Sramana Mitra: Congratulations, that is awesome. You were obviously way ahead in terms of coming up with these ideas. Then you had to wait for the market to catch up with you. Who were your investors, and how did they deal with it? Typically VCs have a very hard time dealing with that scenario.
Rajat Paharia: We were very lucky with our investors. Our first investors were Adobe Ventures – the venture arm of the Adobe Corporation. Then there was Granite Ventures, which is a former Hambrecht & Quist venture arm. Chris Hallenbeck has been on our board from there. He has been great. He has been the primary supporter of the company since 2006, when we first raised funding. He is the lead investor in the company. He was able to see that there was something.
And we learned from the first time. We abandoned the social gaming market right before Facebook launched their platform, because nobody knew what was happening there. At the time of gamification, we knew there was something big here, so we stayed the course and added new investors over the years – a company called Triangle Peak, partners in Palo Alto, and Correlation Ventures. I love those guys. They have a really cool model, which is “Moneyball” for venture capital. They have a model in which they feed your data through, and if you score highly, they will invest. It is very clever. Then there is Northport Investments out of Chicago. We have a great group of investors who have been very supportive of our growth, especially through the times when we had to be very evangelical and educational in the market. It is like they say in Silicon Valley, “Being early is the same as being wrong.” We were wrong for many years, and one day we were right.
SM: And the thing that most entrepreneurs run into is that they don’t have the staying power to get to the point where they are right. They are early and they run out of resources and capital, and they are stuck.
RP: And you don’t know when they are going to be right.
SM: Yes, you have to keep going and somehow manage to stay alive.
RP: And in the meantime you have your parents who tell you to go get a job.
SM: Give us a visceral feel for what your customers are doing with your technology and ideas. Pick a few customers who illustrate the power of your platform.
RP: Adobe is a great example. These guys, apart from being investors, are also partners and customers. I was an interaction designer at IDEO for four years and I never learned how to use Photoshop. I was using Paint and PowerPoint. The reason was I had the same reaction most people do when they open up Photoshop. You are an amateur photographer, you get a fancy new camera, you want to do something with your photos, so you go to adobe.com, download Photoshop, you open it up, and you see a blank campus with 10,000 panels, menus and buttons, and you have no idea where to start. What is the likelihood that at the end of your 30-day free trial you are going to buy it? Right now the likelihood is low, and Adobe knows that this is a problem. It is a complex piece of software. So we worked with them.
One of our core gamification mechanics is onboarding – how video games are incredibly good at training you without feeling that it is training. You open up any game – they don’t make you read a manual or go through a training course – you spend five minutes and you learn by playing. How do we take that same idea and apply it to Photoshop? We built a plugin with Adobe called level up for Photoshop, and if anybody out there has a copy of Photoshop, you can search for it and install it. They just released a new version for Creative Cloud and it is a plugin that is native inside Photoshop. It pops up and it says, “ Welcome. We want you to learn, you want to win, get ready to learn some of the cool features of Photoshop and have a chance to earn prizes.” You earn points, and they give you a chance to win copies of Photoshop, for example. My hypothesis was that that was going to be completely beside the point. You have already invested nearly an hour of your life just to get to this point, and clearly you want to know how to use Photoshop. It turned out that 60% of the people were outside of the U.S. and couldn’t do anything with the points anyways. I think that proved to be true.
The hypothesis here is if you can get people exposed to 12 key pieces of functionality in Photoshop, giving the sense of mastery and fluency using those tools, and to learn by doing, then the likelihood that they will buy at the end of a 30-day trial period is much higher. This plugin pops up, you enter your name and address, and you get these 12 missions across three levels, and you can’t get to level two until you completed level one. You have a progress bar showing your progress, you can unlock badges for doing extra things. Then it tells you exactly what to do “drag the slider here,” “do this,” “do that.” If you can figure it out, great. If you can’t figure it out, there is a button to go and look at all the tutorial content they always had – the videos and text that people didn’t go through, because people wanted to go into Photoshop and do something.
I love this because it flips the learning model around. The typical model is learn and then do – read the manual, go through the training course, and then maybe at some future point apply something you have learned. This is a different model. “Here is your mission. I am giving you something to do. Can you do it? If you can, great. If you can’t, then do the learning.” But the learning is very directed. It is all about helping you accomplish a goal, which makes it incredibly sticky and makes you feel better, because it is helping you do something.
When you are done, you earned points and badges, you can share the stuff to Facebook and Twitter – 35% of people did. More than 40% of people made it all the way through this thing, and the missions got hard in the end. You had to do relatively complex things in Photoshop. They interviewed both new users and longtime users of Photoshop and had 85% to 90% positive sentiment about the experience. Four times as many people bought at the end of the 30-day free trial, which was the big metric they were trying to push.
The one thing I thought was really interesting was that experienced users of Photoshop missed an upgrade tool which made the workflow for them more efficient. They were still doing things in an old and inefficient way. They learned the new tool using this mission, and they could see, looking at this utilization data, that people then changed their behavior after even longtime users learned something new and were able to continue using it. It was very successful. With Adobe there are now lots of opportunities, since they have a lot of powerful and complex programs, like InDesign and Illustrator. They are switching to a subscription model. That works best. You pay for a subscription to all the products if you know how to use those products, so you have to train those people to get them on board. There is a lot of opportunity in that space.