ResearchTalk

The MR industry has Richard Branson to thank for its latest up-and-coming entrepreneurial star, Peanut Labs.

In late 2006, Murtaza Hussain, co-founder of the social network Xuqa, hit a snag. He and his fellow co-founders realised that making money from their increasingly popular social network was trickier than expected: “The CPMs [advertising income per 1,000 users] were horrible.” And with $1.3m in seed funding there was pressure to grow revenues.

But while normal folks might get depressed when things go bad, entrepreneurs look for inspiration. And this came to Murti, as he likes to be called, from reading Branson’s “Losing My Virginity”. Branson, the eternal optimist, talked of switching business models if ventures didn’t at first succeed. And so Murti and his fellow co-founders turned to market research for enlightenment.

No, not to identify answers. They decided to offer their community to researchers.

Going It Alone
Murti’s initial instinct was to work with one of the big online panels.

But he switched from partnering to competing after what he refers to as “a very interesting experience” speaking to Greenfield Online and GMI: “For the panel companies, technology is not their strength. When it came to integrating systems, creating a good user experience, they did a really bad job.”

So Peanut Labs was born. A Silicon Valley start-up run by a 22-year old!

Delivering Gen-Y Happiness
Peanut Labs’ claimed forte is providing high quality Gen-Y sample at reasonable cost (eg. CPI of $5-7 at 50% incidence). And they source way beyond the Xuqa network, having done deals with a bunch of applications across the main social networks (MySpace, FaceBook, Bebo etc.) as well as with smaller, niche communities. Applications include Fluff Friends on FaceBook.

Their 29% response rate is much higher than standard. The secret sauce? Murti repeatedly talks of focusing on the user, almost as a mantra (a common ideal in Silicon Valley): “We do a lot of targeting and pre-screening.”

Murti has also found that users far prefer virtual currency than cash incentives: “Even though I’m young it still doesn’t make sense to me…but it seems that a virtual incentive…has a much higher perceived value to people…it’s their way of feeling important and being loved.”

The TeenPreneur
Like most CEOs, Murti is highly articulate in the financials, mission, strategy and key operational details of the business. But then you remember that he’s just 22 (his older brother is the COO).

His entrepreneurial zeal started at the tender age of 14 in Pakistan where he formed a web design company. He then moved to the US only to become, at 21, a dropout from Williams College (“a small liberal arts college in the middle of nowhere”). Entrepreneurial dropouts include FaceBook founder Mark Zuckerberg who he knows well (“we’ve had a love-hate relationship given we were in the same business”).

The good news with his current venture is that the shift from social network to panel provider is paying off: “We’ve had good luck breaking into the industry with access to an attractive demographic at a price no one else can match.” (he’s keen to point out key initiatives beyond cost such as the fraud reduction Optimus ID).

Target: $100m
Murti reports 15-20% monthly growth. And 2008 revenues are estimated to be “in eight figures”. A sizeable chunk is split with the application providers given the revenue share model.

There’s been recent acquisition interest: “In the last three months we’ve had at least two research firms interested, but I think there’s a lot more value we can add”. They’re not ideologically opposed to selling: “Realistically I think the company will probably sell before an IPO.”

In the mean time, Peanut Labs has raised a second tranche of funds to support growth. This brings the total investment to $4.5m.

The target, Murti says with confidence, is to build a $100m company (by market capitalization).

So, having proven they can turn communities and forums into efficient panels, they plan to move beyond Gen-Y and launch a physician’s panel (“the largest US physicians panel”). Murti’s proud of finding a “fool-proof way to verify that panellists are indeed physicians”.