iinnovate 7: Meebo Team

Matt and Julio – Episode 7: Elaine, Sandy and Team, Founders of Meebo 

Hi.  Welcome to iinovate, a podcast about innovation and entrepreneurship with Julio Vasconcellos and Matt Wyndowe.   

Hello and welcome to the seventh episode of iinnovate.  We wanted to say thank you to all our listeners and especially to those of you that have been providing us with a lot of great input and feedback on the site.  We are listening so keep sending it us via our site at www.iinovatecast.com.  Next week we’re really excited to feature Philip Rosedale, the founder and CEO of Linden Lab, the company that has brought us the virtual world of Second Life.  We also received a lot of feedback from all of you that you’d like to see a little bit more of an early stage entrepreneur feel, so we’re responding to that this week with this interview in bringing you one of the hottest startups in Silicon Valley, Meebo.  Meebo is a Web-based instant messenger that connects you to IM networks for free.  Launched in the fall of 2005 and funded by Sequoia Capital shortly thereafter, Meebo has experienced tremendous growth.  We were welcomed to Meebo by the founding team consisting of Team, who is a business guy; Elaine, the Ajax girl; and Sandy, the server chick, as they describe themselves on the Meebo site.  So enjoy the interview and thanks for listening.   

Matt:  We are here in Paulo Alto with the Meebo team, Team, Sandy and Elaine.  Welcome to the podcast. 

Team: Thanks, thank you. 

Matt:  First of all, for some of our listeners who don’t know about Meebo, can you give the quick elevator pitch?  What does Meebo do? 

Team: Sure.  So, Meebo is a web-based instant messaging client, and it lets people get on IM absolutely anywhere.  So if they’re at school, work, home, at a friend’s house, on a ship in the middle of ocean, as long as they have a web browser and internet connection they can get on IM.  And then we’ve also built something called Meebo Me that lets them embed IM in any web page that they own, so if they put it on their My Space page for example, they can see everybody on their page and they can talk to them live through their IM client.   

Matt:  How many users does Meebo have? 

Team:  It really depends on how you measure it.  So, if you want to ask log-ins per day, we do just south of a million log-ons every single day.  Messages carried through the system, I think it is 57 million messages every day, move through Meebo.  If you want to look at unique ID’s every month, it’s 3.5 million.  If you want to know what our other interesting – how much time, yeah this is really interesting.  How much time of people’s attention does Meebo capture every day?  The answer is 120 man-years.  So, 120 years are spent inside Meebo by people every single day, if you add up everyone across the globe.  It’s incredible.  So, Meebo has – our average session lengths are extremely long for a website, and we have a lot of people’s connect time attention, which is fantastic. 

Matt:  Can you talk a little bit about the vision that you have for Meebo, where this is going to go, when you are meeting with VC’s.  What was the story you were telling them, and as a part of that, how do you plan to make money? 

Team:  So, the big thing for us, when we were talking to VC’s is we were pointing out that there were all these opportunities once you brought instant messaging into the web, to do really cool things with instant messaging.  So, what we came to realize, especially after we launched Meebo, is most technologies have moved from software to the web.  And so, if you think about it, community, like Face Book, My Space, Friendster, all on the web; productivity, Salesforce.com, Commerce, E-Bay, Amazon, etc.; all these categories moved to the web.  But wait, instant messaging is not in the web, that doesn’t make sense right?  And so we thought, okay, get instant messaging in the web and you can do really interesting things.  And so, the first piece of the puzzle was to build Meebo, Meebo.com and get a really great IM web client.  And then the next piece was well, how can you create things that embed in the web, and Meebo meets the first example of that right?  Where now, you have a way for individuals to put IM on any web page they own.  And so, what will continue rolling out is improvements to what we already have, Meebo.com and Meebo Me, and other really interesting functionality that embeds into the web, and so that’s kind of the direction that we’re headed in.  In terms of revenue, so we’re going to do revenue in the same way that we’ve done Meebo, which is to say it’s very user-driven, and very much kind of, what adds value or is good for the user.  And there are lots of categories that we can potentially test, right?  And everything’s going to be tested because in Meebo, most things are tested.  So advertising is a very obvious way to make revenue.  The interesting this is, if we put one banner ad in Meebo today, at our size, we’d instantly be profitable, right?  But we’ve chosen to not simply throw a banner ad in there because we want to make sure that if we do do advertising in Meebo.com, it’s the best kind of highest value advertising that we can do.  Youtube’s got this really interesting ad right on their front page, it’s a video that does not automatically play, but it’s actually an ad, and people love it, right?  So we want to find ways that we do advertising that people like, as opposed to detracting from the experience.  Another way to potentially do revenue is personalization.  So if you look at how Ten Cent, which has QQ in China, which is the biggest IM network there, makes all of their money, it’s all in personalization.  And so, you can have an Avatari, buy costumes for your Avatari, you can buy digital goods, etc., and they have a really healthy business ground of personalization and actually Siweld in Korea also has a really healthy business around personalization.  So it’s another possibility.  Another one is, you know, integrate SMS into Meebo and let people send and receive SMS’s in and out of Meebo, and we would get a large share from the telecom carriers for that.  So, the interesting thing is software tends to monetize by charging you for the software up front right?  The web has all sorts of other ways to monetize, particularly because that’s where the action is and so, just like we’ve tested the building of Meebo.com with the users, we’ll test the building of revenue within Meebo.com with the users. 

And by being in the web, you can, you know, give 30% of your users one revenue experiment, give another 30% another one, and measure which one does better.  You take that one, you give it to the larger percentage, and then you sort of divide that off again, and say I’m going to take that one and devolve it this way and devolve that way, and then you kind of sort of, iterate over and over again until you find that one that actually does the best.   

Matt:  You guys are a Web 2.0 company? 

That’s so funny.  We should start with when we launched, we had no idea what Web 2.0 was, and when someone said, “Oh, you’re a Web 2.0 company” we’re like, really?  We didn’t know that. 

Matt: You’d just never heard the term? 

Team:  Never.  We had no idea.  People were like, “You’re Web 2.0!”  We’re like, “Really?”   

And then we found out there was a Web 2.0 conference. 

Team:  You go, there’s a Web 2.0 conference in two weeks.  We’re like, “What?  Well geez, if we’re a Web 2.0 company, we should be at the Web 2.0 conference.  How do we get to that conference?”  So, we just had no idea. 

Team:  If you look at it, Web 2.0 is generally defined as things that are very collaborative right?  And bring users together to communicate with each other in the web, so, the collaborative web.  And Meebo is very collaborative and brings users together, so, in that way, sure.  But we really don’t define ourselves by being a Web 2.0 company.  We define ourselves by being a company that builds a product that a lot of people really want, that you know, makes them happy when they’re like at the office or they’re at school, or they’re at home and we get them on IM when it would otherwise be difficult. 

Julio:  When you guys launched, I think E Messenger was already out right?  And I think that within four months you guys caught up to the same usage or same number of numbers as E Messenger did.  So I was wondering, how do you think about the advantage that E Messenger had over you in terms of being your first move, or was that actually a disadvantage that you could see what they did right or what they did wrong? 

Team:  It wasn’t.  When we starting calling Meebo the IM client, the third version of Meebo if you will and we’re like, “Okay.  We’re going to make this really software-like experience.  We’re going to make it a great user experience, and we were all gung-ho about it.”  And we found E Messenger maybe like two months into the development or something like that, and we’re like, “Oh, someone has already done something like this” and we took a look at it, and we just thought, you know, they were using Java at the time, and so people had to have Java runtime engine on their computers in order to use E Messenger, and that’s a problem for a lot of people, because they don’t have Java runtime engines, and it had a pop-up blocker issue at the time.  And so, we were like ok, they have a pop-up blocker too, and so we just saw it as, you know, they were clearly doing very well.  We looked, there are lots of charts here, doing extremely well, but we just thought that we could create a really great user experience and do it in a pretty different way.  And what’s interesting is, I do think that there’s, if you set out to copy someone, if you see what someone else has done and you’re like, “You know what, I’m going to copy it, and I’m gonna maybe do it a little bit better” my guess is that that’s when you usually fail and your product usually doesn’t take off with the users.  And so, we’ve watched, you know, a number of people look at Meebo and effectively try to copy what Meebo has done, and for the most part on a traffic basis, from what we can tell, they’ve really not gotten a lot of users, and we’ve noticed that they’ve, you know, copied bit for bit a lot of what we’ve done, but haven’t seen the why, right?  Like, they copy what Meebo is today, but they didn’t see the evolution of how Meebo got there, and so things actually used to look very different when we first launched.  And if you looked at our website when we first launched, it was really different and so, I think that you need to understand why a product is built the way it is in order for a product to be successful.  And so I think that, you know, just straight copying is usually not successful whereas setting out to build a really great product because you have a vision for the product that you think people are going to love, because it’s solving one of your own problems, I think that can create a really successful product.  And it’s interesting, we just had a group of students actually in our office from Taiwan, and they all, there was a group of I think 20, and they won this business competition in Taiwan and so they were going around to different startups in Silicon Valley and asking a bunch of really smart questions, and was, you know, “How do you know that your idea has enough of a potential market” because maybe you’ll do the analysis on the market and you’ll discover ‘Oh, it’s a really small market.’”  And what Elaine, Sandy and I pointed out was if you’re solving a problem that you have, chances are, a lot of other people have it too, and it’s very hard with new technologies that never existed before, to truly size that market.  And so I was pointing out if we tried to do a market sizing on Meebo before we just built it and launched it, we probably would have come up with something really small, like the total amount of internet café users in the world is ‘X’ because we kind of thought internet café users would probably be the prime users of Meebo, and it turns out we were totally wrong, right? It turned out that office and school users were the biggest first users of Meebo, and then that dragged it into the home.  So, you know, doing a market sizing on something like Meebo, which is very new technology, is very hard to do, and if you’re passionate about something and you think it’s solving a problem of yours, you should just build it right?  And build it the way you’d want it yourself. 

Julio: Could you guys talk a little bit about the VC funding process? 

Team:  So, the process…well what happened was we’d launched Meebo without having raised any money at all, and the theory was, let’s just get it out there and see how it does.  Because I think once you raise money, a lot of things change that make you move a lot slower, so, now you have to start trying to hire people, and you have to try find them and you have to interview, and that takes a long time.  And then you need to get an office, which you have to find, and you have to setup, and you have to get chairs and phone lines, and that takes a long time.  And then you have a board that you have to prepare Power Point slides for, and that takes time. 

Julio: And people with podcasts come and interview you.   

Team: And so really, raising funding slows you down for a while, and it only speeds you up once you’ve assembled a team that’s really, really good, and then you can actually get faster.  And so, we weren’t sure initially that we wanted to raise funding, and so we put the product out there and it started doing very well.  And we’re like okay, we need a little money now because we’re having to buy a lot of servers, so we need the money.  And so, we raised $100,000 angel round, from John Callahan and Phil Black, who have now formed True Ventures, and that got us through to about the end of November, when, and we still had a lot of money left but, now we were dying because Sandy was basically keeping servers alive and not coding new features. 

We were dying in terms of time, not in terms of, like the early technology was not that expensive and we were funding it out of our pockets.  We had pizza for a long time. 

I mean, I think, I did the quick math, I think we spent like $6000 a month, the three of us, to get Meebo off the ground to the point where we then raised that angel round.  So it’s very cheap because of open source technology and cheap hardware, etc.  So then we were like, okay, we need to start expanding the team, which meant we had to raise a series A, and when we had to do that, we went to a few of the VC firms who’d been talking to us and contacting us, because they’d seen Meebo, and we’d been talking to them, but we were saying, you know, we’re not raising a round yet, because we didn’t know if we were.  So we went to them and we said okay we’re actually going to raise a round now, if you’re interested in participating let us know.  So they were, and then we basically said to the VC’s, there are four metrics that we’re using to figure out who should work what.  One is just kind of a bar that they had to pass around, like evaluation expectation in terms of conditions, and that was just like kind of a given but not a big deal.  The three more important things were how do we all get along?  Do we all like each other as people?  Where do we all think Meebo should go, and do we agree where it should go?  And finally, how should it get there?  What’s the path it should take in order to get to that final destination?  So, those were the three core metrics that we used to figure out who to potentially work with.  So, I think the interesting thing is this, if you have a product that’s launched that’s getting lots of users, VC’s are very interested, and investors are very interested because they hear about it because they watch the blogs right?  And so they’ll come to you as opposed to you having to go to them, and that’s a lot better.  So it’s kind of like, don’t waste time trying to get in to see a VC, spend all that time building a product, right, and just focusing on the product.  And then, something that fortunately we had this really great founding configuration where Elaine and Sandy are these two brilliant techies and I’m just a business guy who cannot code a thing right?  And the good news is that means that I could do these meetings after we launched that were requested of us, and Elaine and Sandy could keep working on the product.  Now, if there were no me, right, and Elaine and Sandy were doing those meetings, that would have diverted a lot of attention away from building Meebo, and that would have been pretty bad.  So it’s a trap you have to be careful to not fall in to.  If you have a successful launch, you don’t want to fall into the trap of now meeting with everybody, but getting no work done. 

Julio: That’s a great plug for us MBA’s out there … all you engineers… 

Team: Team did just a good job, it’s a funny story to some people, when some people didn’t think that we existed, so… 

It’s true.  Elaine and Sandy would finally come to these VC meetings right?  And we got comments from, “Oh my God, you’re actually real, to… We were a little worried about the culture of this company, we thought Team had you locked away in a dungeon.”  But, that’s the way we chose to do it. 

Julio: Well listen, thank you so much for the talk and thanks for being in the podcast. 

Team:  Cool, thanks very much for having us. 

Thanks for listening.  A transcript of this interview as well as bios and comments are available at iinovatecast.com.