After serving as an executive at Adobe (NASDAQ:ADBE), in May 2006, Ivan Koon went over to a startup called YouSendIt. As its CEO, he tried to find ways to make money from the company�s cloud-based collaboration system. Keep in mind that his company’s core product was free!
So far, Koon has been a success. YouSendIt is attracting 1.2 million users per month, with 35,000 converting to paid offerings.
To learn more about the business, I had a chance to interview Ivan:
Q: Your market has been growing quickly, but there are many players like Dropbox, Google and Microsoft. What sets your company apart?
A: Today, email traffic amounts to 180 billion messages per day. Facebook and Twitter together equates to 0.2% of email traffic, while total searches on Google (NASDAQ:GOOG), Yahoo (NASDAQ:YHOO) and Microsoft‘s (NASDAQ:MSFT) Bing add up to 1.1% of email traffic. Email is the only common business tool that requires no learning and is truly ubiquitous. It is on Windows, Mac, mobile, web and even accessible through smart TVs.
So our product design centers on email infrastructure. We launched an Outlook plug-in over four years ago. With that, users do not have to remember what URL to use to collaborate.
We then launched our Active Directory integration two years ago, enabling IT to deploy tens of thousands of YouSendIt accounts within their companies. With this, end users do not have to remember what login and password to use. End users just log into their email as they always do.
Second, we offer a full suite of collaborative services. From send-receive-track to sync-and-share to e-signature, these services are fully integrated and available through web, Windows, Mac, mobile, Microsoft Outlook, Microsoft Office, etc.
Next, we have many large or enterprise-wide depl! oyments. These are deployments in upwards of 10,000 YouSendIt accounts per site. Our largest single site deployment is way over 25,000.
Last but not least, we have proven partners that built on our API and offer new services to their huge user bases. More than half of our new registered users per month come from major partners.
Q: Describe the “freemium” model. Why go with this approach?
A: Freemium is a customer acquisition approach — a replacement of traditional marketing spend. To enjoy the full benefits of the freemium model, you need virality, word of mouth and a low cost of serving free users. For example, 70% of our organic traffic comes through word of mouth, representing the volume of new users that we�ve gained at no cost.
In addition, you need highly satisfied and loyal customers. The Net Promoter Score is a good way to measure that. YouSendIt�s NPS is consistently at 68 to 69 year-over-year, which is at the same level as industry leaders like Amazon (Nasdaq:AMZN), Apple (NASDAQ:AAPL) and eBay (NASDAQ:EBAY). If your business enjoys all of the above, move forward with the freemium model. It is much more effective than classical marketing spend.
Q: We’ve seen IPO activity and M&A deals in the cloud this year. What do you see on these fronts for 2012?
A: SAP (NYSE:SAP) acquired SuccessFactors (NASDAQ:SFSF) for $3.4 billion. Oracle (NASDAQ:ORCL) bought RightNow (NASDAQ:RNOW) at $1.5 billion. Traditional software as we know it is dead. Software companies are awakening to the fact that they have to move their value to a SaaS (software as a service) context. But they don�t have the right DNA and talent within their companies to move forward. Therefore, they need to acquire. This enriches technology investors who focus on the cloud. Investors then reinvest in even more cloud comp! anies, w hich drives up market value. This cycle will last for a few years.
Tom Taulli runs the InvestorPlace blog�IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of��All About Short Selling��and��All About Commodities.��Follow him on Twitter at�@ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.
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