How a Developer Turned a Failing Startup into a Profitable Business

More About Jay Gibb & Cloudsponge Technical leader with deep entrepreneurial experience as a developer, consultant, founder, and partner. Particularly interested in very early stage, web-based startups with a focus on product design and development.

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Specialties: Software development management, product design, software architecture, process definition, and execution. Cloudsponge products will improve the performance of your E-Commerce site, referral programs, invitation forms, contact importing workflows, and sharing features.

We’ve helped thousands of companies in every industry get more referrals, send more invitations, create stronger social networks and distribute more content.

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Jonathan: Welcome back fans to WP-Tonic show it’s episode 599. Yes. One more show it’s 600, 600 episodes listeners and viewers. We got a great guest for the show. This week, we got Jay Gib, founder and CEO of CloudSponge. I’m going to let Jay explain what CloudSponge is, and then we’re going to be talking about his journey in the world of startups and making a profitable business. It should be a great interview. Let’s start off first with my cohost. Steven, would you like to quickly introduce yourself to the new listeners and viewers Steven?

Steven: Yeah my name is Steven Sauder, I’m from zipfish.io. We make WordPress fast by optimizing the code that runs WordPress and the code that’s running on the service.

Jonathan: Jay, if you can give us a quick 22nd intro about yourself, and then we’ll go straight into the interview Jay.

Jay: Thank you, Mr. Denwood. Nice to meet you guys. I’m Jay from CloudSponge, we help woo-commerce stores double their word of mouth sales. We do that optimizing interfaces for sharing and making them better in general.

Jonathan: Jay let’s go into the history of playoffs. How old is the company? By your previous interviews, you were at the beginning while you were the founder of it. Why did you start the company? What made you think that this was going to be a good idea?

Jay: It was a kind of the classic story of scratching your own itch, I guess, is sort of a lot of ways companies start. We sort of conceptually began in 2009 and started building something in 2010. We’re at about 11 years old going on 12. One of the things that we were building for the product that we had in mind, was address book integrations. It was kind of a feature of the product. We were building integrations with like Google contacts at the time they called it Gmail contacts.

Now it’s Google contact and, you know, Hotmail and AOL and Yahoo and iCloud and all these other places where people store their address books. We did the engineering efforts to build all those integrations because part of what we were trying to build requires that like a piece of the puzzle. In that journey, as we were doing that, first of all, we realized that it was really hard. That was the first thing. It was a lot harder than we thought it was going to be. Then second of all, we realized that there were a lot of like open source solutions sort of abandoned software packages that claim to do what we thought they would do, as far as making that job easier.

They were either, like I say, abandoned, or they just didn’t work. Or, you know, one of them was acquired by Facebook. It just kind of vanished and went away. In that journey as developers, you know we’re using like stack overflow and GitHub and all kinds of communities and stuff. We just run across a lot of other people that were challenged by the same problem. They’re bumping into the same absence of solutions and they’re all sort of building it themselves as well.

Because of that, we saw that opportunity, right, when we saw the energy that we’re putting into it and the quality of what we had built. We decided to pivot and basically sell that. Take those integrations that we had built, layer an API on top of them, like at the time, it was just a rest API, like the back end API, and then, you know, put a price tag on it and make a homepage. See if any of these other people that we were running across in these communities wanted to buy it from us instead of building it themselves.

It so happened that they did. Right. That’s how we kind of initially got off the ground, because we had this product, we knew there was a demand for it because we saw the demand with our own eyes. We knew how to reach those people because they were in the communities that we were in. We could literally just send them a message and say, hey, like, come check this out if you don’t want to build this yourself.

We got some initial traction by doing that. Then sort of fast forward kind of quickly, cause it’s a 10-year story. I don’t want to bore you with all the little details, but over the years we’ve always had this culture of observing what our customers are doing with what we’ve built and then figuring out how we can meet them a little bit closer to that. Inching closer and closer to the actual use case. The actual point of value recognition.

At first, it was this rest API that I mentioned, and then we built what we called the address book widget. Now we’ve renamed it to being called the contact picker. That’s basically an interface that you can put on your website that brings all those different address book sources into one interface, where you can select people and use it to populate for like recipient lists and things like that on your website. We had that contact picker for years. The vast majority of our lifespan has been selling the contact picker. G to generally the buyer for us has been engineering teams.

Big companies, small companies, you know, all kinds of companies that don’t want to build their own integrations with all these places, and don’t want to build their own contact pickers or contact picker, but they’ll use ours. It’s just a JavaScript snippet that you can configure. It’s really easy to install. Then again with that same culture, we’ve always observed like, why are they using the contact picker? We’ll see, it’s like we’re dominant in crowdfunding sites. We’re dominant in social networking sites. We’re dominant in e-commerce stores. We’re dominant in like CRMs that are trying to make it easy for you to import your address book, to populate a CRM.

There are all these different use cases for why different companies or products want to use address books. The one that we’re excited about now, and the one that we’ve sort of decided to focus our energy into is the e-commerce store because it’s just such an instant value where when e-commerce stores make it so that their customers, their users, are able to access their contacts directly from these places inside the store. Like for a referral program or for sending coupons to their friends or for wishlist sharing, or for all the different places that you can imagine inside an e-commerce store.

Where you might want your existing customers to input an email address of somebody from their address book, and you don’t want them to go to a different tab or try to copy and paste an email address from a different window, because that’s where you get your abandonments and people just lose you if you make them leave your website. I got this kind of instant, obvious value with the e-commerce vertical. In that theme of sort of observing the success stories that our customers are having when they’re doing all the work, the next phase that we’re in right now is building that layer. 

Working on actually meeting our customers halfway or meeting them where they are and building that functionality to make sharing better within the e-commerce universe.

Jonathan: Oh, that’s great. I forgot to mention [inaudible 08:30]  sponsor the show. I’m going to do that. Then I’m going to throw it over to Steven. I just wanted to mention one of my other sponsors which are Kestos. If you’re looking to do hosting for your podcast and you will need some way to host your audio files, I can’t highly recommend more than Kestos. I was using another provider and I’ve been using them for about three to four years, and then Kestos approached me and it was about half the price, but what really excited me was their great interface.

Basically, not only is it an extremely clean interface, it’s extremely easy to use. Those two things don’t always go together. You can sometimes have a very simplistic-looking interface yet it can be a bit of a puzzle to use. But you don’t often get a really clean interface that’s really easy to use from day one. That’s what you get with Kestos. It’s extremely attractively priced, has a load of additional other options. If you’re thinking of getting into podcasting.

Their support, I’ve just found it really fantastic. If that’s interesting for yourself or for your clients go over to castoffs, you’ll find all the links in the show notes and have a look at their plans and buy one I would suggest. Over to you Steven.

Steven: I love this product by looking at the logos and stuff on your website, I’ve definitely interacted with you guys before and without even knowing it. It’s like super smooth and probably has gotten me to share things with other people that I would have not otherwise because I’m not going to go and open up my email probably like create a draft to try to find the person’s email address and then copy and paste it over. Kind of ridiculous, archaic way of trying to get somebody’s email address. But like, you know, with one click, all of a sudden my contacts are there.

I can grab them. With e-commerce shops that like choose to adopt CloudSponge as a way of sharing. Let’s say referral, just for sake of argument, like a referral link to contacts. Does that e-commerce then a company, get to see who’s being emailed and like who’s sending those emails out? Like, so we have a user that’s like sending emails, like, can they know whose contact that is going through? Or is that all done through you guys on the back end? How does that integration happen? How does that work? How should somebody start thinking about it if this is something that they want to do?

Jay: Yeah. Thank you for asking that question. It’s kind of the next obvious one. The thing that’s important to understand is that we will multiply the performance of an existing referral program, but we don’t offer that referral program. As I said, there are lots of different use cases for a contact picker. A referral program is one of them and CloudSponge satisfied is really, to me, anyway, as the founder, it’s important that we stay in our lane. We don’t try to try to do too much in each of these things. We’ve got to work it out for us in terms of keeping what we’re already responsible for perfect.

The way that we approach that is, e-commerce store owners. When they’ve got a referral program already, like maybe they’ve got something that’s powered by automating woo, for example, in the woo commerce area. We have the ability to double the performance of automating woo. Automated woo is the system. In this example, it’s keeping track of who’s sending referral emails to who right. That’s not a CloudSponge function. It’s really up to the store owner to decide how do they want to power a sharing feature.

Whether it’s a referral program or a wishlist or something else. Once they’ve done that, then we can help. Once it’s you’ve got an existing function, that’s sending those emails and maybe generating the referral links for bigger stories, you’re going to be worried about fraud. You’re going to want to choose a referral program platform that handles fraud or indemnifies you from fraud. There’s lots of stuff that goes into that. That’s a pretty involved vendor selection process all by itself to get the functionality that you’re talking about.

But at the end of the day, once you’ve got a screen on your website, a form on your website that has an input for creating a recipient list, whatever the reason is for that. Then that’s where we can basically double or triple their performance of that form in that area. Ultimately like that whole sort of acquisition channel for your business.

Steven: Then doubling and tripling of performance is coming from just like removing the barrier of having somebody manually enter in the email addresses. It’s allowing them to connect. It’s exponential is because it becomes that much easier.

Jay: That’s one of the ingredients in the recipe. It’s not the only one, there’s a couple of other things that I can sort of telling you about that, also are byproducts of the address book that I think is pretty interesting, but before I move on to those, that one is you’re right. Our data on that is really just anecdotal. Looking back at 10 years, what do our customers say? We’ve got case studies and testimonials, and we talk with our customers all the time and that’s like a conservative. Most of them say, yeah, we’re sending out double the number of referrals that we used to send out or more.

The actual number, one of our north star metrics inside the company today, as of now is 3.5. What that number means to us, is for a person that lands on a page on your website, or like on an e-commerce stores website who type’s in a friend’s email address, on average people that have to type an email address, will do it once, especially if they’re on a mobile device. If you ever tried to assemble a comma-separated list of email addresses on your phone, like it’s almost impossible, so they’ll do one.

But for those that have the address book, the contact picker attached to that form field so that people can click on a button that says, add from the address book, the average number of email addresses inputted in that scenario is 3.5. You’ve got basically three and a half times the number of email addresses or the volume of emails that are being sent, is multiplied by about three and a half.

That’s kind of the first top-of-funnel metric that we improve pretty much instantly, as soon as you install it. The next one, it requires a little bit more engineering, but it’s really interesting. It’s something that wasn’t, self-evident. It wasn’t obvious until we saw basically like our best customers and we sort of dissected what did they do?

What it really is, is if you think about, those two different examples, the with, and without the address book. Without an address book, your software receives an email address, like a recipient email address. How personalized can that email really be? How much personalization can your transactional email have, when all you know is the email address of the recipient of the referral. It’s going to be, first of all, the from address or the from the field of the email is going to be from your store, which is probably a story that the recipient’s never heard of because they’re being referred to it.

The sender may or may not be in a session where you’ve got their name. You can’t really personalize this, but the sender’s name in the subject or anything, or anywhere. The recipient’s name, you don’t have. All you have is an email address. My friend typed in my email address, but you don’t want to make the type name, first name, last name, email, over and over again. You just don’t do that. But when the payload that’s populating that form is an address book. You have everything. Each of those emails that goes out, can be like from Jay Gibb, via store name. The recipient sees my name and they recognize a person they know. It can have your name in the subject line, without the user having to type in your name.

They just clicked on the thing that was your email address. But now the software sees your name as well. Cause it’s also storing the person’s address book, right? Not only do we get that like three and a half X on average multiplier at the top of the funnel, but then we also get another multiplier on the open rates and conversion rates of the email that’s being sent, because we’re personalizing or enabling the story to personalize. Of course, there’s some engineering that goes into that. But that personalization is where you can really ratchet that performance even more if you invest the energy into doing the personalization for the referral emails themselves.

Jonathan: We need to go for a break actually Steven. We’ll be back in a few moments with Jay Gibb. The founder and CEO of CloudSponge. We’ll be back in a few moments folks.

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Jonathan: We’re coming back. We’ve had a good conversation in the first half with Jay. Before we continue the discussion, I want to tell you about a webinar I’m doing with Spencer Fall when one of my regular panelists on my round table show. We’re going to be doing this on Friday, June the 11th at 10:30 AM Pacific standard time. It’s going to be part three. The final part of our trilogy on how to use launch flows and a group of plugins to build something even better than ClickFunnels. Something that allows you to utilize the power of WordPress to produce marketing automation funnels that can match the best of the SAS products at, let’s say a fifth of the price that you would be charged for something like click funnel.

Not only for yourself, but for your clients. I suggest that you join us. How can you join? Well, you just go to any of the podcast episodes and you will find links that will enable you to sign up. We’ll just send you a quick email reminder. I’ll tell you before we go live, and there’ll be a link where you will be able to join us and ask myself and Spencer me any questions that you might have about what we discussed in the webinar. Let’s go straight back into the interview.  Is your company bootstrapped or did you take outside funding to help you, Jay?

Jay: We are self-funded.

Jonathan: Oh so you’re bootstrapped. Was that a conscious choice that you would keep the company bootstrapped?

Jay: Yeah. I mean, that’s my preference. Personally, I like the calm lifestyle. We’ve built a culture within the company of everybody actually enjoying their jobs and sort of enjoying being able to take their time, to do things properly and talk to customers and all that kind of thing. The stress and anxiety of being a venture-backed business really have no appeal to me.

Jonathan: No, I totally agree with you. You said you’re focusing on e-commerce. The two main players seem to be either Shopify or WooCommerce. I don’t know what your statistics is of those two major players. Is there one that’s dominant that utilizes your product at the present moment? Obviously, we’re quite focused on WordPress and we have a lot of WordPress developers and members of the WordPress community that listen to this. But we like to get people from the outside in web development and in products coming on the podcast because it just mixes things up a bit. Of those two platforms, is it mostly Shopify or WooCommerce or is it mostly equal?

Jay: No, it’s probably pretty close. I think a lot of the ways that we actually end up showing up and I think Steven kind of alluded to this at the beginning of our conversation where, when he said that feels like he’s used CloudSponge before, but like he didn’t like consciously acknowledged that he was using CloudSponge. Like we’re sort of that like the undercurrent of a lot of things and people, I get that reaction a lot were like, oh yeah. Like I think I have seen that before, whether it’s on like next door or Yelp or Airbnb like you’ve seen it before, even though you didn’t really know that we were behind it.

So that’s the way that we have ended up entering Shopify and WooCommerce in a lot of cases where we were sort of bundled into other software. Our relationship is kind of a one-to-many, where we’ve got a relationship with somebody that’s got a really strong wishlist functionality or referral program functionality, or a whole business that I don’t have any interest in getting into. They’re in there. From our perspective, it’s a little bit abstracted, to be honest, But it is probably pretty equal though. The one thing that I would say sort of is in favor of the WordPress side of that, is that there’s more development freedom.

For people that want to do the kind of thing that I just described with the perfect personalization of the referral emails, it’s a little bit more approachable to do that in WordPress because you can do whatever you want. It’s open-source software and platform, and however much engineering you want to invest into it, you can do. In Shopify, I think that’s possible, but there are more barriers in the way of actually making it do whatever you can imagine.

Jonathan: Thanks for that over to you, Steven.

Steven: As you’ve been working on this for 10 years, was there ever a point where things started to like, you know, you get that classic or what everybody tries to get that hockey stick growth, like where all of a sudden, like the market’s like, oh, this is what we need, an eclipse or is it something that just likes slowly built over time?

Jay: If I zoom out to like a 10-year view, is kind of like a pretty steady like stacking. But then, if you zoom into different events that happened in our lifestyle, either like we cracked a marketing nut somewhere and something good happened, or you know, one case I already mentioned was a product that was doing some of what we do get acquired by Facebook, and they just literally just turn it off and all their customers are homeless. Those types of sort of Black Swan events, you can’t really predict. Those happen and those have created those like little stair steps.

But just because of the nature of where we are, you know, there’s B2B software that’s you know, kind of a set it and forget it. Like most people, once they get set up with our product and they get it integrated, they’re done. Now it’s our job. They continue to pay us monthly to make sure it stays functioning and as awesome as it can be. Our job is to keep up with Google and keep up with Yahoo and keep up with iCloud and AOL and all the other stuff that our customers are depending on.

It ends up being something where it’s just sort of this like a linear, steady ratchet that just keeps going up and up, as we get more and more customers. We don’t generally lose customers unless they go out of business. If they just like close shop, nothing we can do about that. But any business that joins CloudSponge and uses it and continues to be in business, like they don’t churn and they don’t ever cancel basically.

Steven: Just took a quick look at your pricing. It’s all like extraordinarily reasonable for the amount of work that you’d have to go and do yourself if you were trying to build this feature. There’s never probably that point where someone’s like, oh, well we’ll just build our own thing. It’s just like, no this is way easier. It just makes sense.

Jay: Yeah. It’s true. Our pricing is really geared around, the more expensive plans are for e-commerce stores that put a really high premium on brand. They really want to make sure that the color palette is perfect. The corner radiuses are perfect. The text is exact. Everything matches. If that’s what they want, then the product is worth a little bit more. That’s part of the reasoning why you have this impression that you’ve used it before, but you weren’t really sure where, and that’s because of our customers that like make it a perfect match and take credit for what we’ve done. It’s totally white-labeled for them.

Jonathan: Well, that’s great. I’m going to come to the end of the podcast here. Can you stay with us for another 15 minutes, Jay, for some bonus content?

Jay: Yeah, sure. No problem.

Jonathan: But we’re going to wrap up the podcast. You’ll be able to watch the whole interview, plus the bonus content on the WP-Tonic YouTube channel. Go over there. We’ve got a host of interviews with bonus content, which you won’t be able to hear on the podcast part of the show. Go over to YouTube and subscribe to the WP-Tonic YouTube channel. I have a load of tutorials and other materials there that you might find interesting. Jay, what’s the best way for people to find out more about you, your team, and your product?

Jay: It’s not up right now. I realize this is life and we normally do it a little bit after the recording, so it might be a week but we’ll have cloudsponge.com/wptonic for your viewers to go to. We’ll put some special offers there for them. Also, that’s the easiest way to find me and the rest of the CloudSponge team.

Jonathan: Thanks for doing that Jay. The WP tribe always loves people that come on the show and do that for them. Thank you so much and send it to me and I’ll make sure it’s in the show notes Jay. Steven, how can people find more about you and what are you up to.

Steven: Yeah head over to zipfish.io to run a speed test to see how much faster we can make your website.

Jonathan: Steven’s team help the WP tonic website. It’s quite a large website. It was getting a little bit as these WordPress websites came, and Steven and his team really helped with that. I can highly recommend they go over there and see what they can do for your site. We’re going to wrap this up. We’ll be back next week with another great guest like Jay, we’ll see you soon folks bye.

Thanks for listening to the WP-Tonic podcast, the podcast that gives you a dose of WordPress medicine twice a week.

Watch The Full Interview Plus Bonus Content Here

Here’s a link to the WordPress plugin that you can easily use to link your client’s WooComerce website to the Cloudsponge service.

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