SurveyMonkey Reaches Out to New Branch

SurveyMonkey is a classic example of a successful online business, that has recently gone through the transition from start-up to established company. Born out of a deceptively simple service, the company has quietly grown in terms of revenue for ten years and is now embarking on a geographical expansion programme.

I spoke to CEO Dave Goldberg about how this transformation was achieved and how the company demonstrates a departure from the traditional models of running a business.

The company was started up in 1999 by a young dotcom entrepreneur Ryan Finley, who saw the need for an online survey generator. Starting very much as a one-man-band, Finley realised that it was imperative to keep the product simple to keep customer support costs down. He relied on viral marketing to get the brand known â€" people used the service, had a good experience and told their friends. Usage grew slowly but steadily until last year when the company doubled its market to 5 million users.

The company's revenue model is based on what is now known as a freemium service. This enabled Finley to keep sales costs down too. Customers are lured in for free and then persuaded to pay more as their usage becomes more sophisticated. Much of the revenue comes from corporate customers and Goldberg says most of the Fortune and FTSE 100 companies are on his books.

Goldberg himself arrived on the scene in 2009, when Finley sold a majority stake in the business to private investors Spectrum Equity and Bain Capital Ventures. Goldberg was brought in by the financiers after starting up his own venture and selling it to Yahoo!, where he spent some time in-house. He had an ongoing relationship with the financiers and invested a stake in Survey Monkey himself.

Goldberg's goal was to consolidate the growth Finley had achieved and build on it. He has increased the headcount from a dozen to 60 people. Even so, most of that workforce is concentrated in customer support and product development. Goldberg insists the company doesn't really have sales or marketing teams. It's more likely that these two functions have been absorbed into customer care, as the company continues to work on the same revenue models that Finley set up â€" delighted customers come back and buy more. If they leave a corporate customer, they set up another account in their new company.

The people he has recruited come from the giants of the online world â€" Google, eBay and Ticketmaster. Goldberg says they come across because they like the entrepreneurial atmosphere of the company, but are reassured by its financial health. Because of the low headcount, the company has enjoyed enviable profit margins.

Now that he has the people he needs in place, Goldberg's next priority is to improve the site in anticipation for a move into non-English-speaking markets. He insists the original site was well designed, but it inevitably reflects the feeling of a start-up. It's time now to improve on the site, so that it reflects the more established company. He has made sure that the customer base has been included in the design process, but has also enlisted the services of Phil Garland, a Phd in survey design.

The key is customer loyalty. Goldberg maintains that 50 percent of the customers won seven years ago are still paying for the service and he wants to keep it that way. In fact he thinks there is potential to grow the company by ten times. The opportunities to capture new markets outside of the US, especially in education and government are huge, which is why Goldberg is expanding into mainland Europe and Latin American countries.

As far as Goldberg is concerned it's not just about new markets, it's about timing. The concept of running your IT through the cloud is starting to reach a new phase, where companies don't just host their own systems over the internet, they are actually starting to lease other company's applications, turning a capital expenditure into an operational expenditure.