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Noah Kagan

AppSumo

Interview by Spencer Fry on October 14, 2014

Noah Kagan is best known for his companies AppSumo and SumoMe, having been fired from Facebook as employee #30 and losing out on $185 million there, and having also been employee number #4 at Mint. After I met Noah for tacos at Calexico in the Lower East Side of Manhattan, what interested me was how open and honest he is. You don't meet many entrepreneurs who are as straightforward as Noah. After meeting him, I knew I had to hang out with him again and interview him for STP before he went home to Austin. The very next day we met for coffee and headed back to my apartment for our interview, which we finished just in time for him to rush off and participate in a webinar at GrowthHackers.

# Photograph by Aaron Wulf
Sweat the Product

Tell me a little bit about your first days as an entrepreneur and how you got involved in the early companies you were working for.

Noah Kagan

It started at Berkley. I just always made websites. My first website was a book exchange. It was just interesting to see, how do people use it? We ended up, at Berkley, getting about half the campus and 25,000 books. It was really cool to build a website. Then we merged with a competitor. It became ComeGetUsed.com. Then we went to other campuses. It was really good. All right, how do you build a website? How do you get people to your website? How do you make something that people might actually use?

Then I wanted to build another site, so I built CollegeUp.org, which was a... I was, like, "Well, there's Craigslist for all these cities, but what about college campuses?" It was kind of taking a little bit of the Facebook model and building it for colleges. No one used it. It was pretty empty.

But then I tried to add a Hot Or Not feature to get college girls to add it, but still no one used it. And then, actually, the only site that ever did pretty... Well, the second site that did pretty well is I made a site called NinjaCard.com, which was a college discount card. I went around to all the local businesses and said, "Hey, give me a discount." What we did is we sold a lot of it through fraternities. They would go do it in groups. But also we would sell it online and we would put discounts online.

I just kept messing around with websites, and then with Facebook... I was working at Intel not doing shit, still running these websites, and then I sent in my resume to Facebook.

Sweat the Product

What years are we talking about?

We really should have engineers and designers that just make their decisions, and the business people bring food.
Noah Kagan

2004 to 2005 at Intel, and then Facebook it was 2005. I just sent them my resume. I said, "Hey, I've been building a lot of websites. Let me show you them."

Then when I came for the Facebook interview I brought mockups of what Facebook should do. I was, like, "I already know your site. I have been using it all day at Intel because I'm not really working. Here's what I would do with your site. Here are things I have already done."

They said, "Come work here," and I got the job off of that. I do product management. It pretty much meant, stay the fuck out of the engineer's way. I have kind of always gotten the idea that engineers should basically be their own product managers. Business people should stay the fuck out. We really should have engineers and designers that just make their decisions, and the business people bring food.

They bring the food. They bring the massages. They help reduce whatever things... I always think, at least from the value, the engineers are the leaders. At Facebook I was basically just around insanely great people, like the guys who did design at Apple, design for Napster. I really learned how to build web products there. I mostly sucked ass and everyone was so great.

I got fired there. The story is online. It was a good decision for them. I wasn't ready to scale with them. I didn't have the skills. Even now, maybe I don't. I ended up doing nothing for about six months. Pretty depressed. I taught in Korea. I consulted for Scanner.com. I did pretty much nothing. Just moped.

Then I saw Mint.com and I was, like, "This is the fucking coolest thing," because I love finance. I knew it was a big market, and it was free. I said to myself, "How could this not be huge?"

One of the things, product-wise, I always encourage people [about] is, if you're not sure what idea to create, just go to work with companies that you already love. Right? I thought, "I fucking love personal finances. I have to be apart of it." He didn't offer me the job at first, Aaron. I basically came back to him with a proposal and I said, "Here's what I'll do for 90 days. You can pay me the bare minimum. If you like it, then you can hire me full time." I made it a risk free obligation for him to hire me as a marketer, and I never did marketing before. I just was, "Well, here's how I think I would get the word out."

Sweat the Product

What did you hope to achieve in the 90 days?

Noah Kagan

His original thing I asked him, I think as a marketer... The first thing you have to do is, "what is your goal? What are you trying to work towards?" I talked to someone recently. They don't have goals and that's fine, but for me, when I'm hiring people or as I do my things, I ask "What's the destination?"

Then I figure out my route to get there. Aaron's goal was 100,000 people before launch. I was trying to figure out, well, who is the customer for that and then what are the different avenues for us to get there? I just kind of listed them out.

I think the most successful strategt for Mint was our content network. We basically did a lot of SEO before. Specifically, the main reason we did that was because we're asking for people's credit card information, which is super sensitive. There's basically sex, money and maybe health that are pretty important to people. They're not just gonna give it up.

We thought if we taught them and we educated them and they came through Google, too, they would probably trust us more. The second thing we did really, really well is we built relationships with niche people, specifically in personal finance blogs. Even to this day I know almost all of the personal finance bloggers, because we went to every single one and either sponsored them or interviewed them.

Those were two tactics that worked insanely well with building relationships and making sure that before we even launched they were all onboard with the product. They had input in it. They talked about what things they hated.

I just listed out those two strategies, who the people we were going to talk to... I had a few other random things. Like, search Google for all the product competitors and then the suck word. So, like, "Quicken Sucks" or "Wasabe Sucks" or "Geezeo Sucks", and then make sure that we're listed in all those blog posts. As people search Google for "Alternative to Quicken", or whatever those keywords were, we would be listed in those top posts. I call it infestation.

Sweat the Product

In the comments section?

Noah Kagan

Or even in the blog posts themselves. Like, "Hey, you guys are talking about this. I'd love to show you an alternative." That's what I would email the writer. So if you go and search it, we'd actually have a lot of those keywords.

Sweat the Product

That's pretty impressive.

Noah Kagan

Well, I mean, even with our new product, I can talk about how we are doing something similar.

Sweat the Product

How long were you working at Mint?

Then my co-founder... I forgot about this, but he hacked the severs and he locked me out.
Noah Kagan

I worked at Mint for nine months and then I started building Facebook games because I saw the platform open up. My games exploded. I was one of the top developers. I quit Mint and I was, like, "I'll go make Facebook games."

I always wanted to go run my own thing. I wanted to go work in Thailand on the beach. It was kind of crazy. During the way I was working at Mint and I'd have to run upstairs to call Media Temple: "Servers are fucking down. Add more servers." Then I'm talking to sysadmins, and then my co-founder... I forgot about this, but he hacked the severs and he locked me out. It was just a whole ordeal.

Sweat the Product

What's the story behind that?

I think this is interesting, when you're building product, is working backwards from a framework of data.
Noah Kagan

His name was Gary. I don't even remember his last name. I met this kid. He was in Canada. I made the first steps with the guy in the Philippines. I would code and he would code. He was $20 bucks an hour. I think this is interesting, when you're building product, is working backwards from a framework of data. What I did was I looked at what the popular apps were that have the least amount of competition.

So it was sports. We're even doing this with SumoMe. We're looking at, what are popular apps based on data from BuiltWith or from the Wordpress plugin directory that are really popular that people are paying for, and we're making those free. We're not just making random products. We're, like, "These are already popular. We'll just copy those and take the 80% of them," like Google Docs to Microsoft Word. What are the popular features of popular things?

With the apps, I built all the sports apps. Even though I didn't follow sports, I knew that they were really popular and there wasn't a lot of competition with them. I found Gary randomly. I don't even know how. But he was so fucking good. I'd say, "Gary, do you think you can do this?" It was, like, done. Before I finished my sentence.

I think some of the best developers... I mean, almost can take take it to the next level. You don't have to ask. They're just, like, "Here's where I know the goals are. I'm just gonna start building towards that."

Then, all of a sudden, one day he disappeared. I don't know if this is a common thing with developers. They go AWOL. Gary just never responded for two weeks. I was, like, "Holy shit. The site is going insane. I need someone around that can be reliable." I tried to change the password, but he is a good developer. I suck. He had root access, which I have now been aware of. So he locked out the root access of the servers. I couldn't even get into our own servers.

Then I paid him... It was basically blackmail... I paid him $3,000 to give the servers back, but what he did, which was really interesting... and I wasn't crazy technical, but in a major include file he included some computation, like Hex 64 computation, so when a page would load it would call this include function that the pages would never load.

I'm, like, "Holy shit!" I thought it was because we were getting so much traffic. I was, like, "Upgrade the servers!" I was having sysadmins check this stuff out. I'm quitting my job to go do this and now the servers aren't working, and so eventually this guy, Mike, who is awesome, figured it out. He was, like, "Dude, there's this function that's computing. Do you need this?" Then we figured that out and then we eventually changed all the passwords and things smoothed down.

I moved the company to Argentina. I raised money from Naval Ravikant, the AngelList guy. I hired a few people. Then I had a breakdown of sorts where I was, like, "I don't really like games whatsoever. I don't like making games. I don't really play games." It sounds so weird as an adult to say something like that, but I just didn't play the games. It was really just a straight business opportunity, which I discourage myself and others from doing.

I went to Argentina and kind of stopped doing all the work. The rest of the team were, like, "We're gonna quit unless you come back to work." Naval was, like, "Dude, stop being a bitch. You can't party all day." I was drinking wine. I was working a little bit. We made some popular games. One of the biggest ones is Oregon Trail on Facebook games. That was big, and some sports games. It did work out. I didn't know what else to do with my life, so I did come back to work. I moved to Texas.

We built a game for six months called BetArcade. I think one of the key takeaways on a product that I am learning is, how do you build up an asset? A mailing list is an asset, but if you don't maintain it, it goes away. With software, which is really cool, is that we built a sports game. How do you take all of these sports players and build something even bigger? That's kind of what we've done with AppSumo.

We had this game called SportsBet. We were, like, "Well, we want to build something out of Facebook." We figured we'd take all of our sports games and promote it to this website, and the idea for the website was Netflix for sports betting. For $20 bucks a month you could bet on games and win prizes. The legality of it was... We went to a lawyer in Vegas and spent $,6000 on him. Hired a $5,000 designer. We spent five or six months developing it. We finally had the site up, betarcade.com, and we promoted it and then pretty much no one came to it. Then Facebook blocked our notifications because we're sending people to an external site.

That was pretty depressing for the team. I was actually really happy, because I wanted to quit. I don't do betting and I don't really follow as much sports. I'm an ESPN Top 10 guy. I got the highlight reel. I like the social part.

Sweat the Product

Right.

We looked at each other. We're, like, "Holy fuck, we should just do payments."
Noah Kagan

We built these games. They're all kind of dying. Then this new site we put a lot of money into, we were hoping would work, didn't work. Then Andrew Hunter, one of the guys on the team, was, like, "Well, what if we could fix the payments and maybe try to make a few more bucks if we updated the payments with our own software?"

He built it in a weekend, payments for our games. It sounds crazy, but it was literally, instantly, it was, like, "Oh, wow. This is doing really well. We're beating the competitors for this payment software." It was pretty weird. We looked at each other. We're, like, "Holy fuck, we should just do payments." The best part about it was, once we put it in your game... It sounds a little sexual, but once we got in you we were profitable instantly.

Sweat the Product

You guys took a cut of the payment software?

Noah Kagan

Yeah. There are different payment options, and what was happening was that there's no transparency. If you actually broke out how much they are taking, most of the companies were taking 50%. I don't think we created insanely better software. We just basically took 20%. We told them: "You're getting fucked."

We'd go to people. We'd be, like, "Here's how much you're making. If you use us you're gonna make this much. Is there any reason you wouldn't use it?" No. We used it in our games. We saw that it worked. We validated it that way. We started from the bottom. I called up Zynga because I knew Mark from when we were making the games. I was, like, "Mark, use our stuff!" He's, like, "Go fuck yourself. You are nobodies."

I had to start, literally, one person at a time, really scrappy. I think this is a thing with marketing. Start with the people who don't get attention and give them insane amounts of attention. Then they will appreciate you more, and that's how you really build a foundation. We did that with really small games.

Then we got our first big hit with Farm Town. This is the first farm game. It was literally some punk kid in Oregon, 17 year old who was making, like, $5,000 a day. Literally, one of the best times. He crashed his M6 and he sent a photo of him laughing about it. I'm literally kissing ass to a 17 year old. That business exploded. We went from zero to processing $30 million dollars in one year.

Sweat the Product

Wow.

But when it finally does hit, you have an internal understanding of it.
Noah Kagan

It was a fucking insane ride. I think that's something there with a product. Sometimes... Like, let's say Twitter. You have to persist for a few years. Or Pinterest -- you have to persist for a few years and it finally hits. But when it finally does hit, you have an internal understanding of it.

When we were at Facebook, when everyone was saying "Why would Facebook do well?" We saw that growth was happening. Maybe that wasn't as apparent externally, but maybe for some products, if you don't see the growth happening, maybe you see the engagement happening.

Sweat the Product

What year was this and why did you stop working on this thing?

Noah Kagan

Mint was 2007. This is 2008 to 2010. We did all this game stuff. We blew up. We still had a small team. There was only, like, six of us, and we're killing these funded companies. They sued us. On the same day we got sued by OfferPal, Facebook banned us.

One of the forms of payment was ads. You could click ads and sign up for stuff. So some of our international ads violated their terms. Everybody did it. We were the one that was chosen as the guy that took the fall for that.

I was actually kind of happy for that one too. The money wasn't as interesting. Once you have enough money to live and enough money to buy the lifestyle that you want, it doesn't really motivate me. It doesn't really do much. Having a nicer car doesn't make my life better. Working on something where it was just about that... And I still have to come back to that, because I get greedy sometimes. Facebook banned us. We got sued by OfferPal and it was almost relieving. I was, like, "Cool."

Sweat the Product

What did you guys get sued for?

I think we ended up settling for $130,000 because it was cheaper than going to court and all the other time it would take.
Noah Kagan

OfferPal, we were their client. We were using them in all their games. Then we built a competitor. They basically said we used their insider knowledge. I mean, their stuff is public. Their ads were public. Their rates were public. You could figure it out.

Because we're not funded and we had a small team, it basically stopped the company for three months. We couldn't work. We have to go get deposition. They have to go do discovery through all of our computer emails, through all of our files. We pretty much stopped working.

Then the sad part about our system... But the good and bad. There's good and bad about the justice system. I think we ended up settling for $130,000 because it was cheaper than going to court and all the other time it would take. We were, like, "We don't think we did anything wrong." We didn't believe it. They did. I mean, that's part of he said, she said.

Then Facebook banned us for the ads. We literally got wiped out, about 90% of our business, in, I think, almost the same day. That was a very interesting day.

Sweat the Product

What was it like with all that being behind you? What do you do next?

What is critical for them where they say "If we don't have you, we are fucked."
Noah Kagan

The hard part was that I was, like, "Damn, Mark fucked me over again." He is really getting to me. I mean, Facebook fired me, which I think I deserved. So I'm not as bitter about that one. I don't think resentful, but a little sad at the time. From time to time I feel sad about it.

But, then this time I was actually a little relieved. I didn't really necessarily want to be working. I had some co-founder issues, which is something we've talked about a bit. I have learned a lot about that. The big takeaways from that experience on business and product... The guys who became my partners, I didn't really know them professionally. It was, like, "Hey, you seem good. You can code, right? Oh, you made that website? Yeah, yeah. Let's work together."

I was much more intentional for the next business, AppSumo, that I didn't want a co-founder. Then the second thing that was key was that in the product base, I think what most people neglect is figuring out how important they are to people. When we were doing payments... I mean, I don't want to say sucked dick, but I would pretty much kiss ass for six months, finally get the deal, and then the next day they would be, like, "Well, sorry. We're gonna turn you off because your competitor took us out to dinner."

What was interesting about the whole process, though, is how do you build products that are essential for people? It's called a totem pole. What is critical for them where they say "If we don't have you, we are fucked." I think about that with some restaurants. I'm, like, "Man, if you go away, where else am I going to get these really good tacos?"

I think that's what people neglect when they are building products. They are just, like, "Oh, I think this is kind of important," versus really being, like, "All right. How much are people willing to pay of Mint? How much are they willing to pay? If I went away would they go out of business, or would their business be inconvenienced?"

I realized those were two key things I wanted to fix for the next one. I was fortunate. I got to consult for SpeedDate.com. My buddy Simon hooked it up. I did some product work for them. That was great. They were super analytical. They did hundreds of thousands of ad spending. I got to see how they did their testing and how they did their ROI analysis.

I basically just was messing around with ideas on the side. I wanted to create another lifestyle, like, three to four thousand a month business and then travel. My first idea was Fishbowl. The idea with Fishbowl is that a lot of local businesses don't collect their customers.

Like, we went and got coffee at Ninth Street Expresso. They're not gonna see you until you remember to think to go back there. That's common with a lot of restaurants. I thought, "What if I could help them get their customer's email or phone numbers," and then they don't even have to give discounts, but they could say, "Hey, we've got a dinner this week, or have you tried this coffee this week?"

Then I realized that local businesses mostly suck and they are outdated. They are not as wanting to do, "Oh, let me create an email list or let me go to texting and tell them to come back." They are so focused on, "Holy shit. This guy quit. I've got to deal with this problem," that they can't really do a lot of that stuff.

Then AppSumo came around because I realized I want to do something myself. I love marketing. I love spreading the word of good things and I realized most people suck at it. Then I saw Woot.com. I saw Woot and MacHeist and I was, like, "Oh, wow. If you bundle things and put a time limit on it, that's a cool new way of distribution."

I pretty much copied them for web applications. So that's the founding story to where I got to AppSumo. For that product, I mean, it was pretty much just having fun. I basically went out and found products that I didn't want to pay for. I emailed the company and I said, "Hey, I'll promote you to a lot of people. Can you give it to me for free?" They're, like, "Sure." Or, not free, but give it to me, I'll promote you and then we'll split the revenue. Then I just went out to products that I really liked and used.

Sweat the Product

How long did it take from starting AppSump to realizing it was going to be something that could bring you in three to four thousand a month or more?

Noah Kagan

I kind of dicked around with it for the first nine months just by myself, where I was doing bundles. The bundle was six awesome products that was literally worth $2,000 in value and I would sell it for $50 bucks. I would make $500 for three months of work, but I would sell a decent amount of them. Lifehacker would pick it up.

One of the marketing things that people should do that worked really well for us is... They call it zero dollar partnerships. I took all the companies in the bundle and I asked them to promote it to their free customers. For them, it's great. They're getting people who aren't paying them to pay, and then for me, I got the email signups and the exposure.

I think the first big break came when we did a bundle for South by Southwest with Eric Ries. I got him in it. All these companies were in it. All the companies promoted it. I think that was the first six figure bundle. This is in my first year. I was, like, "Okay. I guess there's something here with this."

Then Andrew Chen, one of my close friends, said "Dude, these bundles are so much work." I think this is one of the most key things that people neglect in their business. Doing modeling. He modeled it out. He's, like, "Here's how your business is now with bundles. Here's how it looks if you separate out a bundle. Less work, higher margins. You can actually do ads."

We separated out the bundles, and also the value perception was too high. For you to be, like, save 99% on $2,000 is really hard versus you're saving... it used to be $200 and now it's $20. You're, like, "Oh, wow. That's pretty good." For some reason, mentally, there's some psychology stuff with that.

Andrew just showed the model. We basically separated out bundles because it was easy for us. You're not spending so much time getting a deal. Then, because the frequency was higher... instead of a bundle every three months we could do a deal two to three times a week. We could basically make money back faster. We took all the money, bought ads, and because we had deals three times a week we would acutely be able to break even on customers in either same day or 30 days, or less than 90 days.

Sweat the Product

What kind of ads would you guys buy?

Noah Kagan

Facebook ads. Right sidebar. This is before News Feed got big. But the idea was that we would spend a dollar today and then we would make that money back in 30 days because we'd have enough promotions during that time period. Eventually that one person would buy something that would compensate for them.

So that was probably one of the big inflection points. Going to individual deals and then spending money on advertising.

Sweat the Product

Wow. That's cool. I read online that you made your first $10,000 from selling some typography deal? Do you remember that story and what it felt like?

Noah Kagan

For sure. Well, so I hate typography. I have hated typography in fonts. Mostly because of Facebook. We would try to make a change on the website and people would have a two hour discussion about which font.

For me, I was always functional. There is function inform. I was, like, "Why do people fucking care about fonts?" For AppSumo I never even cared about emails. I was just, like, "Here's a great product. People should find it and buy it."

A buddy of mine, Heaton, was, like, "Dude, just get emails so you could tell them about it every time." I would either write it or I would have a guy in Bulgaria write the emails, and he can't even speak English that well. So we would be, like, "Hey, here's a cool product. Buy it." Now I actually appreciate fonts. I look at restaurants and I'm, like, "Oh, this is a fancy restaurant because of their font." I never really noticed that. I was in Mexico. I was, like, "Oh, this is really cool."

Sweat the Product

Sets the tone.

That was our first $10,000 day.
Noah Kagan

Yeah. It really did. I was, like, "Oh, wow. They care about their business." It was really interesting. It represented them better than just, like, "Here's a generic font. There's no effort." My buddy Naval, a good friend of mine. He's a copywriter. He said, "Let me just write the email for this one."

He wrote a long story. It was basically a story of how Steve Jobs loves Helvetica and he makes sweet, sweet love on it. It was just a stupid story. It was really funny, but it was a really good story and really captivating. The only difference between that and any of our other emails was just the copy in it.

That was our first $10,000 day. One, I think that was also a big realization. Like, "Wow, we can make money in this business," and also the idea that I think sometimes we do a better job of selling the product than the people themselves. We have had some hits that are just insane because we share why this is so valuable for people.

You ever use Share As Image? If you saw it you'd be, like, "Okay. Whatever." But it's really powerful. Basically, you can super quickly take an image and then put caption text on it, or design it very lightly. We had an unlimited deal for them. That deal, I don't know what the five figures was, but it was definitely very high. I think it's because we presented it in that way. When Naval first did copy it really dawned on me how much copywriting is essential.

Sweat the Product

Couldn't you have seen that from having looked at Woot? They were known as writing amazing content and really caring about having a voice and adding personality.

What happens, though, is that as you start getting larger you get more sensitive to all the different customers and you become a pussy.
Noah Kagan

I think a few things happened. One, I didn't really look at Woot as that. I just saw a distribution model. Secondly, I was in English as a second language in college and I'm from America. It's not my second language. I'm a good speaker. I speak well. But I have never been a strong writer.

I just learned about T-O versus T-O-O or T-H-E-N versus T-H-A-N. I just never got that stuff until recently. Basically, Naval did that email. Another thing that was really big and impactful was I went to a 37signals design workshop. Before they design they write the copy of the page. That was a huge thing. They're, like, "Yeah, we don't care about what the page looks like. What are the words that they are gonna be taking away?"

Those two things dawned on me, how valuable copy is. But the interesting thing I think people need to be aware of is that, if you think about Groupon, what was Groupon actually known for in the beginning? Their copy. Besides, the deals were actually good. Now they suck. But the copy was just fucking hysterical.

What happens, though, is that as you start getting larger you get more sensitive to all the different customers and you become a pussy. That's something that we struggle with. I want to say swear words or things like that. I said the word shit in an email and someone complained.

I think the point, though, is that it's better to have people at least talking about you than not at all. Just being aware... People start on the edges with their businesses and their products. You come into the middle because it's safer that way, but you're on the edges and that's actually where you're getting your success, versus where you come and boring and bland in the middle.

I'll tell you some of the books I've read. I don't know if you want to publish it. But Gary Halbert Letters? Super amazing. It's all free. It's called the Boron Letters. They are free and they are online. Ogilvy On Advertising.

Sweat the Product

I just bought that.

Noah Kagan

Oglivy On Advertising is fucking insane. The Scientific Advertising. There's maybe one or two more. Anything on copy that you could write, read and practice. It just made such a difference.

We actually do copy all day long. You email people all day long. You don't realize it. Maybe you do. But a lot of people don't. So if you can become a better writer you can get a lot more things accomplished. You can persuade people. You can educate people. You can basically get what you want, as long as you are able to explain it clearly.

Sweat the Product

So you've been running AppSumo for a few years. When did you decide to start SumoMe, and fund it with AppSumo. How did that start?

I have done two [businesses] that have done seven figures. They're, like, "How did you do it?"
Noah Kagan

So the business story was that, after about two years we were doing seven figure business. Not arrogantly. Just to give you a size of that. We had about 20 people. Then what I realized, though, is that our retention rates were really bad. So we used to make money and people would come back and buy every three months. Now they're buying every eighteen months.

We pretty much started promoting more shitty products, I would say, and we did more sloppy advertising. I would actually say the number one way we've grown is when we promote a great product. With all the gimmicks we've done and Facebook share buttons or hacks, whatever you can do... The better product we promoted, the more viral it went, the more money we made.

That has been the key all along, even though everyone is always looking for a shortcut. I know people have heard this kind of stuff before. I'm sure you have too. Like, "Make a great product!" But we kind of think there are other secrets that we're hoping to find.

What I noticed is that no one was coming back. We're not gonna probably stay in business if we kept doing what we're doing, so I fired most of the team and then we just went back to promoting once or twice a week. Then what we realized is that there's not enough great products out there that we can promote.

Design stuff, I was surprised how much people like to buy design things... Design templates and icons. But even that, there's a limit. What we ended up doing was we ended up realizing, "Shit, we have to make our own products." Last year we created a course called Monthly1K.com. The whole idea behind that is, just look at where your customers keep asking questions of you. Everyone kept asking me how I started businesses. I have done two that have done seven figures. They're, like, "How did you do it?"

I have also done two that have lost six figures. I basically just put together the content and custom software that showed people how I did it. That was where we wanted to basically look at where our biggest problem was. Our biggest problem was, we don't have enough good products. Of course it's a product that we could sell and not be as dependent on finding deals.

We were, like, "Well, we did this course. It hit our goal." This year we're, like, "Well, what do we do now?" Right? So AppSumo has always been about promoting cool stuff. We still do that through the newsletter. We have the course, which helps people start a business. We're, like, "Well, we promote cool products to help people kick ass in their startups. We have something to start a business. Why don't we give away tools or sell tools to grow a business?"

We basically built SumoMe.com. It's interesting, because it's more of an asset. But the whole idea is we use all these tools ourselves, so let's make a product out of them, of the tools we have been using to grow our own business to 750,000 subscribes and seven figures. These are the tools we use internally.

Sweat the Product

Would you promote SumoMe to your existing AppSumo people, or was that a completely different market for you?

It's not to say it can't be done, but what do you know a lot about?
Noah Kagan

No. We definitely promote it. We promote it now once a week. Someone is, like, "Well, why would you promote it?" It's because we're proud of it and it's gonna be helpful for people. I think what people neglect a lot of the times is you already have a mailing list. You already have a userbase. You already have a friend network. How do you work with what you already have, versus trying to start something new?

Especially with Monthly OneK. I have seen over 5000 people start businesses. That's one of the most common pitfalls. They're, like, "I want to start something in health because Tim Ferriss wrote about health and there's some opportunity there." I'm, like, "How many people do you know in health?" None. It's not to say it can't be done, but what do you know a lot about? Cooking, bowling, engineering. Take advantage of what you already know and who you already have access to.

We have a lot of people starting businesses that want to grow them. Why don't we provide the tools that we know that they would want?

Sweat the Product

What was the very first product at SumoMe? What did it look like?

We finally had a prototype ready and the prototype was still pretty shitty.
Noah Kagan

Oh, man. So it sucked. Our first product was called SumoTest and we thought we were gonna kill Optimizely. We built our own internal AB testing and banded testing systems. We thought, "All right. Well, fuck. We can just undercut Optimizely and launch this software and we'll beat them and just out hustle them."

Then it was taking three months. We finally had a prototype ready and the prototype was still pretty shitty. We're, like, "Man, this sucks." Right? We don't even want to promote it and we've just spent a few months already building it. Then what we realized is... There has been three evolutions of SumoMe. We're, like, "Let's just launch something super lightweight, super quick that we can see if people will use."

So the first product we launched was called Twilighter. What we realized is that... So on New York Times, if you highlighted something... They used to have it on some of the articles where you could highlight and then tweet or Facebook share. So we're, like, "All right. Let's just see if you can highlight and tweet." Like, Kindle highlighting.

We launched that and people started using it. It wasn't great. It was actually pretty ugly. I don't even put it on my own blog. I think that's a really good sign of your business. Are you using your own product often? There are certain features on AppSumo I love. Those are the ones I'm, like, "All right. Let's do more of that or fix those." There are ones where I'm, like, "This is shitty," which is hard sometimes. Some of the people actually liked Twilighter.

So we launched Twilighter. The idea was that we started realizing, how do we launch super lightweight ones that we can get out in two to three weeks? The three month one was just way too long. The overall idea was, how do we launch lightweight ones, see which ones people are really excited about and then make those more robust?

Then we did that for awhile and it was, like, "Okay. People kind of like some of the tools." Then what we finally realized was, how do we take products that are already popular... This is what I was telling you over coffee earlier. They are already popular. They are already validated to some extent. We can see it with BuiltWith.com or Wordpress plugins, as well as what we're already paying for. What are you already paying for every month?

Then we basically say, "All right. We know these are popular. Let's just create the 80% of those in two to three week sprints max." If you limit yourself on the time you're gonna be building your product, you will cut all of the features that aren't necessarily. You launch it and you figure out what are the key things that... later, if people are really using it, we can make more robust.

That's kind of been the three part evolution, which was, like, super big, clunky... Finally launched it, was shitty, didn't really even promote it... Build random shit that we thought was kind of interesting and then try to be a little more strategic with the product. We're, like, "All right. Well, what are ones we know are gonna be popular versus assuming that people might want to use it?"

Sweat the Product

How do you and your small team of six people split your time between creating new products for SumoMe and maintaining existing ones?

Noah Kagan

I think right now in SumoMe we have about nine to ten apps total. What we did is we kind of laid out the top apps that are out there that people are paying for now. We want to commoditize them, and also put it in one place.

You don't want to have to go to this site and pay here or this site and do this. One place. It's all free. You can use it instantly. We pretty much laid out the apps we wanted to build. Right now we're kind of in a holding pattern where we're going back and building backend systems. So which people are churning? What are our top sites? Which features have people been requesting that we can get out really easy, we're in more of a maintenance mode.

More of what we're doing now is we're going to larger sites. As I did with Gambit, we build it with tiny sites and now we're getting sites that are doing... Movoto is a big site, or WaitButWhy.com, or Foreign Street or Bakadesuyo, Eric Barker's site, and we're finding out what are some of their custom features. You get to larger sites, they have more custom features. We're doing more, "Hey, why won't you use this today?" "Because you don't have X." We built X. "Now we'll use you."

A lot of the apps we did was, all right, if we launch this app will it help us grow more? We're at a point where we have launched a suite of apps where there's no reason someone shouldn't use SumoMe. From an analytics point of view, from an email conversion point of view or from a sharing point of view, we have the tools you will need. It's more understanding where do we need to go back and develop more of the 80% of people.

Sweat the Product

A quick case study. What apps from SumoMe would you add to SweatTheProduct.com?

Noah Kagan

The main thing, though, before I... "Oh, this is what you should use and this is what you should use." What's your goal for it? What would you want more of? Do you want to have a certain amount of emails you're trying to collect, a certain amount of sharing? You want people to pay for something?

Sweat the Product

I think, for the most part, looking for just more emails and more readers every single time I release a new interview.

Noah Kagan

Do you have a mailing list now?

Sweat the Product

Yeah.

Noah Kagan

How many people?

Sweat the Product

About one hundred and ten.

Noah Kagan

Okay. Do you have a goal?

Sweat the Product

My goal is 250 by the end of the year.

Noah Kagan

Right now I'm doing more custom work with large sites where I'll install it for them. I think as a product person, or with your product, go and do the work for people. We actually have a guy full time, or as much time as he can do, where, if you email us, we will do the setup for you. We will onboard you completely. We will customize it. We will install it. We will turn on the apps.

A lot of people, I don't know. We started doing it. We're, like, "Holy shit." People are busy. I asked you if you used SumoMe. You're, like, "Yeah. I looked at the website." So the idea is, all right, stay busy. We'll handle it for you. Then you'll just get the results and then we get a tool that you're using.

So for your site... I mean, how many visitors do you get a month?

Sweat the Product

The site has only been around for about two months. I would say each interview gets around 250 to 500 reads within the first few days after it goes live.

Noah Kagan

Then where do you people sign up for your newsletter?

Sweat the Product

A small link at the bottom.

Noah Kagan

A few things that are really interesting. If I were you, I would use... Do you have Brian or the people you interview promote it? Do you ask them to tweet or share anyone?

Sweat the Product

Yeah.

Noah Kagan

Okay. So here are the things that I would say for your site that I would do personally. One, we have a tool called Content Analytics, which is really fascinating. What is does is, it's a scroll map, and what you'll probably realize is that people are only reading halfway through your articles. It's really depressing.

What's cool with that, though, is that you can then optimize where you ask for the email address. You're asking for the email address at the bottom, where probably less than 10% of your people are actually ever making it.

If I would you I would put a byline at the top, or basically where the percentage is, of... "Hey, make sure you're not to miss the next interview. Click here to join." Putting it somewhere a little more apparent within the content.

The second thing I would do is we have a thing called Scroll Box. So we have three email conversion tools. Smart Bar, which is at the top, List Builder, which is a popup, and Scroll Box, which is on the bottom right. The conversion rates of those are, popup gets on average across our network... Which is about a million uniques a day on just List Builder. It's 1.7%. Scroll Box is 0.8% and then Smart Bar is 0.2% conversion rate to email.

List Builder is the most in your face. I prefer Scroll Box. I think it's a little less intrusive. What you can do is load Scroll Box at about... Depending on how far people read, probably at 30% of the article. Then it will say, "Hey, if you want to get our next article, subscribe here."

I would probably use those two things and then the last tool I would consider is maybe a share button, depending if you want people to share your articles. Oh, so you have it up top. See, that's great.

Well, I'll give you two other things. But the share buttons, what are cool about them, is that you could have a few different options and it will auto-optimize them per article based on where people are sharing it. If a lot of people are sharing on Facebook it will move that button up and then remove other buttons. That's kind of neat. It's not even crazy technical. It's just stuff that we found helpful for ourselves.

Sweat the Product

How do you balance not being too intrusive to your readers in getting your shares and newsletter sign-ups?

It's like getting to a destination. You can bicycle. You can car. You can walk. Subway. It doesn't matter. It's more personal preference.
Noah Kagan

The first thing I always say is, just do whatever aligns with your integrity and your aesthetic preferences... That's ultimately what it comes down to. Some people are super aggressive. Some people are, like, "I don't want share buttons anywhere because I think they're ugly, or I don't want share buttons anywhere because I want them to give me an email address."

It's really personal preference. I don't really care. You have to have your goal and figure out which ways are the best ways. It's like getting to a destination. You can bicycle. You can car. You can walk. Subway. It doesn't matter. It's more personal preference.

For me, I think a popup is a little annoying. We do a thing called Smart Mode. So as they are finishing the article it will ask for the email address, which is better. But I just find Scroll Box a little more pleasant. Share buttons, I think, are fine. But it ultimately comes back to how you feel about treating your readers and how you want to be yourself... How you want to experience the site yourself.

For AppSumo, if you go to our homepage it asks for an email address. It used to be really annoying. You couldn't do anything. We were going to our own website and being, like, "This fucking sucks." Then we're, like, "Oh, shit. We made this website." Now you can easily skip out of seeing asking for an email address. Before it was a pain in the ass.

It's more personal preference. What I have seen Mark at Facebook do and a lot of successful businesses is that they are super spammy, super aggressive until they are big, and then they are less. If you look at Facebook, what's the first thing you do when you join? Spam your address book. Spam your IM. Spam your Skype. Spam everybody.

How did Mark actually get Facebook started? He spammed Harvard mailing lists. It's not really spam, I guess, if people wanted it or not. But he did email a lot of people and said, "Go email other people." Then after you get really big, then you could tone it down. People kind of forget about that. Same as Airbnb. Spammed Craigslist.

Sweat the Product

What starting a business, what would you say is most important during the first three months?

So many people spend a lot of money and time building an MVP. I'm, like, "That's not an MVP. That's an expensive prototype."
Noah Kagan

With Monthly OneK, I have seen over 5000 people start businesses. I have gotten a good understanding of where people are afraid, what things work and what doesn't work. I would say three months is too long. What I really believe, and I don't know why more people don't do this. You should be able to validate your business within a week or less. If you don't find a paying customer for your business within a week or less, I probably would think you're on the wrong idea.

What I mean by that specifically is, get someone to be a paying customer. If you're a developer, be a freelancer and build a prototype for someone that they pay you for. If you are a marketer, get someone to be your customer before you go find a developer to build it, or figure out if you can solve that problem manually.

Most people want to go out and build things because that's the easier thing. Like, "Oh, I'll just do this. Maybe sometime later people will use it." I'd say in the first three months the key thing is velocity to getting that first dollar. Get your first dollar. Find out that people want it. Then you can go dick around and make a pretty website and all that kind of jazz, but most people do the reverse of that.

I don't even like saying MVP anymore. So many people spend a lot of money and time building an MVP. I'm, like, "That's not an MVP. That's an expensive prototype." I just think people should try to make money soon. In our course and what I have done for myself is, try to do it within 48 hours and get three paying customers.

That's what I found to do really well. I started a jerky business in 24 hours. It wasn't super complicated. I built a GoDaddy 99 cent website with a PayPal button. In 24 hours I sold $1,000 of profit. The point, though, wasn't to build a website and do a subscription business and all this kind of jazz. It was just to prove that people wanted it. Then I gave the business away and now the guy is doing $15,000 a month.

But so many people would say, "Oh, well, I need to go interview people if they want jerky. Then I need to go get discouraged by all the naysayers. Then I need to psyche myself out. Then I need to build a website and find a designer on 99designs and fucking Wordpress and then it's not working." Then you launch it in a month and you're, like, "Well, how do I get someone to buy the jerky?" Versus, I find out right away people want jerky and then I can go do all the website kind of jazz.

Most people don't do things enough manually. Do fucking ghetto manual Google spreadsheets. All that kind of jazz.

Sweat the Product

Cool. Well, let's end it there. Sounds good.

Noah Kagan

Okay. Thanks.

The End