GeoRiot is a relatively new start-up that provides an easy answer to a problem most people in the U.S. might not even be aware of – geo-fragmentation. When a band goes to sell their new album, or an author wants to tell fans about her new book, consumers need to go to different websites to purchase a copy depending on where they are in the world, and which device they want to use.
So marketers are hit with a dilemma – they want to have one simple link to spread on social media worldwide, but need it to send people to many different destinations. GeoRiot does exactly that, using an algorithm to determine where in the world the link should send each visitor.
Forbes spoke with GeoRiot co-founder and CEO Jesse Lakes about his company, its role in the music and book business, why extreme sports led him to create a startup, and how to change revenue models mid-stream.
Forbes: I became aware of GeoRiot when a publicist friend said, ‘Hey, I’m working with this artist, and the label sent me this crazy link that, depending on where you are and what device you’re on, guides you to the right place to buy something.' Can you tell me about GeoRiot and what it is?
Jesse Lakes: For sure. We started out with a focus on iTunes. iTunes had this rapid expansion, opening up all these storefronts around the world. There was this challenge with the user experience aspect. People in Germany clicking a link weren’t getting to their local iTunes store – they were getting an error message. If you dig into that a bit, you realize fundamentally there’s this problem when you have a global brand expanding, covering the world with country/region-specific storefronts. When they, or anyone else, do their marketing, they’re still just sending out a single link. And that link doesn’t work for a chunk of their audience.
So one factor is global brands going out and building storefronts. Another one is that you have people accessing more and more on different types of mobile devices. And three is you have people who are expecting more and more choice, and fragmentation is happening – not just at the device level, but the store level. More and more options are becoming available, and sending everyone a single link just doesn’t make sense any more.
We’ve been working on this technology for a while now. It started with iTunes, with the country-specific aspect of that – realizing that if you’re going to convert something, you’ve got to get to the item they want to consume.
So your friend, like you mentioned, got one link. They can tweet that, or throw it on Facebook, or put it in an e-mail, and it works for more and more people. So instead of writing off that fraction of the audience that it didn’t work for, we can offer a solution. The music industry’s in a tough spot, so you can’t afford to provide the best user experience to everyone possible.
F: This works for more than iTunes at this point, right?
JL: Yeah. It started on iTunes, but we saw that Amazon had the exact same problems, if not more so. That was phase two. And phrase three, which started last May, was to roll out what we call a “genius link.” A genius link is not only geography and not only one ecosystem. It’s the ability to define rules so you can make that link even more flexible.
So you have people coming from France on Android devices. Okay, so that’s the French Google Play store. You have people coming from a Kindle in Canada. Okay, so that’s the Amazon.ca store. Maybe you want to send everybody to Spotify, but Spotify isn’t in every country. So the countries where Spotify doesn’t exist, what’s your fallback? We can define that. We’ve got crazy technology that makes all the links work automatically – “auto-magically.” The tool allows you to be smart about how it works.
F: Who’s making these decisions about where the person who clicks on the link will be sent? Is it the seller, or you, or some combination, or an algorithm? How does that work?
JL: For iTunes and Amazon, it’s a series of algorithms. Past that, it’s our clients defining what makes sense. But we understand that’s a stepping stone. We’ve got some big plans on where that ultimately goes and I can’t let too much out of the bag. But ultimately the consumer needs to make that decision on which services they prefer, and we’ll get there at some point.
But for right now, iTunes and Amazon, we make those decisions. Other ecosystems, our clients make those decisions. Someday down the road, we think the consumer should make those decisions.
F: You guys don’t charge for your services, right?
JL: If you had asked us that two and a half weeks ago, that’s absolutely right. We’re in the midst of a reshuffling on that aspect as well. With the new model, there is a price associated with it. We priced it pretty dang low to make sure it’s as friendly as possible.
F: As of a couple weeks ago, the way GeoRiot made money had to do with referrals and commissions and affiliate programs. You would take some of the money from sales in smaller countries or places where you would have to set up accounts. Can you lay that out for us?
JL: That model’s called "clickshare." It worked out really well when we were super-focused specifically on iTunes and Amazon. We believe in our service and we believe it’s going to provide a better user experience for your international users, and you’ll make more money because you’re not serving up these error messages.
We would share 15% of your clicks, but those clicks that we’re sharing were coming internationally. So it’s from stores set up in Japan or India or wherever it may be. Those clicks would go through, but we would earn our commissions there.
That worked really well for a long time, but unfortunately the affiliate spaces had some fundamental shifts in the past year-and-a-half. On top of that, we were getting more and more pressure from our music clients to expand past just iTunes and Amazon. Google Play was really pushing hard. Spotify and the streaming world was becoming more and more valuable. They wanted to use the same platform to be able to link multiple places. Well, building out support for Spotify based off an affiliate model doesn’t make sense, since Spotify doesn’t…
F: They don’t sell anything.
JL: Exactly. We came to these crossroads and said, we want to build these tools. But if there’s no affiliate revenue model behind it, we’re stuck. That was one of the major reasons why we shifted revenue models.
It’s been a hard shift. We really liked our previous revenue model. But we understand that in the bigger picture of things, you need to not be so specific to one ecosystem. The other big pieces of that was the Earnings Per Click, the EPC value, which is the core metric we revolve around, we continue to see that fall. That’s understandable, as we see more and more people get into the affiliate space and more and more people are not paying for music. But it’s really hard to build a sustainable business off of a metric that’s falling.
It's the same story with Amazon. There’s external pressure there to move off this model, because Amazon likes to have a very direct relationship with their clients. All these things have come together and culminated over the last three to four months. So we decided, the time is now. Let’s build a better and cooler tool, and unfortunately along with that we’re going to have to do some pricing that’s quite not as convenient for everyone. It’s been a hell of a few months!
F: I can imagine. So you’re in the middle of changing the entire way your company makes money.
JL: Exactly. We’re a little over five years old, and we sent our first invoices out last week. Some of these clients I unfortunately haven’t talked to in quite a while, so I’ve been telling the story a lot lately. It’s been getting a pretty good reception. People understand. But you’re right, it’s a very major shift.
F: And it’s not like they weren’t paying before. It was just invisible. It was money they weren’t getting from different sales.
JL: Exactly. And that was one of the big challenges. A lot of times, the clickshare was very profitable. It worked out very well. There was nothing on their line items, they didn’t have to get approval from the office, they were still seeing a net increase in their commission. We were just getting some of that upside. So it was super-convenient.
Now it is a line item and they do have to get managerial approval, even though they are going to get that extra 15% commission, and they’re not sharing that with us. That’s one of the harder things for us. Some manager that’s just hearing about this for the first time, and seeing this charge, can sometimes not be smooth. But it’s working out.
F: Yeah, I can imagine someone saying, ‘You’re charging me to create a link? Why don’t you just use one of these custom URL sites or something?’
JL: Right. And that’s the other thing too that’s going to come out now. So Bit.ly is an amazing tool. Everyone uses it, everyone knows it. But when you start to use some of the more powerful tools from Bit.ly, it’s a thousand dollars a month minimum price tag. So we saw that and realized we need to be very cognizant of that. We’ve been little guys for a long time, we continue to support the little guys. Let’s make sure that the little guys can afford our service.
So to get back to your original question: can you build links for free? Yeah, absolutely. Thirty-day free trial, and then after that, the first thousand clicks every month are free. We need to support those little guys, we need to help those little guys become better marketers. And if they can grow, awesome. We very much want to make sure that links work as much as possible, so that little and medium guys can take full advantage of it.
F: On the music side specifically, who have you been dealing with? Has it been mostly labels, or individual artists? How has that been working?
JL: Great question. It’s all over the board now. I’ll answer that question, but I’ll take kind of a long way to get to it.
When we first started this company, shortly afterwards I got a job offer from iTunes to manage their affiliate program. I set the company on the back-burner, and my co-founder was able to push it through for a couple years. I went to iTunes to help grow the affiliate program. Towards the end of that time period, a media agency created a tool that was relatively similar. That media agency was focused on music, so they were able to walk into the bigger labels pretty quickly – we’re going to do your media buys for you, we’re going to do your advertising for you, but you have to use this tool.
Now, we originally built GeoRiot for music. So after I left iTunes, I thought it was time to get back into the music game. And it was hard to get traction from the big guys, because they were locked in and enamoured with this new service. So we started at the bottom, and our competitor started at the top.
We’ve been working with small indie labels and small bands for the long term. In fact, The Orchard is one of our favorite clients, because we’ve got so much in common. But as our tool set has evolved, we’re seeing that more of the major labels are starting to realize, oh wow, do we want a tool that is a side project of a company, or do we want a tool where the company’s core focus is the tool?
So back to your question of who do we work with: The Orchard, Universal Group is working with us, Warner’s working with us. But I’d say the majority of our music-related clients are somehow related to The Orchard – that medium, indie-sized scope.
F: Give me the history of the company.
JL: I was building websites that were taking the soundtracks from extreme sports films, and I was listing that with buy links to iTunes and Amazon. I grew up in west Montana, and spent a lot of my time skiing, snowboarding, surfing – you don’t do that in Montana, of course.
So that was a passion, and I built it up. I really loved the music from the soundtracks. After a couple years, I noticed I was getting this great exponential curve in traffic for my site, but the affiliate revenue was very linear. It took some head-scratching, but I finally realized that the revenue was linear because I was only monetizing from my U.S.-based traffic, but the exponential growth I was seeing was from all this international traffic. So that led to, how do we solve that? Along the way, I wrote a book about the iTunes affiliate program, which landed me the job at iTunes.
So late 2011, our first full-time team member came on, and that was actually my wife. She started in August, 2011 full-time. I started in February 2012 as full-time. Our co-founder came in shortly after that.
We’re slowly growing the team. We’re a team of nine now, based mostly in Seattle. We’ve got a few people scattered throughout the U.S. It’s been a wild ride. We’ve seen some pretty fundamental shifts in the affiliate program. It’s been interesting to see how this geo-fragmentation’s evolved into this purchasing aspect, where different consumers on different devices around the world want to consume the same content, but in different regions, and how we can enable that.
F: And you actually bought a company recently that had a similar mission, but for books, right?
JL: Yeah, exactly. BookLinker. BookLinker was built by this guy Adam, based in the UK. He had a fundamental premise – Amazon has all these different stores, authors need to be able to promote their book in social media wherever and make sure they sell it. So he built out a MVP, a minimum viable product – the bare minimum you need to do it. Unfortunately, early on, he somehow pissed off Amazon, and Amazon is not someone you want to piss off, as I’m sure you know. His whole revenue model was based around affiliates, similar to what ours was. His problem was that his service kept getting kicked out of the Amazon affiliate program. He kept losing his revenue model.
So after a couple iterations of this, he made a big, bold change and started charging for his service. And for all the clients who didn’t pay the fee, he’d interject an interstitial page that showed an ad for five or six seconds before the link would go through. Unfortunately, he really angered a subset of his clients. We saw that, and figured out we could do a lot more with it. He was pretty burnt out on it, so it worked out really well where we were able to hook in our translation algorithm, which is much more in-depth.
It was good for his clients, it was good for him to get something out of his efforts, and it was good for us because it was a really cool tool that’s taught us a lot. The GeoRiot dashboard, our toolset, has always been a bit more technical. We’re not great marketers, by any stretch, but we really love playing with technology. I think unfortunately that shows through a little bit sometimes. Our UI is not as polished as it should be. We did hire a designer a few years ago who’s made it significantly better.
BookLinker taught us the value of super-simple, especially on the client side. So BookLinker works really well for the indie author who also markets on the side, while GeoRiot is much more focused on the marketer, who might also be a musician or author or whatever on the side – a swapping of those primary roles and responsibilities.
The BookLinker purchase also taught us a lot about how not to roll out a revenue model. We can count the number of really pissed-off clients on one hand, where BookLinker, you couldn’t turn one direction or another without someone complaining about how they rolled that out. It was a good lesson.
F: I know you guys provided detailed statistics on sales and traffic in different countries with your old revenue model. Is that continuing?
JL: Oh, absolutely. In fact, it’s only getting better. Unfortunately, with the clickshare model, things would sometimes get a little bit complicated, because those clicks you shared with us, we weren’t able to report back to the dashboard. But now that you keep all your clicks, the reporting will become even more robust. It also gives us a much more stable foundation to build on that reporting.
The reporting we knew was an important aspect. It was almost a loss leader, because there’s no direct correlation between amazing reporting and good reporting, as far as the extra revenue goes. But now that we know that we don’t have to be tied to affiliate revenue, we can put emphasis back in the reporting and make it better, because we know that’s going to be a tool that people want, especially in comparison to our competitors.
F: What are your immediate plans, other than getting the new revenue model up to speed?
JL: Google, with Play, has come on the roadmap for a lot of people. It’s been a very often-requested feature in support. They’ve got an affiliate program in the works, and we’d be really eager to fill out some support for that. Another big aspect goes back to the reporting. We’ve had some pretty grand plans of things we want to do there that just didn’t make sense with our previous revenue model. So I’m really excited to do a deep dive on that aspect.
Those are two of the more immediate things. There’s also some general UX/UI cleanup. Our designer is slowly but surely teaching us all of these really important lessons – that you don’t necessarily need to give everyone every single control. Make things easier to use, and you’re going to get a whole lot out of it. That’s really starting to resonate. I think we’ve got a dashboard refresh of sorts coming up in the near future.
I think, get the revenue figured out and then refocus on making sure that our tools are easy to use and as powerful as possible. The translation algorithm, all that back-end stuff, is super-rock-solid – we’re not too worried about that. But the focus is on making sure that we can empower people.
