The old Indextools website is gone. The new Yahoo! Analytics website is minimalistic, offering just the home page and a second page describing the features. That’s appropriate, because this incarnation of Indextools doesn’t have to sell. It’s Yahoo! And it’s free.
However, the technology behind the screens is still 100% Indextools. They probably have four or five times more server capacity, but the features are essentially the same ones I described on the original site. (Disclosure: I was the marketing director in 2004-2005.)
In the first part of this case study I described how Indextools minimized its weaknesses to compete with VC-funded US companies. This time around I’ll talk about how this scrappy Hungarian startup maximized its natural strengths to build a world class business.
Most companies are only really good at one or two things, and this is especially true of underfunded startup companies. What Indextools was particularly good at was software feature development.
Central Europe has long had a reputation as a hotbed of talented, cheap software developers. In fact, this is no longer the case. Many local software engineers are highly skilled, but they are increasingly hard to find – and no longer as cheap as they used to be.
Neverthess, Indextools founder, Marton Szoke was able to build a top notch development team. He was also ruthless at keeping costs down, and that included salaries.
Szoke started out small, with a team comprised mainly of personal friends. As the company grew, he recruited new talent – primarily through referrals from his developers. He didn’t pay as much as the multinationals (Nokia, Siemens, Eriksson and others operate development centers in Budapest). He knew he didn’t have to.
Szoke understood that money is not always the first motivation for a software developer. The engineers I knew at Indextools were inspired by the opportunity to work on a highly-talented team building a world class product. They worked insane hours in a spartan office in one of the least fashionable districts of Budapest. The development team were never offered stock options. They simply loved their work.
Would it be possible to build such a team in Silicon Valley without offering them fancy salaries and Google-style perks? I don’t have the answer. What I do know is that none of Indextools’ US competitors were able to assemble such a talented team at such a low cost.
Indextools’ other key asset was Marton Szoke, himself. He was founder and CEO, but most importantly he drove the development team. Szoke was obsessive about building new features. Each time a competitor launched a new feature he would assemble the developers in the company’s one meeting room and map out their new task.
However, Szoke wasn’t simply copying, he was also innovating and improving. The company couldn’t afford to market their product and so they outsourced most of their sales effort to white-label resellers. Most of these resellers were fairly sophisticated customers and they inevitably chose Indextools because of its advanced set of features.
In a sense, the company’s revenues never really mattered as long as Szoke had the cashflow to pay his staff and continue developing features. Yahoo! didn’t purchase Indextools for its customer base. Yahoo! wanted those features.
Marton Szoke was also lucky to find good people. In order to focus on Indextools feature development, Szoke handed over operation of the business to his COO, a Danish entrepreneur named Dennis Mortensen. Mortensen took over responsibility for the sales team. Lacking resources for marketing and PR he cultivated relationships with industry analysts and journalists. Mortensen also deserves credit for the Yahoo! sale, as does Charlie Holbech, who ran the Partner Program.
In the end, though, Indextools’ main strength was its features. And it should come as no surprise that those features, and the development team, are all that now remains of the original Indextools.