Sam Yagan has had an incredibly successful career. He co-founded SparkNotes with several Harvard classmates. In early adulthood, he co-founded the dating website OkCupid. When OkCupid was bought by the Match Group, Sam moved into leadership roles there, eventually becoming CEO and Vice Chairman. He seeded the swipe-left, swipe-right dating app, Tinder. Currently, he’s the CEO of ShopRunner, which was just acquired by FedEx.
That kind of success across different industries is not a coincidence. Sam has figured out how to read the landscape, understand customers, and deliver a product that people love.
It shouldn’t come as a surprise that data has had a role to play. But for Sam, it’s not just about the data—there is an element of following his heart, too (dating app pun fully intended).
Take, for example, the story of OkCupid’s blog, which is what initially put the dating site on the map in a big way.
The company, founded by Sam and other math majors, was steeped in data. The concept was that people could enter data about themselves and what they were looking for in a partner, and an algorithm would help them find their perfect match.
They gamified the data collection process, rewarding those who input more data about themselves with higher quality matches (which they could offer because the algorithm had more data to work with).
With so many people handing over data to find love, a lot of data on people’s dating habits passed through the company’s hands. Sam and his co-founders happened upon fascinating nuggets. For example, they saw that as the price of gas rose, people narrowed their search radius for potential matches. People didn’t want to squander gas to drive further away to meet up on a blind date!
Sam and his partners found this data intriguing and reached out to journalists to pitch the data as a story about dating trends. All of the journalists responded in the same way: “The data is interesting, but we’re not writing about dating right now.”
After a few rounds of pitching dating data and getting no bites, one of Sam’s colleagues decided to write his own blog post on the topic. They made infographics and shared the data in a fun and engaging way.
And it took off. Suddenly, they were getting more press inquiries than they could handle. Sam credits this savvy organic marketing move as one of the key drivers of OkCupid’s early success.
Sam’s experience with OkCupid could be read as proof of the power of data. Data fueled its product development, informed its marketing techniques, and was at the heart of the company’s success.
But Sam is realistic and knows that nothing (not even data!) is perfect. He shared another story to demonstrate the perils of over-reliance on data.
Sam was aware of the research out there about what worked in a dating app and what spelled disaster. All of the data said you should never do these three things: create a pictures-only app, make your app location-based, or require registration via Facebook profile.
As a mentor with the incubator Hatch Labs, he was introduced to a teeny startup called Tinder. The app went against all of the rules. Their pitch was for a photos-only, location-based app that only worked with Facebook sign-in.
If Sam had only listened to the data, he would have sent them on their way. But something told him to give them a shot, and the rest is history.
While data can be a powerful tool, he acknowledges that the way we use it can be flawed. There are many ways to twist data to make it say what we want it to say. We have to be careful when relying on data that we’re not telling a story to confirm our biases. Maintaining objectivity is key. That’s why, sometimes, it’s okay to follow your heart and take a leap of faith, even if the data doesn’t back you up.
Rob Ristagno: You know all of us at The CEO Campfire Chat fully believe in the power of data, but is it possible to get carried away? How do you strike the right balance between relying on the numbers and listening to your heart?
Rob Ristagno: Today’s guest talks about how data and intuition both have helped him achieve major business success. And for the single people out there, listen carefully. You might even get some dating tips.
Announcer: This is the CEO Campfire Chat with your host, Rob Ristagno. Taped in front of a live studio audience, join us to hear successful growth stories from middle-market companies just like yours. Sponsored by the Sterling Woods Group.
Rob Ristagno: Welcome to the CEO Campfire Chat, recorded live in front of an audience of senior executives. I’m your host, Rob Ristagno, and have the privilege of introducing you to Sam Yagan, CEO of ShopRunner, which was just acquired by FedEx. Sam is also known as the founder of OkCupid and became the CEO of Match.com, the Match Group, after being acquired. While at Match, Sam and the company launched the famous swipe left, swipe right app called Tinder. And if that wasn’t enough, back in college Sam and some others co-founded SparkNotes, which completely disrupted CliffsNotes, which many people on this call probably are familiar with. Not that anyone here used it. My high school English teacher is in our listening audience. So, we didn’t use it.
Rob Ristagno: Sam, welcome.
Sam Yagan: Thanks for having me. It’s great to be here.
Rob Ristagno: Yeah, it’s amazing. Thanks for joining us and congratulations on the recent acquisition.
Sam Yagan: Thank you. Right place at the right time.
Rob Ristagno: Well, tell us a little bit about FedEx’s vision? Are they trying to become the Tinder of e-commerce here?
Sam Yagan: I wouldn’t say that. I’d probably get in trouble. FedEx has established itself as really the premier company in post-purchase e-commerce. So, the best way to actually get that order fulfilled from the time you hit buy to the time it shows up at your door. ShopRunner really has focused on the pre-purchase experience. Our goal is to give our members that VIP experience, that sort of TSA pre, if you will, to be able to just fly through any one of our retailers’ e-commerce websites.
Sam Yagan: So, the marriage of what we think of as our best-in-class pre-purchase experience with their best-in-class post-purchase experience hopefully will bring together some magical experiences for customers and a great way for retailers to compete in this ever more challenging environment.
Rob Ristagno: All right, the pre-purchase going together with post-purchase. It sounds like a match made in heaven, even though I just had a heard time pronouncing it.
Rob Ristagno: Let’s talk a little bit about you’ve built several companies here and successfully exited them or merged or went public. Tell us a little bit, though. You once told me that you think having a large advertising budget is cheating a little bit. You’re really a big fan and have shown it’s possible to bootstrap these businesses, and now they’re iconic household names. We all know OkCupid. I met my wife on Match.com.
Sam Yagan: Great.
Rob Ristagno: So there’s lots of people out there who are very familiar with what you’ve done without a huge marketing budget. Maybe walk us through a story, tell us a little bit about how you scaled SparkNotes. Let’s go way back to the beginning?
Sam Yagan: Sure. I think when I say it’s cheating, I think there’s great power in paid marketing. When I was the CEO of Match, we deployed a meaningful nine-digit marketing budget every year. So, I’d probably revise the statement to say it’s cheating, but if you go back to SparkNotes, you have to go back in the wayback machine to 1999. The internet was a very different place back then, and CliffsNotes was the dominant brand of study guides. When I grew up, in high school, I couldn’t even tell you what the number two brand of study guides was. For those of you wondering, it’s probably Monarch Notes or something. Cliffs was 95% plus market share.
Sam Yagan: When you asked in that survey earlier today, I hit product, because to me the story of SparkNotes’ marketing, yes, is brand, but also was really a product innovation. If you think about CliffsNotes the way we all experienced it growing up, it was a physical product. It was a product that in many cases was almost as long as the book itself that you were trying to read or augment, and your experience of that book was linear. You had to start at the beginning and go through it. Maybe you’d use the index to help speed up or slow down that process, but it really was limited.
Sam Yagan: What we did is we realized that the internet had really fundamentally changed the way a student could interact with a study guide. All of a sudden, things like search became very easy. All of a sudden you didn’t have to read linearly. You could just say, “Okay, well even though the book is 40 pages, the thing I really need is right here, and I’m going to be really deep and laser-focused.” Also, little things like oftentimes you don’t remember you need the study guide until after the book store is closed. So, it was just an inherent limitation even in the distribution of the product.
Sam Yagan: So, we basically hired our classmates. The idea was sort of for students, by students. So we hired our classmates. We built a brand that was irreverent. More like your older brother than your professor, and let’s face it, who do you want to be in a study group with? Much more your peer. Sort of who’s that smart kid in class that you want to be in the study group with. That’s what we were trying to build with SparkNotes.
Sam Yagan: So, we had this more irreverent brand, we didn’t take ourselves too seriously, we built a product that was I think better but also more designed for the way students needed to use it.
Rob Ristagno: Yeah, it sounded like you listen to the use cases, figure out how and when and what was missing from what was going on. If the bookstore is closed or you can’t get a ride there, you don’t have a way to get it. Very clever.
Sam Yagan: The great thing is there’s natural virality built in. If you’re reading the book, likely your other 30 or 300 kids in your class are reading that same book, and you get social capital from sharing a new innovation. So, people would immediately say, “Oh my gosh, I found this great study guide on Scarlet Letter,” and boom. We would just see spikes in individual zip codes whenever that happened.
Rob Ristagno: Did that happen automatically or did you somehow fuel that fire?
Sam Yagan: Once we saw it happening, we made it easier to share with friends. This was when forward to a friend was still [crosstalk 00:06:54] technology back in the 90s. But no, it was something that was a natural consumer behavior that we tried to push along.
Rob Ristagno: Okay, so SparkNotes, disrupt the incumbent, provide an experience that people want but doesn’t exist right now, make it easy for people to share and get that viral word of mouth factor. Let’s shift gears a little bit to OkCupid and tell us a little bit about how that got formed and how you thought about scaling that business.
Sam Yagan: Yeah, we created the product because we were dissatisfied with the products that were out in market. Not even that we were consumers or users of the product, but the smugness of Dr. Phil and Dr. Neil Clark Warren of eHarmony, they presented this marketing message of, “We know what’s best for you, you poor single person. You don’t know what you want. Let us look into your soul and find you a soulmate.” That’s very much the ethos of eHarmony in particular, and our view was people aren’t single because they don’t know what they want. People are single because they don’t meet enough other single people in their day, and our proof for that is the reason we’re all alive is because we had ancestors who managed to find a way to find someone to make a kid with. So, people know how to find other people. We are wired that way. So, if somebody wants to have found someone and hasn’t, then likely their challenge is … Not that people can’t get help in finding what they want, but largely it’s probably a situation of they haven’t met enough people.
Sam Yagan: That was the product problem that we were solving. We had a couple marketing innovations, I would say. The first was we created a matching algorithm that was naturally one that drew other people into the fold, and the way we did that was through a community-generated Q&A system. Instead of the eHarmony model where Dr. Neil Clark Warren says, “Here are the questions that matter,” we engaged the community into saying, “Hey, if your best friend from college calls you up and says ‘hey, I’ve got someone I want to set you up on a date with,’ you don’t just say yes or no. You’re going to ask her some questions.” Maybe it’s about jobs, maybe it’s about pets, maybe it’s about religion. I don’t know. But you already know in your mind what are those questions that you want to filter a perspective date on.
Sam Yagan: So, we basically allowed consumers to submit those questions to us and in that way share those questions with other people around the internet. Those questions themselves became marketing fodder as people said, “Oh, that is an interesting question.” I’m going to go answer that question and use that as the profile creation mechanism by which they would join OkCupid.
Rob Ristagno: Excellent. So it sounds like crowdsourced product and marketing to some extent.
Sam Yagan: Exactly, exactly. I think the thing that we really ended up getting more acclaim for and that really boosted our business even more was our blog that we wrote. So, I’m a math major. My three co-founders are all math majors, and we built OkCupid on this idea of using data to generate these recommendations, and I’ll tell you a story of failure first, and then a story of success. We knew that this data that we had would be valuable from a marketing perspective. The way to think about the data that we have, remember I’m watching every single interaction of people on my website. I know when a person of this age, gender, ethnicity who plays video games two hours a day, whatever sends a message to this person. I can tell whether that person responds, responds positively, engages in a conversation, goes on a date. The analogy is imagine a video camera in every bar in America, and you can just watch people date. What would you do with that data?
Sam Yagan: Here’s what we found. This was in 2009 right after the financial crisis. We found that when the price of gas goes up, people narrow their search radius. I thought that was pretty cool. It’s more expensive to drive. I’m going to look for someone closer. So, what did we do? We hired a PR firm, we packaged up this beautiful little nugget of data, we had the PR firm call, I don’t know, 100 reporters. Every single reporter said the same two things. “This is fascinating data. Please keep me on your list.” And, “I’m sorry. I’m not really writing a story right now about gas prices and dating.”
Sam Yagan: We literally got zero pickup on the first story. So we said, “Okay, well 100 people said they want to know more. Let’s look past the zero. Let’s do it again.” Next month we come up with our next stat. PR usually calls 100 people. 100 people say the exact same thing. “This is really cool data. I’m not really writing a story on this right now.”
Sam Yagan: So we sort of had this moment where like, “Oh, should we just shut this thing down and give up?” One of my co-founders said, “I’m just going to write a blog post about his.” And so basically took the exact same data that we had tried to farm out to the reporters and the journalists, and instead we wrote a pretty long three, four thousand word blog post about some insight that we had gleaned. We used humor, we used … Remember when infographics were all the rave? We had all these infographics, we made it funny, but it was all fundamentally holding a mirror up to society and saying, “This is how we date people.”
Sam Yagan: Anyway, so this blog became really required reading for people in digital media in 2009, 2010. I was telling the breakout room in July of 2010 we made three consecutive Sunday New York Times section covers. Arts, culture, and tech.
Rob Ristagno: Oh wow.
Sam Yagan: Each one writing about a different blog post that we had done and just sort of being fascinated with how we had taken this data and in one case sort of reflected on society. In one case, built this great tech product around it. So we became a household name in 2010, and I would argue that blog really drove the acquisition. Match finally realized they have a marketing engine that we can’t buy. You can’t buy those New York Times section covers. So I would argue that that one marketing strategy drove tons of enterprise value and lead to Match wanting to buy us.
Rob Ristagno: That’s amazing. I think it ties back to really understanding your customer and the data you have about your customer and then turning the data you have about your customer into either marketing materials or the product itself. I think I could see that in your story about SparkNotes, and it’s much bigger and more amplified in your OkCupid story. By the way, for the single people in the listening audience, any pointers do you remember from that infographic? What should they–?
Sam Yagan: I used to go on Rachael Ray and give dating advice and horrified my wife. She’s like, “You know every time you do that I get shit from my colleagues …” Can I say that?
Rob Ristagno: Yeah, sure.
Sam Yagan: “I get made fun of at work.” She had a corporate job, and she’s like, “How do I explain that my husband is giving dating advice on Rachael Ray?” She’s like, “This is a disaster.”
Audience Member: Can I have a question?
Sam Yagan: Yeah.
Audience Member: Sam, you may have said this, but was the blog written by a professional writer or one of the math majors?
Sam Yagan: One of the math majors who it turns out became a New York Times bestseller. He wrote a book called Dataclysm, which I strong recommend to everyone here on using data to market. Turns out I guess he was an about-to-be professional writer, but he was at the time an amateur.
Audience Member: Wow, great.
Sam Yagan: Rob, to your question, I think it varies a lot by gender actually. Quick tip is women’s pictures, and here I’m going to use a heterosexual norm, women’s pictures should look directly into the camera. Men’s pictures should look off-camera. So there’s a simple tip.
Rob Ristagno: Does that apply to LinkedIn profiles? Or is that only-
Sam Yagan: I don’t know anything about LinkedIn profiles.
Rob Ristagno: All right, I think someone out there’s going to run that analysis.
Sam Yagan: I’m sure. I’m sure.
Audience Member: What’s the reasoning for that?
Sam Yagan: We only have anecdotal support for it. So the data show that those are the better responding pics. When we talk to users, the members, I think men see that as attention to them. When they see a woman looking at them, she’s not looking at other men, and I think women find it a little bit weird when men stare at them. But that’s not data-supported. Well, that’s qualitative data-supported. Not rigorous quantitative.
Rob Ristagno: We’ll poll that next week in the studio.
Sam Yagan: There you go.
Rob Ristagno: So now you’re at Match. You’re at a bigger company. You have bigger budgets. Tell us what part of the ethos you kept, and tell us what you did differently now that you had access to, as you said, what was it? A nine figure marketing budget?
Sam Yagan: Yeah. I think for me that was a great learning experience for me. I had certainly done some small tiny, tiny tests at OkCupid, but I’m sure I had never deployed a million dollars of marketing. Probably not even $100,000 of marketing. So for me it was learning.
Sam Yagan: Again, I think it’s always important to understand the timing of this. This was 2012 through 2015. So I think a lot of sophistication that we have now on multichannel attribution, et cetera was still much more nascent. We were not unique, because I’m sure there were other brands like us, but we were A, market leading. So we had a lot of just organic brands awareness. We did a lot of television, and at the time I think it was much less trackable than it is today. And we were doing obviously a bunch of direct.
Sam Yagan: So the question of how you think about spend with that sort of position … I remember the CEO before me had kept basically offline and online marketing in two different orgs, and I put them together under one CMO. The woman who was the CMO had come out of the direct online, and she was such a TV skeptic. She came into my office and she’s like, “All right, I’m declaring no TV Tuesdays,” and she would go dark on Tuesdays. She’d be like, “See, nothing changed. No TV Thursdays, and nothing changed.” But of course there’s this longterm effect, and so we really just spent a lot of time trying to understand what are those dynamics.
Sam Yagan: Then how do you start introducing marketing into OkCupid was something that we spent a lot of time on. OkCupid’s lifetime value of a customer is much lower, which was fine because we had no customer acquisition cost. So your LTV-backed structures have to sort of go together, and so how do you begin introducing paid customer acquisition into low lifetime value environments and do you try to get creative, especially in a network business like OkCupid? Are there certain users who bring value to other users, and can you try to attribute more value? Again, I’ll use the heterosexual norm here like you might pay more to have some women in the bar to make sure that you have the men come later. There are those kinds of dynamics that are there actual members in the community that actually generate more monetization elsewhere in the community. So, you get a lot of creativity around just how you think about lifetime value in those kind of environments.
Rob Ristagno: Do you have data scientists doing this for you? How are you figuring this out?
Sam Yagan: No, I would say analytics, and I try to be rigorous about the difference between data science and analytics. We did a ton of analytics on it, but I would say we weren’t machine learning. No A.I. was put to work.
Rob Ristagno: Go with your gut. Follow your heart. Trust your intuition. We’ve heard this kind of advice before, and sometimes it works like when you’re trying to decide what movie to binge tonight or you’re on the fence about asking her out for that second date or you have sneaking suspicion about which neighborhood dog keeps digging up your lawn. But it’s not the way to make major business decisions.
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Rob Ristagno: So now Match.com. Tinder comes along under your tutelage here. It was a part of Hatch Labs. You want to tell us the story about how Tinder was founded?
Sam Yagan: In the spirit of what I said earlier about the blog, I’ll start with failure. A failure that turned into a success. I know this is about marketing, so I’ll try to keep this part short. But I think one of the challenges that many of us who claim to be data-driven or want to be data-driven is how do you innovate when you’re constrained by what the data tells you, the data tell you. Here’s an example: If you had asked me in 2012 tell me some things about the online data industry that you consider to be veritable facts of the world, I would tell you number one, nobody wants a photo-based dating site. Some of you may remember the site called hotornot.com from the 90s where people rated each other. I see Michelle remembers this one.
Sam Yagan: You would upload a picture, and then you would get rated one to ten. This company was a fad, flash in the pan.
Audience Member: Oh my God, that sounds horrifying.
Sam Yagan: It sounds horrifying. Exactly. Nobody wants a photo-based dating site. I would have said that, and there’s data to prove that. Every one that’s ever been started has failed. Number two, this was the era when Facebook login was just starting, and we probably had run 100 A/B tests testing adding or requiring Facebook’s off into our registration flows, and every single one of them lost. The rationale that we reverse justified into explaining away the test results was people want to keep their dating life and their social profiles separate. This was back in the day when Facebook spammed your feed all the time with like, “Rob did this on this app,” and you’re like, “Wait, why did this just get spammed back to my feed?” So, those two.
Sam Yagan: Then number three, no dating site has ever launched with a local marketing angle, because it’s too hard to get density if you constrain yourself to one location. So you want to have a national footprint so that even if the match isn’t local, it at least creates entertainment value as you sit there and look at people. So, I would have said those are three data-driven facts of the industry, and if you were data-driven, you would have used that to constrain what you were doing.
Sam Yagan: We had these different labs around the company, and this team had created a hack-a-thon. They had created this dating app. It was called Matchbox at the time, and they presented it to me. They had three points to make. Number one, it’s so simple, you have to log in with your Facebook ID. You cannot sign up with email. You can’t sign up with a cell phone. You must only log in with Facebook. That’s the only option.
Rob Ristagno: That’s strike one.
Sam Yagan: Number two, there is no contents on your profile. It’s just your picture, and someone who sees it can either swipe left or swipe right. And they’re like, “We’ve got a great idea for how we’re going to launch this thing. We’re going to go to USC and SMU and we’ve going to launch with some sororities.”
Rob Ristagno: So they’re batting O for three at this point.
Sam Yagan: Literally I’m looking for the candid camera to be like, “You’ve been punked.” I’m like this is everything you’re not supposed to do as a dating product. So the only credit I get in really, I think, launching Tinder was when you get to the end of the ask, I said, “Okay, well what’s your ask?” They said, “We want $50,000 to go do this sorority launch.” I’m sitting there saying to myself, “It’s not going to work. I’m the king of online dating. It says so on Time.com. This is not going to be a thing,” but then I at least had the humility or stupidity, I don’t know what it was, but $50,000 in the scheme of a $300 million dollar marketing budget, I was like, “Well, I could be wrong.”
Sam Yagan: We said, “Go for it,” and that $50,000 investment is now worth almost $50 billion in market cap. Anyway, that’s I think not really a marketing. I guess there was a small marketing piece in there, but-
Rob Ristagno: Well, it’s grounded in what I would consider your analysis of the market, the data-driven-
Sam Yagan: Okay, fair enough. Fair enough. I think that’s just a word of caution, especially for market leaders where you are so subject to confirmation bias and just saying, “Look, we know the market. How can we be wrong?” I think that’s where you’re really at risk of having an insurgent … We happen to be the ones that owned it, but Tinder could have just as easily been owned by someone else and really eaten our lunch.
Rob Ristagno: That makes sense. Sometimes I say if you use data too much, you can optimize yourself into a corner. It sounds like those three rules were your corner.
Sam Yagan: That’s right.
Rob Ristagno: Questions from the audience about the birth of Tinder and how it grew up?
Audience Member: I’m thankful that none of this stuff as around when I was in college. I don’t know how things would have turned out, but the question I have always thought about, especially when it comes to dating apps is how far do you guys have the, I guess you could test into this, permission to really push for data? For example, the feedback loop after you go on a date, how did it go, how was the match, do you find that consumers … I think they’re getting so much more sophisticated, and if I tell you this, you’re probably going to give this back to me. So are you finding that they’re, especially in the dating world, I’m willing to give up more information about myself and what has happened with that data or whatever so that we get it right next time? Or how’s that go?
Sam Yagan: Yeah, it’s a great question. It’s a great question. On the specific question of date reviews, I think until mobile apps became ubiquitous, the hardest part of that was actually verifying that the date happens. I think there are opportunities to do that now, but in the early days when before you knew you were going to have your app on the phone, the biggest problem was just the risk of someone saying, “I want on a date with this person,” and it’s really just someone trashing their ex. So, we didn’t do a lot of that.
Sam Yagan: But to the spirit of your question about getting data, to me it’s all about making it as clear as possible the return to the customer for the data. What I mean by that is … The OkCupid example is every time you went to a profile of another member, we put in big bold font what your match percentage was, what your compatibility was, which was quantified. The powerful thing we did was before you give us any data, if you have any answer to any of these questions do you play two hours of video games a day, how many times a month do you go to a religious service, before you give us any of that data your match percentage with everybody on the system is zero. It says zero in big font right there in some way saying our product doesn’t work.
Audience Member: So you have to earn that customization, yeah. They see the benefit of that, yeah.
Sam Yagan: The intuition that I think a lot of other products could use, we want to show people that know what’s going on as soon as possible. I think you could imagine a default being actually overstating our confidence. So we said, “Look, you didn’t give us any data. Zero.” Nobody wants a big zero staring at them. So you’d give us that first question. We’d say four, and importantly, the matches got better. Now all of a sudden those people who, you know, I don’t want to date somebody who plays two hours of video games a day, awesome. They’re gone. You’re like, “Oh, these people are better. I’m going to do more.” Then it’s 12, and then it’s 16, and then it’s 89.
Sam Yagan: Then we saw people who they realized that at 89, the matches are so good I want to keep going. We had people answer 4,000 questions in our database-
Audience Member: That’s great.
Sam Yagan: … because they wanted 99.9. I’ve gotten emails from people who have said, “Sam, I ended up marrying …” My favorite … Well, I have a lot of favorite stories. “I went on one OkCupid date with my single best match on the entire platform, and we’re married.” You hear that, and you’re like, “Wow.” Of course that’s not the usual case, but you pat yourself on the back when your algorithm works like that. You’re like, “Wow.”
Audience Member: My husband was complaining that Netflix doesn’t understand his algorithm anymore. I think it’s becoming like people are naturally like, “Okay, the more data I drop, I’m getting smarter at. I hope the company stays as smart as me.”
Sam Yagan: Oh, interesting. Interesting.
Audience Member: Yeah, that’s great. That transparency is critical. Obviously your business, too, because it’s such a personal situation.
Sam Yagan: That’s right. So I think obviously there has to be a level of trust that you’re not going to use it for bad, but then there also has to be like what is the reason for good.
Rob Ristagno: Another question I have is it sounds like scaling a business is so much fun and you know exactly how to do it, and it seems like you had a lot of fun doing it, but at some point there comes a time to merge, sell, go public. Let’s get inside your head a little bit. When is it time? When is it time to let someone else take the baton and take things even higher?
Sam Yagan: I haven’t yet sent a kid off to college yet, but I think there’s an analogy that is somewhat like that, especially when you found a company. I’ll draw a little bit of a contrast between OkCupid and SparkNotes, which I was a founder of and ShopRunner, which I was not. I think that when you start a business, especially a digital business that you get outside investment for, you kind of know at some point it’s going to have a different capital structure. It’s going to be acquired. It’s going to be public. You could own it for the rest of your life. That is the exception in these kinds of startups.
Sam Yagan: My oldest is 13. At some point she’s going to go to college most likely or she’s going to leave home, and in that case it’s not a negative. It’s bittersweet, but it’s sort of an expected part of the relationship we’re going to have. So, I think I look at that kind of similarly with a startup, which is the fact that SparkNotes 20 years after I sold the company to Barnes & Noble, we sold the company to Barnes & Noble it’s still market leading, that’s awesome. We built something that lived beyond us.
Sam Yagan: OkCupid is not the market leader, but a market leader, and it has survived a decade since we sold. In fact, oh my gosh, maybe today. This might be the 10 year anniversary. I should celebrate.
Rob Ristagno: All right, happy anniversary.
Sam Yagan: Yeah, it’s sometime. I’d have to go look, but definitely the last week of January in 2011. It has lived beyond its founders, and so I think it’s a very emotional thing. For me, what I’m looking for in that transaction is permanence. What do I mean? I want my kids to use the products that I’ve had blood, sweat, and tears in building. We’ll see if Barnes & Noble is a permanent entity, but at the time it seemed like Barnes & Noble might be around for a while. When I sold OkCupid to Match, we thought Match was the market leader, and it’ll be around for a while.
Sam Yagan: In the ShopRunner case, I was the first CEO of the business, and I was brought in six years into its existence. So, I don’t have that same emotional relationship that I have with OkCupid and SparkNotes.
Sam Yagan: So here I think it’s a little bit more of a strategic match than sort of a natural evolution. Here our vision was to build this ecosystem that would allow retailers to compete with Amazon. It’s a bold, big vision that will take us years and hundreds of millions of dollars of investment to build into what I had in my head. We could have done that ourselves, but FedEx has some incredible resources. Physical resources like planes, financial resources like dollars, and intangible resources like relationships in the industry.
Sam Yagan: So from there I look at ShopRunner as more like a Rubik’s cube that I’ve been trying to solve for the last four years. What is the right way to the game? Or chess match maybe is a better example. If partnering with FedEx helps us win the game, it’s not my company anyway. And so whether my company is owned by my previous investors or whether my company is owned by FedEx, as long as I’m the CEO and as long as I have the ability to pursue my vision, build my culture, what does it matter? It’s a very different emotional situation I think when you’re the founder versus when you’re the hired gun CEO.
Rob Ristagno: Makes a lot of sense.
Sam Yagan: At least for me.
Rob Ristagno: What other questions do we have from the audience?
Audience Member: Yeah, I’ve got one if you don’t mind. I thought it was fascinating talking about all the different algorithms and the data science and things that you guys were using for Match and for Cupid. How much effort do you put into those versus trusting your gut kind of like what you talked about with Tinder where you had a little bit of extra cash, and it wasn’t that big of a deal, but to kind of trust and say, “Okay here, let’s try this out,” versus trusting saying here data says one thing, but my gut says something else? When do you draw that line?
Sam Yagan: It’s a great question. I think what I’ll maybe try to do is try to tell you how I actually merged them together. When I took over Match, I realized that they used data. It was a very data-driven organization, but the expectation was still that their tests would all succeed and that an A/B test that one was considered better than an A/B test that lost. There just wasn’t this built-in culture of failure and that it was okay to fail. Not just that it was okay to fail, but that actually failure was a requirement of learning and failure was a requirement or at least a corollary of ambition.
Sam Yagan: The analogy I took the team to have an offsite, and this was right after SpaceX had launched this rocket that was supposed to return to the ship it launched from, but it landed in the ocean a little bit away. I showed a picture and I said, “What is this?” Someone answered, “Oh, that’s the failed SpaceX launch.” I said, “I’m glad you said the word fail. Elon Musk’s goal is to go to Mars. Does anyone think it’s a reasonable expectation to go to Mars without ever failing along the way?” Of course the answer is no. You have to fail.
Sam Yagan: So, I pair never failing with insufficient ambition. If we have enough ambition, we must fail, and we must learn from those failures. So the question was intuition versus data. To me it’s just like, “How do we allow ourselves to test our intuition?” It’s okay if that intuition is wrong and the data tells us it’s wrong, and that’s a little bit what I think we ended up doing at Tinder. Had that $50,000 test been a waste, I hope we would have learned something. I hope we would have said, “Okay, was it the wrong sororities? Was it we should have done fraternities? Was it that we went to the wrong schools? Or is this just another validation that local marketing is not a way to launch a dating business?”
Sam Yagan: Maybe I’ll try to answer just one more different way, which is the intuition has to inform what data you go get, what data you look at. Otherwise you wouldn’t need management. You would just have robots. So, we as managers have to bring our intuition to the data or else we are useless.
Rob Ristagno: It’s all about asking the right questions of the data.
Sam Yagan: And interpreting the data. We all know we can make data say anything.
Rob Ristagno: We have time for one more question from the audience.
Audience Member: I have one. It’s a little off-topic if that’s okay.
Sam Yagan: Love it.
Audience Member: Okay, so I have two, because my kids don’t share, Oculus virtual reality in my house. I’m blown away where we’re going to go with this world, and I was trying to explain to my kids. They’re like, “Oh, we got it.” They’re already there. So, I would love your thoughts on what you see virtual reality doing great things for us or we have a whole new game coming ahead in terms of how we just consume content and interact with human beings. I know in this pandemic -I’m sure with other folks on this call- my kids have made these connections with other kids who aren’t even in our town. Of course we’re keeping an eye on it all, but just that connection across experiences.
Sam Yagan: Yeah, I think all the data would suggest that I think when you get these new platforms or these step change in consumer experiences that innovators and others will find use for them. So, I think this is happening. If you had told me 20 years ago that everybody had to have a computer in their pocket, you would have said, “That’s crazy. My mom does not need a computer in her pocket,” and we all have one. So, to me it’s really an innovation on what is the form factor going to be right now. I think how the actual human interface into those has to, I think, evolve in a way, but it’ll start out with very specific use cases where maybe it’s seeing a design of a room or something, and you’re like, “Okay, I will do that.” Or if it’s a game where you’re willingly immersed into this other, which is this VR.
Sam Yagan: I think the day when I can walk into a bar and my VR glasses tell me who all the single people are and that’s the person to go date, that’s an amazing use case. Scary, but amazing use case. It’ll happen at some point, but I can’t wear my Oculus VR thing into a bar.
Rob Ristagno: Or you’ll have to do some research on if you have a profile picture with the goggles on.
Audience Member: Not without a mask.
Audience Member: Right.
Sam Yagan: Right, you have a mask and an Oculus VR.
Audience Member: I think even the education space or just training space. Obviously fine motor skills. We can’t teach surgeons that way, but just getting people immersed and experienced. Like if you have a fear of heights, can you overcome it by virtual reality? It’ll be interesting to see where it ends up going, therapeutically and just for entertainment.
Sam Yagan: I think you say that it’s obvious that you can’t do it with fine surgical. I think you will be able to.
Audience Member: Maybe. Yeah, right?
Sam Yagan: Why not?
Audience Member: Fire it off from here to here.
Sam Yagan: That’s right, that’s right.
Rob Ristagno: Well, excellent. Sam, this has been extremely helpful to all of us. I’ve learned a lot. I think the common theme is just looking at your customer experience, looking at the data around your customer experience. That becomes your marketing. That becomes your product, and it’s really a self-fulfilling virtuous circle. So, thank you so much.
Rob Ristagno: What can the group do to help you out? This has been helpful to us. What can we do to help you out?
Sam Yagan: I am just happy to have been a part of this and to see so many smiling faces today. So, go do something kind for someone else, and that’s my ask.
Rob Ristagno: Thanks again, Sam, and congratulations on all your all successes. This has been the CEO Campfire Chat with your host, Rob Ristagno. To listen to more episodes, sign up for bonus content or take a two minute business growth assessment. Visit ceocampfirechat.com. See you next time around the fire.
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