[richardFINEman]

I worked at Optimizely for 4 years and can tell you that pivoting to Enterprise has been one of the best company decisions.

One of the important distinctions between Optimizely and most developer-first platforms is that experimentation is a hard practice to pick up. Most companies have difficulties getting their programs off the ground and keeping them funded, let alone grow or scale them. Small digital businesses struggle more for several reasons: 1) they have few resources, so teams are understaffed and resources are pulled easily, 2) they have little money, so the percentage uplifts are rarely motivating, 3) they have little traffic, so it is harder to get a statistically significant measure in their experiments

Because of these issues, Optimizely always had really poor retention in the SMB space. Nonetheless, the SMB customers helped Optimizely build up a brand name, build up legions of practitioners, and get the skills and experience to go after the Enterprise market. When Optimizely started acquiring enterprise customers, retention improved substantially.

This isn't to say that there aren't lots of problems with Enterprise sales and that Optimizely didn't make tons of cultural mistakes in that pivot. But on the core financials, Enterprise kept Optimizely afloat. The problem wasn't the pivot to enterprise, but the trade-offs that were mismanaged along the way. The path to enterprise was inevitable and correct.

[richardfeynman]

First off, love the username :-).

You argue that pivoting from self-serve to enterprise was one of the company's best decisions. If that were true, Optimizely would be considerably more valuable now than it was four years ago, which is manifestly not the case.

Moreover, if the self serve model was indeed fatally flawed, then it would not be possible for anyone to build a profitable business serving this segment. However, a competitor, VWO, showed that it is possible to build a large, profitable business using this model.

Finally, let's say my prior two arguments are wrong, and the unit economics of the self serve business were fundamentally flawed--an assertion I challenge--the self serve business would still have been useful as a source for attracting future enterprise customers. When Optimizely cut the self serve plans, it also killed its largest source of enterprise deals.

[conductrics]

Are you suggesting that revenues fell after bailing on SMB. That is hard to imagine, but I guess possible. Given that the core of the industry is about asking counterfactual questions, I would think the appropriate question would be 'would they be more valuable now if they had not gone to the enterprise - would they even have the deal they did wind up getting?'rather than are they more valuable now then they were 4 years ago. Hard to know, but my guess is that they wouldn't. A simple web editor with a random number generator isn't going to be of interest to anyone looking to buy. The larger problem is that statistical inference is hard - it just is. And, unlike analytics, where you are just placing sensors into an existing system, here you need to also place actuators, so implementation is much more complicated. That means that at any scale, both the marketing team, and the dev/IT teams need to be involved for anyone to get value and not wind up breaking systems all the time. Software like theirs, and ours, isn't magic, and without good editorial and hard work by the client, the entire exercise is more statistical theater than science. And that material fact was always in conflict with the rhetoric that they make AB Testing easy for everyone. It lends itself to a particular type of solutionism that VCs and the larger industry are prone to be seduced by. Self service to SMB clients might be a profitable biz, but perhaps not enough to service such a large amount of venture funding. FWIW VWO also tries compete at the enterprise.

[richardFINEman]

Richard, I appreciate your theoretical arguments. Consider me the applied physicist who has actually seen the data. :)

On the valuation. Optimizely's pre-exit valuation rose in every VC round since changing the focus of the business from SMB (Series B) to Mid-Market (Series C) to Enterprise (Series D). The valuation of the exit took a hit for reasons that were not the enterprise focus. I could say more here, but consciously choose not to.

The self-serve model at Optimizely was certainly flawed. If VWO was able to build it profitably, that's likely because their labor costs, being based in India, are substantially lower than Optimizely's. Keeping a legion of engineers funded in SF has very different unit economics than keeping engineers funded in India.

Now on your last argument, that self-serve customers could acquire enterprise accounts, I certainly agree. If that strategy were better executed, it could have created a valuable pipeline. But the self-serve to enterprise funnel was sorely lacking, and when self-serve was cancelled, the business benefited financially and migrated everyone to the new pricing model for substantial success.

Its easy to look at Optimizely's final fortunes and link that to the enterprise approach, and I won't argue they're completely unrelated, but there were very different factors that caused Optimizely to fold into EPi's acquisition spree.

[richardfeynman]

Thanks for making these points. They seem less hyperbolic and more grounded than your earlier claim ("it was one of optimizely's best decisions") and I appreciate that change in tone.

You characterize my arguments as theoretical, but they are empirical. Optimizely's valuation didn't increase after the decision to kill self serve was made, and VWO was able to build a successful business without killing self serve.

Also, as you now agree, optimizely would have had a better source of enterprise deals with self serve intact. That's important.

Stepping back, every SaaS business has issues converting self serve users to enterprise. Fixing those issues takes hard work, which optimizely was not willing to do. Similarly, every business has higher churn in monthly self serve plans than annual enterprise plans. Fixing this takes hard work too. Things were not unsolvable, optimizely simply had no appetite for solving them.

To address your other points: 1. I donbt that labor costs would have made a difference, but say they would have. Was anything stopping optimizely from reducing costs to have overseas development in india? 3. Your comments about the various foci at different rounds of funding is irrelevant. I'm not arguing that building an enterprise business is bad, I'm arguing that killing self serve was bad.

Ultimately, as Dan predicted in 2013, Optimizely died of indigestion rather than starvation; the market was always there, and still is.

Hope this helps clarify my position, even if we still disagree. If you send me an email, I'd be happy to help squash your skepticism about the $100k too.

PS. I don't think that killing self serve was the only thing that led to optimizely's demise, but I do think it was a factor.

[ajit_singh]

"Optimizely died of indigestion rather than starvation" while it might be true, not sure if Dan ever admitted anything close to that in public.

[jimbojones79]

I think your argument that VWO is a profitable business, is unknown. VWO is also still private. It could be going through the same issues. Additionally, I'd say that valuations are inherently made up. Optimizely was perceived as having more value previously, it doesn't mean it actually was. When it was serving the SMB space, it had a massive churn in that space.

[hnthrowavay]

>I think your argument that VWO is a profitable business, is unknown

VWO has been profitable since its first month of inception

(throwaway account + I am a VWO employee)

[mrnobody_67]

The big missed opportunity was to build a bounty-based marketplace to serve the SMBs... charge for results vs. the product.

[cutenewt]

Would the bounties be large enough to cover the work involved? I'm doubtful.