Yoast Revenue & Valuation (2019)

hello everyone my guest today is jose valk he is the web developer seo and open source fanatic from the netherlands he's the founder and ceo of yoast which provides software and training for website optimization seo yoast seo yoast main software product currently runs on over 10 million wordpress websites yost you're ready to take us to the top all right i always am good all right so tell us about the company uh we know what's it do obviously seo is obvious but what's to do specifically on wordpress and then how do you make money is it pure place ass um no not really so uh we build us a software plug-in for wordpress that is basically an extension that allows you to optimize your site better and there's a free version of that plug-in and a premium version of that plug-in so it's mostly a freemium model um some of it is sas now because it connects to a service called my yoast which has some added features but most of it right now is a pure freemium software play okay so let me quickly touch on the frame and then i want to go towards how you introduce the sas model so the freemium kind of plug-in when did you launch the tool uh right from scratch uh so the first version of yoast seo was released in 2014 early 2014 no 2013 and then the first premium version of yoast was somewhere around 2014. okay and premium version means what paid paid yes okay it started out with a free plug-in and had a million users and then decided maybe i should make some money from it okay yeah so first year in 2013 you got a million users uh yes now it's so how'd you do that i mean that's impressive um i've been a speaker on the seo speaking circuit for ages so i just told my friends and they told all their other friends and so people at seo conferences started talking about it um and at that time wordpress was growing almost just as fast as it was now and we were one of the better seo plugins and that word spread rather quickly so mostly through word of mouth how did you get on the speaking circuit before you had the tool i was an seo consultant and have been seo consultant for the last decade but don't take offense to this but there are a bunch of really stupid seo consultants right so like how did you have credibility before you had the tool i know you were a seo consultant but what what credibility did you have i was working for some of the biggest brands on the planet uh i've done seo for ebay the guardian facebook uh so i let the migration from guardian co uk to theguardian.com uh so there was uh projects i i was also allowed to talk about which helps a lot at conferences because a lot of the seo work is also it's always hard because you're not allowed to talk about it um and uh well i i had a lot of friends in that circuit was thrown into it by a friend of mine when i i attended a conference i started asking questions that were too hard for the speakers so they basically invited me on stage interesting so you got on stage because you were doing work for these big brands that you were allowed to talk about how many then in 2013 how many conferences did you speak at in 2014 not as much anymore because i was focused on building this business okay uh but you said that so you got most of your new users yes i i told my my friends in the industry and then they started speaking about it more so i think i did like 10 or 12 in that year but a lot of other people talked about it as well so did you incentivize them at all besides word of mouth was there an affiliate program no okay they just share they just shared it because they liked you they knew the tool worked for them it's it's open sources i mean at that point it was uh most of the people still most of the people are using the free plug-in and they're not using the premium version yeah okay when people upgrade a premium what are they paying on average per year per month would you say uh they're paying eighty nine dollars a year okay eight eight or nine or eighty nine eighty nine okay eight nine per year okay and what do they get for that what's in premium that they can't get in the free a couple of features uh uh reader expiration uh easy easy social previews uh good internal linking suggestions a couple of things like that and access to our support team and that's it there's more coming but we're that's what we're building on the sas side so we're we're slowly transitioning a bit into sas because more and more of the services that we need to provide require us to have a connection to the site and then connect from our platform to the other platforms that we need to connect to so yes if you look between kind of 2013 actually 2014 when you introduced premium and today for you know five years later how many people have upgraded to premium hundreds of thousands okay so i mean can we say like 200 300 000 or is it closer to 800 or 900 no it's closer to 300 okay two or three hundred thousand that's great so and then where are you introducing you know a lot of people struggle that are on these freemium plans we've had like tight form on and a lot of other people that kind of fit this same kind of mold in terms of price point and number of free users and they always are testing where to actually put up the paywall like what is the limit how did you decide that and how do you test that every month um i would wish to say that that was a really conscious decision on all sides but we basically just decided to introduce freemium we didn't want to take any features out of the free plug-in so we added some features that we thought were useful um but we have a pretty strict rule within the company on everything that we think every every site on the planet needs to do the basic works we put into our free plug-in and then stuff that saves you time we put into the premium plugin and so that is basically how we go by choosing what goes and where it's not necessarily optimizing for making more money even though we're doing pretty well in that regard yeah and we're definitely not optimizing for that so how many on the free plan today uh there's about nine to ten million sites okay and uh there's a couple hundred thousand on the paid one so there's a oh that's it yeah so when you say 10 million free users or free sites is it is your ratio about one to one in terms of an actual person to the site uh and we don't have real numbers on that i wish we did but uh it's hard for wordpress.org to track all that um but the difference probably it's probably more like two to three users on average because there's a lot of sites that have like 30 or 40 users i mean there are sites like the nextweb.com or um microsoft.com that run our software where there's hundreds of people working on that site and it's only one site and under then there's also a lot of sites that are single blogs by single people and even some affiliates that have a hundred sites and and use our plug-in on all of them but it's all only one person so it's probably about 2x what we have in sites but it's a that's still a guesstimation and then capital wise i mean have you bootstrapped the company or did you decide to raise no we've bootstrapped bootstrapped i love that it's great we're now at uh well last year we did about 10 million euros so about 12 million dollars in revenue there's about 100 people here so uh yeah we're doing well yep 100 people and then look you told me earlier you had about 200 000 customers 89 a year would be seven bucks a month that would put you about 1.4 million a month today is that a little high so it's somewhere around there yeah okay and and what would you say you said you finished last year at a 10 million run rate yeah so yeah we our uh total revenue was about 10 million euros so that's real money yep yeah yeah why do you say that's real money oh it's not dollars well you think the euro is stronger than the dollar right now well at the moment it seems to be which is not necessarily good for us by the way because a lot of it is so our we have a couple of currencies that people pay us in yeah and uh a strong dollar is usually better for our uh bottom line than a strong euro so yep no that makes sense good all right so good so you're doing about a million a month then in terms of in terms of euros obviously scaling that nicely team of 100 people where are they all based uh 80 of them are around me here in beacon the netherlands which is a relatively small town on the east of the netherlands and then about 20 are spread out across the world because they're in our support team and they're hired in part based on times and help me understand how effective you've been with this team so if you're doing a million a month today do you remember what you're doing exactly a year ago we've grown about 60 year-on-year for the last five years okay it's pretty good so about 700 000 bucks a month a year ago something like that yeah that's nice and is most that growth coming from getting expansion revenue on accounts or actually adding totally new users uh most of that growth is new users um and we're slowly getting better at expanding it but most of its growth on new users yeah churn's critical at this kind of price point with smbs what's your churn today and how do you make sure to keep it low from a product perspective uh we're we suck at keeping it low which is one uh one of our focuses um so we've only recently switched to uh subscriptions it was a manual renewal for far too long so um for far too long our turn was of like 70 percent uh we're annually but yeah uh but at the same time we were we're now seeing that uh for people who have subscriptions and we the first bunch of people that had signed up to a subscription are now over a year in and for them we only have like 15 percent and if if we can get it to that then at that point we're i mean that's where you really become big yeah so it's like 15 logo churn per year yeah and when you say manual upgrades on the court that hasn't hasn't switched to sas what do you mean manual upgrades like you wouldn't automatically rebuild them you'd have to email them and get them put in their credit card again or something i see well that there's just friction there right that makes it more difficult it's there's far too much friction there yeah you can't just automatically switch everyone over to a recurring thing um no because europe and a lot of privacy laws and a lot of things that we have to uh keep in mind in in terms of what we can store so it took a while for us to to set all that up in a proper way um and also we were too lazy for too long yeah and so what you get when you have a fast growing company you have to focus your efforts somewhere and then and then you figure out oh we should have done this a long time again yeah i know that's fine that's fine so where are you where are you getting new free users and customers today and what i mean what are you paying fully weighted cac to get a new 90 of your customer zero we don't spend money on marketing and so we what what we do because we have a blog team and we so we do a lot of basically all of what we do is inbound marketing uh and a lot of our uh getting new users is based on our wordpress.org um the wordpress store plugin repository where people start searching for seo plugins and then they find us and we're the highest rated most used seo plugin and they install it and go from there so and then it's just good user experience and people talking to each other yep so what what i mean when you do the fully weighted so include your content team your marketing team your sales team i mean do you even look at that number no okay just you just you just know it's working so it's not something you track no but it's also we're not necessarily running it just to make money i mean it's making good money we've got decent revenue decent profits um but this company exists for more reasons than just just to make money it's we have a mission where we want to give everyone the seo tools too yeah look by the way i totally believe that but this in the same breath your ability to pursue that mission the more if you're able to generate revenue you can pursue that mission way more aggressively right and so cac's an important piece of that i don't disagree with that yeah yeah but we are growing as i said we're growing 60 during your revenues growing faster uh so it's it's going pretty well you said profitable i mean are we talking 10 to the bottom line or like 60 to the bottom line uh more like 25 25 okay that's pretty healthy for especially for a sas company so you just thought that yeah this probably could be way higher if we actually optimized for it yeah do you just let that kind of sit in the bank because you're not quite sure where to invest it or how do you handle extra cash uh well so far a lot of it's been invested reinvested into growth uh into new people more developers etc yep yep so no and we're we're diverting a little bit of it to uh to uh um how do you call it real estate uh we bought some of our offices stuff like that and but putting in the bank is really pretty useless right now uh so i don't really like keeping a lot of money in the bank because well there's no interest whatsoever yeah yep no these are all good these are good points what so why hasn't matt acquired you guys yet um why would he i don't think he can afford us first of all no come on he can afford you guys come on if you're doing 12 million bucks a year in revenue and he paid you something astronomical like 10x he could he could easily write 120 million dollar check i don't think he can uh and i mean we just had him on the show the other day and he broke down his run rate for me he has plenty of capital i don't think 120 would be i yeah well i've i talked to him on a regular basis i don't know if you've seen yesterday that he just appointed me lead marketing and communication board uh um yeah but i mean does he share his financials with you we should we talk about a lot of things we we've invested in companies together i mean there's a we we talk a lot okay so yeah this my question is even more more relevant then why hasn't he acquired you yeah i don't think he can and i honestly i don't think we're a good fit either because he's a very easy completely remote company and we're a very uh a local company so we wouldn't fit there's culturally i mean we like each other and the com people within the companies definitely like each other but there's absolutely no cultural fit between the companies in how we operate yep yep no i think that makes sense does um does the wordpress plugin repository they don't take a commission they don't take like 10 20 cut do they no there's no financial model there so all that has to go through yoast.com yep tell me about this new role he's appointed to you how does that affect your your ceo role at yoast um well it takes a bit of time my time out of course uh and it'll probably mean me doing some some less work here but the good thing is we're a board of four people here just so uh we run it together with the four of us and we're basically peers and they're all you're all co-founders of equity uh we all have equity i was the only founder but people slowly came on um one of those four is my wife who basically runs the company oh great um and this is the smartest of the two of us no so um it'll it'll impact my time here a bit but it's not a full-time role i'll be spending about eight hours a week on it um but it's i mean leading marketing for wordpress is is uh a lot of work but it doesn't have to be all my work so that's perfect very good all right yes let's wrap up here with the famous five number one what's your favorite business book ah that's a good question i'm not really into business books i like novels okay what's your last novel you read i actually re-write a lord of the rings good okay number two is there a ceo you're following or studying right now um there's a couple i i follow deeply elon musk but that's probably the most mentioned one yeah name name like an under the radar one maybe in the netherlands that people may not have heard of um well it's funny there's actually a local guy here who runs a 300 person company but he's done so well in making themselves controlling teams within that company that is really impressive and i talked to him about that relative relatively often oh yeah so what's the company what's his name uh the the company is called molocholic which you wouldn't know it's like a really local like in industrial company okay what's his name his uh and now i'm looking on his uh his last name um or spell the company name just so we can look it up and this pump the company name is m-o-d-d-e-r-k-o-l-k okay perfect we'll look it up ceo of m how do you say that moder culk yeah it's very it's it's but it's it's a good example of how a relatively local company can build something well really useful and have uh small teams that steer themselves and are basically self self controlling units entirely i i really like seeing that number three what's your favorite online tool for building your company my brain [Music] besides your brain like name like obviously besides wordpress or your own tool um so a lot of it i mean i'm i'm an seo guy so i'm gonna say google.com and actually searching for stuff and and looking at what's there and what's missing and what people are searching for and and are missing you said just google.com yeah yeah all right number four how many hours of sleep to get every night sorry again how many hours of sleep seven and you said married any kids four four holy mackerel okay how old are you i'm 36 36 last question just what do you wish your 20 year old self knew um my 20 year old self should probably start a company sooner when did you launch how old were you when you launched your first company uh 2010 so uh 28. 28. very good guys there you have it he will launch his company sooner yost again launched his seo tool on wordpress back in 2013 now over 200 000 customers paying seven bucks a month doing about 12 million bucks in terms of run rate today that's up sixty percent year over year so that's healthy twenty five percent ebitda margin so that's about three million a year in free cash flow that he reinvest in real estate for the company or other things 100 people in the netherlands totally bootstrapped which i love 15 logo churn per year on their subscription cohort they're moving more of their users into that subscription code as they look to scale and grow again doesn't track cac or payback period just because a lot of his growth comes from the wordpress.org plugin repository and it's working nicely today so yoast thank you so much for taking us to the top