Although we achieved a lot with Tutorspree, we failed to create a scalable business. I've been working through why. In doing so, I’m trying to avoid the sort of hugely broad pronouncements I often see creep into post mortems that I’ve read: “don’t hire people!”; “hire people faster!”; “focus on marketing at all costs”; “ignore marketing, focus on product” etc.
I’ve focused here on the strategic causes of our failure. While I learned a huge amount about operations, managing, and team building; mistakes made in those areas were not the ultimate cause of failure just as the many things we got right within the company did not ultimately lead to success. I also recognize that this doesn’t cover every detail, even on the strategy side.
SEO: Too good to be true
Tutorspree didn’t scale because we were single channel dependent and that channel shifted on us radically and suddenly. SEO was baked into our model from the start, and it became increasingly important to the business as we grew and evolved. In our early days, and during Y Combinator, we didn’t have money to spend on acquisition. SEO was free so we focused on it and got good at it.
That
worked brilliantly for us. We acquired users for practically nothing by using
the content and site structure generated as a byproduct of our tutor acquisition.
However, that success was also a trap. It convinced us that there had to
be another channel that would perform for us at the level of SEO.
In our first year, that conviction drove our experiments with a series of other channels: PPC, partnerships, deals, guerilla type tactics, targeted mailings, craigslist posting tools, etc. Each experiment produced results inferior to those from SEO. The acquisition costs through those channels were significantly higher than what was allowable based on our revenue per customers. We also found that potential customers coming through PPC were converted at a lower rate than those originating through SEO. Even as we sharpened our targeting, experimented with messaging, and sought advice and consulting from more experienced parties, we found that paid channels just weren’t good enough to merit real focus.
That dynamic put us in a strange position. On the one hand we had a channel bringing in profitable customers. On the other hand, we did not have the budget within our model and product to push hard enough on other channels.
The AirBnb Head Fake
At the end of our first year, the divergence between our success with SEO and our failure with other channels dovetailed with a whole set of lessons we drew from analyzing user behavior on Tutorspree. We realized that there were fundamental problems with the product of Tutorspree which both prevented us from converting visitors to customers at optimal rates and from having enough capital to spend on acquiring more visitors/potential customers.
We had modeled ourselves on AirBnB, believing we were a clear parallel of their model for the tutoring market. What we were seeing in terms of user behavior, however, was fundamentally different. Parents simply didn’t trust profiles and a messaging system enough to transact at the rate we needed. Our dropoff was too high, and the number of lessons being completed was too low. We realized that we were wrong in how we thought about the entire market, and radically altered our model to suit in March of 2012. Looking back, it is also apparent that we were able to ignore our error for as long as we did precisely because SEO worked as well as it did. The dynamics of our marketing provided air cover for any other issues we had.
We called the new model Agency as we pulled in aspects of a traditional agency’s hands on approach and combined it with our matching system and our customer acquisition channel – SEO. Within a month of the change, we doubled revenue. Six months after the shift, our revenue had increased another 3x and we’d increased margins from 15% to 40%. The new model gave us our first profitable month, and put us within striking distance of consistent profitability. It looked like we had cracked the product problem. Our conversion rates were way up and per user revenue was climbing rapidly. Those factors gave us the budget we needed to more productively experiment with other channels.
Virtually all of our customers came from SEO.
New and Better Model; Same Old Channel
By December of 2012, we had virtually infinite runway and were at the edge of profitability. We still wanted to swing for the fences, and, given the radically shifted economics presented by our new model, we made the decision to retest all the marketing channels we had tried with our initial model and then some. We knew that only having a single scaling channel – SEO – would not let us become huge, so we began pushing for another scalable channel.
Given
the strength of where we were and the challenges we saw, we raised another
round with the explicit purpose of finding the right marketing channels. While
we considered raising an A, we played conservatively, deciding that we wanted
to find the repeatable channels, then raise an A to push them hard rather than
raise too much money too early.
We finished that fundraise in January, began a much needed redesign of the site to fit with our significantly more high touch model, hired a full time growth lead and began to push rapidly into content marketing, partnerships. Then, in March of 2013, Google cut the ground out from under us and reduced our traffic by 80% overnight. Though we could not be 100% certain, the timing strongly indicated that we had been caught in the latest Panda algorithm update.
With our SEO gone, we took a hard look at our other channels. While content may have played out in the long run, and in fact showed signs of the beginning of a true audience, the runway it needed was far too long without the cushion provided by SEO. PPC - mainly through Adwords (though also through FB) – was moving in the direction of being ROI positive, but the primary issue turned out to be one of volume rather than cost. Because of our desire to focus heavily on the markets in which we had the highest tutor density (and therefore the greatest chance of filling requests), we had to carefully target our ads in terms of geography and subject. Given that dynamic, we simply couldn’t find a way to generate enough leads, no matter the price. In the end, that calculus applied to nearly every paid channel we could identify.
Common
Thread
Our reliance on SEO influenced nearly every decision we made with Tutorspree. At the beginning, it influenced our decisions to allow tutors to sign up anywhere, for almost any subject. On the one hand, that brought in leads we could never have specifically targeted. On the other hand, it spread our resources out across too many verticals/locations. That problem was compounded by our move into Agency. While we were converting at a higher rate and price than ever, we were also forced to spend too much time and money on completely unlikely leads. When you build your brand on incredible service, it becomes very hard to simply ignore people.
When our SEO collapsed, we routed virtually all of our technical resources to fixing it. In that effort, we had significant amounts of success. We regained most of the traffic that we lost with the algorithm switch in June. We regained a significant portion of our rankings. However, the traffic that we were getting at that point was not as high quality as that which we had been getting beforehand.[1]
Because
of how successful SEO was, it was the lens through which we viewed all other
marketing efforts, and masked the issues we were having in other channels along
with important realities of how the tutoring market differed from how we wanted
to make it work. We were, in effect, blinded by our own success in organic
search. Even though we saw the blindness, we couldn’t work around it.
Lessons
Learned
Tutorspree taught me a lot of lessons. I learned about product, users, customers, hiring, fundraising, managing, and firing. I made some bad hires because of my own blind spots and desire to believe in how people operate. There were periods of time where I avoided conflicts within our team too much – decisions that were always the wrong ones for the business and that I regretted later. Those mistakes were not ultimately what caused our failure.
Nor is the largest lesson for me that SEO shouldn’t be part of a startup’s marketing kit. It should be there, but it has to be just one of many tools. SEO cannot be the only channel a company has, nor can any other single channel serve that purpose. There is a chance that a single channel can grow a company very quickly to a very large size, but the risks involved in that single channel are large and grow in tandem with the company.[2]
That’s especially true when the channel is owned by a specific, profit seeking, entity. Almost inevitably, that company will move to compete with you or make what you are doing significantly more expensive, something Yelp gets at well in their 10K risks section: “We rely on traffic to our website from search engines like Google, Bing and Yahoo!, some of which offer products and services that compete directly with our solutions. If our website fails to rank prominently in unpaid search results, traffic to our website could decline and our business would be adversely affected.”
For me, this is a lesson about concentration risk and control. In this case, it played out on the surface in our only truly successful marketing channel. That success wound its way through everything we did, pulling all that we did onto a single pillar that we could not control.
By necessity we had to concentrate risk on certain decisions (something likely true of most small startups). I did not have the time or resources to do everything I wanted or needed to do. I never will. But I need to be cognizant of the ways in which that concentration is influencing everything I do. I need to make sure that it doesn’t dig me into holes I can’t work out of on my own.
Ultimately, this post mortem is about the single largest cause I can identify of why we failed to scale Tutorspree. In examining our SEO dependence, I was surprised at how deeply it influenced so many different pieces of the company and aspects of our strategy. It powered a huge piece of our success, and ultimately triggered our failure. There’s a symmetry there that I can’t help but appreciate, even though I wish to hell it had been otherwise.
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[1] This is a whole other issue I explored in the Tutorspree blog at the time. It seems that Google is increasingly favoring itself in local transactional search.
[2] RapGenius recently ran into this issue, but were able to overcome their immediate problems through some impressively fast and thorough work.