Student Entrepreneur to $10M Revenue Run Rate: Extrabux CEO Jeff Nobbs (Part 4)

Sramana: You were chugging along, making some progress, and then you hit an inflection point. What was that inflection point and what led up to that?

Jeff Nobbs: The inflection point was the holiday shopping season in 2011. I don’t think there is any one thing that led up to it. We had 20% month over month growth, but that was growth on a very slim amount of revenue. As the revenue number begins to grow then that number starts to get a lot more significant. That is when we launched our “refer a friend” program.

Before that program launched there was no real incentive to tell a friend about our site. That program compelled users to tell other people about our site. They would get $5 for every friend they signed up. They also get 5% cash back on all of their friends’ purchases.

Sramana: Doesn’t that take away all of your margin?

Jeff Nobbs: No, not necessarily. If someone purchased $100 of product, then the cash back would be $8, so 5% of $8 is only 40 cents. That program definitely increased our growth. We also experienced a lot of traction from international opportunities. We now have users in countries all over the world. We have an office in Shanghai now as well.

Sramana: What does your traction ramp look like from 2006 until now?

Jeff Nobbs: In terms of traffic, in 2006 we were getting a few thousand unique visitors per month. In 2008 and 2009 we were getting around 30,000 unique visitors per month. We saw that rate triple in 2010 and 2011. Today we are getting 200,000 unique visitors a month. From 2011 to 2012 we grew fivefold and averaged 20% month-over-month growth. It is looking like 2013 is on that same pace. About 25% of our visitors will sign up for the site, and about 25% of those who sign up will buy. Of that last group, another 25% will continually make purchases. It is a funnel that we are fine tuning and optimizing.

Sramana: Of the 25% who are buying, what is the average amount of purchases made by that group in a month?

Jeff Nobbs: The amounts vary month to month. In Q4 about $25 million was spent in U.S. sales.

Sramana: You said that of that distribution, then 25% of them are really active and use your program frequently. What would the average purchase look like from them?

Jeff Nobbs: As you get higher up the chain, in terms of customer activity, they become very active. It is like the 80/20 rule except more so. You have a core set of customers and then a really long tail. Like all businesses, we have power users, and we have to figure out how to cater to their needs.

Sramana: What do you sell? What is your top selling category?

Jeff Nobbs: We work with almost every online store. We have stores in almost every category you can imagine. The categories that tend to do best are retail as opposed to services. A Walmart or Target will perform better than Norton Antivirus or Netflix.

Sramana: Is your customer base mostly women?

Jeff Nobbs: Yes, it is. Most of our customers are Gen X women, ages 25 to 50.

This segment is part 4 in the series : Student Entrepreneur to $10M Revenue Run Rate: Extrabux CEO Jeff Nobbs
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