Sramana: You started selling language learning products online in 2001. How did the business build from there?
Dan Roitman: We had been selling the product as early as 2001, but we really started focusing on it in the middle of 2002. We became one of the largest resellers in the audio books division. Based on our track record we negotiated a license in the middle of 2005. That gave us the gross profit margins we needed in order to invest more in advertising which further fueled our growth. Our compounded growth rate since 2002 is over 70%. Last year we grew over 100% and this year we will grow over 100%.
Sramana: Tell me more about your very early startup stage. What were the mechanics of building your business from that stage on?
Dan Roitman: I call the startup mode the fishing stage. You have to figure out if you are even in a viable business. Your only goal should be to sell at the expense of everything else. Early on we had to make a few pivots to get to a viable business in terms of scale and prfitability. We were originally selling the text scanning pen and we moved from there into professional development products. Language learning was one of those products. We thought that business would be more successful if we specialized more narrowly. That proved true because once we launched a solo site for language learning our business just took off.
We launched that site in 2002. I had funded the company with credit card debt. Throughout college I worked 20 or more hours per week, and I built up my credit. I also saved money so I had enough capital to start the company between my credit card lines and my savings. Prior to 2003 I had essentially been living on credit cards. I graduated from college and moved in with my parents. When we launched the Pimsleur Approach, I was $20,000 in debt. As I started to see things move, I added another $50,000 dollars in credit card debt to get the company over the hump. We went from $200,000 in revenue in 2002 to $2 million in revenue in 2003.
From there it was a function of running a real business. The leverage point in getting to that $2 million was slight tweaks I made to get higher conversion rates. I had learned and experimented for several years, and that knowledge came together. That created new challenges around scaling. I had to determine what channels to use to advertise.
Sramana: What was your primary customer acquisition mechanism that let you achieve $2 million dollars in revenue?
Dan Roitman: At that point we used email advertising. We found a company that had a subscriber base and they would send our offer to their subscriber base.
Sramana: What was the original source of the email leads?
Dan Roitman: Various publishers that created their own lists. We would advertise on their lists.
Sramana: Was there a particular publisher that had leads that were well aligned to your business?
Dan Roitman: No, we never did find that. The nice thing about our product is that it has mass appeal. That meant we did not have to pay for the cost. If you get too specific with demographics, you get charged a lot more. Regardless of publication we were able to market on an un-segmented basis.
Sramana: There must be some sweet spot for your product, right?
Dan Roitman: There is, and we know what the demographics are now. Typically we are appealing to people who are over 35 and have upper levels of income. Today we do get narrower with a cohort of customers. Back then, we just did broad advertising to online subscribers.
The advertising we did was very creative. We were fortunate to have a winning advertising strategy. That helped us early on. In 2002 it was really just me and one other person assisting me. Fortunately for me, all the studying, learning and mentoring I had was on advertising and conversion optimization. It all came together, and I was able to apply it. We hit a home run in that sense.