AppSumo

Beginnings

Kagan, a former Intel, Facebook, and Mint worker, began the company after seeing an opportunity to sell web applications for startups.

AppSumo was originally created in one weekend using an outsourced team in Pakistan for $60. Kagan bootstrapped the company, eventually accepting limited outside funding, including a "staggering" $20.47 from his mother, Debra.

AppSumo's first deals were with Imgur and Lifehacker.

Growth

Initially, AppSumo focused only on digital tools, such as apps. The company found that their largest response came from their learning offerings. Today, the majority of deals offered are learning based products attempting to teach customers skills such as programming languages, project management, and hiring practices. This helped AppSumo achieve over $1 million in revenue in the first year, the majority (60-80%) stemmed from learning offerings.

After conversations with Mark Zuckerberg of Facebook, Kagan was convinced to focus solely on growth, specifically of AppSumo’s email list. To accomplish this, Kagan increased advertising budgets which led to more long term customers. In addition, he increased the frequency of both AppSumo’s advertisements and customer emails. This allowed AppSumo to grow their email list to over 200,000 in the first year.

The final problem Kagan attributes to the growth on AppSumo was hiring practices. The first issue was removing himself from many of the roles he served when bootstrapping the company. Next, he hired more sales people to source more deals for the website. These two changes Kagan cites as a major reason for AppSumo’s long term success.

Description

AppSumo, in contrast to other popular deal sites (Groupon, LivingSocial) deals exclusively with digitally distributed goods. The deals include application software (apps), ebooks, learning courses, and other packages. Many of the site's deals are aimed towards productivity products and website tools, such as copywriting courses, email marketing, or project management apps. This has made the website particularly popular within the startup community.

Due to the digital nature of the products, there is more flexibility than in traditional models. There is no cost for shipping or reproduction, so the profit margin can be much greater than traditional deal websites. The benefit also extends to customers, as greater deals can be offered. Typically deals of 50 to 75% off retail price are offered.

AppSumo takes a percentage of sales from every deal, typically 50% of sales.

Reception

AppSumo has been well received by many individuals, startups, and established businesses that cite AppSumo for helping them acquire both new customers and valuable resources. It has been featured in major news publications like Inc. Magazine, Fast Company, Huffington Post, Business Insider, PC Magazine, PCWorld, LifeHacker, and TechCrunch.