Sramana Mitra: How did you utilize this data? What did you do with the data that you were accumulating?
Stephan Goss: We never did any bulk data sales. We would use the data to then start showing ads against that data. For example, if somebody told us he’s a diabetic, then we would show an advertisement about diabetes. We had a lot of inexpensive traffic that we were able to up value into high quality traffic.
Sramana Mitra: How do you show them ads based on email addresses? Do you do retargeting?
Stephan Goss: We would buy traffic. People would come to our website. They would answer questions and then right in line we show the advertisement.
Sramana Mitra: How did that ramp in 2011?
Stephan Goss: We went from zero to doing $5 million a year run rate towards the end of the year. It ramped pretty quickly. I wasn’t good at accounting. I wasn’t good at a whole bunch of things. I started filling positions that I wasn’t very good at. It was a lot of junior hires. We had a lot of people straight out from school who learned it as they went.
Sramana Mitra: What did you have them do? What was manual about this process that you needed people to do?
Stephan Goss: First we hired a designer. She was designing a lot of the ads that I was then promoting. We hired accountants. We hired a developer to help us build the site better.
Sramana Mitra: How many people were in the company in 2011 when you did $5 million?
Stephan Goss: Three or four.
Sramana Mitra: So it was an incredible operation in 2011?
Stephan Goss: It was $5 million – not $5 million in EBITDA. I forgot the EBITDA margin but it was slightly above breakeven because we spent the money we were making on hiring people.
Sramana Mitra: But three or four people tend to be a profitable operations, but you’re somehow pushing back on that.
Stephan Goss: To get the $5 million in revenue, we’d have to spend about $4.5 million.
Sramana Mitra: You operate on a very thin gross margin?
Stephan Goss: Yes. Then we started improving our tech to improve the gross margin.
Sramana Mitra: $5 million in revenues cost you $4.5 million in ads. The money that you’re really operating with is $500,000.
Stephan Goss: Right. I think it was roughly around there.