Smart Bear Live 6: Jared from Padseeker.com

SBLive – @ASmartBear – WP Engine

Welcome back to Smart Bear Live, the call-in show with Jason Cohen, sponsored by Software Promotions. In this episode, Jason speaks with Jared from Padseeker.com.

Listen to this episode if you want to hear a really tough conversation about refining a cool idea into a profit-making business. This is a long episode (1:20), but it’s a conversation that will resonate with a lot of early-stage startup founders.

Don’t forget to sign up for the wonderful Business of Software conference to hear Jason speak in person.

You can subscribe to Smart Bear Live on iTunes (please review the podcast as well!) … and if you’d like to appear on a future episode of Smart Bear Live, send an email to the Smart Bear Live producer, [e-mail], to schedule a recording with Jason.

Transcript

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Jason: Hi, Jared, tell me a little bit about your business.

Jared: Well, the name of the company is Padseeker.com. So we’re trying to
build . . . I guess the best way to describe it is some sort of analogy,
that Padseeker would like to be for rental properties and real estate what
Shopify is to e-commerce. I think that is a pretty good one-sentence
synopsis, but I can give you more information if you’d like.

Jason: So what’s the idea? I’m looking for an apartment and this is the
best place for me to find one? And if I’m trying to rent out a place, this
is also where I go? In other words, it’s a marketplace, or what?

Jared: Yeah, I think initially the real focus of Padseeker is going to be
an on-demand solution to create a website for property management.

Jason: I don’t know what “on-demand solution” means. You mean website?

Jared: Yeah, it’s a website. I mean, if you own a few buildings, or maybe
you own many buildings, maybe you have a website, but you’re not happy with
it. Maybe you didn’t think it was worth it to spend $5,000 or more on a
custom website, something along those lines. I mean, imagine, in an
abstract sense, how you might download, say, WordPress, and you’re doing
that for content management, or for a blog. And I know that there are some
online solutions, I’m not exactly sure if your site is . . .

Jason: Well, look, every apartment I can find has a website already, and
then there’s stuff like CraigsList, so I don’t understand why anybody needs
this.

Jared: There are quite a few property management companies that have sites,
but they’re somewhat out-of-date in the sense that . . . I think that our
biggest, our easiest group of people to target or market to are people who
. . .

Jason: The question is, if they already have a website, how come it’s not
just Craigslist? Because that’s where people are going To go for things
like that, to find apartments. They’ll just Google it, and they’ll find
apartmentratings.com, for example, which is really good at SEO, and is
basically a way to find apartments, with ratings even, and it’s very
popular. Why do we need this thing?

Jared: That’s a very fair and good question. I think, for an individual
company that has their own property website that it may not have some of
the features that they used to have. I guess I’m more targeting property
management companies.

Jason: So why is it called Padseeker?

Jared: Because that . . .

Jason: That implies it’s for people finding apartments, but you’re saying
. . .

Jared: That’s a very fair point. The idea was to have a single source of
information, as far as people creating multiple sites, and then eventually
have an API where people could build stuff on top of Padseeker in the sense
that multiple companies would put their properties into Padseeker, get
their own site out of it, as well as have an API where people could
potentially grab that data. I mean, that wasn’t necessarily the . . .

Jason: Okay, wait, but who cares about grabbing the data? That’s already
there, there’s already websites that have all the data. I don’t get this.
So it’s property management software? With a customer-facing front end as
well so it also manages your front-end website? Is that what it is?

Jared: All right, the first stage is primarily . . . you have a property
management company, but you don’t necessarily have a website for yourself,
or if you have a website, you’re not happy with it. You did it five years
ago, it doesn’t have Google Maps, not mobile compliant. My goal is to say
to them, “I can get you a much more affordable and up-to-date solution for
your website.” And to get as many customers as possible in that respect.
That’s primarily what the first stage of the business is going to be, and
that’s what I’m going To focus on, and that’s what I’m trying to get live.
So I certainly appreciate you trying to burst the bubble, but it’s . . .

Jason: So it’s not property management, it’s just the website for a
property manager so that they have a presence that’s not outdated, and
which presumably makes it easier for people to find it, and if they find
it, to actually discover the apartments that they have, and where they are,
and that kind of stuff.

But from what I can tell, that’s not how people find apartments anyway.
They go through apartment locators because, for the clients, those are
free, and you get to tour around and look at them, which is what you really
want to do, and they help winnow down the results, and you and I know that
they don’t really give you the full gamut of what’s available, they only
have certain things they get kickbacks for, we know.

We know it’s like that, but nevertheless, it’s easy, it’s free, they will
show you things that are more or less in the area and price range that you
want. That’s how you find an apartment, so I don’t understand why the
property management needs a modern website. So have you talked to some of
these property managers.

Jared: I have. I’ve had about four conversations. One of them is . . .

Jason: Great. So why did they say they want a new website? Because I can’t
believe they get a lot of traffic anyway of normal humans finding
apartments that way instead of through one of these SEO websites or through
a physical apartment locator.

Jared: I would agree. I think part of it, initially, would just be to have
a presence on the web and the ability to say, “Hey, if you want to . . .

Jason: No, no. What did they say? Why did they say they’re going to throw
away their website and use you? They said it’s because what?

Jared: All right. The first customer that I had the most receptive
conversation with is, they don’t have a website.

Jason: No, not at all.

Jared: They deal with specific . . .

Jason: Okay. So it could be you, it could be a WordPress site, and you may
be a faster, cheaper way to get to a website. Okay. So, that’s one.

Jared: Yeah, that’s part of it.

Jason: That’s a really easy one, but, then again, most people have
websites, I’m sure.

Jared: There are a few people that don’t, or if they had a website done,
maybe more than five years ago, it doesn’t have mobile compliance. It
doesn’t have Google Maps. It’s a way to get a lot of the features that I
think a modern apartment management company might want or feel like it’s to
their advantage.

Jason: You had four people and they all said, “We’re in.”

Jared: One said, “We’re in,” and the other three were, “Well, I’m curious
to see what you have, but don’t talk to me until you’re done.” So,
essentially, “It sounds interesting, and potentially I might be . . . ”

Jason: Okay. Why is it interesting? What do they expect it to do? And
don’t tell me maps. That is a means to some end. What is the end? Are they
expecting apartment locators to discover them and then add them to their
rounds? Are they trying to get to the end customer?

Jared: They are. I mean, essentially, one of the features I was going to
add was the ability to easily create a Craigslist ad. It’s all a matter of
funneling people from other sites to your particular site. I mean, hey, you
post an ad for an apartment, you generate a nice looking ad in Craigslist,
as opposed to just something in simple text.

Jason: It sounds like, though, that you’re just stabbing around at things
you could do that they might want. You’re not using these firm words like,
this guy told me that if we could automatically post a Craigslist ad every
week, because those ads get stale and could roll off, so you have to keep
at it. Also, you have to rotate the content and put them in different
categories, otherwise this or that happens. Our software will do that. They
say, “Oh my God, if you do that, that’s big time. Then I’m interested.”

I just made that up. I don’t even know if that’s true.

Jared: Yeah.

Jason: If you don’t have that detailed and someone saying, “Oh, man, I
need that.” Just adding a Google map to a website, I mean, you might as
well just be a web developer and charge $100 an hour and have a WordPress
template and knock us out and charge them $5,000. It cost you less than a
week because you’ve got your template and you’re fast and smart, and you’re
done.

Unless you have something tangible, that they said I will pay X dollars if
you do this thing, then you’re just a web designer, which is fine, but then
just do that.

Jared: Okay. Based on the conversations that I’ve had, where someone spent
$5,000 on a website say five years ago, and whether they have Google Maps
or not, the whole idea of getting a better website or getting a better
product, that’s not something they want to do. They had, maybe, a bad
experience or it cost a lot of money, and the whole idea is to pay between
$25 and $50 a month to get a higher quality website than what they have
right now.

There’s other ideas beyond just that. I realize it seems all kind of
nebulous right now.

Jason: Here’s what it seems like. You’ve talked to four people. Let’s say
they all do it. All you’ve proven is that you can make $200 a month in
revenue off of some basic websites. Even if you can get 1,000 people doing
that, that’s really not much of a company, because with all the expenses
around 1,000 people and acquiring them, answering their questions, and “How
come we can’t put this here?” and the hosting costs, that’s not even really
much of a lifestyle business yet.

So, you probably could build that company, because, of course, they want a
website. Presumably your websites aren’t so bad. You can probably do that.
That’s not . . . If you want to do that, I guess just do that. But, again,
that doesn’t seem like even a good lifestyle business.

That doesn’t seem like the kind of thing you want to do. You want to do
something else. My question is what’s something else? It sounds like you
haven’t discovered yet what the something else is. Why not discover that
first, because that’s the interesting part?

Jared: All right. One of the things that I’m really fascinated by . . . I
guess you could say that that first part of that idea, as far as giving
people websites, it is not necessarily the end destination. It’s also the
ability to create an API of properties.

Jason: No way. No, it’s not. I think there’s no way any property manager
has ever told you, “You know what I really want is an API.”

Jared: But here’s the problem that currently exists, as far as the . . . If
you have an individually hosted solution, even if you have an API, how are
people going to find you? On the other hand, if you get 1,000 people…
Let’s say if, for argument’s sake, I get 50 people in Chicago to sign up
because that’s where I’m located at, and I get between 10 and 20
properties. Well, if I get 50 people with 20 properties, I now have 1,000
properties.

Let’s say you wanted to build a site on top of that API. I mean, one of the
ideas that I was talking to somebody about . . .

Jason: Wait, stop. You’re not addressing the point, which is that the
property managers . . . This is all a means to some end that you still
haven’t told me. They want to double the leads coming to their website.
They want to increase the conversion on their website. They’re trying to
sell units through their website. They’re trying to attract apartment
locators and give them all the tools to encourage them to show people their
units so that more units get sold.

You have to get to what is it that the property manager goes, “Oh, my God.
I’m going to make more money because my vacancy is going to go down,” or
because, whatever. I have not heard that yet. If the idea is, “We’re going
to sell more units.” “Well, how is that possible?” “Because through Google,
we’re going to have thousands of people coming to your website, where today
it’s just 10 a day. Now it’s going to be 1,000 a day. You interested?”

If it’s not that straightforward to their bottom line, then it’s all just a
means to an end and blah, blah, blah, and techno-babble, and it’s not what
they want. There’s no way anyone says, “Oh, I can’t wait to be part of a
network with an API.” That isn’t what they want. They want units filled.
They want cheaper hosting. They want – I mean, I don’t know. But it doesn’t
sound like you’ve discovered what that thing is, or you’re not telling it
to me.

Jared: I mean, if it winds up that I get 1,000 customers paying between $25
and $50 a month . . .

Jason: No, not winds up. You have to find people that say, “I will give you
$300 a month if you can get the number of leads to my website to go up to
100 a day instead of 10 a day.” See what I mean?

Jared: Yeah. I don’t think that’s what I’m selling, or that’s not what I’m
going after, and that’s not what I have.

Jason: Well, what is it that they want to have happen with their business?

Jared: The ability to market their properties better as opposed to the way
. . .

Jason: To who?

Jared: To anybody that’s looking, whether it’s creating a Craigslist ad.
It’s the ability to say, “Here’s my business card. These are where the
properties are,” to hang a sign on the outside of their apartment building.

Jason: No. They already hang signs on the outside of the apartment
building, and we all know that is not how you sell apartments, right? It’s
almost no walk-ins. It’s all apartment stuff. Sometimes there’s walk-ins.
But if there are walk-ins, they just walked in. It has nothing to do with
what you’re talking about. So, let’s say it’s Craigslist ads.

Jared: Okay.

Jason: It’s too hard or they don’t know how, or it’s just tedious.

Jared: It’s tedious? Maybe there are certain aspects to it that’s annoying.
They forget to do it. They can’t track whether they’re working. They want
to try different messages and see which ones are working better, but that’s
too much work or they’re not technical enough. I’m making this up, but
supposing that’s a thing, that sounds good.

I would like to hear a property manager say, “We know people find us
through Craigslist ads. We don’t know how many. We don’t know how to
improve those ads, and it’s too much of a pain in the ass to post them and
post them often enough. The person who I assign it to at the office have
other duties and they don’t really know either, and it just doesn’t work
well.”

You say, “Right. For $50 a month, I will completely manage your Craigslist
ad stuff. You’re going to get a report every month of how much impact they
had. How many people saw it, maybe, maybe you can’t tell that, but how many
people click-through. Of those people, how many people did some interesting
action, like they spent more than a minute on your site or they filled out
a contact form,” or something that you decide that they agree is somewhat
valuable.

You make this little report, and then furthermore overtime with your
expertise and your testing – again assisted upon your amazing, special tool
– you’re even going to improve this amount of leads and conversion, and
quality of leads over time, because that’s part of the service. You’re
going to charge, and I’m making this up again, $199 a month for up to a
dozen Craigslist ads, or Craigslist ads for up to three properties, or
something like that.

They’re going to get these reports and it’s month-to-month, so if they
don’t feel like it’s getting value, they can cancel. So, there’s no reason
not to try it, and by the way, if they go through the first and they don’t
like it, it’s a money-back guarantee for the first month. I just made all
of that up.

Jared: Yeah.

Jason: But that is at least a testable business hypothesis. There’s this
pain. It sucks. Your tool completely solves the pain. Full visibility for
them. Hands-free for them. Will they pay that much money for it? Trying to
reduce some of the barriers to entry, like they can cancel and other things
so they don’t feel locked in. They feel like it’s easy to try this and see
if they like it. That is a formulation of something you could go out and
try to sell. If five people say yes, you could actually try it.

Here’s another thing. You seem gung ho in building websites and building
technology, which is fine. But with this kind of stuff, again, they don’t
care about the technology. Let’s just for now go with this Craigslist
assumption, because at least it’s a business. The other stuff you’re
talking about, to me – I still don’t understand the business model and the
pain point. You obviously haven’t talked to people to identify it yet. So,
let’s just use this as an example.

Jared: Right. I understand your skepticism.

Jason: Wait, let’s just use this as an example . . .

Jared: Okay.

Jason: . . . because it’s tangible and the other stuff is not tangible to
me yet. So, then what I would do with this Craigslist idea, is I would go
sell it to people with no code, no code at all. Then, I would wait until I
had five or 10 people who literally gave me the money, the $199 a month or
whatever it is. They literally said, “Okay, here’s my credit card,” or “my
PayPal,” or however they do that, right?

So, you have it. You know now that they want this for this amount of money
for sure, because, look. If you could find even five people – but 10 is
better – then for sure there’s 1,000 people out there like that too, right.
If you did that, now you’ve got something like one or $2,000 a month of
revenue, proving that this is interesting.

Now, what you do is you fulfill this by hand. You write to Craigslist. You
log into Craigslist with their account or however that works. You make the
links with bitly or something that allows you to track stuff. You request
access to their Google Analytics so that you can track the rest of it. You
make the report to Google Analytics, “This many clicks. This, this, this.”
You make a cool custom report, which you can very easily export and format
into a nice one-pager for them, and so on.

You try different ads in Craigslist. You try different ad text in, I don’t
know, whatever other stuff that you feel is good to try, and you do it. The
first month that you make the reports, you make the stuff, no code. You
figure out what is interesting. What does work? Do they like that? Did it
produce the traffic they wanted?

Maybe, for example, maybe they won’t be impressed with . . . Maybe the
number of people that actually make it to the contact form is never going
to be that good.

Jared: Jason, I’m really sorry to interrupt. Listen, I totally respect you.
I wouldn’t be calling if I wasn’t looking for your opinion. It’s taken me a
long time to get to this point, and it sounds like you’re talking about a
different business idea at all. Those things [inaudible 17:38]

Jason: No, no, no. I’m not. No, I’m just using this as an example. If it’s
not Craigslist, fine. Then, just cross-apply all this to the other idea.
But, in other words, the thing that they want done, you can probably just
do. You can probably do it with very little code or a little bit, or a
couple of tools, just to prove out that this is what they want and you can
deliver it. Then, they want it, and then of course, everything I just said,
you can build an incredible tool.

Maybe it’s self-serve for them. Maybe you use it, I don’t know. It sort of
depends on how well that rolls out. All of a sudden, you have a scaleable
business with a scaleable tool set that you know they like. You have some
nice testimonials from them now, because you kick some ass. That’s a
business.

This other stuff about, if it’s just a website then it’s a website, and
okay. If it’s something else, we’re going to drive more leads. Your SEO is
going to improve. We’re going to manage your Craigslist. We’re going to do
property management. Conversions of your website will improve. All of those
things would be great businesses, and I understand you have a big vision
and it’s going to be many things someday, and that’s fine. But it won’t be
many things on day one. It’ll be something.

So, I feel like you have to find something that they’re going to pay for,
more than one person. Find a way to deliver that to them in the easiest,
quickest possible way, and that’s how you can sort of validate that you
have a business that people will give you money for.

Jared: Okay. You’ve thrown a lot out there and I sort of have to process
that. I can certainly see the direction of the business potentially
changing. At the same time, it’s taken me a long time to get there and I’m
sort of pretty committed to this as far as this idea. I’ll be honest with
you, I’m willing to fail if it turns or I have to pivot, or something along
those lines, or something along those lines. If I only get 50 customers
paying $20, or $40, or $50 a month for a website, and that’s not enough to
sustain myself, or that’s not enough to give me [inaudible 19:42].

Jason: Wait. Wait, hold on.

Jared: I’m willing to fail with this idea.

Jason: Wait. Let’s just do the math. You’re willing to fail. That’s very
brave, except why bother when you could be failing faster in some other
way? You said it took it a long time to get to this point, well let’s try
to accelerate how fast you can learn and fail, and get two points that
work. So, let’s go down this road. Let’s say how much money they’re going
to give you per month for a website? What have you been quoting them?

Jared: Between $25 and $50 a month.

Jason: All right. Let’s call it $50 because I think you can probably,
honestly charge them $250 a month because, for example, there’s a company
here in Austin that charges real estate agents $150 dollars a month plus a
$1,500 dollars set up fee for a very generic real estate agent site with
like 3 pages, here’s me, here’s my face, here’s my properties. Call me.

Like, in other words, almost nothing. Certainly less than what you’re
describing and they get away with $150 bucks a month plus $1,500 setup so I
think you can go a lot higher. But let’s go with your numbers.

Let’s round up and say it’s $50, $50 bucks a month and let’s say this
company does pretty well, how many property owners do you feel like in the
span of a year could you have sign up on this system?

Jared: I’m hoping to get at least 25 customers by the end of this year.
We’re hoping to go into beta in maybe, I’m targeting February so a very low
estimate would be 25.

Jason: But then the year wears on and you’re acquiring more customers and
so let’s say at the end of May next year, how many customers could you
have?

Jared: I hope more than 100.

Jason: 200?

Jared: Potentially.

Jason: All right, let’s go with 200. That’s good.

So 200 people each giving you $50 bucks a month, right?

Jared: Yeah.

Jason: So that’s $10,000 a month, right?

Jared: Sure.

Jason: In revenue. And then there’s some hosting costs. I’m not sure what
it is but I bet these sites don’t get a lot of traffic. I’m sure you’ve
built this in a way that’s intelligent for multi-tenant lists and whatnot
so hosting costs are probably what? $500 a month?

Jared: Right now it’s less than $50.

Jason: No. Not right now. Once you have 200 customers.

Jared: If I get to 200 customers as far as capacity I’d have to look at
what it would cost. It would probably be at least a couple of hundred
dollars a month, if not more.

Jason: Probably more because remember you have to remember you have
backups and stuff. it kind of piles up so let’s say $500 a month for that
and there’s other stuff. Like, in order to acquire 200 customers, you might
do some advertising or go to a show or bang the phone or do some Google
ads. I don’t know but there’ll be some costs in acquiring customers, right?

Jared: Sure.

Jason: So that’s probably a couple of grand a month. So probably what
you’re looking at, assuming the high end of what you’re talking about cost-
wise, you’re probably making something like $5,000 to $8,000 grand a month
for yourself assuming you have no other employees. You’re still doing all
this yourself.

Is that the case?

Jared: Yeah.

Jason: So is that okay? That sounds good?

Jared: Yes.

Jason: You want this to be a lifestyle business where it feeds you and
hopefully it does more than that, right ?

Jared: Theoretically, yes. Again, I have grander ambitions for just getting
200 people to sign up for the service but yes. If it even made half of
that, I would consider that a success as far as a feather in my hat and say
I did something I’d never done before.

Like I said, I’m willing to fail but even if I get that half of what
you’re talking about, I would say I accomplished something and I’m
learning something and it might lead to the next thing or it might just be
exactly what it is.

Jason: Okay. So in other words, part of this is just you’re sort of
exploring a new career and your own boundaries and what you enjoy doing and
it would be great if it throws off some money, that’d be cool, which is
great. I love that. It’s such a healthy attitude. I wish more people had
that attitude with their startups.

Great. That’s great.

Now, if you’re going to do that then here’s what I think. You absolutely
should charge a lot more. Because you’re not trying to get, you just said,
like you’re not really aiming at getting like 1,000 or 2,000 people online.
It’d be cool if you did but like that’s not even really the goal. You have
a bunch of things that you’re trying to achieve and making the biggest,
baddest company as fast as possible is not on the list actually, right?

Jared: Yes. That’s a pretty accurate description.

Jason: So here is what I think you should do. I think you should consider
this. Not a modernized website because as soon as you say things like I’m
building you a modernized website, then you get put in this category of
okay, right now I pay GoDaddy $10 bucks a month for this old WordPress
thing so I can maybe stretch it to $20, $30 bucks a month if it’s better.
You put yourself in that position when you call it things like a modernized
website.

On the other hand, if you position it as this is the platform for the
online presence, kind of like what you said, but specific stuff. Like, “We
know that this will increase your SEO and you’ll get more traffic. We know
that people will stick. We’re constantly trying out and developing new
techniques, so month to month we’re not just serving traffic like some web
host would do.”

“We’re literally discovering better ways to attract traffic, engage people
with your site, get them to Tweet about it, get them to user contact form,
increase your SEO position, etc. We’re constantly figuring these things
out, and we’re constantly tweaking these things on the site, so that we’re
constantly improving your footprint. That’s part of what you’re paying
for.”

In other words, if you position it as this kind of a value to them, then
you’re not in web hosting anymore, and then you could absolutely justify
$150 a month. Maybe more, but let’s start with that. Also, I think a setup
fee makes a lot of sense. There’s almost always a setup fee. I understand
maybe the first few people, when you’re trying to get going, maybe you
can’t get away with that. I’m not sure. But when you’re at customer #74,
there are going to be setup costs, right?

Jared: Yeah.

Jason: Because their own content needs to get in there. There are photos,
their maps, [I need] five properties, not three. I don’t know. There’s just
stuff, and they’re not technical. They’re not going to set it up that well,
and if you set it up for them, you’re going to do such a better job. You
know that, and that’s going to make them more successful and happier. You
know that and they know that, and it’s absolutely normal to charge a setup
fee.

So, again, using this model locally, of people with even less money than
the property agent people, and they get away with $150 a month, plus $1,000
or $1,500 setup fee . . . For example, you could roll other things into
that if you still feel uncomfortable charging that much, or if they need
more to charge that much.

So, for example, you could say, “Part of that $1,500 setup fee is I sit
down with you on the phone for two hours or an hour, and I ask you
questions about, well, what is important to you? What kind of things do you
want to say about this property? What do you want to rank highly for? Is it
luxury? Is it affordable? Is it convenient? What are the things about this
property that we want to highlight?”

In other words, you sit down and you do a counseling session, and then you
can tune the site to them. That’s part of why there’s a $1,500 setup fee
because it’s going to be really good.

Jared: Okay.

Jason: You know what I mean? This is all brainstorming.

Jared: I understand what you’re saying.

Jason: But here’s what happens now. Now, the math changes completely,
because with $1,500 setup, let’s say $1,000 setup times 100 customers.
That’s $100,000. You’re going to do that setup stuff anyway to get their
website to work because they’re not technical. They can’t make all this
stuff look good and all that. They don’t know what to write.

So, that’s $100,000 right there, and that $150 a month, that extra $100 is
just pure profit, right? Because your costs don’t go up charging $150 over
$50. Same cost to you.

Jared: Yeah.

Jason: Let’s say you have 200 customers. That’s $20,000 of profit per
month in your pocket. Let’s say it is only 25 or 50 customers like you
said, and it doesn’t even get to 200. But still, to get 50 customers,
you’re actually at the same place monetarily that we just said you were at
200 . . .

Jared: Yeah.

Jason: . . . because it’s bottom line money, that money. That setup fee
means you can do things. Like, if this does start growing, you can afford
to do whatever like hire someone else to help on-board people, or spend
more money on marketing, or I don’t know. In your words, you could afford
to fail at different things because you have the extra cash to do so and
it’s okay.

So, especially because you’re not trying to get 1,000 people on the site
real fast, and so you want to make it real cheap so it’s a no-brainer.
That’s not what you’re doing. So, I would go way upscale with it and make a
lot of money on these guys.

Jared: Okay. All right, so let me tell you about the ambitions for the
project that I have if I get more than 50 or 100 customers I’m charging $25
or $50 a month. I’ve talked to a couple other people that are at least
somewhat interested, and it’s more conversation, not necessarily they’re
going to pay for it. But here’s a perfect example. There’s somebody I know
who is involved with an association dealing with people who are
handicapped, and whenever you’re dealing with an apartment, you’re trying
to get an apartment that’s ADA accessible.

Jason: Right.

Jared: They would like the ability to post properties that are ADA
accessible. That’s one of the goals of Padseeker and the API in the sense
that I want to offer people the advantage of, “Here’s not just your
website.” I hate to say it. That’s sort of like the honey to draw the first
initial customers.

Jason: That’s fine.

Jared: It’s the ability to say, “Your property will not just show up in
your own website, it has the potential for other people that will build on
top of the Padseeker API to show you ADA, American Disabilities Act,
compliant properties on this other site. Or dog-friendly. Or, I mean
there’s any number of options, but that is the reason why I want to keep it
relatively low, and I certainly understand [inaudible 30:14]

Jason: Wait, wait, wait. Let me ask you about that.

Jared: Sure.

Jason: I totally understand what you just said, kick-ass. Now explain what
you meant about, “That’s the reason why you’re trying to keep the price
low.” I don’t get why one leads to the other.

Jared: Because I feel . . . I feel like if the price is too high for some
people that have a website, or even don’t have a website, they’re not going
to see the advantage of, “Why am I paying,” let’s say, for argument’s sake,
$100 a month. You’re talking about the price point that you were
discussing. If you’re paying $100 a month, that means $1,200 a year. That’s
probably on par with one of the solutions that are available now.

Essentially, if you own a property management association, or you own a few
apartments, and you want a website, you have two options. Your first option
is to pay $5,000 or more, significantly more, for a custom website, or you
can pay somebody for an existing template. There are even plugins available
for WordPress. But at that point, once you hit $100 a month, that’s roughly
what some of the other companies that exist in the marketplace are doing
now.

Jason: Right.

Jared: And I could see even doing that at some point when I had enough
properties. I mean, I’d be thrilled if I built a company that had 50
subscribers, maybe they were paying $50 a month, and then we tried to build
another site on top of the API that . . .

Jason: I still didn’t hear, though, why . . . I mean, to me, if you’re
providing even more value, then you should be even more expensive, right?

Jared: Because that value doesn’t exist, that . . .

Jason: I know.

Jared: . . . ADA-accessible site doesn’t exist anymore, that dog-friendly,
and that’s…

Jason: I know. But isn’t the website you’re talking about building, even
without the API, the basic website you’re talking about, isn’t that at
least on par with the other things they have available to them?

Jared: Yes, yes.

Jason: Or better, hopefully? At least incrementally better?

Jared: Right now, I mean, I have a long ways to go, I mean, we’re going To
add stuff, but yeah, I feel like based on what I’ve seen with what’s
available now and what we’re offering, it’s . . . if it’s not there, and it
won’t be there on beta, it will be, but within a short period of time.

Jason: Okay, so here’s what I think. I understand all that, so here’s what
I think. Anything we talk about with all this doesn’t apply during beta,
because those people are receiving product that’s not fully baked, they’re
early, before you have a track record, there are all kinds of reasons why
they’re special. Maybe they get it for free, maybe it’s really cheap, maybe
it’s free until you launch and then they get 50% off for life, whatever,
right? Just take care of them. So let’s set them aside for a minute,
because whatever . . . you’re going To take care of them and it’s not
going To apply to them, right? So let’s go . . .

Jared: Yeah.

Jason: So let’s go to customer 15 and higher. In other words, it’s not
beta, it’s live, you’ve got enough testimonials and nice things that that’s
not an issue anymore, they’re not betting on an unknown anymore, you have
sufficient features, right? Because you’re past that period. We’re 20, or
however many you think, 35, whatever you say the beta period is, whatever
that number is. Let’s talk about . . . because, for them, you’re just going
to do whatever is right, you know?

So let’s talk about what happens after that. My feeling is, if you’re at
least as good at just the website as their next best alternative, I don’t
understand why you wouldn’t be at least the price, if not more, than their
next best alternative. I don’t know why you would need to undercut that
price because I would assume that your site . . . again, ignoring the API
for just a minute that your site is incrementally better. Maybe not a
completely disruptive website, no, but it’s more modern, it’s better, it’s
easier for them to change, it . . . I don’t know, your SEO is smarter, it’s
incrementally better. So why shouldn’t you charge the same amount or even
more?

Jared: Well, right now, it’s not. I mean . . .

Jason: I know, but we’re not talking about right now.

Jared: Okay. We’re talking about a year from now when I have all the
features? I mean, I feel like I would have a hard time asking for more than
the $50 until we, myself, or somebody else, builds, say, the ADA-accessible
site. I mean, I live in Chicago, and I’m not far from Northwestern
University, which is in Evanston. One of the ideas was to get —
Evanston’s a relatively small town — try and get some of these other
people to sign up and then have a site that was just specifically targeted
to Northwestern University students, things of that sort. And I don’t . . .

Jason: Hold on. Wait, wait, wait. I get all that. When you do that, it is
worth more, and I’m not arguing with any of that. But I’m still stuck on
this thing with the website. You’re not comfortable charging more? So . . .

Jared: Until the value can be justified. If I were to say, “Listen, some of
the other companies that have websites, it’s going To . . . ” I think it’s
going To be easy for a few of them that either have a lousy website, or an
out-of-date one, for them to say, “Yeah, I can justify paying $50 a month,
$100 I’m not entirely sure. I think $50 is not unreasonable.”

Jason: Hold on. First of all you need to ask them. You need to propose,
it’s $150 bucks and see what they say. And if they say why is it $150
bucks, you need to have some pretty good answers. Because the SEO is
better. Because people don’t bounce off of it and I have the numbers to
prove it, or whatever.

But explain to me then why this real estate agents pay $150 bucks a month
for a WordPress site literally in which they can buy a template for $80
bucks and shuffle around some images and have a site.

Why do they pay $150 bucks a month?

Jared: Why do they pay $150 dollars now?

Jason: There’s thousands of them right now doing it.

Why in the world are they doing it?

Jared: I’m a little thrown off. I guess I don’t have the answer to that
question.

Jason: Yes. It’s an interesting question.

Here’s another example. I know WordPress consultants where they do build up
the site through, like you said, three grand, five grand, whatever. And
then they put in like this retainer. Like you need 5 hours a month for my
time, plus all the hosting costs included and it’s going to be $200 bucks a
month or $150 bucks a month. And they’re almost always successful in doing
that.

And of course, they go put the site on something really cheap. It probably
cost them $5 to $10 bucks a month per site, tops. And they made us think
like they’re creating WordPress latest version and I don’t know, like
whatever it is that they do, right?

Jared: Okay.

Jason: $150 bucks a month, there it is again. Like the hosting cost are
$10 bucks a month but somehow they are able to charge $150 bucks a month,
what you and I, technical people would consider trivial services. With the
insane markup of like 10x, right?

So my point of all of that is it’s a little bit rhetorical but not really,
to ask, why are they paying that? My point is just to comeback what you
said when you said, “I’m not comfortable charging $150 bucks a month
because we don’t have enough.”

And what I’m trying to get you to see is that I think you’re thinking of
this as how good is this offer, how many features does it have, how does it
stack up to stuff and how hard would it be for, what’s an alternative, how
hard would it be for them to build this another way? And that’s what the
value is. Therefore, that’s why I should charge.

And what I’m trying to do is push you in exactly the other direction. They
don’t care what your technology is. They don’t care how much it costs for
you to host it. They don’t care how much each feature took to build, etc.

There’s something’s that they want, which is where we kind of started the
call with. I don’t know what those are. Increasing traffic, increasing
their Google Search.

Jared: I understand. You’re asking for one thing. Why is someone to pay
that money? What is the justification for me paying that money? And I can
give you a simple one.

One sentence answer. Anything that gets somebody into that apartment a
month earlier than they would have is creating value. If you’re paying $50
to $100 a month or whatever a month, if you put someone in that apartment a
month earlier than you would have for any number of months earlier and
they’re paying $800 to $1,000 dollars, you’ve made your money back.

And for $50 dollars a month, that’s $600 a year and if you get somebody in
one month earlier, that’s creating value. But the easiest way to say I can
charge more is, say for arguments sake, we’re talking 2 years down the
road, if you had 2 or 3 or 10 different sites that where using Padseeker.

I had a friend of mine who was talking about “I want to create a site that
deals specifically with this issue, trying to reduce your commute”, if you
could put your data into this application and maybe it’s 5 or maybe it’s
100 different sites built on top of the API means your property will go up
to that site and find that person, make it more likely that the person
that’s looking for that type of apartment they’re looking for actually
finds it, that is where the value is in that software.

And right now when you just have a site, I hate to say it, even though I
think it’s valuable to have a website, $50 dollars a month does seem like a
ridiculous amount of money. I have a hard time charging more than that
because if you have 10 or 20 properties and you get somebody to go to your
website, there’s not a huge guarantee that you’re going to get somebody’s
rear end in that apartment faster. It will with the potential growth of
having 50 to 100 clients with 1,000 properties and having at least 3 to 5
different websites that are built on top of your application that means
other people are looking at your stuff.

And I always think about the ADA accessible thing because that’s a very
specific market and if you say I have 20 apartments but I have 2 that are
ADA accessible and this website says you have 2 units available in your
price range or the amount of bedrooms that you’re looking for, that is the
truest value of what Padseeker provides or hopes to down the road.

That’s assuming I get to that point. That assumes that I get 50 customers
to sign up for this and actually you having a website, your property, your
ADA specific property is being shown on this particular website. That’s
where the value is, and at that point, once there’s something built on top
of Padseeker, yeah, I think I could charge $150 to $200 a month because
you’re not just offering the website, you’re offering the ability to market
this individual property or certain types of properties to specific people
that are looking for that.

Jason: That still the means to the end. The end is get an ass in the
apartment faster because vacant apartments just cost you money. One way is
you have a special ADA site, and that drives a bunch of traffic, and there
are many other niches as you just described, and you want to open it up so
that’s it easy to have a lot of these, but what I think it comes down to is
driving a whole lot more very qualified traffic to a website that converts
well. Is that true?

Jared: Yeah, I mean, yeah.

Jason: Okay, so here’s what I would say. I’m still not negating the
vision. I get it, and I think it’s great, but I’m still trying to figure
out, because you also say, “that’s down the road, that’s down the road,”
and so I’m trying to figure out, how can we maximize the amount and the
value now.

I think it sounds like the pitch is, you need A) more traffic to the
website, and not just crap traffic. You need more real traffic to the
website, and B) you need that traffic to actually result in people getting
apartments faster. Just getting people to look at the home page is not
valuable. Getting them to actually get an apartment, to say yes and sign
on an apartment, is really valuable.

That’s two things; more traffic and more conversion that you can tell. It
sounds like if you could just fill an apartment every couple of months that
would pay for a website that’s $150 a month, if you could prove that,
right?

Jared: Yeah.

Jason: Here’s an idea. What if your website, and I know they could do
what I’m about to say now, but they would have to build stuff, and figure
it, and you could build this pretty easily, what if you made on their
website a way for someone to print out a special offer, and the special
offer is probably stuff like, “if you move in by this date, the first
month’s free,” or it’s half off. Stuff like that. I know for property,
especially from commercial renting, stuff like giving away a month of free
month is very easy for them to say yes to because they know that gets them
a tenant for a certain period of time, and that’s a very easy give-away for
them. No sweat, right?

Jared: Okay.

Jason: In commercial real estate it’s almost a given that you sort of ask
for a couple of months off, and they always say yes because it works, and
it works with their financing on their side and all that stuff. It’s very
easy for them to do it. Here’s what you could do. What if your website, a
visitor comes, and you’re like, “Hey, we have a special end-of-year thing,
and if you move in by December 31st, you can print this out, bring it in
and get your first month off,” or whatever the property manager agrees to.

Of course that thing is tracked, right? Because that thing is a thing you
generate even though they can print it as a PDF or whatever it is that
prints the webpage. You’ll determine an easy way, right? Whatever it is,
you can track it because it’s got some numbers there, and that’s going to
get back to your analytics about where it came from and whatever, but the
bottom line is every time someone redeems one of those it’s 100% proof that
you did it through the website, right?

Jared: Okay.

Jason: Every time that happens they know they just made whatever their
average lifetime value is from the customer, which I’m sure is 1000s and
1000s of dollars, right?

Jared: Yes.

Jason: If you did that on a website where you could actually track
whether the website was working, because this is a great offer. Shoot, if
I was looking for an apartment, and you told me a month free, I’m probably
print that sucker out. That’s going to save me $800. That’s a lot of
money to save. That’s a pretty good incentive for the person, right?

Jared: Mm-hmm.

Jason: You could probably track how many print outs there were, too.
Just part of your own funnel. That would be kind of cool to see. Anyway,
you only have to show a couple of hits. To me, you’d probably only have to
show a couple hits a year to justify a pretty expensive website, and again,
I think you could do that before there’s an API, before you have a way to
generate a lot of traffic, and just say here’s a website we’re encouraging
people to get into the apartment, and we will know if it works or not.
Either their going to redeem these things, which means it’s working, or
they don’t, and we’ll all know.

Jared: Okay.

Jason: Right?

Jared: Yeah.

Jason: Now you can justify a lot of money because they can do the math,
and they’ll know. Now you can justify the $150, because how else will they
print coupons. Then imagine all the stuff that suddenly starts appearing.
We’re going to put Craigslist’s ads and try stuff, and we can actually
track it all the way to whether they got the apartment, or like you said,
we’re going to have the ADA site, and these other sites, and it’s going to
just generate more traffic.

Now imagine this. I wouldn’t do this today, because you don’t know enough
about the behavior of these people, but let’s suppose you are good at this,
and this does work, people redeem these suckers and property managers go
ape. What if the way you got paid was every time someone gets an
apartment, you get $500, or $1000, or something? So that’s it, if you
don’t generate leads for them- No, wait, forget leads. I take it back. If
you don’t generate asses in the apartment, you don’t even get paid. But if
you do, you get a nice commission. I bet you could do that. Right now,
that would be a pretty big leap of faith on your part because you don’t
know if you can convert that.

Jared: Yeah. That also involves, as far as being available from potentially
9:00 to 5:00 . . . Maybe not; up until this point, the application I’ve
been primarily trying to develop is as much self-service as possible, and
not having to be intimately involved with talking to human beings from 9:00
to 5:00.

Jason: Wait, why would you . . . ? No, you’re not talking to humans from
9:00 to 5:00. This is a coupon they bring physically to the apartment and
redeem there; you’re not involved.

Jared: How would you go about saying you rented this apartment, and they
printed this ad, and this is the person that did it? How can you trust the
apartment management company to pay you the finder’s fee?

Jason: You’re right, it might not work. But, here’s what I would bet: if
it doesn’t work, if they’re pretending like it doesn’t work, then you’re
going to shut off the website. And if it is working, they don’t want that
to happen. So I agree with you, and so maybe that’s a bad idea. We’re
brainstorming, right? You’re right, that might be a bad idea. Fair
enough, right? That’s fine.

But your bottom line is, they can now measure how much this is worth to
them, and it doesn’t take a lot of hits in this idea to make it worth a lot
of money per month. And you could do that first, today, with the website –
how are you different from their alternative? Well, there’s this feature
and this map – Okay, fair enough, you need to have a base line of modern,
good stuff, no doubt. And you know how to do that; you’re already doing
it, of course.

Here could be the magic thing that nobody else has, this coupon thing which
gets – just what you said – gets the ass in the chair sooner, gets the
person in the apartment sooner, and they know it. And that is insane; if
you could do that right, that’s the Holy Grail for them. It proves that
you’re worth a ton of money; now you could charge $500 a month for the damn
website.

Jared: This is the whole basis on which the advertising industry is built –
you have no idea where your traffic’s coming from and should just pay us
money, hopefully we’ll get people. I guess what I’m hearing you saying is,
imagine someone gets to the site and they click a button, and they print
out a flyer that says, “you get a month for free.” You could say, “Listen,
this is somebody that would not have found you under normal circumstances,
and therefore, we created value.”

Jason: Well, two things. 1, they may not have found you, or they probably
would have just left this website and not printed anything out or bothered.
That’s probably true. But here’s what we know for sure: if you put a
time limit on that – which you should, because you’re trying to get them to
act – what you said is, if you could get someone even a month earlier into
that apartment, then they would have. Even the same person that was going
to find you anyway, if you could get them in there a month earlier, you
just told me, that’s worth money to you.

So what I would say is, “it’s pretty likely that this person would not
have, in fact, printed out something from your website and got over there,
because there was no compelling reason to. We gave them a reason to.” So,
number one, you’re right, this is probably a new customer you didn’t have
before. But number two, they sure might not have moved this quickly, and
you got them to move faster. That’s the worst case, is you got them into
the apartment sooner. Probably, that was a new person.

The more this happens, in other words, as you get better at driving traffic
and at converting that traffic, which, again, is something you know will
get better over time, whether that means better SEO, whether that means an
API that just drags really highly qualified people in all the time, there’s
lots of ways in which you can increase the amount of this clearly tangibly
valuable thing, and you will.

You have this vision with API and these other sites, awesome. That will be
another part of your secret sauce for why this drives a ton of value that
they can even measure, unlike every other form of advertising that they
have. I mean, that’s incredibly valuable.

But, even on day one, I’m still trying to drive to you, how is it on day
one your website’s still worth $150 a mont