SaaStr Podcast #389 with Unsplash CEO Mikael Cho and Morning Brew Business Editor Kinsey Grant: “How To Really Disrupt the Big Guys With Free”

Ep. 389: Mikael Cho, CEO of Unsplash shares his lessons learned from starting Unsplash as a side project and growing it to a market leader, and disrupting an industry of giants like Shutterstock, Getty, and Adobe Stock with a free business model.

You can also watch the video or read the transcript below.

 

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Jason Lemkin
SaaStr
Mikael Cho
Kinsey Grant

Transcript:

Kinsey Grant:

I am Kinsey Grant. I am the host of Morning Brew’s Business Casual podcast, and I am so excited today to interview Mikael Cho. Mikael is the founder and CEO of Unsplash. Thanks for having me. I’m excited to have this conversation together.

Mikael Cho:

Yeah, same here. I’m really excited.

Kinsey Grant:

So as you can see from the slide, we are talking about how to really disrupt the big guys, which of course is a huge question. And one that we I’m sure could talk about for hours, but we’re going to try to have some fun, get some great insight, and hopefully get some great questions from you guys. So if you do have questions, feel free to pop them in here. We will try to address them as well as we can throughout the conversation. But I’m really excited to have this conversation to begin with. I think that there is a lot to be learned from any founder CEO story, especially something like Unsplash, which has been a really, really incredible company to watch for a while now. So Mikael, start from the early days here. How did Unsplash start and what inspired you to start the company in the first place?

Mikael Cho:

Yeah, so Unsplash wasn’t supposed to be a company. So it really just started as we were building something else, different product, different company, and we were struggling to grow. And one of the challenges that we found was just trying to make a website and using images. We couldn’t find good images, everything was complicated. And so we did a photo shoot for that site, we had all these leftovers and we thought, “Hey, this could be really useful for people. It might actually be a potential growth source, also. So let’s put these up, we’ll make them totally free. You can do whatever you want with them, super easy to use.” So we ended up making a Tumblr blog in an afternoon, on a $19 Tumblr theme, threw out 10 of these images on public Dropbox links, which you’re not technically supposed to do.

Mikael Cho:

And then, we put it on Hacker News and I didn’t think anything of it. We actually put it on Hacker News on purpose because I’m like, “This is probably not going to do very well. Let’s let it sit over here. I’m not going to share it anywhere else.” It went number one within a couple hours. And then there was like 30,000 downloads on those 10 images. And yeah, then we saw sort of this flood of people coming through saying that this was really useful.

Kinsey Grant:

So what kind of website were you trying to build when this idea happened?

Mikael Cho:

So we were building a marketplace for design talent. So, just connecting people who wanted to build websites or mobile apps with great designers.

Kinsey Grant:

It’s interesting that the almost side project is now the big project.

Mikael Cho:

Yeah. We had to make some decisions. So, if you fast forward to sort of where we’re at now, Unsplash actually does more image downloads than Shutterstock, Getty, and Adobe Stock combined. So we were on that trajectory pretty fast, like it took off, and we had to make some decisions. So we ended up selling the previous company to Dribble, the design community, and we continued on with Unsplash. We made that decision a couple years ago.

Kinsey Grant:

So day-to-day, what exactly does Unsplash do? If you had to boil it down to a couple sentences or words, what is the mission?

Mikael Cho:

Yeah, so Unsplash is high resolution images that you can use for anything.

Kinsey Grant:

That makes a whole lot of sense. But when you think about starting a business, especially a business that you hope to be profitable at some point in the lifetime, be as successful business pursuit to do something. Oftentimes these businesses are solving for big pain points. So you said that you ran into some trouble, but beyond that experience, what kind of pain points do you see Unsplash solving for that, maybe the competition hasn’t been?

Mikael Cho:

One of the big things was the complexity around licensing. So to people who are in the industry, or who’ve been a professional media buyer or designer, you might understand those differences of those licenses. But what’s happening now with all the creative tools that are available, it’s becoming like everybody can create, so it’s for the masses. And that licensing world is just not understood. I didn’t even understand it. I’m like, “Can I put this on a site? What if more than 500 people see it, am I going to get in trouble? Do I have to take it down? What size do I need?” I didn’t know the ideal answer for all those questions. And what we wanted to do with Unsplash, was just cut through the noise. How could we make just the simplest version where you didn’t even have to come up with answers for those questions? We just answer them for you.

Kinsey Grant:

Right. Cutting through the noise is a huge moat and competitive advantage, especially for companies in the early days. What other lessons did the early days of starting Unsplash teach you?

Mikael Cho:

So I think the biggest was you focus on the shortest path to the value that you just said, what do you offer? You offer high resolution images that you can use for anything. What is the shortest path to get to that? And I think a lot of times that gets diluted by a whole bunch of, whether it’s people who are telling you different things, whether it’s like, “We have to think about the business model. We have to think about how this is going to scale. We have to think about the technical challenges.” But really I think the biggest thing that we learned from starting Unsplash was just flip that. Instead of starting with thinking about all of those things, you just say, “This is the ideal thing that we wish would exist.” Now, work backwards.

Mikael Cho:

How do we just try to keep that intact, even though yes, we might have to answer all these questions, but how do we keep that piece intact? So I have this sort of thinking of how we thought about Unsplash, you have all these different steps that people need to do. And this was like sort of the previous versions that existed. If you were looking for an image, you would have to search, you have to sign up, you have to subscribe, you have to download, you have to even figure out how to pay, all of those steps before you could actually get the image.

Mikael Cho:

And so what we did is we said, “You can just search and get the image.” And it’s as simple as that. And by just removing each of those steps, it’s almost like an order of magnitude. More attention and interest and stickiness as you can capture from people. And so that’s sort of this piece where you sort of start with this ideal in your head, and I think a lot of people start here. They started to say, “This thing should exist. It should be like this.” But then as you start to make, you might have teammates, people you’re bouncing things off of, and they tell you about all these limitations. And then the thing that actually gets shipped is like a kernel of that original thing that you actually wanted to exist.

Kinsey Grant:

Right. I think one thing that really caught my ear here is the concept of scalability in the early days. How did you think about scalability? It’s not exactly the typical founder story. A lot of people are thinking, how can I make this as big as possible as soon as possible? Was that what you thought? Or how did you consider scalability in the early days of the product?

Mikael Cho:

One of the biggest lessons I learned, not only just with Unsplash, but from having the previous company and then also going to Unsplash after that, and sort of being able to apply some of the lessons, because that was our first company. We started this company pretty much, my entire working career has been that company and then Unsplash. And one thing I learned was the importance of sequencing. So you feel when you’re in a startup, like you can do whatever you want, or you can make all these things. You can try all these things, you can run ads over here, you can do this crazy idea, to try to get people to use your product. You can make all these different features. And I think one thing, a mistake that I made in the first company was thinking that we could do a lot of those things at once.

Mikael Cho:

And even if you think you have the team, like let’s scale the team, we can do that, we have capital, we raised funding. And you start to do all these things, but you quickly realize that they’re maybe not getting to the spot, it’s maybe 10 times or a hundred times harder in each of those things to get it to the level that you want. So when we launched Unsplash, it was like, “Let’s pick the tiniest thing. And we will sit on that for a while and really think through how can we make that better and better if it’s already gravitating to people.”

Kinsey Grant:

Right. Focus is so important.

Mikael Cho:

Yeah. It’s that ability to constrain and sequence. So yes, you can do those things. I think what happens in a lot of companies, especially if you raise capital, you feel you have this short timeframe where you have to do all of the stuff within an 18 to 24 month period. What I’ve learned is you will always execute better if you can sequence those things. You’ll get to those things and you’ll earn the right almost to make those things by executing really well on something first, and then push out that next thing after.

Kinsey Grant:

Of course. And that strategy is also hugely underpinned by the fact that you believe in the viability of the company and the product in the long term. That you will have time to get to something down the road, you don’t have to do it all day one. You might be eager to, but you don’t certainly don’t have to.

Mikael Cho:

Right.

Kinsey Grant:

What do you think, before we hop into the business model side of things, just one more question on the early days. How do you think that you took this from just idea to actually product? What was the biggest factor in that shift for you?

Mikael Cho:

So the idea was that simple sort of notion of how do we get these images to people as easy as possible? So, I’m not a programmer, I’m not a developer. And so that constraint in a way, it sort of helps. We were talking about scalability. I didn’t really have the option to build something scalable because I didn’t know how. So I need something that already exists sort of out of the box that I could use. That was Tumblr in that case, and then I knew that there was this theme where it showed images really well and in the way that would make Unsplash look very different compared to all the other alternatives. I think that was another, just interesting insight. It seems like not a big deal, but when people land on new sites, you’re immediately fighting inertia all the time.

Mikael Cho:

So when you’re a new thing, people were just already entrenched in doing something else. And so when they look at your new thing, even if you’re totally different, once people get in the box and they sign up and all these things. But if you look on the surface, kind of like that other thing, it’s just almost not enough. You’re going to lose a whole bunch of people who just think like, “That’s another one of those things.” So with Unsplash, that’s why 10 images, we were competing against sites that had 60 million or a hundred million, and they’d show them all in little blocks. And one thing we did with design was, let’s communicate the opposite of what we’re doing through how we design the product. So by taking those 10 images, they were huge. They were like the size of your screen and you just scroll and there was one image, one image, one image, one image, all the way down. It just made the site look totally different. And then they resonated even more like, “Oh. I get it right away. And now I can just click this image.” It was almost like too good to be true kind of thing.

Kinsey Grant:

Right. It’s a breath of fresh air, certainly. But I imagine it was a little intimidating that you were up against these giant incumbents.

Mikael Cho:

I think we were fortunate in not trying to start a company actually too soon. I think that was one of the strongest things. I think even without that, we may have made more mistakes. If we would have tried to make it be a company very early, we may have rushed things. We may have done different things that would have not led to the same result, by slowing it down and sort of that same philosophy of sequencing accidentally. Now, if I was running a company on purpose at the beginning, I would actually do those same steps. But I would do them on purpose. When we started Unsplash, it was an accident. Let’s leave it, let’s make sure, that people aspire to be a part of this, to submit images. That kept the quality bar really high. We only did 10 images every 10 days. That was an accidental feature because we just didn’t have time. We were working on another company, but it turned out that those sorts of things were what I think really made people gravitate to Unsplash.

Kinsey Grant:

I think it really speaks volumes too, for the concept of not putting the cart before the horse. When you really think about, is this product a product that people are going to want to use? Think of it as a product, not as a company that could buy XYZ in 10 years. The most important thing should be the product, not the reputation or the company, or what have you. So Mikael, a lot of this sounds really, really good. How do you make money?

Mikael Cho:

Yeah. So the way that we–we put that off for a while. And that was a strategy sort of once we saw the image downloads really taking off, and we needed to really think about what is the business value that’s going to come from this? Where is the industry going, is where we looked at things, not how can we extract what’s there today? So that was the first sort of framework for how we thought about that. And I think this fits into a model of disruptive thinking as well. And again, it comes down to rushing. If you want to be disruptive, sometimes you need to delay some of the things that you’re going to do, where you need to think about it differently. Can’t just take from it, because that sort of caps it at what it potentially could be.

Mikael Cho:

So we looked at all the potential business models, we wanted something that would align with the mission, which would allow us to keep the images freely usable. We wanted to keep that super simple. That’s intact with that original mission. And at the same time, it needed to be something that could sustain, where we see the potential growth of this being. Unsplash is about to be a top 200 site in terms of a destination and we have a whole bunch of integration partners, which has the same amount of traffic on all of that. That’s equal to unsplash.com. So when we see where that all is all going, we thought that there was an advertising model that could work with this. And there’s a lot of people like, “Advertising models never work. You’ve got the duopoly. For us, we understood that. We looked at the nuances that we had in the product that we have. And we said, “Why are people saying that?”

Mikael Cho:

And I think it just comes down more to everyone is sort of building these ad products to compete on the audience and how do we track better? And how do we maybe track like Google or Facebook? And that’s how you sort of compete. Unsplash, we just said, “We’re not going to do that. We’re going to use what Unsplash does uniquely, which is get you mass distribution in places that you can’t even advertise.” So when people go and use these images and they get spread around the internet, we actually work with brands who put some of these images into Unsplash. So we’ll work with like Boxed Water or Harley Davidson. They have images when you search motorcycles, you’ll see Harley Davidson images come on the top. And if you find those useful as a creator, you might go and take those and put those in front of your audience by choice. And that’s sitting in a really good spot of real estate on the internet that you can’t typically advertise on. We saw that organically happening with images and we thought we could do that for any brand.

Kinsey Grant:

 It makes a lot of sense. It’s just the duopoly you’re referring to has been a headache for any company with ad based revenue. Do you think that you have effectively taken on this duopoly or is it just a different tack to making money than they might take up?

Mikael Cho:

Yes. So I think we will end up working solving different jobs. So where Google and Facebook sit is in sort of a different part of the funnel. Google already knows you’ve made a search and you’re on the path to something. Unsplash is more like we’re going to make someone aware who wasn’t previously aware at all. So this person who’s writing a post on where to travel next year, they’re going to choose from 10 images that they might use and now they might choose this branded image that’s on Unsplash because they think it’s useful for what they’re creating. You’ve now elevated your brand in front of that audience, with something related, they’re thinking about travel. Now they’re actually thinking about your specific destination, whereas previously they may not have even considered your destination.

Kinsey Grant:

What are the metrics on that? How do you track effectiveness?

Mikael Cho:

So the big focus for us is brand lift. So we look at how do we affect things from, are there new people who are becoming aware of what you’re doing? Does that affect purchase intent? Does that affect consideration? A big piece that we also look at is what we call as a visual mindshare. So how are we affecting the mental space that people have that they’re dedicating to your brand? We all have sort of this, it’s sitting inside of us, we have these brands that have sort of imprinted on us, like a feeling. Like Nike, you feel a certain way about Nike, you resonate with certain things. And those usually end up being things that you buy. So these products, it’s a similar thing. They’re sort of subtly trying to be useful. And at the same time, they’re creating this ability for you to feel something about them in a way that’s related to an attribute of the brand that they want you to feel. So the way that we look back on that is by how much of the visual Mindshare are you changing as a brand by putting your visuals on Unsplash and spreading them across the internet?

Kinsey Grant:

Is that harder to quantify than something like say, CPMs or page views, even?

Mikael Cho:

Yeah. We do charge on CPMs. But yeah, it’s different than a cost per click. It’s like, here’s the cost, here’s what’s going to come in and here’s the sale that’s going to come out on the other side. And is that like a plus, that’s essentially what you’re looking for in that. But really what we’re doing is shifting the masses who may not have even ever clicked in the first place. So we’re going to widen that potential group of people who may one day go and search for your thing. And I think in marketing and advertising, there’s been this thing where advertisers think people are like cattle. Like we go through this funnel, right? We see this thing, we click this thing and we go through that and we make a purchase.

Mikael Cho:

And there’s like a percentage of that, but that’s really not how we work. If you think about how you maybe see something over here, you saw something on Instagram, so you ask a friend and all those little interactions happen. And then it leads eventually to a purchase. What Unsplash creates is many more of those interactions and they’re trusted interactions because those visuals are being shown by people. They’re choosing to use that visual that has a brand in it and put it in front of their audience versus all the major advertising platforms are interrupted. It’s in the way of something that you’re trying to do. So you actually, usually don’t feel very good about those kinds of advertisements.

Kinsey Grant:

Yeah. I think one of the biggest lessons I’ve learned over my couple of years working in the startup world is that people like people, people are less likely to like a brand than they are ,say, I trust this writer or this, whoever is taking a photo or an image from Unsplash and using it. They trust a person more than they might a faceless brand. Mikael, would you ever consider another kind of revenue stream? What would it take for you to consider, say, selling more traditional forms of advertising on unsplash.com?

Mikael Cho:

Yeah, there are other things that we’ve considered. We do have another kind of advertisement that’s on Unsplash that is more direct. And those are folks who do want to connect with the creative audience directly that’s on unsplash.com. So we work with someone like Squarespace, where if after you download the image, it’s like, “Hey, you’re going to go create something with this next.” Squarespace is an option if you’re building a website. So put it in those places where it’s still useful. It’s not just like a banner ad in front of your face. But still it allows us to keep the images free. And the number one thing is we want to align with that mission so that we can keep expanding the market and keep making sure that it’s clear how to use Unsplash. Products get diluted, it’s the same thing. At the beginning, you have those choices that you’re making, those trade-offs, to try not to dilute this ideal product and that as you go along in the journey, it’s the same thing. It’s like, how do you not dilute this product? You see it happen all the time, especially with advertising. Once advertising is introduced, you see that sort of ideal product really get chipped away at.

Kinsey Grant:

Do you think that the images will always be free?

Mikael Cho:

Our hope is to keep them always free. There might be subsets, certain things where it makes sense to offer something. But our view is the future is free, and making that open and useful is what we want to keep.

Kinsey Grant:

Thank you so much Mikael. And thank you everybody for tuning in. 

 

 

Published on October 23, 2020

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