This interview is with John Marshall. He started his first software business around the age of 13 by making and selling video games. His most recent businesses have included ClickTracks, which is a Web analytics company, and now Market Motive, which provides online marketing training material. John talks about what prompted him to eventually sell ClickTracks. He also explains why he involved an investment bank in the selling process. John never took VC money to grow his business, and talks about why that is a better approach.
Full Interview Audio and Transcript
Hobbies and Interests: Endurance Cycling, Photography.
Favourite Sports Teams: Doesn’t follow sports and no television.
- One Hundred Years of Solitude by Gabriel Garcia Marquez
Company Website: http://www.marketmotive.com/
Adrian Bye: Today, I’m here talking with John Marshall. John is originally from the United Kingdom and built a business there. In the United States, he worked for Netscape. He also started and sold a company called ClickTracks. He is now starting a new company called Market Motive. John, you can tell us a little bit about yourself before we talk about ClickTracks and Market Motive?
John Marshall: I’ve always been a software entrepreneur. I started writing software when I was about 13 and have been selling it since the age of 14. At that time, I wrote eight-bit video games and sold them on cassette tape. After school, I would open the mail, collect the checks, and duplicate the cassettes myself. It was a good introduction to the process of building and commercializing software. I left the video game business in 1986 or 1987.
I then started writing driver software for color printers. I started a company with another programmer, and we built an OEM business. We developed a tool kit that made it very easy to write a color printer driver. We probably wrote drivers for 40 or more different printers. Printer manufacturers licensed the tool kit from us. In 1992, I moved to California to expand our business by selling more in the United States. I sold that company and then worked at Netscape for a while.
Adrian Bye: You left Netscape at the time AOL was taking over the company. What happened next?
John Marshall: I was recruited to run a small software company that was developing an e-learning product. The company was attempting to market the product entirely online. It was a small company, so one of my many jobs was marketing the product for the Web site.
We bought a copy of WebTrends because we needed to know what was happening on the Web site. The product really did not answer what people were doing on the site. Because I know the fundamental process to design quality software from the users’ point of view and to design an underlying product, I found the experience frustrating. I knew I could create something better.
I had an epiphany about revealing where people click on a Web site. I remember saying to somebody, “All these reports from WebTrends are just not doing any good. What I really need to see is what people click on. Then, I’ll understand what they’re trying to do on the Web site.”
I decided to start a new company focused on solving that problem: what do people click on when they come to the Web site. That was the beginning of ClickTracks. I bootstrapped that company and designed the initial version of the product.
The product’s key feature was the idea of placing little bars next to each hyperlink. Those bars represent the number of people who click on that link. It can be put on any Web page, homepage or site that you’re analyzing.
We took that idea and developed a complete package around it. We made the product available for a relatively inexpensive price. It was also available as a downloadable trial.
Adrian Bye: When they downloaded the trial you wanted them to be able to do receive value within five minutes, is that correct?
John Marshall: Yes. Most people with a Web site had already bought or implemented a product for Web analytics. However, it didn’t actually help them understand what people were doing, and it didn’t produce useful results.
We had a ready-made market into which we could sell. Because the market was utterly dominated by WebTrends, we had to promise our customers that they were going to be able to understand the results. We made this promise, “You’ll be able to use it in five minutes.” We also made the program really easy to access and install.
Adrian Bye: What did you do to make sure they received value in that time?
John Marshall: Most of the programs, such as WebTrends, were extremely heavyweight. They were big and slow. They also needed to be installed on a big fast machine, which typically was a server. We built a very lightweight desktop application. In order for someone to try it, all they had to do was install it on the desktop. It was a completely different approach.
We also made it look very friendly and very icon driven. It looked like an Apple-type product with little blue images that made it very easy for people to use. We were recognizing that the user of the program was a very busy person who didn’t have a lot of time, and they already didn’t have a lot of confidence that the program was going to work. We needed to win them over in the first few minutes of use.
Adrian Bye: Did you have outside investors for your company?
John Marshall: We had two investors. Both of them came in separately after the company was already three years old, profitable, and selling products. We just needed a little bit of a cash infusion to help us develop additional products.
My wife and I used our own money to start the company. It certainly was not easy, but it had a very happy outcome. I retained control of the company. I had my own decision-making power. In the end, the key was that I hired an investment bank to help us sell the company.
Adrian Bye: Why did you want to sell?
John Marshall: It was a personal diversification goal. When you start a company and you and your wife are the majority shareholders, a lot of your personal wealth is tied up in that one asset. That’s not necessarily a smart move. You need to diversify from that one asset because technology changes so fast. If your product is no longer selling in two years, that asset has become worthless.
Web analytics was also clearly moving in a direction where it was going to be central to many other products. For example, Web analytics is at the heart of online marketing activities with search engines, ad banner companies, e-mail providers, and RSS feeds. All of these ways of marketing to people need to have integrated Web analytics in order to be effective.
It was really a matter of approaching companies that do those things and making sure ClickTracks was the Web analytics product they are going to use as opposed to some other company. We were already partnering with various companies. If we didn’t “marry” one of those companies, then they were going to “marry” a different Web analytic’s vendor.
Adrian Bye: Couldn’t you have been coy and let them pursue you?
John Marshall: At first, I thought the way to do this was to be coy and wait for the phone to ring. I was already getting VCs calling and wanting to invest in the company, but I never took that money. Since I was getting calls, I felt that selling the company would be the same thing. It really doesn’t work that way.
If you’re waiting for the phone to ring and somebody to offer to buy you, it often doesn’t happen. If you hire an investment bank, it sends a signal to the market that this company is for sale. Additionally, it motivates company A to buy because if they don’t, company B will.
Adrian Bye: Is it necessary to send that signal through paying expensive fees to an investment banker? Why do you need the intermediary?
John Marshall: The intermediary implies a degree of seriousness. If you’re the buyer and you know the company is represented by an investment bank, you know that the principals of the company are paying that investment bank a significant amount of money to get the deal done. Therefore, the deal is going to get done. This company is going to be sold to somebody because that’s the only way that the principals can recoup the amount of money that they’re paying to the investment bank.
If company A knows that your company is going to be acquired, then they fear that company B, their competitor, is going to get it. Company A says, “Okay, we’re going to make this happen because the consequence of a competitor getting this technology is worse than us spending the money to do it.” There is this degree of intent that hiring an investment bank implies to the market, which is not there if you just sit around and wait for it to happen.
Adrian Bye: Can you tell us the numbers or percentages you paid the investment bank?
John Marshall: All investment banks charge different amounts. A lot of it depends on the structure of the deal. Typically it is somewhere in the range of five, seven, or eight percent of the total sale price.
Another important detail about the acquisition process is the fact that ClickTracks was not VC-backed. This was instrumental in getting the deal done. The first question acquirers asked was, “Are you VC-backed?” Later they said, “We never would have bought you if you’d been VC-backed because the deal would have been just too painful.” I think that word “painful” means financially and legally.
Entrepreneurs should think about that when starting their company and determining the company’s structure. If you take VC money, you potentially close the door to an acquisition. Sometimes, an entrepreneur would be better off not taking the money, keeping the company small, quickly turning it into something profitable, building really unique technology that other companies need, and then deliberately setting out to sell it. That’s the way I’ll do things from now on.
Adrian Bye: Tell us about your latest venture, Market Motive.
John Marshall: The idea for Market Motive came from ClickTracks. Michael Stebbins, who was the vice president of marketing at ClickTracks, and I were discussing a common problem we had with selling the ClickTracks’ products.
One of the fundamental problems is that the user often lacks enough knowledge of the particular nuances of online marketing to really be able to make the most effective use of the numeric data the program can produce.
Our solution was to provide a really good foundational training environment to give people this basic knowledge. With the blessing of the new owners of ClickTracks, Michael and I started Market Motive.
It’s a subscription Web site with premium content. Subscribers have access to training material that covers the whole gamut of online marketing. The content is put together by some of the top minds in the industry. For example, Avinash Kaushik, a leading author and blogger, teaches Web analytics. Brian Eisenberg teaches conversion, optimization, and testing. Alan Rimm-Kaufman teaches paid search and effective PPC campaigns.
A subscriber has access to all of that training material. They also get a conference call with the faculty where they can ask specific questions and access to an online forum for questions.
Adrian Bye: What kind of people should sign up for the material?
John Marshall: We wanted to address the general problem of teaching people how to do really high-quality and effective online marketing. The types of people that do best with this material are new hires at companies, such as someone brought on board to manage online marketing. It works great at agencies that are hiring staff to work on client accounts. We also have some small business subscribers who have a common problem of doing everything all at once.
The material is fairly structured with a step-by-step approach. We provide the training in the form of 30-minute videos that are very topic specific. They’re focused on the ins and outs of actually getting something done, such as building a good campaign.
Adrian Bye: Where do you see the business going?
John Marshall: We’re expanding the amount of content. We recently decided to offer certifications. We had a lot of requests from subscribers for that, and we had been thinking of what to do there. We will have some announcements coming out shortly about the certifications, which will be accredited.
We’ll also be announcing some partnerships with other companies. We’re going to start doing live training, which is all Web-based delivery. We’re not doing physical world training. It’s very difficult to get people to leave the office long enough to attend physical world classes. Our specialty is doing it online.
Adrian Bye: How do you find your buyers?
John Marshall: We do a certain amount of advertising, but a lot of it is just word-of-mouth. The members of the faculty are all very well-known; they are all personalities and public speakers in their own right. We also use blog coverage and Public Relations.
Adrian Bye: Have you considered a lead generation or CPA campaign to drive traffic?
John Marshall: We have an affiliate program, which is basically a CPA program. We have limited roll out of that, and we’ve been testing it. We’ve learned that lead generation partners work well, but the degree to which we’ve driven that has been small so far. I think that’s going to change.
Adrian Bye: Is there anything else you’d like to share?
John Marshall: I do have a recommendation for how entrepreneurs and technologists need to think about hiring developers. If entrepreneurs, who are trying to make progress in the tech world, are not developers, they have a hard time working through the process of hiring and understanding developers. Yet developers are probably the most important people that you’re going to hire because of the important role they have in actually building the products. I’m often surprised at how entrepreneurs are not doing very well at hiring developers.
A Web site I recommend is JoelOnSoftware. It’s an Econ site. If you’re an entrepreneur and you’re trying to build a software product or service, you really need to read what Joel has to say on his site. His advice has really saved me multiple times.
If you mishandle the development of your product, you really will pay for that long term. Within ClickTracks, we did many things wrong. However, we were right with the architecture of the product and the clarity of thought that went into the design of the products.
I realized in retrospect that we would have paid a very heavy price if we had not gotten the architecture of that product right from the start. Entrepreneurs may say, “Well, big companies can afford to do that. As small companies, we do not have time to worry about those things.”
My closing advice is worry about it. You will absolutely pay, and pay big, if you get those things wrong.