Lex Friedman worked at a series of successful startups. He co-founded The Daily Plate, which was acquired by Demand Media in 2008. Three months after selling his first podcast ad, he represented 50 shows. Now, he heads up podcast ad sales for Midroll, which was acquired by Scripps in July 2015.
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Worst Entrepreneur Moment
- Sunk cost fallacy is something that often SINKS Entrepreneurs. Not you, Fire Nation! Listen to Lex’s lesson learned!
Entrepreneur AH-HA Moment
- Lex was scratching HIS OWN itch when he realized a business had been born!
Small Business Resource
- Slack: Brings all your communication together in one place. It’s real-time messaging, archiving and search for modern teams.
Best Business Book
- Dave Barry Does Japan by Dave Barry
- Lex’s email
- Midroll: The leading podcast advertising network, connecting companies and brands with some of the most beloved and respected names in podcasting.
Lex Friedman: I sure am, John.
Interviewer: Yes. Lex worked at a series of successful startups. He cofoundedThe Daily Plate which was acquired by Demand Media back in 2008. Three months after selling his first podcast ad, he represented 50, 5-0 shows fire nation and now he heads up podcasts ad sells for Miderol which was acquired by Scripts in July 2015. Lex, take a minute, fill in some gaps from that intro and give us a little glimpse in your personal life.
Lex Friedman: I worked for a series of internet companies fresh out of college. I was at MySpace when MySpace was a thing. After that was when I did The Daily Plate and then when we were acquired by Demand Media, I worked with The Daily Plate. I worked at Demand on The Daily Plate for years and eventually I decided I had done enough successful internet companies that I was ready to take a break. So for a couple years, I worked full time as a writer for a publication called Mac World and it was then that I started dabbling in podcasting and that’s when that podcast ad sales thing happened and here I am. So I’ve had a couple different jobs. They’ve always surprised me, but I’ve had fun doing them.
Interviewer: Well, I can say I’m really glad that you have progressed in the manner that you have because we were talking about Jeff Oreca in the pre-interview chat that we had and it was really April 2013, six months after I launched EO Fire when I got from Jeff and we had a conversation that I said you know what? This is maybe something that I’m going to be able to do for not just another couple months, but maybe another couple years and here we are almost three years later. Millions of dollars of ad sales just between my company and your company have taken place. So good stuff.
Lex Friedman: Yeah, it’s been very exciting and I always – when people ask me about my career, I always say that I’ve been fortunate that I’ve been in the right place at the right time and I’ve made good decisions to take the jumps when it makes sense to.
Interviewer: Yeah and it was really cool for me to have met you in person actually at Podcast Movement 2015 and to get to see you speak from stage. I mean you just really feel comfortable in the space and you really seem like this is an area that you’re going to be sticking around in. So it’s good for people like me who rely on people like you and the great work that you do. So thank you for that, but to kind of break it down, Lex, we’re going to get into your journey as an entrepreneur and that’s super cool that the journey you’ve been on, the path, the MySpaces of the world, but right now today let’s talk present times. How do you, Lex, generate revenue as an entrepreneur, as a business person?
Lex Friedman: It’s ad sales. I sell ads for podcasts. So Miderol sells ads and we keep a percentage of all the gross ad dollars as our commission and that’s our primary revenue generation right now.
Interviewer: Can you kind of talk just for a second about podcasting? I mean why is this an area that you as a guy that could do so many things and has really just endless amounts of opportunities, why is this something that you’re saying you know what? This is where I’m going to currently roll the die. This is where I’m going to focus my energy and bandwidth. What fires you up about podcasting?
Lex Friedman: Well, I’ll tell you. There’s a lot of it that I like and I was a podcast fan and a podcaster myself before I ever got into selling the ads and what I love about what we do now is because of what my team does and what I do here, the shows exist, right? If you couldn’t support this show with the ad sales, you’d be less inclined to do entrepreneur on fire. If you were – and this is true for all the big podcasters, for Comedy Bang Bang, for WTF with Mark Maren, all these shows.
They’re doing them because they can make a living at it and so I’m one, happy to be empowering these talented people to create their shows, but then two, there’s an audience on the other side. The audience wouldn’t get to experience and enjoy these shows, benefit from them in whatever ways they do if they didn’t exist. So for me, it ends up being a win win and then a third win, too, because it’s good for the podcaster, it’s great for the audience because they get to hear the show, and then it’s great for the advertisers, too, because they’re very happy with the results they see from the ads they’re placing on shows. So what makes it so appealing to me is there’s no loser in the relationship. Everybody’s coming out ahead.
Interviewer: There’s a lot of people that jump around the topic of generating revenue, especially more of the artist types. They’re just like I just want to speak or to paint or do this or do that, but the reality is, and this is what I really stress with fire nation, is you are obligated to generate revenue from what you’re doing so you can continue to do that because we all have bills to pay, responsibilities. We all need to make sure that our runway is stretched out and it doesn’t end tomorrow because that’s why most businesses fail, especially for entrepreneurs.
We run out of time. So all of that, fire nation, I hope you’re absorbing and taking in and Lex I kind of turn and shift this conversation to you and specifically your journey as an entrepreneur. You gave us a little glimpse of a couple things you have going on, but I want you to take us to one moment and that moment being your worst entrepreneurial moment that you’ve had to date and Lex really tell us that story.
Lex Friedman: I mentioned earlier, I’ve done a lot of different things and worked on a couple different kinds of companies. When I was at Mac World writing full time, I had started the podcast that I was doing then, but hadn’t yet explored the podcast ad world. A buddy of mine decided we would launch an app together. This was in the early hay day of iPhone apps and iPad apps being really successful things and we were especially buoyed and inspired by the success of an app called Draw Something.
Now if you don’t remember Draw Something, then I’ll show you the foreboding nature of this story, but Draw Something was a game that was acquired Zinga, the company that makes Words with Friend for billions of dollars and it was basically a Pictionary style game where you draw a picture. Asynchronously your friend would have to guess what you had drawn and I liked the game. I really liked the fact that they got bought by Zinga for so much money and a buddy and I decided we were going to make an app called let’s sing and it was going to be kind of name that tune-esque.
You would be presented with a song. You had to hum it or whistle it, just do anything without using the lyrics and your sound bite would be sent to your friend who would play it back and guess what you had sung and I’ll tell you the truth, John. The game was fun. We got at our peek, thousands of people would play each day and they would have a really good time. The problem was we peeked at thousands of people playing each day. It was never tens of thousands or hundreds of thousands which is what you really need for a network effect style game to be successful and the problems became obvious pretty early on.
One, it was a game you could not play at work. You couldn’t play it on the bus. Any game that you can play quietly on your phone, you can do while you’re commuting. You can do it under the table at meetings, but a game where you have to sing into your phone or listen to somebody else singing is a lot harder to play in a public space.
Interviewer: Well, what that brings to mind is that commercial where that guy is on the phone in the subway saying what is your password? He’s like blue banana. Everybody’s like what is this guy talking about.
Lex Friedman: Yeah and so we started realizing that where we were in terms of numbers of players we had, it was a game that you could get a free version with ads or a paid version without them, but we ended up seeing that our costs just in terms of bandwidth to serve all those sound files back and forth to people as they were sending their songs to each other were exceeding our revenue pretty quickly and so we tried to hold out for a while and see if we could get it turned around because we weren’t losing – we were losing a couple hundred dollars a month.
It wasn’t anything monstrous and I would tell you I would do it again. I’ve worked for like I said a variety of successful internet companies. I sold two companies where I was a founder, but – and I made a bunch of mistakes doing all of those things, but with this story, I was disappointed with how it turned out and we probably waited too long to pull the plug, but even though the app we made was a failure, I’m still – I’m glad we did it because it’s great for me to be able to say that I have the experience of having built the app and the reality is that the app store model right now is very akin to a lottery in terms of who’s going to get successful there because there are so many.
And it’s so hard to break through and I think it was a good experience for me to have firsthand kind of realizing that you can have a good, a fun, a playable, successful app and a successful app in the sense that it works and is functional. That still doesn’t turn into a financial or business success.
Interviewer: So take us to the moment that you decided that this is not going to be something we’re going to continue, kind of walk us through that just a little bit with your mindset because I think of entrepreneurs, Lex, struggle with actually giving up and actually just saying hey, I want to spend my time and energy elsewhere. How did you manage to take that step forward?
Lex Friedman: For a couple months, we were very comfortable looking each month and saying here’s what we’re paying to make this app run and here’s what we’re bringing in and we’re bringing in way less than we’re paying and at the end of month one, we said well, we could keep doing this loss run right here for another three months and see what happens. So four months into it, we’ve got a very core base of users. We’re not seeing a ton of new users come in each week or each day.
We’re in a single digit user gain and the same kind of number of people playing each day and the losses weren’t getting any better. We were still going to lose a couple hundred bucks each month. It was after four months, we – every month we would check in and say let’s keep using that four month deadline, four month deadline. After four months we said, you know what? We’re not ready yet. Let’s wait two more. It feels like six months are a thing and my cofounder and I agreed. It was just the two of us. That was it.
At six months, that was going to be our do or die date and when nothing changed over the next two months, we said okay, a half year feels like a fair shake for an app waiting for some kind of magical breakthrough to happen where suddenly more people will discover this app isn’t going to happen, isn’t the same business strategy, and we love the game. I still love playing the game and if it still worked, I would play it now. It’s still on my phone. It just doesn’t work anymore, but I – all those flaws that I mentioned earlier where you couldn’t play it in the public spot, you couldn’t be the blue banana guy on the subway, we got it and we knew that going in.
We were kind of aware, hey, this could be a limitation, but oh, it’s so darn fun it’ll be worth it anyway. So again, I’m glad we did it and learned a ton while doing it, but it was at that six month mark when we saw that the trend had not bucked in any way that we said that it’s time to pull the plug.
Interviewer: Fire nation, that’s one thing I want to mention real quick with what Lex is getting into here and that’s the sunk cost fallacy that so many entrepreneurs get caught up and they say, hey, I put six month of my life into this. I’ve got to keep doing this otherwise it’s just a completely wasted six months and as Lex has said a number of times, it is not a waste of six months. It’s not a waste of any amount of time if you’re gaining experience.
So don’t let time in the past fully affect your future. Look at it. Say, hey, do I need to adjust? Do I need to pivot or do I need to just change the direction that I’m going in? Don’t let the past always be the dictator of your future. Now Lex, let’s shift a little bit and you’ve had a lot of what I would call epiphanies, ah-ha moments. I mean we’ve gone through a little bit of your journey in the past and leading up to where you’re at right now. What ah-ha have you had that you think would make a good story to share with fire nation today?
Lex Friedman: Sure. I mean it’s the one that ended up with my being here in this role now. So you and I mentioned a couple times. I was at Mac World and a friend said hey, do you want to cohost a podcast with me? And I said sure and he and I started doing the podcast and for our very first episode we were on a now no longer existent podcast network. They sent us over some ad copy and I said why did they send us this? And my cohost said well, because they’re going to – we’re going to make money from the show doing ads.
I was like oh, I didn’t know that. I thought we were just doing the show for fun and exposure, whatever else. So this was – I understood that podcast ads exist, but I just didn’t think that I qualified and after a couple weeks of those, then suddenly there was no ad and any podcaster who I represent can tell you when you’ve gone from having ads to suddenly there’s a day where there’s not an ad, you’re like hey, this is way less interesting now. It’s a lot more fun to have ads.
So I reached out to the network and I said hey, if you don’t mind, I’d love to try to sell ads for this show myself and they said, we certainly don’t mind. Go for it. Now, I had absolutely no ad sales experience at the time and I started just by reaching out actually to app developers on the app store who had successful ads and I was looking at the iTunes charts. iTunes has three charts, the top free apps, the top paid apps and the top grossing apps because some apps might be free, but have in app purchases or whatever else.
So there’s not necessarily the same as the top paid apps and I started going to the top grossing apps and I was saying hey, you guys are doing really well. Why don’t you advertise on my podcast that a lot of Apple nerds listen to and we can help you promote your app, and as you kind of mentioned at the onset in introducing me, I started selling ads for my show and was successful. A friend on the same network said well, if you’re going to sell ads for your show, could you sell ads for my show, too?
And then the network said, well, if you’re going to sell ads for both of those shows, why don’t you sell all 12 of our shows and then a few friends from outside the network said, well, if you’re going to sell those shows, you should sell our shows, too, and then non-friends, just entities that had podcasts that I had no direct connection to emailed in through my website’s form and said, hey, if you’re going to sell ads for all those shows, will you sell ours too?
And three months after I sold my first podcast ad, I was representing 50 shows and as that was going along and Miderol at the time which I was not a part of because I was independent was growing at a very similar aggressive pace. I was just looking around and realizing there aren’t too many people doing what I’m doing right now. I have a full time job writing for Mac World. I’m only selling these ads nights and weekends. I can never call any advertisers because I’m working during those hours. I’m only doing this via email. I either have to stop doing this altogether or do it full time, and that for me was the ah-ha moment of this is really turning into a business.
I had done $500,000 in ad revenue for those 50 shows by that time and I was realizing this is a business and I either have to take the plunge and say I’m going to go do this only and quit my stable day job or I’m going to stop doing it and it turned out that I lucked out and found a third option where Jeff Orlick reached out to me around the same time I reached out to him and we ended up – it was kind of like a [inaudible] [00:13:33] hire where I merged my business into his and started doing that full time. So I got to keep a steady paycheck and benefits and all the things that had been – the fear that had been holding me back a little bit from saying I’m just going to go strict indie and I also got to work with much larger shows that I had been partnered with, including yours.
Interviewer: So fire nation, there’s a lot of things that I want you to be taking away from Lex’s ah-ha moment here. I mean number one is the reality that he’s kept his ears open. He kept his eyes open. He was doing the thing and he was seeing opportunities that were just coming before him. I mean I just recently was on a walk listening to Derik Seavers, one of his most recent books that he has. He talks about the birth of [inaudible]. He just wanted to sell his CD on his site.
Then all his friends started asking him, you know I mean Lex just wanted to sell podcast ads for his podcast and then all his friends started pinging him. So what is that thing that you’re doing or that you could be doing that you’re just having people reach out and say hey, can you do that for me and it’s just opportunities everywhere. So that’s a huge takeaway for me, Lex, is that you just spotted the opportunity from what you were already doing, said hey, I’m going to double down. I’m going to leverage this opportunity and see where it takes me. What do you want to make sure fire nation gets from that story?
Lex Friedman: It’s funny. I was thinking about it because I’ve listened to many, many episodes of your show and for me the biggest takeaway is I found that I was enjoying what I was doing. Part of what I was enjoying was I have no idea and I would – I mean I wouldn’t say it as much now, but I still feel like I have no idea why I’m good at selling ads for podcasts. I happen to be very good at it, but I wasn’t trained in it. I didn’t go to school for it. I had no other sales experience of any kind, but I enjoyed it.
It felt like – a bit like playing a game, but instead of winning points you would win real money for these podcasters and then a little bit for me, too, when I was selling these ads independent and like we talked about, when I would win by getting these advertisers to say yes and place their ads on these shows, the advertisers ended up happy. The host ended up happy.
The listeners ended up happy because they were hearing about cool stuff and because the shows kept going and realizing that I was having so much fun doing it was what made me realize that it was something that I could do full time and obviously I mean I think it’s kind of very much everyone’s dream in the working world to be able to say I’d love to have a job that I love doing each day and sometimes that’s harder to attain than others, but when I realized how much fun I was having while doing it, that’s when I knew I wanted to try to go – make a go of going it full time.
Interviewer: And I can vouch fire nation is good at what he does. I mean I don’t know the exact number, but the reality for 2015, we’re actually over 100 percent for fully of inventory for EO Fire because of all the out rolls that we did. So you did your job well for EO Fire, Lex.
Lex Friedman: I’m glad to hear it. I’ll say now that we’re a part of a publicly traded company, I can’t get into any specific revenue numbers, but we were attracted to scripts because we more than double our revenue just on ad sales alone every year since inception and that trend continues.
Interviewer: Wow. Love that. So Lex, you obviously have a lot of strengths as an entrepreneur and just as a business guy in general, but let’s start with a weakness. What’s your biggest weakness?
Lex Friedman: I can get to some extremes on delegation where I’m either thinking I’ve got to handle everything myself or I’ve got to have you – I’ve got to have you handle it all and what I work on the most I think right now is delegating just the right amount of here’s the guidance you need so that you can handle this task for me. I’m not going to just send you out into this all alone and I’m not just going to own this whole thing myself because I don’t have enough bandwidth to do all those things.
Interviewer: What’s your biggest strength?
Lex Friedman: I think I’m a good communicator. I think that early on when I look at my early ad sales experience which was entirely via email, it’s – thinking about cold emailing. I was literally by hand writing out cold emails to various people who I had no connections to. I’d go on LinkedIn and look up who was the director of marketing at various companies and writing the right email so that they would get what the heck I was talking about that at time, three or four years ago, you had to explain to most advertisers what a podcast was and why they should care.
I think that my communication both to advertisers and to my employees is pretty strong and I’m able to communicate pretty effectively with both groups what I’m offering and what I’m asking.
Interviewer: Lex, what’s the one thing that has you most fired up today?
Lex Friedman: I’m pretty excited right now about the fact that podcasting has been having a moment for two and a half years running and it doesn’t show any signs of slowing down. The most recent giant moment in podcasting, you have to take your pick. It could be Serial which obviously really captured mainstream attention. Mark Maren had the president of the United States on his show from his garage. There’s been a ton of press for shows recently, like The Message which was a fictional series, Serial Season Two is starting, but what’s exciting to me is just there’s so much happening around podcasts and it doesn’t show any sign of slowing down and today, John, podcasting is still really hard to get into.
Like your listeners, to fire nation knows how to know how to subscribe to a podcast, how to listen, how to get every episode, but many, many people worldwide still would struggle to figure it out. The whole concept of subscribing and how to get them and do you have to find an RSS feed and all this stuff. It’s still much more difficult than it could be and as connected cars get smarter, as your car can just download your episodes overnight so they’re waiting for you in the car when you take it out of the garage the next morning, as all that stuff gets better and faster and easier, it’s just going to mean way more listeners.
And today we’re seeing brands like Dunkin Donuts and Chipotle and Prudential and Proctor and Gamble who want to start advertising on podcasts or who are now advertising on podcasts and that’s quite a shift from even 12 months ago when it was still great companies, but ones that were less well known to mainstream Americans and so that’s the excitement to me, is just everything about this industry keeps growing and there’s so much untapped resources available, so many untapped listeners still to get into the space. That’s going to be really appealing to both them and to the advertisers.
Interviewer: I mean picture the day, Lex, when someone just sits in their car and says um, car, let me listen to a top ranked business podcast and then the car just starts playing it through the speakers.
Lex Friedman: There’s only one and it’s [inaudible] [00:19:29].
Interviewer: That is my car, yes. So fire nation, we have some incredible stuff coming up in the lightning round, but we’re going to take a quick minute to thank our sponsors.
Lex Friedman: I love that.
Interviewer: Are you prepared for the lightning round?
Lex Friedman: I am. I’ve been studying all night.
Interviewer: What was holding you back from becoming an entrepreneur?
Lex Friedman: Definitely fear. It was – I have three young kids. 10 years ago I had three even younger kids or at the time just one I guess, but it was just fear of will I be able to provide? Will I be able to generate that I need? Am I going to dwindle all my savings down too much? It was just fear.
Interviewer: What’s the best advice you’ve ever received?
Lex Friedman: It’s one I touched on a little bit earlier. It’s do something that makes you happy. If you can find work that makes you happy, you’re going to do great at it.
Interviewer: What’s a personal habit that contributes to your success?
Lex Friedman: I read a ton, news, essays, fiction, all of it. Reading anybody’s successful business essay gets me excited, but even reading Steven King’s latest collection of short stories gets me excited and motivated.
Interviewer: Share an internet resource like Evernotes with fire nation.
Lex Friedman: I love Slack. It’s a great group chat communications role and it’s really changed work life [inaudible] [00:20:36] entirely.
Interviewer: Yeah, they had a great feature recently on Ink Magazine which was killer. So check out one of the back issues fire nation. If you could recommend just one book for fire nation, Lex, would it be and why?
Lex Friedman: I think the book that I would recommend is Dave Berry Does Japan. It’s a recent book, but it’s one of my favorite books. Dave Berry one of my favorite authors. It’s not full of business advice or anything, but Dave Berry is so good at being humorous, but he also has some really serious stuff in that book, too, and it’s just every time I reread that book which I’ve probably done half a dozen times or more, it really speaks to me. It leaves me feeling like I want to be a better dad and a better person.
Interviewer: Dave Berry Does Japan. Now, Lex, this is the last question of the lightning round, but it’s a doozy. Imagine you woke up tomorrow morning in a brand new world, identical to earth, but you knew no one. You still have all the experience and knowledge you currently have. Your food and shelter is taken care of, but all you have is a laptop and $500. What would do in the next seven days?
Lex Friedman: I have $500. I have a functional laptop. I’m going to buy a microphone and a USB piano keyboard. It’s going to – I’ll have $200 left. I’m going to use the $200 to buy a domain name and a square space site and I’m going to launch a brand new podcast so I can start building an audience and building revenue at the same time.
Interviewer: And is the keyboard just for pleasure?
Lex Friedman: The keyboard is so I can do a theme song for it and yeah, I play piano a little bit every day just to – it makes me relax so I enjoy doing that every day.
Interviewer: So let’s end today on fire with a parting piece of guidance. The best way that we can connect with you and then we’ll say goodbye.
Lex Friedman: Okay. Well, you can find me – you can email anytime email@example.com and I’m on Twitter, lexfri. I pronounce it Lex Fry. Some say Lex Free.
Interviewer: So what’s that parting piece of guidance?
Lex Friedman: If you can find stuff that makes you happy and you can feel like you’re really good at it, it’s easy to wake up every day and feel motivated about doing what it is you have to get done.
Interviewer: Fire nation, you’re the average of the five people you spend the most time with and you’ve been hanging out with LF and JLD. So keep up the heat and head over to eofire.com. Just type Lex in the search bar. His show notes page will pop up with everything we’ve been talking about, links to the book, the resource, everything. Of course, his direct email firstname.lastname@example.org. Hit him up and Lex I just want to thank you for sharing your journey with fire nation and for that, we salute you, Lex, and we’ll catch you on the flip side.
Lex Friedman: Thank you. It was my pleasure, John.
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