Kunle: Hello guys, welcome to this episode that 2X eCommerce Podcast Show and today I’m joined by the cofounder of Template Monster. His name is David Braun. Template Monster is a website template marketplace that features over 46,000 designs for Magento, Drupal, WordPress, PrestaShop, Joomla, and WooCommerce. You most likely have heard about Template Monster. I have come across Template Monster in the last few years, so you most likely have. If you haven’t, this will be an interesting introduction to Template Monster. David has quite an interesting back-story, and also tips on how to manage and scale a digital-product ecommerce business to 8 figures. It’s actually my first time getting someone who sells digital products for an e-commerce website on the show, so it will be quite interesting to hear how they managed to build an eight figure business that sells digital products through their marketplace. Template Monster was founded back in 2002, so it’s about 14 years old. So with all of that experience, David is here’s to share his wisdom on selling digital products online. Without further ado, I’d like to welcome David to the show. Welcome to the show, David.

David: Yeah, hello everybody. It’s an honour for me actually to participate in this podcast. And I think many readers will try to build the productive atmosphere and I’ll try to be as clear as possible to bring some insights that many listeners will be happy to actually implement their own businesses. Or if somebody’s learning how to run e-commerce business, I think it will be a lot of insights.

Kunle: All right, brilliant, brilliant. Because you bring so much experience, you know, 14 years in the game. You’ve seen up and downs of the business, you seen I think it was prior to when Google was quite dominant, using what it means to be marketing prior to the Google era, and what it means the marketing today, so I’m really glad to have you on the show, David. So could you take about a minute or two to introduce yourself? Because I don’t think I’ve done enough justice with intro.

David: Yeah, sure. Okay, well I am 36 years old. I have four kids. Basically I was born in Georgia, not in the state of Georgia in the United States. In a little country, former USSR country. And I lived there actually, great sun and sea and everything, until the war started there. So I had to, with my family, we basically dropped everything we have and we became refugees. And so we have to kind of restart life from scratch. We moved from one country to another country because it was very tough to find a proper job, a place to live and so on. And everything ended up in the Ukraine, in the south of Ukraine, and I met a guy… So, I graduated and university there and when I was on the first course, I met one US guy who came to Ukraine to actually look for some partners to do some business with. Because obviously you know by that time, 14 years ago, Ukraine had a very cheap labour force but people were very talented. He kind of heard about it and just as a stranger came into Ukraine and met me, actually. And he offered me, I was working in the consulting industry by that time as a student, I was a junior marketing expert, and we help Ukraine in enterprises to restructure their processes, you know, to build distribution networks, to establish proper branding, and so on. So I kind of knew off-line marketing stuff, you know, read a lot of books and so on, but never… well, I was using emails, like browsing the Internet, searching in Yahoo because Google is not famous by that time. And then he offered me to start a web design business. I didn’t know anything about web design but I heard that it’s a big story, it was already one Dot Com bubble already destroyed. And I said, ‘Okay, let’s try.’ And he said, ‘I will do the sales and marketing,’ because he was in New York, ‘And you will try to make a production.’ So we started to do the web design, opened a web design agency called Inverse Logic. And we were happy enough to actually, you know, the first client that we got, we got a website that they paid us $25,000. And it was like, ‘Wow.’ That was a lot of money for the first ever job in the web design agency. And then we learned the really hard way, we almost went bankrupt because we spent… basically we delivered the final result to the customer in six months or so, so it wasn’t really a gain for us, but we learned the hard way so we learned that we had to micromanage lots of communications with the client. There is a lot of revision processes, you know, change this, change that. We had to build lots things from scratch. So we did successful projects, 10 or 20 successful projects, made the first $200,000 in sales during the first six months. And it wasn’t really too much profitable, but it was busy, definitely. And then I started to think that probably this is a dead end, you know. I started to think, okay, we can probably push more marketing, more sales and get more orders, but there’s going to be more people in this stuff so that’s not scalable enough. And I was starting to think about making some mass products that people can buy and just use it, and we can resell it many times. And I was watching, we had one very talented designer in the team, and he was very fast and productive. And when I was watching how he makes designs, he was using his own sort of libraries, you know, in Photoshop. Different kind of design elements and styles. Right now it’s no surprise, because right now you can go and buy UI kit. Basically he was sort of creating UI kits without knowing that it was a UI kit. And I asked him, ‘What is this?’ And then he said, ‘This is elements that help me to speed up the production, you know, make the website.’ I said, ‘Do other designers really use it?’ And he said, ‘I don’t know really, but I think that if somebody would give me this design elements I would definitely pay for that.’ And that was like the first insight that we got. And I said, ‘Hey, why don’t we go further. Why don’t we not only provide some elements, because you know in order to use elements you need a qualification for that, you need to be a sort of web designer.’ And I said, ‘Why don’t we offer predesigned designs, so like, site designs? Does it exist?’ And then we didn’t even know that the template would exist. So we kind of Yahooed it and found one website, there was only one website selling shitty-looking designs. And we said okay, let’s do it. So we named it Template Monster. We made first 30 designs divided into three categories: Bronze, Silver, and Gold to help the customer distinguish by quality. And it started to work. You know, surprisingly, so how we marketed… The initial marketing strategy was just direct marketing. Nowadays it’s called spam, but back then it was direct marketing. So we basically manually visited Yahoo directory and for example we had five different designs for restaurant businesses, so we visited those restaurants and sent them an email using contact forms, everything was done manually. It was just like, ‘Hey guys, we see that you’ve got a restaurant. Your design is outdated. We have five different designs for restaurants for a affordable price. Come see it, if you like it get in touch.’ And it really worked. We were sending 300-400 different emails every day and at the end of the day, first week we got $70,000 in sales. And we said, ‘Wow. This is it. We found a goldmine.’

Kunle: Okay, let’s track back a bit. I kind of like what you said about your identification of the fact that your project-based work, your custom-product based work was not scalable and then at the same time you looked at your developer’s who was creating UI kits and reusable modules, basically, to speed up his projects. So I suppose the take away from there is ‘we provide digitized products to be able to scale our business.’ So how many templates did you start out with to be justifiable to go to market and engage in the direct marketing?

David: Yeah I think it was 30 templates for the beginning. And every day we were editing one more templates. So it was just to begin with, because we didn’t know if it was going to sell or not. It was just an idea, a rough idea, but since we already had a guy team, the designer, who was very productive and we paid him a salary, so there was no additional investments besides making the store.

Kunle: So by the first year, how many templates had the team been able to churn out to the market?

David: So I think it was about 250 templates for our first year, because it was all done by the same designer. And we were just expanding the coverage for different business niches.

Kunle: Okay, and how has the template size evolved over the years?

David: Well, we were multiplying the quantity and quality four times, five times every year. Because once we verified the business model, once we knew that we had a demand that was ready to pay, so it was just a matter of business skills to actually scale it.

Kunle: Yep, yeah. And it was also quite interesting given your background with regards to being in Georgia and having been a victim of, you know, being refugees, how you managed to strive to get into university and finally getting into marketing consulting and then setting up Template Monster. It’s a phenomenal story, back story, making the best…

David: Right, I learned, because if you’re raised in a wealthy family and you don’t have enough motivation, right. You just go to university and you graduate, find a good job, you can allow yourself a luxury actually to be slow and happy, kind of.

Kunle: Just normal. [laughs]

David: Yeah, yeah, right.

Kunle: And did that spark your entrepreneurial flair to build something? You’re a cofounder. Who are your other founders?

David: Yeah, there are three other guys. One guy, the guy who offered me… he was actually doing the yacht boating business, he’s a yacht guy, but for some reason he decided that he needed to step into web business. And the two other guys, they joined a little bit later on. Because then we needed more tech-oriented guys. Because I’m not a programmer, and we found that basically a good engineer is as essential as a good marketing guy or a good product guy. So one guy is our main engineer, so the guy who runs all the programmers, all the back-end systems in the front-end systems. And another guy, he joins after we decided to actually expand our products into content management systems about three years after, when Flash died, when lots of changes began. So we kind of lost the focus because we didn’t know where to go, you know, we had already 20,000 templates. Most of them were Flash-based. Then we were really one of the best in the world for Flash animation.

Kunle: Yeah, we’re going to talk about that pivot you made from being that Flash-only website to now what you are, which is a template for various platforms. And how you sort of adapted to the changes on the online space. Because if you think about it, your business could have just gone down the waters if you didn’t adapt and change and pivot with changes in the marketplace.

David: Exactly.

Kunle: So we’ll talk about… I read a bit about your back story and it’s quite exciting. Because listeners who are into digital products should have a lot of takeaways from your story with regards to changes in the marketplace, and not just being stubborn, more or less, is that’s not too much of a harsh word. So now, what does your team size looked like? You have four founders. So what does your team look like? Are you still based in the Ukraine?

David: Yes. Well we do have about 15 people in US, mostly marketing, business development, a lawyer, the accountant. You still have to be, about 40% of our customers are coming from the US so we have to have a US presence. And also legally from the beginning we were a US company.

Kunle: Okay. Delaware company or?

David: Yeah we started to the Delaware company and then we moved to New York. And then we moved to Florida because it was better business terms to do business in Florida. Also we like to come to Miami.

Kunle: The weather.

David: The weather yes, so I always like saying, okay, we would end up to live in Florida, you know like it’s definitely a good place to…

Kunle: Excluding the hurricanes but, the weather is fantastic.

David: Of course, yeah, exactly, exactly.

Kunle: So you’re based in Miami now?

David: Yeah, yes. Yeah, but I’m spending lots of time in Ukraine, especially lately because Ukraine has the work there and I actually kind of have the repeating story… So Template Monster set up the biggest, in the Ukraine, crowdfunding platform called PeoplesProject.com, so we fundraised more than $10 million to help fund soldiers, to help refugees to reallocate. So it’s like a big, big focus for us at the moment, [00:18:47.26 inaudible]. Because you know, it’s my story, basically. After 20 years I had the same kind of situation. My wife is from the Ukraine. I grew up in Ukraine. And everything started there to be the same story, exactly the same story, with exactly the same players. Russia is playing the big part in that, pretending that it is not, but in fact we have a war with Russia there.

Kunle: So this is like a déjà vu for you.

David: Exactly, exactly.

Kunle: Yeah. Interesting, really, really interesting. So you are in the Ukraine, you spend a lot of your time in the Ukraine.

David: Yeah, I spend, mostly like I’m spending, for example in 2015 I spent seven months in Ukraine and the rest in the US. And so this year it’s probably going to be even more time in the Ukraine because of the charity stuff. I’m finally, I’m happy to actually manage the company, so I’m not needed on an everyday basis, so I’m not doing any operational stuff anymore. So I’m trying to do strategic planning, I’m trying to do the business development still because people like to talk to founders and visionaries. Because strategic things are things that, you know like, what would happen in three years? And definitely you have to kind of talk to people who make decision-making power.

Kunle: Okay, so beyond the 14 people currently working in the company, how many are devs and how many are… so within the 14, what does the dev and non-dev…

David: No, no devs at all. Altogether in the Ukraine we had 300 people in the Ukraine.

Kunle: Wow, 300 staff!

David: Yeah, that is a lot.

Kunle: That’s a lot. [laughs] What city are you based in?

David: We have three different… so we started in the south of Ukraine where everything started historically. Then we moved to Lviv, it’s like a western part nearby Poland, because we wanted to grab people from Poland as well. And then we ended up in Kiev, its the capital, because it was easier for logistics to come from this direct flight from New York to Kiev, so it was easier.

Kunle: Okay, okay. Wow, okay. So they are all full-time staff or part-time?

David: Yeah, full-time staff. We actually never use any freelancers, besides designers. So we could have a designer that we buy out the designs from. Because it’s very, very tough, I always was jealous if I see people who can manage, actually, the whole business is working with freelancers remotely. I never could do it. I don’t know, always they were unreliable, unmanageable.

Kunle: You’d probably have to be a developer; you have to speak their language to get the most out of them.

David: Yeah, maybe, maybe.

Kunle: Okay. So, and turnover is… what’s your turnover like? Revenue like?

David: I would say it’s about $10 million a year, about.

Kunle: $10 million US?

David: Yeah, US, of course.

Kunle: Okay, so, 300 people, wow. So do you have a marketplace? So beyond the 300 techies that actually churned out all these templates and manage the website and all the traffic you’re getting, do you also have a marketplace of developers, third-party developers, designers that submit their templates?

David: Yeah, we do, we do. But not very aggressively. And I think that this is our mistake. So this year is going to be a year of transformation Template Monster from being closed marketplace to being the most democratic open marketplace. Because right now we got a couple of competitors which over-grew us in terms of number of customers, the traffic, and so on. And primarily because of the open marketplace model. But right now they also struggle with being closed marketplace, so you know like people who were first actually enjoy the benefits and the most sales. So we want to change the game in this industry, so we want to create the most open marketplace anybody ever was creating in the subject.

Kunle: Gotcha, gotcha. Yeah, you are right, some third-party templates providers… yeah, some marketplace templates would allow third-party template designers. Okay, that’s interesting. But you know, there’s that thing about control versus…

David: Yeah, but the biggest issue in that is the stability of the product. Because 50% of our customers are end users who are building the site for themselves, and another 50 are web developers who are using our templates in their production process to speed up the delivery, to cut down the budget and so on. So the thing is with those people, with the second part, developers, they’d prefer not to repeat the learning curve all the time. So if you are kind of learn how our WordPress templates are built, so you don’t want to buy another WordPress from the same website and then re-learn the learning curve, you know, so they could be built totally differently. And this is the biggest challenge for us: how do we transform the existing Template Monster to the open marketplace. And support is another issue. Because we are the only company on the market right now who are providing 24-7 live support. You know, live chat support, phone support and so on. And this is a big issue. Let’s say after six months would have 10 times bigger inventory with products completely differently built…

Kunle: How do you scale support…

David: Yeah, how do we scale support and how do we distinguish, okay, this is 24-7, and another product with it which is just right to that is email only, 48 hours response. So those challenges still exist, we’re thinking hard… how do we do it?

Kunle: Yeah, because I recall… when I was reading the Jeff Bezos book, The Everything Store, I recall when the early days he decided that Amazon must be a platform, and that’s where the scale started to… because half of their business really is the marketplace. And just that scale of the…

David: Yeah, exactly. Yeah I was reading the same book and I said, okay, Amazon had it already 10 years ago. And they managed it successfully. So let’s try to do the same, because we would be… actually right now, we are splitting two different businesses. One is a template vendors, so you know, our own production. And the second is a template shop, you know, basically the shop. So I asked myself very important question: if that would be two different businesses with two different owners, what would be the interest for each other? So for the template producer, the interest would be to actually maximize the distribution channel. To sell their products everywhere where they could sell it for. To submit it to all different marketplaces, to all different deals, websites and so on, not only be exclusively available on Template Monster. And for the shop, to offer whatever people can buy. Basically go to every provider and say listen, come to us, bring your products, we put them for sale and we make commission, you make a business, we make a business, right. So why do we actually have those two businesses suffering from living with each other for so many years? So this year is going to be a divorce of two different business models.

Kunle: That’s amazing, that is really amazing. Okay, now let’s talk about your journey. So I want to talk about crisis points. You been in business for 14 years. What core crisis points… by that I mean where you just thought, ‘You know what, going to go under if we don’t make changes.’ How many crisis points have you had in your business over the last 14 years?

David: Yeah, let me think. First crisis, but the crisis was the very first week of running the business after we got $70,000 in sales and all of them, literally, were fraud. So we got two of our accounts frozen, you know the bank accounts closed, and they said you know, you’ll never go to the business and so on. And we didn’t know even that this word exists. So we learned it really, really hard way. So I said, ‘How do we combat?’ So I said in order to combat you need to learn how it works. So I registered myself into this shadow community where the carders are and pretended to be one of them.

Kunle: The dark web…

David: Yeah, exactly. There was a CarderPlanet.com, that guy was arrested after that. But he was the biggest forum for those people. So I became a power user actually, and it was very stupid actually I think, let you know we did it. Because I didn’t know about possible thing that could happen later. But you know what I did? So I found this guy and I met the founder this community, and I said we would help you to redesign your website because we are good designers and so on. So we redesigned Carder Planet, the biggest carding community in the world where every intelligence agent probably was there, like FBI, CIA, MI6, whatever you know. And we put a back link in the footer saying, ‘ proudly design by Template Monster.

Kunle: [laughs] Okay.

David: Yeah, you know, I don’t know why nobody came to us after that. But you know what, after we did it, the level of fraud decreased 10 times. Because the founder posted an announcement: ‘Template Monster are our friends, it’s a very bad thing to steal from your friends. Whoever touches a friend, he’s my enemy.’

Kunle: [laughs] Full godfather, mafioso stuff there.

David: Exactly, exactly. So that was the first thing, very stupid but very effective.

Kunle: Right. So about that time, 60% to 70% of transactions were pretty much fraud.

David: Yes, because it’s a digital barter.

Kunle: What were they doing with templates? What were fraudsters doing templates?

David: I have no idea. Some of them were building sites definitely to catch more visitors and customers and then probably steal credit cards from them. I think that was one reason. The second reason, they were reselling them. For example, our templates were priced like $50 and they could sell it for five dollars because they’re getting it for free. So that brought us many challenges. The first challenge, how do you establish 24-7 billing, you know and [00:30:45.17 inaudible] fraud officers actually screening manually every transaction. And we built very successful model from that, it’s really like a great service, so we wanted even to offer it as a stand-alone service to other merchants who are dealing with digital products. This is the first challenge. The second challenge we got was actually protect your templates. Because the template, we were shipping the old source files. So it was very, tough to actually protect it, because it’s not software, right.

Kunle: So this is pre WordPress, pre-platform…

David: Yeah, exactly. That was a purely PSD files plus HTML files.

Kunle: Okay, okay. PSD and HTML, that was all, okay.

David: Yeah, exactly. But what we did, we found a technology called stegano, it was open source technology allowing you to encrypt the text information into the picture. So what we did, we were encrypting the transaction IDs into the pictures and then we were developing the scripts, like a spider which spiders the web. And if it found our design, it can go and decrypt this information so we know, okay this is a legit customer or we found five different designs using the same transaction ID.

Kunle: So they were like security keys.

David: Exactly, but like invisible security keys.

Kunle: I see, I see. So what happens when that template was used illegally? Would you lock the template up or?

David: Because we didn’t know like who was the legal customer, so we were sending polite email saying you know, ‘Listen, we see your design is not registered in our database. Can you please send us a proof of purchase?’ And that was actually quite a good sales channel for us, so by turning illegal customers into legal customers without any penalties, so we just asked him to actually to buy it. So we were making about 20% of our revenue using this kind of….

Kunle: Wow, that’s clever, very clever. I think there are two learning points here. The fact that you were trading time for money, initially. And then you swapped over to just scaling this into a digitized template, pretty much. And then this, reaching out to…. These are just really clever milestones.

David: Yeah, because initial idea was to kind of battle with them, try to close the website and so on, but it’s never ending story. So I said you know this is not going to happen because it’s too much for us. So let’s try to make the business from that.

Kunle: Okay. So speaking of other crisis points…

David: Yeah, that was the first crisis point from the very beginning. The second, and the biggest still, it was when Steve Jobs said Flash is going to die.

Kunle: 2007 or?

David: Yeah, I think it was 2007. And you can imagine by that time, 90% of our revenue was coming from selling Flash. And we had 25,000 different Flash-based templates. And it was like a ‘boom!’ After this letter, every single month there was a decline in revenue by 2 to 5%. Every single month it was going down down down. And then we had a challenge, we were having urgent meetings and saying what are we going to do, you know. It would take us extra 3-4 years to actually rebuild this inventory in HTML. And because we didn’t have too many coders knowing perfectly HTML, because most of our staff in production was Flash animators. So we decided, because despite the size of the company we had a family-type of company. So we said we’re not going to fire those Flash-based animators. We’re going to retrain them to learn HTML. And nowadays, I think it was stupid decision, it was better to actually kind of pay them some money, give them some money to find another job because we lost about year to retrain people. And by that time lots of things changed. It was a big, big hit for us. But still, any crisis brings you more ideas, more insights and makes you stronger, so we basically learned that we would never put all eggs into one basket. So we need more products, much more products so you made 10% of the revenue from one product, extra 15% from another one, and so on. So this is the biggest crisis. And the third crisis was when Google introduce Google AdSense. Not AdWords, but AdSense, and I’ll tell you what. 50% of our revenue was coming from affiliates. We had 250,000 affiliates reselling our products everywhere. All the web, like when you put in Google any template related keyword, the top 10 results on the first page were either we or our affiliates. No competitors, nobody. So we were really dominating this market primarily because of the limited choice for the webmasters, how do they monetize their websites. Before Google AdSense, you can only sell some banners, not through established channels but through personal communications. Be somebody comes to your site and writes you a letter, ‘Listen, I want to buy banner on your site,’ and so on, so it was not scalable. And the second way was to participate in some gambling or adult industry, which was not for everyone, it was more like a gray area. Third one, Template Monster affiliate program. So that’s why, and it was privately brand, white label, so you can open your own Template Monster within a couple minutes. You print business cards and you were going to your friends and saying, ‘Listen, guys I opened my template store. Buy from me, I make money, I give you discounts,’ and so on. And when Google AdSense actually came to the scene, lots of people choose put a couple lines of code and started to make money automatically. And it really decreased the number of affiliates; huge, huge hit for us.

Kunle: This was when? When did AdSense come into the market?

David: Let me Google it. It’s 2010.

Kunle: 2010, okay.

David: Yeah, 2010.

Kunle: Wow. Okay, so tracking back to the first crisis point, how long was the training of staff were…

David: One year.

Kunle: So did the business of the significantly over one year?

David: Yeah. But because we were extra-profitable back then, we kind of refinanced this loss to stay in the business and see how it evolved.

Kunle: You had sufficient padding, financial padding, to keep you going.

David: Right.

Kunle: Okay, right. So yeah, and then from then on you started to build out HTML. And then when did you start to move into platforms?

David: Well, I was… because I became online marketing and primarily search engine marketing guy, I was always using, I was browsing… so half of my day was just collecting different banners and browsing the website. Because there were no tools available, right, like Google Trends, nothing like that. And then I started to see that many websites started to use content management systems. There were no dominant players but still I started to find out lots of people using Joomla. So I said, you know, why are they using Joomla? And then I found that they are attracted by the idea that somebody makes a website for them and then they manage it by themselves, so they never rely on the developer. And we started, okay, let’s try to learn what Joomla is and start making Joomla templates, because it’s no different for us. You know, basically you just need to train a couple of guys and see how it works. And you know it was a first successful launch for CMS business for us, it was really, really big. Probably grew in the first quarter, it grew from zero in our revenue portfolio to 15%. And I said, ‘Wow, it looks like that’s the right idea again.’ And then we found Drupal, and then WordPress… WordPress was simply for blogging initially, so people who were creating their own blogs were not ready to pay for anything except probably hosting. But still, step-by-step, the WordPress evolved into fully big content management system and I think it is another mistake that we did. We didn’t pay enough attention. Because Joomla was so big for us. We didn’t pay enough attention to WordPress, so we didn’t train enough qualified developers how to do great stuff in WordPress. And we lost momentum, so still now we are actually catching up the others.

Kunle: Okay, what about your e-commerce platforms?

David: E-commerce is big for us as well. It’s about 35% of the revenue. Because it’s a simple answer. Well, first because they are more expensive than just websites. And second because if you’re opening the e-commerce business, it’s basically by default that, you know, it’s a business, so you have to invest into the business, right. So offline business you have to invest into getting a shop, renting out, making some refurbishments. In online it’s the same, so you need to find a place where you would sell your products and so you know, you find a shop. So that’s why people who are buying e-commerce powered products, they are ready to pay. The conversion there is two times bigger than the conversion for just a normal website. So first we started with Magento. And I actually started with Magento when Magento was not existent. So I found those guys with an idea, so I flew to them, to Israel, it’s an Israeli-based company. So I met the guys, I explained who we are, and I said listen guys, we would make Magento popular. You don’t believe us? Look I’m telling you, you know once we open… because on Template Monster back then we already had about 100,000 unique visits every day. And I said, ‘Listen guys, 10 million different customers, potential customers, would see Magento in our primary menu. And believe me you would have lots of downloads from that.’ And so we were working from the beginning together to actually make our templates fully compatible with Magento, and it really paid back. Because before everybody understood Magento… Oh no. Sorry. Magento was late stage. Actually the first was OS Commerce and ZenCart, they were dinosaurs. You know, we started with them of course. And working with open sources requires, basically, completely different mind-set. Honestly, I’m talking about this phenomenon with lots of my business friends and they say, ‘Yeah, that’s true.’ Because as a businessman, as a commercial businessman, you’re thinking about potential results, the revenue, what kind of benefits you get, what kind of benefits the partner gets. In the open source world is different. People are thinking about the community, about the influence to the world. So the money and the financial side is not in the priority, it’s not top three things they are thinking.

Kunle: How do you build leverage when you’re negotiating, you know, speaking to them?

David: Yeah so initially my initial approach was business approach, and I said why is it not working? Why the guy who is running, Harold, his name was Harald Ponce, I think, he was living in Belgium. And he was not reacting to really generous offers, like let’s buy ad on your site, let’s make templates and do revenue share. So he was always resistant to that, and I said why? He doesn’t want to make any money, you know. And after some time, by working with both osCommerce, Zen Cart, Drupal, Joomla, I realized that you have to plug in different mind-set. So instead of saying let’s put our templates on your site and we split the revenue, it’s basically, you have to say let’s put our templates on your website, we generated revenue, and we reinvest back into of your platform 50% of the revenue, for example. And you know, it’s kind of working much better because they started this business not to make money, they started this business to prove the world that they are capable to do it.

Kunle: Which is a very interesting mind-set and perspective, to building out something that would make a significant impact on people’s lives. It’s interesting. Okay let’s quickly run through acquisition. So I just use SimilarWeb.com and I ran Template Monster and I realize that according to Similar Web, about 48% of traffic comes from search.

David: Yeah, that’s true. Probably even a little bit more, about 55%, I’d say.

Kunle: And then another 30% is kind of like direct, which could mean anything. It could mean mobile and it could also mean just people from bookmarks or just direct traffic. So my question is, what impact… well, prior to that, how many visitors do you currently have on a daily basis now?

David: I think we have something like 15 million visitors a month. Yeah.

Kunle: Okay, that’s like half a million a day.

David: Yeah, something like that.

Kunle: Wow, okay. So what impact does search in today’s world, 2016, have on your business? What are you seeing from your perspective? You’ve been 14 years in the game, so you’ve built a lot of brand recognition, so a lot of people would just type ‘Template Monster’ and get in straight to your website. Good what’s the impact from search, in general?

David: Well, it’s always changing, like the Google tries to improve their algorithm and we’re always dancing around it, like dancing in the dark, because nobody knows what exactly works and what’s not. But yeah, we were lucky enough to enjoy the Google’s attention since the beginning. Besides direct traffic, the branded traffic where people directly type in Template Monster, it’s the most, the conversions there are much much higher. And then the second place his search because people are looking for something, for exact things like ‘WordPress theme’ and then you see it, WordPress theme, a big selection of that. We are enjoying lots of different requests and it’s tough to maintain it because the site gets bigger, you get new sections, you get the blog, and you get some random people visiting your website. All this is like big challenge, how do you monetize properly and how do you present to people who… for example our Help Centre became suddenly number one under ‘support chat’ before. You know, like, but Support Chat is like a service in the UK where people want to commit the suicide, they go and talk, you know like you need to support them. So we got so many visitors like that disturbing our operators, saying like, ‘Listen, my girlfriend just dropped me, I want to kill myself,’ and it’s not related to templates.

Kunle: [laughs] That’s broken Google for you.

David: Yeah, exactly. [laughs]

Kunle: Okay, okay. Really, really quickly, do you do any content marketing like YouTube? Do you do any videos? So post purchase, do you engage in any content marketing to come help either potential customers or existing customers get the most out of templates…?

David: Well, we do but on a very, very limited basis, and I hate it. I wanted to make it because everybody, you know the Google team says, you know, it’s the future, the Google forecasts that the next year about 35% of search words will be in the video, primarily through YouTube so we have to do it. But we don’t do it yet.

Kunle: Let’s talk about retention, real quick. What has been your number one means of driving repeat customers?

David: Number one? Developers who bought, randomly basically, or somebody recommended them to buy the template and they like it so they kind of re-synched their production processes. And our stats showing that on average, every third project, if you’re a professional developer and you are doing the websites as a custom service, every third project they are using our template.

Kunle: Okay, okay.

David: And the lifetime value, you know, you understand, is way, way higher than the end user who just came to the site, bought a template for himself, and then he’s asking gazillion numbers of questions: How do I do it? What did I buy? What is a zip file? Why is it not working as it’s on your demo page? And so on. So it’s much, much more profitable to work with developers because they learned one time and then they can stay with you for 10 years.

Kunle: Yeah, it’s important to also distinguish those customer segments, I suppose, because they are two different kinds of customers. And I suppose your growth efforts would be more skewed towards helping developers more, because there are…

David: Right, right. And they speak different languages.

Kunle: Exactly. One other question I had was, which would you say has been more effective in driving the business: your product itself, that is, the quality of templates generated buyer team versus your post purchase support?

David: Well, it’s very hard to reply with definite answer. Because you know, it should be a great balance between them. Because you would never buy the thing that you don’t like from the first impression just because the support is good, right? But at the same time, you could buy accidentally, and once you learn that support is bad, then you would never come back or you would tell everybody, don’t go there because the support is nonexistent. So support is a big challenge for us. We spend about 20% of the total revenue on support. It’s a lot, you know, that’s a lot and it’s growing all the time because the products become more complex, so more and more questions arise from the customers so you have to reply and you have to reply fast and [00:52:14.15 inaudible].

Kunle: Does that 20% translate to staff or systems?

David: Mostly to staff. Honestly, I couldn’t manage to make some automate, what we call ‘passive support’ where people don’t talk to, you know, don’t interact with humans. Because most of our customers, they prefer, when you send them a link to documentation, they say, ‘Okay, documentation is for losers, talk to me.’ So they prefer to talk and to be explained. We also like, when the technology allows us to do it, we right now using remote access tools to actually even do some stuff on the customer’s computers just to show him how to do stuff.

Kunle: Ah, I see, I see. And I suppose, given the fact that is a technical product, you can’t just train anybody over a week and say, okay, here’s your computer, become a support team. They’d need to have some development skills.

David: Yeah, so basically we have support courses, the first course is three months. After three months you can replied to basically sort of presale questions or very basic questions. Next three months, you get an expertise and you can support one or two product types, you know like WordPress or Joomla or Magento. And after a year, you become a real supporter. The retention of support staff is a key challenge for us.

Kunle: I see, I see. That makes a lot of sense now, and I can see the 20% easily eaten up there on revenue. Okay, before we get into the evergreen lightning round, I would like to ask you just one more question. And this is to help listeners who are either selling digital products online being an e-commerce format, people thinking about selling digital products on an e-commerce site. What one tip what’s your advice to them with regards to building and scaling out and e-commerce store that sells digitized products? From your learnings, if you were to do it again with a view to 10X-ing what you have today, what would you suggest? What advice would you give?

David: Well, yeah, I got your question. It’s a good question. I would say that the most important thing: never lose your customer. Do whatever it takes, even if it’s a negative balance for you, if it’s a loss. Never lose a customer. You would learn it hard way and there is a simple reason behind it. Nowadays with Google AdWords and all this competition going on, the customer acquisition costs are double every year. So you pay, apparently, to attract the customers, sometimes we pay $50, sometimes $60, to have a customer pays us $60, you know. So when you know it already, you understand that maybe next year or after three years, if you don’t change anything, the customer would cost you more than he pays you. And if I would know this rule 10 years before… we served more than 5 million customers during this 10 years… we would be super rich and profitable at the moment if I would knows this rule. We would never let the customer go away. We would support him until he builds the site in three years or four years. If it becomes outdated we could re-contact him back, saying, ‘Listen, let’s change your design, let’s refresh it.’ You know, we could upsell him some web tools, how you promote a website, how do you create content and so on. So it’s like a lifetime customer relation approach. And nowadays there is a lot of tools for that, you know, you can basically have free customer relation, CRM system basically. You know, like a sales course but something free. Also, like there is a lot of tools for learning your customers and segmenting them, like Customers.io, Segment.io, KissMetrics and so on. So at the moment the web is much much more intelligent than it used to be 10 years ago. So right now you have, when you start something, since very first customer you have to know your customers and never let them go away.

Kunle: Okay, okay, right. So that retention. Retaining customers is where it’s at. And I keep on banging on that. So I suppose it would be down to your product and support as we alluded to earlier, with regards to retaining them longer-term.

David: Right.

Kunle: Okay. Where also are you seeing opportunity in the digital space? I know SaaS is huge and it will always be huge, but in a format where you are selling digital products… because you’re e-commerce, you’re not really SaaS, right.

David: Right.

Kunle: So where are you seeing opportunity? Where are you seeing new opportunity arising? In what areas of digitized product sales, basically?

David: Well, nowadays we want to extend the number of product categories, because right now lots of things… so the way the people create the web, it also changed, right. So even if you start with WordPress, you still need lots of UI kits, icons, vectors, web tools, and everything. So we, I’m thinking about converting Template Monster into something like an all in one platform the site building process. You know like, even after you build the site you still need lots of tools, web tools, which are most of them are SaaS, but we could be a reseller. That’s what hosting companies do. So they don’t sell hosting anymore, because hosting is the most competitive industry in the web. The hosting companies pay to resellers actually, the commissions that worth three years of revenue had. Which is like crazy to me, so we know that in order to sustain that you have to find a way how you monetize, how you increase the customer lifetime value. So by that, I’m meaning that the biggest opportunity for us is actually to become sort of a learning centre for customers. Because still huge number of businesses worldwide are maybe they don’t have the online presence or they have a really old outdated online presence. So there is all this churn of new customers on the market, we just need to find the best way how to reach to them out with a message, and how you build it in the most, basically, usable way for them. Because they speak, as we were discussing with you, they speak to different languages. The developer prefers to know in advance what kind of bootstrapped version is powered for. And the newbie, just says like, ‘I need the website for my massage shop. And I don’t care what it is, WordPress, Joomla, or whatever, like code it yourself. But I just need it.’

Kunle: Yep. That’s very, very interesting, in terms of that expansion and partnerships to be that learning centre. Okay, let’s move on the evergreen questions section. It’s a lightning round, so I ask a question and then you just answer it in a sentence or two, maximum. Okay I will start when you’re ready. Are you ready?

David: Yes, sure.

Kunle: How do you hire people?

David: Well, I prefer, ideally if they’re already not working anywhere, we talk to them about the compensation that they want. And we say we give you one week paid, sit in the office. Just come and sit and do something that you can accomplish in one week. And this is like the best ever. Because, believe me, we tried different models. We tried psychology testing, lots of probation and so on, but nothing works like real job.

Kunle: Try before you buy, okay.

David: Try before you buy, exactly.

Kunle: What are your three indispensable tools for managing Template Monster?

David: First is Bitrix24.com. It’s like a Russian-based tool, but it is like nothing in the world works like that. It’s like all in one communications for the whole company, despite the fact where they’re is sitting, at home or in the office, all communications never be lost. The to-do system, you know, the project management tool, all-in-one. And the live chat and everything is in one place. This is one tool that replaces all other tools that I have.

Kunle: Wow, sounds like Slack to me. Okay.

David: No, no, much more than Slack.

Kunle: Okay. All right. Any to others? Or just that?

David: Just that. Because it combines all tools altogether.

Kunle: Okay, how do you get there? What’s the website address?

David: It’s Bitrix24.com.

Kunle: Okay. All right, we’ll check it out. What advice would you give to yourself 14 years ago when you were founding Template Monster? One sentence.

David: Well. Don’t afraid anything, I will say.

Kunle: Okay. [laughs] What has been your best mistake today? By that I mean a setback that’s giving you the biggest feedback?

David: Yeah, that was… I decided… I learned in the marketing book how to survey customers. And I actually wrote an email, it was like automatic email, to 100,000 customers that I’m disappointed their website look. Well basically I meant different, but probably my bad English played bad thing. But you can’t believe how many I back.

Kunle: [laughs] Okay. I suppose they were quite negative?

David: Yeah, but it was not… finally, lots of them became my friends because I apologized and so on. But that was the biggest response rate ever.

Kunle: Wow, okay. If you could choose a single book or resource that has made the highest impact on how you view building a business and growth, which would it be?

David: Delivering Happiness. I think Delivering Happiness, for sure. Zappos, you know, Zappos…

Kunle: Yeah, Tony Hsieh. Finally, how can people get in touch with you? Where do you hang out online?

David: How… what? Can you repeat?

Kunle: How can people get in touch, listeners, get in touch with you?

David: Well, I’m sending you my email address. I mostly, I’m an email guy, old school.

Kunle: Is it okay if I shared on the show notes of…

David: Sure, sure. You can give it to anybody. I love talking to people, especially people who want to do something. I hate lazy people.

Kunle: Good stuff, I’m on the same page with the. So it’s your name @Gmail.com, David.Braun.

David: Yes.

Kunle: Okay, right. David, it’s been an absolute, absolute pleasure having you on the show. This has been insightful. We went into different angles I didn’t even fathom. But it’s been really, really good. And I will check Template Monster out, for sure. And for our listeners, check it out. It’s TemplateMonster.com. You most likely would have come across Template Monster over the years. Thank you so much, David.

David: Thank you too. Good luck.

Kunle: Cheers. So everyone listening, this show will be ready on the website, 2XeCommerce.com, just check it out, have a listen. For updates on how to grow your store, how to grow your business, just sign up to our email list. And just make sure that a lot of the takeaways that David provided, you do one thing. Take action. You don’t need to take action on everything, just pick up on one thing and just take action. Until the next show everybody, do have a fantastic one. Thank you. Bye.