Sramana Mitra: Why don’t we step through the journey.
Neal Taparia: When we started working on it full-time, I had mentioned that we benefited from a lot of organic growth. What was really interesting is as we focused on it full-time, we were able to understand all these ways to increase ad revenue.
The ad technology space was pretty nascent back then but because we had hired a friend who knew the ad space well, we were able to focus on what really drives ad revenue. We learned that we can work with a variety of ad networks to optimize CPM.
Sramana Mitra: What were you advertising on? You were selling SaaS to schools. Now we’re talking about ad revenue.
Neal Taparia: We had a few business lines. The product was this citation and reference management tool. Students used that directly. That was more of a direct to consumer model. We also built a version of it where we could sell it to schools.
For that direct to consumer model, we had two ways of monetization. One was with ads. We also had a direct to consumer freemium service where those people could subscribe to our premium features. We had various business lines back then.
When we started focusing on the business, we focused on the advertising revenue stream in particular. As we dug into that, we learned that there were a lot of opportunities to build technology and to build a setup where we can work with different ad networks who’d want to advertise on our site and effectively make them compete against each other to optimize the amount we were making per ad.
We learned that we were achieving ad rates that were well beyond industry standards. That started supercharging our revenue growth back then. We used to look at revenue per user. As we focused on building technologies and processes around that, that metric would continue to improve.
Sramana Mitra: It sounds like a niche user base for this citation management tool. What kind of traffic numbers did you have that make it meaningful from a revenue point of view?
Neal Taparia: Students everywhere in the world, especially in Western-educated countries, always have to write a paper. Generally when they write a paper, they’re doing references with that. They could start as early as middle school. They all need to manage their references and citations.
Because we were one of the first movers in this market and because we had built a software solution that we wanted to use ourselves, it just grew tremendously in popularity. The product was very user-friendly. We were getting millions and millions of users by the time I started focusing on it in 2008.
The ad revenue model ended up becoming a pretty attractive model for us. The other characteristic was the fact that these users would stay on our site for a long time. Typically when people peruse the internet, they will be on the site for one to two minutes. We were seeing people interact with our site between 5 to 15 minutes.