How AppSumo grew from 0 to over $100M

Good morning! This is The Zero to One. Think of us as your startup barista - your favorite person in the morning serving you your fix right when you need it.

Here’s what’s in store for you today:

• Deep dive of AppSumo, enabling entrepreneurs to launch profitable businesses through deals on awesome products.

• Interesting things around the community.

AppSumo: 0 to $100M+ helping entrepreneurs launch profitable businesses

Before founding and growing AppSumo into a $100M+ revenue business, Noah Kagan was employee #30 at Facebook, was fired 9 months later, missing out on $1.2B of stock options (0.1% at today’s valuation), grew Mint to 1M users then left, and was sued by Facebook for making games on the platform.

This sounds like a movie. But I promise you it’s real 😂 

Noah was a big believer that the tools you need to grow your business shouldn’t be the things that put you out of business in the first place.

And so he launched AppSumo, which promoted weekly deals on awesome products that help you grow your business.

Fast forward 14 years and AppSumo has launched over 1,000 products and helped 1.5M+ entrepreneurs save over $550M since 2010.

Oh, and he loves Tacos.

But this isn’t about Noah’s culinary preferences.

This is the story of how AppSumo went from Zero to One. 🚀

Business model: How AppSumo makes money

AppSumo makes money in three ways:

1. Marketplace 🏪

A majority of AppSumo’s revenue comes from its two-sided marketplace where it promotes the hottest lifetime software deals on upcoming products.

1.5M+ entrepreneurs have saved $550M+ with AppSumo’s discounted lifetime software deals. Including saving on products like Zapier in its early days.

AppSumo has become the best way to promote new software.

It essentially guarantees exposure to their audience of 1-3M monthly visitors. Giving you a massive pool of potential customers - and all you pay is a percentage of your earnings - so no upfront marketing costs.

AppSumo even has a group of what they call “Betalings” who review products and help founders improve them before they launch.

To make it even easier for founders, AppSumo also does the marketing for you. With a dedicated video and content team for products.

AppSumo sets you and your product up for success - they win when you win.

Beyond being awesome for founders, it’s also an awesome business for AppSumo. They get money upfront with very little variable costs.

2. AppSumo Plus 🔃

The second way they make money is through AppSumo Plus.

A yearly subscription of $99. What do you get?

• More deals

• Free software

• Extra savings

Some would say the Amazon Prime for Founders.

On average, AppSumo Plus members save $350 per year on products.

Much more than the $99 yearly cost.

3. AppSumo Originals - its own products 📲

The last way AppSumo makes money is through its own products.

They have created a suite of products that replace well-known SaaS tools, such as Calendly, for a one-time fee:

AppSumo’s Growth

AppSumo has had a very interesting growth journey.

In year 1 (2010) AppSumo made $100k in revenue - a good start.

But then skyrocketed to $3M in revenue in 2011. Growth could only go up, right?

Wrong.

For the next two years, they stayed at $3M. Before dropping down to $2.9M in 2014.

During this stagnation, Noah almost sold the business for ~$2M.

Luckily for Noah, this is when he found Ayman Al-Abdullah - the company’s most important hire and future CEO.

Ayman immediately had an impact, with revenue reaching $5.5M in 2015.

In the next 6 years, he became CEO and took the company to $80M in revenue by the time he left in 2021.

After his departure as CEO, Noah stepped into the CEO role again and has developed the company into a $100M+ business.

Key Success Factors (KSFs)

There have been plenty of reasons why AppSumo has seen so much success, but here are three that really stood out to me:

🚄 1. Quick to validate: Noah understands that the most important part of starting a business is validating if people will pay for the product or service. He ran a test deal on Reddit and set a target number of sales that would determine if AppSumo was a real business or just a cool idea.

📧 2. Double down on what works: AppSumo is a strong believer in testing new ideas and doubling down on what works. For them, this was email marketing, which they are absolutely crushing with ~50% of revenue coming from it, another test and double-down lever was a creative giveaway program that drove 250k newsletter subscribers.

🧑‍💻 3. Key person of influence: Noah has become a Key Person of Influence for AppSumo, becoming a highly visible, valuable, and connected person within the entrepreneurship space. He’s done this through making courses, writing blogs, gaining over 1M subscribers on YouTube, and most recently, publishing his book Million Dollar Weekend.

🚄 1. Quick to validate

Before launching AppSumo, Noah was already a bit of a serial entrepreneur.

AppSumo was his 17th venture. 17! And he was only 28 at the time of launching.

These ventures were also in multiple industries - events, gaming, media, and sports betting to name a few. Giving him a wide-scope of experience.

But how did he manage to launch so many businesses? And how did that translate into success for AppSumo?

Well he was quick to validate his ideas - were they actual businesses? Would someone pay for the product or service?

So that’s exactly what he did with AppSumo - sort of.

Noah validated that AppSumo was a legitimate business in one weekend. And with only $50.

He asked a freelancer he knew if he could design a simple website - accept emails and have a PayPal integration. That was basically it.

Noah uses the phrase, “Don’t play business”.

What he means by this is that often when starting a business, people (Noah and myself included) get caught up in the color palette, name, logo, web design, and other non-money related tasks.

When what actually matters is getting customers.

For a while before validating AppSumo, Noah was caught up in playing entrepreneur, creating and A/B testing landing pages to collect emails.

But luckily, a friend hit him with reality: Get customers first - sort everything else out later. If you actually do validate your idea.

And so he changed tracks to validate AppSumo as soon as possible.

For Noah his goal for validation was 200 sales with his first campaign on Reddit, promoting a deal for Imgur.

And he hit that 200 number - what this meant to him was that there was an actual customer base he could sell to.

To get an idea of the speed he launched with - his processes were so underdeveloped, he manually sent the first buyers the codes for Imgur Pro.

Validation is critical.

It will save you both time and money. Telling you if your idea has the potential to turn into an actual business.

📧 2. Double down on what works

For AppSumo this means a few things.

The first is AppSumo itself.

Noah was still running a few of his other businesses when he launched AppSumo.

But after he validated the idea with the Imgur deal, he had figured out his main thing.

AppSumo.

It was a big opportunity and it was interesting to him - he was solving his own problem as well, helping people start and grow online businesses.

So he went all-in on AppSumo.

Over the 14 years of AppSumo, they’ve launched a bunch of other products. But revenue from them has been less than 10% of AppSumo’s.

But that doesn’t really matter. They don’t launch new products as stand-alone. They think about how they can create a flywheel around AppSumo.

An ecosystem of products that complement one another and create a ton of value when used together.

Doubling down on the main thing, AppSumo, through other enabling products.

But it’s not just in their product that AppSumo has doubled down on what works - it’s in how they’ve grown as well.

Remember that email collection landing page on the first launch of AppSumo?

Although it didn’t help Noah test if he had willing to pay customers on his hands. It was the start of their most successful growth and revenue channel.

Email marketing.

Early on in the business, email marketing drove ~90% of the revenue.

Now that number’s closer to 50% - which is still a massive chunk.

Why rely so heavily on email marketing though?

• It creates a personal connection with their customers.

• It’s permission marketing, i.e., people have given AppSumo permission to advertise to them, which usually has much higher conversion rates.

• It boosts website visits, which in return boosts SEO, another channel they have focused on recently.

• And because they’ve figured it out. They are seriously great at it.

It makes them over $40M per year. And this is only growing.

From 2013 to 2021 the company grew its email list by over 600k subscribers - with a lot coming from lead magnets.

But they didn’t know email would be this massive driver.

It started as an experiment and then only became their biggest piece of the pie. Once they knew it worked.

This became a key operating principle of theirs:

Test and invest. Then double down on what works.

Another example of this was their lifetime giveaways.

Early on, AppSumo ran a giveaway, Dropbox for Life (which they still pay for today). This got them 250k+ subscribers. From one giveaway.

So they started to repeat this - one giveaway per month for 6 months.

Netflix for life. Evernote for life. Photoshop for life.

They tested an idea. If it worked. They doubled down.

🧑‍💻 3. Key Person of Influence

Daniel Priestly coined this awesome phrase in business, Key Person of Influence.

Essentially it is about becoming a highly visible, valuable, and connected person in your industry. I must say he did a good job naming it - it’s right on the nose. 👃

Being a Key Person of Influence has 5 main components, and Noah meets all of them:

1. The perfect pitch: A compelling answer to “What do you do?” - Help founders turn ideas into actual businesses with the right products. 🗣️

2. Publish content: Create consistent content that puts their message out in the world - Noah’s YouTube channel, Twitter, Instagram, blogs, and books to name a few. 🎥

3. Product ecosystems: Turn skills and ideas into products people love - AppSumo. 🛠️

4. Raise your profile: You need to stand out - Noah’s bestselling book. And door-to-door asking how millionaires made their money. 🙋‍♂️

5. Partner with performers: Create opportunities with other high performers - Noah has been on plenty of podcasts with leading hosts, such as Tim Ferriss. 👬

If you’re around the entrepreneurship social media spaces, you’ve definitely heard of or seen Noah before. Whether it’s him knocking on the doors of millionaires and asking how they got rich:

Or on a podcast: Ali Abdaal, My First Million (my personal favorite), Tim Ferriss, etc.

Noah has built a massive online following:

• 100k+ subscribers for his personal newsletter.

• 1M+ subscribers on YouTube.

• 270k+ followers on Instagram.

• 220k+ followers on TikTok.

• Worldwide best selling book: Million Dollar Weekend.

Noah has used social media as the driver behind him becoming a Key Person of Influence in the entrepreneurship space.

Actions you can take to replicate AppSumo’s success

Shoot your shot (with value though) 🔫

In the process of trying to validate AppSumo, Noah started looking at web apps he knew people were using.

He wanted to see if he could sell the premium versions of them on AppSumo.

He was a diehard Reddit user and noticed a lot of people were using Imgur on the platform.

There was an Imgur Pro version and so he wanted to try and sell it to Reddit users at a special price.

But he had no business or customers yet.

He emailed the Imgur founder, Alan Schaaf, and asked if he would do a promo with him.

Alan said yes.

They agreed that Imgur would get $7 for every sale (the price was usually $29) and the rest would go to AppSumo.

Noah knew he needed customers though. So how did he plan to get them?

By asking one of the founders of Reddit if he could have free ad space.

Of course.

He also said yes.

Importantly though, he not only took him out to breakfast first. But he also led with the value this would bring to the Reddit community and thus Reddit as a whole.

It never hurts to ask for something.

So shoot your shot. But do it accompanied with providing value.

You’ll be surprised at what you can get.

Evolve your strategy as you grow ♟️

Almost no one who starts a $100M+ company treats it like that from the beginning.

It would probably be detrimental in many ways to do so.

Often businesses start as side hustles. Just like AppSumo, which Noah planned on just making an extra $3,000 a month doing something he loved - promoting awesome products that he wanted to try himself.

But 14 years later and AppSumo does over $100M in revenue.

Slightly higher than planned.

However, it would’ve never reached these heights if it hadn’t evolved as a business.

At first, AppSumo would bundle products and sell them as a package deal.

This worked. And over-delivering value probably helped in the beginning.

But then what took them from $100k to $3M was unbundling these deals and selling individual products.

They had legitimacy now, so they could charge a bit more on a per-product level - plus their customers preferred not having to buy products they didn’t necessarily need or want (the others in the bundle).

This opened the door for AppSumo’s third stage of growth, which was hiring salespeople - from this, they got to the $10M mark.

All of these stages though took a lot of chasing partners - trying to align everybody’s interests - there was only so much scale to gain here.

So they needed something more. This is when they evolved into a two-sided marketplace.

What we know now as the AppSumo Marketplace. Where anyone can sell their digital products. 

Anyone could now become an AppSumo salesperson and it didn’t cost AppSumo anything.

This took them from $30M to $100M+.

Their strategy was always to get more product partners.

They just evolved how they did it over time.

Think about how you can adjust and evolve your strategy to meet your business where it’s at in its lifecycle.

Set a clear Mission, Vision, and Culture 🎯

One of the most important factors in AppSumo scaling to $100M+ was setting a clear Mission, Vision, and Culture.

This might sound a bit intangible.

But it most certainly isn’t.

Early on in your business, when there aren’t many people, it’s much easier to keep a good flow of communication. Which means having a clear mission, vision, and culture (MVC) isn’t as important - the company is still small enough to have high levels of visible accountability.

However, when you scale your business and bring in more employees, things get a bit trickier.

More employees = more communication breakdowns.

Levels and layers enter into communication and workflows.

So what a clear MVC helps to do is encourage the right behaviours when no one else is around.

It can set a standard of excellence.

Culture defines who should come and work for you - what type of person will thrive at your company.

Then once they are there, your mission and vision guide how they will behave - choosing the right path that’s aligned with your company.

You can’t tell everyone what to do. But having a clear MVC shows your team how they should work and behave without you needing to.

Test, measure, and do more of what works 🧪

Test and invest has been a crucial part of AppSumo staying profitable and scaling over the years.

Add this to their double down on what works mantra and you get an efficient flywheel for business building.

One of the trickiest parts of scaling a startup is still acting like a startup.

You have an inherent advantage against big corporates - flexibility and speed.

Use it.

You don’t have to write bulletproof product docs that go through a brigade of people before a new feature or growth channel can be added.

So be quick to test new ideas - it’s one of your biggest advantages.

But don’t stop there.

Measure your tests.

And whatever works - double down on it.

Have a great week, speak soon!