Thread
Look at this kids face.
He was making $500K per cold email sent.
Earned $10M+ profit in the first year of his business. Sold it and "retired".
Here's what his business was and how he built it: (this is my story) 👇
He was making $500K per cold email sent.
Earned $10M+ profit in the first year of his business. Sold it and "retired".
Here's what his business was and how he built it: (this is my story) 👇
It all started in 2006. I had already built a massive Google Ads business from my parent's basement.
I was paid to drive search traffic to advertisers.
I was paid to drive search traffic to advertisers.
For example, The New York Times paid me like $100 for every new subscriber I sign-up.
Say I pay 50 cents a click, and on average I get a conversion for every 80 clicks. That means for every $40 I spent on search ads, I’d get $100 from NYT.
Say I pay 50 cents a click, and on average I get a conversion for every 80 clicks. That means for every $40 I spent on search ads, I’d get $100 from NYT.
It was a solid business but, driving search traffic became so heavily dependent on Google that I needed to diversify away from this biz.
One of the clients that I used to drive traffic to was Rhapsody Music.
Rhapsody was ahead of its time allowing people to subscribe to unlimited music.
This was the future (Steve Jobs of course thought otherwise with a $0.99 per song price and set streaming back many years)
Rhapsody was ahead of its time allowing people to subscribe to unlimited music.
This was the future (Steve Jobs of course thought otherwise with a $0.99 per song price and set streaming back many years)
I noticed something HUGE.
Lyrics were the 2nd largest search category on the planet with billions of searches (after sex).
I reached out to a few lyric websites to put Rhapsody ads on them instead of driving traffic to Rhapsody directly from Google.
Lyrics were the 2nd largest search category on the planet with billions of searches (after sex).
I reached out to a few lyric websites to put Rhapsody ads on them instead of driving traffic to Rhapsody directly from Google.
It felt like the perfect fit.
A user looked up lyrics, saw my Rhapsody ad, and signed up.
It converted OK.
A user looked up lyrics, saw my Rhapsody ad, and signed up.
It converted OK.
But I again noticed something HUGE.
70% of the traffic for the lyric sites was non-US.
And Rhapsody only worked in the US. Meaning a lot of the clicks I was getting from these lyric websites were being wasted.
70% of the traffic for the lyric sites was non-US.
And Rhapsody only worked in the US. Meaning a lot of the clicks I was getting from these lyric websites were being wasted.
So I started to look for non-US businesses I could advertise on these lyric websites.
Finding non-US businesses would allow me to monetize 100% of the clicks from these lyric websites.
Finding non-US businesses would allow me to monetize 100% of the clicks from these lyric websites.
Instead of finding which lyric website I could post Rhapsody ads on, I started looking at which business I can advertise on these lyric sites to capitalize on their millions of page views.
Genius, I thought.
Genius, I thought.
I came across ringtones.
A user searched lyrics, saw my ringtone ad, and could simply click to get the ringtone
Instead of driving traffic to Rhapsody, I could drive them to ringtone providers.
A user searched lyrics, saw my ringtone ad, and could simply click to get the ringtone
Instead of driving traffic to Rhapsody, I could drive them to ringtone providers.
Once I tested advertising ringtones on these lyric sites outside the US, the conversions surprised me.
Ringtones were CRUSHING my Rhapsody Ads in monetization per click.
Ringtones were CRUSHING my Rhapsody Ads in monetization per click.
Ringtones were billed through a wireless carrier, so the friction was minimal to subscribe.
The ads looked like this. Do you remember seeing these around? 
I knew that I've found a gold mine, there was so much lyric traffic that I could easily build a $10M business by sending the lyric traffic to ringtones.
But there were several massive problems.
But there were several massive problems.
Problem 1 - Fragmentation
Ringtone Provider A might only support Verizon carriers in the US, and they would only have 2 of 4 major music catalogs covered.
Ringtone Provider A might only support Verizon carriers in the US, and they would only have 2 of 4 major music catalogs covered.
Plus every country had its own ringtone services because globally every carrier was collecting huge transaction fees
Different countries, different carriers, different music catalogs, very fragmented.
Different countries, different carriers, different music catalogs, very fragmented.
Problem 2 - I could get cut out.
Either the ringtone providers or their marketing agencies will go straight to my ringtone providers with my own optimization techniques.
Either the ringtone providers or their marketing agencies will go straight to my ringtone providers with my own optimization techniques.
Problem 3 - Licensing
Lyric sites were unlicensed. Music industry tried to shut them down for over a decade, and they couldn't win.
Lyric sites were unlicensed. Music industry tried to shut them down for over a decade, and they couldn't win.
Almost every lyric site was owned by someone in untouchable countries like Romania, China, Ukraine, Russia, etc.
But, to build a sustainable business, I had to find a way to legitimize the space.
But, to build a sustainable business, I had to find a way to legitimize the space.
I was still a one-man show at this point and running a very successful marketing business.
But decided to solve all of these problems and see where it leads me. This is how I tackled each issue…
But decided to solve all of these problems and see where it leads me. This is how I tackled each issue…
First. I built a simple system called "RingtoneMatcher".
One single link that would direct the user to the ringtone provider that matched geo, content, and carrier for the specific ringtone they want.
Boom. Fragmentation fixed
One single link that would direct the user to the ringtone provider that matched geo, content, and carrier for the specific ringtone they want.
Boom. Fragmentation fixed
Next,
I reached out to some of the ringtone providers and ask if they're willing to sign a non-circumvent in return for way more traffic.
Some agreed.
I reached out to some of the ringtone providers and ask if they're willing to sign a non-circumvent in return for way more traffic.
Some agreed.
So I started prioritizing all my traffic to them.
Other ringtone providers got dried up instantly. They felt the pain and signed my non-circumvent agreement as well.
Other ringtone providers got dried up instantly. They felt the pain and signed my non-circumvent agreement as well.
On the Lyric Website side, I wrote up a simple 2 page publisher agreement that gives me the exclusivity to monetize their website for ringtones and music services.
It was annual and auto-renewing. Once signed, they were locked in, and if a ringtone provider tried to circumvent, the publisher would be in breach.
Boom. Now I couldn't be cut out
(at least not soon).
Boom. Now I couldn't be cut out
(at least not soon).
Realistically I knew that with all these lyric websites being outside US, the agreement didn't mean anything.
I had to provide the best monetization and pay fast.
I had to provide the best monetization and pay fast.
Third, to understand the licensing problems, I bought an unlicensed site called LeosLyrics.
Crazy, I know.
But by then I learned to not be afraid taking chances and see where the rabbit hole lead me.
Crazy, I know.
But by then I learned to not be afraid taking chances and see where the rabbit hole lead me.
I wanted to explore the legalities and see what kind of emails these unlicensed sites get.
Later in the story, you'll see how this website turned the game around for me.
Later in the story, you'll see how this website turned the game around for me.
Now, I got to work.
Signing publishers left and right.
RingtoneMatcher was so consistent, that I could project what revenue a site would generate simply looking at Alexa traffic numbers.
I'd cold email with an exact dollar amount offer.
Signing publishers left and right.
RingtoneMatcher was so consistent, that I could project what revenue a site would generate simply looking at Alexa traffic numbers.
I'd cold email with an exact dollar amount offer.
I'd offer to pay $10K upfront to Lyric Websites just to run a test for a week.
They couldn't say no.
My cold email was short and it killed.
They couldn't say no.
My cold email was short and it killed.
In one case I offered $150K for a 1 month test. Wired to an anonymous person, somewhere in the world, someone I never met before, just on a hope he doesn't keep the money an ghosts me.
Like I said, I wasn't afraid to roll the dice.
Like I said, I wasn't afraid to roll the dice.
It was so effective, each cold email I sent in the early days eventually made me on average over $500,000 in profits.
As I got more exclusive lyric website deals, other lyric sites noticed.
It allowed us to negotiate better deals with ringtone providers and secure deals in smaller countries. 65 countries or so.
More countries = more lyric sites.
The flywheel was reaching escape velocity.
It allowed us to negotiate better deals with ringtone providers and secure deals in smaller countries. 65 countries or so.
More countries = more lyric sites.
The flywheel was reaching escape velocity.
Things started to take off but all the sudden I had one BIG issue.
There was an ad network, Shark Ads, a group of 5 guys whom I knew from my search traffic days.
They sold their first ad network for $10M+.
Shark boys noticed my game.
There was an ad network, Shark Ads, a group of 5 guys whom I knew from my search traffic days.
They sold their first ad network for $10M+.
Shark boys noticed my game.
So they started to copy everything I do.
They were quite fast.
Furthermore, a lot of their clients were ringtone providers. So they had direct relationships with them.
I had more lyric sites locked in. They had more ringtone providers locked in.
They were quite fast.
Furthermore, a lot of their clients were ringtone providers. So they had direct relationships with them.
I had more lyric sites locked in. They had more ringtone providers locked in.
They went aggressively after lyric sites I had not yet signed.
I was outnumbered, and didn't have my own relationships with ringtone providers.
I was outnumbered, and didn't have my own relationships with ringtone providers.
I was working my ass off to make sure RingtoneMatcher monetized the most countries possible in order to pay the most to the sites
And I would cold email as many people as possible day and night.
And I would cold email as many people as possible day and night.
I out-hustled them but we were both losing margins because we were overpaying the lyric sites to beat each other.
So we decided to partner up instead.
So we decided to partner up instead.
We agreed that I send a ton of my ringtone traffic to their ringtone providers. They get what they want.
And they stop going after publishers. I got what I want.
Win. Win.
And they stop going after publishers. I got what I want.
Win. Win.
On a Friday we had a verbal truce with their CEO, Ken.
However a few hours later I intercepted an offer email from Shark Ads to LeosLyrics (that site I secretly bought).
However a few hours later I intercepted an offer email from Shark Ads to LeosLyrics (that site I secretly bought).
I felt betrayed, and called the deal off.
They didn't know how I had this info. Nobody knew I owned Leo's Lyrics.
They didn't know how I had this info. Nobody knew I owned Leo's Lyrics.
Leo's Lyrics was my secret weapon to get inside information on anyone trying to approach my space.
I was able to react very quickly.
And it worked.
I was able to react very quickly.
And it worked.
So I went at everything HARD.
It felt like Cold War
My distribution and profits grew.
These guys lit me up and I wasn't going to stop.
It felt like Cold War
My distribution and profits grew.
These guys lit me up and I wasn't going to stop.
They had the demand from their ringtone providers but I controlled and locked in most of the lyric website traffic of the entire world.
I was the Wolf of Lyric Sites
In a very strong position.
I was the Wolf of Lyric Sites
In a very strong position.
I think once they noticed they were losing ground, the Shark boys started to reach out trying to cut a deal.
One day the nice guy from their team Matt called me up and begged to give Ken one more chance to talk
(I wasn't taking Ken's calls)
One day the nice guy from their team Matt called me up and begged to give Ken one more chance to talk
(I wasn't taking Ken's calls)
I agreed to a sit down at a NYC restaurant. Ken and I never met before.
At this meeting they propose a deal. These talks led to talks of a merger.
Merger made sense. We'd have a monopoly on this niche.
At this meeting they propose a deal. These talks led to talks of a merger.
Merger made sense. We'd have a monopoly on this niche.
We drew up the paperwork to form ToneFuse and agreed to sign in person at Ken's house in NJ.
We merged.
The best moment for me happened seconds after we all signed the agreement.
We merged.
The best moment for me happened seconds after we all signed the agreement.
I said "Guys, by the way, I'm Leos Lyrics" 😎
The faces around the table all went WHAT THE F@$#!
I wish I'd record this moment. Matt loved it. He just loved to see someone stick it to Ken (they were best friends).
The faces around the table all went WHAT THE F@$#!
I wish I'd record this moment. Matt loved it. He just loved to see someone stick it to Ken (they were best friends).
The 6 of us gelled.
Even though I'd own majority of the company and have a lot of control, Ken was experienced.
Cornell MBA and already sold one ad biz for 8-figures to a public company.
Even though I'd own majority of the company and have a lot of control, Ken was experienced.
Cornell MBA and already sold one ad biz for 8-figures to a public company.
To that day I was successful financially, but always an army of one.
So I thought maybe he would be a better choice for CEO.
I asked in a meeting, who should be the CEO.
So I thought maybe he would be a better choice for CEO.
I asked in a meeting, who should be the CEO.
To my surprise, Ken says "Val you've been batting way over 500. I bet you will continue to. You take us to the next level. You're the CEO."
Frankly I was surprised, but think he saw more than I knew about myself at the time.
(Maybe he just wanted to chill and let me do the heavy lifting 😂.)
(Maybe he just wanted to chill and let me do the heavy lifting 😂.)
I set responsibilities and everyone on the team hustled and worked hard.
We were hungry and unstoppable. We were scaling fast.
The first year of ToneFuse, our NET profit was over $10M.
We were hungry and unstoppable. We were scaling fast.
The first year of ToneFuse, our NET profit was over $10M.
Our product was so strong that every music property started to add it. AOL, Yahoo, CBS, LastFM, Pandora...our ringtones were everywhere.
6 of us and a young developer had 500M people at their fingertips.
6 of us and a young developer had 500M people at their fingertips.
As we scaled, we quickly noticed two major trends starting in 2009:
• rise of mobile traffic
• lack of brand ads
So we launched two more companies to specialize in those areas:
• rise of mobile traffic
• lack of brand ads
So we launched two more companies to specialize in those areas:
1- MobileFuse was started as a mobile advertising company.
Today it's very profitable, employs ~100, and on its way to do $100M in revenue.
Led by none other than by co-founder and CEO, Ken Harlan. Yes, Shark Ken!
Today it's very profitable, employs ~100, and on its way to do $100M in revenue.
Led by none other than by co-founder and CEO, Ken Harlan. Yes, Shark Ken!
2- ToneMedia was founded to attract music enthusiasts on one platform for brands to reach. It quickly grew to become 2nd largest music property, only after YouTube/Vevo.
All the sudden I was the CEO of 3 companies.
In just 2 years I went from managing nobody & working from home, to leading 3 separate fast-growing companies simultaneously.
In just 2 years I went from managing nobody & working from home, to leading 3 separate fast-growing companies simultaneously.
We also started getting acquisition offers. Our profits made the company attractive in the post-2008 era when cash flow was king.
In 2012 we signed a LOI with subsidiary of a multi-billion dollar French media conglomerate, Lagardere.
In 2012 we signed a LOI with subsidiary of a multi-billion dollar French media conglomerate, Lagardere.
The deal moved frustratingly slowly, but at that point we were collecting a 7-figure profit every month as we wait. So we weren't in a rush.
When the deal finally closed, we sold ToneFuse and ToneMedia simultaneously.
I agreed to stay on for some time as CEO of the advertising division.
I agreed to stay on for some time as CEO of the advertising division.
The journey had so many lessons from start to finish.
I handed over CEO role of MobileFuse to Ken.
Finished my stint at Lagardere/Bandsintown.
Went from 3 to 0 CEO roles.
And decided to "retire".
I handed over CEO role of MobileFuse to Ken.
Finished my stint at Lagardere/Bandsintown.
Went from 3 to 0 CEO roles.
And decided to "retire".
Follow me @ValKatayev to see the story of my next company.
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Retweet the first tweet if you found this story cool.
