Monday, March 3, 2008
Interview with Paul Ryan, Done Right
Paul Ryan is founder and CEO of Done Right (www.Done Right.com), a Pasadena-based startup in the lead generation and local advertising industry. The firm is venture backed by August Capital, Mohr Davidow, and others, and recently closed an (unannounced) Series C funding round. We caught up with Paul last week to get the latest on the firm's services, and also to hear Paul's contrast between his experience as CTO of Overture Services and running Done Right. Paul spoke with socalTECH's Ben Kuo.
Thanks for the interview. Can you describe Done Right's business to us?
Paul Ryan: Done Right is a venture funded startup in the local lead generation space. We generate telephone leads for local businesses, primarily in the home improvement category--for contractors, plumbers, roofers and others like that. We generate leads by using both online and offline media. That includes things like printing directories and distributing them, search marketing online, and various partnerships. We consider ourselves part of the next generation of convergence, performance media. Up until now, advertisers have always had the choice of being in the Yellow Pages or to put a display ad in the newspaper. With those, they're paying for the privilege of getting up in front of people--paying for impressions. That's the fundamental model that funds local media. We believe that there is an inexorable shift happening towards performance-based media, such as you see on the web with search marketing. That's where advertisers only pay for people who click on the ads. That's the Google Adwords and Yahoo Search marketing revolution. It's great for advertisers, and it's great for consumers, because when they're searching the ads are somewhat relevant. We founded Done Right at the beginning of 2005, when we were seed funded to launch into one market.
Before that, I was a vice president at Overture, which was bought out by Yahoo at the end of 2003. When we were purchased, I blew out of there after a couple of months, took 2004 to look at a couple of ideas, and then hooked up with Tom Lamb, who was in Corporate Development at Overture. We were trying to figure there how to get some of the Yellow Pages spending. If you look at offline versus online advertising, the different is enormous. Worldwide, there is something like $500 billion a year spent on Yellow Pages advertising. The online part is big -- $20 billion -- but it's dwarfed by the offline stuff. We're not saying that offline media can all go towards performance based advertising--there will still be brand advertising--but there are large buckets of offline advertising which should be performance media.
We saw that as an interesting business to get into, and decided to focus on something that makes sense to consumers, which is home improvement. We wrapped a brand around it -- which is Done Right --and decided to see where we can take this. For consumers, we're like Zagats for home improvement. We guarantee all of the people in our directories, and check them out ahead of time. We don't provide unbridled end user rating, although we allow some testimonials. We believe that social networking will not solve all the world's problem, and that it turns out that sometimes expert opinons are quite valuable. The fact that three people thought a plumber was really good may be interesting, but it's not enough. You have to know that the person is a plumber--are they licensed, do they have insurance, and do they have the right certifications. We go through that process when contractors sign up. We put our money where our mouth is with a limited consumer guarantee. We sit in the middle and police contractors if there's a problem. There's always two sides to a story, and we find out if a consumer actually did work with a contractor, and if we find a contractor didn't do the job, we fix it and then we drop them and find another contractor. With a lot of social networking sites, you can write any review you want, and there is no verification.
We launched in August 2005 in San Diego, and we're currently nationwide in 20 cities, with huge penetration in five -- San Diego, Denver, Houston, Dallas-Fort Worth, and Chicago. We're likely to launch later this year in the Los Angeles area, and potentially up in the Bay Area up north. When we launch we do a fair amount of traditional advertising on offline media to get consumers involved with our service, including billboard and TV advertising, printing out directories and distributing them, and stuff like that.
I've heard breaking into the local markets can be fairly tough, how are you handling that issue?
Paul Ryan: People have been trying to crack the local market for years. Citysearch has been trying to build a local media presence for ten years now. The hard thing about local is that you need to generate enough traffic, and enough interest from consumers to generate enough business for your advertisers. It's a chicken and the egg problem. The folks that primarily focus on engaging consumers online on the web run into the problem that they have to wait for web adoption by consumers for their local media to increase. Frankly, local services businesses get a lot of their business from traditional channels like Yellow Pages, newspapers, and other direct marketing packages. The online folks have this problem, in that they have a great product and value proposition for an advertiser, but there's not enough business generation. It's kind of like having the best paid search engine, with the most wonderful capabilities, and you are only getting one tenth of 1 percent of the traffic that Google is getting. You might be an interesting search engine, but to the marketer or advertisers, it's just too hard, and they don't get enough out of it to generate lots of business.
We get around that by generating more than half of the leads for our advertisers from the offline universe. When you print a directory and distribute it, you get lots of phone calls from people. We're not just waiting to compete against others in waiting for someone to fill out a lead form on the web. We have to do that to jump start the lead generation business. If you're stuck in the situation where you're online and are the extra five percent of leads for someone, it's discretionary spend and people churn out of that. There have been lots of startups trying to get local businesses online -- if you remember Geocities and MerchantCircle - it was all about getting everyone online, then having all that content, which would hopefully generate a huge amount of consumers using that content. That's an interesting leap of faith. We generate leads from anywhere, and give them the benefit of performance advertising with Done Right. Business often manage their advertising budget, setting aside ten percent for your web site, some for clicks on Yahoo and Google, and 25% on direct marketing--and we tell them, why don't you forget all of that, we'll generate the leads for you, and you just pay on a per lead basis. It's very compelling message. We're just saying, why manage the complexity. Let us do that for you, at a per-lead price.
Can you talk about your funding?
Paul Ryan: We just closed our C round before Christmas. We've got a couple of large, Sand Hill-type venture capitalists, including August Capital and Mohr Davidow (MDV). We recently also added Glynn Capital Management. We've raised enough to continue growing the business, building out our infrastructure, and launching in new markets. We're relatively small compared to the existing incumbents in local advertising, but we expect this business will be a template for other businesses and to extend to other categories. Our plans are to continue growing until we basically have deep nationwide coverage in the categories we operate in.
Can you contrast your experience between Overture and Done Right?
Paul Ryan: Overture was potentially a once in a lifetime experience. From a technology standpoint, it meant scaling out and building the infrastructure up to 100 million searches a day, and figuring out how to charge a quarter of million advertisers a penny at a time. The fundamental technology challenge was fun to figure out and build a team around. Back in 1998 and 199, GoTo, which became Overture, was the antichrist of the web for allowing pay for placement. We were "destroying search" and all this stuff, but it turns out we created a novel revenue model that would pay for search.
Before that, search was the biggest cost of any portal out there. They used to pay search providers for results. Inktomi ran a bunch of sites, and so did Altavista. We completely flipped the model on its head. Search results had intrinsic value, and you could generate revenue from them. Plus, advertisers got a better deal than on display advertising. It was one of those fundamentally cool products that everyone benefited from. As such, when it started to be adopted it just took off. Then of course, Google "invented" it and it got bigger. Google took it to the next step, automating some of it, where we had more of an editorial process. Google's fundamental success was all about sheer volume. If you can aggregate that much search, your click price goes up, and advertisers will flock to where they can get lots of business.
Search marketing was not particularly easy, and that experience was really changing the engine while you were running down the highway. In the Done Right experience, it's a little different. There's a fair amount of technology in what we do -- you have to manage a dynamic toll free network, and handle what happens when an advertiser runs out of money, when they're on a budget--but it's been fun to build that. It's been a smaller organization, and more of an "early stage" startup. I'm running this one, and was CTO of the other one. It has its benefits either way. We provide so much value for these advertisers, there is no falloff--they don't leave the service, unless they screw up service and we throw them off. It's a great value for consumers.