s always these big corporations I can just pay you and if you don’t want to work for them, right.
YARO: Yes, awesome.
So, let’s go back to the story then. You knew your link building techniques back then and you practiced them like crazy better than most people did so, you were able to generate a lot of search traffic for, first of all, the battery company and then, the battery company’s sons advertising agency, did you say? Is that what it was?
NEIL: Yes, his clients because I key-worked with Blue Cross and Country Wide which is now under by Bank of America here in the US. He worked with a lot of large corporations. We pretty much did, was take everything that we were doing for the electronic company and do it for the owner’s son’s client list.
YARO: Okay, so by now, you’re making some probably couple of six-figure incomes there, way more than most people would be at, how old were you? Like 19, something like that?
NEIL: 16, 17, or 18 at the latest.
YARO: Right. So, what do you do with all that money at 18?
NEIL: I re-invested it back into the business. So, technically, I wasn’t making a dollar in my own pocket.
YARO: Okay, what were you re-investing it for like staff or…?
NEIL: People in the business, yes. Staff… I figured out how to do sales. I figured out who’s spending money on Google Pay-per-Click and do rough estimates on how much it costs and I’ll just go through specific keyword list, Google and call every single one in the top 100 that was paying for ads, put a keyword and I just go page by page until I saw a new ad and keep on clicking to it, called and find out in the marketing department and sell them on SEO services.
I kept on re-investing in the business, expanded the client list, started speaking at conferences, investing money into a better website, a blog, so forth and so on, to really grow the agency’s brand and did that for a few years and after a while, realize that it wasn’t the fun-nest thing to do but, nonetheless, I did it for long. That’s when I started transitioning into software.
YARO: Okay, I guess the real question is “why?” It sounds like you would have had staff doing most of the jobs that you didn’t like in your consultancy firm. Is that right?
NEIL: That’s correct. What most people don’t know about SEO agencies or Internet Marketing agencies, clients don’t stay forever. It’s a high-churn business and it’s hard to prevent a lot of the churn because in many cases, you only get six months through your contracts and people don’t stay with you for three, four, five years like they do at software companies.
YARO: Okay, so the high-churn is because they don’t need ongoing services once you’ve got the rankings they leave?
NEIL: There are a lot of different reasons. It’s not always that. That could be one and if internally, they don’t need to keep on spending money to maintain those rankings even though eventually they will drop if you don’t.
The other big reason was it’s like budget cuts or companies want to try new things, or companies feel that, “Hey, we can get a higher ROI if we try something else,” or, “Hey, let’s bring this on internally because we can do it for 1/10th of the cost then, it will be easy, right?” Then, in many cases, they’ll learn that it doesn’t always work that way but, nonetheless it’s a high-churn business.
YARO: Okay, software.
NEIL: Someone can stay with you for a year or two years but, most clients won’t stay with you for that long. You typically have six months to one year contracts and it just doesn’t pan out the lifetime value of the customer like it would in a software business which has much better margins and the customer stayed for three or four years.
YARO: Okay, you obviously wanted a new challenge as well is probably safe to say, right?
NEIL: Yes, I was getting bored with it. I was frustrated because I continued to have to do sales and I hated sales instead of doing the actual work because I had no time to do the work. So, I actually started, me and my co-founder of that marketing industry started creating a software company and the software company wasn’t created because we wanted to get into software. It was more so we kept on seeing a problem.
For every client that we were managing and working with, we were driving them the traffic but, they were like, “Hey, we’re getting all these traffic but, how does this traffic relate in to more sales?”
Sure, you can track your conversion rates but, they didn’t get how those visitors actually engaged on their website and was causing them to leave, buy and all those types of things.
So, what we pretty much did was we created Crazy Egg. Crazy Egg at that point was a solution that helps you visually understand how people engaged and interact with your website.
YARO: Okay, so Crazy Egg is like a hidden map service. I think some of our listeners will have heard of it. Before maybe you talk about how Crazy Egg went or at least I’d like to jump in to the start of this because I’m actually doing a software startup now and I know how challenging it is to get bug-free software or functional software out there and keep building on features at the same time is manage and hiring the developers to do it and keep a cash flow or getting startup capital, whatever it is to keep everything running. Can you tell us how did Crazy Egg go in that startup phase?
NEIL: Yes, so me and my co-partner were self-funding it because it was really tough on getting it out there and making that money. Took us a while to launch it, six plus months. When we launched it, we had an email list of over 20,000 people because I realized that, hey most of the people who are interested in this part when I showed it to them were designers.
I was like, let me go to all these CSS gallery websites, which back then were already popular, and I bought an add on, every single one of it, create a squeeze page and just collected 20,000 emails.
YARO: Now, who are you having to develop it though? Obviously, you’re not a software developer yourself or was your partner?
NEIL: We actually outsourced it.
NEIL: We went to two or three before we actually found a software developer who completed it and actually worked.
YARO: Okay, was that like overseas for you or locally?
NEIL: Local, in the US.
YARO: Okay, because I’m assuming you had to keep maintaining the software, too so, you would have had to have an ongoing relationship with your developer.
NEIL: That’s correct. So, we did that for a while and when we launched it, we got a ton of press from TechCrunch, Mashable, tons of sites out there, we thought we’d kill it financially.
First month, really did a few thousand bucks in revenue.
YARO: How come?
NEIL: Just, we realized everyone was signing up for the free plan and they weren’t upgrading into paid. We didn’t know how to upsell people really well back then. We do now but, if you look at it, it took us, by the end of the year, we weren’t even at $30,000 a month in re-occurring income.
YARO: Right, so you consider that not successful?
NEIL: It was not successful. We had a valid offering for around six million bucks back then to, it went for 100 grand of our own money or 200.
YARO: And, you decided to say, ‘No’?
NEIL: Yes. Obviously, it was a ‘no.’ In total we probably put a half a million bucks into the company because over the months, out of all those years for running, it wasn’t breaking even so, someone had to keep feeding more money into it.
YARO: Now, you must have a lot of free users then like…
NEIL: Ton of them, over six figures worth of free users.
YARO: Right, so the potential was there that’s why you probably didn’t want to sell. You saw that if you just figured out how to get these guys to spend some money, you’d be fine.
NEIL: No, we should have sold. I was a stupid naïve. A big corporation who’s worth 100+ billion dollars offers me six, they can afford ten million because it was just me and my co-founder, so I’m like, “At least I want five million so that, we’ll get five million each.” That was my life. It was very silly and stupid. I was naïve.
YARO: Okay, so you said, “No” anyway to this golden opportunity and then, what did you go?
NEIL: What did I do? I ended up, throughout the years, we went crazier from five to six years now. We just kept on growing it. And, the turning point for that business was when we removed the free plan, and we just made it paid.
Because we were getting thousands and thousands of free signups every month so, when we removed it, we started getting a high percentage of people who were paying every month and then, fast forward a year, we were breaking in.
But, the moment we went from free to paid and there’s no more free plan, we doubled the income within 30 days.
YARO: Yes, right. Now, I’m assuming the cost of the bandwidth, so many free users would have been high as well.
NEIL: Our server cost weren’t too bad. I think right now, it’s like 20 to 30 grand a month, I could be wrong.
YARO: Right but, you don’t have the free users now. I mean back when you had all those…
NEIL: We still have the free users because we didn’t cut them off.
YARO: Oh, okay.
NEIL: We still have free users and accounts that you can find if you search hard enough and sign up from that box. Nonetheless, and we’re going back to adding a free plan.
YARO: Okay, just so people understand, what do people use Crazy Egg for?
NEIL: They use Crazy Egg to figure out how to make their website more usable?
NEIL: How? You put a Java script on your site. It tracks where people click and where they don’t click and you can figure out what’s causing them to get confused, click on the wrong things.
For example, if you have a blog and you have images on your blog, you’ll notice that a lot of times, people click on your images. It’ll show you that they think it’s a link but, it’s actually not a link.
So, one thing you could end up doing is making it a link. Or, you may notice that people aren’t clicking in the way or area that you are looking them to click. So, you may want to modify the design, test it with the new Crazy Egg version because you can run a new test and see the differences between the two heat maps to see what are the hot and cold spots so that way, you can get more of the engagements you are looking for versus less of the ones that you’re not looking for.
YARO: Okay, so it’s obviously a valuable service and I can see why it’s taken off so well over the years now. When was that launched?
NEIL: I have no clue.
YARO: I remember getting an email from, I don’t know who it was. I’m not sure if it was you, Neil, just to take a look because obviously, I was writing a blog, or I am writing a blog in that space and someone got in touch about having a play with it and writing about it, but that’s a while ago. It must be four years ago maybe?
NEIL: That can be right, yes. The service is at least five or six years ago. So, you’re looking somewhere around 2006. 2007 is my guess that we launched it.
YARO: Okay. So, what happened next? Obviously, that’s gone on to become a successful business. You’re still an owner of that, right?
NEIL: That’s correct. Still own it, own team runs it. But yes, I would say gross, yes, more than 100% year over year.
YARO: So, do you consider that your biggest success so far?
NEIL: Financially, it doesn’t have the most revenue but, if you look at it from an exit standpoint, if I ever sold it today, my chunk of it is enough where I never have to work again assuming nothing bad happens.
YARO: Okay, well take us forward. Then, you’re having success with Crazy Egg but, you do a lot, Neil. I remember you were writing your Quick Sprout blog, you seem to still do the odd SEO consulting for big companies like the Cheezburger Network, TechCrunch…
NEIL: So, that was the companies I’m advisers for like Cheezburger. I was just doing it for free and getting stock or shares in the company.
NEIL: What ended up happening is when Crazy wasn’t breaking even, we actually went to go to pitching venture capitalist because for me and my co-founder put a half a million bucks of our own money and at this time, we didn’t put a half a million and I was probably between two hundred grand and five hundred. We are getting burned out because we were raising so much of our own cash.
What we ended up doing is pitching venture capitalist and they all said, “No.” The vision we are trying to pitch is to evolve the product into being a much larger company. That company turned into KISSmetrics. KISSmetrics is like Crazy Egg 2.0 and no one would fund us.
We probably pitched over 20 to 30 VCs and they’re like, “Your business is like an auto shop. You go on once, you fine tune it, do a heat map once and then, you ever use it again.” But, that’s actually incorrect, right? The lifetime value of a customer and user ratios that people actually do multiple tests in the paper on a regular basis instead of using it just like an oil change every 3000 or 5000 miles.
So, we pitched the VCs, that didn’t work. We ranked Crazy Egg a bit more and sooner or later, my buddy is like, “Hey, if you’re interested in raising money for this bigger vision, let me know.”
So, we spent out KISSmetrics into his own company, at that time, it had no name because what we found is we had a really hard time pitching the vision when it was you could see Crazy Egg because they’re like, “Oh, where is the hockey stick growth and… ?” They are looking at that data versus looking at this vision that we are trying to pitch.
So, we said, “Hey, let’s get Crazy Egg out and let’s keep Crazy Egg on its own separate company. Let’s create a new company that is what KISSmetrics says.” That was our vision for Crazy Egg 2.0 that we were just like, “Let’s just create a new company.”
We pitched that and we were able to raise venture capital for it.
YARO: Okay, what did you pitch exactly? What was the difference there?
NEIL: The difference was this Crazy Egg helps you make your site more usable. KISSmetrics helps you make more money from your website. So, instead of focusing on the design aspect, KISSmetrics focused on improving your lifetime value of your customer, improving your revenue, improving your conversion rates, similar to Crazy Egg which also helps improve conversion rates but, this also helps you reduce your churn rates.
Think of Google Analytics. Google will tell you your pages and visitors and what’s causing it to go up or down. KISSmetrics focuses on your revenue and it tells you what’s causing you to go up or down.
YARO: Okay, so that was a more interesting pitch to VC firms.
NEIL: It was and we were able to raise… In total we’ve raised four million bucks for it. We were growing that. We have a pretty big team, somewhere between 20 and 30 people but, it has been growing fast, quarter over quarter, we have been meeting our expectations and our numbers or at least meeting them. But, yes, you know, that’s where my focus is today. I’ve been doing that for exactly four years now which means Crazy Egg must be at least six years old.
YARO: There you go.
NEIL: Yes, not exactly four years now. I think like four years and one month.
YARO: What’s your personal role nowadays, Neil, for all of these? What do you do each day?
NEIL: Don’t work really on Crazy Egg anymore. I may spend an hour a week on that max. I pretty much spend all of my time on KISSmetrics and I’m pretty much the VP of marketing there. But, I barely do any marketing stuff there even though that’s my title. I spend all my time dealing with legal, finance, sales, and some marketing, some more of the revenue-related stuff on figuring out how we can make more revenue for the business.
YARO: Okay so, you sort of had two home runs here with Crazy Egg and KISSmetrics and their both software based.
NEIL: Yes, KISS is doing well. It’s not done yet even Crazy Egg. I don’t consider it a homerun until it’s sold.
YARO: Fair enough but, by most people’s standards, you’ve got two successful going concerns here which like you said, Crazy Egg, if it’s sold would be set for life and KISSmetrics is on the same path. That’s every different to, say, your first business which was the more SEO consulting, not software based.
Could you maybe summarize, like there’s a lot of transitions that goes on. You’ve gone from I guess, doing a sales role and an SEO role early on in your career to building a business sort of role, being a founder, raising capital, building a team, all those sorts of things.
What’s the key difference? How can you make that leap and what do you think really went well with Crazy Egg and KISSmetrics and what are the pitfalls?
NEIL: Yes. So, there really is no, how do you make that leap? You just go out there and do it. If you want to create a big business, you got to surround yourself with people and people that are smarter than you because at the end of the day, you can’t do everything yourself. There’s just not enough hours in the day.
So, instead of focusing on the small things yourselves, you got to start focusing on hiring great people.
As a founder of the business, well start early on. If the only thing you do is hire exceptionally great people to do all the task and everything else in the business, you’ve done your job as a founder because if you’re going to hire an awesome CTO and people under him and awesome VP of sales and awesome CFO and so forth and so on, your company is very likely to succeed as soon as you got a decent product.
YARO: How do you do that?
NEIL: You go out there and you spend your time networking and building up your brand because if you build up your brand, it’s easier to hire good talented people versus if you don’t have a brand.
YARO: Right, so these people they know about Neil Patel and they know about Crazy Egg so, they want to work for KISSmetrics because of that.
NEIL: Exactly. That’s why I blog on Quick Sprout. I love giving back to the community but, it also helps me with my brand which helps me recruit better talent.
To recruit better talent at lower costs because people want to work for me versus me paying a market rate which you really can’t afford as a startup because then, if your startup is spending cash, you’re not putting the same amount of cash like Microsoft or Google so, you can never afford to compete with them, salary-wise.
YARO: Interesting. Okay, so good people. Now, you’re obviously located… Are you still in Orange County living now?
NEIL: I moved a few years ago to Seattle Washington. So, it’s the more Northern Side of the United States but, that’s where I have been living for the last three, almost three and a half years now.
YARO: Rainy Seattle. So, what’s the startup scene like there? Is that where you have been basically growing this?
NEIL: It’s in a sense not great. My startups, they’re all based in San Francisco, California so, I end up flying a lot. I picked Seattle for random reasons that aren’t even related to the community but, I do love the community there and they are great people.
YARO: One of the things I noticed about you, Neil is your ability to be, I guess, a thought leader in your space. You do seem to be on top of lots of parts of the Internet, the social space, the SEO space, the startup scene…
You’ve raised your profile on that space but, you also maintain a really strong knowledge and awareness of what’s going on. How do you do that? Is that a networking thing? Or, do you spend all day staying at your computer reading about other companies and playing with tools and software?
NEIL: Great team around me who shares a lot of information. My co-founder shares a lot of information with me. I read a lot and I also work like 70 to 80 hours a week which helps.
YARO: Okay, so it’s just hard work and the people around you.
NEIL: Yes, I don’t really have a life other than. People look at it like, “Oh if you make money life is easier.”
No really, the more money you make, you actually find yourself working more hours. It’s not the other way around.
YARO: Right. And, why do you do it then?
NEIL: I enjoy it. I don’t know what else I would be doing like you give me a hundred million bucks today, nothing would change in my life. I may have a bit nicer clothes and a nicer home. I probably won’t even still get a car because I don’t drive but, nonetheless, nothing would really change. I would still be working all those hours.
YARO: Right, so you’re doing it for the love of the work not for the money.
NEIL: Yes, and it’s what I know how to do, right. I would make a terrible nine to five employee. I can’t wake up and go into work and have someone tell me what to do. I would suck at that.
YARO: What are the plans then for the future? How old are you now, Neil? You can’t be that old if you’re 16, 17 just a few years ago.
NEIL: I’m old now. I’m 27.
YARO: Oh, okay. You’re over the hill.
NEIL: I would say I got another good 15 or 20 years in me before I’m done.
YARO: Okay, so what are you going to do in those 15, 20 years? What’s the bigger plan?
NEIL: I would probably say, I would focus more on the non-profit sector. I’ve done a lot in the non-profit sector over the last 2 to 3 years but, I’ll focus more on it than anything else.
YARO: All right, Neil. I think we’ve covered most of your story. So, let’s start wrapping up the interview. I’m going to… I normally ask a question at the end of this but, I’m going to be completely selfish here and ask a very question I’m interested in but, I’m sure a lot of people listening will be interested in too because this is where I am struggling with in my start up.
We can make this a consulting call like a free consulting time with you, thank you. [Laughs]
We’re struggling with software development. We’re doing a software startup as well in the advertising space and we’re just struggling with like I’ve got a technical co-founder and a designer co-founder and we’re doing our best with all the technical work and we’re looking for software development teams at the same time as growing the business and I’m looking for capital in doing those sort of founder-CEO kind of roles.
We struggle too, for example, we were looking for new hires to develop software, some new tech talent but, doing that process kind of have their productivity because we had to spend all this time hiring or we’re looking for people in setting up systems so we could collaborate and build a team and we realize we’re actually going slower than our intention to speed up.
Could you maybe give me advice, anyone listening to this call, when you’re looking to build a team especially in a technical software driven company, and during the early stages, how do you manage the need to work on the software as well as hire the team and find good people.
I know networking was the answer to part of that question but, we’re struggling with logistics.
NEIL: Yes, networking, blogging what you do, and the other thing is just go out there and start reaching out. So, I’d reach out to friends, other people I know in this space saying, “Hey, do you know of any good engineers or contractors or whoever I can hire designers.”
I’ll also start posting ads for jobs like on places like Craigslist. I would also go out there hunt for all the other businesses that I like and find out who did their design and development. We’re going to try to approach those people but, the real trick is to actually not hire too many people at the early stages because if you have too big of a team, things take longer. The communication, distance barrier assuming they’re not all in one central location, having a lot of heads and training people making sure everyone is on the same page, it takes much longer to get something launched when you have a ton of people versus having a really small team, getting something out there, and expanding the team as revenue expands.
YARO: So, would you recommend like a team of two developers or something like that to start with?
NEIL: Yes, one or two developers. You can even get one developer and one designer and you can do the business stuff yourself and calling it in, trying to get things out but, worst case, I wouldn’t do more than two developers for something that’s medium or somewhat simple. Later on, you can expand from there. It’s all about a lean startup.
YARO: Exactly yes. Was that the story for Crazy Egg? I know for KISSmetrics, you probably started with a slightly larger team because you had the venture funding, right?
NEIL: Yes, KISSmetrics, we started with a much larger team but, we had a lot more cash. When you’re a venture startup, you got to burn the money quick. You can’t take four million bucks and hold on to four million bucks for five years. You’re not doing justice to the investors because that means you’re not growing fast enough.
But, that was the story with Crazy Egg. We were able to build Crazy Egg with one developer.
YARO: Okay, fantastic. So, you must have had a great A-player.
NEIL: Yes, one great developer and one awesome designer.
YARO: Okay, well, that’s encouraging, Neil, that’s what we have. Fingers-crossed.
NEIL: Focus on creating something that’s very minimal, get feedback from it, keep on iterating until you actually get product market fit and then, go out there and start releasing your product and market it.
YARO: We’re having a bit of a problem with the product market fit. I think it’s definitely a challenge. We’re doing quite a little pivot here and there to figure out where the sweet spot is.
NEIL: There you go. You got all the —
YARO: The lingo.
NEIL: The lingo and terminology and you know what to do. So, you’re on the right path!
YARO: Awesome, thank you.
NEIL: For software company that most people don’t realize, you got to really give it three years before it starts making decent money. Yes, you can start making good money in the short run but, after the three-year point, you’ll actually start seeing you’re going to be making much more money than you don’t and for that reason, it’s always attractive to go out there and find software businesses that have been hit three years and only been around for like a year to end and just buy them up.
YARO: Actually, I’ve noticed, I looked at your CrunchBase profile. You’re certainly listing as an adviser and investor in a few companies and becoming quite active. Is that something that just interests you or you’re just meeting friends and you want to help them.
NEIL: It interests me. I always like making money on my money because it’s like I don’t really believe in buying big homes that you’re not going to use when you’re living by yourself. I have a one-bedroom condo.
So, it’s like, what else do you do with your money? I end up investing it all. That’s typically based on businesses that I see and like versus trying to buy out a company. I do two aspects. One is investing in entrepreneurs and startups and ideas that I like and I’ve done almost 30 of them, I think to date.
Then, the other approach is we buy software companies out that we like. Crazy Egg recently bought HelloBar.com. I don’t think we actually even released the information.
YARO: You just did.
NEIL: Yes, I just did. We’ve owned that for a decent amount of time now although we haven’t announced it even to the Hello Bar users.
YARO: All right.
NEIL: But, yes. We’ll do stuff like that that we feel we can take in our hands and grow and start adding value to it.
YARO: I see WhitePages.com, Payperpost, DocStoc, Cheezburger… these are all adviser companies for you.
NEIL: That’s correct. Very few of my investments are listed out online.
YARO: Right, but, Molar Geek, is this your latest, most recent entry in your Crunch Base profile? Is that something new?
NEIL: I don’t even think that was me. I don’t even know what Molar Geek is [laughs].
YARO: [Laughs] Okay. They seem to think you’re the CEO.
NEIL: Awesome. I learn something new about myself everyday.
YARO: Yes, well. That’s a problem when you build a profile. Everyone’s talking about you.
NEIL: That’s correct.
YARO: All right, Neil well, thank you for giving us a breakdown of each of the steps. There’s so much we could go into for every business there. I’m sure it’s a nice overview of all that you’ve built so far and I know you’ve got a lot more in you.
I think at 27, okay it’s not that old. I hope you have a lot more success with what you are doing and hopefully, at some point, we’ll bump into each other over in the States. It would be probably nice to one day get over to San Francisco and properly get myself in the startup saying, “It seems like a fun place to be.”
NEIL: Sounds good. Yes, if you’re ever on the States, feel free to hit me up.
YARO: Now, before I go, websites, we’ve obviously mentioned KISSmetrics.com, CrazyEgg.com. So, if you’re in the, well, everything, the traffic conversion and usability space, all those things are answered and monitoring your income streams with KISSmetrics and then, Quick Sprout is your… It’s a personal blog, isn’t it?
NEIL: That’s correct.
YARO: So, QuickSprout.com and… now, do you mind, I’m curious, is that a business or that’s just purely a profile builder?
NEIL: Sure, it is a business. I have my own personal company called, I’m Kind of a Big Deal [laughs] and the blog is under that corporation, in case someone tries to sue me for some odd reason.
YARO: Who’d want to sue someone called, “I’m a big deal?”
NEIL: You’d be shock, I think I’ve been to three or four lawsuits. I don’t know how many. I’ve been through quite a few of random frivolous things. At the end of the day, it’s just a personal blog but, it doesn’t make money because that’s all the traffic system on there like an eBook and that’s done pretty well over the, I don’t know, five months that it’s been out.
YARO: Yes, fantastic. So, you’re also an information publisher.
NEIL: There you go.
YARO: All right well, we managed to do a lot but, 80 hours, you can get a lot done.
NEIL: That’s right.
YARO: Neil, thank you! I appreciate the call and good luck in the future.
NEIL: You too, take care.
YARO: For everyone listening in, if you want to grab more interviews like this, you can head to my blog, entrepreneurs-journey.com or just Google my name, easiest way to find it, Y-A-R-O and you can find lots more podcast interviews just like this one.
Thank you for listening and I’ll talk to you soon.
About Yaro Starak
Yaro Starak is the author of the Blog Profits Blueprint, a report you can download instantly to learn how to make $10,000 a month, from only blogging 2 hours per day. You can find Yaro on Facebook, Twitter and Google+.