How Meebo Got Started & Its Strategy to Make the Web More Social

Posted on Feb 7, 2011 | 7 comments


One of the great joys of doing the web series This Week in VC every week is that I get to spend time with great people debating the issues of our day including how our industry is evolving as well as insights into how companies got started, got their initial traction and dealt with adversities.

I usually get some form of the following comment …

“But Mark, isn’t it one big time suck?”

Oh, yeah. I’m used to that refrain.  It makes me laugh. All I really do is have the same meetings I have every week with fascinating people except for one of them every week is on camera and public!

Such was my recent meeting with Seth Sternberg, founder & CEO of Meebo. Seth is one of those truly decent human beings that you meet occasionally in this industry whose earnestness on camera is matched by his behavior off camera. If you have an hour to watch the TWiVC video of Seth I promise you won’t regret it. He’s open and insightful with his knowledge.

Before we filmed the segment we had the chance to chat over lunch over the direction of the Internet and how social was changing the fabric of the web. He remarked,

“It’s true that with Facebook connect all websites can immediately have access to your social graph. From there most websites unfortunately don’t know what to really do with it so it basically just becomes a way to log you in and potentially allow advertisers to serve up more targeted (and therefore higher CPM) ads.

What we’re doing at Meebo is trying to socially enable websites by allowing them to immediately get not only the social graph information but to do useful stuff with it. Over time we’ll continue to build out the applications – helping make the entire web more social.”

I hadn’t quite thought of things this way but it made sense.  We then captured this conversation again on camera.  It then permeated my thinking and I began to explore the theme more as I looked around at web properties. It became a theme in my keynote at Caltech on the future of social networking.

We then spoke about startups. Again, Seth:

“One of the things I noticed when I looked around at startups is that often the founding teams hired people just like themselves. It’s kind of like school – the short guys hang out with the short guys and the tall guys hang out with the tall guys.

Startups shouldn’t be like this. You need a diverse set of skills on your team.”

Awesome. I totally agree and this also formed the basis of my public speaking and get an entire section in my keynote at Stanford last year.
And then we talked Sequoia, the much respected and occasionally feared VC. Respected because they’re as good as it gets in our industry. Feared because they’re rumored to not suffer fools (or poorly performing CEO’s) lightly.

I personally have only had positive experiences with Sequoia in my meetings with Roelof Botha, Mark Kvamme, Mark Dempster and others. But I was curious what Seth would think having worked with them. He told me the following off camera (obviously if he said bad things I wouldn’t print them here ;-))

“Sequoia has been awesome. Nothing but value add. They have been supportive when we’ve been doing well and also when we’ve made changes to the business.

What I’ve learned about Sequoia is that when you’re straightforward about the facts they just try to help. They look at data. They help make rational decisions. My guess is that if any CEO’s have had problems with them it might have been because the CEO tried to give a rosy picture of things and then Sequoia later learned that they didn’t have the complete picture. They seem to value openness, integrity and a realistic perspective of your business.

So I’ve never had any problems because I was always straight forward. And I’d recommend them to any talented startup founders out there.”

And there you have it.

So do I waste my hour per week on camera and my hour of discussion before hand? Not a chance. I use to to learn, to grow, to ask questions for which I’m curious and to further develop relationships that I have. And I hope the output is that you get a glimpse into the people shaping our tech present and a sense of the kinds of conversations we have when the cameras aren’t around.

So some show notes if you’re a bit busy to watch the video. A huge shout out to Ricky Wong of NYCSteals for helping me with the write-up. Check out his website if you live in or are visiting New York!

Background:
Seth grew Meebo from 0 to 170 million uniques in five years. He grew up in Connecticut attended Yale undergrad and worked for IBM after graduation doing M&A, strategy and venture capital.

Why do you love speaking to students at universities?
Seth’s interest in helping others grew out of his lack of having a mentor. In 1995, while in high school, Seth wanted to start a business scanning paper documents for companies, but realized it was a non-starter when he learned that a scanner costs $4k. Although both parents are educators, his father a professor and his mother the Commissioner of Education in Connecticut, they did not teach him business.

Why did you pursue an MBA at Stanford?
Seth saw friends move out to California, go to school, and launch Plaxo. He was drawn to Stanford by the people ecosystem- access to professors and mentors. Stanford was also the right place because of nearby Silicon Valley. He knew he was an entrepreneur because he couldn’t stop thinking about ideas.

What is the reaction when you first tell people a concept?
On the east coast, the response is typically all the reasons why your idea is not going to work. On the west coast, generally the response is how to improve on an idea. Positive feedback feeds the idea. Meebo (the current incarnation) was their third idea and if he had asked his friends whether they wanted web-based IM, it would have not started. Build something for yourself and feel free to alpha test on your friends and family.

But once you launch, then you need to have a solid way to get feedback from your users. Then iterate and improve based on feedback. Feedback means having an obvious way for users to give feedback. Leverage a feedback platform like Get Satisfaction or UserVoice.  Mark then talked about Crittercism, a mobile feedback solution.

Talk about the Meebo team and early Meebo experiences.
In addition to Seth, the core team he pulled together consisted of Elaine, a product person with front-end engineering skills and sharp design sense, and Sandy a back-end server engineer. Seth spoke about the complimentary skills of this three person team as the prototypical startup team.

Before Stanford, Seth started Meebo as a company to backup data, but after 8 months abandoned it because he was wasn’t happy about the prototype. The team then moved on to Meebo version 2 a file sharing concept, but that also was scrapped 16 months later when Seth and the team lost passion.

How did the idea for Meebo version 3, the web-based IM service, come about?
Seth said it was born out of solving a personal pain point when Sandy couldn’t get onto IM at Elaine’s apartment because Elaine didn’t have IM. That was the moment when Seth realized that a web-based IM client would fill a void. The idea took hold immediately since all three used IM and they were solving a problem for themselves.

Seth also spoke about not accepting investment until after gaining traction. And when there is a spark, go for it. Every day that passes, you become more risk averse. You are also less likely to be an entrepreneur when your personal obligations, like family and mortgage pile up.

Tell us about the Meebo launch.
After Meebo launched, his friends helped him get the word out and soon they were getting coverage as far a China and India. After a month of launch Meebo was getting 50k logins a day. Seth raised $100k in angel funding to fuel operations. Initial traffic was driven by word-of-mouth, specifically blogs and a bit of luck.

Seth constantly listened to user feedback and tweaked his service along the way to improve the user experience. Initial use was driven by students and office workers who used IM but could not install a desktop client. Meebo gained traction because there’s was viral component when users wanted to tell their friend.

Tell us about your Series A round and your relationship with Sequoia Capital’s Roelof Botha.
Approximately two months after initial launch he raised a $3.5m Series A round. Since Meebo was getting traction, it was easy to get the attention of VCs and through a series of introduction he met with Roelof. Once you have traction people want to help and see you succeed.

When choosing a VC to work with, it’s important to make sure you get along personally (with Roelof), share a vision on where you are going and how to get there. The firm’s brand is important, as is your relationship with the individual who can go to bat for you and support you within the firm.

Seth dispelled the rumor that first-time entrepreneurs who accept capital from Sequoia Capital are eventually fired. He gave positive feedback about Sequoia and their rational thinking. Again, he stressed the importance of good mentors. Before working with Sequoia he got feedback from friends.

Meebo angel investors also include Marc Andreessen and Auren Hoffman.

Can you address the criticism that it’s difficult to monetize IM?
Meebo is not like traditional IM clients like ICQ, AIM, or MSN. Unlike those IM clients with a small (ineffective) footprint, Meebo experience is a website and a full page screen. Because you put ads in front of user for a long time and cover the whole screen Meebo click-rates are very high. From listening to feedback after launch, it was clear that users wanted a chat experience on other websites too. In 2005, Meebo started connected users across other websites.

With three co-founders, what was decision making and roles and responsibilities like?
In the early days, decision-making was made by consensus by all three co-founders.  As the company grew more traditional roles emerged. I stressed the point that consensus doesn’t scale and Seth agreed. He stressed the importance of building a team with complimentary skills, which they did from day one. That’s why he believes the relationship has worked so well.

What is the communication rhythm and dynamics with the board and in other meetings?
In the beginning there were monthly board meetings then after Series C they moved to quarterly. Seth likes to get together with board members every 30 days. It’s a valuable use of time because those are candid one-on-one conversations. Seth and I discussed the value of making board members part of the team and not just viewing them as individuals checking-in on you.

He meets with each board member one-on-one before board meetings – a sort of personal strategy & sparring session. He says this is the most valuable time for him and recommends it to every founder. [I totally agree. I spend 1-on-1 time with every one of the companies of which I'm on the board and find this to be our most productive time.]

Seth’s approach to internal meetings is very different from board meetings. He doesn’t like the idea of pre-rolling topics as it’s a waste of time and can become political. With a team of rational people it should be possible to bring topics to the table and have an intelligent discussion. You’ll win some, you’ll lose some.

We talked about the dynamics of having multiple board members and observers in board meetings and how that can change the dynamics of a meeting. Seth treats observers similar to board members. [which is why I recommend not having them, where possible]

Would you choose someone with great skills but not a cultural fit?
We both agreed that, with all things being equal, cultural match is must. If there were two individuals and one was cultural fit and lacking a bit on the skills side but could be trained, we would take that person over one who had the skills but not the fit. You may hire a superstar, but if they are not a cultural fit then s/he can become very disruptive to the team.

Speak about the Meebo toolbar and how Meebo makes money.

“The Meebo MiniBar sits on the bottom of your browser and is the social layer connecting people on sites including TV Guide and TMZ. The bar brings chat to the website and sites have seen share rates double using the bar. Currently 35% of time spent online is using social communication the other 65% is spent doing non-social activities.

But soon these activities will be social, like recommending product to your friends while browsing a commerce site. Brands like Samsung, LG, and Dunkin Donuts pay Meebo to advertise to users on our partner sites. Industry average click rate for banners is 0.15%. For Meebo 1.3% average engagement rate and 60 seconds of time with the rich advertisement. Meebo reaches 170 million, with 75 million in US. Meebo’s current focus is US market.”

What is your mobile strategy?

Mobile is another very important distribution place for the internet and Meebo is on the iPhone, Android, and BB. Meebo on mobile devices will be another way for people to engage with their friends while they are on the internet.

  • Art

    Thanks for this great interview, Mark. It was interesting to see how Seth was able to let go of other projects after spending several months working on it. If you had an entrepreneur pitch a business plan to you for funding (and you don't invest) and then six months later they abandon it, start a new project because they are more passionate about this new idea – how would you react to that situation? Would you think of the entrepreneur as someone who lacks the ability to commit to anything?

  • http://bothsidesofthetable.com msuster

    Yeah, I found this bit really fascinating. Frankly, I was surprised that they scrapped their first two projects.

    If somebody approached me after this situation I wouldn't have a problem with it if they had good reason why they didn't pursue things and if their second (or third) project seemed sensible. I've backed similar teams. What's interesting is that in a way this actually shows me how they think.

    That said, I do worry about teams that chase shiny objects. So, yes, eventually I'd want to see some stick-to-it-ness.

  • Art

    Thank you.

  • Trent

    Hey Mark. Once again, great interview. Thanks.

    A timely post given that Meebo has just acquired Mindset Media – an ad company.

    http://techcrunch.com/2011/02/…/

    Would love to hear Seth's comments on this and if/how Meebo plans to avoid being just another way to serve up higher CPMs (refer: Facebook Connect comment).

    Cheers!

  • philsugar

    I totally disagreed with treating observers like members, so I had to go to your linked post. I love it. Observe: to see or to watch.

    I made that mistake once. In my second biggest board dust up ever, I told an observer who tried to take control of the meeting a second time that he could not speak and had to sit at a chair not at the table. There were some really hard feelings and no more observers.

    At least he didn't stand up, walk out the door and yell at the top of his lungs guys are so fucking unprofessional as he slammed the door, when we proposed a board vote to shoot down retaining his iBanker friend.

  • Kylepearson

    Watched the first ten minutes of it, wish i had more time to finish because he seemed like a great interviewee and a nice guy. Thanks for the transcript, good quick read

  • robkwok

    Thanks Mark for the Crittercism plug! http://www.crittercism.com