Original video interview: http://mixergy.com/navarro-skimlinks-interview/
This interview was originally aired on February 28, 2012
Alicia Navarro is the co-founder of Skimlinks, a service which makes it easy for sites to monetize their product links and in-text content by replacing them with tracking links that generate affiliate revenue.
The story of Skimlinks began back in 2006, in Sydney, Australia, when Alicia Navarro came up with an early Pinterest clone called Skimbit. She gave it that name “because it skimmed the best bits of sites that you liked and helped you make group decisions.” Her service allowed users to easily share pinned images of products and things, such a bridal gowns or wedding venues or sofas, which could then be sent to friends and family for their feedback.
The idea grew out of Navarro’s own desire to find a tool to help her overcome the same problems she’d come across every time she tried to make a decision with a group of people.For instance, if she was trying to buy a sofa she found herself constantly sending emails back and forth to her friends asking them if she should buy a particular one from one store or something else from a different retailer.With Skimbit, she thought she had hit upon a solution so she spent $15,000 of her own savings and hired a team of developers from Romania to build a prototype. She even reduced the hours at her job from from full-time to part-time work in order to devote more time to her idea, but being a bit of a perfectionist it took her almost a year to create the initial version.
“(At the time) I did not know about lean startup,” Navarro admits that, “I was very much a product manager by trade and I just wanted to build the most perfect product.” In addition, there were challenges to outsourced, offshore development she had not foreseen. One of the hurdles she faced was the inability to meet and motivate the developers. Navarro believes one of the biggest assets in an entrepreneur’s arsenal “is the ability to motivate a team and get them excited and inspired by what (they’re) doing and if you can’t jump around them and cheer and smile at them and pat them on the back when they’ve done well. That little magic, that little oomph isn’t there, and it’s difficult for them to succeed. You can outsource web design development or CMS integration, but getting other people outside of your company who are not there with you to build something that is the core of your system…I’ve never seen it work.”
And then there was the feedback system Navarro created which further delayed the launch. She had this idea that once all the images were pinned, users could then have a visual representation of the favorites in the form of a horse race, where the winning horse was the choice with the most votes. “I spent a lot of time perfecting how that would look and work and, of course, no one ever looked at that page and those that did thought it was kind of ridiculous,” she laughs. That was in retrospect, but at the time she thought it was a brilliant idea. She’d also spent a lot of time on things like account management, allowing users to edit certain items, and admissions controls; none of which turned out to be important. “I think the reason that other sites that have come and gone have failed, and why Pinterest has succeeded, is design. Pinterest is a beautifully designed site that invites exploration. And mine was a murky green site that used horses. We did not win on the design front.”
When the time came for Skimbit’s launch – nothing happened. No one came to her site. Navarro was at a loss as to what to do next so she did “what a lot of Australians do in time of trials and tribulations. (She) packed a rucksack, bought a round the world ticket and went backpacking for six weeks to find the answer.” Since the site didn’t have any visitors she felt she didn’t have anything to lose; and the crazy thing about the trip – was that it worked.
“One of the core sayings in our company is ‘we believe in the power of rumination.’ Where you kind of have an idea but rather than try to get the answer right there and then you seed with your mind with all these potentials. Then you just go off and do something relaxing and you wait for inspiration to hit.” And that was where she was at with Skimbit, but she was at an impasse and needed a seismic change in order to get to the next stage. She says that, “In retrospect (the trip) was the best thing I could have done. I would never be here today if it wasn’t for that.”
Navarro went and saw the world. She visited Vancouver, Munich, the Black Forest, and even Romania to visit the developers. And in a life changing moment she went to London to meet an old schoolmate who also happened to be an entrepreneur. It was there she told him of her situation, how she had this product that wasn’t doing anything and she didn’t know where to go with it. He advised her that instead of selling the product directly to customers, she should turn it into a white label service and license it out. He also helped her get free office space in London and set her up in a meeting with a potential investor the following week. With no time to spare, Navarro called her developers in Romania, giving them just two days to build a working prototype and borrowed a friend’s business suit to meet the client. “I bribed my way in,” she says, “I basically went into this meeting, said, ‘So I live here in the UK and I’ve built this product. Look how nice it works. Would you like it?’ In my head I’m thinking if they say yes I’ve got two months to build it and to move to the UK.”
In the end, the meeting was a success. “Every single bit of what he arranged for me worked. I won this client over. I got the free office space and an initial first investor.” She went back to Australia, gave up her apartment, sold off her car, quit her job, and wrote the specifications for this product that she had said was already built, then got it built for real and moved to the UK.
Her move to London wasn’t just to be near her customers. Sydney was a very difficult place to begin a start up. “It’s a teensy, market,” Navarro explains, “we’re talking 20 million people, which is like the size of one small state in the U.S. and it’s very distributed and it’s not as advanced technologically as they would like to think they are. E-commerce is several years behind. You don’t even have local Amazon. So there’s a lot of challenges there and further more to that there was just no startup community and no VC community.”
Once she was back in the UK, she showed the product to the client and was able to start her business with a white label version of Skimbit. However, success was elusive. Skimbit had clients, but it’s business model proved to be a tough sell. Customer balked at the high cost of the licensing fee. They wanted to do revenue sharing, but there just wasn’t enough scale to make it work. It was around this time that Navarro and her friend, Joe Stepniewski, who she had taken on as her business partner, began looking at all the links on Skimbit created by people bookmarking products they’d seen on Amazon, eBay, and Macy’s and thought, “Wouldn’t it be great if there was a way to automatically make them affiliate links?” Out of this they came up with a concept where they would take existing hyperlinks to merchants and convert them into affiliate links that generated money to the website. Navarro says that the destination link would never change. “Whatever the user has placed there, they click (on it and get to where they want to go), but in the background there’s a tracking that’s added, so if the user buys anything, (the publisher of the site) gets a commission for that sale.”
While this idea was taking shape, Navarro continued to go out and meet potential customers and investors and try to sell them on her white label Skimbit service. Every time she told them about the new affiliate linking technology and possibilities of revenue sharing they would always want to hear more about how it worked, but when it actually came time to purchase the service they were always hesitant to pay the licensing fee.
Finally in late 2008, with the effects of the financial crisis beginning to grip the world markets, she realized she had to do something drastic to save her company or else it too was going to fail. She made the decision to disentangle the Skimbit service from the affiliate linking technology that had so interested the venture capitalists and potential clients. “(They weren’t) interested in my horses but in this kind of monetization method that we’ve come up with.” So she asked herself, “What if we disentangled that from the rest of it? Dump everything else and just focus on this monetization method and make it accessible to any publisher.”
To see whether the idea would work, she immediately picked up her phone and cold called a client that had previously shown interest in licensing Skimbit. Over the phone she told him, “’Look, I have this proposition for you. If I was to make this monetization method accessible to you, would you use it?’ And he said, ‘Yes I would.’ ”
For the next two weeks, Navarro had her developers prepare the “launch version of what was to become Skimlinks.” Then she hit the road and “approached every single publisher that (they) had been pitching the white label service to and asked them if they wanted this new CMS product.” They all agreed to try to the service and Navarro suddenly had a bunch of new clients. She recalls that “(this) all went down the week after Lehman Brothers collapsed. I think we were the only company getting funded at the time. Somehow from the jaws of death we survived. That was end of 2008, early 2009 and the rest is history.”
Navarro had hit on the right product for the right customer and everything else just seemed to fall into place. Skimlinks’ launch was not only successful, but they were able to get the initial version out very quickly. “We didn’t even build (a) way to pay clients when we first launched,” Navarro reveals, “because we knew the first payment cycle would take three months we had three months to build it after the launch.” It was a stark contrast to the perfectionist minded approach she’d taken with Skimbit.
Skimlinks works by integrating affiliate networks, such as Commission Junction, Link Shares, Trade Doublers, and then using script to “automatically detect links that could be monetized by one of those networks.” When a site had links out on a page, the Skimlinks code would tack on a tracking ID to the link. Navarro says that, “We certainly don’t fiddle with existing affiliate links. We ignore existing affiliate links. We only (use ones) that aren’t yet affiliated.”
One of their earliest clients was AV Forums, a UK based audio and visual enthusiast site with an international audience. “(AV Forums) had always refused any type of in-text advertising because they didn’t want intrusive ads popping up inside their content. They actually didn’t allow any kind of out-bound links on their site because they only made money if they kept (users) on their site.” When AV Forums incorporated Skimlinks they were able to earn a revenue stream through in-text revenues that would otherwise be annoying in-text advertisements, in addition to their traditional banner sponsorship. Skimlinks also changed the way their content was editorially managed. “(They) not only allow, but encourage users to talk about products and to link out to different retailers because, now they are actually earning an income (from) people who chose to leave their site to buy something from the retailers,” says Navarro, “And they’ve been fantastic, they’ve disclosed, very openly, and the community accepts that it’s free and this is a way that the site can maintain a revenue stream without interrupting user experience. So, it’s a win-win-win situation.”
One question that inevitably gets asked about a service like Skimlinks is: why would merchants agree to do this when they could get links for free without having to pay a commission? Navarro says that merchants have the right take down external links and disable the hyper-linking capability. “The fact that they are allowing and encouraging there to be outbound links is entirely up to the discretion of the site itself. And, that’s what affiliate marketing is about, you create content that links out to retailers and you get rewarded if you drive traffic that converts. That’s the basis of affiliate marketing. Merchants are under the assumption that these sites, kind of, exist purely for their benefit. But, these sites are becoming a business and they are serving a really valuable role in driving high quality converting traffic to retailer’s sites. Obviously, no one likes to pay for something that they think should be free, but the majority of merchants are aware that this is great.”
At any time, publishers also have the choice to direct traffic to merchants that do pay, but Navarro says the majority of the merchants has been fantastic. She cites eBay as a great example of a retailer that has embraced the service. “When we first started, eBay had some concerns about the forum space because that’s free traffic. But they very quickly realized that something really interesting happens when you are supported with forums. You get moderators that encourage certain discussions. You get new sections of the site created purely for the discussion of products.You are paying a publisher a lot more money which means they can invest more time in better moderation, better quality design. It’s kind of this synchronicity which is all about fostering an environment and fostering the creation of sites that drive you traffic. Surely you want there to be an environment where there’s lots more sites that are driving all this new incremental traffic to retailers. Pinterest didn’t exist two years ago and the fact that it does and is driving all this great new traffic is something to be really celebrated by merchants rather than admonished that it should be for free.”
Every year, Navarro and her team try to innovate and come up with new ideas , they’ve created URL shorteners, RSS monetization tools, Skimkit (a research tool that allows editors to look up products to add to their site), and Skimwords, their most successful service since Skimlinks. Because Skimlinks would only work on pages with existing links to a merchant, it wasn’t compatible with websites that had great content but no links unless someone went in and did the tedious task of adding the necessary links.
Skimwords gets around that problem by scanning “any page of content and in real time decide if there’s any product mentioned on it, (then matches) it to a set of potential products, (and identifies) the phrase and links it to where you can buy it.” In the beginning it would show up as just a direct link, but today Skimwords has optional services like flyovers that displays text price or product comparisons between different merchants, allowing users to compare products without leaving the publisher’s site.
In addition to the revenue generation for publishers, Navarro has found an unexpected analytics side containing valuable data for merchants. Through the tracking ID they were able to find out where users were going and how much they were spending, and thanks to this information, some of their clients were able to discover otherwise unknown retailers that their users were buying from and out of this, they were able to create sponsorship relationships with the merchants.
In the four years since its launch, Skimlinks has grown to 20,000 publishers of various sizes, from tiny blogs to big content networks with hundreds of sites. In combination with Skimwords, they currently receive over 110 million clicks a month, where each click means a user uses a link that takes them to a product page and the publisher gets paid an affiliate commission. To further their growth, the company has raised another round of funding and poured all their profits back into the company in order to expand even faster by gathering additional talent in their new offices in San Francisco, along with their original team in London.
Navarro says that even though she was regularly coming to the U.S. to meet clients in person, they still looked at Skimlinks as a UK company or a UK startup, which was “inhibiting (their) ability to win certain deals.” She felt there was “subconscious patriotism with Americans that, given a choice of a few options, (they) go with all American.” So in order to make the U.S. a key market she decided to move to San Francisco and build a team there to strengthen the company’s presence. “I do go back to the London office very often,” she says, “but we are now indisputably an international company.”
Creating Trust with Clients
What advice would Navarro tell young entrepreneurs listening to her story of how she was able to go back to her clients multiple times and get them to buy a product even after they had said declined all her previous offers?
“It’s a good question,” Navarro says, “I think it’s just about trust and likeability. People like to do business with people that they like and…trust. I approach selling not by selling but by finding point clarities. Creating a sincere bond and then them wanting to do business. It ends up being a pull as opposed to a push because they want to see me succeed. A lot of my customers are our biggest kind of fans for that reason. Because they know that we act with integrity. We do what we say. We stir a little bit of passion into everything that we do. Hopefully that kind of pays off in the long run. I think (that) a lot of these early customers were people that didn’t want my white label service but the second I (asked what they thought of Skimlinks they would help me and) they valued there was a kind of friendship there. I think that has probably been the most important thing.”