In 2011, Google dropped an atomic bomb on their search results by releasing Google Panda. It was an update that penalized low-quality sites from appearing in Google.
According to Google, nearly 12% of all search requests changed. Overnight, companies who filled their websites with cheap, keyword-stuffed content watched in terror as their Google rankings dropped like a stone. (Source)
A year later Google launched Penguin, the codename for its second massive attack. This time, websites using unethical, black-hat SEO were caught in the crossfire. And another 3% of search queries changed with the new algorithm. (Source)
But the purge and purification was not over.
16 months later on August 2013, Google Hummingbird swooped in to emphasize a page’s context and meaning over individual keywords.
Amit Singhal, then search-chief at Google, told Search Engine Land that "Hummingbird" was the most dramatic algorithm change since 2001. While the effect was smaller, Google’s then head of webspam Matt Cutts said Hummingbird impacted 90% of all search results. (Source)
From the beginning, Google made its agenda clear: to deliver quality answers to every search. By updating its algorithm, Google forced impatient entrepreneurs and marketers to deliver that quality.
SEO quickly became a race to learn what Google was looking for.
While most scrambled for a solution, Aki Balogh knew the answer. And Balogh was ready to turn this opportunity into the next multi-million-dollar startup.
Not all breakthrough ideas happen over-night. Sometimes it takes working on a terrible idea before you find where real opportunities lie.
Four years before, Balogh started researching how to start a healthcare startup. He planned to use AI to analyze healthcare data.
“Early on, I worked at a big data database company. I realized not many big data platforms existed, and I wanted to build one to help society. My original idea involved healthcare. I wanted to take info from charts, analyze it, and crunch the data to improve the quality of care for patients.”
The healthcare idea had huge market potential.
But (un)fortunately, a mentor helped Balogh see his idea was difficult to turn into a successful startup. Especially for his first business.
Barriers were high due to HIPAA privacy laws. Doctors and hospitals were reluctant to turn over patient data. And sales cycles in the medical field are notoriously long.
Balogh considered his options. He reflected on his time as an Associate at OpenView Venture Partners, a late-stage VC fund, and InfiniDB, a (defunct) database management system. (Source)
“At OpenView Ventures, they used content [marketing]. At the database company, I created an inbound funnel [with content]. I asked myself, ‘How could I write great database content?’ At the time, most tools were talking about content length and keyword volume. So I began to see the opportunity to optimize keywords for relevance over volume.”
After the havoc of Hummingbird, content marketers were scrambling to find quality writers. Could data science improve society with better content the way he dreamed? He decided to take the plunge and find out.
Working nights and weekends, Balogh developed a machine learning engine to crack the content quality code. After emerging from his dungeon, MarketMuse was born. (Source)
“Until now, there’s been no objective measure to score content quality. At MarketMuse, we’ve built that rubric. We think that one day, it will be like the Nielsen score for content marketing. To put it another way, we tell writers how an expert would thoroughly cover any topic.
“This removes biases and blind spots from [a writer’s] content plans. It also guides their research, which frees them to focus on writing.”
But a powerful product by itself doesn’t pay the bills. There needs to be a marketing or sales engine to generate revenue. Which meant Balogh needed to validate his business.
A year after the early years of MarketMuse, Balogh ran into Rand Fishkin, the co-founder of Moz and a respected authority in SEO, at a marketing conference. (Source)
“Rand liked the idea and wanted to license my software. I spent two years on the product, so I was glad he thought this was an issue. He started talking about the concept on his Whiteboard Friday’s (a video series on SEO). Even though the partnership did not pan out, the exposure was great.”
Though Fishkin’s interest wasn’t the business validation of generating sales, it gave Balogh the confidence he needed to continue. And he was able to do that in spite of Moz creating a competing product.
“Rand tried to build a competitor. I was a little worried at first. But this meant he started writing and talking about the problem which helped grow the market. It created a wave that we rode to success.”
Fishkin wasn’t the only competitor who first tried to steal Balogh’s idea.
“There’s a long history where I’d meet someone smart who tries to build it, doesn’t work, then eventually tries to partner with us. This happened 8-10 times. The first time, I was a little worried. But by the 5th time, it became irrelevant.”
Why did so many successful entrepreneurs fail to create a competitor? One reason was Balogh built an economic moat using data.
“Our system has an actual machine learning system, which you can’t fake (as his competitors tried to do). There’s also a flywheel that improves the product which gets faster over time. This makes it hard for others to catch up.”
Riding a market trend makes growth easier. Unfortunately, MarketMuse’s sales were slow. To convert his traffic into profit, he needed to work on his messaging.
Early on, Balogh recognized a significant marketing problem. Being first-to-market has its drawbacks. You can’t compare your company to competitors if they don’t exist.
“It’s hard to explain a new concept when you don’t have any comparison. We had to invent technical terms, educate investors and customers, and help them visualize concepts to explain how the process works.”
Part of Balogh’s process to master his messaging meant listening to Jeff Coyle, a customer whose enthusiasm later led to becoming a co-founder. Coyle’s secret? Turning the complex into something simple.
“That’s one of Jeff’s great strengths. He understood that our pitch wasn’t working and presented a new perspective to work from. Communicating the value of an esoteric product can be difficult. Jeff explains things in a way anyone can understand.”
SEO is a mystery to most people. Coyle helped Balogh craft a dynamic narrative that made sense. It was just technical enough to communicate value without boring potential buyers to sleep.
As customers came in, it was time to improve the price-point.
Mastering your pricing strategy is one of the most overlooked growth levers.
One challenge is people do not know what to charge. As a result, some startups give away their product in the beginning, hoping some kind soul will pay.
This revenue model, freemium, is very difficult to work because you need a lot of free users before someone upgrades. Industry benchmarks suggest around 0.6% of free users will convert to paid customers.
Balogh wanted to charge money right from the get-go, even if it wasn’t much.
“Hubspot was $10 a month in the beginning, so I decided to price MarketMuse higher and charged $20. If it’s free, customers [often] won’t value it enough to use it. Setting a price, even a small one, demands a conscious decision… a commitment. I knew if they tried it, they’d be impressed, and we’d get better feedback.”
His pricing method wasn’t scientific. But you’ll see how he watched customer reactions to radically increase his prices.
“The first customers signed on at $20 per month,” Balogh continued, “After a while, we upped the price to $50 per month, and got very little pushback. So we pitched the next customer $100 a month, and they didn’t flinch.”
If you find there’s no resistance when you bring up your price, it’s likely too low. Although Balogh’s method wasn’t scientific, the qualitative data helped him command premium rates.
Perhaps a part of the pricing challenge was being first-to-market. Since Balogh still wasn’t getting much resistance, he doubled down on this growth lever.
“With the next prospective customer, we pitched $500 per month, even though the price was lower on the website. After that meeting, I stopped at a Starbucks, hopped on the website, and changed the price before my new customer saw it.”
MarketMuse lost some early customers due to the price increases. But they knew they could provide enough value to justify the price.
“The product was a whole different level from early versions,” Balogh explained. “It was like upgrading from a scooter to a sedan. When we increased the price, we lost some of the early customers though.”
Losing those early customers can cause major fear of bumping up your prices. However, when you consider the numbers, bumping up your prices often makes sense.
One $500 a month customer brings in the same revenue as 25 customers at $20 a month. That said, one customer will not have 25 times the customer support problems. And it sure is a lot easier to make a product one person loves than 25 people tolerate.
With the price point in place, it was time to grow again.
Where a startup finds success is the best place to keep your focus. It sounds obvious. But many entrepreneurs chase shiny new objects when they should double down on what’s working.
For MarketMuse, they found success initially doing sales.
“Calling people was our most successful way of bringing in new customers. Marketing was important, but talking to people really gets the job done to make money. [MarketMuse’s value] doesn’t really click until you talk about the program, how it works, and what that means to their business.”
After the launch, Balogh had to figure out how to market his product with a small marketing budget. Partnering with influencers made a big difference.
First, Brian Dean listed MarketMuse in his article on SEO tools.
“Even though MarketMuse was one of fifty tools in Brian Dean's article, [his article] performed well.”
This later led to a bigger data-driven partnership.
“A mutual friend, Eric Van Buskirk, suggested us to Brain Dean. We partnered with Brian for one data journalism study to show how our data moves the needle. He put the research on his site. This generated a lot of inbound leads, all from a chance meeting with Brian at an event.”
And since he found success, Balogh kept doubling down.
Later, the same friend introduced Balogh to Neil Patel.
“We gave 400 content outlines [to Patel]. They were already driving over 100,000 visitors to his site every month. In a year, we doubled Neil Patel’s blog traffic, then tripled it. You can read more about how we did that from our case study. This also brought in the vast majority of our traffic. Patel’s whole business tripled.”
Once Neil Patel wrote about it, marketing blog after marketing blog cited the story. That led to a lot of traffic, leads, and sales for MarketMuse.
In closing, Balogh offered three solid tips for new startups.
1. Don’t give up too soon, but know when to pivot.
“When I left my job, my mom asked, ‘What if this doesn’t work out?’ I answered, ‘Mom, I will either make this work or die trying. Something will happen between 27 and age 80. I’ll keep going until something happens.’ As long as you keep going, you can always change the idea. The only time you fail is when you give up.
“A lot of entrepreneurs give up in year two or three when it’s really hard,” Balogh continued. “I found out my original healthcare idea would not work five or six months in and might have given up. But I didn’t want to give up so easily. Instead, I just moved to the next project, keeping the parts of my concept that would work in a different industry.”
Keep in mind Balogh did give up on the healthcare idea.
Grit and determination are critical to your success. But at times you should throw in the towel and pivot when barriers are high and profits are low. As long as you have money, you can always test new ideas.
2. Consider if you want to raise funds or not.
Too many startups go under because they are not funded enough. Balogh learned his way around angel investing to make it work.
“I wanted to learn how to get into angel investment. After working at OpenView Ventures, I wanted to learn what it was like on the other side of the table.
“Sure, you could keep 100% of the company. But I always wanted to be generous with my employees. My view is I wanted everyone to be rich: partners, employees, and customers. I don’t need much money and wanted to share the wealth. I made a lot of mistakes, but now I can raise more money if needed.
“Some of my friends kept 100% of their company and sold it for $30-60 million. But I did not care about getting rich, only solving problems for society and doing it faster. Having investor money allows me to do just that.”
3. FInally, surround yourself with people who add value to your ideas.
“For me, having a co-founder helps. I had an adviser who was essential for data science. Jeff and I complement each other which helped us become an actual company. Surround yourself with the right people and you’ll have a much higher chance of success.”
Special thanks to Stephen Jeske for making this interview possible. For more articles like this, click here to check out our 1,000 True Fans series.