When Trip Adler founded the reading subscription service Scribd in 2007with $12,000 in funding from Y Combinator. Four years later, the company reached 100 million users and $4.5 million MRR.
Scribd users can upload and read books and other publications on a compatible device. Although many users take advantage of Scribd’s free features, half a million monthly subscribers paid one flat monthly fee as of Latka’s interview with Adler in 2017. By January 2019, that number had risen to 1 million subscribers.
The subscription model is simple enough: For $9.99 per month, users have unlimited access to Scribd’s selection of ebooks, audiobooks, podcasts, and magazines. In the past, Scribd has been called the “Netflix for books.” But unlike Netflix, which offers tiered payment plans, Scribd offers one subscription plan with one flat rate.
“With the subscription model, the beauty of that is it gives users really the freedom to just kind of explore different types of content … and you kind of focus on what to read and not what to buy,” Adler says.
After the initial $12,000 in funding, Scribd received nearly $50 million from organizations like Silicon Valley Bank and Coastal Ventures. Now the company remains profitable on its own, growing 50% each year. In 2017, with half a million paying customers, Scribd earned about $4.5 million MRR and $54 million ARR.
To become profitable, though, Scribd cycled through different ideas before finding its current subscription model. Advertising didn’t convert well and Scribd didn’t see great results from partnering with publishers to sell content.
Source: GetLatka
Instead, Adler and his team noticed that Scribd’s freemium model was performing very well. They decided to turn it into a subscription; “At the time, the idea of a book subscription service was pretty crazy,” Adler says. “Most people couldn’t even envision that.”
Although publishers weren’t originally keen to include their books in Scribd’s subscription service, Scribd got the ball rolling with smaller publishers. Eventually larger publishers joined in, and the company now has one million books in its virtual library from major publishers like Bloomsbury and HarperCollins.
Any time a publisher comes out with a new book, that book automatically appears in Scribd’s library too. Scribd pays the publishers for a read any time somebody gets through at least 20% of a book.
Much of the company’s costs go towards its deals with publishers. The other major expense is for talent — hiring good engineers, designers, and other product builders to build upon Scribd’s 120-person team. Since Scribd simply markets to its free users, the company pays very little in marketing costs.
For now, Scribd’s main aim is to continue to add subscribers.
“The more we grow the subscriber base, the more revenue we have to return to publishers and authors, and we can get more and more content in the service,” Adler says. “And we’re just trying to continually get that kind of growth loop going.”
What is Scribd’s annual revenue?
In 2017, Scribd hit $54 million in revenue.
What is Scribd’s monthly revenue?
In 2017, Scribd reached $4.5 million MRR.
Who is Scribd’s CEO?
Trip Adler, 33, is the CEO of Scribd.
Transcript Excerpts
Why free users find Scribd through SEO, not books
“We have this library of 70 million documents that have been uploaded by users. And basically we have over a hundred million people a month who come to visit that library of content. And mostly people are searching for things on Google and then long tail searches bring them to our library of content.”
Adler on overcoming the ‘chicken and egg’ problem of Scribd’s marketplace
“In the early days, the initial idea was we would just allow someone to take a piece of content, publish it on the web, and then we would find an audience for them primarily via SEO. And then of that SEO traffic, a small fraction of people would come in, upload their own content and that would kind of get the cycle going. So, we really got that growth going early on. And that’s what took us from launch to one hundred million monthly users pretty quickly.”
Saving on marketing costs by going direct to Scribd’s 100 million users
“We started the service as just a free service for publishing and sharing content and it today reaches over a hundred million monthly users. So, we basically just market our subscription service to those a hundred million users. We don’t have to actually pay for marketing. We pay for a little bit, but just a small amount.”
Full Transcript Nathan Latka: Hello, everyone. My guest today is Trip Adler. He’s an American entrepreneur. He’s the CEO and co-founder of Scribd, a digital library and document sharing platform. He grew up in Palo Alto, California and graduated from Harvard. He launched Scribd in 2007 and they now have over 80 million monthly readers and 500 thousand subscribers. Trip, are you ready to take us to the top? Trip Adler: Sure. Sounds good. Nathan Latka: All right, good. So for those people that are not familiar with Scribd, or they’re not subscribed yet, what does it do and what’s your revenue model? How do you make money? Trip Adler: So Scribd’s a subscription service for reading. So, what you can do is pay $9 a month, and then you can read books, audio books, magazines, newspapers, documents on whatever device you like. So, it’s all basically funded by our consumers who pay the monthly Scribd subscription fee. Nathan Latka: Okay. And there’s that one simple pricing, just nine bucks a month? Trip Adler: Yeah, it’s really simple. I mean, rather than the old model for media where people would pay for each piece of content one at a time, we now just have one simple monthly subscription, same price for everyone. And then you can pay once and once you pay you can just read whatever you like. And with the subscription model, the beauty of that is it gives users really the freedom to just kind of explore different types of content, discover new types of content, and you kind of focus on what to read and not what to buy. Nathan Latka: And where were you at, get us in your head a little bit, back in 2007. Did you just graduate? Did you just have a big financial windfall so you could take a risk with Scribd? Did you have to make Scribd work because you were broke as hell? Where were you? Trip Adler: So, I had just finished college and- Nathan Latka: So, you were broke as hell. Trip Adler: Broke as hell but at the same time had supportive parents, so I could at least live with them. So, I didn’t have to worry about my living expenses. And on top of that, we did apply to Y Combinator and we raised $12,000. So that also was like a pretty … at the time, a pretty large amount of money that covered our basic expenses. So, we had the … between Y Combinator and living at home we had a few thousand dollars to build a website, get that online. And that was really enough to get started. I mean, back then 12,000 was really … it still is sufficient to get a service up and running. And then we were able to … once we got some traction, we were able to raise venture money and kind of scale from there. Nathan Latka: Going down that funding path, so update us today, how much total capital has been infused? Trip Adler: We’ve raised 50 million at this point. So, basically the trajectory was … it was the first 12,000 from Y Combinator, and then we raised 40,000 in angel money. And then at that point we got some tractions and we really quickly went to raise three and a half million from Red Point and then another 10 from CRV and then another 10 from Silicon Valley Bank, and then another 25 from Coastal Ventures. I think that adds up to 50, but I might’ve got my math wrong. So, it was about 50 to date. And at this point we’re profitable so we’re just living off profits, which is a good spot to be. We’re not really intending to raise any more money for the time being. Nathan Latka: Where has most of that capital gone? Head count or just channels where the [inaudible 00:03:07] to be worked and you wanted to just pour more money in those channels? Trip Adler: So, for us it’s really … it’s two things. It’s headcount and it’s content. So, we don’t actually pay for users. We started the service as just a free service for publishing and sharing content and it today reaches over a hundred million monthly users. So, we basically just market our subscription service to those a hundred million users. We don’t have to actually pay for marketing. We pay for a little bit, but just a small amount. So, our two costs are really just hiring good people, hiring good engineers and designers and all types of people to build the product. And then also on the content side, we do deals with book publishers, with magazine publishers, with newspapers, and we make all that content available through the subscription model. Nathan Latka: And where are you at now today in terms of team size? Trip Adler: It’s about 120 right now. Nathan Latka: Okay. All there in Palo Alto? Trip Adler: We’re actually in San Francisco now. I’m from Palo Alto, but I live in San Francisco. You can see the view behind me. Nathan Latka: I was about to say, yeah. Trip Adler: Yeah, we’re right in the financial district on the 24th floor. So, most of them are in San Francisco. We’ve now got a small team in New York who does our publisher relationships. We also have … we have to have offices in Phoenix. We’re building our support team out there. And a few other people around the world. Nathan Latka: Walk me through how you make the kind of … you have a market, right? This is a traditional marketplace. You got to get the content and you got to get the users. So, early on when you were solving that chicken and egg problem, usually marketplace creators did something very creative to make the wheels start spinning. What did you do in the early days? Trip Adler: That’s a good question. Yeah, we’ve basically been perpetually solving this chicken egg problem for the last 10 years. So, in the early days, the initial idea was we would just allow someone to take a piece of content, publish it on the web, and then we would find audience for them primarily via SEO. And then of that SEO traffic, a small fraction of people would come in, upload their own content and that would kind of get the cycle going. So, we really got that growth going early on. And that’s what took us from launch to a hundred million monthly users pretty quickly. And then the nice thing was actually- Nathan Latka: How quick was that trip? How long did it take you to hit a hundred million? Trip Adler: Probably four years. Nathan Latka: Okay. So, up to about … was that 2011? Trip Adler: Yeah, 2007 to 2011, I went from roughly zero to a hundred. And then we had to figure out a business model. So, we tried advertising. That didn’t really … advertising’s not a really interesting model unless you’re huge like Google or Facebook. We tried allowing publishers to sell content and that also didn’t really scale. Eventually we tried the subscription and that worked really well. And since we already had an audience, we were able to market the service. Nathan Latka: Trip, hold on, hold on. I have to stop you there. Because you take it for granted now, but take me back to that moment. You were running all these tests. What was the early indicator? What was the test you ran to see if subscription would work and what was the feedback from the test where you said, that’s where we’re going all in? Trip Adler: So, we just put up a simple freemium model that offered some freemium features and that quickly became the most dominant business model for us. So, that was kind of indication that subscription was working. The big moment for subscription was that when we decided to go partner with all the publishers to put their content in. So, at the time the idea of a book subscription service was pretty crazy. Most people couldn’t even envision that. And we went and we talked to all the publishers about including their books in our subscription. They pretty much all said no unanimously, but we were able to get some small ones on. And then those led to bigger ones. And over time it started to lead to a tipping point where we were able to now get up to a million books in our service. So, it actually all happened very iteratively. And the way we’ve been able to solve this chicken egg problem over time is just each step leads to the next. And as long as we keep kind of inching forward in various directions, both on the content side and on the consumer side, on the business model side, it all kind of came together over time. Nathan Latka: What are you at now today? I think you said … is it 500 million? Or what are you at today now in terms of readers? Trip Adler: So, we reached about a hundred million non-paying users a month. And then we have … last summer, we announced it’s 500,000 paying subscribers. Nathan Latka: Okay. That a hundred million dollar … sorry, that hundred million user number though, you said that was what you hit in 2011, right? I imagine you grew between ’11 and ’17, right? Trip Adler: Yeah, we’ve grown. We just haven’t announced the new traffic numbers. At the same time though, the nonpaying audience hasn’t grown as much over the years, just because it’s very SEO driven and we’ve kind of plateaued in terms of the nonpaying audience. Nathan Latka: How is it SEO driven? Help us understand that? Trip Adler: Well, we have this library of 70 million documents that have been uploaded by users. And basically we have over a hundred million people a month who come to visit that library of content. And mostly people are searching for things on Google and then long tail searches bring them to our library of content. Nathan Latka: Got it. That makes sense. So, with 500,000 folks paying now a minimum nine bucks per month, it sounds like that’s your only price point. That’s about four and a half million in MRR or well over 54 million in ARR. And when was that date? Because those are just your most recently announced. When was that announced? Trip Adler: When did we announce that? Like six months ago. Nathan Latka: Okay. Okay. So, it’s fairly accurate in terms of today. Trip Adler: We’ve grown past that quite a bit. I mean, we’re growing at maybe 50% per year right now. So, yeah, I mean, revenue’s going pretty nicely. We’re pretty profitable. And yeah, I mean the more we grow the subscriber base, the more revenue we have to return to publishers and authors, we can get more and more content in the service. And we’re just trying to continually get that kind of growth loop going. Nathan Latka: You’re about 20, 25 days from a holiday party there in the financial district with your team before everyone heads out. Are you celebrating you with champagne? Do you pass 56 million, you think, in ARR by that holiday party or no? Trip Adler: Yeah. Well we … every hundred thousand subs, we have a big celebration and I mean, the next one for us is a million subs. I mean, that’s really what we’re aiming towards. So, that’s a big one that we’re looking forward to celebrating. Nathan Latka: That’s good. Will you be celebrating … do you think you’ll pass 600 before the end of the year? 600 thousand? Trip Adler: Yeah. I mean, I don’t want to comment our numbers too much. Nathan Latka: I’ll skip over. I’ll skip over if you don’t want to talk. Trip Adler: We’re blowing past 500,000, so we’re, we’re on our way to the next big one. We’re going to be announcing soon hopefully Nathan Latka: That’s exciting. So, what do you … help me understand now. You said all your user acquisition is free, but I’m very interested in how you’re … more about how you’re getting this content. So, for example, I just signed a big book deal with Portfolio, right. And I’m curious, if I want to go talk to them and say, “I really like Trip. I want to figure out how to get my book in Scribd,” what does that negotiation look like on the back end? Trip Adler: Well, I mean, if we work with a publisher, the book kind of shows up automatically on our service. So, the main thing for us that we’ve had to do is work with publishers to get them comfortable with this kind of model. Nathan Latka: Are you paying them though? Or is it just a trade? Trip Adler: We definitely pay them. So, we have a number of different types of deals in place these days. The main type these days is we will pay by the read of the book. So, this way it … from their perspective it more or less looks like a sale. So, just like they’re selling the book, we’ll pay them any time the user reads a book. Nathan Latka: What if the user only opens the first 10 pages and doesn’t complete the read? Trip Adler: So, yeah, so we have a threshold that we use for when the book counts as reads. It’s usually about 20% of the book, is when that triggers the payment. Nathan Latka: You guys are going to start releasing .. Amazon has started getting more aggressive about releasing their top 10 most … It’s funny how they label it. They say like most sold and most read. They don’t say which one’s actually driving the list. But when are you guys going to start publishing your own bestseller or best read list? Trip Adler: We do share a bunch of those. It’s a good idea though. We should really … we do have a lot of interesting data. I mean, we have people reading different books in our service than they read in others just because of the nature of the model and the types of content we have. So, it’d be a really interesting thing to share. We should share that more. Nathan Latka: Interesting. All right, Trip lets wrap up here with the famous five. Number one, what is your favorite business book? Trip Adler: Favorite business book … I would say Good to Great. Nathan Latka: I was about to say, this is like asking you to pick a baby, considering all your book relationships, right? Trip Adler: Yeah, well, Good to Great is on Scribd both in ebook and audio book form. So, you should listen to it yet. Get your [crosstalk 00:11:39]- Nathan Latka: There’s the pitch. All right. Number two, is there a CEO you’re following or studying, Trip? Trip Adler: Not really. I guess if I were to pick a couple, I think … I mean, the other one’s doing big subscription services. So, I mean, I’m a big fan of other services that have kind of pioneered some of the ideas we’re pursuing. So, like Reed Hastings at Netflix or Daniel Ek at Spotify. I mean, they’ve both accomplished really interesting things. We’re trying to do something similar for reading. So, I those are two that I pay a lot of attention to. Nathan Latka: Number three, in terms of building Scribd and the business, what’s your favorite online tool? Trip Adler: I think Tableau is really great. I mean, we have a lot of data, so it’s fun to look at data. Nathan Latka: Number four, how many hours of sleep do you get every night? Trip Adler: Seven, eight. Nathan Latka: I think it’s pretty healthy. And what’s your situation? Married, single, you have kids? Trip Adler: Married as of a year ago. Nathan Latka: Oh, congratulations. Any kids yet or no? Trip Adler: Not yet. Not yet. Nathan Latka: All right. None yet. And how old are you, Trip? Trip Adler: 33. Nathan Latka: Trip Adler: I would say just to trust my gut a lot. When I look at mistakes I made, it’s usually from not trusting my gut. So, always trust your gut. Nathan Latka: There you guys have it from Trip, founder of Scribd. Trust your gut. He founded his company back many years ago, got his first 12,000 from Y Combinator. He’s since grown the service again. That was back in 2007, launch date. He’s since grown the service, supporting over a hundred million readers, 500,000 of them paying nine bucks a month, so about 4.5 million bucks a month recurring revenue, or about 54 million in ARR. Growing super, super fast with his team of about 120 people out there in San Francisco. Looking at, again, how to get more content in the system, more readers, and more value to the end subscribers. Trip, thank you so much for taking us to the top. Trip Adler: Thank you. Great to talk to you.
