Hi, Zev. So happy to have you with us today. Hi, Gigi. How are you doing? I'm very good. Where are you in the world? At the moment, I'm in Jerusalem, Israel. In Jerusalem, the headquarter of the company. Right? Yep. We have another office in hypehand in London, but they had cultures in Jerusalem. Which is a pretty unique thing. I don't know that everybody that listens know that at the end of the day, most startups in Israel are in Beller Aviv and around Tel Aviv and not in Jerusalem.
That's a unique thing in the company. That's true. The founders of the company were a group of PhD that's in Hebrew, you. And for many reasons, we decided to stay in the city. We use Hebrew, you, and the subtle Academy of Arts is a hiring club. Form, like, really kind of being able to pull top talent from there. So still there. Good. And how many people work in the company today? It's a moment we have around 450 people to come. And are they working in our remote or from the office?
So we are kind of coming back from the can log down here in Israel, and we are kind of starting to nudge people to have social interactions. Not necessarily come to the office, but we're trying to arrange, you know, kind of fun activities outside. And at the moment, where is this still kind of complete flexibility around working, like, remote your working at office. And do you think that you're gonna change the way people work when COVID is over when the vaccines are given?
Or everybody's gonna come back to the office? It's a great question. If you can have everyone who's thinking is evolving around it and they constantly try to talk with the other kind of fellow CEOs of growth stage startups to figure out where their thinking is. I think when this whole, you know, COVID situation started, there was a little bit of euphoria around the abilities of remote on the work. We saw a lot of people talking about, you know, like, teaching office space and things like that.
And I think that Pete realize that social interactions are important. So on one hand, everyone wants to, like, retain some of the flexibility Pete we're having at the moment, in the background, everyone also realized that without social interactions where, I don't know, like, becoming an army of mercenaries, it like, really changed the DNA of the companies.
So I think what's gonna happen is that I think we're gonna work in the current setup meaning kind of flexible work until this whole COVID situation is gonna be resolved. I don't know, like, say, a year from now. And then a lot of companies will try to retain some of the flexibility, right? Like, that's allowing most of the employees to work, like 2, 3 days from home, things like that. And that, if it's gonna work on the long term or not, like, frankly, no idea.
I really hope that something will change it to the better in how things work, but at the moment, I don't have a strong bet there. Yeah. I think what we're seeing in many companies is that, you know, you can break it down to the tasks that are more of the James, and these are done very well remotely. Really no problem. But whenever you look at innovation, the needs to be creative, the needs to invent new things, then not being in the same room on the same blackboard is just slowing things down.
Know, like, it's an interesting distinction, but now when you kind of mention it and they try to think if it correlates what I see internally, it's interesting. Like, I agree. I mean, there are like this moments where you want, like, this brainstorming with other Pete. You want, like, arguments. You won't see other Pete. And it sounds about right. So Lytrix is basically a company that I think not many people know the actual name of the company because you go under different names of products.
Right? Do you wanna throw over a few of the product names that people may know. Yeah. So I think our biggest brand at the moment is Face Soon, which became almost a verb for a mobile retouching. That's our biggest brand. Another big brand that we have at the moment is video lead, which is Omri creative video in our kind of brands that we're pushing at the moment is boosted our SMB product. By now, we have a pretty big portfolio of Morgan 10 product.
That we're basically kind of divide them even in the user facing way into free kids. There's like a social kit, creative kid and business kids. And I think that, you know, one of the things I love about the company is that it defies a lot of everyday startup wisdom and how it succeed, and people may not know, but this company that is only like eight years old is already, a unicorn or multiple time unicorn, you know, raised a lot of money, has millions of customers.
And I wanna basically touch on how you got here in what is theoretically a very non common strategy of offering stand alone apps that are not themselves, social networks or the place where you share your content. And so, basically, you know, we if we wanna call this, like, a pre layer or top layer place where you actually go to Snap, Facebook, TikTok.
And you're basically succeeded in what many people thought is impossible in creating a very meaningful company out of such a top player or a pre layer. And that is something that I really, really want to understand. Because most people think that in startup culture, you have to really totally build something completely new, invent a new category, or disrupt something completely.
But you basically build a super successful company that leverages innovation that are just the beginning of entry into a new platform. Are you basically focused on owning that prelayer, the, the place that you go to before you go sharing? Well, you know, gig, it's an excellent question, and there are so many different kind of ways to try to untangle it.
So, you know, I'm gonna start drawing different directions like how things evolved and our thinking evolved and please feel free kind of stop means switch gears to different directions. Because again, it's kind of a really big question about the strategy of the company and why we're doing things in a certain way. So let's start with social networks. And I guess, you know, like, the wisdom of owning a platform is obviously has a substantial basis around it. Right?
When we started the company, you can just remember our kind of DNA. We were a group of PhD students that did the research in computer graphics, image processing, And, we really saw ourselves as tooling. You know, like, we really kind of, when tried to kind of explain ourselves in the poetic way, we're telling everyone Beller, you know what? We're not artists, but, I don't know, think about Bethoven as a composer. Someone built this guy at piano to write.
And in symphony, we are going to be like this toolmakers for a new generation of artists. And we obviously thought that creative tools are sometimes they create, like, this layered functionality that allows you to create a platform, but we really didn't think that it possible to create a social network, like a consumer social network, like, from Metro.
Okay. Like, we already saw, like, Instagram was already a thing when we started the company, we saw it as an extreme saturated space where, you need a ton of capital in order to kind of explode and, tried to establish a significant position and we just didn't see it in our DNA. We actually thought that we will be able to create magical tools we thought, because in terms of a role model, we thought about companies like Adobe, like Autodesk who are toolmakers.
Like, with time, we're obviously started to see that, it's a problem of being of layer on top of the platforms. And they try to figure out a place for ourselves. But I guess one of these, things that gives us a degree of comfort maybe a degree of false comfort is that when you look at the history of tech, you're seeing that the relationship between different layers are kind of shifting over time. Right?
So, like, one example comes to mind is that when, Telegram started in, you know, like, United States, or after that, then, telephone companies became kind of huge monopoles. The people who own the pipeline basically kind of owned Beller thing. Like, we've started due to regulatory pressure, etcetera, of the relationship between, people owning the pipeline and content providers kind of shifted. And I think we're gonna to seeing the shifts, right?
Because again, like, the infrastructure of pipes tends to be kind of so lucrative that it to get people to focus on it. Exactly. Like, and it's actually the regulators, and we didn't see it with social networks for a long time, but I think it's kind of common. Right? Like, we already can see the signs all over the place. And we actually thought that as a tool maker, Unisense can enjoy a degree of independence because you're not relying on any single Pete, right?
You can create basically tools that are oblivious of the platforms where you're sharing, like, the output of the tools on Okay. That's kind of an interesting place to be. I'm not, like, obviously advocating it as a, you know, amazing or great or, I'm sure that many people, including, I think, me at some point, told you that without owning anything in the actual network, then you're standing at the risk of being marginalized. That was always like a big question for us, right?
Because I think content creation tools, they are in the core of most of the social media platform, right? Like, you have filters on Instagram and you have video editing in TikTok. And most of these guys will give you some kind of tools, right?
And on the other hand, if you're like reading to professional production, you have a dog, you really want a professional crew, you're probably gonna use, professional software for that it was all this a question, like, for us, how big is the space in the middle? In the pros and the tools that are inherent in the systems. And as you know, since you kind of tracked the company for a while, we actually didn't have a good question to this answer. Right?
It was mostly, I guess, in the beginning, kind of, wishful thinking, you know, let's, do the best we can and hope that the market grows somewhere. We didn't realize back then kind of the of the Morgan. But, you know, there's a time when by. We started to realize the kind of things platforms are willing to do and the kind of things, Adobe and, you know, like, comp indicator and professional is willing to do.
So if you're talking about the platforms, kind of one of the things, I guess, the problems they have is that they need to build tools that really gator to their entire audience. Okay. I don't know, like, think about Beller in Apple Software in iOS. When you're, product manager working there, you better create something than 95% of the population.
Yep. And if you're working for Adobe, well, you're really focused on, I don't know, 0.05 percent of creation in terms of the complexity of the user experience, etcetera. And I think what we started to do at Lyteryx is to identify different audiences of deep people who are willing to invest more time into tools, but not to kind of jump shift to a professional software just yet.
I guess you can claim that we kind of, our bet was that there is going to be a layer of people who are interested in more sophisticated tools that are not professional just yet. We identified, like, these users across, like, 3 different categories. Like, people who are, like, really Flint social media or power users of these networks.
And the tools that the networking themselves provide them aren't good enough for them, Another category of users are like really people with creative aspirations that again just need more. And yet another category of users are small businesses because, like, their needs are kind of different than the tools that, you know, platforms will provide. It's kind of a really underserved market. So, but again, in terms of your high level thinking, you're right.
Like, we really needed to carve place for ourselves. It wasn't immediately evident how big this place is gonna be. And in terms of our relationship with the platforms, I think it's kind Flint interesting symbiotic relationship, right? Like you mentioned TikTok. And I think that's kind of a great example because before TikTok came out, less people were interested in video editing. Like, we actually Pete it, right?
Like, since Tik came out Pete leap power, you know, flagship create video editing product, like, really started to attract way broader audience And we already, like, developed a product that in terms of product thinking was, like, squarely targeting TikTok as a platform. That's the good news if the bad news is obviously TikTok, also, like, it's a great tool building. Right?
If you're looking at TikTok, you know, the video editing capabilities that they bundle with the plot were actually pretty decent, actually more than decent. We are in this position that on one hand, we benefit from this, like, new platform attracts and users to video editing. On the other hand, we constantly need to innovate in order to clearly, you know, like, carve our niche of being above the plug. I think that's really interesting.
I think what I like most about the way you described it is that what I hear you saying is that when a new major platform emerges, then the platform will cater for the needs of the lowest common denominator of its users, but it's very likely that you look at the needs of some niches of users on these platforms, especially if the platforms are huge and every niche can be billions of users, that you may find new needs that the platform is not gonna
serve for many, many years simply because they're focusing on the lowest common denominator, and that is an opportunity. It's exactly that. Right? Like, these platforms are so huge that even you are identifying a bunch of niches that are single percentage of the total users, you're still talking about kind of really big audiences if you know how to monetize them well.
And so when you think today about competition, do you think more about the platforms, putting more and more people to build more capabilities internally, or do you think about the likes of Adobe or other more professional tools, one thing to try and take part of your market share of the consumers. To tell the truth, like, my concern was always, like, the of the Morgan Flint Pete, right? Because, like, there was time when the platforms kind of try to do, like, tool making as well.
So Facebook at some point released a bunch of satellite apps to Instagram, like Boomerang and Lair, etcetera. And there was a time that Apple had their own kind of photo and video editing tools on the Beller.
But if I need to kind of look at the trends, like the platform kind of less interested in these things because frankly, if you think about it from the platform perspective, if they want to compete in this market, again, they need pull some pretty good people there and they just, like, have higher priority tasks inside the company. Right? Like, you also it's kind of hard to even see why Apple will do something like that because they also directly benefit from us being on their platform.
So we're less concerned about that. We're also less concerned about Adobe because, again, like, they're really kind of squarely focused on professional tools. So from our perspective, it's just like the size of our market, like how fast it grows. How these audiences we're finding that are not content with existing platform tools, but do not want shift to Adobe products.
So most of the time when we're thinking about competition, we're looking at other startups that are competing with us on, like, these different verticals of creativity. Like, we do not have another company with kind of tries to tackle all that, but, there is no shortage of companies that are trying to compete with us on a product by interesting. I love the way you put it because I think that there's some interesting insight here for everybody.
And the insight is that when the large platforms think about what to enhance in their product, many times they would not focus on enhancing something that would not directly impact the usage. So I think another example with this would be why isn't the, I don't to do list application on Android and iOS, great. And the reason is probably because they can make it better. They can put people on it.
But at the end of the day, that's not gonna be the main decision of a person to buy an iPhone versus an Android phone. And so these are kinda lowest common denominator. They're okay. They may improve them every once in a while, but there's still room for startup that are gonna come and build better tools like this because it's not in the main focused channel of the platform.
And I think that that's what you're saying, which is why the internal competition from the platforms is not the scariest thing. Is that right? Yes. I mean, it's obviously can be more nuanced than that. Like, especially with TikTok, again, like, I think we're doing a great job with video editing well, like with tools inside their platform kind of trying to bundle everything inside.
But in general, yes, like from the perspective of Apple or Facebook or, you know, all the platforms, the needle mover activities for them, they're really different than the needle moving activities for Right? Like you mentioned, like, at some point, we got to a $100,000,000 in revenues, and now we are going to get to a biden, right, and to us, it sounds like, you know, such an exciting and cool goal, etcetera. But, like, let's be frank. Right?
For Apple, getting another Beller from somewhere isn't gonna exactly move the needle So, you know, in general, I what I always admired about the way the company ran is that when I think about how many people told you competition, competition competition, competition, company from all directions, and, you know, Apple gonna take you. Facebook's gonna take you. TikTok's gonna take you. Adobe's gonna take you.
And still you guys managed to navigate yourself to this great spot without freezing because of competition. So what's kind of your thinking philosophically about competition? How do you think about how do you take into account everything they're doing without letting it slow you down or scare you? Beller, you know what? Like, he's evolved over time. Right?
Like, in the very beginning, we saw, like, this great quote by Jeff Beller, former CEO of a general electric like the quote was if you do not have a competitive advantage, do not Right? So that was, like, really clear for us from the very beginning. And when we started, we just looked at the market of that's called content creation on mobile. And it was like a really small one. I don't know. It's Snap. It was the end of the year. And, like, the revenue is there. I don't know.
Maybe the whole market maybe in single or double digit millions a year. Right? It was really a small market back then. But what to realize, okay, the market is small, but it seems to be growing. And at least at the moment, we have a big competitive advantage because the company that we perceive as a market leader, like unique software, Google Botham, like, creators of SnapSid, they actually kind of engage Hebrew you and specifically our lab to buy Pete from us.
They needed, like, 2 patents that we're working on. Kind of realized, oh, like, these guys, those are clear market leaders here. There are kind of, you know, like, certain things that we know how to do and they don't. That's like, the top of the field. And we also realized that we know kind of a bunch of other things that when we look at our software, we thought, well, you know, like, we can do better. We can do a more impressive stuff on mobile.
Please some time with academia on working on, like, projects that were related to kind of mobile hardware. So it wasn't exactly photo editing it, but we knew, like, back then the constraints of GPUs on the iPhones, etcetera. So frankly, in the beginning of the competitive advantage was this understanding that at this moment, we can deal something better than, you know, like, our competition.
And I think you did our, like, first product back in the day was able to basically create interactions that our people couldn't replicate. So it kind of bought us some time, right? But obviously, with the technology, it becomes commodity pretty fast. And things that are state to the art like 1 year, 2 years after their commodity. So, like, which time we needed to figure out how we are constantly maintaining this competitive advantage.
So one of the kind of early decision that we made is that we're gonna invest heavily in Again, like we saw in Adobe or, you know, like Microsoft Research where it's had some time, we just, like, realize that again, we're not a network we're never gonna be in a position where we can just rely on what we built already without keep innovating. The decision was, yeah, like, to build a big research team and think Morgan startup, it's like, we have a huge research team, right?
By now, it's almost like 4 g compute science masters and PhD is kind of mostly from Hebrew. You, they're kind of constantly trying to figure out what to do next. Right? It's like, giga, kind of, I can't see you, but I almost see kind of, you know, gear spinning in your head. Well, but that's, like, how big of the mode it is, etcetera. Like, again, that's true. Like, we, our age, we really need to constantly sharpen it.
It was understanding from the very beginning, right, that we constantly need to innovate, which is very unique. I think that, you know, the common thinking that we are all promoting is that you've gotta think about competitive advantage that is not just being better in technology because that's not fensible over time. But apparently, you guys manage because I know that there's nothing in the app store right now that is even close to what you guys are doing in terms of machine vision.
And so your basic still today, 2 years in and with millions of users, your main competitive advantage is being much better in the core tech of your product So, Lisa, like, we've time obviously started to see what other toolmakers did over time in order to have a competitive exam. Like this category of consumer subscription software, that's where we played the moment as a fairly new one.
So all the comparisons that can think about their true only to a degree, but we started to look at our competitors to see what we're doing. At some point, realize that product brand is a thing. It's funny, but, you know, we're coming from a computer science background, not exactly marketeers, not not exactly, you know, MBAs. And it was something that took us a while to realize, but you know what? Brand is a real thing. Right?
Like, once you're building a brand, you, like, can really measure the impact of the brand you build on, for example, your marketing costs. So, like, constantly kind of significantly go down. Keep proving your Morgan. So was almost kind of a strike of luck. Like, phase 2 was really a groundbreaking product in this category in the app Morgan, and it became a brand just frankly, mostly to the amount of usage it got. Right?
Like, I don't think we did a exciting job at, like, creating this brand, but once we saw the impact of having a brand, we started to think how we can do it to more products. Right? And finally, we go to the point where, like, next year, like, a big chunk of our market channel is gonna be kind of branded or We don't know if you'll kind of remember. We didn't even want to touch before, right? Because, like, the whole thing was performance marketing, like, really ROI driven, etcetera.
Quick time, we started to realize Morgan of brand. Right? So that's, like, I think a real mode, not without its challenges, obviously, but that's something and not always easy to build. I mean, you guys were also incredibly lucky in that some very famous creators picked up the product early on and basically gave you crazy free marketing by mentioning to everybody that they're using it because the product was so magical. That's true.
And now we're basically trying to rip applicate some of the things in the more principled way. Right? Like, a lot of the things that we're working on at the moment are, you know, really structured collaboration with opinion leading create. That's like also a big part of the road map for next year. We really see that these activities are working for us. And, you know, like, it brings me to influencer marketing, which is kind of one of these dirty topics of marketing.
Sometimes the thing because think, again, a lot of people tried that it didn't work. But for us, it's almost part of the core business, right? Like, we really need to attract, you know, opinion leaders in this field or kind of mass market creativity and to work with them. But, you know, that's part of what we're doing. Another interesting perspective is that when I think about what you're saying, basically, you're 5 founders, right? Yep. And you were all basically experts in machine vision.
So one of the founders was, Claire Phoenix screen cords of Israel back then, but most of us are. And so I wonder whether as a strategy, it's interesting to think that when you choose core technology, James remote, we gotta make sure that the founding team really know what they're doing in this field. Again, like, to meet circles back to if you don't have a competitive advantage, do not compete Right?
Like, if you want the tech to be your single mode or at least your core mode, you better know your tech. Completely. How do you think about your dependency on the main platforms. I mean, clearly there's some, you know, ex organic things, like if TikTok Pete shut down, then maybe there's gonna be less video creation because there's not gonna talked, but that's completely out of your control. But how do you think about API changes, about, you know, changing what you can or can't do?
Is this something that you guys are very busy with? To tell you the truth, yes, the platforms are still undergoing massive changes in terms of, like, their own evolution, like, kind of really nothing to do with us And the evolution is, like, driven sometimes by product needs, sometimes by, monetization pressure on the plus from side thumb, something's but regulatory changes in. We need to adopt pretty fast.
I guess, you know, like, one big, like, really, example that we have at the moment, that's, I guess, not only, like, cross industry problem is the privacy changes that Apple are implementing, right? Like, there's to be as part of the iOS 14. And now we're, like, a little bit postponed in how it affects the DFA and the way Facebook does tracking and how performance marketing is done. So all these things, they definitely affect us. And these are one of the challenges of our business.
Where built a layer on top of the, a vastly evolving platforms. And, you know, there are costs to that. Definitely. Been working well so far, so I don't think you can complain. I know you've added many more products, and I wonder whether in the new product that you've added, you've try to implement additional defensibilities on top of brand and core technology?
Are you trying in every new product to come out to also add attention network effects or other defensibilities that will make the new products even more defensible? Great question. To tell what you feel like, I mean, we're really trying to get outside of our comfort zone and constantly try to figure out what else we can do in order to, like, not only increasingly like definability, obviously, create a better user experience by somehow leveraging the fact that we have a diversified product.
Right? So I'll give you just a bunch of examples. So before you have a specific new product, first of all, it's like the question of bonding and unbound, right? Like there's like the families saying that there are only 2 business strategies funding and unbundling. So so far, we tried to really kind of diversify tackle different verticals of creativity to a mobile by different products. But now we're going to the point where you kind of start to try and bundle things.
Because both, like, from business perspective and from user perspective, the current situation doesn't make sense. I mentioned kind of light tricks user, kind of a creative person that is interested in more with one product at the moment maintaining 11 subscriptions. That just, like, seems too much, right? Like, just, like, really bad experience. You can't expect users to do that. But the problem is, of course, that the platforms like aren't evolved to support this thing just yet.
It's just like not a concept that exists on the abstract. So we kind of try to work around that with what we have. And I think we're kind of having some impressive work failed, but we weren't able to kind of tackle it just yet. And it's a big priority at the Like, we really want to avoid this, like, 11 subscription per user. That's, that sounds great. So that's, like, one thing of going out of the comfort zone of, things that we did for.
Another two examples gonna be on the kind of a label specific product. So we are trying to figure out that, you know, might laugh at Beller. Because it's, again, kind of, our baby step way of thinking, but we're trying to figure out if we can create some kind of network facts without actually building a social network, but actually leveraging existing network. Right? I'll give you an example. We have, like, this new product came out is called filter tune. It's an amazing photo editor.
It, like, introduces the concept of semantic photo editing where the software understands the semantic of the image and then you kind of work on different parts, etcetera. But the cool social concept there is that we saw a behavior of users of influencers on social media that are trying to kind of share their own filters, their own creation, They have, for example, an Instagram feed that is customized in a certain way, and they want their followers to adopt disappearance. Right?
And it's kind of good for both sides here, both for the influencer and the person who, you know, feels better or elevated because falling or whatever. So in this product, we're trying to create this concept there. It's like really easy to share your own filters. So it comes with a QR code So you can count when you export your filter, or you look on any photo, there's like a small QR code.
And then if you're folder opens the app with this, like, QR code, he can kind of copy your filter and then remix your fields or things like that. So that's kind of an attempt to create a network without a network. Yeah. Exactly. So it's a layer of network ish like activity on top of network, right, that's gonna capture a certain relationship Pete. And, again, I know that's, like, one of these crazy Beller, right, like, obviously, we have no idea if it's gonna work out.
It really depends how the users will like the interaction, how valuable is gonna be for them. But that's, again, that's kind of something out of our comfort zone of two makers. Another thing, like, another example of is our protocol Detrip that was actually was built with a t talk audience in mind, right?
Like, the whole idea there is that we are trying to take hard things out of video editing, especially when you're creating music videos like for most people working with a professional level software video editing timelines kind of really Like, you do all these cuts and then teach things together. It's like the video exactly on the beach of the music. It's like really hard. So we developed, like, this algorithm that analyzes a soundtrack and then the video editing is driving by the soundtrack.
Okay. So it's like a really cool concept. Obviously, kind of, targets, TikTok crowd. But on top of that, we actually want people to help follow TikTok trends more easily. So, like, on TikTok, sometimes when you're seeing, like, the Pete trending videos, they are actually were created by already, like, professional cruise. Right?
That's always kind of a problem with the mass market creativity that once it's become big enough, like, platform is big enough, it tracks a professional crowd and then the gap between, home creations and professional creation groups, right? And then again, it's like a really democratized James, but again, like, a really small number of user So we're gonna want to bridge that and we want to, like, really use AI in order to help our users to kind of follow this trend.
That's another kind of activity that tries to take us out our comfort zone. And on that, just a question that comes to my mind, are the apps built in a way that the more users use them, they're becoming Beller? So is there, like, a data or a tech network effect where the more images you're getting users to edit, the more you can make it better and automatic for the next users.
Well, you don't think I'll start with the first part, like, pollution of kind of usage and your level of productivity over time. Internally, that's one of kind of things where we're tracking Right? Like, you know, like, if you don't mind, there's, like, really important tangent here. So I want to mention that it's also gonna connect to modes and stuff. One of the things with platforms when they create their tools that they tend to create, like, the single click tools.
They want to, again, increase engagement. They, like, don't want to, you know, like, spend too much, etcetera. Like, from our perspective, we actually want to create interactions that require a degree of investment So you kind of become better with time. And sometimes, like, even for tools that potentially could be automatic, we prefer to exposed the degrees of freedom that gives the user like a certain extra.
We just see that people invested more than into tools, into the things that we're creating we're actually kind of constantly tracking these things. We constantly want to see that the user that spend more time inside the apps, they're both x sporting more assets and they're using more advanced tools. In our opinion, kind of, could be an additional mode Right?
Like when users are kind of using your more sophisticated tools with a more complex they're getting into habit of using tools, and that's in our opinion of something. We're definitely kind of trying to do that. Interesting. That's great. I think that you're thinking about it of adding new layers of defensibility on top of it. It's definitely what we always tell founders. Even if you're the beginning, you've got one type of defensibility.
You've gotta continuously think of how you can enhance it additional defensibilities to make your product even better and stronger. One other thing I really wanna ask you, and I know it's not gonna be a simple answer. How many products do you have out today? Well, by now, you know, it depends who you're asking. Let's say 11. Okay. I think that's other than hyper casual game company, I don't know any company of that size that has 11 active products.
And so managing a product pipeline or product roadmap, and this seems like crazily complex to me. How do you think about that? What is your thinking about adding a new product versus digging more into the existing product when do you think it's enough and you need to move on? How does that work? Kiki, but, like, I have a question for you now. Right? Like, couldn't you tell me, like, 5 years ago that gonna be really hard to manage 11 perks. I think I told you.
And, luckily, you didn't listen to me, and you did what you did. Why where you are today. So that's great. But it is very complex. Right? It is something that huge companies with years and years of product buildings struggle with. And here you are with you know, 450 people, you know, not little, but no thousands needing to manage 11 products with 11 different roadmaps with delivering different, you know, teams coming up with ideas. That's a pretty crazy task. It is a crazy task.
Like, we kind of realized that for a while. We kind of constantly try to shift the kind of structure of the company from being a pretty flat company where, like, a product manager is basically like CEO of a small startup inside the company then, like, to the division level. And now, like, after, you know, like, you free this year, release, like, for new products, we just start to see that it's a great extremely hard. Right?
We underestimated how hard it's constantly push forward 11 products with, again, like, the life shelf of our products is supposed to be, I don't know, like, a decade or Morgan, right? We released phase 2 and 8 years ago, and it's still our top performing products. So really aiming long term here, I guess unlike many hyper casual gaming companies. So Morgan, you know, like, it started with the fact when we released phase 2 and it was very successful.
But a lot of people told us, well, you know, you're, like, one big Flint. Right? So we had, like, this one time hit, great for you, but it's not gonna move anywhere beyond that. So we kind of constantly wanted to prove that we are kind of a diversified company that it's not only fake soon. And once they kind of started to realize that the way we build a brand with phase 2.
And other company might do it on other verticals of creativity, and then it's gonna be extremely hard to, you know, like talk to them. Like, a brand is actually a thing. And by now, by the way, we do have a competitors that created, you know, some great things. And now, like, we're playing a catch up game there. It's gonna be Right? So that's like where the push for diversification came from. We're like in the small, yeah, like Morgan products.
Let's tackle more and more verticals And now we got to the point where just, like, realized that we need to post. We already have diversity portfolio, and we need to figure out how to structure our self organization, maybe, in order to tackle this challenge. That's, like, really an understanding the donors, kind of at some Flint, the year and, like, really switch gear to different kinds of activities and we structure a company in a different way to tackle it, right?
So every division is gonna be really structured as a company inside the company. You know, like, meaning with a strong management team, so a division manager is indeed going to be like CEO, but he's gonna have his own DP product and VP engineering, creative director, etcetera, etcetera. And so we're, like, at the moment in the position where we need to hire a ton of senior people just to kind of structure the company in the appropriate way. Right? I don't know.
Like, you have a team that are service providers inside the company and, like, a research team, tech transfer team, purchase experience James, and now you need to figure out, like, the communication patterns because, obviously, each one of the product internally feels like the most important product. Right? Like, so how you're, like, constantly doing this prioritization between the product teams and the service providers. So there are like a ton of challenges.
And, you know, like, to tell you the truth, I don't think, like, so far, we're doing a great job to tackle that. That's like, we don't going process. We're, you know, trying to bring students, people outside working with consultants that really saw multi product companies that can't advise us there. So it's a really ongoing process.
And in games companies, usually, when you have many products, one of the indications that you're doing your process as fast and as hard as you need is that you end up killing products every once in a while. Did you guys Beller kill a product? No. But we intend to obviously have kind of a hard question and a hard thing because Beller product we release, we try to be, like, really state of the art and it requires Morgan, like, enormous amount of blood within tears from product teams working on it.
By now, yeah, we start kind of to realize that, okay, you get the product out or should be a definite kind of grace period for a product to materialize it's for roadmap and show how great it can be. But beyond a certain point, if you're not reaching a certain goals, And that's something that we're measuring, like, raw, softer, like, a month a year 2 years for not reaching these goals and, you know, like, you should go to a maintenance mode.
That's really like a game company, and that's probably the way to think about it. Let's go back to the beginning for a second. So when Facebook came out, How did you know that you have a product market fit? And, I mean, how did you measure it? How did it feel? Did it immediately strike, or was it at the beginning, not so, and then something changed. How was the beginning?
We had a lot of lag, but one thing that goes on for us back then, I think we were, like, pretty harnessed with a measuring user response to our product. Right? Like, so when we started the company, we have no idea what's our first product is gonna Right?
We have this idea about the space in general, but the way we started to think about the first product is that we started to build a bunch of small prototype like, really kind of cool computer graphics, computer vision, like image processing things. And we let's use it for our friends basically to play with it. And, we just saw their response to, like, these small prototypes. At some point, we implemented this tool that I don't know, like, exist in Photoshop for 25 years. It's called liquefied.
This tool allows you to change the contrast of the image by dragging a mouse or like in our prototype. It was by, moving your finger on the screen. And we just saw a reaction of the person that saw that he can change the, I don't know, like shape of the nose by dragging, I think you're on the image. It's like what was off the charts, right? So so that was like this immediate. And, again, like, we did a lot of prototypes, and we saw this was just a different Beller of reaction.
So that's where we get like this initial hunch. Well, you know what? Maybe if we take kind of retouching capabilities out of the photoshop, and make them, like, really easy to use. Maybe there is something there. Right? That was initial hunch, and we started by implementing a bunch of our kind of, you know, like, small prototypes. They can keep them play with it. And, like, currently, reaction was all the charts. It was, like, way before we even released that as an app. Right?
It was, like, in the qualotyping stage when we learn how to use iOS, etcetera. And we constantly constantly reached out to users for feedback because, like, early on, we realized that things that are fun for us as, researchers coming from academia aren't gonna be fun things for our users. Even with this liquefied tool, the crazy thing about it is that we didn't think that it's, like, super interesting. Right? It was like a state of the art thing.
It was just, you know, kind of implementation of existing idea in your new plot form, we're trying to try kind of way more sophisticated algorithms, our other prototypes. But, like, I think the thing that worked really well is just being honest with how you measure the reaction of the users. If someone, like, really likes something, you're gonna notice.
Because I think that, you know, what we tell founders often and people don't always get it is that if you're not sure, you have product market Flint, then you probably don't because when you do, you really feel it. And I think that's what happened. Right? You put this new feature out and that really changed everything. Yeah. Like, even before the Pete store, the reaction was of the charts.
We compared to reaction to our other prototypes that tried maybe to implement better existing activity things that already existed like filters, etcetera. And people were like, okay. Fine. It was off the charts. And, again, like, before you release, you obviously don't know exactly how it's gonna look like, but for us, you know, like, since the initial relationship phase 1, it was crazy. It was just they couldn't believe how it constantly was, kind of, above our expectations. That's great.
And do you have now, like, a framework with 11 apps? Do you have an internal framework of how to measure product Morgan fit that you run on each one of these apps, have you basically turned into methodology of verifying that the app has product markets fit before you it pushing it? That's a great question, right? Like, I think at the end of the day, if you think about kind of our activities, you can broadly divide them into, exploration activities and exploitation activities.
And that's like with the new features and with the new apps. Most of the activities that, like, once you already have a a sizable business. They're like exploitation activities. You really need to take things that are working for you for competitors and, you know, make them there are, like, exploration activities. There's, like, completely new things. And we're constantly trying to say, well, roughly 80% of the time is exploitation of existing things.
20 percent of the time, it's like exploration of the new concept. So when we're thinking about, again, new apps, new features, but first of all, you're looking at things that are working already, like, for you, for competitors, and you're trying to figure out how just, you know, to make them better. Like, it sounds maybe a bit more boring than, you know, like, the crazy exploration, new kind of ways of doing things activities. I think by now it should be a big part of your piece.
We already have something to defend. So, you know, like, that's like, you just need to figure out how to make certain things better. That is so true. We call it going after places where you've got guaranteed demand, and you only need to create a new type of supply of something and new capability and new something. But the demand, the need for editing. The need for things is proven already. That makes life much easier. Exactly.
So, like, 80% of the James is that we know what already is working on mobile. We know what users like, again, in our tools and competitors. That said, you know, like, we're still in the market that grows really fast and sometimes competition surprises, like really coming up with a cool new products that we didn't think about. We also obviously tried surprise the competition, right?
Like, if you look at the two products that they match the new ones, like filter tune and feature, they're, like, really trying to do new And we don't know how well it's gonna work, but, like, we have to do the things. And then the process around exploration, exploitation is different. When you're doing exploitation, you Beller to come up with some numbers, some data points from our products, from existing competition, etcetera. Tara, and you should come with a lot of data.
When you're doing exploration, to tell you the truth, it works around kind of products street cred that people have around the company. Right? Like, if you kind of created a cool things in the past that users are really like if you have, like, a proven intuition around these things, getting kind of, you know, like street cred to try kind of bigger and bigger things and sometimes new products.
Again, like, obviously, these exploratory ideas need to generate a lot of excitement in turn, right, in order to, like, really be pushed as a new product. Once these things are out, and, yeah, you also start to measure them with the same set of measurements where I guess retention is always the most important parameter revenue is a begging indicator, but, you know, retention usage is in the end of the day what drives our business.
So if I'm an early stage founder now, looking for a product market fit and trying to measure it. Do you have any kind of insights on how to think about it? I know it's pretty generic, but being that you've already done it eleven James. It really depends on the stage. If it's a kind of a first product, and the company is like either before funding, we just secure an initial round of finding I would say, like, be as honest with yourself as you can.
And they always say when you're, like, writing something, you better get an editor. Doesn't matter how good of the writer you are. The same thing with business ideas with software, you need constantly like external validation, even in the prototype Pete, right, because something that looks cool to you might not look cool to our people.
So again, like, constantly kind of honesty, constantly Pete an external feedback kind of really cherish it and realize that you can lie to yourself, but at the end of the day, the market is gonna be a hard judge. Completely. And using data is so critical. I wanna talk about the product themselves, and products have a very interesting mix, I think, of utility and fun. Right.
I mean, the products are really fun because they do kind of very magical things on images that you don't think are possible as a user. On the other hand, you know, they're really geared to bring sick utility. How do you think about balancing them? And is the balance different when you target consumer versus people that have creative aspirations versus SMBs, or do you keep the same balance between utility and magic fund? I think it's kind of intuitive realization balances of the city Right?
Like, once you're targeting, like, really consumers that look at the app as kind of, you know, fun activity or immediately competing on their time with other fun activities, you know, like gaming or with excellent workload, etcetera. So you need to create, like, this magical moments, like, this wow moment.
And the interesting thing is that sometimes like these wild moments or magical experience, they aren't like the core of the product, meaning that most of the time the users will spend elsewhere, but you still kind of need these magical things to kind of rule them in to show them you'll really care about them that there's the kind of special place to be at. And it's obviously like really different for, you know, like small businesses. Obviously, the best example, right?
These kind of guys, they don't care about creativity per se. They're not coming for, you know, like, magical moments. They're coming to achieve, like, really clear goals, right? They want to promote their They want to see our why. So you better, you know, show them something that does it really fast. Right? So there, you're kind of hear a little bit less about that. You care more about understanding who the user is from what domain he's customizing his experience according to his domain.
So, yeah, it's like really different products and capabilities. And, like, frankly, like, different people who might be great for one set of products has lesser intuitions for others. Yeah. Which is always difficult because you're basically having 3 types of customers in the same company. Yep. So making things even more complicated. So let's talk for a second about pricing.
I think that what many people may not know because right now the products are all subscription based is that you were initially a paper download company and you basically shifted in a very brave move, I think, from a model that everybody knew before, which is a utility is something that you pay Morgan, and then you continue using it for life. Into a subscription model. How did you think about it? How was the change? How did customers receive it?
So we got to a $10,000,000 in annual revenues and that when we did their first round. And Danny calling from Viola was our first investor. And, okay, we did their own and immediately realize that there is no way that we're gonna get to a $100,000,000 with the same business model that the map just didn't work out, right? Like, We just part of the paid model was built on the fact that our performance marketing worked with burst campaigns where we were able to get the credit high in the paid rents.
And that created a lot of kind of organic impressions for people just growing the up store we start, like, if you did the math and realized that even if constantly we have top 10 of the paid apps in the United States are all metrics products. All year around. It's still not gonna be a $100,000,000. So something just really doesn't add up. And we started to obviously look at different Morgan. I don't know, like, paper use and freemium models, etcetera.
And we kind of, like, immediately realized that, first of all, we didn't have any competitors who were able to Like, so no one had kind of significant revenues back then. And our attempts with freemium, like, we just didn't see how the model that worked great for games is gonna be applicable for creative tools. So we just decided that, you know, like, we're gonna bet on some in existing future.
And we're do we're gonna try do our best in order to, you know, convince the platforms to make it happen. It obviously was like really crazy bad when you look at it on the retrospect, but frankly, we didn't have any Right? Like, the old business model didn't work, the new one didn't exist yet. You know, we kind of hope that it will materialize at some Flint, and thank God it happened. And was it the painful switch were customers upset?
I mean, you clearly grandfather the old customers, but were there any kinda pushback from the community? Gigga, like, the crazy thing here is that, you know, what, like, Pete, maybe one's kind of interesting lessons for founders of starter companies is that we completely overestimated the backlash. The way we kind of started to think about that is, like, we looked at Adobe. We did basically like a real retail package soft square for, I don't know, like, decades.
And then around, like, 2011, 2012, they started to switch to subscription. Yeah. There was, like, a backlash of Adobe use. You could clearly see it on social network, etcetera. And Adobe were actually prepared to earn less, right, like in the beginning of the transition to description. And we kind of thought, well, you know what? It may be like a year or 2 until people realize that it's like, if They want us to constantly keep working and creating a great software.
We need to get something out of it. The process was kind of way fast. Like unbelievably faster. Like, I think after a couple of months, it just was a norm and everything forgot that it didn't exist for. And the another thing is that we were, like, so anxious that the users will not see value in the subscription that we, like, really built an overkill features in our first app.
Like, we also, like, created, like, all kind of weird things where you can subscribe to the tools, but you also could within the purchases to buy each one of the separately. And we want you to be able to try the tools like demo of the tools before, like, really, we built a ton of stuff, but frankly, it was an because in the end of the day, it looks like if you're creating, you know, something that gives value to the users, they're just, like, willing to pay.
Yep. And you guys must have the wealth of, pricing data in your minds. How do you think about pricing? How do you know, if a founder is thinking now about how to set the product pricing Could you give a few guidelines as to what your way of thinking with a new product, how to price it?
So I think, again, like, our initial Pete of assumption was completely wrong, luckily for us, So, like, the thinking started, I mean, like, this transition to subscription is that we constantly should be an order of magnitude cheaper than the cheapest pricing by Adobe. Okay. So I don't know. We thought that we're gonna, like, I don't know, they're, like, charging back then we're charging for photoshop and lightroom, maybe like 10 bucks a month.
We thought that's gonna be a pricing for a year for us. Okay. Something like that. And even that kind of seemed high for us, And kind of lucky Morgan, we were, like, super dogmatic. And, by the way, our CMO constantly told us that we're mistaken. He told us, listen. Like, you're using incorrect anchor when you're thinking about our users. Like, right? Like, they're not familiar with Adobe products. I don't care about them.
They use, like, their phones and some of the phase 2 users and the thinking about applying, like, retouching. They think more about, like, makeup and how much cost in the real world, not about Adobe products. I like it for us. He was right. Like, so we were mistaking about, like, the end for pricing that our users are using. And we're, like, really mistaken, but our willingness to pay. The cool thing is that we always try to approach pricing from a kind of empirical standpoint.
Just, you know, like, offer a different pricing to different audiences of users and kind of track the parameters over time. And it became, like, really clear for us that the price was too low by a factor of almost 4. Pete. And, you know, at the moment, we're still thinking a lot about pricing right now, but we kind of bundle things. Like, some of the product managers are saying, well, you know what? Like, let's not care about at all.
Let's just have, like, a single product price for all the products and just make sure that the user are starting to use all the products inside the echo because that's like what's important for us in the next year or 2, right? If not, monetization, just yet. Okay. I obviously want, you know, like, to immediately start with the pretty high price point for the bundle because it's a unique value proposition because you're, like, without a friction can move across the apps on the same project.
So again, those are, like, a lot of kind of different thoughts. And I think from my perspective, if you can validate your assumptions with the experiments. That's the way to go. It's obviously not all this possible in every domain. But again, if it's like one of the cool things working with consumers that, you know, you Pete on the time of users so you can run a lot of tests and figure these things incorrectly. I hear testing I hear not being afraid to charge what you really should charge.
And Morgan. Like, really, like, if you're creating something great that gives value for the users, like, that's almost like a reality problem that we had. Right? Like, woah. Like, who's gonna pay, etcetera. You don't have to create any people with me. So I wanna touch for a second on SMBs because this has been quite a shift. You guys started with social power users. Then you moved to creative people that wanted better tools for creation. And now you're betting a lot on SMBs.
And I kinda wonder what you're seeing in the landscape of SMB marketing that makes it so interesting for you to bet on. So I think historically SMBs was kind of underserved market. The price points can chart from SMBs. And, again, like, in our case, we're talking about, like, really kind of nano SMBs. Right? Like, some of the restaurant owners freelancers. Freelancers. Exactly.
Like, they are obviously willing to pay more than the consumers, but less than, you know, like, business enterprise is significantly less. So a campaign not for you to justify Salesforce for your software, right? On the other hand, it's kind of hard to reach these users using kind of regular consumer marketing. Right? So feeling you created like this situation there is pretty big Morgan.
Like, from our talks with Facebook, they claim that I don't know if there are more than 100,000,000 James on top of their platforms that can be attributed to small businesses. It's a big market, but still underserved, right? Like, if you think about restaurant owners or moms and pops, so most of them are using smart that's, like, part of the reality of their life. Many of them aren't reaching to marketing agency just Pete.
And sometimes the rates of the agencies as way kind of beyond the reach of the businesses. So we're trying to figure out, like, how we can create self serving tools that can not only address the problem of content creation, but also the problem of, you know, like social media planning and then, like, are why positive, promotion of your content on top of social networks. Right? Again, it Pete not an easy problem, right? Because I think actually, like, content creation is the easy part.
Here. Like, okay, we know how to do it. So we created a tool that allows you to create video ads and posts, etcetera. But now, how you're taking our expertise and performance marketing and kind of package in a way that's gonna Pete into small businesses. Like, there is a real challenge there. And so you're basically in the SMB products. You're gonna go more to the execution.
The actual use of the content is being created rather than just allow the creation of the content, then let them post it on other places the way you let consumers or creators do. Exactly. Like, when you think about it is that in terms of content for SMBs, there are already, like, really strong established players. And if we want to be, like, a really significant player in this market, we want to be the this one stop shop for always in business. Right? So it's not about content creation anymore.
It's like disclosing the cycle between Now I'm a restaurant owner. I realize that I need to promote myself on top of Facebook. How do I do? Right? Like, how do I create a brand? How do I create a social media plan? What kind of content I need to create? What kind of copyright I need to create? How I need to promote it after there's like a really bunch of different problems.
Maybe they're like really cool problems, right, even like this creating copyright things, even on top of templates, it's like really challenging research level things. It's kind of pretty cool. But, yeah, it's like a big problem to try to tackle a big product with a lot of different verticals inside of the product but it's cool. You know, there are many consumer product founders that come with SMB based ideas.
So setting to SMBs, and they're saying, selling to SMBs is the same like selling to consumers. What would you tell these people and what would you say is the main mental shift you need to do when you move from selling to consumers to selling to SMBs. I think, we were also in the camp of this. Right? Like, definitely. On the Facebook, I can reach, to everyone, be it a small business Morgan consumer, but what do we realize that there are nuances and frankly, we're kind of still learning them.
It starts even if you're using, like, Facebook to reach us in B's, and that's definitely a possible way to do that. You need to figure out, like, a different set of creatives, right? Like, you have a marketing people who are a great consumer, not necessarily immediately translate to kind of small businesses. It's obviously like a really different set of influencer. You know, how to work with consumer influence as Beller. Like, who are the business influencers? Yeah. Exactly.
Like, we're talking about, like, small businesses. So who is exactly is gonna be, like, the Ethereum for restaurant owners. And, again, like, the influencers can be, like, really different across geos, right, like, because the market is obviously kinda way more fragmented. So, like, frankly, we're still in the process of learning this Morgan. You know, be happy if you host me in the year, maybe we have something more smart. So that's question a bit more, on the funny side.
There is, urban legend that being that you guys wear 5 founders, none of you very much of an expert in his field, you were not a CEO, people were not necessarily experts in marketing or in being a CFO, you basically kinda had a interesting discussion on founder is gonna take control. Is this true? It is true. And how did that work? How did you end up being the CEO? Yeah. And so, like, you know, by now, it's, like, you're really overwhelmed with different flavors of this story.
Some people claim that the fact that they, you know, train the world in Brazil and Jiujitsu has something to do with it. I was the only one to complete the PhD. It has something to do with it, but when Pete ask me that they kind of deflect the questions back to my cofounder. So So what I think is amazing is that, you know, you were just 5 great founders and with no experience, each one of you took a role and you ended up doing them really well by learning and moving fast and listening to people.
You were one of the most listening team that I've seen and learning very fast. So that's also great. Ziv, I wanna really, really thank you for your time. You've been incredibly generous with us, and I think there's tons of very interesting and important inputs for founders. Thank you so much for your time. And, you know, you put it out. We're gonna host you in your time to hear more about the evolution of the product and the company. That's great. Thank you very much for having me.
Thanks, Eve. You've been listening to the NFX podcast. You can rate and review this on Apple Podcasts, and you can subscribe to the NFX podcast on Apple Podcasts, Spotify, Google Podcasts, or wherever you get your favorite podcast. For more information on building iconic technology companies, visitnfx.com.