BBD CEO tour: Survey Monkey

People use the SurveyMonkey tool for a large number of purposes with performance reviews, training and parent feedback my favorite non-traditional uses that CEO David Goldberg mentioned.
The product is easy to use, simple to set up and marketed essentially through word of mouth, mainly through people answering surveys. Easy to use was designed in from the start by the founder – who wanted to reduce support emails.
Their customers growth curve is wonderful organic, from a start in 1999, 8000 paid customers in 2003 and 340,000 customers now. More recently they have become acquisitive, purchasing Wufoo, Zoomerang and Zoompanel, whatever they are.

SurveyMonkey has a fremium model, and they believe in making the free product useful. However a surprising to me 50% or so of surveys that go out are from paid customers – I would have estimated a lot less. I checked out their pricing plan and pondered their average revenue. That pondering was unnecessary as David later said that the average price was about $25 a month, which when multiplied by 340,000 gives a run rate of $8.5m a month, or $102m a year. They are still growing, and at a good rate, so historical numbers would be lower, and future ones higher. ]
I suspect that they are leaving money on the table from customers who would be willing to pay a lot more. The highest rate of $65 a month feels like a lot above the next highest, but the plenty of clients would be able to cope with much greater monthly payments, and SurveyMonkey should help them do so. Overall it’s a nice little earner.
It’s a great investment for Bain Capital, in the news a lot recently as Mitt Romney was the founding CEO, who bought into the company in 2009, along with the current CEO David Goldberg and others. The founder Ryan Finley is still on the board, though it seems not very engaged aside from that.

We don’t know the sale price, but I wonder whether Survey Monkey founder lost a lot by selling “most of his shares” to the private equity companies. All they have done is reinvest in the product, changed the pricing model (I assume) and grow capability across the board. The same result could have occurred without selling out, by appointing a CEO, getting a consultant to help with pricing and strategy (pick me) and letting go of the reins a bit. They found, for example, that price ‘does not move the dial’ for their business. As mentioned above they could raise prices, but have deliberately chosen to keep prices low to mop up all customers and prevent the emergence of a new large competitor.

I can’t help comparing this to Trade Me – a wonderful organic curve, and yet rather than selling out completely the founder sold down and stepped up, appointing someone else as a CEO. This could have worked for Trade Me, and they didn’t have to bring in outside money. However in a way Trade Me, post IPO, is back to where they could have been with new found freedom from Fairfax to carve their own path.

The CEO presentation we watched felt like a pitch deck – are SurveyMonkey looking for an IPO or a new investor? Or was this a deck designed for Bain and their limited partner investors?

Next up were the product designers and owners. SurveyMonkey are redesigning their venerable interface – you can see the redesign it here. They are using an agile process, with the front end developers were unleashed first, and the back end database developers chasing behind. The test site is not connected to a database, and so the front end team can iterate much more quickly, while the back end team can observe the progress and see the obvious trends and direction. The front end team focussed on the negative feedback and ran web based user testing to see where the dissatisfied customers were being under-served. When launched it will run in parallel with the current create tool, but overall I guess that people will switch.

Their analysis tool was always weak, and they have another project to improve it. That’s a much longer project, with a quite long for the industry end user observation and interview process before they started to code.

Overall SurveyMonkey looked like any one of several NZ SAAS companies, including Trade Me, Vend or Xero. The key differences were the front end-only testing, the longer time spent observing and interacting with end users and the very high paid share of customers.

Top three tips for surveys from Survey Monkey staff

      Survey often
      Don’t sent a survey out that is more than 12 minutes long. Aim for it to be much shorter – and I would counsel 3-10 questions is much more likely to leave a great feeling.
      Don’t use the matrix question type, where you have to fill in a grid of answers.

 

About Lance Wiggs

@lancewiggs
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