How we left over $1bn on the table
In 2008 we launched a product that could have made us billionaires, Rodney.
Twitter was launched in 2006, I signed up for a Twitter account in November 2007 and in 2008 our digital agency launched Twilert, a Twitter monitoring tool, as a side project. At around the same time, a product called HootSuite was launched.
Jump forward to 2014, we weren’t quite sure what to do with Twilert. Meanwhile HootSuite raised some finance that valued them at around $1bn. How, when we started our businesses at the same time solving problems that we’d identified for social media users, did HootSuite create something so monumental when our business had already plateaued and was on the decline?
I know. Comparing the two businesses and saying we should have enjoyed the same success as HootSuite simply because we were operating in the same area at the same time is ridiculous, I know. But hear me out. I’m making a ridiculous comparison to make a serious point.
Bit of background
Twilert started life as a simple idea to solve a simple problem: in a world where millions of people were Tweeting all the time, how could you make sure you didn’t miss something that was critical to you? What we did was allow people to create an alert (like a Google Alert) for Twitter. Every day (or whatever regularity you chose), the user would get an email with a copy of any Tweets that were relevant to the search(es) they’d set up.
The thing is, we didn’t know how to monetise it. In many ways we didn’t care too much. It was a side project among a raft of other side projects we were experimenting on in our agency. So we just launched it and waited to see what happened.
The product was well-received. Twitter wasn’t really as mainstream then but a lot of people loved what we’d built. In fact, we got to over 100,000 users without spending a penny on marketing. It was all word-of-mouth.
Becoming SaaS
With the success came costs. We started to rack up monthly hosting costs and then Twitter deprecated the API we were relying on to make it work which meant we had to spend money rebuilding it. We’d thought about maybe sticking advertising in the millions of emails we were sending out each month, but we couldn’t really work out how that would work. I mean, if you are the brand manager for Coca-Cola and you create an alert for anything related to that, there’s no point in us selling you an advert for Pepsi. SaaS, back in 2008/2009 wasn’t as much of a thing as it is today, but after a while we realised that the only way to cover the costs was to charge people a monthly fee. We settled on $10.
We wrote to every one of our more than 100,000 subscribers and explained that we’d run this at our own expense and we were going to have to charge for it. I wouldn’t recommend doing this as a strategy, by the way. I mean, freemium is great, free trial is great, so long as you know what you’re signing up for. But what we did was told people who thought this was free that it was actually going to cost. In many ways what we were doing looked like a bait and switch, but it really wasn’t intended to be that way. It was entirely down to our naivety.
As you would expect most people told us to f**k off. Actually some people did exactly that but most people ignored us and let the service lapse. But a small minority of people went ahead and subscribed. Around 3% to be precise. Not a great conversion rate from a free trial, but given that people didn’t expect this to be a trial, 3% was more than we’d hoped for and actually represented a whopping 3,000 customers who were suddenly paying us $10/month each. Suddenly, we had a $360k ARR SaaS business.
Passive Income or Double-Down?
At this point we had two choices:
Sit back and enjoy the passive income. After all, we’d done the hard work. Why not just do bits and pieces when we had some downtime to make improvements if there were things we thought might make it better, but bathe in the satisfaction of knowing that we were getting paid anyway.
Decide to really double-down on the product and sales and marketing to increase our reach. We’d clearly hit a nerve, but what were the other problems facing people for whom keeping an eye on Twitter was worth them paying for? Yes it would take a lot more work and more money than existing subscribers were paying us (although that was a great start), but it would be worth it as we pushed out paying subscribers back to the 100,000 people we had before.
My assessment is that we opted for choice 1, whereas Ryan Holmes over at HootSuite was very much in the choice 2 camp.
The agency owner’s dilemma
What the hell were we thinking? Were we stupid? I don’t think so. We were experiencing what thousands of agency owners face all the time: our main business was our agency and our side projects were bonuses if they took off. Diverting too much time and money to a side project, and away from the agency would be a big deal.
The problem with this though, is that about 8 years later, having done a few of these and seeing a similar pattern, we realised that we were leaving money on the table by not properly going for it. In fact, the first time we properly ‘went for it’, our SaaS business, ScreenCloud sky-rocketed, eclipsing our agency by a factor of 15X in revenues (and still growing) .
I’m not really saying Twilert could have been as successful as HootSuite, but I’m 100% confident it would have been a significantly bigger business than our agency if we’d understood how to take it forward.