Noman Ali, Co-Founder and CEO, Peanut Labs
Even though he tries to make it sound that way, Noman Ali has had anything but an ordinary life. He grew up in Karachi in a home where his mother, a school principal, and father, part of the corporate world, stressed a great deal on education. Noman attended the prestigious St. Patrick’s High School for his Matriculation before going to DJ Science College and ending up at FAST University of Computer Sciences. “My parents always wanted me to be a doctor I think, and pushed me to pick Biology as a major when I really wanted to take Computers.”
His father got him a Pentium machine at a time when the rest of the country thought the 486 was king. “I was glued to my PC at home while in Class 10andmy parents agreed to let me study Computer Science.”
Noman came to the US to follow a dream after already having completed his higher education in Pakistan. “FAST gives you a crash course in some of life’s most critical lessons on time and pressure management. As the saying goes, ‘A smooth sea never made a skillful sailor’, rest assure, FAST makes you a very skillful sailor. Once you’ve survived the 4-year BS program there, you’re set to handle anything. From that perspective, I don’t think I could have asked for a better foundation.” The kinds of people he met there and the time he was able to spend with family, helped shape Noman what he is today. That fact that he also met his future wife there also makes the experience more meaningful.
But the real turning point for him during University was when he chose to focus more on coding very early on. In fact, playing around with the visual interfaces of software was just not challenging enough. “I found being a developer very empowering. There are no other variables except you and the machine and no matter how complex the problem, as long as you are willing to put in the time and effort, you can always develop a solution.” It was the ‘creative problem solving through programming’ that kept his interest in studying, as opposed to everything else that required clicks to set things up.
The Final Year Projectdreaded by most students and meant to die on graduation (DoG), only added to Noman’s disappointed at the monotony of the graduate lifecycle: graduate and get a job in a software house. “There were some software houses that were doing impressive work but most of them were just outsource shops working on small pieces of the really large puzzles. Keep in mind that this was a time when Rs.25,000-a-month was considered a great salary.” When he got his offer, he turned it down wanting to do something different.
Back in 2001, when websites were still considered a luxury add-on, Noman spent his time pitching ideas to small companies and professionals to develop their online presence. “They just could not understand the ROI it would bring them because most of these people didn’t have anything to sell. Not that I did a very good job explaining the value of an online presence to them!” No surprise that most of his offers and ideas would get rejected. But all the effort did get him to chew on the idea that doing something different was possible. Difficult but possible.
Working on Real Solutions
Funnily enough, Noman joined Hookah because he was tired of working Visual Studio at FAST and that was the only other option that had grabbed his interest. “None of us had ever actually built anything of this magnitude, but Hookah was a good testing ground for Pakistan.” After an accidental case of a missing loop mimicking spam, all the web-based mail servers blacklisted their domain and they changed their name to Xuqa. They transferred their technology onto it, and target-marketed the US market and shut down Hookah for good.
“We wanted a 4 letter domain, which we got, but it wasn’t one that people could remember or spell, which made it difficult to share. Yes”, he admits, “we weren’t the best at coming up with product names back then.” So it’s 2006 and Xuqa.com has about a million users, whichwas a big deal at the time. “I remember when Mark Zuckerberg’s name popped up as an account and we were so fascinated because at that time Facebook was only 4 or 5 times our size, and not the mammoth it eventually became.” But things weren’t going anywhere because there was no strong business model. “The thing about raising money or even getting investors interested is that if you are in the top two of your field, people will talk to you. If not, nobody cares. So you’re either in the top two or you’re making your own money.” Xuqa was neither. That’s when they stumbled into the incredible realm of Market Research.
Advertising spend on social media was not as big as it today and Xuqa was looking for a way to monetize its users. “Someone reached out to us and asked if we’d run a ‘take a survey, win an iPod’ type or activity on our site and take advantage of our large user-base. We initially thought it was spam but as it turns out, the online market research was a multi-billion dollar industry we had no idea about. So we started learning about it.”
As long as a website had enough users or traffic, market research companies were willing to pay them to run surveys that would help the ‘owners’ of those surveys, known as the Consumer Insight Division, determine what their next campaign would include. “They would pay communities like ours to learn what our users thought of something. In the process, some users could also possibly win a reward.”
Large corporations spend hundreds of millions of dollars on market research to better understand their customers.”The market research companies were looking for online consumers who could participate in their surveys. We had people who would do anything for ‘peanuts’. ‘Peanuts’ was the virtual currency in our social network, so we told our users that they could earn Peanuts by completing a survey and drove hundreds of thousands of users to the task.”
The rate of completion for the task was insignificantly small and they barely made a hundred dollars. “At least it was something, but we obviously needed to fast track Market Research 101. The key, as we later learned, was targeted traffic. Surveys often needed a specific demographic of users to participate. Since we didn’t have that kind of datasets on our users, we went back to add code to our system.” And they made many such visits back to the drawing board. “Eventually we got to a point where the surveys we were sending targeted traffic to , were broken links. ” Being techies, they investigated and realized the horrific reality that a 50% uptime of a link was acceptable for that industry. “That got us thinking – maybe the survey industry itself needed an overhaul. It was ripe for some disruptive innovation.”
The industry had very low standards but then you have to realize that market research had just shifted from offline research to email-based marketing, and now to online. “Market Research is a very analytical field that is run by scientists, majority of whom don’t like change.” This was still the time where they were trying to justify that online market research was representative of the offline for a population.
“There was much skepticism about online market research and we felt that there was huge potential for us to do something bigger than what we were trying to do with our social network. We made a decision to set up a new business, eventually sell off or shut down our social network, which was later acquired.” By this time, Noman’s three co-founders had returned to the US, leaving him in charge in Karachi.
Noman had no intention of leaving Pakistan but by March 2007 things weren’t going very well for Peanut Labs and they were running out of money. “We all decided that I would also make a trip out to the US and give the entire venture fundraising our ‘last hoorah’. If it worked, great! If not, we still had the social networking site to fallback on.”
When Noman landed in the US, Peanut Labs had a week’s worth of cash left. “I told my parents I would be back soon.” The four of them started focus on the technology, basically crashing in a ‘one room corporate apartment’ until they came up with something. They had something within a few weeks and raised a $1 million. “We passed the litmus test for having potential, had direction and cash.” Over the years, the team raised $4.5 million across the various businesses they ran but the $1 million was the largest investor interest they had received.
The Stars Align
It was more than just investor interest that kept Peanut Labs running. “Our methodology was that users would be paid for their time and we would take surveys to them. ‘Pay with your time’ surveys always existed, but our innovation was that instead of asking people to come onto a link, we took the surveys to them.”Noman explains this concept a little further. “Take Electronic Arts as an example. They have a casual gaming website called Pogo. People play games and use gems as virtual currency and you can either purchase those gems with real cash or participate in market research surveys and get those gems for free. That is how you get users to ‘pay with your time’ model and take the survey to them.”
The market tolerance for online market research and the methodology introduced by Peanut Labs was becoming acceptable. “We ended up creating a platform to attract other clients and organizations to make money.”
The Market Research industry would never have ever outsourced an entire pie to Peanut Labs, which worked in their favor, because they couldn’t deliver the entire solution they needed. “In a way, we faked it till we made it. We were telling clients that we could help them make X amount of money by using our platform, which only solved one part of the equation. We would then run to the other side, the organizations, and pitch the ideas to them.” They were building the supply and demand simultaneously.
When Facebook opened up its platform in 2007, they solved one part of the equation: they gave rise to the 1-2 person companies operating out of garages with hundreds of thousands of users each, each of whom was willing to test out new monetization propositions. “As long as we had access to people who we could connect with the research industry, we were in the game.”
Noman soon realized that the platform had been built and he needed to do something alongside just managing the product. Hee moved into sales and product management and eventually the team was able to hire developers and build a team. “I have had every role in the business. You have to if you want to understand the business from all perspectives.”
Until the end of 2007, Noman and a co-founder were still developing the system. A year later, they hired developers in Pakistan, added a presence in Singapore and hired an 8-person sales team out of Seattle.
Peanut Labs was acquired by e-Rewards in 2010 and presently Noman and Prosper oversee a team of 30 people and operate as an independent subsidiary of the group.
Peanut Labs 2.0
Peanut Labs built a reputation for itself for being innovative and willing to walk away from business for the sake of a better user experience. They played a big role in rallying the industry to cut down the average survey time in half and greatly improving user conversion rates. These were guys who didn’t care about the disruption they were creating. “But we got to a point where the business was growing marginally and beginning to plateau. We were doing really well and began asking ourselves what to focus on for future expansion. Further expansion, however, meant raising more money because it would require significant capital investment.
The alternative was to find a strategic partner, much bigger than them, and piggyback off of it for their own growth.”E-Rewards was one our customers. They understood what we did and what we stood for. The acquisition made a lot of sense.”Their attitude played a strong role in their acquisition, to the point that their trendsetter attitude was acknowledged several times during the talks.
Peanut Labs today boasts of a datapool of 240 million they get by partnering with networks that give increase their reach astronomically. “When we partner with a site or network,” continuing from the earlier example, “we are exposed to all of their traffic. Because Peanut Labs partners with hundreds of different partners, and you add up their total reach, you get a very large pool of possible respondents. That was another disruptive concept for the industry – for an industry which was satisfied with a pool of 2 million, we came in and said we could tap into a pool of tens or possibly hundreds of millions of online consumers.”
The company came in with a social media play at a time when the Market Research industry was still debating the validity of email-based communities. “When we started off, we called ourselves the ‘Gen Y Market Research’ company. That really gave us our edge because the social media explosion helped our services to growand no one else could access this group. Initially we only had access to Gen Y, but as Internet access grew, the older demographic also started coming online. This just allowed us to be more competitive across a wider demographic.”
‘Going towards mobile’ has been a hot topic in the Market Research industry since the past few years, and the shorter surveys and better user experience that Peanut Labs fought for primes it to pave the way towards it. “Things have taken off in the last year or so and I expect to see exciting things happen in the mobile space within the industry in the next few years.”
The Market Research landscape has a lot of ‘frenemies’; competition you have to work with. For Peanut Labs, just like establishing the business was hard, dealing with the competition is also tough because there is competition across all fronts of the business. “The industry isn’t the fastest industry when it comes to accepting new methodologies or technologies. We essentially went through a year of trying to break down the barriers and prove ourselves. If we had launched Peanut Labs today, I don’t think we would be as successful. The timing worked in our favor.”
Entrepreneurs pick their battles wisely, or at least try to. “There are things that you want to do and then there are things you need to do. That’s a dilemma I struggle with everyday. I have to get better at things I need to do, in order to be able to do the things that I want to do. There is just so much more I have to learn.” But then, Noman never worked in a company before taking the leap of faith into a startup to spin out into his own company. The learning did come in at some point.
To him, the time to sell a company or be acquired is when the business is doing well. Timing is equally important., even if it means failing. “At least you can pivot and try something else. Things move so much faster now. Especially in the Valley, if you aren’t growing, you need to act quick and move onto something else.”
“I remember the sheer joy I felt on programming the first moving pixel on my computer screen. We had to code this game ‘Brick’ in C++ and I couldn’t believe the first time the pixel moved! I had this laptop back then with a terrible screen and I couldn’t tell if it really was the pixel moving or just some dust on the screen. Similar experiences kept building up my confidence over the years.”
As with most alumni working in the Valley, Noman speaks fondly of his memories of FAST. “It seems like a different life now but in more ways than one, it helped shape me who I am today. For that, I don’t think I can ever repay my alma mater.”
People can do or be anything regardless of where they come from. A 23-year old Noman left Pakistan in pursuit of a dream he had marinated with the desire to do something different. “Keep pushing and go the extra mile,” he says. “The only thing you have to do is to not give up and keep trying – you will be amazed at what you can accomplish if you believe in yourself.”
This profile was published in the book, “A Greener Valley” published by InfoTech (Pvt) Ltd.