AppSumo

How Noah Kagan Grew AppSumo from $50 To An $80M/Year Business

Monthly Revenue

$6.67M

Starting Costs

$50

Founders

Profitable

Yes

Year Started

2010

Customer

B2B & B2C

Founders

Profitable

Yes

Year Started

2010

Customer

B2B & B2C

Who is Noah Kagan?

Noah Kagan, the founder of AppSumo, is an entrepreneur from California with a background in marketing, having previously worked at Mint.com and Facebook. He studied at UC Berkeley and has a knack for identifying market opportunities and developing successful business ventures.

What problem does AppSumo solve?

AppSumo effectively addresses the challenge faced by startups and small businesses in accessing high-quality software due to budget constraints, by offering them deeply discounted deals on essential digital tools, making it easier and more affordable for them to grow their operations.

How did Noah come up with the idea for AppSumo?

Noah Kagan conceived AppSumo after being frustrated with the challenge of acquiring customers for his previous venture. Having a background in marketing at Mint.com, he noticed the potential for a service that could help web apps gain more users, especially with the rise of Dropbox and similar platforms. He created a simple landing page to collect emails and started validating the idea by connecting with companies and offering premium app deals at discounted prices.

To test the market, Noah cold-emailed the founder of imgur to negotiate a deal on their pro accounts, successfully securing an agreement to sell at a discounted rate. He then reached out to his network and obtained free ad space from Reddit to drive traffic. Along the way, he A/B tested landing pages and iteratively improved his offerings based on feedback. By securing his first 200 sales, Noah confirmed that his idea had viable demand and laid the groundwork for what would become AppSumo.

Snapshot of the Appsumo landing page fromearly days

How did Noah build the initial version of AppSumo?

Noah Kagan built the initial version of AppSumo by validating his concept through direct outreach to potential partners and customers. He began by negotiating a deal to sell Imgur Pro accounts at a discounted rate and secured a promotional spot on Reddit by offering its co-founder breakfast. Kagan used PHP registration code and PayPal to create a functional yet basic site, spending just $50 on the initial setup by hiring a developer for $12 an hour. The development process involved continuous tweaking and A/B testing of landing pages, along with manual tasks like sending redemption codes. It took approximately 48 hours of concentrated effort over a weekend to get everything up and running, though the process included numerous challenges such as time constraints and initial rejections.

How did Noah launch AppSumo and get initial traction?

Reddit Ads

To get the initial word out about AppSumo, Noah Kagan utilized Reddit ads. He identified Reddit as a platform where many potential users of Imgur Pro were active, given Imgur’s popularity among the Reddit community. Kagan took a gamble by directly emailing one of Reddit's founders, offering to buy them breakfast in exchange for some free ad space to promote the Imgur Pro deal. His pitch worked, and he secured the ad space.

Why it worked: This tactic worked because Kagan correctly identified where his target audience was already spending their time. By negotiating for free or discounted ad space in a community that would be highly interested in the Imgur Pro offer, he was able to tap into a ready-made audience without significant upfront costs.

Metrics:

Secured the ad space without any direct advertisement costs.
Managed to run ads directly to his target audience, resulting in immediate visibility and interest.

Cold Outreach

Noah began by cold emailing Alan Schaaf, the founder of Imgur, to negotiate a deal for selling Imgur Pro accounts at a discounted rate. He proposed a revenue-sharing model where he would receive the remaining profit after paying Schaaf $7 for every discounted $14 Imgur Pro account sold, compared to its usual price of $29.

Why it worked: This strategy worked as it clearly demonstrated Kagan’s ability to lock in a deal with an established service provider, which added credibility to AppSumo's service offerings. By securing this partnership, he also created an attractive deal for potential customers.

Metrics:

Closed a deal to sell Imgur Pro accounts with a clear profit-sharing model.
Set a successful foundation by identifying and approaching complementary businesses.

Manual Setup and Personal Touch

Once ads brought in attention, Noah set up a very simple website using basic PHP code connected to PayPal to handle transactions. He didn't wait for a perfect platform; he opted for speed and functionality. Upon making sales, Kagan manually sent out redemption codes for Imgur Pro to each buyer.

Why it worked: Focusing on functionality over perfection enabled Kagan to quickly bring the product to market and see real customer responses. The personal touch of manually sending codes also allowed him to interact with early customers, understand their needs, and ensure immediate service.

Metrics:

Immediate sales after ad launch.
Achieved his target of 200 sales relatively quickly, signaling strong market validation.

Tapping into Existing Networks

Noah also reached out to his personal and professional networks by emailing friends and contacts. He tested landing pages and asked for feedback, used every opportunity to get the word out, and even leveraged his experience and connections from previous jobs at Mint.com and Facebook.

Why it worked: Leveraging existing networks allowed Kagan to quickly gather feedback, validate his idea, and gain initial customers. People who knew him were more likely to try out the new service and spread word of mouth, acting as early adopters and advocates.

Metrics:

Initial customer base of around 200 paying users.
Created a revenue stream and validated his business model with those initial customers.

Noah’s approach to launching AppSumo was a combination of savvy marketing, leveraging personal connections, and quickly implementing a functional, market-ready product. His strategies effectively brought in his first few hundred customers and validated the potential for AppSumo to grow into a successful business.

What was the growth strategy for AppSumo and how did they scale?

Cold Emailing and Outreach

In the early days, Noah Kagan used cold emailing to establish partnerships and promote deals. For instance, he reached out to the founder of Imgur to offer their Pro account at a discounted rate. Once the deal was set, he also cold emailed a Reddit founder to gain ad space.

Why it worked: Cold emailing is direct and can yield immediate responses when personalized and value-driven. Noah's approach was straightforward, providing value first, which made it easier to form these early and crucial partnerships.

Reddit Ads

After securing the Imgur deal, Noah used Reddit ads to drive traffic to the AppSumo site. This provided immediate visibility on a platform where early adopters and tech enthusiasts congregate.

Why it worked: Advertising on Reddit targeted a niche audience who were already interested in tech and digital tools, making it easier to convert them into paying customers. These ads were paired with strategic placements on subreddits where the potential customers spent their time.

Email Marketing

Noah initially collected emails from friends and potential customers. This list was essential for product launches and deal announcements. He even sent emails manually to ensure personal touch and reliability in the early sales processes.

Why it worked: Email marketing is a cost-effective way to keep in touch with an audience. By building a list early on, AppSumo could directly communicate with interested users, keeping them informed and engaged with new offerings, which significantly boosted conversions.

Partnerships with Web Apps

AppSumo’s growth was heavily fueled by forming partnerships with other web apps. They offered premium versions of these apps at discounted prices. This mutual benefit helped both AppSumo and the partnering apps expand their customer base.

Why it worked: These partnerships provided value to all parties involved. The app companies got marketing and new customers, AppSumo earned through profits from the deals, and the customers received valuable tools at a lower price.

Ad Placements on Relevant Platforms

Aside from Reddit, AppSumo placed ads on other relevant platforms to drive traffic and awareness. This was a strategic move to ensure their presence where their potential customers were active.

Why it worked: Continuous ad placements on platforms frequented by the target audience ensured constant visibility and influx of new users. This method keeps the brand top-of-mind for potential customers.

These strategic channels not only helped AppSumo gain its initial user base but also established a strong foundation for sustainable growth. By focusing on creating value through targeted outreach and partnerships, they were able to build a loyal customer base early on.

What's the pricing strategy for AppSumo?

AppSumo offers lifetime deals on software tools at one-time payments, with popular deals like TidyCal for $29, allowing users to avoid recurring monthly fees.

What were the biggest lessons learned from building AppSumo?

Validate Before Building: Noah Kagan emphasized the importance of validating an idea before investing too much time or money. By securing early sales or commitments, you can ensure there is actual market demand, saving resources on unproductive ventures.
Ask Directly for What You Need: Kagan found success by directly reaching out and asking for support or collaboration. For instance, he secured free ad space on Reddit by simply requesting it during a breakfast meeting. Don't be afraid to ask; you may be surprised at the positive responses.
Stay Flexible and Adapt Quickly: Kagan highlighted the importance of being adaptable and open to feedback. He pivoted his approach based on what worked in real-time, such as tweaking sales tactics or product offerings based on customer feedback.
Utilize Resources Intelligently: Instead of building complex solutions from scratch, Kagan used simple, low-cost methods to get started. For example, he connected his website to PayPal using inexpensive development help, proving that you don't need a massive budget to launch effectively.
Persistence Pays Off: Building AppSumo wasn't an overnight success. Through many trials and errors, Kagan persisted, learning from failures and continuously improving his approach. Aspiring founders should embrace perseverance and view setbacks as learning opportunities.

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